Opposition Brief — Alman v. George Manufacturing Corp.

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No. 88-1008

In the

Supreme Court of the United States

October Term, 1988

RONALD ALMAN, as Trustee, Board of Trustees,

Northeast Department, ILGWU Health and Welfare

Fund, ILGWU Health Services Plan and ILGWU

National Retirement Fund,

Petitioner,

GEORGE MANUFACTURING CORP.

and

GEORGE KALELL,

Respondent.

On Petition for Writ of Certiorari to the United States

Court of Appeals for the First Circuit

BRIEF FOR RESPONDENT IN OPPOSITION

Jay L. Fiatkow*

STEPHEN M. SHEEHY

HowarpD M. Brown

Kaye, FIALKow,

RICHMOND & ROTHSTEIN

100 Federal Street

Boston, MA 02110

(617) 482-6800

Counsel for Respondent

January 18, 1989

*Counsel of Record

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

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QUESTION PRESENTED

Absent facts sufficient to “pierce the corporate veil”

of a corporation, is an individual shareholder or corpo-

rate officer personally liable under the Employee Retire-

ment Income Security Act for contributions owed by the

corporation to multiemployer health, welfare and pen-

sion funds?

LIST OF PARTIES

The parties to the proceeding below were the Peti-

tioner, Ronald Alman (“Alman”), a trustee of various

multiemployer benefit funds in the garment industry,

Respondent George Kalell (“Kalell”), and George Manu-

facturing Corp. (“George Mfg.”), the corporation of

which Kalell was the sole shareholder and president.

ili

TABLE OF CONTENTS

p Page

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Applicable Statutory Provisions.................+.-- 2

CU MD i cae nes sevens cnncsnvevesua's 3

A. Statement of Prior Proceedings.............. 3

ee ES POE cece esectueasnadenuceds 5

Reasons for Denying the Writ ..................... 6

A. There is No Constitutional Issue or Important

ney 0G WGN GW nw oe cece tence. 6

B. There is No Conflict in the Circuit Courts of

PEPE ELS PeETe LeeLee TELE EL 10

C. There is No Conflict with Congressional Intent

re ee ew ck ec Wee eee EA A eo 11

D. There is No Conflict with Prior Decisions of

a ra ne gas # ans 6 oars 12

E. There is No Connection Between this Case and

Any Case Pending Before this Court......... 12

Sere eae eeuencaeae : a

TABLE OF AUTHORITIES CITED

CASES

Alman v. George Manufacturing Corp., 680

FSupp. 56 GD.Maes. 1966)............: 4, 6, 10,

Alman v. George Manufacturing Corp., No.

OG-1522 (isk Cie fake 21, TRU). occ ieee

Commonwealth v. Morash, 402 Mass. 287, 552

N.E.2d 409, cert. granted, _—=- U.S. __, 109 S.Ct.

SF CRUD oo oc ee ee eee ea

Debreceni v. Graf Bros. Leasing, Inc., 828 F.2d 877

(ist Cir. 1987), cert. denied, __-~OU.S. __, 108

SAd ROR CES ip doe pdedas cd eWernepaes iabas

Donovan v. Agnew, 712 F.2d 1509 (1st Cir. 1983)

Int’l Brotherhood of Painters v. George A.

Kracher, Inc., 856 F.2d 1546 (D.C. Cir. 1988)...

Laborers Health and Welfare Trust Fund v.

Advanced Lightweight Concrete Co., __ U.S.

ee UG MO Nps ee ere

Massachusetts Laborers’ Health & Welfare Fund v.

Starrett Paving Corp., 845 F.2d 23 (1st Cir. 1988)

Dee Bae PRR eH NAS eye ie Se PE tS 3, &, 7,

North Dakota v. United States, 460 U.S. 300 (1983)

Operating Engineers Pension Trust v. Reed, 726

Fi Sao Ce BA Es ode ce rien kedaecwananas

Solomon v. Klein, 770 F.2d 352 (3d Cir. 1985)....

Trustees of Amalgamated Insurance Co. v. Gelt-

man Industries, Inc., 784 F.2d 926 (9th Cir.

1986), cert. denied, 479 U.S. 822 (1986)........

Page

11, 13

5a, 35

TABLE OF AUTHORITIES CITED - Continued

Page

STATUTES

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CONGRESSIONAL MATERIALS

Staff of Senate Committee on Labor and Human

Resources, 96th Cong., 2d Sess., The Multi-

employer Pension Plan Amendments Act of

1980: Summary and Analysis of Consideration

Comm, PRUE THs oo csnc cow ecskoarertsanvaxccens 11

SuPREME Court RULES

Rules of the Supreme Court of the United States,

eA | Perret r er Terr TT eer Tee Ty 10

No. 88-1008

In the

Supreme Court of the United States

October Term, 1988

RONALD ALMAN, as Trustee, Board of Trustees,

Northeast Department, ILGWU Health and Welfare

Fund, ILGWU Health Services Plan and ILGWU

National Retirement Fund,

Petitioner,

GEORGE MANUFACTURING CORP.

and

GEORGE KALELL,

Respondent.

On Petition for Writ of Certiorari to the United States

Court of Appeals for the First Circuit

BRIEF FOR RESPONDENT IN OPPOSITION

The Respondent, George Kalell, respectfully prays

that the Court deny the Petition for a Writ of Certiorari

sought by Petitioner Ronald Alman to review the mem-

orandum and order of the United States Court of Appeals

for the First Circuit entered in the above-entitled pro-

ceeding on July 21, 1988.

OPINIONS BELOW -

The memorandum and order of the United States

Court of Appeals for the First Circuit is not reported and

is reprinted as an appendix to the petition at page A-1.

The opinion and judgment of the United States Dis-

trict Court for the District of Massachusetts (Tauro, J.) is

reported at 680 F.Supp. 56 and is reprinted as a supple-

mental appendix to the petition at pages B-1 - B-6.

JURISDICTION

The United States Court of Appeals for the First

Circuit entered judgment on July 21, 1988. Petitioner

seeks review of the judgment of the Court of Appeals

pursuant to 28 U.S.C. § 1254(1).

—

APPLICABLE STATUTORY PROVISIONS

Petitioner’s claim does not involve any provisions of

the Constitution of the United States of America. Rather,

Petitioner’s claim involves the construction and inter-

pretation of the Employee Retirement Income Security

Act of 1974 (“ERISA”), as amended, 29 U.S.C. § 1001 et

seq. The specific provisions involved in Petitioner’s claim

are 29 U.S.C. § 1145, which requires certain employers to

make contributions to multiemployer plans, and 29

U.S.C. § 1002(5), which defines “employer” for the pur-

poses of ERISA. In addition, because Petitioner attempts

to draw an analogy between ERISA and the Fair Labor

Standards Act (“FLSA”), this action involves 29 U.S.C.

§ 203(d), the FLSA definition of “employer” and 29 U.S.C.

§ 206(a), the FLSA provision which requires all employers

to pay wages in accordance with the FLSA.

The text of 29 U.S.C. § 203(d), 29 U.S.C. § 1002(5),

and 29 U.S.C. § 1145 are reproduced in the petition at

pages 4-8. The petition does not include the text of 29

U.S.C. § 206(a), which is reproduced in pertinent part

below:

Section 206. Minimum Wages

(a) Every employer shall pay to each of his

employees who in any workweek is engaged in com-

merce or in the production of goods for commerce, or is

employed in an enterprise engaged in commerce or in the

production of goods for commerce, wages at the follow-

ing rates: (1) not less than $2.65 an hour during the year

beginning January 1, 1978, not less than $2.90 an hour

during the year beginning January 1, 1979, not less than

$3.10 an hour during the year beginning January 1, 1980,

and not less than $3.35 an hour after December 31, 1980,

except as otherwise provided in this section... .

29 U.S.C. § 206(a).

STATEMENT OF THE CASE

A. Statement of Prior Proceedings

On July 31, 1985, petitioner Alman filed a Complaint

against George Manufacturing Corp. (“George Mfg.”)

and George Kalell (“Kalell”), the sole shareholder and

president of George Mfg. The Complaint sought, pur-

suant to Sections 502(a)(3) and 515 of ERISA, 29 U.S.C.

§ 1132(a)(3) and § 1145, to collect contributions owed by

George Mfg. to the various multiemployer funds (the

“Funds”), of which Alman is trustee. A Consent Judg-

ment was entered against George Mfg. on October 28,

1985, in the amount of $119,358.94, while the action

against Kalell proceeded.

Alman filed a Motion for Summary Judgment and

Kalell filed a Cross Motion for Summary Judgment. On

February 16, 1988, the District Court issued an Opinion

and Order allowing Kalell’s Cross Motion for Summary

Judgment and denying Alman’s Motion for Summary

Judgment. Alman v. George Mfg. Corp., 680 F. Supp. 56

(D.Mass. 1988). The District Court held that a corporate

officer or shareholder may be personally liable for a

corporation’s unpaid contributions to multiemployer

plans only if the circumstances require a piercing of the

corporate veil. Id. at 58. Since Alman conceded that there

was no factual basis to pierce the corporate veil of George

Mfg., Id. at 58, n.4, the District Court entered judgment

for Kalell.

Shortly after the District Court allowed Kalell’s Cross

Motion for Summary Judgment, the United States Court

of Appeals for the First Circuit issued its opinion in a

case which presented issues virtually identical to those in

George Mfg. Corp. See, Massachusetts Laborers’ Health and

Welfare Fund v. Starrett Paving Corp., 845 F.2d 23 (1st Cir.

1988), (“Starrett”). The Opinion in Starrett is reproduced

as an appendix to the petition at pages A-2 to A-15.

In Starrett, the United States Court of Appeals for the

First Circuit adopted the reasoning of the District Court

in George Mfg. Corp., and held that, absent factors which

would justify “piercing the corporate veil”, a corporate

officer or shareholder could not be held personally liable

for unpaid contributions because such an individual was

not “obligated to make contributions to a multiemployer

plan under the terms of the plan or under the terms of a

collectively bargained agreement,” as required by 29

U.S.C. § 1145. 845 F.2d at 25.

Alman filed an appeal from the District Court’s judg-

ment in favor of Kalell. On July 21, 1988, the United

States Court of Appeals for the First Circuit granted

Kalell’s Motion for Summary Disposition and affirmed

the judgment of the District Court. The Memorandum

and Order of the Court of Appeals, which is reproduced

as an appendix to the petition at page A-1, made plain

that its decision was based on its earlier holding in

Starrett.

On December 15, 1988, Petitioner Alman sought

review of the decision below by filing a Petition for Writ

of Certiorari to the United States Court of Appeals for the

First Circuit.

B. Statement of Facts

The District Court summarized the facts in this case

in its Memorandum. Briefly stated, George Kalell was the

sole shareholder and president of George Mfg., a Massa-

chusetts corporation engaged in the business of garment

manufacturing in Boston, Massachusetts. George Mfg.

was a party to a collective bargaining agreement with an

affiliate of the International Ladies’ Garment Workers’

Union. George Kalell was not a party to the collective

bargaining agreement and signed the agreement solely in

his capacity as president of George Mfg. The collective

bargaining agreement required George Mfg. to contribute

to the Funds of which petitioner Alman is a trustee.

George Mfg. experienced financial problems and

became delinquent in its contributions to the Funds.

George Mfg. eventually terminated its operations, at

which time it owed the Funds $119,359. As the Funds

concede, nothing in Kalell’s dealings with George Mfg.

would allow the Funds to “pierce the corporate veil”.

George Mfg. Corp., 680 F.Supp. at 58, n.4.

REASONS FOR DENYING THE WRIT

The Court should deny certiorari because the petition

does not present a significant issue of constitutional inter-

pretation or an important question of federal law. The

decision of the United States Court of Appeals is not in

conflict with other decisions of the Circuit Courts of

Appeals, not in conflict with Congressional intent as

expressed in ERISA and not in conflict with prior deci- 7

sions of the United States Supreme Court. Further, there

is no connection between this case and any case pending

before this Court. There is no compelling reason to grant

the petition and hear this case.

A. There is No Constitutional Issue or

Important Question of Federal Law

The Petition does not present the Court with any

constitutional issue. Instead, Petitioner seeks review of

the decision issued by the United States Court of Appeals

for the First Circuit which, by its reliance upon Massa-

chusetts Laborers’ Health & Welfare Fund v. Starrett Paving

— ee

Corp., 845 F.2d 23 (1st Cir. 1988), adopted Starrett’s hold-

ing that corporate officers or shareholders could not be

liable for contributions owed by the corporation to a

multiemployer fund absent facts sufficient to “pierce the

corporate veil.” The Petitioner opposed this interpreta-

tion of ERISA in the District Court and in an amicus curiae

brief filed with the Court of Appeals in Starrett, as well as

in a brief filed in the Court of Appeals below. Alman now

seeks review of this interpretation of federal law in the

United States Supreme Court.

In place of the interpretation of federal law adopted

by the United States Court of Appeals for the First Cir-

cuit, the Petitioner proposes an interpretation of ERISA

that ignores the plain meaning of 29 U.S.C. § 1145, which

requires contributions to be made to multiemployer

funds only by an employer “who is obligated to make

contributions to a multiemployer plan under the terms of

the plan or under the terms of a collectively bargained

agreement.” See North Dakota v. United States, 460 U'S.

300, 312 (1983) (absent a clearly expressed legislative

intention to the contrary, language of a statute is ordi-

narily regarded as conclusive).

Petitioner ignores the plain meaning of this statute

and instead focuses on a flawed analogy between ERISA

and the Fair Labor Standards Act (“FLSA”). Petitioner

first notes that ERISA’s definition of “employer”, 29

U.S.C. § 1002(5) is very similar to that of the FLSA, 29

U.S.C. § 203(d). Petition at 21. Petitioner then observes

that the FLSA definition of “employer” has been inter-

preted to include controlling officers or shareholders

under an “economic reality” test. Petition at 22. See Don-

ovan v. Agnew, 712 F.2d 1509, 1511 (1st Cir. 1983) (officer

or shareholder who in economic reality controls the cor-

poration is individually liable for the nonpayment of

wages to the employees of the corporation). Given the

similarity between the ERISA and FLSA definitions of

“employer” Petitioner argues that the “economic reality”

test should also apply to cases under ERISA, thus impos-

ing personal liability upon a controlling shareholder or

officer when a corporation fails to make required contri-

butions to multiemployer funds.

Both the United States District Court for the District

of Massachusetts and the United States Court of Appeals

for the First Circuit decided that they could not ignore

the plain language of 29 U.S.C. § 1145 and adopt the

analogy suggested by Petitioner. There is no compelling

reason for the United States Supreme Court to review

those decisions.

Petitioner’s analogy between the FLSA and ERISA is

fatally flawed because it fails to recognize the difference

between the liability-creating provisions of the FLSA, 29

U.S.C. § 206, and ERISA, 29 U.S.C. § 1145. The relevant

provision of FLSA provides in pertinent part that “every

employer shall pay to each of his employees . . . wages at

the following rates... .” 29 U.S.C. § 206(a).

This provision statutorily requires all employers to

pay certain wages,whether or not those employers are so

obligated by the terms of a collective bargaining agree-

ment. That being the case, once a court decides that an

individual officer or shareholder is an employer under

the FLSA, it inevitably follows that such individuals, like

all other employers, are bound to pay wages in accor-

dance with 29 U.S.C. § 206(a) and are personally liable if

they do not.

In contrast to the FLSA, the relevant provision of

ERISA, 29 U.S.C. § 1145, does not require all employers to

make contributions to multiemployer plans, only those

employers who are obligated to contribute under the

terms of a particular multiemployer plan or the terms of a

collectively bargained agreement. Since Kalell was not

obligated to contribute either by the terms of the plans or

of the collective bargaining agreement, he is not liable for

unpaid contributions. Thus, the question of whether or

not Kalell is an “employer” under 29 U.S.C. § 1002(5) is

not dispositive, because, even assuming that Kalell is an

employer, under the plain language of 29 U.S.C. § 1145 he

is not an employer who is obligated to contribute to the

Funds of which Petitioner is a trustee.

Petitioner claims that “[i]n the years since ERISA’s

passage, the Court has granted certiorari to hear a

number of cases involving key questions central to the

effectiveness [sic] administration of the statute.” Petition

at 19. The simple response to this argument is that this

Court has often denied certiorari in cases involving pro-

visions of ERISA which, like 29 U.S.C. § 1145, apply only

to multiemployer plans. Most recently, the Court refused

to hear a case from the United States Court of Appeals for

the First Circuit which posed a very similar issue, i.e.

whether an individual shareholder or officer could be

held personally liable for a corporation’s withdrawal lia-

bility under ERISA, absent facts sufficient to “pierce the

corporate veil” of the corporation. Debreceni v. Graf Bros.

Leasing, Inc., 828 F.2d 877 (1st Cir. 1987), cert. denied,

__ US. __, 108 S. Ct. 1024 (1988). Certiorari has also

been denied in other cases involving questions of first

impression under the multiemployer provisions of

ERISA. See, Trustees of the Amalgamated Insurance Co. v.

Geltman Industries, Inc., 784 F.2d 926 (9th Cir. 1986), cert.

denied, 479 U.S. 822 (1986) (denial of certiorari where

issue was the application of 29 U.S.C. § 1405(a) and (b),

which provide two different methods of limiting the

withdrawal liability claims of multiemployer pension

plans).

B. There is No Conflict in the

Circuit Courts of Appeals

The Petition for a Writ of Certiorari should be denied

since there is no split of opinion in the Circuit Courts of

Appeals which the United States Supreme Court should

resolve. Rules of the Supreme Court of the United States,

Rule 17.1(a). The decision of the United States Court of

Appeals for the First Circuit is consistent with those of

the three other Court of Appeals which have directly

addressed this issue. In Solomon v. Klein, 770 F.2d 352 (3d

Cir. 1985), the United States Court of Appeals for the

Third Circuit, using an analysis virtually identical to that

of the District Court in George Mfg. Corp., rejected the

FLSA analogy relied upon by the Petitioner, holding that

“in matters of statutory construction of ERISA our

responsibility is to ascertain the intention of Congress in

ERISA and not its intention in enacting a separate federal

statute.” Id. at 355. A similar conclusion was reached by

the United States Court of Appeals for the District of

Columbia Circuit in Int'l Brotherhood of Painters v. George

A. Kracher, Inc., 856 F.2d 1546 (D.C.Cir. 1988). In Kracher,

the Court of Appeals cited Starrett with approval and

relied upon reasoning very similar to that of the District

Court in George Mfg. Corp. and the Court of Appeals in

Starrett. 856 F.2d at 1549 and 1550, n.26. The United States

Court of Appeals for the Ninth Circuit has reached a

similar conclusion. Operating Engineers Pension Trust v.

Reed, 726 F.2d 513 (9th Cir. 1984).

As a result, in what may be the most important

consideration in determining whether or not to grant

certiorari, the Circuit Courts of Appeals are in complete

agreement.

C. There is No Conflict with

Congressional Intent

The Petition for Writ of Certiorari should be denied

because there is no conflict between the decisions of the

United States Court of Appeals for the First Circuit in

George Mfg. Corp. and Starrett and the intent of Congress

in enacting ERISA, particularly Section 515 of ERISA, 29

U.S.C. § 1145, the provision crucial to this case. In Star-

rett, the United States Court of Appeals for the First

Circuit reviewed the legislative history of 29 U.S.C.

§ 1145 and found that the “legislative history .. .

indicates that the language means what it says.” 845 F.2d

at 25. The legislative history is replete with statements

which make it plain that this section only imposes a duty

to contribute on “employers that are already contrac-

tually obligated to make contributions to multiemployer

plans.” Staff of Senate Committee on Labor and Human

Resources, 96th Cong., 2d Sess., the Multiemployer Pen-

sion Plan Amendments Act of 1980: Summary and Anal-

ysis of Consideration at 44 (Comm. Print 1980). Thus

Petitioner is in error when he argues that the decision in

Starrett “produces an illogical result at variance with the

statute’s plain meaning and its broad remedial pur-

poses.” Petition at 22.

D. There is No Conflict with Prior

Decisions of this Court

Petitioner argues that the decision of the Court of

Appeals in Starrett misapprehends the decision of this

Court in Laborers Health and Welfare Trust Fund v. Advanced

Lightweight Concrete Co.,__ U.S. __, 108 S. Ct. 830 (1988).

In the first place, even a cursory review of Starrett dem-

onstrates that the Court of Appeals’ discussion of

Advanced Lightweight Concrete was not central to its deci-

sion, but merely one of many reasons for accepting the

plain meaning of 29 U.S.C. § 1145, i.e. that the statute

only applies to employers who are contractually obli-

gated to contribute to multiemployer plans. The Court of

Appeals was correct when it took note of the fact that this

Court had held in Advanced Lightweight Concrete that 29

U.S.C. § 1145 only permits multiemployer plans to bring

suit for contractually required contributions, as opposed

to contributions which might be due under Section 8(a)(5)

of the National Labor Relations Act, 29 U.S.C. § 185(a).

__ U.S. at __, 108 S. Ct. at 835 (1988).

E. There is No Connection Between this Case

and Any Case Pending Before this Court

Petitioner asserts that this case should be considered

in conjunction with Commonwealth v. Morash, 402 Mass.

287, 522 N.E.2d 409, cert. granted, vs. . , eS. G2.

53 (1988). Petition at 25. However, as Petitioner freely

acknowledges, the issue presented by Morash is simply

whether a Massachusetts statute imposing criminal pen-

alties for non-payment of vacation pay is preempted by

ERISA. Petition at 26. Morash does not raise any of the

issues involved here, nor does it interpret the various

statutory provisions involved in George Mfg. Corp. Con-

versely, George Mfg. Corp. does not deal with preemption

under ERISA. The only thing that George Mfg. Corp. and

Morash have in common is that both involve ERISA,

hardly a reason for the Court to grant certiorari in this

case.

CONCLUSION

The Respondent, George Kalell, respectfully urges

that the Petition for Writ of Certiorari to the United States

Court of Appeals for the First Circuit be denied as there

is no constitutional issue, no conflict among the Circuit

Courts of Appeals, no conflict with Congressional intent

and purpose, and no conflict with prior decisions of this

Court created by the decision of the United States Court

of Appeals for the First Circuit in Alman v. George Mfg.

Corp. The Petition for a Writ of Certiorari to the United

States Court of Appeals for the First Circuit should be

denied.

Respectfully submitted,

Jay L. FiAL-Kow

STEPHEN M. SHEEHY

Howarpb M. Brown

Kaye, FIALKow,

RICHMOND & ROTHSTEIN

100 Federal Street

Boston, MA 02110

(617) 482-6800

January 18, 1989 Counsel for Respondent

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.