Teamsters Local 456 Pension v. Transportation

Background

The plaintiffs were the Teamsters Local 456 Funds, acting through their trustees and fiduciaries, and Westchester Teamsters Local Union No. 456. They sued CRL Transportation, Inc., alleging that it failed to make employee-benefit contributions required by collective bargaining agreements, in violation of Section 515 of the Employee Retirement Income Security Act. The court had previously granted summary judgment for the plaintiffs and entered a judgment for $212,639.58 plus post-judgment interest on September 16, 2019.

The plaintiffs later sought a turnover order to enforce that judgment. They asked the court to require CRL to deliver five vehicles—a 2017 semi-trailer, a second 2017 semi-trailer, a 2010 Peterbilt tractor, a 2005 Peterbilt tractor, and a Caterpillar skid-steer loader—to the Westchester County Sheriff. Alternatively, they asked CRL to confirm that the vehicles could not be used to satisfy the judgment. The plaintiffs also sought a preliminary injunction barring transfers of the vehicles.

The evidence showed disputes about the vehicles’ possession, ownership, and leasing. Christopher Lumia testified that the trucks and semi-trailers had been re-leased to Lumia Leasing, Inc., while Jim Reed’s Truck Sales still held title. The record also suggested that Caterpillar Financial Services Corporation had a security interest in the skid-steer loader. CRL disputed some of the plaintiffs’ assertions, including whether the 2010 Peterbilt had ever been leased by CRL. The plaintiffs argued that transfers to Lumia Leasing were fraudulent and that Lumia Leasing was CRL’s alter ego, meaning a related entity that could potentially be held responsible for CRL’s judgment.

Legal standards and analysis

Federal Rule of Civil Procedure 69 requires federal courts enforcing money judgments to follow the enforcement procedures of the state where the court sits. The court therefore applied New York Civil Practice Law and Rules §§ 5225 and 5201. Section 5225(a) allows a court to order a judgment debtor to deliver property in the debtor’s possession. Section 5225(b) allows a judgment creditor to seek a third party’s turnover of the judgment debtor’s assets and can provide a procedure for challenging an allegedly fraudulent transfer or asserting alter-ego liability.

The court held that relief under Section 5225(a) was not warranted because the evidence raised factual disputes about whether CRL currently possessed the vehicles. The testimony and documents conflicted about whether CRL or Lumia Leasing held the relevant lease interests, and the title to several vehicles appeared to remain with Jim Reed’s Truck Sales.

The court also declined to order turnover under Section 5225(b). Although the plaintiffs showed that the judgment remained unpaid and presented evidence suggesting that at least some vehicles remained in CRL’s name after the judgment was entered, they had not conclusively shown that the alleged re-leases lacked fair consideration, which is a required part of a fraudulent-transfer claim. The record also contained conflicting evidence about the 2010 Peterbilt’s ownership and leasing history.

In addition, the court found that Lumia Leasing had apparently not been served with the turnover motion or given an opportunity to respond. The court stated that potentially affected entities, including the vehicle lessors and titleholders, should have an opportunity to be heard before a turnover order issued. The court further noted that a request to hold Lumia Leasing liable as CRL’s alter ego could require a separate basis for federal jurisdiction and would involve the demanding standards for piercing the corporate veil.

Preliminary injunction and discovery motion

The court found that a preliminary injunction under Federal Rule of Civil Procedure 65 was not warranted. As to three vehicles allegedly re-leased to Lumia Leasing, the requested injunction appeared moot because CRL no longer leased them. As to the skid-steer loader, the plaintiffs had an adequate remedy through restraining notices under Rule 69 and New York law. The court also noted that post-judgment enforcement ordinarily proceeds under Rule 69 and New York enforcement procedures.

The court concluded that the earlier motion to compel discovery appeared to have been replaced by the turnover motion because the plaintiffs had received additional responses and deposed Lumia. It therefore denied the motion to compel as moot, while stating that the plaintiffs could renew it if they sought additional discovery or attorney fees and clarified what they wanted.

Disposition

Judge Kenneth M. Karas denied without prejudice the plaintiffs’ motion for a turnover order and denied as moot the plaintiffs’ motion to compel discovery. The court allowed 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 them. Those entities were given 30 days to respond, and the plaintiffs were given 21 days to reply. The Clerk was directed to terminate the pending motions.