Teamsters Local 456 Pension v. Transportation

Background

The Funds and Westchester Teamsters Local Union No. 456 sued CRL Transportation, Inc. under Section 515 of the Employee Retirement Income Security Act, a federal employee-benefits law, alleging that CRL failed to pay required employee-benefit contributions. On August 22, 2019, the court granted the plaintiffs’ motion for summary judgment. On September 16, 2019, it entered a $212,639.58 judgment plus post-judgment interest. The opinion states that the judgment remained unsatisfied.

After investigating CRL’s assets, the plaintiffs identified two semi-trailers, a 2010 Peterbilt tractor, a 2005 Peterbilt tractor, and a Caterpillar skid steer loader. They moved for a turnover order requiring CRL to deliver the vehicles to the Westchester County Sheriff to satisfy the judgment, or alternatively to confirm that the vehicles were unavailable. They also requested a preliminary injunction preventing transfer of the vehicles. A previously filed motion to compel discovery remained pending.

Legal framework

Federal Rule of Civil Procedure 69 requires enforcement of a federal money judgment to follow the procedure of the state where the federal court is located. The court therefore applied New York Civil Practice Law and Rules Article 52, including Sections 5225(a), 5225(b), and 5222.

Section 5225(a) allows a court to order a judgment debtor to pay money or deliver personal property in the debtor’s possession or custody. Section 5225(b) permits a judgment creditor to seek property held by a third party, including through claims that property was fraudulently conveyed or that another entity is an alter ego of the judgment debtor. An alter ego is an entity alleged to be so controlled and connected with another entity that it should be treated as responsible for that entity’s obligations. The court explained that a turnover request based only on the parties’ written submissions could be granted only if there were no genuine disputes about material facts.

Turnover request under Section 5225(a)

The court denied relief under Section 5225(a) because the evidence did not clearly establish that CRL currently possessed or controlled the vehicles. Lumia testified that the trucks and semi-trailers had been re-leased to Lumia Leasing and that Jim Reed’s Truck Sales still held title. CRL also argued that the 2010 Peterbilt had been leased directly to Lumia Leasing. Although that contention conflicted with portions of Lumia’s testimony, the conflict itself created a factual issue. The court therefore concluded that Section 5225(a) could not support a turnover order on the current record.

Turnover request under Section 5225(b)

The plaintiffs also argued that transfers or re-leases to Lumia Leasing were fraudulent conveyances and that Lumia Leasing was CRL’s alter ego. The court explained that Section 5225(b) can provide a procedural mechanism for attacking an allegedly fraudulent transfer or asserting alter-ego liability in a judgment-enforcement proceeding.

The court found evidence suggesting that the semi-trailers and the 2005 Peterbilt remained in CRL’s name after the judgment was entered. But the plaintiffs had not conclusively shown that the re-leasing occurred without fair consideration. Fair consideration generally requires an exchange of property or discharge of an existing debt, a fair equivalent, and good faith. Lumia’s testimony did not specifically establish what consideration, if any, Lumia Leasing provided for the vehicles. The court also found a factual dispute about whether the 2010 Peterbilt had originally been leased by CRL or directly by Lumia Leasing.

The court further determined that Lumia Leasing had not been served with the motion or otherwise given an opportunity to respond. The plaintiffs had not served or shown notice to the entities that may have owned or held security interests in the vehicles, including Jim Reed’s Truck Sales and Caterpillar Financial Services Corporation. Because those entities’ property rights could be affected, they had to receive notice and an opportunity to be heard before the court could decide whether to order turnover. The court did not resolve the plaintiffs’ alter-ego theory or the defendant’s “tools of the trade” exemption argument on the existing motion.

Preliminary-injunction request

The court construed the request to prevent transfers as a request under Federal Rule of Civil Procedure 65. It found that an injunction was moot as to the semi-trailers and the two Peterbilt vehicles because those vehicles were allegedly no longer leased by CRL. As to the skid steer loader, the court found that a preliminary injunction was unnecessary because the plaintiffs had an adequate enforcement remedy through restraining notices under Rule 69 and New York law. The court also noted that the plaintiffs had served restraining notices on CRL and other parties. The request for a preliminary injunction was therefore not warranted.

Discovery motion and disposition

The court concluded that the turnover motion appeared to have replaced the earlier motion to compel because the plaintiffs had received discovery responses and deposed Lumia. It therefore denied the pending motion to compel as moot. The court stated that the plaintiffs could renew that motion if they sought additional discovery or attorney’s fees and clarified what additional relief they wanted.

Judge Kenneth M. Karas denied without prejudice the plaintiffs’ motion for a turnover order and denied as moot the plaintiffs’ motion to compel. The court permitted the plaintiffs to renew the turnover motion by filing supplemental briefing within 30 days and serving the briefing, original motion, supporting papers, and order on Lumia Leasing, Inc., Jim Reed’s Truck Sales, Caterpillar Financial, and any attorneys known to represent those entities. The court directed the relevant entities to respond under the schedule stated in the order and directed the Clerk to terminate the pending motions.