NEW JERSEY BUILDING LABORERS' STATEWIDE BENEFIT FUNDS AND THE TRUSTEES THEREOF v. DEMZA MASONRY LLC

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

NEW JERSEY BUILDING LABORERS’

TRUSTERS THEREOF, FUNDS AND THE | Civil Action No.: 18-cv-9607 (PGS)(LHG)

Plaintiffs,

MEMORANDUM

V. AND ORDER

DEMZA MASONRY LLC,

Defendant.

SHERIDAN, U.S.D.J.

This matter comes before the Court on a motion for summary judgment filed by Plaintiffs

New Jersey Building Laborers’ Statewide Pension Fund and the Trustees Thereof (the “Pension

Fund”) and the New Jersey Building Laborers’ Statewide Benefit Funds and Trustees Thereof (the

Funds”) (together, “Plaintiffs”) (ECF No. 23) and on a cross-motion for summary judgment filed

by Defendant Demza Masonry LLC (“Demza’’) (ECF No. 31). In this action, Plaintiffs seek to

hold Demza liable for defunct J. Speranza Brickwork, Inc. d/b/a Speranza Brickwork, Inc.’s

(“Speranza Inc.”’) delinquent contributions to a multiemployer benefit plan and withdrawal liability

pursuant to ERISA. Specifically, Plaintiffs assert that the doctrines of alter ego liability, successor

liability, and controlled group liability render Demza jointly and severally liable for Speranza

Inc.’s ERISA liabilities.

BACKGROUND

Speranza Inc. was a New Jersey-based construction contractor bound to a Collective

Bargaining Agreement (“CBA”) with the New Jersey Building Construction Laborers’ District

Council and its Local Unions (the “Union’”).' (Plaintiffs’ Statement of Material Facts Not in

Dispute (“Plaintiffs’ SMFND”) { 8, ECF No. 23-3). Under the terms of the CBA, Speranza Inc.

was obligated to hire members of the Union to perform certain bargaining unit work covered by

the CBA. (/d.{ 8).

Under the terms of the CBA, Speranza Inc. was obligated to pay CBA-scale wages and

remit fringe benefit contributions to Plaintiffs for work performed by its employees. (/d. J 10).

Speranza Inc. paid fringe benefit contributions to Plaintiffs until about 2014. Ud. 711). On or

about August 27, 2014, the United States District Court of the District of New Jersey entered

judgment in New Jersey Building Laborers Statewide Benefit Funds and the Trustees Thereof v.

Speranza Brickwork, Inc., No.13-cv-7272, in favor of the Funds and against Speranza Inc. for

delinquent contributions for the period of January 1, 2007 through December 31, 2010, in the

amount of $4,901,819.05. Ud. J 12). On or about May 12, 2015, Speranza Inc. filed for Chapter

7 bankruptcy protection in the United State Bankruptcy Court for the District of New Jersey, in a

matter captioned In Re: J. Speranza Brickwork, Inc., No. 15-cv-18907. (Ud. [ 13). Speranza Inc.

was discharged from bankruptcy on or about December 5, 2017. (/d. { 14). Thereafter,

Speranza Inc. ceased making contributions to the Pension Fund and therefore permanently

effected a “complete withdrawal” from the Pension Fund, within the meaning of ERISA § 4203,

29 U.S.C. § 1383. (Ud. 15). The Pension Fund calculated Speranza Inc.’s withdrawal liability

as $7,778,286.00. (Jd. J 16).

On or about November 8, 2017, the Pension Fund prepared a payment schedule for

Speranza Inc.’s withdrawal liability, as well as a demand for payment in accordance with the

payment schedule, and forwarded same to Speranza Inc. and Demza. (/d. 17). After the first

' All facts presented in this section are undisputed, unless otherwise noted.

quarterly installment was not received, on or about March 22, 2018, the Pension Fund advised

Speranza Inc. and Demza of their failure to remit said quarterly installment and that Speranza

Inc. and Demza were in default of their obligation. (id. { 18). On or about March 22, 2018, the

Pension Fund notified Speranza Inc. and Demza that if they did not cure the default within sixty

(60) days of receipt of the written notification, Plaintiffs would require the immediate payment

of the outstanding liability from the due date of the first payment which was not timely made.

(Id.). Speranza Inc. and Demza failed to cure the default, and, as a result, Plaintiffs brought two

separate actions, now consolidated before the Court, seeking the outstanding withdrawal liability,

as well as unpaid fringe benefit contributions, liquidated damages, interest, and attorneys’ fees.”

(id. Tf 19, 21).

By way of background, Joe Speranza was the president and sole owner of Speranza Inc.,

a masonry subcontractor. (Id. | 30). Speranza Inc. operated out of 15 High Street, White House

Station, New Jersey 08889 (the “Whitehouse Station Location”), which was then owned by Mr.

Speranza’s mother and sister. (/d.). Speranza Inc. ceased operations in late 2012 or early 2013

because the company “was no longer making money.” (/d. {| 13, 24, 30; Deposition of Joe

Speranza (“Speranza Dep.’’) at 54:1-3, Certification of Seth Ptasiewicz, Esq. in Support of

Motion for Summary Judgment (‘‘Ptasiewicz Cert.,” Ex. L, ECF No. 23-2)). A labor union

dispute in 2010 also contributed to Speranza Inc.’s financial woes. (Affidavit of Joseph

Speranza J 8, Ptastewicz Cert, Ex. I).

* The Pension Fund commenced this action seeking withdrawal liability. The Funds brought a

separate action with captioned New Jersey Buildings Laborers’ Statewide Benefit Funds and the

Trustees Thereof v. Demza Masonry LLC d/b/a Demza Masonry Construction, No. 18-cv-9893

seeking to hold Demza jointly and severally liable for Speranza Inc.’s delinquent contributions.

(Plaintiffs’ SMFND J 27). These cases are now consolidated before the Court. (ECF No. 10).

After being unemployed for several months, Mr. Speranza was advised by a contact in

the construction industry of an employment opportunity with a new masonry company. (/d. □

13, 14). After successfully following up on that lead, in or around January 2016, Mr. Speranza

began working with Tim O’Brien and Willie Dempsey at the new masonry company, which was

ultimately named Dempsey, O’Brien, Speranza (“DOS”). (Speranza Dep. at 43:8-14). Despite

the name, Mr. Speranza was not offered an ownership interest in DOS. Cd. at 43:17-19). He

was employed by DOS as an office manager and estimator. (/d. at 43:24-44:1). DOS, however,

completed only one project before the relationship between Mr. O’Brien and Mr. Dempsey

soured and the company ceased operations in 2016. (/d. at 44:2-18).

In or around July 2016, Mr. Dempsey formed Demza and subsequently hired Mr.

Speranza as an “estimator/office manager/vice president.” (Plaintiffs’ SMFND □□ 38, 46, 50).

Demza was originally located in Maspeth, New York, but later relocated to the Whitehouse

Station Location, where Speranza Inc. formerly operated. (id. 47). By the time Demza began

operating, however, Mr. Speranza’s siblings no longer owned the Whitehouse Station Location

as the property was in receivership. (Deposition of Willie Dempsey (“Dempsey Dep.”) at 17:15-

19-9, Ptasiewicz Cert, Ex. K). Thus, Demza did not rent its operations space from Mr.

Speranza’s family.

Mr. Dempsey never offered Mr. Speranza an ownership interest in Demza. (Plaintiffs’

SMEND { 39). Rather, Mr. Dempsey has been the sole owner and president of Demza since the

company’s inception in July 2016. (Ud. J 50).

Mr. Speranza is currently employed by Demza. In Mr. Speranza’s role as an

“estimator/office manager/vice president for Demza,” he handles the bidding of projects, payroll,

and signs checks. (/d. 39). In essence, Mr. Speranza manages Demza’s office functions, while

Mr. Dempsey is responsible for Demza’s operations in the field. (Speranza Dep. at 14:18-20).

Demza has employed several other former Speranza, Inc. employees throughout the years, in

addition to Mr. Speranza. (Plaintiffs’ SMFND { 71-75).

Demza has never worked on any of the same projects as Speranza Inc. or DOS.

(Speranza Dep. at 54:11-19). However, the record provided is unclear as to whether Speranza

Inc. and Demza shared the same body of customers.

There are other facts that are not fully explained including, among other things: (1) how

Speranza Inc.’s overall management compares to Demza’s (e.g., putting aside Mr. Speranza’s

purported management functions in both companies); (2) how Speranza Inc.’s operations

compare to Demza’s (e.g., putting aside the fact that they both operate (or operated) as masonry

contractors); and (3) how Speranza Inc.’s supervision compares to Demza’s, particularly in view

of the fact that Plaintiffs seem to allege that Mr. Speranza only had one direct report at Demza,

Tony Triola (Plaintiffs’ SMFND { 62). Additionally, there are no proofs submitted that Mr.

Speranza received extraordinary salary or bonuses which may indicate who is the actual owner

of the business.

In support of its cross-motion, Demza submits that the National Labor Relations Board

(“NLRB”) has previously investigated whether it was an alter ego of Speranza, Inc. and found

that it was not. In that case, Local 4, Bricklayers and Allied Craftworkers’ Administrative

District Council of New Jersey (the “trade union”) filed a charge with the NLRB against

Speranza Inc. and Demza alleging that the companies failed and refused to provide the trade

union with “necessary and relevant information.” (Demza’s Moving Br., Ex A at 1, ECF No. 31-

3). By letter dated September 27, 2018, the NLRB dismissed the charge finding that there was

insufficient evidence adduced to support the trade union’s theory that an alter ego relationship

exists between Speranza Inc and Demza. (/d.). In particular, the NLRB’s Regional Office

concluded:

Although Demza also commenced its operations at Speranza’s

former location in 2017, the investigation did not reveal that Joe

Speranza, [Speranza Inc.’s] former sole owner, has had an

ownership interest in Demza. Moreover, although Joe Speranza is

employed as Demza’s Vice President and Estimator, there is no

evidence that he has any control over Demza. Additionally, the

investigation failed to reveal sufficient evidence that the two

entities share common equipment, management/supervision or

customers. To that end, Speranza’s equipment was liquidated

during its 2015 Bankruptcy proceedings and no evidence was

revealed that Demza purchased any of Speranza’s equipment.

With respect to common management and supervision, the

investigation revealed that out of 11 Speranza

superintendents/foreman, only 3 are employed by Demza in the

same or similar capacity. Additionally, out of approximately 13

Speranza’s customers, Demza has done business with only one.

Finally, there is no evidence that Demza was created to evade its

responsibilities under the [National Labor Relations] Act. Given

these circumstances, the lack of common ownership, control,

equipment, and insufficient evidence of common management,

supervision and common customers precludes a finding that an

alter ego relationship exists between Speranza and Demza.

(Id. at 2). On November 20, 2018, the NLRB’s General Counsel affirmed its Regional Office’s

decision on appeal. (Demza Moving Br., Ex. B).

□ LEGAL STANDARD

Summary judgment is appropriate under Federal Rule of Civil Procedure 56(c) when the

moving party demonstrates that there is no genuine issue of material fact and the evidence

establishes the moving party’s entitlement to judgment as a matter of law. Celotex Corp. v. Catrett,

477 U.S. 317, 322-23 (1986). A factual dispute is genuine if a reasonable jury could return a

verdict for the non-movant, and it is material if, under the substantive law, it would affect the

outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In considering a

motion for summary judgment, a district court may not make credibility determinations or engage

in any weighing of the evidence; instead, the non-moving party’s evidence “is to be believed and

all justifiable inferences are to be drawn in his favor.’ Marino v. Indus. Crating Co., 358 F.3d

241, 247 (3d Cir. 2004) (quoting Anderson, 477 U.S. at 255).

Once the moving party has satisfied its initial burden, the party opposing the motion must

establish that a genuine issue as to a material fact exists. Jersey Cent. Power & Light Co. v. Lacey

Twp., 772 F.2d 1103, 1109 (3d Cir. 1985). The party opposing the motion for summary judgment

cannot rest on mere allegations and instead must present actual evidence that creates a genuine

issue as to a material fact for trial. Anderson, 477 U.S. at 248; Siegel Transfer, Inc. v. Carrier

Express, Inc., 54 F.3d 1125, 1130-31 (3d Cir. 1995). “[U]nsupported allegations . . . and pleadings

are insufficient to repel summary judgment.” Schoch v. First Fid. Bancorp., 912 F.2d 654, 657

(3d Cir. 1990); see also Fed. R. Civ. P. 56(e) (requiring nonmoving party to “set forth specific

facts showing that there is a genuine issue for trial’).

Moreover, only disputes over facts that might affect the outcome of the lawsuit under

governing law will preclude the entry of summary judgment. Anderson, 477 U.S. at 247-48. Ifa

court determines, “after drawing all inferences in favor of [the non-moving party], and making all

credibility determinations in his favor . . . that no reasonable jury could find for him, summary

judgment is appropriate.” Alevras v. Tacopina, 226 Fed. App’x 222, 227 (3d Cir. 2007).

ANALYSIS

The dispute is whether Demza can be held liable for defunct construction company

Speranza Inc.’s delinquent contributions to a multiemployer employment benefit plan and

withdrawal liability. Plaintiffs argue that because “Demza is a disguised continuance of

[Speranza Inc.],”, Demza remains liable for Speranza Inc.’s ERISA liabilities under several

theories.? (See Plaintiffs’ Moving Br. at 32-34, ECF No. 23-4).

ERISA is designed “to ensure that employees and their beneficiaries would not be

deprived of anticipated retirement benefits by the termination of pension plans before sufficient

funds have been accumulated in the plans.” Pension Benefit Guar. Corp. v. R.A. Gray & Co.,

467 U.S. 717, 720 (1984)). In the construction industry, “a significant number of

[multiemployer] plans were experiencing extreme financial hardship” as a result of individual

employers’ withdrawal from the plans, which saddled the remaining employers with increased

funding obligations. /d. at 721. These withdrawals caused a domino effect of cascading

additional withdrawals that eventually “could have resulted in the termination of numerous

plans.” Jd. Accordingly, Congress enacted the Multiemployer Pension Plan Amendments Act of

1980 (““MPPAA”), 29 U.S.C. § 1381, et al. This statute “imposed a withdrawal charge on all

employers withdrawing from an underfunded plan.” Milwaukee Brewery Workers’ Pension Plan

v. Jos. Schlitz Brewing Co., 513 U.S. 414, 416 (1995). “The MPPAA specifically holds an

employer that effects a ‘complete’ or ‘partial’ withdrawal liable to the pension plan for its share

of the plan’s unfunded vested benefits allocable to the withdrawn employer.” New Jersey

Carpenters Pension Fund v. Hous. Auth. & Urban Dev. Agency of the City of Atl. City, 68 F.

Supp. 3d 545, 553-54 (D.N.J. 2014). “The imposition of such liability aims, in essence, to

lessen the harm borne by the pension fund as a result ‘of the loss of the withdrawn employer’s

3 Plaintiffs frame this dispute as primarily a withdrawal liability case, with its withdrawal

liability arguments purportedly “applying with equal force to [Plaintiffs] position that Demza is

liable for [Speranza Inc.’s] unpaid fringe benefit contributions.” (/d. at 22 n.3, 25 n.5). As such,

the Court will analyze the merits of Plaintiffs’ arguments as they relate to withdrawal liability.

future contributions.’” fd. at 554 (quoting O’Connor v. DeBolt Transfer, Inc., 737 F. Supp.

1430, 1435 (W.D. Pa. 1990)).

Withdrawal liability extends only to “employers.” ERISA § 515; 29 U.S.C. § 1145. In

defining who is an “employer,” courts have imposed liability upon entities that are the alter ego,

successor, or member of a controlled group, requiring them to pay the withdrawal liability of the

employer who was responsible for remitting contributions to the pension fund. See generally Bd.

of Trustees of Chicago Plastering Inst. Pension Tr. Fund vy. William A. Duguid Co.,761 F. Supp.

1345 (N.D. I. 1991); Chicago Truck Drivers, Helpers & Warehouse Workers Union (Indep.)

Pension Fund v. Tasemkin, Inc., 59 F.3d 48, 49 (7th Cir. 1995). Plaintiffs contend that Demza

remains liable for Speranza Inc.’s ERISA liabilities pursuant to all of these theories of liability,

which are discussed in turn below.

i. ALTER EGO LIABILITY

The alter ego doctrine is meant to prevent employers from evading their obligations

under labor laws and collective bargaining agreements through the device of making “a mere

technical change in the structure or identity of the employing entity ... without any substantial

change in its ownership or management.” NLRB v. Hosp. San Rafael, Inc., 42 F.3d 45, 51 (1st

1994) (citation omitted).

In applying the alter ego doctrine, courts analyze whether the companies have

“substantially identical management, business purpose, operation, equipment, customers, and

supervision, as well as ownership.” Stardyne, Inc. v. NLRB, 41 F.3d 141, 146 (3d Cir. 1994)

(citation and quotation marks omitted). A plaintiff need not establish all of these factors to prove

alter ego status. Id. “[A]n intent to evade [ERISA] is [also] an important, but not an essential,

factor.” Id. at 151; see also Mass. Carpenters Cent. Collection Agency v. Belmont Concrete

Corp., 139 F.3d 304, 307-09 (1st Cir. 1998). This test is applied with a degree of flexibility, in

light of the general federal policy of piercing the corporate veil when necessary, to protect

employee benefits. See Ret. Plan of UNITE HERE Nat. 7 Ret. Fund v. Kombassan Holding A.S.,

629 F.3d 282, 288 (2d Cir. 2010).

Here, it is undisputed that Speranza Inc. and Demza were both masonry subcontractors

and therefore plausibly maintained the same business purpose. As stated above, a shared

business purpose weighs in favor of finding the existence of an alter ego relationship. It is also

undisputed, however, that Speranza Inc. and Demza did not have the same ownership—Mr.

Speranza owned Speranza Inc. and Mr. Dempsey owned Demza—and that Demza did not use

Speranza Inc.’s equipment, which was liquidated as part of Speranza Inc.’s bankruptcy. These

factors weigh against finding the existence of an alter ego relationship.

The remaining factors—which are whether Speranza Inc. and Demza shared substantially

identical management, operation, customers, and supervision—largely remain question of

material fact that preclude summary judgment. For example, the record does not set forth facts

establishing that there is no genuine dispute as to: (1) whether Mr. Speranza maintained control

over Demza in his capacity as a non-owner Vice President of Demza; (2) whether Speranza

Inc.’s former body of customers overlaps with Demza’s current body of customers; (3) whether

both companies operated similarly, inter alia.

Demza’s cross-motion for summary judgment fares no better. Demza places great weight

on the NLRB’s determination in an unrelated proceeding that Demza was not an alter ego of

Speranza Inc. As Demza concedes, however, that finding is not binding upon this Court.

(Demza Moving Br. at 3, ECF No. 31-2); Spielmann v. Anchor Motor Freight, Inc., 551 F. Supp.

817, 821 (S.D.N.Y. 1982). It also does not supplant Demza’s obligation to set forth material

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facts demonstrating that no genuine issues remain for trial, which it failed to do. In fact, rather

than properly submitting its own statement of material facts not in dispute, Demza merely

submitted a response to Plaintiffs’ statement of material facts not in dispute admitting each fact

set forth by Plaintiffs therein. (See Statement of Material Facts Not in Dispute and In Response

to Plaintiffs’ Statement of Material Facts, ECF No. 31-1); see also L.Civ.R. 56.1(a) (“A motion

for summary judgment unaccompanied by a statement of material facts not in dispute shall be

dismissed.”’).

In sum, as reflected above, the alter ego analysis is inherently “heavily fact-laden.”

Duguid Co., 761 F. Supp. at 1348.; see also Stardyne, 41 F.3d at 146 (quoting Southport

Petroleum Co. v. N.L.R.B., 315 U.S. 100, 106 (1942) (noting that the alter ego analysis involves

questions of fact)). Accordingly, the Court cannot award summary judgment for either party, as

some facts have not been sufficiently adduced or are in contention.

ii. SUCCESSOR LIABILITY

Plaintiffs next argue that the doctrine of successorship liability doctrine applies to this

case. “The successorship [liability] doctrine provides an exception from the general rule that a

purchaser of assets does not acquire a seller’s liabilities.” Chicago Truck Drivers, Helpers &

Warehouse Workers Union (Indep.) Pension Fund v. Tasemkin, Inc., 59 F.3d 48, 49 (7th Cir.

1995). The successorship liability doctrine is invoked where the transfer of the assets

undermines federal labor interests, such as failure to pay employee benefits to a union pension

fund. See Upholsterers’ Int’l Union Pension Fund v. Artistic Furniture of Pontiac, 920 F.2d

1323, 1328 (7th Cir. 1990). Generally, the doctrine may be applied where, under the totality of

the circumstances, “there is a “substantial continuity’ between the enterprises.” /d. at 329;

Hawaii Carpenters Trust Funds v. Waiola Carpenter Shop, Inc., 823 F.2d 289, 293 (9th Cir.

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1987) (quoting Fall River Dyeing and Finishing Corp. v. NLRB, 482 U.S. 27, 43, 107 S.Ct. 2225,

96 L.Ed.2d 22 (1987)). Fairness is a prime consideration in the doctrine’s application. Sullivan

v. Dollar Tree Stores, Inc., 623 F.3d 770, 782 (9th Cir. 2010). In determining fairness, courts

consider a number of factors:

(a) whether there has been a substantial continuity of the same business;

(b) whether the same employer uses the same plant;

(c) whether the same work force is used;

(d) whether the same jobs exist under the same working conditions;

(e) whether the same machinery, and/or equipment is used;

(f) whether the same supervisors are employed;

(g) whether the same methods of production are used;

(h) whether the same product is produced;

(i) whether the body of customers is the same.

NLRB y. Jeffries Lithograph, 752 F.2d 459, 463 (9th Cir. 1985) (quoting Premium Foods Inc.,

260 N.L.R.B. 708, 714 (1982)). The “‘same body of customers’ factor is of special significance

when determining successorship for purposes of withdrawal liability under the MPPAA

construction industry exception.” Resilient Floor Covering Pension Tr. Fund Bd. of Trustees v.

Michael’s Floor Covering, Inc., 801 F.3d 1079, 1095 (9th Cir. 2015).

In reviewing all of these factors, the Court finds that factual issues preclude a dispositive

application of the successorship liability doctrine at this stage of the litigation. Most importantly,

neither party has set forth facts clearly indicating whether Speranza Inc. and Demza share the

same body of customers, which is “a factor is of special significance when determining

successorship for purposes of withdrawal liability under the MPPAA construction industry

exception.” See Resilient, 801 F.3d at 1095. Moreover, many of the same, or very similar,

factors that were not clearly established with respect to the alter ego analysis also preclude

summary judgment in this context (see supra at 9-10). In short, Plaintiffs’ motion for summary

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judgment and Demza’s cross-motion for summary judgment are denied with respect to this

theory of liability.

iii. CONTROLLED GROUP LIABILITY

Finally, the Pension Funds contend that Demza is liable under the controlled group

theory. The MPAA extends liability to “trades or businesses (whether or not incorporated)

which are under common control” of an employer. 29 U.S.C. § 1301(b)(1); New Jersey

Carpenters Pension Fund, 68 F. Supp. 3d at 553-54. While the statute itself does not define

specifically “under common control,” it directs that regulations implementing this provision

“shall be consistent and coextensive with regulations prescribed for similar purposes by the

Secretary of the Treasury under section 414(c)” of the Internal Revenue Code. New Jersey

Carpenters Pension Fund, 68 F. Supp. 3d at 558; United Food & Commercial Workers Union v.

Progressive Supermarkets, 644 F.Supp. 633, 637 (D.N.J. 1986) (quoting 29 U.S.C. §

1301(b)(1)).

In order to extend withdrawal liability to other entities, a plaintiff must show that the

entity is (1) a trade or business; and (2) under common control with the withdrawing employer.

Gov’t Dev. Bank for P.R. v. Holt Marine Terminal, Inc., 765 F.Supp.2d 710, 714-15 (E.D. Pa.

2011). To prove factor one, courts have relied on the tax law (IRS) definition of trade or

business. Comm’r v. Groetzinger, 480 U.S. 23, 35 (1987). In Groetzinger, Justice Blackmun

explained that to be engaged in a trade or business one “must be involved in an activity with

continuity and regularity and that the taxpayer’s primary purpose for engaging in the activity

must be for income or profit.” Jd. In reviewing the “trade or businesses” component, courts

have added an additional inquiry. That is, “whether characterizing an entity as a ‘trade or

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business’ will fulfill the underlying purpose of the MPPAA: to prevent employers from avoiding

withdrawal liability by fractionalizing their operations.” Gov’t Dev. Bank, 765 F.Supp.2d at 715.

Second, under the operative definition of “common control,” companies are essentially

held to be under common control where they are linked by either a parent corporation or “where

five or fewer persons own at least 80% of the voting stock or share value of each corporation,

and the same persons own more than 50% of the voting stock or share value, taking into account

each person’s interest only to the degree of identical stock ownership in each corporation.”

Doherty v. Teamsters Pension Trust Fund, 16 F.3d 1386, 1390 n.3 (3d Cir. 1994) (citing 26

U.S.C. § 1563(a)(2)); New Jersey Bldg. Laborers’ Statewide Pension Fund & Trustees Thereof v.

CID Constr. Servs., LLC, No. 15CV3412SRCCLW, 2015 WL 5965627, at *5 (D.N.J. Oct. 14,

2015). When enacting the common control theory, Congress sought to prevent businesses from

“shirking their ERISA obligations by fractionalizing operations into many separate entities.” See

Brown v. Astro Holdings, 385 F.Supp.2d 519, 533 (E.D. Pa. 2005) (citation omitted).

In applying this test, it cannot be disputed that Speranza Inc. and Demza qualify as

““trade[s] or businesses,” as defined by the IRS. Both companies engaged in “regular and

continual involvement in [masonry contracting], primarily for the purpose of income or profit.”

New Jersey Carpenters Pension Fund, 68 F. Supp. 3d at 559. The undisputed facts demonstrate,

however, that Speranza Inc. and Demza are not under “common control,” as the term is defined

by the IRS. Demza and Speranza Inc. are not linked by a parent corporation, nor is there any

overlapping ownership interests (Plaintiffs’ SMFND { 39). See Doherty, 16 F.3d at 1390 n.3.

The inquiry, however, does not cease there. As Judge Simandle acknowledged in New

Jersey Carpenters Pension Fund, courts should not be “inflexible” in applying these precepts

and should undertake a factual inquiry to determine whether an employer is striving to

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circumvent withdrawal liability by “fractionalizing their operations.” Jd. (quoting Gov’t Dev.

Bank, 765 F.Supp.2d at 715). In other words, the Court is not constrained by the IRS definitions

set forth above and should otherwise seek to determine whether the record before it evidences an

attempt to undermine the underlying purpose of the MPPAA: “‘to prevent employers from

avoiding withdrawal liability.” Jd. (citation omitted); see also Brown, 385 F.Supp.2d at 533. In

the Court’s view, the totality of the facts presented in the evidentiary records before it raises at

least some issues of fact as to whether Speranza Inc. sought to evade withdrawal liability. Since

this fact-laden inquiry is better suited for determination at trial, the Court will deny both motions

for summary judgment and allow this matter to proceed to trial.

CONCLUSION

Based on the foregoing, Plaintiffs’ motion for summary judgment (ECF No. 23) and

Demza’s cross-motion for summary judgment (ECF No. 34) are denied in their entirety. All of

the legal issues discussed herein shall proceed to trial.

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ORDER

This matter comes before the Court on a motion for summary judgment filed by Plaintiffs

New Jersey Building Laborers’ Statewide Pension Fund and the Trustees Thereof (the “Pension

Fund”) and the New Jersey Building Laborers’ Statewide Benefit Funds and Trustees Thereof (the

“Funds”) (together, “Plaintiffs’”) (ECF No. 23) and on a cross-motion for summary judgment filed

by Defendant Demza Masonry LLC (“Demza”) (ECF No. 31). Having carefully reviewed and

taken into consideration the submissions of the parties, as well as the arguments and exhibits

therein presented; and for good cause shown; and for all of the foregoing reasons;

ITIS on this 9 dayof Me _ 2019:

ORDERED that Plaintiffs’ motion for summary judgment (ECF No. 23) is DENIED; and

it is further

ORDERED that Defendant’s cross-motion for summary judgment (ECF No. 31) is

DENIED; and it is further

ORDERED that the parties are directed to meet and confer concerning trial dates and

thereafter submit to the Court by letter proposed trial dates.

(1h Mt Pood

PETER G. SHERIDAN, U.S.D.J.

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