# Petition for Writ of Certiorari — Charles J. Rogers Construction v. Trustees for Michigan Carpenters Council Health & Welfare Fund > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_2794%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1991 - **Citation:** 502 U.S. 982 ## Text 9 i “298 F| YS Case No. gecice OF THE CLERK IN THE SUPREME COURT OF THE UNITED STATES October 1990 Term CHARLES J. ROGERS CONSTRUCTION, a Michigan Corporation, Petitioner, Vv TRUSTEES FOR MICHIGAN CARPENTERS COUNCIL HEALTH AND WELFARE FUND, Respondent.. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT SOLNER & SOLNER, P. C. Robert J. Solner, Counsel of record Attorneys for Petitioner 30300 Telegraph Road Suite 280 Birmingham, Mi. 48010 (313) 647 8250 E. R. WHINHAM Attorney, of counsel 321 S. Main Street Suite 213 Ann Arbor, Mi. 48)]04 (313) 996 5530 THE QUESTION PRESENTED FOR REVIEW WHETHER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 PREEMPTS STATE CORPORATE REORGANIZATION LAW ? TABLE OF CONTENTS The Question Presented on Review. - - - i Table of Contents . +--+ ++ ++ 7° oii Table of Authorities. - +++ +s + iii-v The Prior Opinions in this Case. +s: - 1 Grounds on Which the Jurisdiction of the Supreme Court of the United States is Tewomed «. «ce ese eee 8 2 The Statutes Which are Involved dn this Case .-<.-++-+e«sreeee 8 * -2-8 Concise Statement of the Case. - - -8-18 Argument. .<--+<+«+<+*«ee*rseee es 19-25 Relief. 7. * o e. . 7. * . +. . . ad . s . -26 . N ~] Index to Appendix BQmoenGiz. . «see e eee 8 Oe la-219a ii TABLE OF AUTHORITIES Cases page Deiches v Carpenters Health and Welfare Fund, 572 F.Supp 766 PPE? . os 6 6 6's « « eo we « « 26 FMC Corporation v Holliday, uv. S. e 111 S.Ct. 403 (1990) . .. 23 Fort Halifax Packing Co. v Coyne, 482 U. S. 1, 107 S.Ct. weeny oe uemm. 2 (1987) ....... 22 Goben v Barry, 703 P2d 1378 EE ee Ingersol-Rand Co v McClendon, U. Be ’ 111 3-.Gtb. 476 Dees bs « Ss 6 6 « e 20,21,23,24 Mackey v Lanier Collection Agency & Service, Inc., 486 U. S. 825, 108 S.Ct. 2182, er > | Minority Employees v Tennessee Dep't of Employment Sec., 901 F.2d 1327, cert. denied, oe we Si 8.66. 220, iii 112 L.Ed.24d (1990). ° ° o ° . 7 @ ° e 10 Planned Consumers Marketing v Coats and Clark 522 NE2d 30) (Ct of App NY 1988) - - +++ +++. 24 Trustees of Michigan Carpenters Council Health and Welfare Fund v cC. J. Rogers, Inc. 933 F.2d 376 CIGSR). «§ « ee 0 oS 6 t 6 e@ BeSOsti ees Torres v Oakland Scavenger Co., 487 We Re 312, 108 S.Ce-« 2405, 101 L.Ed2d 285 (1988) - - -. +e -+-e- 9 Statutes 28 usc 1254 (1) ° . . ” . . . * . . . 2 Employees Retirement Income Security Act. . .16,18,19,20,21,22,23,24 Sec. 502; 29 USC 1132. ... .- 9,16 Sec. 514; 29 USC 1144. . .. .18,24 Labor Managément Relations Act Sec. 301; 29 uSC 185 ...+-+e-- 9 Sec. 302; 29 USC 186 ......- 9 Michigan Business Corporations Act; MCLA 450.1101-450.2098. . ...... 12 iv Sec. 204; MCLA 450,1204. . Sec. 862; MCLA 450.1862. . Court Rules Federal Rules of Appellate Procedure oc | ae a a a oe ee PRIOR OPINIONS IN THIS CASE The United States Court of Appeals for the Sixth Circuit decided this case on May 10, 1001 and its opinion is reported in 933 F.2d 376 and reproduced in the Appendix to this Petition for a Writ of Certiorari. The decision of the Court of Appeals was a review of a decision of the United States District Court for the Western District of Michigan. There were several opinions and orders of the District Court which are pertinent to this Petition for a Writ of Certiorari. None of them were published. They are reproduced in the Appendix and are identified by title and date in the Index to the Appendix. GROUNDS ON WHICH THE JURISDICTION OF THE SUPREME COURT OF THE UNITED STATES IS INVOKED The decision of the United States Court of Appeals for the Sixth Circuit was entered on May 10, 1991. The statute which confers jurisdiction on this Court is 28 U. S. C. 1254 (1). THE STATUTES WHICH ARE INVOLVED IN THIS CASE 29 U. S. C. 1144 (a) Except as provided in subsection (b) of this section, the provisions of this title and title IV shall supersede any and all state laws insofar as they now or hereafter relate to any employee benefit plan described in section 4 (a). 29 U. S. C. 1144(b) (2) (A) Nothing in this title shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking or securities. The Michigan Business Corporations Act, Section 204; MCLA 450.1204 Sec. 204. The articles of incorporation may contain the following provision or the substance thereof: When a compromise or arrangement or a plan of reorganization of this corporation is proposed between this corporation and its creditors or any class of them or between this corporation and its shareholders or any class of them, a court of equity jurisdiction within the state, on application of the corporation or of a creditor or a shareholder thereof, or on application of a receiver appointed for the corporation, may order a meeting of the creditors or class of creditors or of the shareholders or a Class of the shareholders to be affected by the proposed compromise or arrangement or reorganization, to be summoned in such manner as_ the court directs. If a majority in mumber representing 3/4 in value of the creditors or class of creditors, or shareholders or class of shareholders to be affected by the proposed compromise or arrangement or a reorganization, agree to a compromise or arrangement or a reorganization of this corporation as a consequence of the compromise Or arrangement, the compromise or arrangement and the reorganization, if sanctioned by the court to which the application has been made, shall be binding on all the creditors or Class of creditors, or on all the shareholders or class of shareholders and also on this corporation. Michigan Business Corporations Act, Section 205; MCLA 450.1205 Sec. 205. (1) When the provision of 204 is included in the original articles of incorporation of a corporation, all persons who become creditors or shareholders thereof are deemed to have become creditors or shareholders subject in all respects to that provision, and it shall be binding upon them. (2) When that provision is inserted in the articles of incorporation, »y an amendment of the articles, all person who become creditors or shareholders of the corporation after the amendment becomes effective are deemed to have become creditors or shareholders subject in all respects to that provision, and it shall be binding upon then. (3) The circuit court may administer and enforce the provision and restrain, pendente lite, actions and proceedings against the corporation with respect to which the court so restraining has begun the administration or enforcement of the provision, and appoint a temporary receiver for the corporation and grant the receiver such powers as are deemed proper. The Michigan Business Corporations Act, Section 862: MCLA 450.1862 Sec. 862. (1) The corporation, in the manner provided in Section 861 but without limiting the generality or effect of that section, may amend or repeal its bylaws; constitute or reconstitute and Classify or reclassify its board of directors, and name, constitute or appoint directors and officers in place of, or in addition to any director or officer then in office; amend its articles of incorporation, and make any change in its capital or capital stock, or any other amendment, change or alteration, or provision authorized by this act; be dissolved, transfer any part of its assets, and merge or consolidate as permitted by this act, but in any of these cases a shareholder does not have a statutory right of appraisal of his shares; change the location of its registered office and remove or appoint a resident agent; authorize and fix the terms, manner and conditions of issuance of bonds, debentures or other obligations, whether or not convertible into shares of its capital stock of any Class, or bearing warrants or other evidences of optional rights to purchase or subscribe for shares of its capital stock of any class; and lease its property and franchises. (2) Irrespective of any other provision of this act, the corporation may issue its shares of capital stock and its bonds for the consideration specified in the plan or reorganization after confirmation of the plan. CONCISE STATEMENT OF THE CASE The Respondent and nine other voluntary unincorporated trust funds established pursuant to Section 302 of the Labor Management Relations Act; 29 U. S. C. 1001 et seq., brought this action under Section 301 of the Labor Management Relations Act; 29 DD. S. C. 185 and Section 502 of ERISA; 29 U. S. C. 1132 to collect claimed arrearages, penalties, interest, liquidated damages and attorneys' fees for unpaid employer contributions to ERISA benefit plans. The Petitioner and other business organizations and individuals were involved in the construction business and named by the Respondent and the other trust funds as defendants in the action described above. Pursuant to Rule 3(c) of the Federal Rules of Appellate Procedure, as applied by this Court in Torres -v. Oakland Scavenger Co., 487 U. 8S. 312 , 108 S.Ct 2405, 101 L.Ed.2d 285 (1988) and by the ~ Sixth Circuit Court of Appeals in Minority Employees v Tennessee _ Dep't of Employment Sec., 901 F.2d 1327 cert. denied, U. S$. , 111 S. Ct. 210, 112 L.Ed.2d 170 (1990), the Court of Appeals ruled that the only parties before it were the Petitioner and the Respondent. The Court of Appeals framed the issue, here pertinent, as follows: This case involves an appeal... from a final judgement that the Employee Retirement Income Security Act of 1974... , preempted state corporate reorganization law... . Trustees of Michigan Carpenters Council Health and Welfare Fund v C. J. Rogers, Inc. 933 F.2d 376, 377. Our jurisdiction - over the cross-appeal is therefore restricted 10 to the only named party, the Michigan Carpenters Council Health and Welfare Fund. Having determined that the defendant Construction is the only party properly before us on appeal, we further find that all issues on appeal are preserved with the exceptic: of the claim that the district court erred in finding that Inc. was the alter ego of Construction and Excavating since Inc. failed to perfect its right to appeal. However, our holdings are subject to the restriction that the outcome affects only Construction. On cross-appeal, all issues raised are preserved, once again with the condition that our findings are applicable only to the Michigan Carpenters Council Health and Welfare Fund. Michigan Carpenters Council, supra, at pp 380-381. 11 . aa PUBLISHER'S } ORIGINAL PAG} Two of the Defendants, Charles J. Rogers Construction Company (Construction) and Chas. J. Rogers Excavating, Inc. (Excavating) experienced financial difficulties in July of 1979. They petitioned the Circuit Court of Genesee County for an arrangement of unsecured creditors pursuant to the Michigan Business Corporations Act; MCLA 450.1101-450.2098. An initial plan of arrangement was approved by the required creditors as spelled out in Section 204 of the Michigan Business Corporations Act; MCLA 450.1204 (a majority in number representing 3/4 in value) and approved by the Genesee County Circuit Court on March 22, 1980.. Construction and Excavating were unable to perform the approved arrangement and a second plan was 12 NATION ILS NOT CONTINUOUS. proposed to the Genesee County Circuit Court; a reorganization in which the assets of Construction and Excavating would be transferred to a new Michigan Corporation, created by the second plan, C. J. Rogers, Inc. (Inc.). Inc. was incorporated on May 1, 1980. This second plan was also approved in the manner used for approval of the initial arrangement. The reorganization required Construction and Excavation to sell their tangible corporate assets (equipment) and assign there accounts receivable, some inventory and their uncompleted contracts to Inc. Inc. purchased tangible assets at fair market value, as distinguished from Salvage value, by the issuance of promissory notes and preferred stock. Inc. assumed certain secured debt of Construction and Excavating owed to a bank and ae bonding 14 company and other secured creditors represented by a creditors committee. Unsecured creditors were to be paid from the receipts on promissory notes made by Inc. to Construction and Excavating. The funds trustees, who were the plaintiffs in the action in district court, were given notice of the proceedings in the Genesee County Circuit Court and attended hearings concerning the proposals of the initial arrangement and the subsequent reorganization, but cid not participate in either of the plans approved by the state court under the authority of the Michigan Business Corporations Act. Two years after the plan for reorganization was in operation and Inc. was a going enterprise, the trustees of the various funds started the action in 15 this case in the United States District Court for the Western District of Michigan seeking unpaid ERISA contributions, interest, penalties, liquidated damages and attorneys fees as provided under ERISA Section 1132 (g) (A), (B), (C), and (D). from Contruction, Excavating, Inc., husband and wife, Willaim H. Leoni and Joanne Leoni, who held the stock of Construction, Excavation and Inc., either directly or indirectly, and two other construction enterprises in which the Leoni's had an interest. During the proceedings on the claims of the trustees of the several ERISA funds in the United States District Court for the Western District of Michigan, a Temporary Restraining Order was issued restraining any payment on the promissory notes that were to be used to make 16 payments to unsecured creditors of Construction and Excavating. This Temporary Restraining Order was vacated on August 29, 1985. The order vacating the Temporary Restraining Order expressly determined that the federal district court was not assuming jurisdiction of the reorganization plan in the state court, jurisdiction for which was determined to be in the Genesee County Circuit Court. A copy of this order is contained in the Appendix. It was evident that the reorganization plan approved by the state court created Inc. to allow for a continuation of the business activity of Construction and Excavating to create assets to pay creditors and to accomplish this purpose it was necessary that Inc. have no responsibility for the debts of the reorganized corporations other 17 than through the plan. Thus, it was the contention of the defendants, in the district court and in the Court of Appeals, that Inc. could have no liability to the ERISA trust funds for the cortributions owed to those funds’ by Construction and Excavating. The lower courts did not accept this contention based upon a legal conclusion that the provisions of Section 514 of ERISA; 29 U. S.C. 1114 (a), directed the preemption of the reorganization provisions of the Michigan Business Corporation Act and the determinations of the Genesee County Circuit Court made pursvant thereto. Because we believe such a conclusion is not within the contemplation of Section 514 as it has been applied by this and other courts, we bring this; Petition for a Writ of Certiorari. 18 ARGUMENT BECAUSE THERE IS NOTHING IN ERISA THAT GIVES UNSECURED CREDITORS OF CONTRIBUTORS TO ERISA BENEFIT PLANS A PREFERRED STATUS BECAUSE THE DEBT OWED IS FOR AN ERISA CONTRIBUTION, A DETERMINATION OF PREEMPTION OF STATE CORPORATE REORGANIZATION LAW BY ERISA IS NOT SOUND. There have been numerous decisions of this Court which have dealt with the question of ERISA preemption of state law. In determining that ERISA did preempt Michigan corporate reorganization law as contained in the Michigan Business Corporations Act and applied by a state court, the Sixth Circuit Court of Appeals placed significant reliance upon the 19 recent decision of this Court, Ingersol-Rand Co.v McClendon, U. S. », lll SS. Ct. 476 (1990). We believe that this reliance is misplaced. There is no relationship which creates a debt that does not significantly concern the creditor with the debtor's ability to pay. The determination of the Court of Appeals, 933 F.2d at p 383, that a corporation in state corporate reorganization would affect the ERISA plans' ability to measure the availability of funds and calculate benefit levels, etc. is reason to determine that preemption is required, is not sound. Any factor which has effect on ability to pay, has effect upon the creditor's ability to plan and spend. This does not make every generally applicable state law dealing with the debtor-credcitor relationship preempted 20 because the relationship arises in connection with an ERISA plan. In determining Ingersol-Rand, supra, at 111 S. Ct. 483, Justice O'Connor said: Notwithstanding its breadth, we have recognized limits to ERISA's pre-emption clause. In Mackey Vv Lanier Collection Agency & Service, Inc,, 486 U. S. 825, 108 S. Ct. 2182, 100 L.Ed.2d 836 (1988) the Court held that ERISA did not preempt a State's general garnishment statute even though it was applied to collect judgements against plan participants. Id., at 841, 108 S.Ct. at 2191. The fact that collection might burden the administration of a plan did not, by itself, compel pre-emption. Moreover, under the plain language 21 ———— of § 514(a) the Court held that only state laws that relate to *enefit plans are pre-empted. Fort Halifax Packing Co. v Coyne, 482 U. S. 1,23, 107 §.Ct. 2211,223-24, 96 L.Ed.2d 1 (1987). Thus, even though a state law required payment of severance benefits, which would normally fall within the purview of ERISA, it was not pre-empted because the statute did not require the establishment or maintenance of an ongoing plan. Id.,at 12, at 107 S.Ct., at 2217-18. Neither of these limitations is applicable to this case. We are not dealing here with a_generally applicable statute that makes _ no reference to, or indeed functions irrespective of, the existence of an ERISA plan. (Emphasis supplied) Nor is the cost of defending this lawsuit a mere administrative 22 burden. Here, the existence of a pension plan is a critical factor in establishing liability under the State's wrongful discharge law. As a result, this cause of action relates, not merely to pension benefits, but to the essence of the pension plan itself. Justice O'Connor, for the Court in Ingersol-Rand, supra, at lll S.Ct. 482, and previously in FMC _ Corporation Vv Holliday, UU. S- ___ 111 S.Ct. 403, 407, relates that basic to the resolution of a preemption question is the intent of Congress. We submit that it cannot be said with conviction that by enacting ERISA, Congress | intended to preempt generaily applicable state laws of corporate reorganization dealing with aiding a debtor corporation's ability to meet its obligations. 23 an saan CU There are decisions in addition to the ones identified in the Ingersol-Rand opinion, supra, which do not support the preemption determination, here. By way of example, and with no attempt at being exhaustive, we point to two state court of last resort cases that determined that generally applicable statutes dealing with the debtor-creditor relationship were not preempted by ERISA. These cases are Goben v_Barry, 703 P2d 1378 (Kan 1985) and Planned Consumers Marketing v Coats and Clark, 522 NE2d 30 (Ct of App. NY 1988). Of similar connotation is Deiches v Carpenters' Health and Welfare Fund, 572 F Supp 766 (D. NJ 1983). Lastly, we wish to challenge the determination of the Sixth Circuit Court of Appeals regarding presuetice as it relates to the provisions of ERISA contained in 29 U. S. C. 1144(b)(2)(A) 24 that preemption is forbidden because the law sought to be preempted deals with "securities." Our contention’ was dismissed by the Sixth Circuit Court of Appeals by reasoning that "securities" in the cited provision concerned only the marketing of securities, 933 F.2d at pp 383-384. While we believe that giving a narrow scope to a broad statutory definition is questionable, assuming the scope of the definition used by the Court of Appeals to be appropriate; examination of the provisions of Sectiuon 662 of the Michigan Business Corporations Act; MCLA 450.1862 shows that these provisions do deal with the marketing of securities within the purposes of a corporate reorganization. 25 RELIEF WHEREFORE, Petitioner prays that a Writ of Certiorari directed to the United States Court of Appeals for the Sixth Circuit be granted. Respectfully submitted, SOLNER & SOLNER, P. C. Robert J. Solner Attorneys for Petitioner 30300 Telegraph Road Suite 280 Birmingham, Michigan 48010 (313) 647 8250 E. R. WHINHAM Attorney, of counsel 321 S. Main Street Suite 213 Ann Arbor, Michigan 48104 (313) 996 5530 INDEX TO APPENDIX Decision of the Court of Appeals of May 10, 1991 . .... +. .-+. 1a-62a Order of District Court Vacating Temporary Restraining Order of August 9, 1985 . . . . ° . . . ° 63a-65a District Court Findings of Fact and Conclusions of Law of November 20, 1985 ....... . 66a-155a Opinion and Order of the District Court of December 27, 1988 .. 156a-197a District Court Judgment of December 27, 1988 a i . . . . . 7 ° . . . a 198a-20la District Court Opinion and Order Re Altering or Amending Judgment of February 20, 1989 .... . 202a-216a District Court Amendment to Judgment of February 20, 1989 . 217a-218a Statement as to Corporate Parent or Subsidiary Relationship ...... . 219a 27 Appendix 1a Nos. 89 1411/1412 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT In Re: MICHIGAN CARPENTERS COUNCIL HEALTH AND WELFARE FUND, et al., Plaintiffs, TRUSTEES FOR MICHIGAN CARPENTERS COUNCIL HEALTH AND WELFARE FUND, Plaintiff-Appellee, Cross~Appellant (89-1412) Vv C.J. ROGERS, INC., a Michigan Corporation, et al., Defendants, CHARLES J. ROGERS CONSTRUCTION, a Michigan Corporation, Defendant-Appellant, Cross-Appellee (89-1411). ON APPEAL from the United States District Court for the Western District of Michigan Decided and Filed May 10, 1991 2a Appendix Before: KENNEDY, BOGGS and SUHRHEINRICH, Circuit Judges. SUHRHEINRICH, Circuit Judge. This case involves an appeal and cross-appeal from a final judgment that the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461, preempted state corporate reorganization law and _ that various defendants were liable to the plaintiffs below on an "alter ego" theory of liability for contributions owed to the plaintiff trust funds. For the reasons stated below, we AFFIRM in part and with respect to the district court's finding as to liquidated damages, VACATE and REMAND in part. I. FACTS Plaintiffs are ten voluntary unincorporated trust funds’ established ae Appendix 3a pursuant to Section 302 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 186, and ERISA. The funds provide health, retirement, and education benefits for employee beneficiaries ‘of the defendant corpora*ions. Plaintiffs brought this action to collect $500,000 in alleged arrearages and penalties, and to compel defendants to keep current on their contributions, under collective bargaining agreements which obligated defendants to make periodic contributions for the benefit of their employees. Defendants, who are or were all generally in the construction business, included Charles J. Rogers Construction Company ("Construction"), C.J. Rogers, Inc. ("Inc."), Chas. J. Rogers Excavating, Inc. ("Excavating"), and W.P.M., Inc., all corporations organized under Michigan law; C.J. Rogers-Cooper, a joint venture which operated in Michigan in the mid-1970's; and William H. Leoni, a building 4a Appendix contractor who is the president of Inc., Construction, and Excavating; and is also the sole shareholder of LERO Corporation, a holding corporation which owns a majority of the shares of stock of Construction and Excavating. Both Excavating and Construction were incorporated by Charles J. Rogers as small, family-owned and ssevenes corporations. Before 1975, controlling interests’ in Excavating were held by Charles J. Roger's two sons, Charles K. Rogers and Lawrence P. Rogers, although other family members held lesser amounts of stock. William H. Leoni had been an employee of Construction since 1952, and until 1975, held a small block of stock in Excavating.' William H. Leoni Sr. is the son-in-law of Charles J. Rogers. Ee Appendix 5a In 1974, Excavating found itself in financial straits and without operating funds. Charles K. and Lawrence P. each agreed to loan Excavating $100,000 in return for promissory notes with face values of the same amount and secured by Excavating's accounts receivable. In addition, Leoni assumed the role of active manager. Difficulties continued and Leoni agreed to buy out the positions of the other shareholders in both Construction and Excavating. It was at this time that LERO Industries, Inc. was incorporated to be a holding company for the stock of the two Rogers' companies. According to the terms of the agreement executed on May 20, 1975, Excavating and Construction agreed to redeem all outstanding shares of their stock for $646,000, and Leoni personally guaranteed the companies' obligations. The agreement further provided that at the closing of the deal, the debts to Charles K. and Lawrence 6a Appendix P. would be discharged by payment to them of $50,000 each. Leoni became president of both companies upon the sale and his wife, Joanne, became the owner of 100% of Construction's stock and 98% of Excavating's stock. At this time, Joanne and William Leoni paid the Rogers brothers $50,000 each for the promissory notes pursuant to the terms of the May 20, 1975 contract. Although the agreement itself stated that the notes would be discharged at the time of the closing, the notes were actually assigned to the Leonis, and remained outstanding debts of Excavating. The promissory notes had been, and continued to be, secured by Excavating's accounts receivable. The companies' financial difficulties continued, leading them to petition the Genesee County Circuit Court in Flint, Michigan, in July of 1979 for an arrangement of unsecured creditors pursuant to the Appendix 7a Michigan Business Corporations Act, Mich. Comp. Laws §§ 450.1101-450.2098 ("the Michigan Act"). Under Michigan law, if a three-fourths majority of creditors in value agree to a compromise, and receive the sanction of the court to which application was made, the compromise is binding on all creditors of the corporation. Mich. Comp. Laws § 450.1204. At that time, the state judge enjoined all creditors of Construction and Excavating from filing any suit against the companies to collect debts owed and from enforcing any lien against the defendant companies. Among the numerous unsecured obligations that had become delinquent were contributions owed by defendants to plaintiffs pursuant to collective bargaining agreements between defendants and plaintiff funds. The plan of arrangement filed with the circuit court proposed to pay off the general unsecured creditors over varying Ba Appendix periods of time, with a 100% payoff to be made to electing creditors over ten years. In accordance with the state court's order, the two companies notified all of their creditors, both secured and unsecured, of the reorganization and submitted a list of these creditors to the court. The initial plan of arrangement submitted jointly by excavating and construction was approved by the required three-fourths majority of the. unsecured creditors, and by the state court on March 22, 1980. Plaintiffs received notice of the plan but did not participate in the arrangement. Construction and Excavating were unable to perform the planned compromise and arrangement. A second plan was then proposed in the state court in which the assets of the two companies would be transferred to a new Michigan corporation, C.J. Rogers, Inc. ("Inc."). This new plan was approved by the required three-fourths Appendix 9a majority of the unsecured creditors and by the state court. Inc. was incorporated on May 1, 1980. Once again, plaintiffs received notice of the second proposed plan, but did not participate in the arrangement. Inc. was capitalized in the following manner. Both Excavating and Construction sold all of their corporate assets and assigned the accounts receivable, inventory, and uncompleted contracts to Inc. Inc. purchased these assets at their fair market value in consideration for two ten-year secured promissory notes given by Inc. to Excavating and Construction. Construction and Excavating were issued $1 million of preferred stock with an indefinite redemption period as payment for’. the accounts receivable and inventory. In addition, Joanne Leoni executed a subscription agreement to purchase 200,000 shares of common stock of Inc. for either cash or property. In return, she assigned 10a Appendix to Inc. the two promissory notes that she held as assignee of the Rogers brothers. Each of the notes, as previously stated, had a face value of $100,000 and were secured by certain accounts receivable of Excavating. Mrs. Leoni became the sole shareholder of Inc. Inc. called for payment of the subscription agreement on October 14, 1980, the date upon which the circuit court and majority of the new creditors approved the sale of assets to Inc. By this time, the accounts receivable securing the two promissory notes had been paid, thereby fulfilling the precondition to Inc.'s creation. The new plan was approved by a majority of the new creditors and the state court. In May 1983, the plaintiffs filed this action in federal district court seeing unpaid contributions and injunctive relief pursuant to collective bargaining agreements Appendix 11a with Construction and Excavating and from Inc. and Leoni as alter-egos of these two companies. On November 20, 1985, the district court rendered its findings of fact and conclusions of law as required by Fed. R. Civ. P. 52(a), finding that: (1) defendants were liable tc plaintiffs for unpaid contributions, interest, liquidated damages, and attorney fees under 29 U.S.C. § 1132(g) (2) (A), (B), (C) and (D); (2) Inc. was the alter-ego of Construction and Excavating; (3) defendant Leoni was not personally liable for the unpaid contributions; and (4) plaintiffs' liquidated damages claims could not exceed the 20% statutory limit of the delinquent contributions of defendants, and that it was irrelevant what type of assessments -- penalty or audit -- plaintiffs could have levied against defendants. A final judgment was entered in favor of plaintiffs for unpaid contributions in the amount of 12a Appendix $100,904.68, interest in the amount of $96,643.56, liquidated damages in an amount equal to the interest, together with attorney fees, costs, and post judgment interest. The district court denied the defendants' motion to alter or amend the judgment on February 22, 1989. On appeal, the defendants assert that the district court erred in holding that Inc. is liable under an alter-ego theory of liability; in applying ERISA rather than state reorganization provisions; and in refusing to offer equitable relief under 29 U.S.C. § 1132 (g) (2) (E). On cross-appeal the plaintiffs allege error in the district court's refusal to find defendant Leoni personally liable. The plaintiffs further allege that the district court erred in holding that’ the liquidated damages available under 20 U.S.C. § 1132 (g) cannot exceed 20% of the total delinquent contributions owed by the defendants. It is Appendix 13a also contended that the 20% referred to in this section deals with an annualized figure rather than a flat 20% of the amount of contributions due and owing regardless of the period that has elapsed between the time they were due and the ultimate judgment entered in the case. II. APPELLATE JURISDICTION An initial matter is the extent to which we may entertain jurisdiction over the appeal and cross-appeal, given that both the notices of appeal in this case merely employe the term "et al." to designate the respective appealing parties. Rule 3(c) of the Federal Rules of Appellate Procedure provides in pertinent part that "[tjhe notice of appeal shall specify the party or parties taking the appeal," and further provides that "[{a)n appeal shall not be 14a Appendix dismissed for informality of form or title of the notice of appeal." [In Torres v. Oakland Scavenger Co., 487 U.S. 312 (1988), the Supreme Court held that use of the term "et al." to designate parties to an appeal fails to comply with the specificity requirement of Rule 3(c), and that this failure creates a jurisdictional bar: "“"[t]jhe failure to name a party in a notice of appeal is more than excusable ‘informality'; it constitutes a failure of that party to appeal." 487 U.S. at 314. In Minority Employees v. Tennessee Dep't of Employment Sec. 901 F.2d 1327 (6th Cir.), cert denied, 111 S. Ct. 210 (1990), we held that, because the failure to specify a party is a jurisdictional defect, we were required to apply the decision in Torres retroactively. Id. The defendants filed their notice of appeal on March 20, 1989, The relevant portion of the caption reads as follows: a pe tm Appendix 15a "MICHIGAN CARPENTERS COUNCIL HEALTH & WELFARE FUND, et al., Plaintiffs, v. et al., Defendants." The body of the notice states as follows: "Notice is hereby given that Defendants, Charles J. Rogers Construction Company, et al., in the above case no. G83- 582 CA5, hereby appeal to the United States Court of Appeals for the Sixth Circuit...." Under Torres and Minority Employees, it is clear that the only defendant properly before us in this appeal is Charles J. Rogers Construction Company ("Construction") since it is the only party designated in the caption and body of the notice of appeal. The notice of cross-appeal, which is governed by Rule 4(a)(3) of the Federal Rules of Appellate Procedure, is similarly defective. In the notice of cross-appeal, the caption appears as follows: "TRUSTEES FOR MICHIGAN CARPENTERS' COUNCIL HEALTH AND WELFARE FUND, et al [sic], Plaintiffs, v. 16a Appendix CHARLES J. ROGERS CONSTRUCTION CO., et al [sic], Defendants;" and the body of the notice states that "Notice is hereby given that plaintiff TRUSTEES FOR MICHIGAN CARPENTERS COUNCIL HEALTH, [sic] et al, 2 Under a Torres and hereby cross-appeals.... Minority Employees analysis, the notice fails to meet the specificity requirement of Rule 3(c), and therefore "constitutes a failure of that party to appeal." While it could be argued that the specificity requirement of Fed. R. App. P. 3(c) applies only to the initial notice of appeal, we conclude that the broad language of Torres also encompasses Rule 4(a)(3). See Young Radiator Co. v. Celotex Corp., 881 2 F.2d 1408, 1416 (7th Cir. 1989) (noting that “The original notice of cross-appeal erroneously stated that "Defendant CHARLES J. ROGERS CONSTRUCTION COMPANY, INC., et al [sic]," was the party cross-appealing to this court. The record reveals the counsel for plaintiffs corrected that error on April 3, 1989, within the jurisdictional time limits. See Fed. R. App. P. 4(a) (3). Appendix 17a the Torres opinion made clear that the requirements of both Rules 3 and 4 must be satisfied as to each party); Stockstill v. Petty Ray Geophysical, 888 F.2d 1493, 1496 (5th Cir. 1989) (same). Our jurisdiction over the cross-appeal is therefore restricted to the only named party, the Michigan Carpenters Council Health and Welfare Fund. Having determined that the defendant Construction is the only party properly before us on the appeal, we further find that all issues on appeal are preserved with the exception of the claim that the district court erred in finding that Inc. was the alter ego of Construction and Excavating Since Inc. failed to perfect its right to appeal. However, our holders are subject to the restriction that the outcome affects only Construction. On cross-appeal, all issues raised are preserved, once again with the condition that our findings are 18a Appendix applicable only to the Michigan Carpenters Council Health and Welfare Fund (hereinafter "Michigan Carpenters" or "the Fund"). III. THE APPEAL Construction's first argument on appeal is that the district court erred in holding that ERISA preempted Michigan's’ state corporate reorganization laws. ERISA is a comprehensive statutory framework which governs the administration of private employee pension and benefit plans. Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 525 (1981). Section 514 of ERISA explicitly preempts state law, providing in pertinent part that "the provisions of this subchapter...shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...." 29 U.S.C. § 1444(a). State laws are defined to include "all laws, decisions, rules, regulations, or Appendix 19a other State action having the effect of law...." 29 U.S.C. § 1144(c)(1). The preemption provision is designed to "‘provide for a uniform source of law,'" Whitworth Bros. Storage Co. v. Central States,794 F.2d 221, 233 (6th Cir.) (quoting H.R. Rep. No. 93-533, 93d Cong., 2d Sess., reprintedin 1974 U.S. CODE CONG. & ADMIN. NEWS 4655), cert. denied, 479 U.S. 1007 (1986), and is "‘intended to apply in its broadest -sense to all actions of State or local governments,' and to ‘reserv[e] to Federal authority the sole power to regulate the field of employee benefit plans.'" Kentucky Laborers District Council Health and Weifare Fund v. Hope, 861 F.2d 1003, 1004 (6th Cir. 1988) (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 99 (1983). In Shaw the Supreme Court held that "[a] law ‘relates to' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a 20a Appendix plan." Shaw 463 U.S. at 96-97 (footnote omitted). Thus, not eniy are "state laws specifically designed to affect employee benefit plans," preempted, Shaw 463 U.S. at 98; but also any law that has_= any "connection with or reference to" the plan. Pilot Life Ins. v. Dedeaux, 481 U.S. 41, 47 (1987). See also Hope, 861 F. 2d at 1004. The Supreme Court recently reaffirmed this principle in Ingersoll-Rand v. McClendon U.S. 111 S. Ct. —— —_—— / 478 (1990), and FMC Corp. v. Holliday, _. U.S. __, 111 S. Ct. 403 (1990) (preemption clause is conspicuous for its breadth). . See also Mackey v. Lanier, 486 U.S. 825, 829-30 (1988). Notwithstanding, the Supreme Court has indicated that "[sjome state actions may affect employee benefit plans in too tenuous, remote, cr peripheral a manner to warrant a finding that the law ‘relates to' the plan." Shaw, 463 U.S. at 100 n.21; ——— / Appendix 21a See, e.g., Mackey, supra (ERISA did not preempt a state's general garnishment statute); For Halifax Packing Co. v. Coyne,482 U.S. 1 (1987) (severance pay statute not preempted); Aetna Life ins. Co. v. Borges, 869 F. 2d 142 (2d Cir.) (state escheat law not preempted), cer. denied,110 S. Ct. 57 (1989); Firestone Tire & Rubber Co. v. Neusser, 810 F.2d 550, 556 (6th Cir. 1987) (municipal income tax not preempted). Under Michigan law, a corporation may include in its articles of incorporation a provision which allows the corporation or a creditor or shareholder’ thereof, upon proposal that a compromise or arrangement plan of reorganization be effectuated between any of the parties, to apply to a court of equity jurisdiction within the state to order a meeting of the creditors or Class of creditors, or shareholders or class of shareholders to be affected by the proposed compromise or reorganization. 22a Appendix Mich. Comp. Laws § 450.1204. fThe statute further provides that: If a majority in number representing 3/4 in value of the creditors ... to be affected by the proposed compromise or arrangement or a reorganization, agree to a compromise, or arrangement or a reorganization of this corporation @as a consequence of the compromise or arrangement, ... if sanctioned by the court ... shall be binding on all the creditors or class of creditors ... and also on this corporation. id. Section 205 states that when the provision of Section 204 (Mich. Comp. Laws § 450.1204) is included in the original articles of incorporation or added by amendment, all persons who become creditors or shareholders thereof are bound by the provision. Mich. Appendix 23a Comp. Laws § 450.1205.° Once a plan of reorganization has been confirmed by the judgment of a court of competent jurisdiction, Section 861 of the Michigan Act authorizes the manner in which the plan or reorganization may be carried out. It states that such action by the corporation "may be taken, as directed in the judgment, by the receiver or trustee of the corporation appointed in the reorganization proceedings, or by any other- person designated by the court." Mich. Comp. Laws § 450.1861. Finally, Section 862 creates and defines the powers of corporation under the judicially confirmed plan of reorganization. Mich. Comp. Laws § 450.1862. A. 1. It is Construction's contention that the state corporate reorganization laws are not preempted by ERISA because they are not 24a Appendix inconsistent with any specific ERISA provisions and therefore do not defeat ERISA's purpose of providing for the uniform administration of employee benefit plans. Specifically, Construction argues’ that because ERISA is silent as to debtor- creditor relationships when a plan is solvent, it does not hinder the uniform application of an administrative scheme such as a state court reorganization plan. In support of its argument, Construction points out that ERISA contains specific legislation to regulate employer withdrawals from multiemployer pension plans. See Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 20 U.S.C. § 1381. Thus, from apparent congressional silence on the issue of debtor-creditor relations when the parties are solvent, Construction asks us to infer that such state regulation is permissible. This argument draws its force Appendix 25a from Mackey, supra, where the Supreme Court held that a generally applicable state garnishment law allowing creditors to garnish ERISA welfare benefits was not preempted. Noting that only pension funds were protected from garnishment, the Court held that it could be inferred from congressional silence that the legislature did not intend to extend a similar protection for welfare benefits. J. We do not find the instant situation analogous to Mackey. Construction's argument ignores the explicit language of section 515 of ERISA, which provides that every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or collective bargaining agreement, "shall to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement." 29 U.S.C. § 1145 (emphasis added). Further, 26a Appendix pursuant to section 502(g), 29 U.S.C. § 1132(g), a trustee of a plan may bring an action in federal district court to enforce those obligations. The requirement of § 515 is mandatory and unconditional. We therefore find that the Michigan Act conflicts directly with the provision to the extent it allows an employer unilaterally to alter its obligation to the plan in contravention of the contractually agreed- upon terms. Nor does the fact that MPPAA regulates employer withéwawsle from multiemployer plans advance Construction's argument. To the extent Congress wished to allow an employer to alter his obligations to a plan it enacted the MPPA, which provides a comprehensive statutory scheme regulating employer withdrawals from 3 multiemployer plans. We do not believe 3The MPPAA protects multiemployer plans by requiring withdrawing employers to pay the multiemployer fund a proportional share of the fund's "unfunded vested liability," Appendix 27a that an employer can avoid these stringent requirements through mechanisms created by state law. Nor are we persuaded ‘by Construction's citation to Fort Packing, supra, (Maine statute requiring a one-time severance payment to employees in the event of plant closings not preempted because it neither established nor required an employer to maintain an employee welfare benefit plan, and involved little more than a conditional one time obligation of writing a lump sum check); _ Borges, supra, (application of Connecticut's escheat law to ERISA covered benefit checks and drafts that had been issued but not collected not preempted because state law had no effect on insurance company's original determination of eligibility for benefits and economic and 29 U.S.C. § 1381. The fund's trustees have initial responsibility of determining all employee's allocable share of the unfunded vested benefit liability and to collect the amounts due. 29 U.S.C. § 1382. 28a Appendix administrative effect was therefore not substantial enough to warrant preemption) ; or Deiches v. Carpenters’ Health & Welfare Fund of Philadelphia, 572 F Supp. 766 (D.N.J. 1983) (New Jersey preference statute which allowed a receiver of an insolvent employer to avoid a preferential transfer of delinquent contributions owed to a welfare trust fund not preempted by ERISA since statute merely required return of certain employer's contributions to a plan and did not have any effect upon the rules, procedures or policies of the ERISA plan). Unlike those cases, each of which found that the effect of state laws on ERISA plans was too tenuous or remote to warrant preemption, we conclude that the application of the Michigan Act to the Fund would have a substantial ongoing effect on the sdniniareetion of the employee benefit plan affected by such an arrangement. Rather than having the amount Wiis. Appendix 29a of contributions owed by the employer determined by the plan's’ trustee in accordance with the parties' agreements and applicable federal law, the state provisions in essence shift those decisions to the administrator of the corporate compromise or reorganization. The amount of contributions received would therefore be subject to the presumable precarious financial condition of the reorganized corporation; and necessarily affect the plan's ability to calculate benefit levels, make disbursements, and monitor the availability of funds’ for benefit payments. See Fort Halifax Packing, supra, 482 U.S. at 9. Thus, we conclude that the district court did not err in treating the Michigan Act as preempted by ERISA. y In the alternative, Construction argues that the Michigan Act falls within an 30a Appendix exception to ERISA preemption under the "savings" clause, 29 U.S.C. § 1144(b) (2) (A), which provides: Except as provided in subparagraph (B),* nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities. Construction cecntends’ that because a reorganization or compromise effectuated pursuant to the Michigan reorganization provisions affects the rights of shareholders, noteholders, and holders of other debt instruments, all of which are classified as securities, the provisions "regulate ... securities." In support, Construction cites the definitional section of ERISA, which incorporates the definition “29 U.S.C. § 1144 (b)(2)(B), the "deemer" clause, is not relevant to the instant appeal. Appendix 31a of "security" found in 15 U.S.C. § 77(b) (1) of the Federal Securities Act of 1933. Construction's argument is without merit. Undisputedly, the provisions of the Michigan Act "relate to" and "affect" securities since the Michigan Act applies to corporations, which are financed by "securities" as broadly defined. Thus, any statutory provisicn which redefines a creditor's right in a corporation necessarily has an impact upon "securities." That is not to say, however, that the iehiene Act was designed to "regulate securities." To the contrary, the express purposes of the Michigan Act are to simplify and modernize the law governing business corporations; provide a general corporate form for the conduct or promotion of a lawful business; and to give’ special recognition to the legitimate needs of close corporations. Mich. Comp. Laws § 450.1103. Moreover, Michigan has adopted the Michigan 32a Appendix Uniform Securities Act, which became effective January 1, 1985.° This legislation "‘is designed to protect the public against fraud and deception in the issuance, sale, exchange, or disposition of securities within the State of Michigan by requiring the registration of certain securities and transactions.'" People v. Dempster, 396 Mich. 700, 704 (1976) (quoting Schmidt & Cavitch, MICHIGAN CORPORATION LAW, 1071 (1974). Thus it is clear that the Michigan Act does not "regulate securities" within the meaning of the savings clause. B. Construction's second argument on appeal is that the district court erred in refusing °The Michigan Uniform Securities Act replaced the 40-year old Michigan Blue Sky Law, 1933 PA 205. The Michigan Act substantially tracks the language of the Uniform Securities Act. -People v. Dempster, 396 Mich. 700, 704 (1976). rel tet Maen att . Appendix 33a to grant it "other equitable relief" pursuant to 29 U.S.C. § 1132(g)(2)(E). The section provides in pertinent part that in any action brought by a fiduciary on behalf of a plan to enforce section 1145, the court shall award the plan "such other legal or equitable relief as the court deems appropriate." 29 U.S.C. § 1132(g) (2) (E). Specifically, Construction argues that the district court failed to give appropriate equitable relief by refusing to assume jurisdiction over the state reorganization plan, and by awarding the plaintiff funds full return of their ‘claim of unpaid contributions, interest, liquidated damages, costs and attorney fees; a recovery four to five times greater than other unsecured creditors of Construction and Excavating will receive on their claims. First, it is clear from the unequivocal language of section 1132(g) (2) (E) that equitable relief is discretionary. To paraphrase the 34a Appendix section, the district court is not required to grant equitable relief unless and until it deems equitable relief appropriate. Second, given our disposition of the preemption issue on appeal, and _ the liquidated damages issue on cross-appeal, we conclude that the district court did not err . in denying equitable relief. rein rere | THE CROSS APPEAL ~ A. On cross-appeal, Michigan Carpenters argues that the district court erred in refusing to "pierce the corporate veil" to find defendant William Leoni personally liable for the willful signing of collective bargaining agreements on behalf of inactive company assets from Construction and Excavating to Mrs. Leoni for capitalization of Inc. A corporation is presumed to be a separate entity from its shareholders. Laborers’ Pension Trust Fund v. Sydney Weinberger Homes, 872 F. 2d 702, 704 (6th Cir. 1988) (citing Contractors Laborers, Teamsters & Engineers Health and Welfare Plan v. Hroch, 757 F.2d 184, 190 (8th Cir. 1985)). The corporate veil may be pierced, however, if the court finds "‘substantial reasons for 36a Appendix doing so'" after weighing the following factors: "(1) the amount of respect given to the separate entity of the corporation by its shareholders; (2) the degree of injustice visited on the litigants by recognition of the corporate entity; and (3) the fraudulent intent of the incorporators." Weinberger Homes, 872 F.2d at 704 (citation omitted).® This court has also noted that "deference to the corporate form may be particularly inappropriate in relation to ERISA because Congress enacted ERISA in part to protect employees who were being deprived of anticipated benefits by a corporate sham." Weinberger Homes, 872 F.2d at 705 In Weinberger Homes, the court provided a nonexhaustive list of specific factors including undercapitalization of the coloration, the maintenance of separate books, the separation of corporate and individual finances, the use of the corporate formalities and finally, whether the corporation is a sham. 872 F.2d at 704- 05 (citation omitted). See also N.L.A. B. v. Fullerton Transfer & Storage Ltd, 910 F.2d 331, 380 n. 13 (1990). Appendix 37a (citing Almanv. Danin, 801 F.2d 1, 3-4 (1st Cir. 1986). On appeal, we review the district court's findings of fact under a clearly erroneous standard of review. Fed. R. Civ. P. 52; Anderson v. City of Bessemer, N.C., 470 U.S. 564 (1985). "If the district court's account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently. id. at 573-74. When findings of fact are based upon assessments of witness credibility, "even greater deference" to the finder of fact is warranted, "for only the trial judge can be aware of the variations in demeanor and tone of voice that bear so heavily on the listener's understanding of and belief in what is said." id. at 575. 38a Appendix In support of its claim, Michigan Carpenters contends first that on several occasions defendant Leoni intentionally signed the wrong corporate entity to a collective bargaining agreement. The plaintiff claims that in November 1980, Leoni signed collective bargaining agreements under the names of the old companies. Excavating .and Construction, with full knowledge that these companies had been inactive since May 1980. It is further alleged that on February 6, 1981, Leoni personally signed the collective bargaining agreement for defendant Excavating when he knew the company was not in business. Michigan Carpenters also alleges that Leoni Clearly testified that his purpose was to gain "an advantage for the company," which the plaintiff argues was that the company would later claim that no such agreement existed and therefore no fringe benefits were owed. We ne Le Appendix 39a At trial, Leoni testified that the union's business manager, Gerald R. Hall, requested him to sign the agreement for "Rogers, Inc.", and that he did so with full knowledge that the company was dormant and not actively in business. It was Leoni's position that this contract executed on behalf of Excavating, should not bind Inc. Hall, on the other hand, testified that he had asked Leoni to sign on behalf of the "new Rogers company." The district court noted that if Hall's testimony were fully credited, it tended to show that Leoni knowingly attempted to deceive Hall by signing for a company which Leoni knew was not active. The court observed, however, that Hall later testified that he believed Leoni to be a man of his word and did not believe Leoni set up Inc. to evade his fringe obligations. In addition, Hall testified that he knew a new Rogers company had been formed and that he believed "Chas. 40a Appendix J. Rogers Inc." was the name of the new company, but that he never asked, nor did Leoni inform him of the new company's name. Hall also stated that he had seen paychecks with the names "Chas. J. Rogers Inc." and "C.J. Rogers Inc." during the period of April to September 1980. Furthermore, Hall testified that it would have been reasonable for Leoni to assume that he, Hall, knew as of February 1981, that C. J. Rogers, Inc. was the name of the new company. On the basis of this testimony, the. district court held that the plaintiffs below failed to show that Leoni acted with specific intent to deceive Hall. The court found that despite the plaintiffs' emphasis on Leoni's willingness to take advantage of Hall's ignorance of the new company's name in order to avoid creating contractual obligations for the new Inc., Hall himself conceded the adversarial nature of employer- union relationships. The court also stated ner ain Se dh Neher hls nig rk bbe DDT Ere ehe oo A bee a inline ist te Appendix 41a in light of the confusion hint attended Inc.'s creation, it was not surprising that Hall might have been confused as to the name of the new corporation, and that he might very well have asked Leoni to sign for Excavating, although intending to sign up Inc. The court further held that it was not implausible that Leoni sincerely believed Hall to be requesting» a contract with Excavating, as various witnesses testified that, although dormant, the two old companies could indeed recommence active operations. Thus, the court was unwilling to find fraud from "what may be characterized as sharp business practices, especially where there may have been some negligence on the part of Hall in not knowing the correct name of the entity with which he was trying to secure a contract." Upon review of the record, we find that the district court's findings of fact are supported by the record as a whole, and are 42a Appendix not clearly erroneous. - Moreover, we are especially hesitant to set aside the district court's findings when they are based on credibility determinations of the witnesses. Anderson, supra, 470 U.S. at 575. Next, Michigan Carpenters asserts that Leoni testified falsely before the state court judge that he was the sole shareholder of Excavating and Construction, since he owned slightly less than 100% of the shares of each company. With respect to this allegation, the district court noted also that witness Rene Ortlieb, the attorney who represented Construction, Excavating and Inc. during the state court reorganization, in his statements to the state court judge, also referred to Leoni as the "sole shareholder." The district court found that this was not a material misrepresentation, since the state court judge was attempting to elicit from Leoni concurrence in the Appendix 43a representations made that day by Ortlieb, the majority of which concerned other details of the reorganization. We find no basis in the record to disturb that finding. Michigan Carpenters' third contention is that during the reorganization, the defendants obtained a restraining order preventing all creditors from collecting obligations owed by the various defendants, and that while that order was in effect, Gefendant Leoni, according to his own testimony, paid over to Inc. for the benefit of Mrs. Leoni approximately $200,000 from the accounts receivable of the old companies, which she now claims is her capital contribution to Inc. The Fund contends that not only did Mrs. Leoni not file a claim with the state court, she was not even listed as a creditor. It argues that defendant Leoni's own exhibit reflects that the note was canceled at the real estate closing in 1975. In addition, 44a Appendix Michigan Carpenters asserts that even if Mrs. Leoni did receive the note, it was unenforceable and therefore invalid consideration for the new stock, since at the time it was paid in September 1980 it was not enforceable under the applicable statute of limitations. Finally, the Fund points out that the note in question had been carried on the corporate books as a "note payable-officer", and that Mrs. Leoni was never an officer, and that the note was payable to husband and wife. We find no support in the record for the Fund's argument. Tne initial order signed by the state court judge enjoined all creditors from enforcing their debts "until further order of the Court." There was testimony at trial that the restraining order was issued in part to allow the companies to work out a plan of arrangement. The state court approved the proposal to create Inc. at a hearing held on October 14, Appendix 45a 1980, based on representations by Ortlieb that all creditors had been apprised of the proposal and that most had approved. The district court specifically found that the Oversight Committee's recommendation to the state court judge to approve the sale of assets was based on full knowledge of the transaction by which the notes’ were assigned. The court based this conclusion on testimony elicited from the accountant who prepared the financial statements of the two companies during the pertinent time period, the attorney who was responsible for the mechanics of Inc.'s incorporation and the attorney for the Oversight Committee. With regard to the plaintiff's contention that these notes were surreptitiously diverted to Inc. without the knowledge or consent of the creditors or the state court, the district court found, and we agree, that: [T]he evidence simply does not support 46a Appendix that claim; if anything, the evidence solidly supports the finding that the transaction was scrupulously monitored by the creditors of the two companies and that their financial affairs were laid naked to all who had an interest in them. It simply strains credibility to find that the attorneys, accountants, and the large creditors, were unaware of the transaction, or, which must be plaintiffs' theory, that they somehow conspired to divert the notes to the Leonis' benefit. Further, testimony at trial indicated that the notation "note payable--officer" was made as an accounting convention. As correctly noted by the district court, the fact that the statute of limitations had run on the two demand notes did not erase the debt but merely prevented the creditor from enforcing his rights. SeeA Corbin, CORBIN Appendix 47a ON CONTRACTS § 8 (1963) (stating that a perfectly valid contract may become naa eer 5 DBs unenforceable by virtue of the statute of limitations but that the expiration of the period fixed by the statute does not make such a contract void but merely unenforceabie). Finally, the district court also found as to Inc. that the evidence showed that it was adequately capitalized. In reaching this conclusion the court relied on the testimony of a corporate law expert that the $200,000 invested by Mrs. Leoni was’ sufficient capitalization for Inc., since it allowed the company to obtain minimal bonding. Further, the district court stated that the $200,000 investment plus Inc.'s deferred- free credit rating enabled it to prequalify for $20 million dollars worth of state work. The plaintiffs offered no rebuttal testimony. In light of the foregoing, we find no basis for reversing the district Jiteacneaatimeiennstiemenil 48a Appendix” court's decision with respect to defendant Leoni. B. Michigan Carpenters' second issue on cross-appeal pertains to the district court's ruling on liquidated damages. Plaintiffs argued below that unpaid contributions in the amount of $187,363.73 ' and liquidated damages representing both late payments and audit assessments in the amount of $284,594.00 were due and owing. The district court noted that the liquidated damages requested by the plaintiffs would amount to roughly 150% of the unpaid contributions. It ruled that such an amount was in excess of that permitted by 29 U.S.C. § 1132(g), since liquidated damages may not exceed 20% of unpaid contributions. The district court also held that it was irrelevant what type of assessment - late payment or audit - plaintiffs might have Appendix 49a levied against the defendants, because the effect was still the same. In its findings of fact and conclusions of law the district court did not determine exactly how much was owed by whom, which particular contracts were binding upon which company, or make findings regarding whether in some instances the contributions had in fact been paid. Instead, the court simply asked the parties to submit itemized statements of damages, interest, and liquidated damages pursuant to the court's rulings and 29 3.S.C. § 1132(g)(2). After adjustments not relevant to the instant appeal. the court | awarded unpaid contributions in the amount of $100,904.68, prejudgment interest on the unpaid contributions in the amount of $96,643.56, and an amount equal to the interest as liquidated damages. On cross~appeal Michigan Carpenters argues that the late payment assessments requested 50a Appendix are for contributions that were voluntarily, but untimely, made by the defendants. Thus, the underlying contributions against which the late payments are assessed are allegedly not a part of the court's "unpaid contribution" figure. Likewise, Michigan Carpenters assets that the audit assessments are also based on contributions that in some instances have already been made. Michigan Carpenters therefore claims that its right to collect these amounts is independent of its right to collect liquidated damages on the unpaid contributions mandated by 29 U.S.C. § 1132(g) (2) (C).’ Michigan Carpenters' allegations require us to determine whether the Fund is entitled to liquidated damages in the form of audit or late payment assessments - in addition to those authorized by section 1132(g). Before 7In the complaint, the plaintiffs sought separate relief under ERISA and the various collective bargaining agreements. Appendix 51a we can determine whether the Fund is entitled to contributions outside of section 1132(g), we must analyze the scope of the term “unpaid contributions" as it is found in that section. Statutory interpretation is a question of law subject to a de novo OO em ee A ERS OO es ow review by this court. /nreVause 886 F.2d 794, 798 (6th Cir. 1989). In construing the statute, we must attempt to "ascertain the intent of Congress." jd. (citation omitted). Section 502 and 515 of ERISA, 29 U.S.C. §§ 1132 and 1145, as amended by the Multiemployer Pension Plan Amendments Act ("MPPAA"). Pub. L. No. 96-364, 94 Stat. 1208 (codified in scattered sections of 5, 26, & 29 U.S.C.) of 1980, §§ 1132(g) and 1145, govern the enforcement of employer contributions to employee pension and welfare trust funds. These sections provide a statutory remedy for a trust’ fund fiduciary suing to collect unpaid plan a le 52a Appendix contributions and até cesigned to "‘promote the prompt payment of contributions and assist plans in recovering the costs incurred in connection with delinquencies. '" Central States, Southeast and Southwest Areas Pension Fund v. Alco Express Co, 522 F. Supp. 919, 928 (E.D. Mich. 1981) (quoting Staff of Senate Comm. on Labor and Human Resources, 96th Cong., 2d Sess., Ss. 1976, The Multiemployer Pension Plan Amendments of 1980: Summary and Analysis of Consideration (Comm. Print. 1980) at 43-44). Section 515 provides: Every 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 shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of Appendix 53a such plan or such agreement. ded, tee 29 U.S.C. § 1145. Section 515 is reinforced by the remedial provisions of ERISA section 502(g): (2) In any action under this subchapter by a fiduciary for or on behalf of a plan to enforce section 1145 of this title in which a judgment in favor of the plan is awarded, the court shall award the plan- (A) the unpaid contributions, (B) intergst on the unpaid contributions, (C) an amount equal to the greater of (i) interest on the unpaid contributions, or (ii) liquidated damages provided for under the plan in an amount’ not in excess of 20 percent (or such higher percentage as may be lie eae ential 54a - Appendix permitted under Federal or State law) of the amount determined by the court under subparagraph (A), (D) reasonable attorney's fees and costs of the action, to be paid by the defendant, and (E) such other legal or equitable relief as the court deems appropriate. For purposes of this paragraph, interest on unpaid contributions shall be determined by using the rate provided under the plan, or, if none, the rate prescribed under section 6621 of Title 26. 29 U.S.C. § 1132(g) (2) (emphasis added). The language of Section 1132(g) is mandatory, and once the provision applies, the district court must award liquidated damages. See, e.g., Idaho Plumbers & Pipefitters v. United Mechanical Contractors, Inc., 875 F.2d 212, 215 (9th Cir. 1989); Central States, Southeast and Southwest Appendix 55a | Areas Pension Fund v. Gerber Truck Serv., Inc., 870 F.2d 1148, 1156 (7th Cir. 1989); feneigemeted ins. Fund v. Sheldon Hall Clothing, 862 F.2d 1020, 1023 (3rd Cir. 1988), cert. denied, 490 U.S. 1082 (1989); Penn Elastic Co. v. United Retail & Wholesale Corp., 792 F.2d oon os «ae Cis. 1986). The section provides that upon "a judgment in favor of the plan" the court shall award the plan the unpaid contributions" and "interest on the unpaid contributions." 29 U.S.C. § 1132(g) (2) (A) & (B). Thus, it is clear that the provisions of that section apply only if there were unpaid contributions on the date of the award. In reaching this conclusion we reject the decisions of those courts which state, often in dicta, that the provisions of section 1132(g)(2) apply at the time suit if filed. See, Idaho Plumbers & Pipefitters, 875 F.2d at 215; Carpenters & Joiners Welfare Fund v. Gittleman Corp., 875 F.2d 476, 478 (8th Cir. 1988) ; Carpenters Health and Welfare Fund of Philadelphia and L a 56a Appendix Vicinity v. Building Tech. Inc., 747 F. Supp. 288 (E.D. Pa. 1990); Bennett v. Machined Metals Co, 591 F. Supp. 600, 605-06 (E.D. Pa. 1984); Trustees of the Glaziers Local 963 Pension, Welfare and A prentice Funds v. Walker and Laberge Co. Inc, 619 F. Supp. 1402. 1405 (D.C. Mad. 1985). See also dhileeiie Amended and Restated Health Benefit Fund v. John Ryan Construction Co., 767 F.2d 1179, 1174 (5th Cir. 1985) (reasoning that a "judgment in favor of the plan" included district court's judgment in plans' favor on ancillary points so as to trigger mandatory assessment of § interest, penalty, and attorney ‘fees where plans sought both unpaid contributions and ancillary relief, despite the fact that the employer paid the delinquent contributions before judgment). We further hold that | as to liquidated damage assessments which are keyed to these "unpaid contributions," the remedy offered by section 1132(g) is exclusive. To recover liquidated damages outside of and in Appendix 57a addition to the statutory frame work of section 502(g) with its 20% limitation would allow a more expansive remecy than that authorized by the Congress. Thus, to the extent that the Fund's late payment and audit assessment figures reflect assessments based upon contributions which were still unpaid at the time judgment was awarded, recovery of these amounts is barred, and the Fund's recovery is limited to those liquidated damages allowed under section 1132(g) (2). This returns us to the precise issue raised by Michigan Carpenters: whether Michigan Carpenters is entitled to late payment or audit damages which reflect ~% assessments based on contributions which were untimely, but ultimately paid prior to judgment.® Section 1132(g)(2) does not Sat trial, the plaintiffs presented evidence that delinquent contributions were assessed on either late payment liquidated damages or audit assessments, but not both. — 58a Append: explicitly cover this situation. Each case which has dealt with the issue has held that delinquent contributions do not qualify as "unpaid contributions" and _ liquidated damages are not recoverable under 29 U.S.C. § 1132(g) (2) (C) (ii). See Idaho Plumbers, supra,; Gittleman, supra; Building Tech, supra; Glaziers, supra; Bennett, supra. In Gittleman, the Eighth Circuit further ruled that liquidated damages were also not recoverable under a collective bargaining agreement on the grounds that "(t]he detail and comprehensiveness of the section 1132(g)(2) remedy supports the conclusion that it was meant to supplant any remedy that other wise would be available." 857 F.2d at 479 (internal quotation omitted). By contrast, in Glaziers, the district court held that liquidated damages for all Thus, there would be no "double recovery" of liquidated damages on a delinquent contribution. Appendix 59a contributions paid in an untimely manner ) were recoverable as mandated by the | operative collective bargaining agreements. 619 F. Supp. at 1805. The court did not discuss ERISA preemption. In Bennett, the court held that the plaintiff plans were not entitled to liquidated damages on untimely contributions, declining to extend section 1132(g) (2) (C) (ii) to untimely payments. 591 F. Supp. at 605-06. The court did not discuss a contractual theory of liability. The most comprehensive treatment of this issue is found in the Ninth Circuit's decision in /daho Plumbers, supra. -There the court concluded that federal common law principles apply to determine the enforceability of a liquidated damages provision under a labor agreement. 875 F.2d at 216-17 (quoting H.R. Rep. No. 869, 96 Cong., 2d Sess. (1980) (Part II), reprinted in 1980 U.S. CODE CONG. & ADMIN. NEWS 2918, 3037-38) (emphasis iil 60a Appendix supplied by /daho Plumbers court). See also 126 Cong. Rec. H7899 (daily ed. Aug. 16, 1980) (statement of Representative Thompson). The court therefore concluded that "Congress intended only to preempt laws limiting liquidated damages to an amount below the 20% level when the terms of 1132(g)(2) are satisfied." ld. at 217. (emphasis in original). Seealso Central States, $22 F. Supp’ at 928 (quoting remarks of Representative Thompson regarding H.R. 3904 in the floor debate of the House). We agree with the reasoning and conclusion of the Ninth Circuit in /daho Plumbers that a fund has a valid claim for late payment and/or audit damages pursuant to its collective bargaining agreements with defendants, not covered by section 1132(g). We caution, however, that in assessing liquidated damages to those contributions not covered by section 1132(g)(2), the Appendix 61a district court should examine whether the liquidated damages provisions in the - en eee Saag cearweaernsieds. de operative collective bargaining agreements constitute a penalty under federal common law. See /ldaho Plumbers, 875 F.2d at 217-18. We now turn to Michigan Carpenters' final contention. The Fund argues that the 20% figure referred to in section 1132(g) (2) (C) (ii) should be assessed on a _ per annum basis. In essence, Michigan Carpenters is asking the court to allow recovery of liquidated damages of up to 20% annually. Nothing in section 1132(g) (2) (c) (ii) or its legislative history, however, suggest that liquidated damages should be assessed on a perannum basis. See Bennett, 591 F. Supp. at 607. We therefore decline to adopt such an interpretation in the absence of explicit language authorizing it. For all the foregoing’ reasons, the judgment of the district court is affirmed — 62a Appendix as to the issues raised in the appeal. As for the issues raised in the cross-appeal, the district court's conclusions regarding defendant Leoni are affirmed. On the liquidated damages issue, we VACATE and REMAND the district court's judgment and order and direct that it make findings of fact as to damages in accordance with our holdings on the liquidated damages issue. The district court's findings are to be limited to Michigan Carpenters. Appendix 63a IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION - GRAND RAPIDS MICHIGAN CARPETERS COUNCIL HEALTH & WELFARE FUND, et al., Plaintiffs, CHARLES J. ROGERS CONSTRUCTION COMPANY, et al., Defendants. 64a Appendix At a session of said court, held on the 9th day of August, 1985 PRESENT: HONORABLE WENDELL A. MILES, Chief U.S. District Judge THIS MATTER having come before the Court upon request by the Defendants Construction and Excavating to lift the Court's prior restraining Order and any extensions the last of which were dated June 3, 1985, all parties being present, and the Court being ctherwise informed; IT IS HEREBY ORDERED that the temporary restraining order as aforementioned is HEREBY VACATED, for the reason that Defendants Excavating and Construction have agreed to notify and send to Plaintiffs' counsel 10 days prior to the hearing date, the written proposed modification for review. The Defendants will notify Plaintiffs' counsel of the date and time upon which the proposed modification will be submitted to Judge Harry B. McAra of the Meets \a- weeny Appendix 65a Genesee County Circuit Court for his approval; IT IS FURTHER ORDERED that the Court is expressly not assuming jurisdiction of the reorganization plan, which jurisdiction is with Judge Harry B. McAra in the Genesee County Circuit Court. Dated: WENDELL A. MILES, Chief U.S. District Court Judge APPROVED AS TO FORM AND CONTENT Dated: GEORGE R. HAMO APPROVED AS TO FORM AND CONTENT Dated: GEMRICH, MOSER, - DOMBROWSKI, BOWSER & FETTE By: EDWARD FREEBERG 66a Appendix UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION MICHIGAN CARPENTERS COUNCIL HEALTH AND WELFARE FUND, et al. Plaintiffs, No. G83-582 CA5 Vv. CHARLES J. ROGERS og CONSTRUCTION et al. OF LAW Defendants. / Plaintiff[{s] are voluntary unincorporated trust funds established pursuant to section 302 of the Labor Management Relations Act, 29 U.S.C. § 186, and the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001, et seg., and provide a variety of pension, health, and welfare benefits to employees throughout the state by means of employer-funded contributions. Plaintiffs brought this action to collect $500,000 in alleged arrearages and penalties, and to compel defendants to keep current on their Appendix 7a contributions, under collective bargaining agreements which purportedly obligate defendants to make periodic contributions for the benefit of defendants' employees. The matter was tried before the Court, sitting without a jury, over eleven trial days. The Court heard testimony from twenty witnesses, and received into evidence well over two hundred exhibits, the majority of which were documents consisting of many pages and varying degrees of complexity. The Court has taken copious notes at trial, has read the entire transcript and all depositions, and has reviewed all of the evidence submitted by the parties. The following shall comprise the Court's findings of fact and conclusions of law, required by Fed. R. Civ. P. 52(a). Before doing so, however, the Court would like to compliment the parties on an exceptionally well-tried case. Trial of this matter was spread out over seventeen months, imposing 68a Appendix not inconsiderable burdens upon counsel, the witnesses (some of whom were frequently recalled for testimony), and the Court in terms of juggled schedules, interrupted concentration, reassembled exhibits, and long distances traveled. Additionally, the issues and factual circumstances involved were highly complex, requiring of the parties and the Court the highest attention to detail, the patience to develop end redevelop particularly difficult areas, and the mental agility to deal intelligently with unexpected evidentiary turns. The parties and counsel have conducted this litigation in a spirit of courtesy and cooperation, for which the Court commends then. Findings of Fact i. Defendants Charles J. Rogers Construction Company; C.J. Rogers, Inc.; Chas. J. Rogers Excavating, Inc.; and W.P.M., Inc. are corporations organized Appendix 69a under the laws of Michigan. Defendant C.J. Rogers-Cooper is a joint venture which operated in Michigan in the mid-1970s.' Defendant William H. lLeoni, Sr. is a building contractor and is the president of ING< Construction, and Excavating. Additionally, Leoni is the sole shareholder of LERO Corporation, a holding corporation which owns a majority of the shares of stock of Construction and Excavating. (Ex. 67 and 70).* Defendant W.P.M. is a corporation shareholder [as] are Leoni, Sr.'s sons William H. Leoni, Jr., Patrick Leoni, and Michael Leoni. Leoni, Jr. is the president of W.P.M. 2. All defendants are, generally, in the building construction business. Excavating was incorporated in 1932 by Charles Rogers* to engage in trucking, hauling, excavating, and general contracting business. Construction was incorporated at some time prior to 1964* and also engaged in the 70a Appendix general contracting business. There were some significant differences in the work performed by the two companies, however, as Construction primarily performed piling, paving, and tunnel work, not done by Excavating, whereas Excavating was primarily involved in trucking and road building. Inc. was incorporated on May 1, 1980 and performs substantially the same types of work as Construction and _ Excavating. Rogers-Cooper was a joint venture formed in the mid-1970's to perform certain specific construction contracts. Construction collaborated with Cooper Construction Company on approximately five contracts until the joint venture entity ended in 1978. W.P.M. was incorporated on October 20, 1978. (Ex. W). Although its Articles of Incorporation state that its purpose is to engage in, inter alia, the general construction and excavation contracting business, W.P.M. operates on a smaller scale Appendix . 71a than the other Rogers companies. (Tr. IX, 6-91).° W.P.M. also subcontracts or engages in joint ventures with Cliff's United Development, a minority contractor, in order to satisfy state minority contracting requirements. 3. The events leading up to Inc.'s incorporation from the background to this lawsuit. The Court believes it necessary to relate these facts in order to understand the instant dispute. 4. Both Excavating and Construction were incorporated as small, family-owned and operated corporations. (Exs. 66, 70; Tr. Iz, 3-8). Before 1975, controlling interests in Excavating were held by Charles Rogers' two sons, Charles K. Rogers and Lawrence P. Rogers, although other family members held lesser amounts of stock. (Ex. L4). William H. Leoni had been employed by Construction since 1952,° and, until 1975 held a small block of stock in Excavating. 72a Appendix 5. In 1974 Excavating found itself in financial straits and had no operating funds. One of its major creditors, the National Bank of Detroit ("NBD") insisted that Excavating's shareholders advance money to the company. Larry and Chuck Rogers thus loaned $100,000 each to Excavating in return for promissory notes. (Deposition of William Martz, pp. 9-11).’ 6. Management difficulties remained unresolved, however. To restore Excavating to profitability, Excavating's bonding ‘company, Aetna, required Leoni to assume the role of active manager. This move was less- than-satisfactory, due to intrafamilial quarrels between Excavating's shareholders, and it was determined that consolidation of ownership of the company was the best way to proceed. As no outside purchasers were found, Leoni agreed to buy out the positions of the other’ shareholders in both Construction and Excavating. It was at this Appendix 73a time that LERO Industries, Inc. was incorporated, on the advice of Leoni Sr.'s bank, to be a holding company for the stock of the two Rogers companies. (Exs. L4, 68; Tr. II, 14-15). Under the May 20, 1975 agreement, the companies agreed to redeem all outstanding shares of stock for $646,000. Leoni personally guaranteed the companies' obligation. The agreement further provided that the debts to Chuck and Larry Rogers should be discharged at the closing by payment to them of $50,000 each. Thus, although the Rogers brothers had each loaned $100,000 to Excavating, the company's poor financial condition, and the lack of interested buyers compelled them to accept a discounted price for the promissory notes which they held. After the sale, Leoni, Sr. and his wife owned 100% of Construction's stock, and 98% of Excavating's' stock. Leoni, Sr. became president of both companies from that date forward. 74a hepunde 7. The closing for what has been referred to as the "family sale" occurred on May 27, 1975, one week after the agreement had been entered into. At this time, Joanne and William Leoni, as trustees for certain Totten trusts, paid the Rogers brothers $50,000 each for the promissory notes. (Martz Dep., 39-40). Thus, although the agreement (Ex. L4) itself states that the notes would be discharged at the time of the closing, the notes were actually assigned to the Leonis, and remained outstanding debts of the Excavating company. These promissory notes had been, and continued to be, secured by Excavating's accounts receivable. These financing arrangements were supervised by the Michigan National Bank (Ex. C5) and the corporate attorneys. The entire transaction is thoroughly documented, and the Court finds there to have been no improprieties in the "family sale" of May 20, 1975. The notes were carried on the books as "note Appendix 75a payable--officer" until 1980.° Although Mrs. Leoni was never an officer of either Construction or Excavating, the note was carried on the books as "note payable-- officer" as an accounting convention. (SoIner Dep., 2-10-84, 24). 8. The State of Michigan required both Construction and Excavating to submit joint bids on state highway work, to eliminate the possibility of collusion. Accordingly, Construction and Excavating often bid on state highway jobs as joint venturers. (Ex. AA; Tr. II, 12-13). These joint ventures required one company to .complete the work awarded to the other if it could not complete such work. (Leoni Dep., 26-28). Additionally, at the insistence of the banks with which Construction and Excavating did business, the two companies were cross- collateralized on various loans. This did not indicate that Construction and Excavating were not in fact acting as 76a Appendix separate entities, but merely reflected the desire for extra protection on the part of the companies' financial partners, the banks. (Solner Dep., 9-23-84, 33-35). 9. In August of 1974 the Michigan National Bank advanced Excavating $1.5 million, so that excavating could pay off an outstanding loan owed to the National Bank of Detroit. The Michigan National Bank required the loan to be collateralized by both Excavating and Construction. Modifications were later required to be personally guaranteed by Leoni, Sr. (Tr. II, 11-12). On April 13, 1979 Michigan National Bank, one of the companies' largest secured creditors, notified Leoni that it was accelerating the promissory note underlying the loan. The bank contended that the note's term was for two years, whereas Leoni maintained that the note was a four-year note, and was thus not due. The issue of this loan became the subject of a Appendix 77a lawsuit filed by Construction and Excavating in the Genessee County Circuit Court. A temporary restraining order was obtained preventing seizure of the corporate assets by the bank; however, the adverse publicity caused severe damage to the companies' ability to carry on business. (Tr. II, 15- 17). In fact, the companies lost their bonding and could not carry on business (Id.) and were in imminent danger of losing their assets to seizure by the Internal Revenue Service for unpaid tax liens. (Ortlieb Dep., 5-6).° 10. The Rogers companies' untenable financial situation compelled them in July of 1979 to file for reorganization in the Genessee County Circuit Court pursuant to Mich. Comp. Laws Ann. §§ 450.1204-450.1205. The Plan of Arrangement to be submitted by Excavating and Construction pursuant to the reorganization would present to the circuit court a plan for paying off general 78a Appendix creditors of both companies. (Ex. G). Judge McAra enjoined all creditors of Construction and Excavating from filing any suit against the companies to collect debts owed and from enforcing any lien. 11. The Plan of Arrangement filed with the circuit court proposed to pay off the general unsecured creditors over varying periods of time, with a 100% payoff to be made to electing creditors over ten years. Pursuant to Judge McAra's order, the two companies were required to notify all creditors, secured and unsecured, of the reorganization, and to submit a list of same to the court. The Court finds’ that representatives of plaintiff trust funds attended some of the circuit court hearings on the proposed reorganization, were aware of the reorganization, and were at all times on notices of the reorganization as it progressed. This finding is based on the testimony of Michael Gautheir (Tr. 1, 53- Appendix 79a 56); Gerry Hall (Tr. IV, 8-9, 30); Cass Dombrowski (Tr. VIII, 274-277); Rene Ortlieb (Dep., 21); stipulation by Mr. Horton (Ortlieb Dep., 29-30). Also see Exs. QQ, 19). Good faith efforts were made to keep all creditors notified of the progress of the reorganization, and the information regarding the reorganization was available to all creditors. (Ortlieb Dep., 21; Ex. R3). 12. Hearings were held before Judge McAra on at least three occasions between December 1979 and October 14, 1980, when Judge McAra gave final sanction to the plan of arrangement. During this period of time, negotiations were ongoing with the companies' major creditors, including the banks, the bonding company (Aetna), the IRS and State of Michigan (to whom taxes were due), without whose cooperation the reorganization could not succeed. Also during this period, balloting by the general 80a Appendix creditors transpired, as a majority vote of acceptance of the plan was necessary for its sanction by the court. 13. At the time of filing of the petition of reorganization, no consideration had been given to the creation of a new corporation. (Ortlieb, Dep., 64). In mid-April, 1980, after consultations with Aetna, the companies' accountant, the banks, the companies' attorneys, eens decided to form a new corporation. This action was taken on the advice of the foregoing parties in order to present an acceptable balance sheet tc Aetna. This would enable the new company to obtain the required bonding and State highway prequalification to continue business. (Ortlieb Dep., 13-17). The Court accepts Mr. Ortlieb's testimony that the new corporation was formed to obtain binding, without which either of the two Rogers' companies could not continue in business. Mr. Ortlieb's testimony with respect to the Appendix 81a discussions and events’ preceding the reorganization and incorporation of the new Inc. is corroborated by attorneys Solner and Martz, who were actively involved in the reorganization and formation of the new company. The Court specifically rejects the contention that formation of a new corporation was contemplated at the time the petition for reorganization was filed. Plaintiff's deposition exhibit (Ortlieb Dep.) shows that the accountant, Edmond Swad, prepared a summary of the necessary steps to be taken in order to form a new corporation; this document, among others, corroborates Mr. Ortlieb's testimony that consideration was first given to this plan in April 1980 long after the petition for reorganization had been filed. (Also see Solner Dep., 9-23-84, 12-14). Counsel for Leoni were in complete agreement that formation of a new company was absolutely necessary to continue in business at all. 82a Appendix Both Ortlieb and Solner agreed that, had a new company not been formed, the bank and Aetna would have repossessed the equipment, leaving nothing for the unsecured creditors. (Ortlieb Dep. 13-15, 21-22; Solner Dep., 9- 23-83, 39-40). Further, according to Ortlieb, Leoni rejected out of hand the suggestion that he liquidate his debts by declaring bankruptcy; rather, Leoni chose a circuit court reorganization because it enabled him to pay his debts, albeit on a reduced scale. (Ortlieb Dep. 47-48; also see Solner 9-23-83 Dep., 74--discussion of Chapter 11 bankruptcy). In accepting this testimony, the Court specifically concludes that the incorporation of the new Inc. was motivated by good faith, legitimate business reasons and was untainted by any fraudulent purpose or desire to evade obligations to creditors. (Ortlieb Dep., 84). 14. Inc. was incorporated on May 1, 1980. Both Excavating and Construction by formal Appendix 83a corporate action agreed to sell all of the assets of the corporations and assign the account receivable, inventory, and 0 Inc. uncompleted contracts to Inc.' purchased the assets of the old corporations on the basis of the fair market value of the assets'' in the form of two ten-year secured promissory notes given b, Inc. to Excavating and Construction. The purpose price of the assets was well over $5 million. (Ex. A). Additionally, Construction and Excavating were issued $1 million of preferred stock with an indefinite redemption period as payment for the accounts receivable and inventory. (Ex. A). 15. Notice was given to all creditors and to the circuit court of the proposed sale of assets and incorporation of Inc. Judge McAra's approval was necessary for the two companies to dispose of their assets. Robert Kotz, counsel to the creditors' Oversight Committee testified that he, and 84a Appendix all creditors, were notified of the proposed plan of sale of assets to Inc. (Kotz Dep., 5-10; Dep. Ex. 1). Judge McAra approved the sale of assets to the new corporation. 16. The question of the initial capitalization of Inc. was hotly contested and closely scrutinized at trial. According to Solner, who formed Inc., in order for the new company to receive continued bonding, it was necessary to obtain certain "Liability- free" assets through the purchase of the two old companies' assets. Effective May 1, 1980 Inc. purchased the assets of Construction and Excavating, conditioned on Excavating paying $200,000 cash to Inc. and on the circuit court's approval of the plan. 17. On Solner's recommendation, Joanne Leoni was to be the sold shareholder of the new corporation, Inc. Joanne Leoni assigned to Inc. the two promissory notes that she held as assignee of the two Rogers brother([s]. Each of the _ notes, as Appendix 85a previously noted, had a face value of $100,000. These notes were secured by certain accounts receivable of Excavating. These receivable were described by William Martz as "net quick assets," or assets with high liquidity because of their easy convertibility to cash. Mrs. Leoni also executed a subscription agreement’ to purchase 200,000 shares of common stock of Inc., payable in cash or property. (Ex. 69). The creation of Inc., was conditioned upon payment in cash of the subscription agreement and upon approval of the circuit court. (Ex. A; Solner Dep., 2-10-84, 39- 43). It was the intention of the incorporators and their representatives that, if any condition should not be fulfilled, the creation of Inc. would not be consummated. (Id.) Inc. did not call for payment of the subscription agreement until October 114, 1980, the date on which Judge McAra approved the sale of assets to Inc. 86a Appendix The subscription agreement was not payable until "the demand of the Treasurer," which demand was not made until October 14, 1980; further, share certificates were not issued until October 14, 1980. Under such circumstances, Mrs. Leoni's obligation to pay for the stock did not become due until October 14, 1980. ivory v. Lamoreaux, 241 Mich. 226 (1928); Gobles Cooperative Ass'n v. Albright, 243 Mich. 68 (1929) (concurring opinion of Fellows, J.). By this time, the accounts receivable securing the _ two promissory notes had in fact been paid. (Ex. V4). Thus, by October 14, 1980, the date the subscription agreement was called, the pre-conditions to Inc.'s creation had been fulfilled.” 18. The promissory notes were in fact valid consideration for the subscription agreement. '3 Although the statute of limitations--in this case, six years--may have run on the two demand notes originally Appendix 87a executed by the Rogers brothers, the statute of limitations does not eradicate the underlying debt but merely prevents the creditor from enforcing his’~ rights. Further, the debtor may expressly or implicitly waive the defense of limitations. Here, Excavating waived whatever defenses it may have had to the enforcement of the notes. As indicated above, by the time the subscription agreement was called by inc., the notes had been paid. Thus, there was no irregularity in the execution or performance of the subscription agreement executed by Mrs. Leoni, nor was Inc.'s creation attended by fraud ont he part of its incorporators. 19. In the lawsuit by Construction and Excavating against Michigan National Bank, paragraph 20 of the complaint refers to the "undercapitalization" of the two companies. (EX. 37). No substantive evidence of undercapitalization of either company was presented by plaintiffs. The Court declines 88a Appendix to find that either company was under- capitalized, due to a complete failure of proofs on this point. 20. As to Inc., the evidence shows that it was adequately capitalized. Solner, one of the corporate law experts, testified that the $200,000 invested by Mrs. Leoni was sufficient capitalization for Inc., as it enabled the new company to obtain minimal bonding. Although less than $200,000 would have been insufficient to obtain state prequalification, Inc.'s deficit~free credit rating enabled it to prequalify. Prequali- fication is determined by the state on the basis of three or four factors, one of which is the amount of capitalization. In this case, Inc. was capitalized not only by the $200,000 note secured by the receivables from the old companies, but also by the $1 million in preferred stock. As noted, the preferred stock carried an indeterminate redemption period, so there was no immediate Appendix 89a obligation to redeem the stock. Taking also into account the "net quick" assets, equipment, and current contracts, the state prequalified Inc. for $20 million of state work. Solner explicitly stated that Inc. was not thinly capitalized. (Solner Dep., 9-23-83, 37-40, 63-67; also see Martz Dep., 18-19). No rebuttal evidence was presented, and the Court specifically finds that Inc. was properly and adequately capitalized. 21. There was some suggestion that the Leonis had improperly diverted corporate assets to their personal use in the capitalization of Inc. As noted above, Judge McAra's temporary restraining order prevented all creditors from realizing on. their debts; yet, Mrs. Leoni's promissory note owed by Excavating was satisfied and used as start-up capital for Inc. The Court regards this allegation with the utmost gravity, as diversion of corporate funds to personal use, and in disregard of the 90a Appendix. circuit court's temporary restraining order, would indicate that Inc. was improperly formed, and would tend to substantiate the allegations of fraud made by plaintiffs. In considering the merit of this allegation, the Court has meticulously examined the testimony of the parties most closely associated with Inc.'s formation and with the circuit reorganization. The initial order signed by Judge McAra (Ex. G) enjoined all creditors of Excavating and Construction from proceeding on their debts "until urthe orde »™ The restraining order was issued in part to allow the companies to work out a plan of arrangement. (Kotz Dep., 37; Solner Dep., 2-10-84, 37). Judge McAra did in fact approve the proposal to create Inc. at a hearing held on October 14, 1980. (See also Ex. T). That hearing was brief, and Judge McAra approved the plan based on Mr. Ortlieb's representations that all creditors Appendix 91a had been apprised of the proposal and that most had approved. An evidentiary hearing was not held, and details of Inc.'s incorporation were not revealed, nor did Judge McAra express any desire or need to review such details. (Ex. R2). It is also clear that Mr. Swad, the accountant who prepared the financial statements of the two companies for the pertinent time period, took account of the "note payable--officer" in all the pertinent financial statements. (See particularly, Exs. S4, T4). Mr. Swad expressly understood that Inc. was to be capitalized using the notes. (Ortlieb Dep. Ex. 6). Mr. Martz was aware of Inc.'s capitalization. (Martz dep., 16-18, 42). Mr. Solner, as the architect of Inc.'s incorporation, was of course aware of the capitalization, and further stated that all creditors were -notified of the proposal and did not object. (Solner Dep., 9-23-83, 16-17, 38-39, 74-75; 92a Appendix Solner Dep., 2-10-84, 14-16). The Court has paid particular attention to the testimony of Mr. Kot™, the attorney for the Oversight Committee. As he represented the Committee in its dealings with the reorganization, and was not an agent for Leoni or the companies, the Court places particular reliance on his knowledge of the capitalization. His testimony indicated that he and the creditors had seen the financial statements (Kotz Dep. 35)3 he was aware that receivable[s] were transferred to Inc., but did not know the precise breakdown between capital and purchase price (Id., 29); he knew there were obligations running from the companies to the Leoni family, but did not know the particulars (Id., 36); he was aware that such notes were disclosed by the financial records but could not recall the exact notes or exact amount (Id., 57); it was his understanding that the bonding company, the bank, the governmental hopendix: 93a entities, and the Oversight Committee were "acutely aware" of the financial transactions (Id., 73-74). Plaintiffs' close cross-examination of Kotz showed that he was never solicited with respect to Joanne Leoni as a creditor of Excavating (Id., 63-64) and was not aware of any specific notes to Chuck and Larry Rogers which had been assigned to the Leonis (Id., 57). Nonetheless, the thrust of Mr. Kotz' testimony is that he had seen the financial records, was indeed aware of obligations running to Joanne Leoni, and was generally aware of the entire transaction. Cross- examination did not alter his fundamental testimony. The Court concludes, therefore, that the Oversight Committee's recom- mendation to Judge McAra to approve the sale of assets was based on full knowledge of the transaction by which the notes’ were assigned. Plaintiffs have vigorously pursued the theory that these notes were 94a Appendix surreptitiously diverted to Inc. without the knowledge and consent of the creditors or the circuit court. However, the evidence simply does not support that claim; if anything, the evidence solidly supports the finding that the transaction was scrupulously monitored by the creditors of the two companies and that their financial affairs were laid naked to all who had an interest in then. It simply strains credibility to find that the attorneys, accountants, and the large creditors, were unaware of the transaction, or, which must be plaintiffs' theory, that they somehow conspired to divert the notes to the Leonis' benefit. The Court thus specifically finds that corporate funds were not fraudulently diverted to the Leonis or Inc., and that Inc. was not capitalized in violation of Judge McAra's temporary restraining order. 22. The Court is somewhat perplexed by Mr. Leoni's representation to Judge McAra Appendix 95a that he was the sole shareholder of Excavating and Construction, (Ex. 02.22.36); in reality, he owned slightly less than 100% of the shares of each company. The Court also notes that Mr. Ortlieb, in his statements to Judge McAra also referred to Mr. Leoni as_ the "sole shareholder," however. (Ex. 02, 19). The Court specifically finds that this was not a material representation. Judge McAra was attempting to elicit from Mr. Leoni concurrence in the misrepresentations made that day by Mr. Ortlieb, the vast majority of which concerned other details of the reorganization. The statement regarding being the sole shareholder was made strictly in passing. The Court also notes Mr. Kotz' statement that the representation was not material (Kotz Dep. 18-22)." 23. After May 1, 1980 Excavating and Construction assumed inactive status. They continue to make payments pursuant to the 96a Appendix reorganization plan, but are not actively conducting business. They have no assets except notes receivable and claims in litigation. 24. Inc. did not assume any unsecured debt of Excavating or Construction other than the debts secured by equipment liens. The two old companies continue to retire their debts, however. 25. After the May 1980 incorporation, Inc. began business utilizing the same personnel, supervisors, equipment, officers, and locations as had been used _ by Construction and Excavating. Inc. completed the contracts entered into by the old companies. 26. Prior to the 1980 reorganization, the relationship between Construction and Excavating evidenced a certain degree of mutuality. Leoni and Charles Lawson were both officers of both corporations. Leoni, as noted above, had controlling interests in Appendix 97a both corporation[{s]. Construction owned the property where Excavating operated in Melvindale. In fact, Construction's tax returns for 1979 and 1980 indicate as its address the Melvindale location. (te. Bz, 41-43). Construction's correct address has been officially registered with the state Corporations and Securities Bureau since 1962, however. [eee £88, 2333 Ex. $5). Between 1978 and 1980, Mrs. Morton, payroll supervisor for Inc., prepared the payrolls for both Construction and Excavating; this occurred, however, because Construction had a computer at its Flint location, and Excavating had no such facility. (Tr. I, 4- 5: Lawson Dep., 14). As noted above, Construction and Excavating occasionally prepared joint bids when required by the State on state highway projects. 27. Generally, however, the two companies prepared separate bids and obtained separate pre-qualification status. (Tr. III, 93-95). 98a Appendix The state's requirement of joint budding to prevent collusion was not motivated by any actual incident of collusion; it was designed to prevent a recurrence of one situation in which the two companies, bidding separately and independently, happened to be the only companies bidding on a particular job and were thus both low bidders. (Id.) On the few occasions that Construction and Excavating were awarded a joint bid, each company worked separately in its respective geographic location. (Tr. II, 13; Tr. III, 29). The companies also filed separate tax returns, had separate federal and state tax identification numbers, separate bonding, different fiscal years, separate annual financial appraisals, and separate financial statements. (Exs. Y, Z, A2, C2, D2, H2, I2, J2, M2). 28. Construction and Excavating operated in distinct geographic regions, Flint and Melvindale, respectively. Construction Appendix 99a rarely operated in the Detroit area--perhaps for three out of 150 jobs per year. Excavating never operated in the Flint area. (Tr. III, 84-85). 29. The companies maintained separate equipment and repair operations and had substantially different customers. (Tr. I, 31; Tr. III, 95-96; Tr. VIII, 10, 20, 98-99, 205-206). They each had a_- separate telephone number. (Tr. III, 136). Some cross-over of equipment did occur. (Tr. VIII, 10). Although Leoni was president of both companies, and Lawson an officer of both, day-to-day management responsibilities were divided between them. Leoni retained daily management and labor relations duties on;y for Construction. These daily responsibilities including labor relations and signing of collective bargaining agreements,w ere handled for Excavating by Lawson between 1978-1980, and before that, by three other individuals. Leoni rarely 100a Appendix participated in Excavating's day-to-day affairs. (Lawson Dep., 17; Tr. III, 83-84; Tr. VIII, 8-9, 95-96, 204-205). Lawson's knowledge of and responsibilities for Excavating's affairs were limited to day-to- day management, however, he had no involvement with many crucial financial decisions, such as the reorganization, the cross-collateralization of the loan with Michigan National Bank, and payment of fringe benefits. It was Leoni, for example, who instructed Mrs. Morton to cease paying late payment assessment levied against Excavating, Construction, Rogers-Cooper, and Inc. (Tr. I, 18; Tr. VI, 35). Each company had separate supervisory personnel. (Tr. IItII, 96; Tr. VIII, 12). 30. The evidence showed that there had been some interchange of employees between Construction and Excavating. (in. 72). This interchange was insignificant, however, representing only 8% and 13% of total a Appendix 101a employee hours worked by employees of Construction and Excavating, respectively. (Tr. VIII, 240-243; Ex. A3). Generally, the two work forces did not intermingle prior to May of 1980. (Tr. VIII, 10, 99, 117, 207, 241-246). 31. On the occasions when Construction and Excavating worked together on a job, for instance in the relationship of contractor- sub, the companies would formally invoice each other for work performed. (ee. VWiis, 14-15, 100-101). + B Curtis Baker, a foreman with Construction, testified that of twenty-two years spent with the company, he worked in Melvindale for only two weeks. (Tr. II, 55- 56). He admitted that knowledge of the Detroit-area company was "common" among Flint employees, but stated that he believed the companies were "all basically the same." (Tr. II, 49). Roy Lee Turner, a laborer for fifteen years for "C.J. Rogers" in Flint 102a Appendix testified that he had never worked in the Detroit area nor had seen Detroit-area employees come to work in Flint. (Tr. II, 68). He had "heard of" a Detroit Rogers company, but stated that "all {he knew]" was that he work for C.J. Rogers. (Tr. II, 69). As these men were plaintiffs' witnesses, their testimony supports the Court; finding that there was little significant interchange among employees of Construction and Excavating. 33. William Martz, attorney for Construction and Excavating, stated that, in his opinion, the two companies were not alter egos of each other and had always operated at arms length in their mutual transactions. Martz felt it significant that the companies kept separate books, jobs, contract bidding, and bonding. (Martz Oam., 23). Solner, in forming Inc., discussed with Leoni and Swad, the accountant, the necessity for separating the Appendix 103a financial affairs of the new corporation from those of the old companies. (Solner Dep., 9-23-83, 80-81). 34. As previously noted, Rogers-Cooper was a joint venture entity of construction and Cooper Construction Company existing wntil 1970. (Tr. FI, 433 Per. VEIZ, 82). It performed $30 million worth of tunneling jobs in Detroit, Bay City, Oregon and Ohio. (Tr. VIII, 77, 91). Construction provided the bondability and financing and Cooper Construction provided the management and employees. Ninety-five percent of the equipment used was purchased separately by the joint venture, and the remaining five percent belonged to Construction. (Tr. VIII, 76-77). The joint venture was headquartered in Mount Clemens, Michigan. However, Mrs. Morton of Construction performed the payroll out of Construction's \ Flint office, and the\checks were cut at “ C.J. Rogers Transco in Melvindale. (Tr. 104a Appendix VIII, 84). Mrs. Morton was paid by the joint venture for these duties. (Tr. VIII. 92). Rogers-Cooper had a separate federal tax ID number, filed separate tax returns, kept separate books, “Michigan Employment Security (MESC) registrations, quarterly reports. (Tr. 76-78; Ex. S2). Labor relations for the joint venture was controlled by Fred Rozelle, president of Cooper Construction. (Tr. VIII, 80). Although the joint venture never executed contracts with a union, fringe benefits were paid to the plaintiff trust funds on behalf of the employees (Tr. VIII, 88-89). Payment of such benefits was made, however, because the joint venture jobs required certified payrolls. (Tr. VIII, 91). 35. It is standard practice for a union to seek separate collective bargaining agreements with bona fide joint ventures, (Tr. X, 119, 202-203), and it is usually possible for a union to discover which joint Appendix 105a venture are being operated within its (the union's) jurisdictional area (Id.). 36. No collective bargaining agreements were produced at trial obligating Rogers- Cooper to pay fringe benefits to plaintiff trust funds; neither Leoni, Mrs. Morton, nor Michael Gautheir, auditor for plaintiff, had ever see such an agreement. (Tr. I, 29, 523 Tr. III, 34). 37. Construction operated another joint venture with a company called "Pneuma North America." This joint venture’ lasted approximately three months in 1978. The relations between Construction and Pneuma were formalized by contract, which provided that Pneuma was to be the managing partner with exclusive power to supervise on-the-job work, and that the relationship of the parties was limited to the performance of the contract. The joint venture had its own office, filed separate tax returns, and had a separate federal ID number (Tr. I, 25-29, 106a Appendix Ex. B). The joint venture agreement also specifically provided, Nothing herein shall be construed to create a general partnership between the parties por to authorize either party to act as genera] agent for the other party, nor to permit either party to bid for or to undertake any other contracts for the other party. The contract was apparently signed by Richard Maloblocki as president of Pneuma North America (also see, Tr. I, 25) and Leoni, as president of Construction. In seeking to obligate defendants for certain of the fringe benefits claimed to be owed, plaintiffs point to a contract executed by Maloblocki for "Charles J. Rogers Construction Co." with the Michigan Laborers for the payment of fringe benefits. The Court specifically finds, in light of the contract provision above, that Maloblocki had no authority to execute the contract, and that execution of such contract was beyond the scope of his authority. Although Appendix 107a plaintiffs did not receive actual notice of the limited joint venture contracts, they must be held responsible for limitations on Maloblocki's authority. This is especially true in light of the conceded practice of obtaining separate contracts from bona fide joint ventures. Plaintiffs could have discovered, had they exerted themselves, that the relationship between Pneuma North America and Construction was that of a bona fide joint venture and the scope of Malobiocki's authority. The Court specifically finds that the so-called Maloblocki agreement is not binding on Construction, as being beyond the scope of Maloblocki's authority. 38. When Inc. was formed new time cards and daily report sheets were filled out by the employees. Their year-to-date withholding balances were zeroed out; however, they did not fill out new withholding forms. (Tr. VIII, 118-119, 108a Appendix 140). 39. It was disputed whether the plaintiff fringe benefit funds were notified in some way of the corporate changeover in May 1980. the Court specifically finds that plaintiffs were so notified by Mrs. Morton. Although plaintiffs may not have understood the purport of the reorganization, it was not because they were not informed. (Tr. X, 338-340, 369, 371). 40. There is no question that some of the corporate formalities were not scrupulously observed. For instance, some of the corporate minutes were not entered into the books of some of the Rogers companies until after trial in this matter had commenced. Martz testified that the minutes of some corporate meetings had been recorded in not form by himself, but simply had not been formally entered into the books after 1979. Nor were corporate meetings regularly held. The Court does not place great emphasis on . Appendix . 109a the informality which sometimes characterized the companies' business. The more important factors, such as corporate financial affairs, were kept separate, and there was no improper commingling of personal with corporate funds.’ 41. The reorganization caused considerable confusion for all concerned. During the period of the reorganization various name changes were implemented among the companies. Inc. was originally incorporated as "CJR, Inc."; "Chas. J. Rogers, Inc." became Chas. J. Rogers Excavating, Inc." Leoni agreed that these changes were confusing. (Tr. III, 129). In fact, stamps, stationery and checks order for Inc. (Tr. VI, 43) read "Chas. J. Rogers, Inc." and continued to be used until May 1981 even after an amendment to the Articles of Incorporation, officially changing the new company*‘s name to "Inc." had been filed (Te. VI, 30, 22, 34). Although the Court 110a Appendix accepts that such matters as the name on company checks were the least of the Rogers companies worries at the time (Tr. VI, 51l- 52), it is indicative of the less than meticulous efforts at keeping the companies strictly separate. 42. The confusion evidenced by the corporate name changes was further pointed out by the fact that Inc. made fringe benefit payments alternately under the names "C.J. Rogers Inc." and Chas. J. Rogers, Inc." until December 1980. (Ex. 39). Only in the spring of 1981 were Inc.'s affairs finally straightened out. Some of these payments were made for employees of the old companies for previously undertaken bonded work, on accounts set up at the insistence of the bonding company and the bank. (Tr. VI, 12-17, 45-46, 58-59; Ex. 34). 43. Excavating had a checking account bearing both names, Construction and Excavating; this account was set up at the Appendix 111a insistence of the bank; (Tr. VI, 30-31; Ex. 42). Each company maintained its own, separate checking accounts in addition to the one joint account. (Tr. VI, 53). 44. The companies have made fringe benefit contributions for obligations owed by the other companies. For instance, Inc. has made at least a few contributions for Construction and Excavating after the May 1980 reorganization (Tr. VI, 12) and Excavating has reported that it was making fringe benefit contributions for Construction's employees. (Tr. VI, 18; Ex. 43). Defendants have at times’ used different names on their monthly reporting forms. (Tr. VII, 157), and have used the same identification number for different corporations (Ex. 107). 45. The Court finds that some of this confusion is due to the inevitable sorting out of affairs during the time of Inc.'s incorporation in May 1980 (Nov. 29, 1983 112a Appendix Tr., B. 145). Some of the confusion may also be due to the negligence of the auditors, who did not take care to match up contributions with the correct company; the auditors conceded that they did not even look at the names that came in on the report because there had been no dispute as to contractual liability (Id., 143). As previously stated, the auditors were on notice that a new corporation had _been created. 46. In establishing their claim that the Rogers companies are contractually obligated to make fringe benefit contributions, plaintiffs have relied on various so-called "rollover" provisions, employer registra- tions, and powers of attorney signed by Leoni or other agents of the Rogers companies. Such documents continue the main contract in effect between the union and the employer without the necessity for executing a master contract. ‘A representative Appendix 113a "rollover" clause provides: (T}he employer agrees that, unless he notifies the Union to the contrary by certified mail at least sixty (60) days prior to the termination date of this Agreement or any subsequent Agreement, the employer will be -bound and adopt any Agreement reached by the Union and the Association aqauring negotiations... At trial, Leoni stated that he understood the purport of the provisions as meaning, with respect to employer registrations, that [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_2794%3A1. Public record. Not legal advice.