Opposition Brief — Walton v. Operating Engineers Pension Trust

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FIBED

Ve) JAN 47 1562

No. 91-1099

In The Supreme Court

OF THE

United States

OCTOBER TERM, 1991

KENNETH M. WALTON,

DBA WALTON BACKHOE SERVICE

and K. WALTON ENTERPRISES, INC.,

DBA LAW PLUMBING Co.,

Petitioners,

VS.

OPERATING ENGINEERS PENSION TRUST,

OPERATING ENGINEERS HEALTH & WELFARE FUND,

OPERATING ENGINEERS VACATION-HOLIDAY SAVINGS

TRUST and OPERATING ENGINEERS TRAINING TRUST,

Respondents.

BRIEF IN OPPOSITION

WAYNE JETT*

JETT & LAQUER

225 South Lake Avenue

Suite 200

Pasadena, California 91101

(818) 449-1882

Counsel for Respondents

*Counsel of Record

, Bowne of Los Angeles, Inc., Law Printers. (213) 627-2200

rm

i

QUESTIONS PRESENTED

1. Did the Court of Appeals properly conclude the

District Court did not ciearly err in finding that Walton

operated Walton Backhoe Service, Law Plumbing Com-

pany and Law Plumbing Co., Inc., as a single, integrated

business enterprise?

2. Did the Court of Appeals properly conclude the

District Court did not clearly error in finding that Ken-

neth M. Walton and K. Walton Enterprises, Inc., are

alter-egos?

il

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED.............--505: i

TABLE OF CASES AND AUTHORITIES ....... ill

BRIEF IN OPPOSITION .........eececceeceess 1

STATEMENT OF THE CASE.............++4-- 1

REASONS FOR DENYING THE PETITION.... 4

I. THE PETITION PRESENTS NO SUFFI-

CIENT REASON FOR GRANTING RE-

II. WALTON’S LIABILITY UNDER THE COL-

LECTIVE BARGAINING AGREEMENT

DOES NOT REQUIRE PIERCING THE

CORPORATE VEIL OR APPLICATION OF

THE SINGLE EMPLOYER DOCTRINE ... 5

Ill. THE DISTRICT COURT’S FINDING OF

FACT THAT WALTON INC. IS THE AL-

TER-EGO OF WALTON WAS NOT

CLEARLY ERRONEOUS, AND PRESENTS

NO ISSUE WORTHY OF REVIEW BY THIS

iii

TABLE OF CASES AND AUTHORITIES

Cases

Fall River Dyeing & Finishing Corp. v. N.L.R.B., 482

U.S. 27, 107 S.Ct. 2225 (1987) .................

Operating Engineers Pension Trust v. A-C Co., 859

F.2d 1336 (9th Cir. 1988) ....................

Zenith Radio Corp. v. Hazeltine Research, Inc., 395

U.S. 100, 89 S.Ct. 1562 (1969) ................

Statute 5

Labor Management Relations Act of 1947

Section 301(a) [29 U.S.C. §185(a)] ...........

Employee Retirement Income Security Act of 1974

Section 502(e) [29 U.S.C. §1132(e)] ..........

Rules

Federal Rules of Civil Procedure

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No. 91-1099

In The Supreme Court

OF THE

United States

OCTOBER TERM, 1991

KENNETH M. WALTON,

DBA WALTON BACKHOE SERVICE

and K. WALTON ENTERPRISES, INC.,

DBA LAw PLUMBING Co.,

Petitioners,

VS.

OPERATING ENGINEERS PENSION TRUST,

OPERATING ENGINEERS HEALTH & WELFARE FUND,

OPERATING ENGINEERS VACATION-HOLIDAY SAVINGS

TRUST and OPERATING ENGINEERS TRAINING TRUST,

Respondents.

BRIEF IN OPPOSITION

Respondents Operating Engineers Pension Trust, Op-

erating Engineers Health and Welfare Fund, Operating

Engineers Vacation-Holiday Savings Trust, and Operat-

ing Engineers Training Trust respectfully pray that the

petition for a writ of certiorari filed in this case should be

denied for the reasons stated below.

STATEMENT OF THE CASE

Respondents (“Trusts”) are employee benefits plans

who filed a breach of contract action against petitioner

Kenneth M. Walton (‘‘Walton’’) in the U. S. District

2

Court for the Central District of California. The com-

plaint asserted jurisdiction under § 301(a) of the Labor

Management Relations Act of 1947 (“LMRA”), 29 U.S.C.

§ 185(a), and §502(e) of the Employee Retirement In-

come Security Act of 1974, as amended (“ERISA”),

29 U.S.C. $ 1132(e), to enforce a written collective bar-

gaining agreement between Walton and the International

Union of Operating Engineers, Local Union No. 12 (‘“Lo-

cal 12’). After discovery proceedings, the Trusts filed an

amended complaint naming K. Walton Enterprises, Inc.

(“Walton Ine.”), as an additional defendant based upon

an alleged alter-ego relationship between Walton and

Walton Ine. A bench trial was conducted on December 12

and 13, 1989.

On March 30, 1990, judgment in favor of the Trusts was

entered against Walten and Walton Inc., jointly and

severally, in the amount of $84,975.55. Pet. 26a. In its

findings of fact and conclusions of law filed the same date,

the District Court found that at all times after January 1,

1986, Walton operated a single integrated business under

the names Walton Backhoe Service, Law Plumbing Co.

and Law Plumbing Co., Ine. The District Court further

found that Walton and Walton Ine. were alter-egos of

each other, that Walton had used Walton Ine. as a

technical change in operations to attempt to avoid con-

tract obligations to the Trusts, and that adhering to the

fiction of a separate existence for Walton and Walton Inc.

would sanction a fraud. Pet. 13(a).

On appellate review, the Court of Appeals tested the

District Court's findings of fact under the clearly errone-

ous standard of Rule 52(a), F.R.Civ.P. The Court of

Appeals concluded that the evidentiary record “fully

supports” the finding that Walton operated a single

integrated business enterprise under the names Walton

3

Backhoe Service, Law Plumbing Co. and Law Plumb-

ing Co., Ine. Pet. 4a.

The evidentiary record shows that Walton opened a

bank acount under the name Walton Backhoe Service in

April, 1985, but closed that account in March, 1986, after

opening a new bank account under the name Law Plumb-

ing Co. as of Januar; 1, 1986. Walton formed Walton Ine.

in February, 1986. However, Walton personally owned

and controlled the bank account for Law Plumbing Co.

The bookkeeping for the entire business “just sort of got

put together,” and was centered upon that single bank

account. Walton testified that after January 1, 1986, only

one set of books and records was maintained for Walton

Backhoe Service and Law Plumbing Co. The business had

one office. All employees and business expenses were paid

from the Law Plumbing Co. bank account, and all income

from the business was deposited into that bank account.

By March, 1986, Walton’s employee Kinsley had told

Walton that he would leave Walton’s employment to work

for an employer signatory to a collective bargaining

agreement with Local 12 unless Walton signed such an

agreement with Local 12. On March 10, 1986, Walton and

Kinsley went to the office of Local 12 and met with a

Local 12 representative. During that meeting, Walton

executed a short form collective bargaining agreement

(‘‘Agreement”), and Local 12 dispatched Kinsley to work

as an employee covered by the Agreement.

In executing the Agreement, Walton stated his busi-

ness name to be Walton Backhoe Service. Walton never

told Loeal 12 or the Trusts that Kinsley was being paid

through a bank account maintained under the name Law

Plumbing Co. Walton paid contributions to the Trusts on

Kinsley’s behalf by eashier’s checks purchased with funds

from the Law Plumbing Co. bank account, apparently as a

deceptive tactic. For a time, Walton reported only a

4

portion of Kinsley’s hours rather than all hours of em-

ployment as required by the Agreement, and never re-

ported similar work by others (including owner-operators

and subcontractors) as required by the Agreement.

REASONS FOR DENYING THE PETITION

I.

THE PETITION PRESENTS NO SUFFICIENT REA-

SON FOR GRANTING REVIEW.

The petition shows no reason for granting review con-

templated by Rule 10 of this Court. No conflict with the

decision of another U. S. Court of Appeals is shown. No

departure from the usual course of judicial proceedings is

shown. No important question of federal law which has

not been settled is shown. Indeed, the petition manages to

make an argument for review only by misstating the

factual record and by ignoring the legal significance of

conceded facts.

The Court of Appeals elected to decide this appeal

without oral argument, and disposed of the appeal by an

umpublished memorandum. Pet. 1(a). The disposition by

the Court of Appeals remains unpublished despite a

request for publication by the Trusts made in an effort to

avoid future, needless trials and appeals of a similar

nature. The case involves a simple contractual liability of

a sole proprietor employer (Walton) who personally

signed a collective bargaining agreement and attempted

to avoid the agreement by forming a shell corporation

(Walton Inc.), but Walton never even put his business

into the shell corporation.

)

II.

WALTON’S LIABILITY UNDER THE COLLECTIVE

BARGAINING AGREEMENT DOES NOT RE-

QUIRE PIERCING THE CORPORATE VEIL OR

APPLICATION OF THE SINGLE EMPLOYER

DOCTRINE.

Walton signed the Agreement with Local 12 as an

individual solé proprietor using the fictitious name of

Walton Backhoe Service. Walton opened the bank ac-

count using Law Plumbing Company as his fictitious

business name, but certainly he remained the same indi-

vidual contractually bound to the Agreement. The petition

concedes that Walton “stupidly” commingled the funds of

his various alleged “entities” in a single bank account

(Pet. 7), but fails to acknowledge that Walton’s treatment

of all such funds as his own is probative evidence that

Walton himself was the employer conducting the

business.

On this factual record, no need arises to “pierce the

corporate veil’ of Walton Ine. in order to hold Walton

liable under the Agreement. Walton himself is personally

signatory to the Agreement.

The doctrine of piercing the corporate veil would be

relevant only if: (1) Walton Ine. had actually conducted

the business of the employer; and (2) Walton Inc. was

beund to the Agreement. In that circumstance, the con-

tactual liability of Walton Inc. to the Trust might be

traceable to Walton himself by “piercing the corporate

veil.”” Those faets simply do not exist in this case, so the

doctrine is irrelevant. Likewise, the “single employer’

doctrine of the National Labor Relations Board is irrele-

vant, since no issue concerning an employer's duty to

bargain with a labor union under the National Labor

Relations Act (““NLRA’’) exists in this action. Fall River

EE

6

Dyeing & Finishing Corp. v. N.L.R.B., 482 U.S. 27, 40-41,

107 S.Ct. 2225, 2234-35 (1987).

The Court of Appeals cited its previous decision in

Operating Engineers Pension Trust v. A-C Co., 859 F.2d

1336 (9th Cir. 1988), on a point of contractual interpreta.

tion. Pet. 5. A-C Co. interprets the Agreement as obligat-

ing Walton to pay contributions to the Trusts on all hours

of employment of his employees, even if some hours are

worked under different fictitious business names. A-C Co.

establishes no new legal principle by which a non-signa-

tory employer is bound to a eollective bargaining

agreement.

The petition struggles at length to mount an attack on

the “legal concept” of “single integrated business”

(Pet. 16), but fails to grasp that the District Court found

as a fact that Walton operated Walton Backhoe Service,

Law Plumbing Co. and Law Plumbing Co., Ine., as a

“single integrated business.” In that factual cireum-

stance, Walton’s obligations to the Trust under the

Agreement do not depend upon legal doctrines involving

“single employer,” ‘“sueccessorship” or “piercing the cor-

porate veil.”

Il.

THE DISTRICT COURT’S FINDING OF FACT THAT

WALTON INC. IS THE ALTER-EGO OF WALTON

WAS NOT CLEARLY ERRONEOUS, AND

PRESENTS NO ISSUE WORTHY OF REVIEW BY

THIS COURT.

The liability of Walton Ine. under the Agreement as an

alter-ego of Walton is almost immaterial from a practical

viewpoint, because the facts show that neither the busi-

ness, nor the business income, nor the equipment acquired

by Walton was actually put into the corporation. The

record contains no evidence that corporate stock was ever

issued by Walton Ine., no evidence that a board of

directors was elected, no corporate minutes, and no cor-

porate tax returns. The Trust will likely enforce their

judgment, if at all, against Walton, who has the assets of

the business.

Nevertheless, the District Court properly found as a

fact that Walton attempted to use the incorporation of

Walton Ine. “as a technical change in operations to

attempt to avoid the obligations of the Agreement.”

Pet. 17. 13(a). The District Court further found as facts

that adherence to the legal fiction of a separate existence

between Walton and Walton Ine. would “promote and

sanction a fraud and injustice” (Pet. 14(a)), and that

Walton and Walton Ine. are “alter-egos’” of each other.

Pet. 13(a). The Court of Appeals reviewed these findings

and the evidentiary record and found them to he sup-

ported by the record and, therefore, not clearly erroneous.

Since the findings of fact were not clearly erroneous, the

Court of Appeals properly affirmed those findings as

required by Rule 52(a), F.R.Civ.P. Zenith Radio Corp. v.

Hazeltine Research, Inc., 395 U.S. 100, 123, 89 S.Ct. 1562,

1576 (1969).

The petition closes by asking this Court to prevent a

“significant injustice” by making ‘“‘a closer examination of

the facts” in this ease. If Walton’s counsel had done

precisely that — examined the facts more closely — both

the appeal and the petition would have been viewed

correctly as unwarranted additions to Walton’s financial

burdens.

8

CONCLUSION

Based on the foregoing, the petition for a writ of

certiorari to the U. S. Court of Appeals for the Ninth

Cireuit should be denied.

Dated: January 17, 1992

Respectfully submitted,

WAYNE JETT

JETT & LAQUER

Counsel for Respondents