Petition for Writ of Certiorari — Pipefitters Pension Trust v. Waldo

A hs

| ROY 10 1992

| OFFICE GI THE CLERK

No.

In Che

Supreme Court of the United States

(October Cerm, 1992

PIPEFITTERS PENSION TRUST;

PIPEFITTERS LOCAL UNION No. 562;

JOHN MARSHAL, administrator and

fiduciary of all plaintiff funds;

LESTER GROss, JOE BARRY, DON DEVvITT,

ROBERT MCDONALD, trustees,

Petitioners,

Vv.

RUSSELL WALDO,

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

JOHN H. GOFFSTEIN*

Bartley, Goffstein, Bollato and Lange

130 South Bemiston, Suite 604

St. Louis, Missouri 63105 (314) 727-0922

*Counsel of Record

November 6, 1992

QUESTIONS PRESENTED

I

WHETHER THE DOMINANT SHAREHOLDER - AND

OFFICER OF A CORPORATION IS AN EMPLOYER AS

THAT TERM IS DEFINED BY THE EMPLOYEE

INCOME RETIREMENT SECURITY ACT (ERISA) AND

PERSONALLY LIABLE FOR THE CORPORATION'S

FAILURE TO MAKE EMPLOYEE BENEFIT FUND

CONTRIBUTIONS.

II

WHETHER THE COURT OF APPEALS APPLIED THE

PROPER RULE OF LAW IN DECIDING THAT THE

SOLE SHAREHOLDER AND OFFICER OF A CLOSELY

HELD CORPORATION WAS NOT PERSONALLY LIABLE

FOR THE CORPORATION'S UNPAID CONTRIBUTIONS

TO EMPLOYEE BENEFIT FUNDS GOVERNED BY

ERISA.

ii

LIST OF PARTIES

The parties to the proceedings below

were the Respondents Russell Waldo, R.

Waldo, Inc. and Waldo, R., Inc., and

Petitioners Pipefitters Health and Welfare

Trust, Pipefitters Pension Trust- and

Pipefitters Local Union No. 562; John

Marshall, administrator and fiduciary of

the Respondents funds; Lester Gross, Joe

Barry, Don Devitt and Robert McDonald,

trustees.

ii

iil

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED .....-.+.e.« -« i

fe ge ge ee a a a ee © |

TABLE OF AUTHORITIES esa 2 ee 2 se wo ae

OPINIONS BELOW er a oe ae oe on oe ee 1

JURISDICTION os. & € 6 « ee ef] 2

STATEMENT OF THE CASE ....e« « « e« « 2

REASONS FOR GRANTING THE WRIT ... . 7

ARGUMENT:

ie THERE IS DISAGREEMENT AMONG THE LOWER

COURTS AS TO WHETHER A CONTROLLING

SHAREHOLDER IS AN EMPLOYER PURSUANT

TO TITLE 29 U.S.C. §1002(5) AND IS

PERSONALLY LIABLE FOR UNPAID ERISA

CONTRIBUTIONS TO EMPLOYEE ' BENEFIT

ee < s + 6.69) 8 © 6 8 s we 8

11. THE COURT OF APPEALS FOR THE EIGHTH

CIRCUIT APPLIED THE WRONG STANDARD OF

LAW WHEN DETERMINING WHETHER- TO

PIERCE THE CORPORATE VEIL AND IMPOSE

PERSONAL LIABILITY ON RUSSELL WALDO

FOR THE UNPAID ERISA CONTRIBUTIONS OF

R. WALDO, INC. AND WALDO, R. INC. 14

CONCLUSION Weare es 6s a eS so 69

iii

APPENDICES:

Appendix A -- Order of Court of Appeals

Denying Rehearing . . A-1

Appendix B -- Opinion and Judgment of

Court of Appeals... B-1

Appendix C -- Memorandum of District

COURT « «© 6 «© 6 6 Se" C-1

Appendix D -- Title 29 USC §1002(5) D-1

TABLE OF AUTHORITIES

Cases:

Alman v. Danin, 801 F.2d 1, 4 (lst Cir.

Ree) cs et ot 6 xe ee ee 22

Amalgamated Insurance Fund v. Danin, 448

F.Supp. 1142 (D.Mass.

1986) os ee a te Re Cees ee eee Oe

Board of Trustees v. Valley Cabinet &

Manufacturing Company, 677 F.2d 769

(9th Cir. 1989) coe 20

Gambino v. Index Sales Corporation, 673

F.Supp. 1450 (N.D. Ill.

1987 ) ie we le ee we le et “et ee a - Be

International Brotherhood of Painters

and Allied Trades v. Kracher, 856

F.2d a5e0 (0.6. 3weer « «a ss 13

Laborers Pension Fund Vv. Bakke

Construction Company, Inc. (N.D.

Ill. 1987), 1987 W.L. 1988 (not

reported in F.Supp.) ..... 16

iv

Leddy v. Standard Dry Wall, Inc., 875

F.2d 383 (2nd Cir. 1989) .22, 23, 24

Lowen v. Tower Asset Management, 829 F.2d

1209 (2nd Cir. 1987) oc <a, 2a, 26

Operating Engineer v. Reed, 726 F.2d 513

ko ae ee er ee 13

Pepper v. Litton, 308 U.S. 295 wee tae

Pipefitters Health and Welfare Trust

Fund et al. v. Waldo, R. Inc.,

872 F.2d 815 (8th Cir. 1989). 4

Plumbers Pension Fund Local 130 ¥.

Neidrich, 891 F.2d 1297 (7th Cir.

ee te eae a eae a a eee 13

R. Waldo, Inc., 280 N.L.R.B. No.

135, 124 L.R.R.M. 1046 (1986) 24

Rockney v. Blohorn, 877 F.2d 637 (8th

Cis. i909) -.« Pie? Fame & oe. Pee

Scarborough v. Perez, 870 F.2d 1079

[Wee ees ROO) eee «eS eS i3

Seymour v. Hull & Moreland Engineering,

605 F.2d 1105 (9th Cir.

1979) a ae oe Oe ee ee S, 19, 20

Smith v. C.M.T.A.-I.A.M. Pension Fund,

746 F.2d 587 (9th Cir. 1984)... 15

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

a aide Ue a ae I ae a 12

United Paperworkers International

Union v. Penntech Papers, 439

F.Supp. 610 (D.Me. 1977) ... 20

West Virginia IBEW Welfare Fund v.

Ball Electrical Company, 685

F.Supp. 953 (S.D.W.Va. 1988). . 13

Statute:

| ag Re & Pe ee ee 18

LMRA §8(a)(3) Se ee ee ae 18

29 U.S.C. $1002(5) yo x, Te Bs ae

Other Authority:

Legislative History, Public Law 83-406 p.

5854 U.S. Code Congress and

piaeah. tee. IG7G « « »« s s&s 12

vi

NO.

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1992

PIPEFITTERS HEALTH AND WELFARE TRUST:

PIPEFITTERS PENSION TRUST;

PIPEFITTERS LOCAL UNION NO. 562;

JOHN MARSHALL, ADMINISTRATOR AND

FIDUCIARY OF ALL PLAINTIFF FUNDS;

LESTER GROSS, JOE BARRY, DON DEVITT,

ROBERT MCDONALD, TRUSTEES,

Petitioners,

Vv.

RUSSELL WALDO,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Petitioner, Pipefitters Local Union

No. 562 ("Union") requests that a Writ of

Certiorari issue to review the Judgment

and Opinion of the United States Court of

Appeals for the Eighth Circuit in this

case.

OPINIONS BELOW

The Opinion of the Court of Appeals is

reprinted at Appendix B. The opinion of

the Court of Appeals, is reported at 872

F.2d 815 (8th Cir. 1989).

JURISDICTION

The Judgment « the United States

Court of Appeals for ~ sighth Circuit

was entered on July 16, 1992. A timely

filed Petition for Rehearing was denied on

August 12, 1992. (Appendix A) This Court

has jurisdiction pursuant to 28 U.S.C.

§1254(1). -

STATEMENT OF THE CASE

Russell Waldo operated R. Waldo,

Inc., a company engaged in the business of

Mechanical Contracting such as plumbing,

heating, air conditioning and underground

piping. R. Waldo Inc. was party to a

Collective Bargaining Agreement with the

Congress of Independent Unions which was

in effect from 1981 through 1984.

In 1982, a business representative

for the Petitioner Pipefitters Local Union

No. 562, contacted Russell Waldo about

Signing a Collective Bargaining Agreement

with the Pipefitters Local Union No. 562.

A second company was incorporated, Waldo

R. Inc., for the purpose of bidding for

projects which required an AFL-CIO Union

labor force. Russell Waldo signed a

Collective Bargaining Agreement with the

Pipefitters on behalf of Waldo R. Inc.

Russell Waldo agreed to phase out work

that was being performed by R. Waldo Inc.

as that work was completed. Waldo R. Inc.

would then employ the former R. Waldo Inc.

employees pursuant to the terms of the

Pipefitters Collective Bargaining

Agreement.’

The two construction companies were

not operated as Russell Waldo had

represented and the Pipefitters’- had

expected. Waldo R. Inc. never bid on any

projects and never had work other than

that which it subcontracted from R. Waldo

Inc. Both corporations were owned and

operated by Russell Waldo from the same

office with the same personnel and using

the same equipment.

In 1983, Pipefitters renewed its

contract with Waldo R. Inc. The contract

ran from June 1, 1983 through and until

May 31, 1986. The contract contained

provisions for payment to the Union of

initiation fees, dues and assessments as

well as contributions to an Employee

Health and Welfare Trust Fund and Pension

1See Pipefitters Health and Welfare

Trust et al. v. Waldo R. Inc., 872 F.2d

815 (8th Cir. 1989).

4

Fund. The Pipefitters filed suit in the

United States District Court for the

Eastern District of Missouri when Waldo R.

Inc. failed to abide by the terms of the

Collective Bargaining Agreement by failing

to pay wages set out in the Agreement and

to make contributions based on _ hours

worked by employees to the Employee

Benefit Funds.

In a decision issued April 17, 1989,

the United States Court of Appeals for the

Eighth Circuit held that R. Waldo Inc. and

Waldo R., Inc. were alter-egos and that R.

Waldo, Inc. became bcund by the terms of

the Pipefitters Contract effective April

15, 1984, Pipefitters Health and Welfare

Trust Fund v. Waldo, R. Inc., supra. As

of that date, the Court held that R. Waldo

Inc. was obligated to pay its employees at

the wage rates set out in the Pipefitters

Agreement. R. Waldo Inc. was’ further

obligated to make contributions to the

Employee Benefit Funds in accordance with

the terms set out in the written trust

agreement and the Collective Bargaining

Agreement. The Court remanded the matter

to the District Court for the Eastern

District of Missouri, Eastern Division, to

determine the amount of any money owed by

R. Waldo Inc. or Waldo R. Inc. to

Pipefitters Local No. 562. The Court also

remanded the matter to the District Court

to determine whether or not Russell Waldo

was personally liable for the contractual

obligations of R. Waldo Inc. and Waldo R.

Inc.

On May 10, 1990, the District Court

for the Eastern District of Missouri held

R. Waldo Inc. liable in the amount of

Seven Hundred Forty One Thousand One

Hundred Eighty Nine Dollars ($741,189.00)

in unpaid wages, delinquent contributions

to Funds, interest on these amounts,

attorneys fees and _ costs. The Court

considered whether Russell Waldo could be

held liable for the delinquent

contributions of R. Waldo Inc. to the

ERISA Funds as an employer solely on the

basis of his status as the dominant

shareholder and officer of the

corporation. The District Court followed

the decision of the Court of Appeals for

the Eighth Circuit in Rockney v. Blohorn,

877 F.2d 637 (8th Cir. 1989) and held that

corporate officers could not be held

personally liable as an employer under

ERISA where there is no basis for piercing

the corporate veil.

The District Court then considered

whether, pursuant to Seymour v. Hull &

Moreland Engineering, 605 F.2d 1105 (9th

Cir. 1979), there were sufficient grounds

to pierce the corporate veil and hold

Russell Waldo personally liable for debts

of the corporation. The District Court

found that Russell Waldo observed the

appropriate corporate formalities,

operated the corporations for a legitimate

purpose and that any trouble the

Plaintiffs may have in recovering on the

Judgment would not alone constitute an

inequitable result warranting piercing of

the corporate veil. The Court refused to

hold Russell Waldo personally liable for

the debts of the corporations.

On July 16, 1992 the Court of Appeals

affirmed the decision of the District

Court. The Court held that there was no

reason to conclude that Title 29 U.S.C.

§1002(5) was intended to include a

dominant shareholder and officer within

the meaning of the definition of

"employer" and thus liable as an employer

for unpaid ERISA contributions. The Court

further agreed with the District Court as

to the factors to be applied in

determining whether to pierce the

corporate veil. The Court refused to apply

Raeome

a less onerous standard for piercing the

corporate veil for purposes of determining

the liability of a corporate officer for

unpaid ERISA contributions. The Court held

that the federal policies evidenced by the

statutory safeguards of the ERISA statute

did not justify an increased willingness

to pierce the corporate veil. Finally, the

Court of Appeals affirmed the decision of

the District Court in finding that the

facts of the instant case did not warrant

piercing the corporate veil and attaching

personal liability to Russell Waldo for

unpaid ERISA contributions. The

Petitioner's timely Motion for Rehearing

by the Panel was denied on August 12,

1992.

REASONS FOR GRANTING THE WRIT

Certiorari should be granted to

resolve a conflict among the Circuit

Courts as to the proper interpretation of

a very significant federal statute. The

Courts of Appeal for the 3rd, 6th, 7th,

8th, and 9th Circuits, as well as the

Court of Appeals for the District of

Columbia, have held that a shareholder or

director who controls a corporation is not

an employer pursuant to 29 U.S.C. §1002(5)

of the ERISA statute who is obligated to

make contributions to an employee benefit

plan. Only when it is appropriate pursuant

to standards of corporate law to pierce

the corporate veil can liability for

unpaid ERISA contributions be imposed upon

a dominant shareholder or officer. The

District Court for the Southern District

of West Virginia has held that’ the

Statutory definition of an employer is

broader than the colloquial meaning of the

10

word. The District Court has imposed

liability on corporate officers with

Significant ownership interests, control

of the day to day aspects of the

corporation's functions who have acted

with respect to employee benefit funds and

who personally were responsible for

continuing the business despite financial

adversity.

Those Courts that have held it

necessary to pierce the corporate veil in

order to attach liability to a controlling

shareholder for unpaid ERISA contributions

have differed with respect to the

appropriate factors to be considered in

making such a determination. Supreme Court

guidance is needed in determining the

balance to be established between

limitations on the liability of

controlling shareholders and the

protections to be given to_ employee

benefit funds governed by ERISA.

11

ARGUMENT

L.

THERE IS DISAGREEMENT AMONG THE LOWER

COURTS AS TO WHETHER A CONTROLLING

SHAREHOLDER IS AN EMPLOYER PURSUANT TO

TITLE 29 U.S.C. §1002(5) AND IS PERSONALLY

LIABLE FOR UNPAID CONTRIBUTIONS TO

EMPLOYEE BENEFIT FUNDS

There is disagreement among the lower

courts as to whether a corporate officer

or controlling shareholder- is personally

liable as an employer pursuant to Title 29

U.S.C. §1002(5) for unpaid contributions

to employee benefit funds. 29 U.S.C.

§1002(5) defines an employer as "any

person acting directly as an employer, or

indirectly in the interest of an employer,

in relation to an employee benefit plan".

The question has arisen numerous times as

to when and if a corporate officer,

because of his actions on behalf of the

corporation with respect to an employee

benefits plan, can be considered an

"employer" pursuant to the statute and

12

ne Oe

personally liable for unpaid ERISA

contributions that the corporation has

failed to make.

The first Courts considering whether

a corporate officer could be considered an

employee for purposes of ERISA compared

the definition of an employer pursuant to

ERISA to the nearly identical definition

of an employer found in the Fair Labor

Standards Act. Amalgamated Insurance Fund

v. Danin 448 F.Supp. 1142 (D. Mass. 1986).

A corporate officer exercising unilateral

control over the day to day operation of a

corporation may be held liable as an

employer pursuant to the Fair Labor

Standards Act. In Gambino v. Index Sales

Corporation, 673 F.Supp. 1450 (M.D. Ill.

1987), the Court held that the definition

Of an employer under the ERISA statute

should be given the same broad

interpretation that courts have given to

the definition of an employer under the

13

Fair Labor Standards Act.

More recently, the Courts of Appeal

have found a distinction between the

Gefinition of an employer pursuant to

ERISA and under the Fair Labor Standards

Act. Several courts have held that there

is nothing in the legislative history of

ERISA to indicate that Congress intended

to include corporate officers and

directors as employers. Rockney Vv.

Blohorn, 877 F.2d 637 (8th Cir. 1989). In

the instant case, the Court below followed

the reasoning of the Court in Rockney and

found no justification for defining an

employer under the ERISA statute as

broadly as that term has been interpreted

under the Fair Labor Standards Act. The

Court found that there was no indication

that Congress intended to expose corporate

officers and shareholders to liability for

a corporations unpaid ERISA contributions.

Rockney v. Blohorn, 877 F.2d 637 (8th Cir.

14

1989).

The Court in Rockney held that a

controlling shareholder or corporate

officer could only be liable for the

unpaid ERISA contributions of a

corporation where there were reasons to

pierce the corporate veil. In so holding,

the Court relied on a similar decision by

the Court of Appeals for the Third Circuit

in Solomon _v. Klein, 770 F.2d 352 (3rd

Cir. 1985), wherein the Court held that a

corporate officer could be held personally

liable for a corporation's unpaid ERISA

contributions only where there were

grounds to pierce the corporate veil.

Several other Courts of Appeal have

followed this line of reasoning’ and

refused to attach personal liability to a

corporate officer in the absence of facts

which permit piercing the corporate veil.

See Operating Engineers Pension Trust v.

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

15

International Brotherhood of Painters and

Allied Trades v. Kracher, 856 F.2d 1546

(D.C. 1988); Scarborough v. Perez, 870

F.2d 1079 (6th Cir. 1989); Plumbers

Pension Fund Local 130 v. Neidrich, 891

F.2d 1297 (7th Cir. 1989).

There is a direct conflict between

the line of cases cited above and the

opinion of the District Court for the

Southern District of West Virginia as set

out in West Virginia- Ohio Valley Area

IBEW Welfare Fund v. Ball Electric Company

Inc., 685. F.Supp. 953 (S.D.W.Va. 1988).

In Ball Electric Company, the Court noted

that the Plaintiffs made no attempt to

show that the controlling shareholder was

the alter ego of the corporation or that

there were grounds to warrant piercing the

corporate veil. Rather the Court adopted

the reasoning elucidated in Amalgamated

Insurance Fund v. Danin, and Gambino v.

Index Sales Corporation, supra. The Court

16

noted that while a "... corporate officer

may not be an employer in the traditional

sense, he may be one in statutory terms"

Ball Electric Company Inc. at 955.

The definition of employer for

purposes of Title 29 U.S.C. §1102(5) is

borrowed from the Fair Labor Standards

Act. The Court in Ball Electric Company

Inc. noted that controlling shareholders

have regularly been held to be employers

under the Fair Labor Standards Act. The

meaning of the term "employer" should be

given the same effect under both statutes.

In Amalgamated Insurance Fund v. Danin,

supra, the Court held that Congress may be

properly deemed to have recognized that

the definition of an employer under ERISA

would be interpreted as expansively as the

nearly identical definition of employer

under the Fair Labor Standards Act. A

corporate officer with significant

ownership interests, who had control of

17

significant aspects of the day to day

corporate functions, who acts on behalf of

the corporetion with respect to the

employee benefit plans and who decides to

continue operations despite financial

adversity when the benefit payments are

sought is an employer as that term is

defined in Title 29 U.S.C. §1002(5).

Danin at 1147.

The conflict among the lower courts

should be resolved in favcr of a broad

definition of those who can be considered

employers under ERISA. The intent of

Congress in adopting the safeguards found

in ERISA for employee benefit funds was to

give broad protection to such funds. The

statute has been given broad application

by the courts to ensure that the interests

of employees, participants and their

beneficiaries are protected. Smith v.

C.M.T.A.-I.A.M. Pension Fund, 746 F.2d 587

(9th Cir. 1984). The legislative history

18

of the statute shows that Congress

intended coverage under the Act "be

construed liberally to provide the maximum

degree of protection to working men and

women covered by private retirement

programs. Conversely, exemptions should

be confined to their narrow purpose."

Legislative History, Public Law 83-406, p.

5854 U.S. Code Congress and Admin. News,

1974. Accordingly, the definition of an

employer under ERISA should = include

corporate officers with significant

ownership interests in the corporation who

have acted for the corporation with

respect to emplcyee benefit plans and

whose actions gave rise to the

corporation's liabilities.

The lower Court's reliance on the

decision of Rockney Vv. Blohorn is

misplaced. In Rockney, the Court looks to

what it perceives as the intent of

Congress in adopting the definition of an

19

employer. The Court concludes’ that

Congress never intended to disregard the

limitations on shareholder liability

afforded by corporate status. In relying

on the legislative history, the Court

ignores the plain meaning of the statutory

language itself. The statute itself

defines an employer as any person

acting... indirectly in the interest of an

employer, in relation to an employee

benefit plan". The plain language itself

seems to include as employers those

corporate officers who act on behaif of

their employer with respect to the

corporation's benefit plans. This

language can hardly have any i other

application. This plain language approach

was endorsed by Chief Judge Grady in

Laborers Pension Fund Vv. Bakke

Construction Company a. . (N.D. Tai.

1987), (not reported in F.Supp.; 1987 W.L.

1988).

20

The focus should properly be upon the

degree to which a corporate officer had a

financial interest in and control of the

corporation and acted with regard to the

employee benefit plan. The dissent in

Rockney noted that the ae restrictive

interpretation of employer under the ERISA

statute does not accord with the statutory

purpose of ERISA and "makes it easier for

ongoing businesses to be looted". Rockney

at 644, 645 Fn. 1. A broad definition

should be given to the term "employer"

under ERISA just as the nearly identical

definition of the term has been

interpreted in the Fair Labor Standards

Act. A corporate officer with a

significant financial interest in the

corporation who assumes responsibility for

the employee benefit plans of the

corporation acts indirectly in the

interest of the corporate employer with

respect to employee benefit plans and

y » |

should thus be liable for any unpaid

contributions of the corporation.

In the instant case, Russell Waldo

should be held personally liable for the

unpaid ERISA contributions of R. Waldo

Inc. and Waldo R. Inc. Russell Waldo

acted indirectly in the interest of an

employer in relation to the corporation's

employee benefit plan. Russell Waldo was a

controlling shareholder of the

corporations, he held a significant

financial interest and was directly

involved in the day to day activities of

the corporations. Russell Waldo

negotiated the Collective Bargaining

Agreement between the corporation and the

union which included the employee benefit

plans. Finally, Russell Waldo made the

various financial decisions which led to

the corporation's failure to make employee

benefit plan contributions. See

Pipefitters Health and Welfare Trust v.

22

eee

Waldo R. Inc., 872 F.2d 815 (8th Cir.

1989). The statutory protections afforded

by ERISA are such as to make Russell Waldo

an employer under the statute and thus

personally liable for the unpaid ERISA

contributions of the corporation.

az.

THE COURT OF APPEALS FOR THE’ EIGHTH

CIRCUIT APPLIED THE WRONG STANDARD OF LAW

WHEN DETERMINING WHETHER TO PIERCE THE

CORPORATE VEIL AND IMPOSE PERSONAL

LIABILITY ON RUSSELL WALDO FOR THE UNPAID

ERISA CONTRIBUTIONS OF R. WALDO, INC. AND

WALDO R., INC.

The Court of Appeals for the Eighth

Circuit held that the controlling

shareholder, Russell Waldo, could only be

found personally liable for unpaid ERISA

contributions if the facts warranted

piercing the corporate veil of R. Waldo,

Inc. and Waldo R., Inc. The Court of

Appeals from the Eighth Circuit applied

the standards for piercing the corporate

veil as set out in Seymour v. Hull &

Moreland Engineering, 605 F.2d 1105, 1110

23

nl

(9th Cir. 1989) in deciding whether or not

to pierce the corporate veii and attach

personal liability to a shareholder, the

Court generally looks to the amount of

respect given to corporate formalities,

the fraudulent intent of the incorporator

and the degree of injustice visited upon

the litigants that would result from

recognizing the corporate form. Seymour

v. Hull & Moreland Engineering, supra. In

the instant case, the District Court found

that the controlling shareholder respected

the separate identity of the corporation

and found no fraudulent intent on the part

of the incorporator. Finally, the District

Court correctly postulated that the

Petitioners would have difficulty in

collecting on judgments against the

corporation but did not find that result

inequitable.

The District Court and the Court of

Appeals for the Eighth Circuit erred in

24

—Seeaeaeaaaa:

applying the test set out in Seymour v.

Hull & Moreland Engineering, in

determining whether it was appropriate to

pierce the corporate veil. The factors

considered in Seymour v. Hull & Moreland

Engineering only reflect common law

concerns about protecting the limited

liability offered shareholders by the

corporate form. This limited consideration

is inappropriate when determining whether

or not to attach personal liability to a

controlling shareholder for unpaid

contributions to employee benefit funds

governed by ERISA. In considering the

liability of a corporate officer for

unpaid ERISA contributions, the interests

in protecting the liability of the

shareholder should be balanced against the

policies underlying’ ERISA. Board of

Trustees Vv. Valley Cabinet and

Manufacturing Company, 677 F.2d 769 (9th

Cir. 1989). Federal policies are not to

25

be defeated by deference to limitations on

corporate liability which give sanctity to

the corporate entity. United Paperworkers

International Union v. Penntech Papers,

Inc, 439 F.Supp. 610 (D.Me. 1977). The

courts have consistently refused to give

effect to the corporate form where it has

been used to defeat legislative policy.

Lowen v. Tower Asset Management, 829 F.2d

1209 (2nd Cir. 1987).

Many courts have applied a less

strict standard for piercing the corporate

veil when balancing the concern for

limitations on liability against the

sanctity and protection of employee

benefit funds. In Amalgamated Trustees v.

Danin, supra, the Court held that a

corporate officer who exercises unilateral

control over the day to day operations of

the corporation, who has Significant

ownership interests, who acts on behalf of

the corporation with respect to employee

26

benefit plans, and who continues’ to

operate the corporation without regard for

the financial adversity facing the

corporation should be held _ personally

liable for unpaid ERISA payments. This is

a far different test than the one employed

by the Court of Appeals for the Eighth

Circuit in the instant case. This type of

relaxed test for piercing the corporate

veil is one in which the limitations on

liability afforded by the corporate form

are balanced against the need for

integrity and protection of employee

benefit funds governed by ERISA.

The purpose for a broad

interpretation of the definition of

employer and the reason for a liberal test

to be applied in piercing the corporate

veil is argued for by the Court of Appeals

of the First Circuit in Alman v. Danin,

801 F.2d 1, 4 (1st Cir. 1986). In Alman,

the Court noted that allowing the

27

shareholder of a marginal corporation to

invoke the corporate shield in

circumstances where it is inequitable to

do so in order to avoid financial

obligations to employee benefit funds,

would seem to be precisely the type of

conduct Congress sought to avoid.

In many cases, the courts have

pierced the corporate veil upon finding

that the shareholders or corporate

officers engaged in some improper or

fraudulent conduct with respect to the

employee benefit plans. In the test to

determine whether to pierce the corporate

veil, more emphasis has been placed on the

fraudulent intent of the incorporator. In

Leddy v. Standard Drywall, Inc., 875 F.2d

383 (2nd Cir. 1989), the Court held the

dominant shareholder liable for unpaid

ERISA contributions where the employer had

engaged in a scheme to defraud the

employee benefit funds of contributions by

28

OE

diverting work to non-union corporations

which were not obligated to pay ERISA

contributions. In Lowen, supra, the Court

held the controlling shareholders of a

corporation liable for the corporations

making improper investments with employee

benefit funds. The Court held that

general principles of limited shareholder

liability should not afford protection

where respect for the corporate form is

inconsistent with ERISA's remedial nature.

The Court further added that parties may

not shift fiduciary obligations to one

legal entity while channeling profits from

self-dealing to a separate legal entity

under their control.

The conduct which warranted disregard

for the corporate form in Leddy and Lowen

was very similar to the conduct of Russell

Waldo in the instant case. The National

Labor Relations Board found that R. Waldo,

Inc. violated §8(a)(2) and 8(a)(3) of the

29

Labor Management Relations Act by

executing an agreement with the Congress

of International Unions at a time when

both the employer and the CIU knew that

all but one employee had signed dues

authorization cards with the Pipefitters

Union herein. The employer, through and

by Russell Waldo, further interrogated

employees concerning their Union

sentiments and threatened employees with

discharge because of their support for the

Pipefitters Union herein. R. Waldo Inc.,

280 N.L.R.B. No. 135, 124 L.R.R.M. 1046

(1986). Russell Waldo signed a Collective

Bargaining Agreement obligating Waldo R.

Inc. to pay wages and make contributions

to employee benefit funds as set out in

the Collective Bargaining Agreement. At

the same time Russell Waldo diverted work

from Waldo R. Inc. to R. Waldo Inc and

failed to pay those employees the wages

and benefits to which they were entitled

30

to. In Pepper v. Litton, 308 U.S. 295,

note 28, the Court held that "in all the

experience of the law, there has never

been a _— prolific breeder of fraud than

the one man corporation." This was never

more true than with Russell Waldo~ and

Waldo, R. Inc.

The purpose and effect of these

actions were to avoid the employer's

obligation to make ERISA contributions

pursuant to its agreement with the

Petitioners. This issue was resolved in

Petitioner's favor by the NLRB. The

conduct of Russell Waldo on behalf of the

corporations with respect to the employee

benefit plans was similar to the conduct

of those corporate officers in Leddy and

Lowen. The actions of the dominant

shareholder and corporate officer to

defraud the employee benefit funds of

contributions warrant disregard of the

corporate form in this instance and the

31

|

imposition of personal liability for the

unpaid ERISA contributions on _ Russell

Waldo. Imposing personal liability on

Russell Waldo in the instant case is in

keeping with the remedial nature of ERISA

and insures integrity and protection for

employee benefit funds.

CONCLUSION

In order to resolve a dispute among

the lower federal courts of importance to

the public, to give proper protection to

employee benefit funds, and for the other

reasons set forth herein, this Petition

for Certiorari should be granted.

32

Respectfully submitted,

BARTLEY, GOFFSTEIN, BOLLATO AND

LANGE

/S/

JOHN H. GOFFSTEIN, Counsel

of Record

BRENT J. JAIMES

130 South Bemiston

Suite 604

St. Louis, Missouri 63105

314/727-0922

DATED: November 6, 1992

33

A-1

APPENDICES TO PETITION FOR CERTIORARI

APPENDIX A

Order Denying Rehearing

(United States Court of Appeals

- Eight Circuit)

(Dated August 12, 1992)

(Pipefitters Health and Welfare

Trust, et al., Appellants, vs. Russell

Waldo, Appellee - No. 91-3063EMSL; Appeal

form the United States District Court for

the Eastern District of Missouri)

The Petition for rehearing by the panel is

denied.

April 12, 1992

Order Entered at the Direction of the

Court:

/s/ Michael E. Gans

Clerk, U.S. Court of Appeals, Eighth

Circuit

APPENDIX B

OPINION AND JUDGMENT

U. S. Court of Appeals- Eighth Circuit

(Submitted March 12, 1992)

(Filed July 16, 1992)

(Pipefitters Health and Welfare Trust;

Pipefitters Pension Trust; Pipe Fitters

Pension Trust; -Pipe Fitters Local Union

No. 562; John Marshall, Administrator and

Fiduciary of all plaintiff funds; Lester

Gross, Joe Barry, Don Devitt, Robert

McDonald, Trustees, Appellants, vs. Waldo,

R.. Inc.; R. Waldo, Inc. and Russell

Waldo, Appellees - No. 91-3063; Appeal

from the Wnited States District Court for

the Eastern District of Missouri)

Before Fagg, Circuit Judge, BEAM, Circuit

Judge, and Battey"™, District Judge.

BEAM, Circuit Judge.

* The Honorable Richard H. Battey,

United States District Judge for the

District of South Dakota, sitting by

designation.

Pipe Fitters Health and Welfare

Trust, Pipe Fitters Pension Trust, Pipe

Fitters Local Union No. 562, and various

fund - administrators and trustees

(collectively "Pipefitters") appeal from

the district court's decision refusing to

pierce the corporate veil of R. Waldo,

Inc. and Waldo, R., Inc. and hold Russell

Waldo personally liable for lost wages,

pension payments, health and welfare

payments, initiation fees, and union dues

under the Employee Retirement Security Act

of 1974 ("ERISA") and the Labor Management

Relations Act. We affirm.

Ya BACKGROUND

Pipefitters brought this action in

1984 against Russell Waldo, individually,

and R. Waldo, Inc., and Waldo, R., Inc.,

two companies owned by ined? Waldo.

Both companies operated as contractors for

plumbing, heating, air conditioning, and

i

other related work. R. Waldo was the

first company formed. "{[FjJor several

years [R. Waldo had] negotiated collective

bargaining agreements with the Congress of

Independent Unions (CIU) covering all of

the company's employees." Pipe Fitters

Health & Welfare Trust v. Waldo, Rs 1. .

872 F.2d 815, 816 (8th Cir.), cert.

denied, 493 U.S. 977 (1989). In 1982,

however, a representative of Pipe Fitters

Local Union No. 562 ("Local 562"), a rival

of CIU, contacted some R. Waldo employees

and discussed the possibility of the

employees and discussed the possibility of

the employees becoming members of Local

562. (Local 562's wage rate was

considerable higher than CIU's.) Later,

another Local 562 representative, James

O'Mara, contacted Russell Waldo. After

negotiation, Russell Waldo agreed to form

a separate corporation, Waldo, R., "for

the purpose of signing a collective

‘bargaining agreement with Local 562."

Pipe Fitters v. Waldo, R., No. 84-2163 C

(2), Memorandum at 2 (E.D. Mo. July 14,

1987).

Waldo, R. having been formed and a

bargaining agreement signed, Russell Waldo

"then transferred eight of his employees

to Waldo, R. [and] promised O'Mara and the

remaining employees [at R. Waldo] that he

would phase out R. Waldo operations as the

work bid by that company was completed,

and its employees could join [Local 562]

when [R. Waldo's] CIU agreement expired."

Pipe Fitters, 872 F.2d at 816. "[Russell]}

Waldo, however, did not run the _ two

construction companies as he had promised.

Waldo, R. never bid on any projects and

never had any work other than what it

subcontracted from R. Waldo." Id. In

1983, Local 562 renewed its contract with

Waldo, R. This renewed contract

"contained provisions for direct payment

to the union of initiation fees, dues and

assessments, and for contributions to an

employee health and welfare trust fund and

pension fund." Id. at 816-817. Then, in

1984, Russell Waldo renewed R. Waldo's CIU

contract "[e]ven though the R. Waldo

employees unanimously voted against CIU

representation." in. at 817. "This

contract was never ratified by R. Waldo

employees" and, after Local 562 brought a

charge of unfair labor practices, "[t]he

NLRB found that [Russell] Waldo had

engaged in unfair labor practices by

renewing the CIU contract after the CIU

ha[d] lost its majority support, by

unlawfully coercing and discriminating

against employees and be giving unlawful

Support to the CIU." Id.

"Meanwhile, Pipefitters brought this

action in federal district court in an

attempt to hold Waldo, R., R. Waldo, and

Russell Waldo, individually, liable for

violations of the [Local 562] contract."

Id. Pipefitters alleged a loss of $90,000

in union wages as a result of Waldo, R.

diverting its work to the R. Waldo

employees. Pipefitters also alleged that

the work diversion resulted in a loss of

pension payments, health and welfare

payments, initiation fees, and union dues,

totalling approximately $80,000. Id. The

aGistrict court, however, refused to

enforce Local 562's contract, holding that

Russell "Waldo was running a doubie-

breasted operation and that Waldo, R. was

the alter ego of R. Waldo." The district

court also held that Local 562's “contract

was illegal as on employer may not

negotiate a collective bargaining

agreement with another union when its

employees are already represented by a

union." Id.

On appeal, we reversed the decision

of the district court, holding that it was

"directly contrary to the findings of the

[NLRB]" and "that the existence of the CIU

contract did not preclude [Russell] Waldo

from operating a split shop and from

entering into a prehire agreement with

[Local 562] covering the construction

workers employed by Waldo R." Id. We did

not, however decide the issue of whether

Russell Waldo could be held personally

liable for the contractual Obligations of

R. Waldo and Waldo, R. Id. at 820. We

remanded this case to the district court

to determine whether any money was owed to

Pipefitters and, if So, to resolve this

issue of Russell wWaldo's individual

liability.

In May 1991, the district court

issued a memorandum opinion deciding that

R. Waldo and Waldo, R. are liable to

Pipefitters in the total amount of

$741,189 and that Russell Waldo could not

be held personally liable for the debts of

his corporations. The district court,

citing Seymour _ v. Hull & Moreland

Engineering, 605 F.2d 1105, 1110-11 (9th

Cir. 1979), looked to three factors in its

analysis of Russell Waldo's personally

liability: (1) the degree of respect that

the shareholder gave to the separate

identity of the corporation; (2) the

incorporator's fraudulent intent, if any;

and (3) the degree of injustice that the

plaintiffs would suffer if the corporate

entity was recognized. See Pipe Fitters

Vv. Waldo, R., No. 84-2163 C (2),

Memorandum Opinion at 7 (E.D. Mo. May 10,

1991).

The district court concluded, with

respect to the first factor, that although

Waldo, R. was the alter ego of R. Waldo,

Russell Waldo had shown a proper degree of

respect for corporate formalities. R.

Waldo, for example, had "maintained

separate corporate records, the board of

directors met annually, and, on occasion,

the board of directors held _ special

meetings to authorize the president of the

company, Russell Waldo, to proceed on a

particular matter." Id. at 8. Although

Pipefitters "tried to establish that Waldo

Ty

commingled his personal funds with those

of the corporations and that he treated

corporate assets as his own," the district

court concluded that Pipefitters "failed

in their proof." Id.

In its consideration of the second

factor, the district court concluded that

there was no evidence of bad faith or

fraudulent intent by Russell Waldo in

forming the corporations: "R. Waldo was an

ongoing business which appears to have

been adequately capitalized at the outset.

Waldo[,] R. was created in good faith for

the purpose of bidding on projects which

required an AFL-CIO union work force."

ig, eat. 3. Finally, applying the third

factor, the district court acknowledged

that Pipefitters "might have trouble

collecting the judgment" against Waldo, R.

and R. Waldo (both of which have since

gone out of business), but concluded that

"that alone does not constitute an

inequitable result." Id. at 10.

On appeal, Pipefitters argues that

because Congress intended ERISA to be

construed liberally to protect workers,

Russell Waldo should be personally liable

for his corporation's failure to make

ERISA contributions, despite the

protection of the corporate entity.

Pipefitters also argues that, if Russell

Waldo can only be held liable by piercing

the corporate veil, the standard for

determining when to disregard the veil of

incorporation should be less onerous when

the action is for failure to make ERISA

contributions. Finally, Pipefitters

Claims that the district court's decision

that Russell Waldo is not liable for wages

and fringe benefits is clearly erroneous.

II. DISCUSSION

Our resolution of the issues raised

by Pipefitters requires far less space

than our summary of the background leading

al

up to this appeal. Pipefitters' general

argument that corporate was decided by

this court in Rockney v. Blohorn, 877 F.2d

637 (8th Cir. 1989). In Rockney, we held

that "corporate officers cannot be held

personally liable under ERISA where there

is no basis for piercing the corporate

veil." Id. at 643. wWe have no authority

to Overrule Rockney. Moreover,

Pipefitters' Simple assertion that the

legislative history of ERISA generally

Supports a liberal construction of the Act

is no argument when considered under our

thorough analysis in Rockney. See id. at

639-43.

‘ Likewise, we do not agree with

Pipefitters that a less onerous standard

for piercing the corporate veil should be

applied, Pipefitters, again, argues that

the general legislative intent to construe

ERISA liberally Supports this notion, and

that a less onerous Standard is

particularly appropriate in a case, such

as this, where the sole shareholder and

corporate officer exercises substantial

control over the business. As we explained

in Rockney, if Congress intended to expose

corporate officers to personal liability

for violations of ERISA beyond the usual

limits, "‘'it would have signaled that

resolve somehow in legislative history.'"

Id. at 642 (quoting International

Brotherhood of Painters and Allied Trades

Union v. Kracher, 856 F.2d 1546, 1548

(D.C. Cir. 1988). In passing ERISA,

Congress gave no indication -- in either

the statutory language or legislative

history -- that it "“intend[ed] to abrogate

the long[-]Jestablished corporate principle

of limited liability," and we will not

treat ERISA as if it had. Id.

Finally, we disagree with Pipefitters

that the district court's decision to not

pierce the corporate veil of R. Waldo and

Waldo, R. is Clearly erroneous.

Pipefitters argues a number of points in ;

this brief, but none of these arguments --

most of which were addressed by the

district court in its memorandum opinion -

- convince us that the district court

abused its discretion.’ Pipefitters'

primary point of contention seems to be

that R. Waldo sold land valued at $95,708

to Russell Waldo in 1983 in exchange for

71 shares of R. Waldo stock. Because

Russell Waldo later sold the same land (in

1986) for $550,000, Pipefitters argues

this is evidence that Russell Waldo had no

respect for the separate identity of the

corporate entity and that he operated the

corporation fraudulently and with bad

*In addition to the factual points,

Pipefitters argues that the district court

erred in relying on the test in Seymour v.

Hull & Moreland Engineering, 605 F.2d

1105, 1110-11 (Sth Cir. 1979), for

piercing the corporate veil, rather than

the test under the Missouri law. See

e.g., Fairbanks v. Chambers, 655 S.W.2d

33, 36-37 (Mo. App. 1984). We agree,

however, with the district court's

conciusion that "the result under the

Missouri law would be the same."

Memorandum Opinion at 7 n.6.

ne

faith. We disagree. The land transaction

was approved by R. Waldo's board of

directors and, as the district court

explained, "(t]he land transaction in

question not only occurred before this

suit was filed, it also occurred before a

formal complaint was issued against ‘Waldo

Construction' by the National Labor

Relations Board." Memorandum Opinion at

9.

III. CONCLUSION

For the reasons stated above, the

decision of the district court is

affirmed.

A true copy.

Attest:

CLERK, Ue COURT OF APPEALS, EIGHTH

CIRCUIT.

aaa

APPENDIX C

MEMORANDUM OPINION

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

PIPE FITTERS HEALTH &

WELFARE TRUST, PIPE

FITTERS PENSION TRUST,

and PIPE FITTERS

LOCAL UNION NO. 562,

Plaintiffs,

Vv.

WALDO R., INC.,

R. WALDO, INC. and

RUSSELL WALDO,

)

)

)

)

)

)

)

) No. 84-2163(c)

)

)

)

)

)

Individually, )

)

)

Defendants.

MEMORANDUM OPINION

This matter is before the Court on a

mandate from the United States Court of

Appeals for the Eighth Circuit.

The facts of this case are set out in

detail in Pipefitters Health & Welfare

Trust v. Waldo R., Inc., 872 F.2d 815 (8th

Cir. 1989). The court of appeals agreed

with this Court's conclusion that Waldo R.

became the alter ego of R. Waldo; however,

the appeals court decided that Russell

Waldo could not assert the alter ego

doctrine to avoid his contractual

obligation. Therefore, this Court's

decision of July 14, 1987, was reversed

and the case remanded. The court of

appeals wrote:

R. Waldo, Inc. became bound by

the terms of the Pipefitters

[plaintiffs] contract upon the

expiration of the CIU [Congress

of Independent Unions] agreement

on April 15, 1984. R. Waldo's

employees expected this to occur

and the NLRB found that Russell

Waldo had promised to be_ so

bound. Thus, any of Waldo's

employees performing pipefitting

or plumbing work after that date

should have been paid _ union

wages. Payments to the union

trust funds should also have

been made, regardless of whether

the employees were members of

the Pipefitters union.

Id. at 819-20.

The court of appeals did not decide

the issue of whether Russell Waldo could

be held personally _liable for the

contractual obligations of R. Waldo and

Waldo R. Therefore, this court must now

decide two questions; first, as a result

of the decision of the court of appeals,

how much money, if any, is owed to

plaintiffs; and, if so, should Russell

Waldo be held personally liable for the

contractual chi tentbnns of the companies.

After the first trial, the parties

Stipulated to the following hours of

“pipefitting worked by R. Waldo, Inc.

employees for which hours were not paid at

the local 562 wage rate and for which

fringe benefit rates were not paid to

plaintiff union or funds":?!

‘The original stipulation covered

hours from October 1, 1982, to March >

1986.

TIME PERIOD HOURS

April 15, 1984 - May 31, 1984 2,912.40?

June 1, 1984 - Dec. 31, 1984 4,654.75

Jan. 1, 1985 - May 31, 1985 S,hnawsto

June 1, 1985 - Dec. 31, 1985 10,946.75

Jan. 1, 1986 - March 31, 1986 2,338.00

Defendants now argue that the stipulation

should not be used because there is no

breakdown of the work as to laborers,

electricians, or other trades and because

plaintiffs elicited no evidence as to

which employees are entitled to the

difference between Local 562 wages and

C.1I.U. wages.

As to the first argument, the Court

has reviewed the transcript of Shirley

Steele's testimony. Steele was the

bookkeeper of R. Waldo, inc. She

testified concerning the total hours of

*The parties originally stipulated to

the period from January 1, 1984, to May

31, 1984 (9708 hours). Since the court of

appeals decision neither party has

indicated how many of those hours were for

the period from April 15, 1984 to May 31,

1984; however, the parties have agreed

that a pro rata computation should be

utilized.

pipefitting worked by employees of R.

Waldo, Inc. As Steele was going through

her figures, the Court questioned her

concerning supporting documentation. She

advised the Court that she had some of the

documents with her and the rest could

easily be obtained. After a fifteen

minute break, defense counsel informed the

Court that the parties could stipulate to

the hours in question. It was the Court's

understanding that the stipulation would

cover pipefitters and it could be used to

determine hours lost under the

Pipefitters' contract. That understanding

is supported by a plain reading of the

stipulation.

The Court does not have to reach

defendant's argument that plaintiffs do

not have standing to sue for wages here

because implicit in the court of appeals'

decision is a finding that plaintiffs have

standing to recover the wages in

question.’ Id. at 819-20.

Plaintiffs have provided an exhibit

calculating the damages, liquidated

damages, wages due and attorney fees.‘

See 29 U.S.C. §1132(g)(2). The only

information contained in the exhibit which

was disputed by defendants were the

figures used for "hours" worked. Having

- decided that defendant's objection to the

stipulation on "hours" is without merit,

the Court now finds that plaintiffs'

exhibit properly reflected how much money

*The issue of "associational standing"

was briefed before the court of appeals.

‘Originally, plaintiffs agreed to

waive their claim for the full amount of

lost wages; however, in response to

defense counsel's decision to reserve his

right to contest wages due, the plaintiffs

now seek the full amount of lost wages on

behalf of its members and not just the

difference between the labor rates paid to

the CIU employees and the Pipefitters

rate. The court has decided that

defendants must abide by their

stipulation. Likewise, plaintiffs must

abide by their decision to waive their

claim for the full amount of lost wages.

was due under the Pipefitters' contract

through July 15, 1990. The figures, as

expressed below, have been adjusted to

reflect money owed through the date of

judgment. As to attorneys fees, it was

stipulated to at the time of the first

trial that $50,000.00 in attorneys fees

was fair and reasonable. Plaintiffs'

counsel has submitted an affidavit in

which he indicates that since the time of

the trial, an additional 400 hours of

plaintiffs' legal counsel's professional

services were required to process this

matter through several judiciary

proceedings before this Court, the Eighth

Circuit, and the United States Supreme

Court. The parties agree that the

additional 400 hours of legal time were

necessary, and the amount charged per hour

was customary to this geographical area.

The Court finds that an additional $40,000

in attorneys fees requested is fair and

reasonable.

CALCULATION OF DAMAGES

Period Hours Rate Amount

4/15/84 to 2,912.40 $5.255 $15,304.66

5/31/84

6/1/84 to 4,654.75 $5.655 $26,322.61

12/31/84

1/1/85 to 5,152.75 $5.655 $29,138.80

5/31/85

6/1/85 to 10,946.75 $6.155 $67,377.25

12/31/85

1/1/86 to 2,338.00 $6.155 $14,390.39

3/31/86

Total April 15, 1984 to

May 31, 1986: $152,533.71

a

Liquidated Damages Through May 15. 1991,

on Unpaid Health & Welfare and Pension

Funds Contributions

Period Amount Months 2% per Liqui-

Delin- Month dated

quent Damages

4/15/84

to $15,305 86 $26,325 $17,200

5/31/84

6/1/84

to $26,323 80 $42,117 $22, 400

12/31/84

1/1/85

to $29,139 74 $43,126 $14,800

5/31/85

6/1/85

to $67,377 68 $91,633 $19,040

12/31/85

1/1/86 $14,390 62 $17,844 $12, 400

$221,045 $85,480

C. Wages Due

Difference Between

Hourly Rate of

Pipefitters and

Period CIU Hours Amount

1/15/84

to $6.42 2,912.00 $18,698

5/31/84

6/1/84

to $7.42 4,654.75 $34,538

12/31/84

1/1/85

to $6.92 5,152.79 $35, 657

5/31/85

6/1/85

to $7.92 10,946.75 $86,698

12/31/85

1/1/86

to $6.92 2,338.00 $16,179

3/31/86

Total April 15, 1984,

to March 31, 1986: 191,770

Total Amounts Owing:

Contributions to Funds: $152, 534 Z

Interest and Liquidated

Damages: $306, 885

Wages Deferential: $191,770

$651,189

Attorneys fees as per Affidavit )

$50,000 stipulation; 400 x

$100 @ hour= $40,000: $90,000

$741, 189

Plaintiffs seek to hold Russell Waldo

individually liable for the amount due

under the Pipefitters' contract because of

Waldo's "self dealing with the corporate

entities," complete commingling of

corporate and individual assets," and

“utter disregard for the corporate form or

practice." Additionally, plaintiffs

assert that Russell Waldo should be held

individually now operates the remaining

shell of the company business out of his

home."

Corporate officers cannot be held

personally liable under ERISA where there

is no basis for piercing the corporate

veil.’ Rockney v. Blohorn, 877 F.2d 637

(8th Cir. 1989). In considering whether

"Several courts have held that

corporate offices or stockholders could be

personally liable under the _ Employee

Retirement Income Security Act of 1974,

even though it would be inappropriate to

pierce the corporate veil. See _ e.g.,

Gambino v. Index Sales Corp., 673 F.Supp.

1450, 1456 (N.D.I1l. 1987); Trustees of

Amalgamated Ins. Fund v. Danin, 648

F.Supp. 1142, 1147 (D.Mass. 1986).

to disregard the corporate form in actions

to recover fringe benefit fund payments,

the Court applies federal substantive law,

although it may look to state law for

guidance. Laborers Clean-up Contract

Admin. Trust Fund v. Uriarte Clean-up

Service, Inc., 736 F.2d 516, 523 (9th Cir.

1984). To determine whether Russell Waldo

should be held personally liable for the

debts of the corporation, the courts looks

to three general factors: the amount of

respect given to the separate identity of

the corporation by its shareholders, the

fraudulent intent of the incorporator, and

the degree of injustice visited on the

litigants by recognition of the corporate

entity.°® Seymour _v. Hull & Moreland

*"Reliance on state corporate law is

proper if consistent with the federal

policy of uniform interpretation and

enforcement of collective bargaining

agreements." Seymour v. Hull & Moreland

Engineering, 605 F.2d 1105, 1110 (9th Cir.

1979). Because federal law provides ample

guidance on this matter, the Court has

looked to it in deciding this matter;

however, the result under Missouri law

;

‘

*

?

2

Engineering, 605 F.2d 1105, 1110-1111 (9th

Cir. 1979).

The Court has already decided that

Waldo R. was the alter ego of R. Waldo.

Therefore, in deciding whether to pierce

the corporate veil to hold Waldo

individually liable, the Court, to

appiying the factors discussed in Seymour,

focuses on Waldo's relationship with the

corporations, not the relationship of the

corporations with one another. With this

in mind, the court finds that the

corporate formalities were preperly

observed. Among other things, R. Waldo

would be the same. Under Missouri law,

the corporate entity may be disregarded if

it is controlled and influenced by one or

a few persons and the evidence establishes

that the corporate cloak was used as "a

subterfuge to defeat public convenience,

to justify wrong or to perpetuate fraud."

Fairbanks v. Chambers, 665 S.W.2d 33, 37

(Mo.App. 1984). Under the facts presented

here, the Court would not pierce the

corporate veil under the Missouri law.

Although Waldo controlled and influenced

the corporations in question, the

corporate cloak was not used as a

subterfuge.

maintained separate corporate records, the

board of directors met annually, and, on

occasion, the board of directors held

special meetings to authorize the

president of the company, Russell Waldo,

to proceed on a particular matter. For

example, on August 1, 1986, the board of

directors held a special meeting and

decided to sell the assets of the

corporation. Waldo, as president of the

corporation, was authorized to conduct the

negotiations and execute all sale

agreements. Additionally, although

plaintiffs tried to establish that Waldo

commingled his personal funds with those

of the corporations and that he treated

corporate assets as his own, they failed

in their proof. Given the above, the

Court finds that Waldo showed respect for

corporate formalities.

As to the second prong of Seymour,

there is no evidence of bad faith or

fraudulent intent in the forming of the

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corporations. R. Waldo was an ongoing

business which appears to have been

adequately capitalized at the outset.

Waldo R. was treated in good faith for the

purpose of bidding on projects which

required an AFL-CIO union work force.

Nonetheless, the plaintiffs ask this Court

to infer bad faith towards the union based

on a land transaction which occurred in

December of 1983 and on the fact that the

corporate assets have now been sold off.

The land in question was sold to Russell

Waldo and so were many of the assets of

the corporations. See International Union

v. Cardwell Manufacturing Co., 416 F.Supp.

1267 (D.C.Kan. 1976) (parent corporation

held liable for contributing to fringe

benefit funds owed by a subsidiary

corporation).

On September 30, 1982, the board of

directors of R. Waldo, Inc., agreed to

sell Russell Waldo a tract of land with

the legal description of Alpha Industrial

Park for 71 shares of R. Waldo, Inc.,

stock. The value of the land was

estimated at $95,708. The property was

actually transferred in December of 1983,

but the transaction remained unrecorded

until August 28, 1985. In November of

1986, Mr. and Mrs. Waldo sold the property

to Sieveking, Inc. for $550,000. The land

transaction in question not only occurred

before this suit was filed, it also

occurred before a formal complaint was

issues against "Waldo Construction" by the

National Labor Relations Board. Under

these facts, the Court will not infer bad

faith. Likewise, the Court will not

assume that Waldo ceased operating the

corporations for an improper purpose. The

Court finds credible Waldo's testimony

that he ceased operating the businesses

because of his health and because they

were no longer profitable.

Finally, although plaintiffs might

have trouble collecting the judgement to

be entered contemporaneously with this

memorandum opinion, that alone does not

constitute an inequitable result. The

evidence establishes that Waldo created

two corporations in good faith and abided

by the corporate form. Additionally,

plaintiffs have not convinced this Court

that Waldo fraudulently drained the

corporate assets. Under the circumstances,

the Court will enter judgment in favor of

Waldo individually and impose joint and

several liability against Waldo, R. and R.

Waldo.

Dated this 10th day of May, 1991.

EDWARD FILIPPINE

“ad /s/

UNITED STATES DISTRICT JUDGE

D-1

APPENDIX D

TITLE 29 USC §1002(5)

(5) The term “employer" means any person

acting directly as an_- employer, or

indirectly in the interest of an employer,

in relation to an employee benefit plan;

and includes a group or association acting

for an employer is such capacity.