Petition for Writ of Certiorari — Pettit v. Bay Area Pipe Trades Pension Trust Fund

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99 962 DEC 6 1999

99-

—___—@FFICE OF THE CLERK

IN THE

SUPREME COURT OF THE UNITED STATES

ELMAR LEE PETTIT, NORTH BAY PLUMBING, INC.;

and NOR-CAL PLUMBING, INC.

Petitioners,

BAY AREA PIPE TRADES PENSION TRUST FUND;

BAY AREA PIPE TRADES HEALTH & WELFARE

TRUST FUND; U.A. LOCAL NO. 343 HEALTH &

WELFARE TRUST FUND; U.A. LOCAL NO. 343

PENSION TRUST FUND; NORTHERN CALIFORNIA

PIPE TRADES HEALTH & WELFARE TRUST FUND;

NORTHERN CALIFORNIA PIPE TRADES PENSION

TRUST FUND; and U.A. LOCAL 343 JOURNEYMAN

AND APPRENTICE TRAINING TRUST FUND

Respondents,

ON PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

NINTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

HENRY F. TELFEIAN NATHAN LEWIN

Law Offices of Henry F. Telfeian (Counsel of Record)

1247 Alvarado Road Miller, Cassidy, Larroca &

Berkeley, California 94705-1545 Lewin, L.L.P.

(510) 848-0542 2555 M Street, N.W.

Washington, D.C. 20037-1302

(202) 293-6400

a ;

QUESTIONS PRESENTED

1. Whether a Federal district court has

jurisdiction under Section 301(a) of the Labor-Management

Relations Act, 29 U.S.C. § 185(a), over a claim by trust

funds against individuals who are not personally parties to a

labor contract but who are sued by the trust funds for

delinquent pension-plan contributions on the ground that “a

body of federal common-law” controls when the corporate

veil of a corporation that signs a labor contract should be

pierced.

2. Whether a federal action to collect delinquent

pension-plan contributions may be initiated only by the

parties specifically enumerated in the Employment

Retirement Income Security Act (“ERISA”) - ie.,

participants, beneficiaries or fiduciaries.

3. Whether a court of appeals may choose to

make a portion of its decision in a single appeal “citable” and

permit its publication and make another portion of its

decision on the same appeal “non-citable” and unpublished.

PARTIES TO THE PROCEEDING

The caption sets forth all parties to the proceeding

with the exception of Audrey Jean Pettit who prevailed in the

court below and is not, therefore, a petitioner. Petitioners

Nor-Cal Plumbing, Inc., and North Bay Plumbing, Inc., are

privately held, have no parent companies, and have no

wholly or partially owned subsidiaries.

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TABLE OF CONTENTS |

Page

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STATUTORY PROVISIONS AND LOCAL

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I FR at era pel IS ACE CMR aD st EAE OT EI 5

1. The Pettits Start Their Businesses .................... 5

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3. The Union’s Claim Is Dismissed...................... 7

4. The District Court Grants Summary

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5. The Ninth Circuit Reverses..........................04. 8

6. ALengthy Jury Trial Is Held..............000000000... 8

Fa, I IE EI PIII 5 osc sciinngescccsccccesseenss. 9

REASONS FOR GRANTING THE WRIT ................00..... 10

I. The Ninth Circuit’s Decision Effectively

Nullifies This Court’s Ruling in

I Wir cio oi chic ates cd dee secixesoiccasenranss 10

I. ERISA Occupies the Field and Specifies

the Only Parties Who May Sue Employers

for Delinquent Pension-Plan Contributions ............ 14

If. A Federal Court May Not Render a Decision

That It Partially Embargoes Against Citation

and Publication ............:::ccccccceccscereeeeseeeeeeeeetereee®

CONCLUSION .......ccccesccscsccsssscescsccssssreserssntsarsncvesrensessneeeeenses

APPENDICES

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TABLE OF AUTHORITIES

Allis-Chalmers v. Lueck,

471 U.S. 202 (1985)

Audit Services v. Rolfson,

GEE Fe FOr Ce es SN diss fasesnrdncassicitagvdedasiaea

Board of Educ. v. Rowley,

RI Bi Fre Gihod cimiatecdeukbicnoanen

Caterpillar v. Williams,

METERS Se heerc Atenas

County of Los Angeles v. Kling,

SFETLE, SO ee oie oi iiicadiasenees

Finley v. United States,

I No

Franchise Tax Bd. v. Construction Laborers

Vacation Trust, 463 US. TIGRE) sii cccscessisiiscccscssostcsicaseese

In re Rules of United States Court of Appeals,

SS FB SG CE Cr Be a vekied totccssncasetdica cd cerriconnsnaes

Jones v. Superintendent, Virginia State

Farm, 465 F.20 1091 CGI Car... UOTE) aos oeicsccesccccsecseisescgncces

Laborers Clean-Up Contract Admin.

Trust Fund v. Uriarte Clean-Up Service,

TORT 28 Sah OO, Se iiciidktstiesniiduiesnaccnoee

Lingle v. Norge Div. of Magic Chef,

SOG E Fee i cadet iccudblemien

Peacock v. Thomas,

516 U.S. 349 (1996).......sccccccereesseseeereerseserenncenansesnes passim

Seymour v. Hull & Moreland Eng’,

605 F.2d 1105 (9th Cir. 1979) ......c.cccccsseeesererseseseeenenetetes 11

Steelworkers v. Rawson,

AOS U.S. 362 (1990).....scsscesscseesssssensnensnenerssesnnenansennanenens 11

Steelworkers v United Eng’g,

52 F.3d 1386 (6th Cir. 1995) ..........cceseeseserseessenetsetetsetenes 15

Textron Lycoming Reciprocating Engine

Div. v. United Auto Aero and Agric. Implement

Workers, 523 U.S. 653 (1998) .....-:-:cceseserseeeeetete 11, 13

UA. Local No. 343 of the United Ass'n

of Journeymen v. Nor-Cal Plumbing, Inc.,

797 F. Supp. 767 (N.D. Cal. 1992) ......-:-:sssesererserretsrres 8

U.A. Local No. 343 of the United Ass'n of

Journeymen v. Nor-Cal Plumbing, Inc.,

48 F.3d 1465 (9th Cir. 1995), cert. denied,

516 U.S. 912 (1995)....-.sssssecescssssssscnesennnesersrersnenssnennennensen® 8

U.S. v. Edge Broad., 509 U.S. 418 (1993) .....eesereereeseeserees 18

STATUTES:

QB U.S.C. § 1257(a) .......-csecsesecsssereesenennenencesnnanenananesensnenens ]

2B U.S.C. § 1367....:n:cc.csosesecescnesenseseesensenvonsnsnsnenssannenenns 12

29 U.S.C. § 185(a) .....ssseseceeeereeseserenenseneenennenennesnenes passim

§ 2132.......-ccscsscscsenenetarsvonenssoensnaanensnnneneses passim

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Vii

PUBLIC LAW

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RULES

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Third Circuit Local Rule IOP 5.1-5-8 00.00... 17

Pourte Circuit Local Rabe 3606). 25... cccccccsccscssesccscascssense 17

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iameien Coren Ecol Tia BG ain in cccccsccccccsccscscssccccevcsccses 17

is Sehaiss sid scihcee camdbacsce tinea’ 19

Seventh Circuit Local Rule $3 ..............ccccccccccccccssscscseseeeess 17

Eagmtn Corcutt Local Rule 286A. .........0........0ccc.ssccsecscsseesseses 18

emt Cironslt Tocnll Rashe 56-1 oo. cccicicccsccccccscscaccsoscsaccessoss 3

FERS ice eaten race eae e 4

SREP Onde s MRR et Meas oe 5,17

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Eleventh Circuit Local Rule 36-2 ...0.........................00000000- 18

Vill

OTHER AUTHORITIES:

Judicial Business of the U.S. Courts, Annual

Report of the Director, 1998, Table S-3 ........... 17

Martha J. Dragich, Will The Federal Courts Of Appeal

Perish If They Publish? Or Does the Declining Use of

Opinions To Explain And Justify Judicial

Decisions Pose A Greater Threat,

44 Am. ULL. Rev. 757, 760-762 (1995).........:0:005 16

William M. Richman & William L. Reynolds, Elitism,

Expediency, And the New Certiorari: Requiem For The

Learned Hand Tradition,

81 Cornell L. Rev. 273 (1996)..........:cccccceeeeeeeerererees 18

FASE PS CIS SPOTTED MS I ES Bs PW

OPINIONS BELOW

The published and citable opinion of the court of

appeals on the issue of subject-matter jurisdiction (Pet. App.

A, pp. la — 13a, infra) is reported at 185 F.3d 978. The

court’s unpublished and non-citable memorandum decision

disposing of all other issues (Pet. App. B, pp. 14a — 37a,

infra) is not reported. An earlier opinion of the district court

granting summary judgment (Pet. App. E, pp. 4la — 52a,

infra) is reported at 797 F. Supp. 767. An earlier opinion of

the court of appeals (Pet. App. F. pp. 53a - 72a, infra)

reversing summary judgment is reported at 48 F.3d 1465.

JURISDICTION

The court of appeals’ decision was issued on July 27,

1999. A timely petition for rehearing was denied on

September 7, 1999 (Pet. App. C, pp. 38a — 39a, infra). A

timely motion to publish the unpublished opinion was denied

on October 14, 1999 (Pet. App. D, p. 40a, infra.). The

jurisdiction of this Court rests on 28 U.S.C. § 1257(a).

STATUTORY PROVISIONS AND

LOCAL RULES INVOLVED

Section 301(a) of the Labor-Management Relations

Act (“LMRA”), 29 U.S.C. § 185(a), provides:

Suits for violation of contracts between

an employer and a labor organization

representing employees in an_ industry

affecting commerce as defined in this

chapter, or between any such labor

organizations, may be brought in any district

court of the United States having jurisdiction

of the parties, without respect to the amount

in controversy or without regard to the

citizenship of the parties.

Section 502(d)(1) of the Employee Retirement

Income Security Act (“ERISA”), 29 U.S.C. § 1132(d)(1),

provides in relevant part:

An employee benefit plan may sue or

be sued under this subchapter as an entity.

Section 502(e)(1) of ERISA, 29 U.S.C. § 1132(e)(1),

provides in relevant part:

Except for actions under subsection

(a)(1)(B) of this section, the district courts of

the United States shall have exclusive

jurisdiction of civil actions under this

subchapter brought by the Secretary or by a

participant, beneficiary, or fiduciary... .

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oe bg hia Sal a AO a eT eg RR ER ye

Section 502(g)(2) of ERISA, 29 U.S.C. § 1132(g)(2),

provides in relevant part:

In an 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. . ..

Section 515 of ERISA, 29 U.S.C. § 1145, 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 such plan or

such agreement.

The Ninth Circuit has adopted Circuit Rule 36 which

provides, inter alia, as follows:

Circuit Rule 36-1: Opinions, Memoranda, Orders;

Publication

Each written disposition of a matter

before this Court shall bear under the

number in the caption the designation

OPINION, or MEMORANDUM, or

ORDER. A written, reasoned disposition of

a case or motion which is designated as an

opinion under Circuit Rule 36-2 is an

OPINION of the Court. It may be an

authored opinion or a per curiam opinion. A

written, reasoned disposition of a case or a

motion which is not intended for publication

under Circuit Rule 36-2 is a

MEMORANDUM. Any other disposition

of a matter before the court is an ORDER.

A memorandum or order shall not identify

its author, nor shall it be designated “Per

Curiam.”

All opinions are published; no

memoranda are published; orders are not

published except by order of the court. As

used in this rule, the term PUBLICATION

means to make a disposition available to

legal publishing companies to be reported

and cited. (Emphasis added).

Circuit Rule 36-2: Criteria For Publication

A written, reasoned disposition shall be

designated as an OPINION only if it:

(a) Establishes, alters, modifies or clarifies

a rule of law, or

(b) Calls attention to a rule of law which

appears to have been generally overlooked,

(d) Involves a legal or factual issue of

unique interest or substantial public

importance, or

(e) Is a disposition of a case in which there

is a published opinion by a lower court or

administrative agency, unless the panel

determines that publication is unnecessary

for clarifying the panel’s disposition of the

case, or

(f) Is a disposition of a case following a

reversal or remand by the United States

Supreme Court, or

(g) Is accompanied by a_ separate

concurring or dissenting expression, and the

author of such separate expression requests

publication of the disposition of the Court

and the separate expression.

Circuit Rule 36-3: Other Dispositions

Any disposition that is not an Opinion or

an order designated for publication under

Circuit Rule 36-5 shall not be regarded as

precedent and shall not be cited to or by this

Court or any district court of the Ninth

Circuit, either in briefs, oral argument,

opinions, memoranda, or orders, except

when relevant under the doctrines of law of

the case, res judicata, or collateral estoppel.

STATEMENT

: l. Pettits Start Their Businesses.

Elmar Lee Pettit purchased Nor-Cal Plumbing, Inc.

(“Nor-Cal”), a small plumbing contract business located in

Fairfield, California, in the early 1960’s (E.R. 13: CR.

474).' He built it up by 1987 to a company employing 30

' “E.R.” refers to the Excerpts of Record filed in the court of

appeals. “C.R.” refers to the Clerk’s Record in the court of appeals.

men, with gross revenues exceeding $2.5 million (C.R. 707).

During the full time that Mr. Pettit owned and operated Nor-

Cal, it was a party to a collective bargaining agreement with

Local 343 of the United Association of Journeymen and

Apprentices of the Plumbing and Pipefitting Industry of the

United States and Canada (“Local 343”), under which it was

required to make contributions-to the respondents, which are

various trust funds covered by The Employee Retirement

Income Security Act of 1974 (“ERISA”). Nor-Cal made the

required contributions for its own employees (C.R. 474).

In 1981, Mr. Pettit’s wife, Audrey Jean Pettit,

incorporated North Bay Plumbing, Inc. (“North Bay”).

North Bay also was located in Fairfield, and it operated a

plumbing contracting business, but it never signed a

collective bargaining agreement. Consequently, no

contributions were made to the respondents on behalf of

North Bay’s employees (E.R. 3-5; C.R. 474). For a period of

six years — between 1981 and 1987 — both Nor-Cal and

North Bay operated concurrently. During this time, Nor-

Cal’s business grew (C.R. 707).

y A Lawsuit Is Initiated.

In May 1987, the trust funds (respondents in this

Court) and Local 343 filed an action against Nor-Cal, North

Bay and the Pettits in the United States District Court for the

| Northern District of California. The complaint alleged (a)

, that all defendants owed Local 343 lost wages and union

i dues for North Bay employees (Count I), (b) that all

] defendants owed the trust funds delinquent trust

contributions for North Bay employees (Count II), (c) that all

defendants had committed fraud by concealing their

‘ relationship and making trust fund contributions only on

: behalf of Nor-Cal’s employees (Count III), and (d) that all

; defendants were liable for punitive damages (Count IV)

; (E.R. 1-11).

The plaintiffs — which were, at the inception of the

suit, the respondent trust funds and Local 343 — invoked the

district court’s jurisdiction under Section 502 of ERISA (29

U.S.C. § 1132) and Section 301 of the Labor-Management

Relations Act (“LMRA”) (29 U.S.C. § 185(a)).

«3 The Union’s Claim Is Dismissed.

ely daa lsat

In 1988, on the defendants’ motion, the district court

dismissed Local 343’s claim for lost wages and union dues

(Count I) on the ground that the claim was subject to

compulsory arbitration under the collective-bargaining

agreement. The only plaintiffs remaining in the action

thereafter were the trust funds themselves.

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4 The District Court Grants Summary Judgment.

In April 1992, the district court granted summary

judgment in favor of the trust funds against all the

defendants. U.A. Local No. 343 of the United Ass'n of

Journeymen v. Nor-Cal Plumbing, 797 F. Supp. 767 (N.D.

Cal. 1992) (Pet. App. E, pp. 41a — 52a, infra). The district

court held that North Bay was the “alter ego” of Nor-Cal and

that it was, therefore, legally obligated to make contributions

on behalf of North Bay employees to the trust funds. The

district court also “pierced the corporate veil” and held Mr.

and Mrs. Pettit personally liable for the obligations of their

corporations. The district court’s damage award was for

fringe benefit contributions ($1,066,820) liquidated damages

($106,682), interest ($899,066), and attorneys’ fees

($478,736). The district court also awarded $2,000,000 in

punitive damages.

5. The Ninth Circuit Reverses.

The court of appeals reversed the entry of summary

judgment on the ground that there were unresolved issues of

fact on the allegation that the separate identities of the two

corporations was a sham and on the claim that the corporate

veils should be pierced so as to make the Pettits individually

liable. U.A. Local 343 of the United Ass'n of Journeymen v.

Nor-Cal Plumbing, 48 F.3d 1465 (9th Cir. 1995) (Pet.

App. F, pp. 53a-—72a, infra). This Court denied the

respondents’ petition for certiorari. 516 U.S. 912 (1995).

6. A Lengthy Jury Trial Is Held.

Following the Ninth Circuit’s remand, the district

court dismissed the fraud claim (Count III) against the Pettits

individually, and the trust funds voluntarily dismissed the

punitive-damages claim (Count IV) (E.R. 73; C.R. 490).

The case proceeded to a seven-week jury trial against all

Pe ers

Ora was pis *

defendants for delinquent trust contributions (Count II) and

against the corporations for fraud (Count Ill). The jury

returned a verdict in favor of the plaintiffs against both

corporations and Mr. Pettit for compensatory damages of

$1,812,897.60. It did not find Mrs. Pettit personally liable

(E.R. 124-126). The district court thereafter held that the

plaintiffs were also entitled to recover attorneys’ fees and

other expenses (C.R. 658).

7. The Ninth Circuit Affirms.

The petitioners appealed the district court’s ruling

that it had jurisdiction under ERISA and the LMRA. The

court of appeals held that since the trust funds are not “a

participant beneficiary, or fiduciary” under Section 502(a)(3)

and 502(e) of ERISA, they could not initiate an action to

enforce any provision of ERISA. Pet App. A, pp. 4a — 9a,

infra. With regard to Section 301 of the LMRA_ however,

the court of appeals held that the trust funds could maintain

a federal action under Section 301(a) and that the “veil-

piercing” claim against the Pettits could be asserted under

Section 301 “because it merely concerns the remedy attached

to a breach of contract claim governed by LMRA.” Pet. App.

A, p. 13a, infra.

REASONS FOR GRANTING THE WRIT

THE NINTH CIRCUIT’S DECISION

EFFECTIVELY NULLIFIES THIS

COURT’S RULING IN

PEACOCK v. THOMAS

This Court decided in Peacock v. Thomas, 516 U.S

349 (1996), that a federal district cout did not have

jurisdiction over an action brought under ERISA against an

officer and shareholder of a corporation that allegedly

breached contractual and fiduciary duties in failing to make

contributions to a pension benefits plan. The Court held in

Peacock that the legal theory under which the corporate veil

may be pierced and an individual shareholder held liable

does not turn on “a violation of an ERISA provision or term

of the plan.” 516 US. at 354. Rather, it is “a means of

imposing liability on an underlying cause of action.” /d

(Quoting | C. Keating & G. O’Gradney, Fletcher Cyclopedia

of Law of Private Corporations § 41, p. 603 (perm. ed

1990))

For the very same reason stated in Peacock, there is

also no federal jurisdiction under Section 301 on a “veil-

piercing” theory against an individual stockholder, director

or owner of a corporation that has failed to make pension

plan contributions. The factual and legal issues that arise

when such a claim is made relate to the intent of the

individual in forming the corporation, the extent to which the

corporation operated independently of the individuals, and

many other questions that concern the corporation’s business

operations.

The claim made by the trust funds in this case is

plainly not the kind of contract claim that Section 301(a)

contemplates. This Court observed in Allis-Chalmers vy.

Lueck, 471 U.S. 202, 220 (1985), that the touchstone of

federal-court jurisdiction under Section 30] is the resolution

of a dispute that is “substantially dependent upon analysis of

the terms of an agreement made between the parties in a

labor contract” or that is “inextricably intertwined” with such

terms. See also Steelworkers y. Rawson, 495 U.S. 362, 371

(1990); Lingle v. Norge Div. of Magic Chef, 486 U.S. 399,

409-410 (1988); Caterpillar v. Williams, 482 U.S. 386, 394

(1987). Whether an individual who Owns and operates a

corporation that has failed to make pension-plan

contributions is liable on a “veil-piercing” theory is not an

interpretation-of-contract issue

The court of appeals explained its holding in this case

by referring to earlier “LMRA suits to recover unpaid

contributions” in which the Ninth Circuit has “developed a

substantial body of federal common-law regarding veil-

piercing in this context” (Pet. App. A, p. 12a, infra). The

cited decisions implementing this Ninth Circuit “body of

federal common-law” — Laborers Clean-Up Contract Admin.

Trust Fund v, Uriarte Clean-Up Service, 736 F.2d 516 (9th

Cir. 1984); Audit Services v. Rolfson, 641 F.2d 757 (9th Cir.

1981); Seymour v. Hull & Moreland Eng'g, 605 F.2d 1105

(9th Cir. 1979) — warrant re-examination in light of this

Court’s recent rulings in Peacock y. Thomas and in Textron

Lycoming Reciprocating Engine Division y, United

Automobile Aerospace and Agricultural Implement Workers

of America, 523 U.S. 653 (1998) The Ninth Circuit’s

decisions creating a “body of federal common-law” on the

subject of veil-piercing is inconsistent with this Court’s

recent decisions regarding Section 30] jurisdiction and

federal-court authority to consider veil-piercing theories.

To be sure, Peacock v. Thomas concerned federal

district-court jurisdiction over a wholly independent lawsuit

that followed the entry of judgment against the corporation

afone. But the jurisdictional issue is the same whether the

individual defendant is joined in the initial lawsuit against

the corporation or is first sued later. This Court said in

Finley v. United States, 490 U.S. 545, 556 (1989), that “a

grant of jurisdiction over claims involving particular parties

does not itself confer jurisdiction over additional claims by

or against different parties” Hence the trust funds in this

case are either legally able to sue Mr. Pettit on a “veil-

piercing” theory in federal court or they are not — regardless

of whether they join him in an action against the

corporations or wait to sue him separately at a later date.’

Peacock v. Thomas held that ERISA conferred no

jurisdiction to proceed in a federal court to pierce a corporate

veil and collect pension-fund contributions. Unless Peacock

v. Thomas can easily be avoided by the expedient of

invoking Section 301 of the LMRA instead of ERISA, the

same result must follow in this case

The question is an important one. If this decision is

permitted to stand, it will encourage plaintiffs in lawsuits

brought to collect delinquent contributions to join individual

stockholders, directors and owners and ask the court in each

case to “pierce the veil.” This will increase the burden on

the federal courts to decide questions that should more

reasonably be presented to state courts and decided by them.’

? Since this action was initiated in 1987, it is not subject to 28

U.S.C. § 1367, which was enacted after Finley and provides for

“supplemental jurisdiction.” Section 1367 was enacted in 1990 and is

not retroactive. See Pub. L. No. 101-650 § 310(c)

> The enactment in 1990 of the supplemental jurisdiction

provision found in 28 U.S.C. § 1367 does not affect this concern. Since

“veil-piercing” issues often overwhelm the contract issues on which

Section 301 jurisdiction is based, a court may, even after the enactment

If the Ninth Circuit’s decision in this case is

permitted to stand, the federal courts will be encouraged to

develop substantive “veil-piercing” standards for pension-

fund cases bought under Section 30]. But this Court held in

Peacock that there is no substantive body of “veil-piercing”

law that warrants the exercise of jurisdiction under ERISA.

516 U.S. at 354.

Although the court of appeals gave a passing nod to

this Court’s recent decisions in Textron Lycoming and

Peacock v. Thomas (see Pet. App. A, pp. i0a, 12a, infra), the

court fundamentally ignored those rulings. It maintained the

Ninth Circuit’s prior course of opening wide the doors of

federal courts to claims against non-signatories and

enforcement of judgments against corporate officers or

stockholders for the liabilities of the corporations. That

course — and its application to this case — violate the

jurisdictional language of Section 301(a) of the Labor-

Management Relations Act, 29 U.S.C. § 185(a).

Section 301(a) creates jurisdiction in a federal court

over “[s]uits for violation of contracts between an employer

and a labor organization ... or between any such labor

organizations.” This Court held in Textron Lycoming that a

lawsuit by a labor organization against an employer to

declare a labor contract voidable and to collect damages for

misrepresentation and concealment was not a claim that a

labor contract had been violated and was not, therefore,

authorized by Section 301(a). By the same token, the “veil-

piercing” claim made in this case is not within the language

of Section 301(a). And in Peacock v. Thomas, supra, this

Court held that there was no federal jurisdiction over a

lawsuit seeking a judgment against corporate owners on a

of Section 1367, properly decline to exercise supplemental jurisdiction

over a veil-piercing claim under the provisions of Section 1367(c).

“veil-piercing claim” or any other theory of vicarious

liability. See 516 U.S. at 352-354.

The combined effect of these two recent decisions by

this Court is to limit Section 301(a) actions to enforcement

of the terms of the labor contract against a signatory or its

“alter ego.” It does not extend to ancillary enforcement of

employer liability.

ERISA OCCUPIES THE FIELD

AND SPECIFIES THE ONLY

PARTIES WHO MAY SUE

EMPLOYERS FOR DELINQUENT

PENSION-PLAN CONTRIBUTIONS

The court of appeals held that the trust funds that

initiated this lawsuit were not authorized by ERISA to be

plaintiffs in such an action (Pet. App. A, pp. 4a — 9a, infra).

Nonetheless, the court held that the same entities that could

not sue under ERISA could maintain an action for violation

of the collective-bargaining agreement under Section 301(a).

The holding of the court below utilizes Section 301(a) to

undermine a_ limitation that Congress deliberately

incorporated into ERISA.

Section 515 of ERISA (p. 3, supra) establishes an

obligation enforceable under ERISA on employers who are

parties to labor contracts to make contributions “in

accordance with the terms and conditions of such plan or

such agreement.” Section 502 (g)(2) describes a court’s

power when it enforces a judgment “in favor of the plan” in

an action brought “by a fiduciary” (p. 3, supra). And

Section 502 (e)(1) specifies that a district court is to have

jurisdiction when an action is brought by “a participant,

beneficiary, or fiduciary.” The Statutory scheme defined by

ERISA clearly precludes an action such as this one,

instituted by trust funds themselves. Although such funds

are recognized by ERISA as potential parties in a lawsuit

(see Section 502(d)(1), p. 2, supra), they were not authorized

by Congress to prosecute actions to collect delinquent

payments.

This Court said in Franchise Tax Bd. y. Construction

Laborers Vacation Trust, 463 US. 1, 21 (1983), that “{t}he

express grant of federal jurisdiction in ERISA is limited to

suits brought by certain parties ... as to whom Congress

presumably determined that a right to enter federal court was

necessary to further the statute’s purposes.” This deliberate

Congressional policy -- which limits the parties who may

“enter federal court” in order to enforce the rights

enumerated in ERISA -is thwarted if Section 301(a) is

read — as the court of appeals read it — to entitle other entities

such as the trust funds themselves to initiate federal actions

to collect delinquent pension-fund obligations.

In Steelworkers v. United Eng'g., 52 F.3d 1386 (6th

Cir. 1995), the Sixth Circuit reached a result that is

inconsistent with the Ninth Circuit’s in this case. The Sixth

Circuit held that the enactment of ERISA “precluded”

federal courts from entertaining the same kind of actions

under Section 301 that ERISA specifically authorizes. Jd. at

1394. As was true in the Sixth Circuit’s Steelworkers case,

the enactment of ERISA was an instance in which Congress

“has now spoken directly” to the question of who may sue to

collect delinquent pension plan contributions. Jd The need

for a Section 301 remedy (and the jurisdiction to proceed

under Section 301) therefore “disappears” once Congress

grants a specific remedy for a particular kind of violation of

a labor contract. That is what Congress did when it

authorized only participants, beneficiaries or fiduciaries --

but not pension funds -- to initiate actions for delinquent

pension-plan contributions.

iil

A FEDERAL COURT MAY NOT

RENDER A DECISION THAT IT

PARTIALLY EMBARGOES

AGAINST CITATION

AND PUBLICATION

Until the early 1960s, virtually all federal appellate

decisions were published and constituted citable precedent.

As a result of a 1964 Judicial Conference suggestion, all of

the courts of appeal have now adopted local rules under

which some decisions are designated as “not for

publication.” See generally Martha J. Dragich, Will The

Federal Courts Of Appeal Perish If They Publish? Or Does

the Declining Use of Opinions To Explain And Justify

Judicial Decisions Pose A Greater Threat, 44 Am. U.L. Rev.

757, 760-762 (1995).

The most recent statistics show that almost 75% of all

federal appellate decisions are now designated as “not for

publication.” The Seventh Circuit publishes the greatest

share of its decisions (slightly more than 50%), and the

Fourth Circuit publishes the least (less than 10%):

U.S. Court of Appeals — Types of Opinions or Orders

Filed in Cases Terminated On the Merits During The

Twelve Month Period Ended September 30, 1998‘

Percent

Unpub- Unpub-

Circuit Total Cases Published _lished_ lished _

All 24,828 6,247 18,581 74.6%

D.C. 633 274 359 56.7%

First 740 370 370 50.0%

Second 1,721 514 1,207 70.1%

Third 1,740 254 1,486 85.4%

Fourth 2,569 242 2,327 90.6%

Fifth 3,552 1,030 2,522 71.0%

Sixth 1,861 399 1,462 78.6%

Seventh 1,415 716 699 49.4%

Eighth 1,856 778 1,078 58.1%

Ninth 4,337 710 3,627 83.6%

Tenth 1,576 436 1,140 72.3%

Eleventh 2,828 524 2,304 81.5%

The First, Second, Seventh and Ninth Circuits,

designate, by local rule, that their non-published decisions

are “non-precedential.” Litigants are barred from citing

these decisions.* The remaining circuits “disfavor” citation

of their non-published decisions but nonetheless permit it.

The Fifth, Eighth, Tenth, and Eleventh Circuits classify such

decisions as “non-precedential” while the Third, Fourth, and

Sixth Circuits acknowledge, either explicitly or implicitly,

the precedential effect of their unpublished decisions.

* This statistical data is excerpted from Table S-3 of the Judicial

Business of the U.S. Courts, Annual Report of the Director, 1998.

Excluded from this excerpt are the 82 oral decisions issued by the Sixth

Circuit which Table S-3 includes as unpublished decisions.

* First Circuit Local Rule 36.1; Second Circuit Local Rule 23;

Seventh Circuit Local Rule 53; Ninth Circuit Local Rule 36-3.

* Third Circuit Local Rule IOP 5.1-5.8; Fourth Circuit Local

Rule 36(c); Fifth Circuit Local Rule 47.5; Sixth Circuit Local Rule 206:

The practice of selective publication has never been

authorized by Congress or approved by this Court. Justice

Stevens, dissenting from a summary disposition in County of

Los Angeles v. Kling, 474 U.S. 936, 938 (1985), described

the practice of selective publication as “plainly wrong.”

This Court has occasionally expressed its disapproval

of a cour of appeals’ issuance of a nonpublishable opinion.

In U.S. v. Edge Broad., 509 U.S. 418 (1993), the Sixth

Circuit, in an unpublished decision, had held that a federal

statute prohibiting the broadcasting of lottery advertisements

was unconstitutional. In reversing the court of appeals, this

Court observed: “We deem it remarkable and unusual that

although the Court of Appeals affirmed a judgment that an

Act of Congress was unconstitutional as applied, the court

found it appropriate to announce its judgment in an

unpublished per curiam opinion.” Jd. at 425 n.3. See also

Board of Educ. v. Rowley, 458 U.S. 176 (1982), where this

Court issued an _ extensive opinion. reversing an

“unpublished” decision of the Second Circuit.

Selective publication has been strongly condemned in

academic writings, which have concluded that it is flawed in

concept and implementation. E.g., William M. Richman &

William L. Reynolds, Elitism, Expediency, And the New

Certiorari: Requiem For The Learned Hand Tradition, 81

Cornell L. Rev. 273 (1996).

And the courts of appeals are in conflict over the

permissibility of declaring appellate decisions “noncitable.”

The Fourth Circuit held in Jones v. Superintendent, Virginia

State Farm, 465 F.2d 1091, 1094 (4th Cir. 1972), that “any

decision is by definition a precedent, and that we cannot

Eighth Circuit Local Rule 28A; Tenth Circuit Local Rule 36.3, and

Eleventh Circuit Local Rule 36-2.

deny litigants and the bar the right to urge upon us what we

have previously done.” This view was also expressed in

dissent by Chief Judge Holloway and Judges Barrett and

Baldock of the Tenth Circuit when the Tenth Circuit Rules

were promulgated. See In re Rules of United States Court of

Appeals, 955 F.2d 36, 37 (10th Cir. 1992). The Sixth Circuit

recognizes counsel’s right to cite an unpubiished decision for

its “precedential value.” Sixth Circuit Local Rule 206(c).

Petitioners’ counsel asked the court of appeals to

publish its subsidiary opinion and to permit its citation. See

the letter of September 9, 1999, reproduced as Pet. App. G,

pp. 73a - 77a, infra. That request was denied. Pet. App. D,

p. 40a, infra.

The historical universal practice of relying on past

judicial decisions as precedent imposes discipline on any

court that renders a decision in a case or controversy. The

deciding court knows that the legal principle it applies to the

parties before it may control the disposition of future cases.

Reliance on stare decisis does not, therefore, only add

predictability to future transactions with legal consequences.

It also ensures that justice is rationally administered in the

case being decided.

When a court is free to render a decision that will not

be published and may not even be cited, it is granted a

license to enter a judgment for which there will be no future

responsibility. This is inconsistent with the constitutional

obligation of federal judges to administer the process of law

to litigants in federal courts.

The practice has reached a new level with the

decision of the court of appeals in this case. One appeal has

resulted, in this case, in two opinions. An opinion on the

subject of jurisdiction is published and citable. The second

decision, which involves many important questions of

federal law, has been designated as nonpublishable and non-

citable. If this bifurcation is permitted, a court can in a

single appeal render judgments for which it is accountable as

precedent and decide other issues, entirely in its own

unreviewable_ discretion, in a framework of non-

accountability.

Petitioners were prejudiced by the refusal to publish

and allow citation of the subsidiary issues in this case

because the panel that decided their case was freed from the

responsibility that should accompany any court decision.

The rationale for part of the decision of the court of appeals

could not be a precedent for future cases. The petitioners are

entitled to have the decision vacated and to have the case

remanded for consideration by a panel that will be obliged to

rule on the issues with the knowledge that its decision will be

published and can be cited in the future.

CONCLUSION

For the foregoing reasons, this petition for a writ of

certiorari should be granted.

Respectfully submitted,

HENRY F. TELFEIAN NATHAN LEWIN

Law Offices of Henry F. Telfeian (Counsel of Record)

1247 Alvarado Road Miller, Cassidy, Larroca

Berkeley, California 94705-1545 & Lewin, L.L.P.

(510) 848-0542 2555 M Street, N.W.

Washington, D.C. 20037

(202) 293-6400

December 1999

APPENDICES

LOCAL 159, 342, 343 & 444; LOCAL 343 UNITED

ASSOC.

JOURNEYMEN & APPRENTICE TRAINING TRUST

FD; LOCAL 343 UNITED

ASSOC. OF PLUMBING, Plaintiffs-Appellees and

Cross-Appellants,

NOR-CAL PLUMBING, INC.; NORTH BAY

PLUMBING, INC.; ELMAR LEE PETTIT, a.k.a.

ELMER LEE PETTIT;

AUDREY JEAN PETTIT, Defendants-Appellants and

Cross-Appellees.

Nos. 96-16172, 96-16284

United States Court of Appeals

Ninth Circuit

Jan. 11, 1999

Submission Deferred Jan. 12, 1999

Re-submitted Feb. 10, 1999

Patrick W. Jordan, Jeffer, Mangels, Butler & Marmaro, San

Francisco, California, for defendants-appellants and cross-

appellees Nor-Cal Plumbing, Inc., and Elmar Lee Pettit.

Henry F. Telfeian, Berkeley, California, for defendants-

appellants and cross-appellees North Bay Plumbing, Inc.,

and Audrey Jean Pettit.

John J. Davis, Jr., McCarthy, Johnson & Miller, San

Francisco, California, for plaintiffs-appellees and cross-

appellants.

Before: WIGGINS, TASHIMA, and SILVERMAN, Circuit

Judges.

TASHIMA, Circuit Judge:

Nor-Cal Plumbing, Inc. (“Nor-Cal”), a plumbing

contracting business, was a signatory to a collective

bargaining agreement (“CBA”) with Local 343 of the United

Association of Journeymen and Apprentices of the Plumbing

and Pipefitting Industry (the “Union’). The CBA

incorporated a Trust Agreement obligating Nor-Cal to make

pension and welfare benefit contributions to employee

benefit plans (the “Trust Funds”)' based on the number of

hours worked by Nor-Cal’s employees.

The owner and manager of Nor-Cal, Elmar Pettit, began

“double-breasting” when he opened a non-union plumbing

business, North Bay Plumbing, Inc. (“North Bay”), while

still maintaining Nor-Cal, which was unionized. He started

transferring work from Nor-Cal to North Bay, until Nor-Cal

finally stopped bidding on jobs altogether and shut down its

operations in 1987.

The Trust Funds sued Nor-Cal, North Bay, Pettit and his

wife Audrey Pettit (collectively the “Employers”), on the

theory that the CBA covered North Bay employees because

North Bay was the alter ego of Nor-Cal. The suit primarily

sought to recover contributions for hours worked by North

Bay employees. A jury found that Nor-Cal and North Bay

were alter egos and pierced the corporate veil as to Elmar

Pettit, but not his wife. We must decide whether ERISA or

LMRA provided subject matter jurisdiction over the action

brought by the Trust Funds. We have appellate jurisdiction

' The Trust Funds are funds established under § 302 of the

Labor Management Relations Act (“LMRA”), 29 U.S.C. § 186, and in

addition are pension and welfare benefit plans governed by § 3 of the

Employee Retirement Income Security Act (“ERISA”), 29 U.S.C.

§ 1002.

aa a nae ae a ne ne

under 28 U.S.C. § 1291, and we affirm on the ground that

jurisdiction over the suit existed under LMRA.”

The Trust Funds initially brought suit against the

Employers in 1987, claiming that Nor-Cal and North Bay

were alter egos and a single employer; therefore, that

contributions were owed under the Trust Agreement to the

Trust Funds for work done by North Bay employees. The

Trust Funds also sought to hold the Pettits individually liable

for the unpaid contributions. In 1992, the district court

granted summary judgment in favor of the Trust Funds. It

found that North Bay was the alter ego of Nor-Cal and that

Nor-Cal and North Bay had breached the CBA by failing to

observe its terms and conditions of employment with respect

to North Bay employees. The district court also entered

judgment against the Pettits in their individual capacities

under a veil-piercing theory. See UA Local No. 343 of the

United Ass'n of Journeymen v. Nor-Cal Plumbing, Inc., 797

F. Supp. 767 (N.D. Cal. 1992).

On appeal, we reversed in part the district court’s summary

judgment ruling. See UA Local 343 of the United Ass'n of

Journeymen v. Nor-Cal Plumbing, Inc., 48 F.3d 1465 (9th

Cir.), cert. denied, 516 U.S. 912, 116 S. Ct. 297, 133 L. Ed.

2d 203, (1995) (“UA Local 343 I’). We remanded the alter

ego claim for trial because genuine issues of material fact

remained as to whether Pettit had the intent to use North Bay

in a sham effort to avoid Nor-Cal’s CBA obligations. See id.

at 1473-74. Similarly, we found that issues of fact remained

? In a separate, unpublished disposition filed concurrently

herewith, we deal with the myriad of remaining issues appealed by the

parties.

on the request to pierce the corporate shell. See id. at 1475-

76.

After a seven-week trial, a jury found that Nor-Cal and

North Bay were indeed alter egos and that North Bay was

therefore bound by the terms of the Trust Agreement. It also

found Nor-Cal and North Bay liable for fraud. Finally, it

determined that Pettit, but not his wife, should be held

individually liable on a veil-piercing theory. It awarded

compensatory damages in the amount of $1,812,897.60. The

district court entered judgment on the verdict on April 15,

1996, and on May 21, 1996, entered an order denying the

Employers’ motion for judgment as a matter of law and for a

new trial. Both sides now appeal.

Whether subject matter jurisdiction exists is a question of

law reviewed de novo. See Galt G/S v. JSS Scandinavia, 142

F.3d 1150, 1153 (9th Cir. 1998). The district court’s

interpretation of a statute is also reviewed de novo. See

United States v. Mack, 164 F.3d 467, 471 (9th Cir. 1999).

The district court’s finding that a party is a “fiduciary” under

ERISA is a factual conclusion reviewed for clear error. See

Steen v. John Hancock Mut. Life Ins. Co., 106 F.3d 904, 913-

14 (9th Cir. 1997).

Ii.

A. Jurisdiction under ERISA

Section 502(e) of ERISA grants exclusive jurisdiction to

the district courts to hear “civil actions under this subchapter

brought by the Secretary [of Labor] or by a participant,

beneficiary, for] fiduciary.” 29 U.S.C. § 1132(e)()).

Similarly, § 502(a)(3) provides that “a participant,

beneficiary, or fiduciary” has standing to enforce any ERISA

PREM NOREEN GREE SI SE BETES ON fs

provisions. § 1132(a)(3)(jii). Therefore, “a federal court has

no jurisdiction to hear a civil action under ERISA that is

brought by a person who is not a ‘participant, beneficiary, or

fiduciary.“ Harris v. Provident Life & Accident Ins. Co., 26

F.3d 930, 933 (9th Cir. 1994); see Franchise Tax Bd. vy.

Construction Laborers Vacation Trust, 463 U.S. 1, 27, , 103

S. Ct. 2841, 77 L. Ed. 2d 420 (1983).

The Employers contend that the district court improperly

exercised jurisdiction under ERISA because the Trust Funds

are neither a participant, beneficiary, nor fiduciary of an

ERISA plan.’ The Trust Funds assert that they are indeed

“fiduciaries” under ERISA.

ERISA “defines ‘fiduciary’ not in terms of formal

trusteeship, but in functional terms of control and authority

over the plan.” Mertens v. Hewitt Assocs., 508 U.S. 248, 262,

113 S. Ct. 2063, 124 L. Ed. 2d 161 (1993) (emphasis in

original).

[A] person is a fiduciary with respect to a plan

[governed by ERISA] to the extent (i) he

exercises any discretionary authority or

discretionary control respecting management

of such plan or exercises any authority or

control respecting management or disposition

of its assets, . . . or (iii) he has any

discretionary authority or discretionary

responsibility in the administration of such

plan.

* The Employers raised this argument for the first time in their

post-trial motion for judgment as a matter of law. We consider the

argument because a challenge to federal subject matter jurisdiction

cannot be waived and may be raised at any time. See Quarty v. United

States, 170 F.3d 961, 973 n.7 (9th Cir. 1999).

29 U.S.C. § 1002(21)(A); see Credit Managers Ass'n v.

Kennesaw Life & Accident Ins. Co., 809 F.2d 617, 625-26

(9th Cir. 1987) (“An ERISA fiduciary includes anyone who

exercises discretionary authority over the _ plan’s

management, anyone who exercises authority over the

management of its assets, and anyone having discretionary

authority or responsibility in the plan’s administration.”).

In providing that “a person is a fiduciary with respect to a

plan,” the statute suggests that the “person” and the “plan”

must be separate entities. 29 U.S.C. § 1002(21)(A). ERISA

includes a “trust” in its definition of “persons,” see 29 U.S.C.

§ 1002(9), and thus a trust fund could qualify as a fiduciary

of a separate ERISA plan so long as it exercises

discretionary authority over the management’ or

administration of the plan or its assets. See Penn Cent. Corp.

v. Western Conference of Teamsters Pension Trust Fund, 75

F.3d 529, 532 (9th Cir. 1996) (finding that pension trust

fund, as sponsor of multiemployer pension plan,

administered plan); Credit Managers Ass‘n, 809 F.2d at 625-

26 (finding that master trust could be fiduciary to several

individual employer ERISA plans because it collected and

disposed of plan premiums and arranged for payment of

claims); U.S. Steel Mining Co. v. District 17, UMW, 897

F.2d 149, 152 (4th Cir. 1990) (holding that “as the plan

administrator, the [pension] fund is clearly a fiduciary”). We

therefore disagree with the Second Circuit’s contrary dicta

that it is “difficult to imagine a situation in which a fund

could fulfill” the role of a fiduciary and thus bring an ERISA

suit in its own name. Pressroom Unions - Printers League

Income Sec. Fund v. Continental Assurance Co., 700 F.2d

889, 893 n.8 (2d Cir. 1983).

While there are cases where the facts reveal that a fund

serves as a fiduciary to a pension plan that constitutes a

separate entity, we do not confront such a situation here. The

Trus’ Funds assert that they have fiduciary responsibility

Over separate ERISA plans, but the record does not reflect

that the Trust Funds and the plans are distinct entities. The

Trust Agreement and even the Trust Funds’ complaint treat

them as one and the same. We conclude that, in the instant

case, the Trust Funds are the ERISA plans themselves. See

29 U.S.C. § 1002(1), (2) (providing that employee benefit

plan governed by ERISA can be a “fund”). As such, they

cannot be ERISA fiduciaries with respect to the plans.

We recognize that a few of our decisions have treated trust

funds as proper plaintiffs under ERISA without setting forth

the facts establishing that the trust funds are “fiduciaries”

with respect to distinct ERISA plans. See, e.g., Pension Trust

Fund for Operating Eng'rs v. Triple A Mach. Shop, Inc., 942

F.2d 1457, 1461 (9th Cir. 1991) (permitting ERISA action

by trust fund against employer for failure to report timely

and accurate pension fund contributions); Brick Masons

Pension Trust v. Industrial Fence & Supply, Inc., 839 F.2d

1333, 1335 (9th Cir. 1988) (trust funds allowed to bring

ERISA suit for contributions from employer’s alter ego);

Operating Eng'rs Pension Trust v. Cecil Backhoe Serv., Inc.,

795 F.2d 1501, 1503 (9th Cir. 1986) (trust fund permitted to

bring ERISA action to recover deficient contributions from

employer); Laborers Health & Welfare Trust Fund y.

Kaufman & Broad, Inc., 707 F.2d 412, 415-16 (9th Cir.

1983) (treating suit brought by pension trust funds as suit

brought by fiduciaries of trust funds). In none of these cases,

however, was the issue of the trust funds’ standing under

ERISA raised. Accordingly, these decisions do not establish

any general rule that trust funds have standing as fiduciaries.

See Leisnoi, Inc. v. United States, 170 F.3d 1188, 1192 n.7

(9th Cir. 1999) (holding that court’s silent exercise of

jurisdiction does not create binding precedent).

We have previously held that an ERISA plan itself does

not have standing to sue under § 502(a) of ERISA because it

is not a plan participant, beneficiary or fiduciary.* See Steen,

106 F.3d at 917. The Trust Funds urge and adopt the Sixth

Circuit’s approach to suits brought by plans under ERISA.

See Saramar Aluminium Co. v. Pension Plan for Employees

of the Aluminum Indus. and Allied Indus., 782 F.2d 577, 581

(6th Cir. 1986). In Saramar, the Sixth Circuit concluded that

“the Plan, as the party before the court, necessarily includes

those who must act for the Plan to administer it and to

effectuate its policies.” Id. Because the Plan’s administrators

had discretionary control over the Plan, the court determined

that “the Plan as a party, then, comes under the ERISA

definition of a ‘fiduciary. Id. See also Louisiana

Bricklayers & Trowel Trades Pension Fund & Welfare Fund

v. Alfred Miller Gen. Masonry Contracting Co., 157 F.3d

404, 406 n.3 (Sth Cir. 1998) (treating ERISA action brought

by benefit plan as action brought by plan’s trustees). Under

* Section 502(d)(1) of ERISA provides that “[aJn employee

benefit plan may sue or be sued under this subchapter as an entity.” 29

U.S.C. § 1132(d)(1). This provision does not itself establish federal

jurisdiction over actions brought under ERISA by pension plans. Section

502(d)(1) serves only to ensure that pension plans are treated as entities

capable of suing and being sued in circumstances where the court can

properly exercise jurisdiction. See Pressroom Unions, 700 F.2d at 893

(ERISA’s provision “[a]ffording plans the power to sue does not,

however, imply that they may bring actions under ERISA; it merely

authorizes suits to be brought by funds in other situations where there

would properly be jurisdiction.”).

The Trust Funds imply that § 515 of ERISA, 29 U.S.C. § 1145,

also confers jurisdiction over suits brought by trust funds. Section 515,

however, merely creates a cause of action under ERISA for proceeding

against an employer who is delinquent in making contributions to a plan.

It does not create a separate basis for jurisdiction, but rather is subject to

the jurisdictional restrictions in § 502(e)(1). See Greenblatt v. Delta

Plumbing & Heating Corp., 68 F.3d 561, 568 (2d Cir. 1995) (“Section

515 does not by itself confer jurisdiction, it is simply a substantive

requirement that an employer make contributions to a multiemployer

ERISA plan... .” )

Steen, 106 F.3d at 917, however, we are not free to follow

the Sixth Circuit and we decline to do so

We conclude that the Trust Funds, as ERISA plans, are not

fiduciaries entitled to sue under ERISA° Accordingly,

subject matter does not exist under ERISA over this action

brought by the Trust Funds.

* A rule treating plans as incorporating their fiduciaries for

purposes of subject matter jurisdiction and standing might also raise

some unintended and undesirable consequences. For example, permitting

a plan to bring suit as a fiduciary could cause statute of limitations

problems. Under ERISA, the running of the statute of limitations does

not commence until the plaintiff gains actual knowledge of the breach or

violation, unless more than six years has passed since the breach or

violation has occurred. See 29 U.S.C. § 1113. If the plan itself is the

plaintiff, whose knowledge would trigger the statute? See Landwehr v.

DuPree, 72 F.3d 726, 732 (9th Cir. 1995) (finding that “limitations

period begins to run on the date that the person bringing suit learns of the

breach or violation” rather than from first date that plan, through any of

its agents, learned of breach because under latter interpretation, if

fiduciary of plan breached his ERISA duties, statute would Start to run on

first day that fiduciary knew of breach, defeating purpose of tolling

provision).

° In Corder v. Howard Johnson & Co., 53 F.3d 225, 229-30 (9th

Cir. 1995), we noted that we have someiimes applied § 502(g)(1) of

ERISA, which provides that attorney’s fees may be awarded when an

action is brought by a participant, beneficiary, or fiduciary or an ERISA

plan, to situations in which the action was brought by a plan itself against

an employer for unpaid contributions. In searching for a rationale for

allowing fees to a clearly unenumerated party under § 502(g)(1), we

noted that “[pjerhaps the courts have presumed that a plan suing an

employer for ERISA contributions is acting as an ERISA fiduciary.” Id.

at 230 n.4. We concluded that these cases had seemingly carved out an

exception permitting attorney’s fees awards in situations in which multi-

employer benefit plans had sued their employers for non-payment of

ERISA contributions and lost. See id. at 230. This weakly supported de

facto exception to ERISA’s strict Standing rules is an insufficient basis

for adoption of a rule which would presume that plans are acting as

fiduciaries when they bring suit under ERISA for unpaid employer

contributions.

10a

B. Jurisdiction under LMRA

Although ERISA does not provide a source of jurisdiction,

§ 301 of LMRA, 29 U.S.C. § 185, does confer subject matter

jurisdiction over the Trust Funds’ action. Jurisdiction under

§ 301 extends to all “suits for violation of contracts between

an employer and a labor organization representing

employees in an industry affecting commerce... .” 29

U.S.C. § 185; see Textron Lycoming Reciprocating Engine

Div., AVCO Corp. v. UAW, 523 U.S. 653, 118 S. Ct. 1626,

1629, 140 L. Ed. 2d 863 (1998). This grant of jurisdiction

covers actions to recover fringe benefits stemming from

collective bargaining agreements. See, e.g., Laborers Clean-

Up Contract Admin. Trust Fund v. Uriarte Clean-Up Serv.,

Inc., 736 F.2d 516, 518 (9th Cir. 1984). Section 301 does not

limit the parties who may bring suit so long as the object of

the suit is the enforcement of rights guaranteed by an

agreement between an employer and a labor organization.

See Smith v. Evening News Ass'n, 371 U.S. 195, 200, 83 S.

Ct. 267, 9 L. Ed. 2d 246 (1962); Associated Builders &

Contractors, Inc. v. Local 302 IBEW, 109 F.3d 1353, 1357

n.6 (9th Cir. 1997).

The Employers assert that § 301 jurisdiction extends only

as far as ERISA jurisdiction. This argument fails because the

Supreme Court has recognized that jurisdiction under LMRA

may be broader than under ERISA. See Franchise Tax Bd,

463 US. 1 at 25 & n.28, 103 S. Ct. 2841, 77 L. Ed. 2d 420

(reading ERISA’s standing and jurisdictional provisions

narrowly while noting that the Court had “not taken a

restrictive view of who may sue under § 301”) (emphasis in

original).

The Trust Agreement in this case is part of the CBA

between the Union and Nor-Cal. The Trust Funds’ suit was

brought to enforce Nor-Cal’s obligations under the Trust

lla

Agreement to contribute pension and welfare benefits to the

Trust Funds. The fact that the Trust Funds were not a

signatory to the CBA is inconsequential, given the object of

the lawsuit.

The Employers contend, however, that the Trust Funds are

improper plaintiffs under § 301 and that the suit should have

been brought by their Board of Trustees.’ The fact that the

Trust Funds are ERISA plans fatally undermines this

argument. Section 502(d)(1) of ERISA bestows on ERISA

plans the status of entities capable of bringing suit in any

context in which the district court’s exercise of subject

matter jurisdiction is otherwise appropniate. See 29 U.S.C.

§ 1132(d)(1); Pressroom Unions, 700 F.2d at 893 (finding

that “if a fund . . . wished to pursue a state law contract

claim, § 1132(d)(1) would allow the fund to bring such an

action its own name”). Therefore, the Trust Funds, as ERISA

plans, are proper plaintiffs in this suit, and the action comes

within the jurisdictional ambit of § 301.°

” The Employers contend that we should defer to the legal

principle employed by most states that a trustee must bring suit on behalf

of a trust. “State law may be resorted to . . . only if it effectuates the

policy which underlies federal labor legislation.” Seymour v. Hull &

Moreland Eng'g, 605 F.2d 1105, 1109 (9th Cir. 1979). This state law

preference does not compliment federal labor policy: the Supreme Court

has interpreted § 301 as not limiting the parties who may bring suit in

order to further the policy that all suits regarding collective bargaining

agreements be decided under a uniform body of federal substantive law.

See Smith, 371 U.S. at 200-01, 83 S. Ct. 267.

* The Trust Funds alleged only one cause of action that falls

only under ERISA and not LMRA: their claim that the Pettits should be

personally liable for causing Nor-Cal and North Bay to violate § 515 of

ERISA, 29 U.S.C. § 1145. The district court dismissed this claim for

failure to state a claim under ERISA, and the Trust Funds appeal this

dismissal. We now affirm the dismissal on the ground that there is no

jurisdiction to support this claim that is wholly derivative of Nor-Cal and

North Bay’s liability under ERISA § 515. See Granite State Ins. Co. vy.

Smart Modular Techs., Inc, 76 F.3d 1023, 1026 (9th Cir. 1996) (finding

12a

C. Jurisdiction Over Claim to Pierce the Corporate Veil

The Employers contend that LMRA does not provide a

source of jurisdiction over the Trust Funds’ attempt to pierce

the corporate veil with respect to the Pettis.” We disagree.

We have previously considered requests to pierce the

corporate veil in the context of LMRA suits to recover

unpaid contributions and have developed a substantial body

of federal common law regarding veil-piercing in this

context. See Laborers Clean-Up Contract Admin. Trust

Fund, 736 F.2d at 523-25, Audit Serv., Inc. v. Rolfson, 641

F.2d 757, 764 (9th Cir. 1981); Seymour v. Hull & Moreland

Eng’g, 605 F.2d 1105, 1111 (9th Cir. 1979). A request to

pierce the corporate veil is only a means of imposing liability

for an underlying cause of action and is not a cause of action

in and of itself. Cf Peacock v. Thomas, 516 U.S. 349, 354,

116 S. Ct. 862, 133 L. Ed. 2d 817, (1996) (holding that

“[p]iercing the corporate veil is not itself an independent

ERISA cause of action, but rather is a means of imposing

liability on an underlying cause of action”) (internal

quotation omitted).

In UA Local 343 I, we noted that “[t]he veil-piercing

doctrine does not come into play in this case unless and until

[the Trust Funds] establish their right to a money judgment

against Nor-Cal and North Bay under the alter ego

doctrine... [T]he traditional rules on piercing the corporate

shell at most affect the quality of a labor organization’s

remedy if it finds itself with a judgment against an insolvent

that we may affirm the district court’s judgment on any ground supported

by the record).

” The jury found only Pettit, and not his wife, individually

liable.

13a

corporate shell.” 48 F.3d at 1476. In other words, whether

the veil could be pierced as to Pettit hinged completely on

the jury’s determination of the Trust Funds’ claim seeking

enforcement of the Trust Agreement. The request to pierce

the corporate shell is encompassed within LMRA’s

jurisdiction because it merely concerns the remedy attached

to a breach of contract claim governed by LMRA.

IV.

The district court erred in concluding that it had

jurisdiction over the Trust Funds’ lawsuit under ERISA,

because the Trust Funds were not “fiduciaries.” The district

court, however, did properly exercise jurisdiction over the

action, including the request to pierce the corporate veil as to

the Pettits, under LMRA.

Accordingly, the judgment of the district court is

AFFIRMED.

l4a

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

LOCAL 159, 342, 343 & 444:

LOCAL 343 UNITED

ASSOC. JOURNEYMEN &

APPRENTICE TRAINING

TRUST FD; LOCAL 343

UNITED ASSOC. OF

PLUMBING,

Nos. 96-16172

& 96-16284

Plaintiffs-Appellees

and Cross-Appellants,

CV-87-2365-SYI

NOR-CAL PLUMBING, INC.;

NORTH BAY PLUMBING, INC.,

ELMAR LEE PETTIT,

a.k.a. ELMER LEE PETTIT;

AUDREY JEAN PETTIT,

Defendants-Appellants

and Cross-Appellees.

)

v. ) D.C. No.

) MEMORANDUM’

)

Appeal from the United States District Court

for the Northern District of California

Susan Y. Illston, District Judge, Presiding

* This disposition is not appropriate for publication and may not

be cited to or by the courts of this circuit except as provided by Ninth

Cir. R. 36-3.

a a aa a eee SN SS

Pog ere

15a

Argued and Submitted January 11, 1999

San Francisco, California

Submission Deferred January 12, 1999

Re-Submitted February 10, 1999

Before: WIGGINS, TASHIMA, AND SILVERMAN,

Circuit Judges.

In our published Opinion filed concurrently herewith,

we hold that the district court had subject matter jurisdiction

of this case. Here, we dispose of the laundry list of

substantive as well as procedural issues raised by both the

Employers and the Trust Funds.’ We affirm the district court

in all respects.

L Alter Ego Claim

The heart of the suit against the Employers is the

Trust Funds’ allegation that North Bay was the alter ego of

Nor-Cal. At trial, the district court followed the two-part test

laid out in UA Local 343 of the United Ass'n of Journe en

v. Nor-Cal Plumbing, Inc., 48 F.3d 1465 (9th Cir.), cert.

denied, 516 U.S. 912 (1995) (“UA Local 343 I’). Under UA

Local 343 J, for determining whether North Bay was the alter

ego of Nor-Cal the first step is to determine whether the two

firms alleged to be alter egos meet the following criteria for

finding that they are a single employer: (1) common

Ownership; (2) common management; (3) interrelation of

operations; and (4) centralized control of labor relations. See

id. at 1471. If this threshold showing is met, it must be

shown that one of the two firms was created or being used in

an attempt to avoid collective bargaining obligations

“through a sham transaction or a technical change in

' In this Memorandum, we use the same shorthand references

we adopted in our published Opinion.

16a

operations.” /d. at 1472 (quoting A. Dariano & Sons, Inc. v.

District Council of Painters No. 33, 869 F.2d 514, 518 (9th

Cir. 1989)).

In UA Local 343 I, we found that there was ample

evidence that Nor-Cal and North Bay constituted a single

employer but remanded the case for a determination of the

second part of the alter ego test: whether Pettit created and

operated North Bay with the intent to avoid the obligations

under Nor-Cal’s CBA. See id. at 1471-74. Our finding that

Nor-Cal and North Bay were a single employer was treated

as the “law of the case” by the trial court. It read to the jury

a Statement of Established Facts (“Statement”) which

summarized the decision in UA Local 343 I that Nor-Cal and

North Bay constituted a single employer. The Statement

properly explained to the jury that the “single employer”

factors had been met and put into context the issue that

remained for the jury — whether Pettit had the intent to avoid

the collective bargaining obligations through a sham

operation. See Robertson Oil Co. v. Phillips Petroleum Co.,

930 F.2d 1342, 1344-45 (8th Cir. 1991) (in retrial limited to

punitive damages issue, trial judge did not err in

summarizing for the jury the issues established at the prior

jury trial).?

* The Employers complain that some of the facts included in the

Statement were controverted by evidence at trial. For instance, the

Statement mentioned that the fourth single employer factor — centralized

control of labor relations — was supported by the fact that “Elmar Lee

Pettit told associates that a non-union shop was the only way he could

make any money.” UA Local 343 I, 48 F.3d at 1472. At trial, Pettit

testified that he never made any such statement. The Employers contend

that they were prejudiced when the testimony of Pettit and their other

witnesses at trial contradicted the “Established Facts” because the jury

was instructed to accept as true the facts included in that instruction and

necessarily would assume that the Employers’ witnesses were lying. We

conclude that any prejudice that resulted was not due to an error by the

district court, which properly summarized the evidence supporting the

single employer finding.

17a

The Employers argue that the test in this Circuit for

“alter ego” status is at odds with the test set forth in 1976 in

Crawford Door Sales Co., 226 NLRB 1144 (1976)? The

district court used the same Ninth Circuit test in ruling on

summary judgment that North Bay was the alter ago of Nor-

Cal, see UA Local No. 343 of the United Ass'n of

Journeymen v. Nor-Cal Plumbing, Inc., 797 F. Supp. 767,

771-72 (N.D. Cal. 1992), and the Employers did not

challenge the test on the first appeal. As such, the

Employers waived their right to review of the issue on this

subsequent appeal. See Kesselring v. F/T Arctic Hero, 95

F.3d 23, 24-25 (9th Cir. 1996).

The Employers also contend that, in the

circumstances of this case, the court erred in not departing

from the “law of the case” when it applied the alter ego test

set forth in UA Local 343 J. “Under the ‘law of the case’

doctrine, ‘a court is generally precluded from reconsidering

an issue that has already been decided by the same court, or a

higher court in the identical case.” United States v.

Alexander, 106 F.3d 874, 876 (9th Cir. 1997) (quoting

Thomas v. Bible, 983 F.2d 152, 154 (9th Cir. 1993)). “A

> The NLRB enunciated seven factors to consider in determining

whether two enterprises are alter egos: “‘substantially identical’

management, business purpose, operation, equipment, customers, and

supervision, as well as ownership.” Crawford Door Sales Co., 226

NLRB 1144.

* Even if the issue could be raised on this appeal, the

Employers’ argument would fail. Long ago, we found that the “alter

ego” factors set forth in Crawford Door Sales Co., were “essentially the

same factors” examined under our test to determine whether two firms

constitute a single employer. See NLRB v. Big Bear Supermarkets No.

3, 640 F.2d 924, 928 n.5 (9th Cir. 1980). Therefore, this Court has

already held that there is no substantive difference between the sets of

factors.

18a

court may have discretion to depart from the law of the case

where: 1) the first decision is clearly erroneous; 2) an

intervening change in the law has occurred; 3) the evidence

on remand is substantially different; 4) other changed

circumstances exist; or 5) a manifest injustice would

otherwise result.” Jd. A district court’s decision whether to

apply the law of the case doctrine is reviewed for an abuse of

discretion. See Rebel Oil Co. v. Atlantic Richfield Co., 146

F.3d 1088, 1093 (9th Cir.), cert. denied, 119 S. Ct. 541

(1998).

First, the Employers point to Johnstown Corp., 322

NLRD 818 (1997), decided after UA Local 343 I, contending

that it constituted intervening authority because it changed

the test for determining whether one employer is the alter

ego of another. Johnstown Corp., however, did not set forth

a new alter ego test; it held only that the alter ego and single

employer doctrines are related, but separate, concepts, and

that the alter ego doctrine is not a mere subset of the single

employer doctrine.” See 322 NLRD 818. The gist of

Johnstown Corp. is that a court may find an entity to be an

“alter ego” without first finding it to be a “single employer,”

making it easier to find that one entity is another’s alter ego.

See id. Nothing in Johnstown Corp. contradicts the

substance of this Circuit’s test or casts doubt on the district

court’s determination that the only remaining alter ego

element to be decided at trial was the intent to use North Bay

as a sham to avoid Nor-Cal’s collective bargaining

obligations.

Second, the Employers contend that the “law of the

case” was contradicted by substantially different evidence

* UA Local 343 I similarly recognized that the “single

employer” and the “alter ego” theories are “conceptually related, but

distinct theories.” 48 F.3d at 1470.

19a

put on trial. At trial, Nor-Cal’s purchasing agent was shown

to have no personal knowledge of facts included in his

affidavit and relied upon by UA Local 343 J in finding that

the third “single employer’ factor — interrelation of

operations between Nor-Cal and North Bay — had been

established. See 48 F.3d at 1472. Even without the affidavit,

however, there was sufficient evidence of the interrelation of

operations to sustain summary judgment. See id. The

Employers provide no other meaningful support for their

claim that substantially different evidence was brought out

a(t] trial. We conclude, therefore, that the district court

correctly applied the law of the case regarding the alter ego

test.

The Employers also argue that the Trust Funds

relitigated the single employer factors under the guise of

proving the intent prong of the alter ego test. They contend

that the Trust Funds should only have been able to put on

“new” evidence of Pettit’s intent, and that the jury could not

have made an objective finding on the issue of alter ego

intent when faced with the same evidence used for the

single-employer showing and instructed by the trial judge

that these facts had been established in a prior proceeding.

We reject this argument. Some of the evidence that

established the single-employer factors was also relevant to

the issues of alter ego intent, veil-piercing and § 301 fraud.

The district court was not required to exclude it just because

the finding that Nor-Cal and North Bay were single

employers was not before the jury.

The Employers challenge several aspects of the

instructions on the alter ego claim. A district court’s

formulation of civil jury instructions is generally reviewed

for an abuse of discretion, although where one party claims

that the trial court misstated the law, we must review the

instructions de novo. See Mockler v. Multnomah County,

140 F.3d 808, 812 (9th Cir. 1998). The instruction must be

20a

viewed as a whole and evaluated in the context of the whole

trial. See United States v. Marabelles, 724 F.2d 1374, 1382

(9th Cir. 1984). An error instructing the jury in a civil case

does not require reversal if it more probably than not was

harmless. See Snyder v. Freight Construction, Gen. Drivers,

Warehousemen & Helpers, Local No. 287, 175 F.3d 680,

689 n.12 (1999).

The Employers contend that the judge’s instructions

on alter ego liability effectively reversed the burden of proof

in stating that a double-breasted operations “may be legal,”

when in fact they are legal unless shown to be alter egos.

See A. Dariano & Sons, Inc., 869 F.2d at 517 (finding that

double-breasting “is not inherently illegal”). We find this

argument unconvincing because the jury was explicitly

instructed that the Trust Funds had the burden of proof on

the alter ego claim.

Nor did the district court err in not including certain

specific facts helpful to the Employers’ case when it

instructed the jury that it should consider certain factors in

determining whether North Bay was Nor-Cai’s alter ego.

The judge instructed the jury to consider only general

factors, such as “whether North Bay Plumbing was in reality

a disguised continuance of the business operations of Nor-

Cal Plumbing.” Likewise, the trial judge adequately

explained the nature of a double-breasted operation in stating

that “a double-breasted operation occurs when the owners of

one company that is a party to a labor agreement own a

second company that is non-union,” and in explaining when

such an operation is not legal.

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2la

IL. Piercing the Corporate Veil

A. The Use of a Jury Trial

Nor-Cal and Pettit contend that the district court

erroneously found that a jury trial was required on the veil-

piercing issue.° “Entitlement to a jury trial in federal court is

a question of law reviewed de novo.” United States vy.

California Mobile Home Park Management Co., 107 F.3d

1347, 1377 (9th Cir. 1997).

We need not decide whether submission of the claim

to a jury was an error, because, even if it were, it was

harmless. There is no constitutional right to have one’s case

tried by a judge rather than a jury. See Beacon Theatres, Inc.

v. Westover, 359 U.S. 500, 510 (1959) (holding that “the

right to jury trial is a constitutional one . . . while no similar

requirement protects trial by the court”); United Press Ass’ns

v. Charles, 245 F.2d 21, 23 (9th Cir. 1957) (finding that

“[t]here is no express prohibition of jury trial in the

Constitution, treaties or laws of the United States”). The

Federal Rules of Civil Procedure do provide that both

parties’ consent is necessary to hold a jury trial when there is

no right to have a jury decide the claim. See Fed. R. Civ. P.

39(c) (“In all actions not triable of right by a jury... the

court, with the consent of both parties, may order a trial with

a jury whose verdict has the same effect as if trial by jury

had been a matter of right.”). While Nor-Cal and Pettit did

not consent to a jury trial, reversal is not warranted because,

as discussed below, the jury’s verdict piercing the veil with

respect to Pettit was supported by ample evidence and any

error was more likely than not harmless. See United Press

* North Bay and Audrey Pettit contend that they had the right to

a jury trial on the issue.

22a

Ass'ns, 245 F.2d at 53 (finding that any error in submitting

case to jury was only procedural and should be reviewed for

harmless error).

B. Jury Instructions

Whether to pierce the corporate veil and hold a

shareholder personally liable depends on a three-part test:

“[1] the amount of respect given to the separate identity 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.” UA Local 343 I, 48 F.3d at 1475. Once the

first threshold factors is met, only one of the latter two must

be satisfied. See id In UA Local 343 I, we held that

summary judgment was inappropriate because there were

disputed facts regarding both the fraud and injustice factors.

See id. Specifically, we held tnat, on the issue of fraud, the

facts were in dispute as to whether the Pettits had misused

the corporate form fraudulently to evade the obligations of

the Trust Agreement. See id. at 1476. As for the injustice

factor, we noted that the inability to collect, on its own, is not

sufficient, and that genuine issues of fact remained. See id.

The Employers contend that the district court’s jury

instructions on veil-piercing strayed from the elements of the

veil-piercing test. The district court instructed the jury that

the fraud factor was satisfied if the jury found that “the

Pettits had fraudulent or deceitful intent in forming or using

their corporations.” The court further told the jury that in

deciding whether the Pettits had this intent, it should

“consider undercapitalization of the corporation and the use

of the corporate form to perpetrate a fraud, such as tax fraud,

or to evade collective bargaining obligations.” The court

also instructed the jury to “consider whether the Pettits’ use

of corporate assets for personal gain diminished the ability of

the corporations to satisfy their obligations.”

23a

The Employers allege that this charge to the jury

misstated the law because in essence the jury was instructed

that “garden-variety” fraud was sufficient to satisfy the fraud

factor of the veil-piercing test.

The intent to avoid collective bargaining obligations

sufficient to satisfy the alter ego theory of liability does not

necessarily satisfy the fraud factor in the veil-piercing test.

See id. at 1475. “Garden-variety fraud” — in this case, the

Pettits’ concealment of the relationship between North Bay

and Nor-Cal - is, by itself, insufficient to pierce the

corporate veil. See id. at 1476. Rather, the Trust Funds must

show that the Pettits misused the corporate form to perpetrate

their fraudulent scheme to evade Nor-Cal’s obligations to

make contributions to the Trust funds. See id; NLRB v.

O'Neill, 965 F.2d 1522, 1531 (9th Cir. 1992) (because

individual had created corporation with intent to avoid

collective bargaining obligations, fraud factor of veil-

piercing test was satisfied).

The district court advised the jury to “consider the

use of the corporate form... to evade legal obligations.”

The instruction tracked the language in UA Local 343 J that

“[w]hether the Pettits misused the corporate form to

fraudulently evade the obligations of the collective

bargaining agreement is in dispute.” 48 F.3d at 1476. The

district court did not instruct the jury that “garden variety”

fraud was sufficient to pierce the veil.

The Employers also contend that the trial judge’s

instruction was erroneous in including tax fraud as a proper

basis for finding the Pettits liable on a veil-piercing theory.

To pierce the corporate shell, the Trust Funds must

prove some fraudulent conduct directed at them specifically

or at a group of creditors to which they belong. See Board of

24a

Trustees of the Mill Cabinet Pension Trust Fund v. Valley

Cabinet & Mfg. Co., 877 F.2d 769, 774 (9th Cir. 1989)

(finding fraud factor not satisfied because there was no intent

to defraud the trust fund); Plumbers & Fitters, Local 761 v.

Matt J. Zaich Const. Co., 418 F.2d 1054, 1058 (9th Cir.

1969) (“[T]he disregarding of the corporate form of business

should not rest on the manner of doing business in general

but should rest on the effect that the manner of doing

business has on the particular transaction involved.”). The

Employers’ tax fraud was not designed to help them avoid

their obligations under the CBA. Therefore, evidence of tax

fraud does not tend to prove the fraud factor of the veil-

piercing test.

The district court’s error, however, was more

probably than not harmless, and therefore reversal is not

warranted. As we discuss below, ample evidence supported

the jury’s conclusion that the fraud prong of the veil-piercing

test was satisfied by Pettit’s misuse of the corporate form

fraudulently to evade the obligations of his corporations to

make contributions to the Trust Funds. See Benigni v. City

of Hemet, 879 F.2d 473, 480 (9th Cir. 1988) (holding that

“(t]he failure to give a proper instruction did not prejudice

the defendants because the evidence would have supported a

verdict for the plaintiff even with that instruction”).

The Employers also claim that the district court erred

in instructing the jury that the “injustice” factor would be

satisfied if the jury found “that it would be unjust to allow

the Pettits to retain the rewards of their conduct.” The

Employers assert that the correct inquiry is “the degree of

injustice visited on the litigants by recognition of the

corporate entity,” UA Local 343 I, 48 F.3d at 1475 (quoting

Seymour, 605 F.2d at 1111) (emphasis added), not the

injustice of not holding the Pettits personally liable. The

Court, however, cured any error by subsequently instructing

LG ALAC CPI a UIE

25a

the jury that it had to determine “whether injustice will result

to the plaintiffs.””

Cc. Expert Testimony

The Employers argue that the Trust Funds’ expert

Paul Meyer was improperly permitted to testify to the legal

conclusion that the Pettits should be found personally liable

under the veil-piercing doctrine. On direct examination, the

Trust Funds’ counsel asked if Meyer had an opinion on

“whether the corporate veil of Nor-Cal and North Bay has

been pierced and the Pettits should be held personally

responsible.” The Employers’ counsel objected on the

ground that the testimony “goes to the ultimate issue.” The

judge overruled the objection. Meyer then responded, “Yes,

that it my opinion,” and that he believed “the corporations

and the Pettits should be one in the same as it relates to the

functioning of the expenses.”

The district court’s rulings on the admissibility of

expert testimony are reviewed for an abuse of discretion.

” We reject the Employers’ additional arguments that the district

court’s instructions did not provide adequate guidance to the jury on

several issues. The district court adequately conveyed to the jury that the

corporate veil should only be lifted in certain limited circumstances. It

did not abuse its discretion in not specifically instructing the jury that it

could only pierce the veil if it found that the Pettits had “controlled and

dominated the corporation such that the individuality of the corporation

ceased” but instead in instructing the jury to consider a sum of factors

regarding the Pettits’ control and lack of separateness. Further, the court

did not abuse its discretion in tailoring the instructions to include only

those veil-piercing factors relevant to this case. Finally, the court’s

failure to explain the terms “undercapitalization” and “commingling” did

not constitute an abuse of discretion, particularly when the instructions

are evaluated in light of the long trial in which the jury became familiar

with these terms through expert testimony. See Marabelles, 724 F.2d at

1382-83.

26a

See Kumho Tire Co. v. Carmichael, 119 §. Ct. 1167, 1176

(1999); Desrosiers v. Flight Int’l, 156 F.3d 952, 960 (9th

Cir.), cert. dismissed, 119 S. Ct. 634 (1998). Such rulings

will be reversed only if “manifestly erroneous.” Jd. (quoting

General Elec. Co. v. Joiner, 118 S. Ct. 512, 517 (1997)).

The Federal Rules of Evidence permit an expert to

testify to his opinion if the expert’s “scientific, technical, or

other specialized knowledge will assist the trier of fact to

understand the evidence or to determine a fact in issue.”

Fed. R. Evid. 702. “[T]estimony in the form of an opinion or

inference otherwise admissible is not objectionable because

it embraces an ultimate issue to be decided by the trier of

fact.” Fed. R. Evid. 704(a).

Expert testimony regarding a legal conclusion can be

problematic. See Aguilar v. International Longshoremen’s

Union Local No. 10, 966 F.2d 443, 447 (9th Cir. 1992)

(finding that reasonableness and foreseeability of plaintiffs

reliance were matters of law for court’s determination and

therefore were inappropriate subjects for expert testimony);

United States v. Scop, 846 F.2d 135, 139 (2d Cir. 1988)

(holding that “Rule 704 was not intended to allow experts to

offer opinions embodying legal conclusions.”); Marx & Co.

v. Diners’ Club, Inc., 550 F.2d 505, 509-10 (2d Cir. 1977)

(expert’s testimony consisting of legal conclusions

construing contract was inadmissible).

During the tnal, however, the Employers did not

specifically object that the testimony called for a “legal

conclusion,” but instead objected on the grounds that the

testimony “goes to an ultimate issue.” Given that testimony

going to an “ultimate issue” is not inadmissible in a civil

case solely on that ground, the Employers’ objection on this

ground was properly overruled and they failed to preserve

for appeal their current objection that the testimony

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27a

concerned a legal conclusion. See United States v. Gomez-

Norena, 908 F.2d 497, 500 (9th Cir. 1990).

The Employers further contend that, while the court

allowed Meyer to testify to the legal conclusion on the veil-

piercing issue, it did not permit the Employers’ expert

Samual Gallina to reach the issue. At trial, the Employers

asked Gallina, “And have you formed an opinion as to

whether or not the corporate form should be respected or

whether the Pettits’ personal assets should be reached?” The

Trust Funds objected on the grounds that the question called

for a legal conclusion, and the judge sustained the objection.

The Employers’ argument that this ruling was in error in

light of the court’s admission of Meyer’s testimony fails

because, unlike the Employers, the Trust Funds made the

relevant objection that the question called for a legal

conclusion. Moreover, the Employers were not actually

prevented from receiving an answer to the question to which

the Trust Funds had objected; counsel merely broke up the

question into two separate ones and received answers to each

part.

The Employers also argue that the judgment should

be reversed because the Trust Funds’ expert James Miller

was permitted to testify repeatedly that the Employers had

committed tax fraud. As discussed above, the evidence of

tax fraud was not relevant to the fraud prong of the veil-

piercing inquiry. Much of the evidence of the conduct that

constitute tax fraud, however, was relevant to the

“commingling” factor of the veil-piercing test, and thus the

majority of the evidence was not erroneously admitted. Any

error was harmless.®

® We find the Employers’ other objections to Miller’s testimony

to be without merit.

28a

D. Substantial Evidence

The Employers appeal the district court’s denial of

their motion for judgment as a matter of law on the veil-

piercing claim, arguing that the jury’s verdict on this issue

was not supported by substantial evidence. Specifically,

they dispute whether substantial evidence supports the fraud

and injustice prongs of the veil-piercing inquiry. The denial

of a motion for judgment as a matter of law is reviewed de

novo. See Scott v. Ross, 140 F.3d 1275, 1281 (9th Cir.

1998), cert. denied, 119 S. Ct. 1285 (1999). Judgment as a

matter of law should be granted where the evidence permits

only one reasonable conclusion, and that conclusion is

contrary to the jury’s. See id.

We agree that evidence of Pettit’s tax fraud should

not be considered in determining whether there is substantial

evidence supporting the fraud prong. We find, however, that

substantial evidence buttresses the conclusion that Pettit

abused the corporate form fraudulently to evade his

contractual obligations to make contributions to the Trust

Funds. Contrary to the Employers’ contention, much of the

same evidence relevant to prove under the alter ego theory

that North Bay was created and operated “in an attempt to

avoid the obligations of Nor-Cal’s collective bargaining

agreement,” UA Local 343 I, 48 F.3d at 1473, will also be

relevant to show the Employers’ abuse of the corporate form

to avoid its contractual obligations under the veil-piercing

test. UA Local 343 I held only that proving labor law alter

ego liability is not necessarily sufficient on its own to satisfy

the fraudulent intent element of the veil-piercing test. See id.

at 1475. We previously found that there was substantial

evidence offered at the summary judgment stage that Pettit’s

purpose in establishing North Bay was to avoid his

contractual obligations to make contributions to the Trust

Funds. See id. at 1473. When added to the evidence of the

29a

abuse of the corporate form elicited through the Trust Funds’

experts’ testimony, along with all the other evidence adduced

at trial, we find that substantial evidence supported the jury’s

determination that Pettit misused the corporate forms of

North Bay and Nor-Cal to perpetrate his fraud on the Trust

Funds. Pettit’s conduct appears to be a paradigmatic

example of abusing the corporate form to defraud creditors”

Accordingly, we affirm the district court’s denial of the

Employer’s motion for a judgment as a matter of law.

Il. Section 301 Fraud Claim

The district court allowed the jury to consider

whether North Bay and Nor-Cal were guilty of fraud under

§ 301 of LMRA in deliberately concealing through

affirmative misrepresentations that they were alter egos,

thereby inducing the Trust Funds not to exercise their rights

based on the Nor-Cal CBA. The jury held Nor-Cal and

North Bay liable on the claim, and the Employers now

appeal this basis of liability. We need not consider the

propriety of this claim, however, because the jury returned a

special verdict specifically finding Nor-Cal and North Bay

liable on the alter ego theory. The jury’s express adoption of

this theory is sufficient alone to support the judgment against

Nor-Cal and North Bay. See Taylor v. Burlington N. R.R.

Co., 787 F.2d 1309, 1315 (9th Cir. 1986).

\ __ ° Because of the substantial evidence of Pettit’s fraudulent intent

sufficient to uphold the verdict imposing individual liability on Pettit, we

need not consider whether the Trust Funds presented substantial evidence

to satisfy the injustice factor of the veil-piercing inquiry.

30a

The district court dismissed a similar fraud claim

against the individual Pettits. The Trust Funds appeal this

determination. !°

In suits under § 301, we have refused to impose

personal liability on the sole shareholder of a corporate

employer that has breached its obligations under LMRA,

except when the veil-piercing test has been satisfied. See

Audit Servs., Inc. v. Rolfson, 641 F.2d 757, 764 (9th Cir.

1981). See also Antol v. Esposto, 100 F.3d 1111, 1118 (3rd

Cir. 1997) (nothing that individual corporate officers are not

liable under § 301 when there is no basis for piercing the

corporate veil).'’ Therefore, the district court did not err in

striking the cause of action under § 301 against the Pettits.

IV. Evidentiary Objections

The Employers contend that the Trust Funds’ expert

witnesses, accountants Meyer, Miller and Steve Grannis, all

relied on hearsay and information from lay witnesses in their

testimony, and thus they argue that neither the experts’

opinions nor the underlying data should have been admitted

at trial. They correctly assert that much of the data

underlying the experts’ testimony could not be indepeéi —.itly

admitted into evidence because it was hearsay.

'© Although Pettit was found personally liable on a veil-piercing

theory, and thus it is inconsequential whether the § 301 fraud claim

against him should have been allowed to proceed, the jury did not pierce

the veil with respect to his wife, and so we must determine whether the

district court should have allowed the jury to consider the § 301 claim

against her.

Of course, where a collective bargaining agreement

specifically provides for personal liability of a corporate officer, such a

provision will be upheld. See Employee Painters’ Trust v. J&B Finishes,

77 F.3d 1188, 1192 (9th Cir. 1996)

Aude dintonk tence oe

3la

Meyer testified that it was common for experts

testifying to similar issues to rely on sworn and unsworm

Statements of witnesses. Further, there is authority for

accountants relying on lay witnesses in forming their

opinions and relaying them at trial. See United States v.

Affleck, 776 F.2d 1451, 1457 (10th Cir. 1985) (finding that

accountant testifying as expert witness relied on reasonable

data including hearsay from interviews with previous

accountant of defendant, other former employees, and

bankruptcy trustee); International Adhesive Coating Co. v.

Bolton Emerson Int’l., Inc., 851 F.2d 540, 545 (lst Cir.

1988) (holding that accountant expert witness has reasonably

relied on interviews with company personnel). Because the

district court determined that the data was of a type upon

which accountants reasonably rely in forming their opinions,

it did not err in permitting the experts to rely on this data in

the course of their testimony or in admitting the data for the

limited purpose of explaining the basis of their opinions. See

Fed. R. Evid. 703; Paddack v. Dave Christensen, Inc., 745

F.2d 1254, 1261-62 (9th Cir. 1984) (holding that if

information relied on by an expert is not independently

admissible, it may be admitted to help explain expert’s

opinion but not to establish the trust of what it asserts). The

district court properly instructed the jury that the hearsay

evidence was to be considered only as a basis for the expert

opinion and not as substantive evidence. See Paddack, 745

F.2d at 1262. Accordingly, the district judge did not abuse

her discretion in admitting this evidence.

The Employers also contend that several of the Trust

Funds’ experts improperly gave their Opinions on witness

credibility in the course of testifying by relying on certain

Statements of witnesses while not relying on other evidence.

In Scop, the Second Circuit found that it was improper for

expert witnesses to offer opinions based on their assessment

of the credibility of another witness’s testimony at trial. See

846 F.2d at 142. See also United States v. Barnard, 490 F.2d

32a

907, 912-13 (9th Cir. 1976) (holding that expert psychiatric

testimony that defendant-witness was a sociopath who would

lie to his advantage was improper opinion about defendant’s

credibility). The Trust Funds’ experts did not directly or

indirectly comment on the credibility of other witnesses, and

thus Scop and Barnard are not on point. The experts merely

chose to rely on certain evidence they deemed to be

consistent with other evidence.’ Every expert will make

decisions as to which pieces of evidence to rely on; on cross-

examination the opposing party is entitled to challenge why

the expert seemingly ignored certain evidence.

The Employers contend, however, that they were not

permitted to cross-examine the Trust Funds’ experts to bring

attention to the experts’ decisions to ignore some evidence.

“(T]he scope and extent of cross-examination of expert

witnesses rests in the sound discretion of the trial court and

‘is not subject to exception unless wholly arbitrary,

unreasonable and abusive, and the examination need not be

extended to permit interrogation about collateral, immaterial

or irrelevant matters.’” United States v. 10.48 Acres of Land,

621 F.2d 338, 340 (9th Cir. 1980) (quoting United States v.

25.02 Acres of Land, 495 F.2d 1398, 1402 (10th Cir. 1974)).

We find that the trial judge did permit cross-examination

testing the foundation of the expert’s opinion, and only

excluded questions that were not relevant to the expert’s

testimony or were overly prejudicial. In cross-examining

both Meyer and Miller, the Employers sought to bring to

light allegations that the Trust Funds’ investigator had gotten

a witness drunk before taking his declaration. During their

direct examinations, Meyer had not relied on that witness’s

testimony at all, and Miller had relied on only one piece of

'2 The one occasion on which Meyer stated that he believed

Nor-Cal’s business records supported the testimony of a particular

witness did not amount to a judgment on the credibility of the witness.

scien HERMES mee acer

33a

testimony from the declaration that was corroborated by the

witness’s later deposition testimony. The trial judge

permitted the Employers to cross-examine Miller on his

reliance of the witness’s declaration for the one point from

the declaration, but sustained the Trust Funds’ objections to

the Employers’ attempt to further delve into the evidence of

impropriety on the Trust Funds’ part during the taking of the

witness’s declaration. Because Meyer or Miller did not rely

extensively on the witness’s declaration, the district court did

not abuse its discretion in concluding that cross-examining

them about the reliability of the declaration would not have

been probative. Similarly, the district court did not abuse its

discretion in excluding a question on the cross-examination

of Meyer regarding prejudicial deposition testimony by Nor-

Cal’s bookkeeper when her testimony did not relate to any

matter to which Meyer had testified.

The Employers also complain that the district court

erred in refusing their request to admit the Lindquist files —

19 boxes of documents that the experts had perused before

testifying — to show the jury the items that the Trust Funds’

experts had chosen to ignore in forming their opinions. The

Federal Rules of Evidence provide that experts may be

required to disclose the sources upon which they have relied,

but they do not make these sources automatically admissible.

See Fed. R. Evid. 705. Moreover, cumulative and non-

relevant evidence may be excluded, see Fed. R. Evid. 402,

403, and much of the evidence in the Lindquist files had

already been admitted or was not probative. The Employers

had access to all the contents and were free to introduce

particular pieces of evidence. It was not an abuse of

discretion to refuse to admit the Lindquist files into evidence

wholesale.

The Employers also appeal the admission of certain

evidence they deem was inadmissible hearsay. Hearsay

rulings are reviewed for abuse of discretion. See Hagood v.

34a

Sonoma County Water Agency, 81 F.3d 1465, 1479 n.24 (9th

Cir. 1996).

The Employers contend that Trial Exhibits 48 and

53A, summaries based on a variety of records and testimony

taken over the course of the litigation, were erroneously

admitted. A summary is admissible if it helps boil down

“(t]he contents of voluminous writings, recordings, or

photographs which cannot conveniently be examined in a

court....” Fed. R. Evid. 1006. “The proponent of a

summary must establish a foundation that: (1) the

underlying materials upon which the summary is based are

admissible in evidence; and (2) the underlying documents

were made available to the opposing party for inspection.”

Paddack, 745 F.2d at 1259. “[I]t is clear that a summary of

both inadmissible and admissible hearsay should not be

admitted under Rule 1006.” Jd. at 1260. Where it is

uncertain precisely which portions of the summary rest on

inadmissible hearsay, the whole summary is inadmissible.

See id. at 1261.

Exhibit 48, mainly comprised of Nor-Cal and North

Bay records that constitute party admissions, was partly

based on the deposition testimony of two customers of Nor-

Cal and North Bay. Similarly, the data underlying Exhibit

53A primarily consisted of Nor-Cal and North Bay records,

but did include summaries produced by one of Nor-Cal and

North Bay’s customers. Therefore, both exhibits contained

hearsay. They were admitted over the Employers’ objection

that they contained hearsay and assumed facts not in

evidence.

While a summary of hearsay properly admitted as a

business record is admissible, see Papadakis v. United

States, 208 F.2d 945, 951-52 (9th Cir. 1953), the Trust Funds

did not lay a foundation for the underlying data to be

admitted as business records. See Fed. R. Evid. 803(6).

35a

Because the summaries contained hearsay to which no

exception applies, it was error to admit them into evidence.

Reversal is only warranted, however, if prejudice is

shown. City of Long Beach v. Standard Oil Co., 46 F.3d

929, 936 (9th Cir. 1995) The exhibits in question were

mainly based on the non-hearsay records of North Bay and

Nor-Cal. The fact that the jury considered some hearsay

statements of Nor-Cal and North Bay’s customers did not

prejudice the verdict. Therefore, reversal is not warranted on

these grounds.

The Employers also challenge the admission of the

testimony of two former North Bay employees regarding

out-of-court statements made by John Adams, the deceased

former supervisor of North Bay, about statements Pettit

made to Adams. We found in UA Local 343 I that North

Bay and Nor-Cal were a single employer, owned and

operated by Pettit. See 48 F.3d at 1473. Therefore, Adams,

as a North Bay employee, was Pettit’s agent, and the

statements Adams made within the scope of his employment

were Clearly admissible as agent admissions. See Fed. R.

Evid. 801(d)(2)(D).

Ve Special Verdict

The district court has broad discretion in deciding

whether to employ a special or general verdict. See United

States v. Real Property Located at 20832 Big Rock Drive, 51

F.3d 1402, 1408 (9th Cir. 1995). “This discretion extends to

determining the content and layout of the verdict form, and

any interrogatories submitted to the jury, provided the

questions asked are reasonably capable of an interpretation

that would allow the jury to address all factual issues

essential to judgment.” Jd.

36a

The special verdict form in this case asked the jury to

answer the ultimate question with respect to each claim -

alter ego liability, § 301 fraud, and veil-piercing — and then

asked the jury to ascertain the amount of damages. The

Employers contend that the verdict form should have asked

for an answer on each element of each claim, thus ensuring

that the jury understood the instructions given them. Given

the deference accorded to the trial judge’s choice of verdict

forms and the great length and confusing nature of the

verdict form the Employers proposed, we reject the

Employers’ argument. There was no abuse of discretion.

VL __siRelitigation of Damages

The Trust Funds appeal the amount of damages

awarded them at trial, claiming that the district court’s

calculation of compensatory damages at the summary

judgment stage was the “law of the case” and that the

amount should not have been relitigated at trial. We find

that the doctrine of the “law of the case” is inapplicable to

the amount of damages because UA Local 343 | did not

decide the issue explicitly or by necessary implication. See

Rebel Oil Co., 146 F.3d at 1093. Our reversal of the grant of

summary judgment necessarily nullified the award of

compensatory damages and the Employers did not concede

the validity of the amount awarded on summary judgment by

not appealing the amount of damages in UA Local 343 1. See

Wheeler v. John Deere Co., 935 F.2d 1090, 1096 (10th Cir.

1991) (where first judgment was reversed, jury’s award of

damages was reversed and could not be reinstated at second

trial, even though defendant failed to appeal amount of

damages awarded by the first jury), The amount of

consequently damages awarded by the jury stands.

37a

VII. Conclusion

For the aforementioned reasons, the judgment of the

district court is

AFFIRMED.

38a

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

LOCAL 159, 342, 343 & 444;

LOCAL 343 UNITED

ASSOC. JOURNEYMEN &

APPRENTICE TRAINING

TRUST FD; LOCAL 343

UNITED ASSOC. OF

PLUMBING,

Nos. 96-16172

& 96-16284

Plaintiffs- Appellees

and Cross-Appellants,

D.C. No.

CV 87-2365-SYI

NOR-CAL PLUMBING, INC-.;

NORTH BAY PLUMBING, INC.,

ELMAR LEE PETTIT,

a.k.a. ELMER LEE PETTIT;

AUDREY JEAN PETTIT,

Defendants-Appellants

and Cross-Appellees.

ORDER

Name Ne Nee Ne Nae a Ne ee Ne ee ee ee ee ee ee ee ee ee ee ee ee Se”

Before: WIGGINS, TASHIMA, and SILVERMAN,

Circuit Judges.

The panel has voted to deny appellees’ petition for

rehearing and appellants’ joint petition for rehearing. Judges

Tashima and Silverman vote to deny appellants’ joint

PEPE AOS DAG ER HER Bae fi F<

PE RMR BN RIE RUE ET I CRM ES Rah NIKE

«.

‘4

39a

petition for rehearing en banc and Judge Wiggins so

recommends.

The full court has been advised of the petition for

rehearing en banc and no judge of the court has requested a

vote on en banc rehearing. Fed. R. App. P. 35(b).

The petitions for rehearing and the petition for

rehearing en banc are denied.

Dated: September 7, 1999

40a

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

)

LOCAL 159, 342, 343 & 444; )

LOCAL 343 UNITED )

ASSOC. JOURNEYMEN & )

APPRENTICE TRAINING )

TRUST FD; LOCAL 343 )

UNITED ASSOC. OF )

PLUMBING, )

Plaintiffs- Appellees ) Nos. 96-16172

and Cross-Appellants, ) & 96-16284

)

Vv ) D.C. No.

) CV 87-2365-SYI

NOR-CAL PLUMBING, INC; )

NORTH BAY PLUMBING, INC., ) ORDER

ELMAR LEE PETTIT, )

a.k.a. ELMER LEE PETTIT; )

AUDREY JEAN PETTIT, )

Defendants-Appellants )

and Cross-Appellees. )

)

Before WIGGINS, TASHIMA, and SILVERMAN,

Circuit Judges

Appellants’ joint request that the Memorandum

portion of the disposition in these cases be designated for

publication is denied.

Dated: October 14, 1999

4la

U.A. LOCAL NO. 343 of the United Association of

Journeymen

and Apprentices of the Plumbing ard Pipefitting

Industry of

the United States and Canada, AFL-CIO; U.A.

LOCAL NOS. 159,

342, 342 AND 444 COMBINED PENSION

TRUST FUND; U.A. LOCAL

NOS. 59, 342, 343 and 444 COMBINED

HEALTH & WELFARE TRUST

FUND; and U.A. LOCAL NO. 343 JOURNEY

MAN AND APPRENTICE

TRAINING TRUST FUND, Plaintiff, v. NOR-

CAL PLUMBING, INC.;

NORTH BAY PLUMBING, INC; ELMAR LEE

PETTIT, a.k.a. Elmer Lee

Pettit; and AUDREY JEAN PETTIT, Defendants.

ESE HI MIT a NL a USP Cty Ulta mea i by Matha? de

No. C 87-2365 BAC

UNITED STATES DISTRICT COURT FOR THE

NORTHERN DISTRICT OF CALIFORNIA

SE a ast aaa ae a Tn ony

797 F. Supp. 767

April 22, 1992, Filed; April 23, 1992, Entered

COUNSEL:

John J. Davis, Jr., McCarthy, Johnson & Miller, 595 Market

Street, San Francisco, CA 94105, For Plaintiff

Mark R. Thierman, Thierman, Cook, Brown & Prager, 601

California Street, San Francisco, CA 94108, Henry F.

Telfeian, Keck, Mahin & Cate, 1 Maritime Plaza, San

Francisco, CA 94111, for Defendants

‘a

42a

ORDER GRANTING SUMMARY JUDGMENT

CAULFIELD, District Judge.

This matter comes before the court on defendants’ motion

for partial summary judgment and plaintiffs’ cross-motion

for partial summary judgment. Oral argument was heard on

January 17, 1992. After careful consideration of the parties’

written and oral arguments, documents submitted in support,

and the record as a whole, the court finds it appropriate to

DENY defendants’ motion and GRANT plaintiffs’ motion.

BACKGROUND

Plaintiffs are U.A. Local No. 343, a plumbers and

pipefitters union, and the labor-management trust funds in

which it participates. Defendant Nor-Cal Plumbing, Inc.

(“Nor-Cal”), has been a party signatory to successive

collective bargaining agreements with plaintiff U.A. Local

343 since at least 1965.' The complaint alleges that

defendants transferred the business of Nor-Cal, owned by

defendant Elmar Lee Pettit, to defendant North Bay

Plumbing, Inc. (“North Bay”), which was established in

1980. North Bay is a non-union company allegedly owned

by Mr. Pettit’s wife, defendant Audrey Jean Pettit, but which

plaintiffs contend was in fact owned, controlled and

managed by Mr. Pettit. It is alleged that North Bay continued

Nor-Cal’s business, but has not honored U.A. Local 343’s

Labor Agreement (the “Agreement”’).

' On or about June 30, 1983, Nor-Cal executed a two-year

Memorandum of Understanding modifying the then-existing Master

Labor Agreement by and between the Plumbing, Heating and Cooling

Contractors Association of Napa, Solano and Lake Counties and plaintiff

U.A. Local 343. On or about May 7, 1984 defendant Nor-Cal executed

the Residential Plumbing Addendum to the Master Labor Agreement,

extending the agreement to at least June 30, 1987

—— ety i 5 die x " os SARI aR SSS ane aR sein + eS eae .

I EN CEE Oe ee ROE 4 Ce eee Te akira sjebe Fe Rolia e e Peas: 2 5

121 nae eae a etme nity

43a

In Count Il, plaintiff trust funds seek an audit in order to

recover the pension, health and welfare and other fringe

benefit contributions they should have received had

defendants applied the Agreement to North Bay. Plaintiffs

have obtained the audit through discovery, and seek

judgment in the amount of $2,551,244.28 delineated as

follows: 1) fringe benefit contributions - $1,066,820.07; 2)

liquidated damages - $106,682.09: 3) interest - $899,066.00;

4) attorneys fees and litigation - $478,736.12. Their claims

are made under Section 301 of the LMRA for breach of the

Agreement and under Sections 502 and 515 of ERISA for

failure to make the required contributions.

In Count II, plaintiffs claim that defendants fraudulently

concealed the true nature and extent of their business through

affirmative acts of deception as well as failures to disclose

material information.

Count IV is a claim by plaintiff trust funds for punitive

damages in an amount equal to compensatory damages based

upon the alleged willful and malicious behavior of

defendants. Plaintiffs seek an order granting summary

judgment against all four defendants on Counts IL, Mi and IV

of the Complaint.”

STATUTE OF LIMITATIONS AND/OR LACHES

Defendants again attempt to raise a state [sic] of limitations

or laches defense in this action. However, plaintiff's claims

have already been held not to be time-barred. As Judge

Schwarzer stated in his order dated May 24, 1988,

? The Union’s claims in Count I for wages and dues were

dismissed without prejudice for pursuit under the Agreement’s grievance

procedure.

44a

This undisputed record of fraud, deception

and obstruction suffices to estop these

defendants from asserting the statute of

limitations after January, 1981.

New facts have not been brought to light, but rather

defendants seek to reargue points previously raised and

rejected. The court will not entertain such arguments.

SUMMARY JUDGMENT

Under Rule 56 of the Federal Rules of Civil Procedure,

summary judgment is appropriate where the movant shows

that there is no genuine issue as to any material fact and that

the party is entitled to a judgment as a matter of law. In

making this determination, the Court must draw inferences in

the light most favorable to the non-moving party, and the

burden is on the movant to establish both the absence of a

genuine issue of material fact and that it is entitled to

judgment as a matter of law. Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 106 S. Ct. 2505 , 91 L. Ed. 2d 202

(1986). Once the moving party has met this burden, the non-

moving party may not rest on the allegations in the

pleadings, but by affidavit or other evidence must set forth

specific facts showing that a genuine issue of material fact

exists. Thus, the non-moving party “must do more than show

that there is some metaphysical doubt as to the material

facts.” Matsushita Electric Industrial Co. v. Zenith Radio

Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 1365, 89 L. Ed.

2d 538 (1986).

NOR-CAL AND NORTH BAY-ALTER EGO TEST

This case arises out of the alleged double-breasting of

defendants. A double-breasted employer relationship is

where a union-signatory business or its owners also have an

45a

interest in another similar non-union business. Although

double-breasting is not per se unlawful, if the non-union-

business is found to be the “alter ego” of the union business,

they will be held to have violated the labor agreement.

Plaintiffs allege that North Bay is the alter ego of Nor-Cal.

Plaintiffs must first establish that the businesses are a single

employer. After such an initial single employer finding, the

court determines whether the non-union business is in reality

either the disguised continuance of a former union signatory

Or an attempt to avoid the obligations of the union

signatory’s collective bargaining agreement through a sham

transaction or a technical change in operation. Haley &

Haley, Inc. v. NLRB, 880 F.2d 1147, 1149-50 (9th Cir.

1989); Northwest Admrs., Inc. v. Con Iverson Ti rucking, Inc..,

749 F.2d 1338, 1340 (9th Cir. 1984).

: If the two businesses are found to be only a single

e employer, the N.L.R.B. must determine whether their

employees together constitute an appropriate bargaining unit,

and thus whether the double-breasted employer can be held

liable under the labor agreement. International

Woodworkers of America v. Ketchikan Pulp Co., 611 F.2d

1295 (9th Cir. 1980). If the alter ego relationship is

established, however, the Court may proceed directly to

enforcement of the collective bargaining agreement. A.

Dariano & Sons, Inc. v. District Council of Painters No. 33,

869 F.2d 514, 518 (9th Cir. 1989). Damages recoverable by

trust funds in alter ego cases under ERISA consist of unpaid

fringe benefit contributions plus liquidated damages, interest

and attorneys’ fees. 29 U.S.C. §§ 1132(g)(2), 1145.

The criteria for determining single employer status are 1)

interrelation of operations, 2) common management, 3)

centralized control of labor relations, and 4) common

ownership. NLRB v. Don Burgess Constr. Corp., 596 F.2d

378, 384 (Sth Cir. 1979), 444 U.S. 940, 62 L. Ed. 2d 306,

46a

100 S. Ct. 293 (1979). No one factor is controlling nor need

all criteria be present. Id. “Single employer status ultimately

depends on ‘all the circumstances of the case’ and is

characterized as an absence of an ‘arm’s length relationship

found among unintegrated companies.’“ /d. at 384 (citations

omitted).

The most important factor is centralized control of labor

relations. JM. Tanaka Constr., Inc. v. NLRB, 675 F.2d

1029, 1034 (9th Cir. 1982) (citing Los Angeles Marine

Hardware Co. v. NLRB, 602 F.2d 1302, 1305 (9th Cir.

1979)). Commonly controlled labor relations can be shown

either on the basis of common control of day-to-day labor

matters, Zanaka, 675 F.2d at 1034, or by showing that the

person in charge of the union company’s labor relations

made the decision that the second company would be non-

union. Burgess, 596 F.2d at 385-86. It is undisputed that Mr.

Pettit controlled Nor-Cal’s labor relations. As for North Bay,

sworn declarations and deposition testimony establish that

Mr. Pettit handled the hiring, firing, promotions, demotions,

training and supervising and thus controlled day-to-day labor

matters. Moreover, extensive evidence establishes that Mr.

Pettit concealed having established North Bay and made the

decision that North Bay would be non-union.

Evidence of common control of labor relations also shows

common management. In addition, the minutes of North

Bay’s original corporate directors’ meeting show Mr. Pettit

as North Bay’s sole director, president and chairman.’ Mr.

Pettit was also the contractor’s license qualifier and

responsible managing officer for both Nor-Cal and North

Bay. Under California law the qualifier is “responsible for

exercising such direct supervision and control of [the

> Another version of the same minutes shows Mrs. Pettit as the

sole director, president, and chairman of North Bay.

47a

contractor’s] operations as is necessary to secure full

compliance with the provisions of this chapter... .” Cal.

Bus. & Prof. Code $7068.1. The Ninth Circuit has found this

to be a significant factor. Burgess, 596 F.2d at 385.

The evidence also indicates that Mr. Pettit had financial

control of North Bay, and in fact from mid-1983 through

1986, signed over half of North Bay’s checks. Finally,

according to their sworn declarations, customers dealt with

Mr. Pettit when they wanted bids or had problems.

Uncontroverted evidence shows that Nor-Cal and North

Bay had closely interrelated Operations. They shared

equipment, material and supplies, coordinated and combined

purchases, and made a number of “loans” without interest or

promissory notes. Thus, Nor-Cal and North Bay were not

operated at “arm’s length,” but rather should be treated as a

single employer.

Having established the threshold issue of single employer

Status, the court now addresses the alter ego issue. As

explained by the Ninth Circuit in Haley, “the alter ego

transfer is in essence a sham transaction, motivated by the

employer’s desire to avoid its contractual obligations.” 880

F.2d at 1149 (citations omitted). There is substantial

undisputed evidence that North Bay was set up in order to

eliminate the high costs of dealing with the Union. Jack

Couthit, North Bay’s purchasing agent, has so testified. In

addition, John Adams, the initial manager at North Bay,

admitted that the purpose “was to transfer Nor-Cal’s

customers to North bay, close down Nor-Cal Plumbing, and

then have a non-union shop.”

Defendants transferred Nor-Cal’s major customers to

North Bay, including the two largest, Lewis Homes and

Presley Homes. Frank Hodel, who was supposedly in charge

of North Bay, has testified that he was surprised by the

48a

transfer of the Presley Homes account, which took place

when Mr. Pettit was on a fishing trip in Mexico with Garth

Patterson, Presley’s vice president. Kaufman and Broad’s

Bradbury Homes project was taken over by North Bay in the

middle of the job, as testified by Cliff Russell. The person

Mr. Russell dealt with for both Nor-Cal and North Bay was

Mr. Pettit.

Defendants’ assertion that Nor-Cal was unable to bid

competitively is not supported by the evidence. Nor-Cal had

been successful in obtaining bids, but Mr. Pettit and Nor-Cal

Superintendent Dave Adams stopped bidding new work in

December 1986. Dave Adams transferred to North Bay in

January 1987.

The issue of whether an alter ego relationship exists is

particularly fact-intensive, and frequently summary

judgment is inappropriate. See Sheet Metal Workers

International Assoc. v. Arizona Mechanical & Stainless, Inc.,

863 F.2d 647, 652 n. 5 (9th Cir. 1988). In this instance,

however, plaintiffs’ evidence, including defendants’

admissions, documentary evidence, and the testimony of

disinterested percipient witnesses, is overwhelming.

Defendant’s [sic] are unable to contradict plaintiffs’ evidence

by reliable documentary or disinterested third-party

evidence.

The only evidence supporting defendants’ position are the

denials by Mr. Pettit of ownership and management of North

Bay. These statements are contradicted by numerous

previous statements by Mr. Pettit that he did own and

manage it, including those contained in North Bay’s

contractors’ license applications made under penalty of

perjury. The Ninth Circuit has stated,

The very object of summary judgment is to

separate real and genuine issues from those

49a

that are formal or pretended, so that only the

former may subject the moving party to the

burden of trial. Here we are convinced that

the issues of fact created by [the non-moving

party] are not issues which this Court could

reasonably characterize as genuine; rather,

they are sham issues which should not subject

the defendants to the burden of a trial.

Radobenko v. Automated Equipment Corp., 520 F.2d 540,

543-44 (9th Cir. 1975). Defendants’ denials do not establish

a genuine issue of material fact. Accordingly, summary

judgment is GRANTED in favor of plaintiffs.

PERSONAL LIABILITY OF THE PETTITS

Ninth Circuit decisions have considered three factors in

determining whether to pierce the corporate veil: 1) a unity

of interest and ownership between the corporation and the

shareholder such that the two no longer exist as separate

entities; 2) failure to disregard the corporation would result

in injustice; and 3) fraudulent intent of the incorporators to

evade civil or criminal liability. Seymour v. Hull & Moreland

Engineering, 605 F.2d 1105, 1111 (9th Cir. 1979). Although

plaintiff need only establish injustice or fraudulent intent in

addition to disregard of the corporate identity, Board of

Trustees v. Valley Cabinet & Mfg. Co., 877 F.2d 769, 773

(9th Cir. 1989), all three factors are present here.

The evidence demonstrates that the Pettits did not respect

the separate corporate identities of either Nor-Cal or North

Bay. The Pettits regularly paid for personal expenses out of

corporate funds, including grocery and hardware store bills,

improvements on persona:.y owned real estate, vehicles and

repairs, life insurance, home utility bills, real estate tax and

insurance on their property, and fees for preparing their

wills. The Ninth Circuit has held that such commingling of

50a

assets is “among the more serious abuses of the corporate

identity.” Valley Cabinet, 877 F.2d at 773. In addition,

defendants’ records contain references to large loans to and

from the Pettits. These loans demonstrate a disregard of the

corporate identity, because no promissory notes were ever

executed and there is no evidence that interest was paid.

Laborers Clean-up Contract Admin. Trust Fund v. Uriarte

Clean-up Service, Inc., 736 F.2d 516, 524 (9th Cir. 1984).

As for fraudulent intent, as Judge Schwarzer stated in his

order of May 24, 1988, defendants’ conduct with respect to

North Bay presents “an undisputed record of fraud,

deception and obstruction.” The evidence establishes that

North Bay was formed for the purpose of defrauding the

union and the trust funds. Frank Hodel and Robert Dandor

have testified that concealment of the two companies’

relationship occurred on a daily basis. For example, Mr.

Pettit frequently told North Bay plumbers that “you didn’t

see me here,” and stated to Lewis Homes Superintendent

Donald Burton that he had to “be careful to conceal his

involvement with North Bay so that he would not get caught

at doublebreasting.” Defendants’ fraudulently failed to report

the work hours of their non-union plumbers. Post-

incorporation use of the corporate form to perpetrate fraud

satisfies the fraudulent intent element, especially where

employee protection is at issue. Valley Cabinet, 877 F.2d at

773-74.

Moreover, it would be unjust to recognize the corporate

entities, which would allow the Pettits to retain the financial

rewards of their fraudulent scheme and would prevent

plaintiffs’ recovery.‘ The doctrine of piercing the corporate

* According to the analysis of Michael Keiser, as of 1988, the

combined assets of Nor-Cal and North Bay were approximately 127,000,

Sla

veil “is designed to prevent a person from doing injury and

then escaping responsibility by hiding behind a corporate

shield.” Plumbers & Fitters v. Matt J. Zaich Constr. Co., 418

F.2d 1054, 58 (9th Cir. 1969).

Since the Pettits are personally liable under the corporate

veil-piercing doctrine, the court does not reach the issue of

whether the Pettits should be held personally liable as

participating tortfeasors or under section 301 of the LMRA,

29 U.S.C. § 185.

PUNITIVE DAMAGES

The Ninth Circuit has held that an award of punitive

damages under Section 502(g)(2)(E) of ERISA is warranted

where the employers’ refusal to make promised contributions

was “willful, wanton and malicious.” Winterrowd v. David

Freedman & Co., 724 F.2d 823, 826 (9th Cir. 1984)

(citations omitted); see also Cox v. Eichler, 765 F. Supp. 601

(N.D. Cal. 1990); Kuntz v. Reese, 760 F.2d 926 (9th Cir.

1985), withdrawn and vacated on other grounds, 785 F.2d

1410 (1986). “Once the factual predicate for aggravated

conduct is established, the imposition of punitive damages is

discretionary with the trier of fact.” Winterrowd, 724 F.2d at

826. Plaintiffs have established that defendants’ refusal to

make contributions were not only wilful, wanton and

malicious, but also fraudulent. The court finds that a punitive

damages award in the $2,000,000.00, approximately equal to

plaintiffs’ compensatory damages, is appropriate.

ATTORNEYS’ FEE AND COSTS

As prevailing parties, the plaintiffs are entitled to a

mandatory award of attorneys’ fees to the plaintiff trust

52a

funds under section 502(g)(2(D) of ERISA. 29 U.S.C.

§ 1132(g)(2)(D).

CONCLUSION

For the forgoing reasons, summary judgment its [sic]

hereby granted in favor of plaintiff Trust Funds and against

all defendants as to Counts II, II] and IV. Defendants’

motion for partial summary judgment is denied in its

entirety. Defendants are directed to pay damages to plaintiff

Trust Funds in the amount of $2,551,244.28 for fringe

benefit contributions, liquidated damages, interest, and

attorneys’ fees and litigation expenses, plus an additional

$2,000,000 in punitive damages.

IT IS SO ORDERED.

, Section 502(g)(2)(D) provides:

(1) 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

(D) reasonable attorney’s fees and costs of the

action, to be paid by the defendants.

53a

UA LOCAL 343 of the United Association of

Journeymen &

Apprentices of the Plumbing and Pipefitting Industry of

the

United States and Canada, AFL-CIO; UA LOCAL NOS.

159, 342,

343, and 444 COMBINED PENSION TRUST FUND;

UA LOCAL NOS. 159,

342, 343 and 444 COMBINED HEALTH & WELFARE

TRUST FUND; and

UA LOCAL NO. 343 JOURNEYMAN AND

APPRENTICE TRAINING TRUST

FUND, Plaintiffs-Appellees, vy. NOR-CAL PLUMBING,

INC.; ELMAR

LEE PETTIT; NORTH BAY PLUMBING, INC..

AUDREY JEAN PETTIT,

Defendants-Appellants.

No. 92-15749

UNITED STATES COURT OF APPEALS FOR THE

NINTH CIRCUIT

48 F.3d 1465

December 16, 1992, Argued and Submitted

October 14, 1994, Filed

As Amended February 28, 1995

COUNSEL: John M. Kelson, Oakland, California, for

defendants-appellants North Bay Plumbing, Inc. and Audrey

Jean Pettit.

S4a

Mark R. Thierman, Thierman, Cook, Brown & Prager, San

Francisco, California, for defendants-appellants Nor-Cal

Plumbing, Inc. and Elmar Lee Pettit.

John J. Davis, Jr.. McCarthy, Johnson & Miller, San

Francisco, California, for the plaintiffs-appellees.

Before: William A. Norris, Robert R. Beezer, and Andrew J.

Kleinfeld, Circuit Judges.

NORRIS, Circuit Judge:

Appellant Elmar Lee Pettit is a plumbing contractor who,

with appellant Audrey Pettit, his wife, owns both Nor-Cal

Plumbing, Inc. and North Bay Plumbing, Inc. Nor-Cal is

union, and North Bay is non-union. Appellees, Local 343

and the employee trust funds in which it participates, brought

this action under Section 301 of the Labor Management

Relations Act (“LMRA”) and Section 502 of the Employee

Retirement Income Security Act (“ERISA”), seeking

damages for breach of the Nor-Cal collective bargaining

agreement. The action is premised on the theory that the

collective bargaining agreement between Local 343 and Nor-

Cal covered North Bay as well because North Bay was the

alter ego of Nor-Cal

On the basis of “an undisputed record of fraud, deception

and obstruction,” the district court ruled on summary

judgment that North Bay was the alter ego of Nor-Cal. Order

Granting Summary Judgment at 10 (quoting Order of May

24, 1988). Consequently, the court held that appellants

breached the collective bargaining agreement by failing to

extend its terms and conditions of employment to North Bay

employees. The district court awarded appellees $2.5 million

in fringe benefit contributions, liquidated damages, interest,

attorneys’ fees and costs, and $2 million in punitive

damages. Judgment was entered not only against Nor-Cal on

55a

the theory that North Bay was its alter ego, but also against

the Pettits in their individual capacities on the theory that

appellants were entitled to pierce the corporate veil. On

appeal, the defendants-appellants argue that the district court

erred in granting summary judgment against Nor-Cal on the

alter-ego theory, in failing to find the action time barred, in

piercing the corporate veil to impose liability on the Pettits

personally, and in awarding punitive damages. We uphold

the court’s ruling that the statute of limitations does not bar

this action, but reverse summary judgment against Nor-Cal

under the alter-ego theory and against the Pettits under the

veil piercing doctrine. Because we reverse summary

judgement, we vacate the award for punitive damages.

Primary Jurisdiction

As a preliminary matter, appellants argue that the doctrine

of primary jurisdiction barred the district court from

extending the Nor-Cal collective bargaining agreement to

North Bay unless and until the National Labor Relations

Board first determined that the employees of both firms

constituted an appropriate bargaining unit. See Brotherhood

of Teamsters, Local No. 70 v. California Consolidators, Inc.,

693 F.2d 81, 82-83 (9th Cir. 1982), cert. denied, 469 U.S.

887, 83 L. Ed. 2d 199, 105 S. Ct. 263 (1984). This argument

misunderstands the differences between the two theories

with which an illegal “double breasted” operation can be

challenged.

Appellants are correct that it may be perfectly legal for a

contractor to conduct business through a “double breasted”

operation, one in which the same contractor owns both union

56a

and non-union companies for legitimate business purposes.’

In such cases, the collective bargaining agreement of the

union firm does not ordinarily apply to the non-union firm.

Out of concern, however, that some contractors would use

double-breasted operations to avoid their collective

bargaining obligations, the courts and the NLRB have

developed two conceptually related, but distinct theories -

“single employer” and “alter ego” - to guard against such

abuse. Carpenters’ Local Union No. 1478 v. Stevens, 743

F.2d 1271, 1275-77 (9th Cir. 1984), cert. denied, 471 U.S.

1015, 85 L. Ed. 2d 300, 105 S. Ct. 2018 (1985).

The requirements of these two theories overlap

substantially. Under both theories, the district court must

first determine whether the two firms are a single employer

by measuring the degree of common ownership,

management, operations, and labor relations. See id. at 1276.

If this threshold requirement is met, the next step depends on

which theory is pursued.

Under the “single employer” theory, the district court must

defer to the NLRB, which has primary jurisdiction to

determine whether the employees of both the union and non-

union firms constitute an appropriate bargaining unit. Only if

the NLRB finds that they constitute a single unit may the

collective bargaining agreement with the union firm be

extended to the non-union firm. See South Prairie Constr.

Co. v. Local No. 627, Int'l Union of Operating Eng’rs, 425

U.S. 800, 805-06, 48 L. Ed. 2d 382, 96 S. Ct. 1842 (1976)

(per curiam); Carpenters’ Local Union No. 1478, 743 F.2d at

' As we said in Carpenters’ Local Union No. 1478 v. Stevens,

743 F.2d 1271 (9th Cir. 1984), cert. denied, 471 U.S. 1015, 85 L. Ed. 2d

300, 105 S. Ct 2018 (1985), “the non-union company can bid

competitively on jobs that do not require union contractors, while the

union company continues to bid on jobs requiring union contractors.” /d.

at 1275.

PAT a LAO AA CIE Se YR re Tie a Orne 9

i Sree eat

aisiemcetuacectcnee a

ms eR a

57a

1276-77 n.7; N.L.RB. v. Don Burgess Constr. Corp., 596

F.2d 378, 386 (9th Cir.), cert, denied, 444 U.S. 940, 100 S.

Ct. 293, 62 L.Ed.2d 306 (1979). This is because the fact that

Nor-Cal and North Bay may constitute a single employer

does not necessarily mean that their employees share a

“community of interests” sufficient to make them a single

bargaining unit. See Don Burgess, 596 F.2d at 386. This

bargaining unit issue, which is a representational question,

must be decided by the NLRB in the first instance See 29

U.S.C. § 159(b) (“The Board shall decide in each case...

[what] the unit appropriate for the purposes of collective

bargaining shall be. . . .”); Carpenters’ Local Union No.

1478, 743 F.2d at 1278; Cappa v. Wiseman, 659 F.2d 957,

959 (9th Cir. 1981).

Accordingly, if appellees had relied solely on the “single

employer” theory, appellants would have prevailed on their

primary jurisdiction argument. The district court could not

have extended the collective bargaining agreement to North

Bay without a prior determination by the NLRB that the

employees and North Bay and Nor-Cal constituted a single

bargaining unit.

But appellees bypassed the “single employer” theory and

instead invoked the “alter ego” theory. To prevail on the

“alter ego” theory, appellees were required not only to make

the threshold showing that the two firms were a single

employer, but also to prove that North Bay was being used

“in a sham effort to avoid collective bargaining obligations,”

Brick Masons Pension Trust v. Industrial Fence & Supply,

Inc., 839 F.2d 1333, 1336 (9th Cir. 1988), rather than for the

pursuit of legitimate business objectives untainted by “union

animus,” Haley & Haley, Inc. vy. NLRB, 880 F.2d 1147, 1150

(9th Cir. 1989) (per curiam). See also A. Dariano & Sons,

Inc. v. District Council of Painters No. 33, 869 F.2d 514, 519

(9th Cir. 1989) (“In all alter ego determinations an element

of fraud or misrepresentation also exists.”). It is the settled

58a

law of our circuit that once appellees prevailed on these

issues, the district court could hold that the Nor-Cal

bargaining agreement covered North Bay without first

getting a unit determination from the NLRB. See, e.g.,

Northwest Adm'rs, Inc. v. Con Iverson Trucking, Inc., 749

F.2d 1338, 1340 (9th Cir. 1984); Carpenters’ Local Union

No. 1478, 743 F.2d at 1276-77 (“[A] showing [that

employees of both companies constitute a single bargaining

unit] is not required under the alter ego doctrine.”).’

Relying on Laborers Health & Welfare Trust Fund v.

Advanced Lightweight Concrete Co., 484 U.S. 539, 98

appellants also assert that ERISA does not provide the

district court jurisdiction to enforce a collective bargaining

agreement with North Bay employees who are not

signatories to the Nor-Cal labor agreement. Advanced

Lightweight Concrete provides appellants no support,

however, because the Court said ERISA provides no

jurisdiction to enforce noncontractual obligations,

specifically, an employer’s obligation under the National

Labor Relations Act to make pension fund contributions

post-contract. See id. at 548-49. Because the case at bar

concerns contractual obligations, namely the employer’s

obligation to contribute during the agreement’s term,

jurisdiction under ERISA was also proper.

? Appellants rely on United Ass'n of Journeymen & Apprentices,

Local 342 v. Valley Eng'rs, 975 F.2d 611 (9th Cir. 1992), to argue that

the primary jurisdiction doctrin. also applies in an “alter ego” case. In

Valley Engineers, the NLRB made a determination that the two firms

were neither a single employer nor alter egos. See id. at 613. The holding

in Valley Engineers that the union could not collaterally attack this

NLRB determination, see id. at 615, has no application to the case at bar

because in this case, the NLRB has made no determination whatsoever.

59a

Alter Ego

Standard of Review

On the merits, appellants claim that the grant of summary

judgment on the “alter ego” theory was inappropriate. The

alter ego test is, as they contend, highly fact specific. See

Local Joint Exec. Bd., Culinary Workers Union, Local 226 v.

Royal Center, Inc., 796 F.2d 1159, 1164 (9th Cir. 1986),

cert. denied, 479 U.S. 1033, 93 L. Ed. 2d 835, 107 S. Ct. 881

(1987); J.M. Tanaka Constr., Inc. v. NLRB, 675 F.2d 1029,

1033 (9th Cir. 1982). Applying the standard test for

summary judgment, we review the district court’s decision

de novo to decide whether a genuine issue of material fact

exists. See Darring v. Kincheloe, 783 F.2d 874, 876 (9th Cir.

1986).

Because appellees had the burden of proof on the question

of alter ego, they had the burden of establishing a prima facie

case on their motion for summary judgement. Celotex Corp.

v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548

(1986); Matsushita Elec. Indus. Co., Lid v. Zenith Radio

Corp., 475 U.S. 574, 89 L. Ed. 2d 538, 106 S. Ct. 1348

(1986). Once they did so, it became incumbent on appellants

to “set forth specific facts showing that there is a genuine

issue for trial,” Fed. R. Civ. P. 56(e), by evidence cognizable

under that rule. Appellants’ burden of contradicting

appellees’ evidence is not negligible. As the Supreme Court

has explained, “[I]f the evidence is merely colorable or is not

significantly probative summary judgment may be granted.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 91 L.

Ed. 2d 202, 106 S. Ct. 2505, 2511 (1986) (citation omitted).

60a

Appellees’ Burden

The record clearly demonstrates that appellees have borne

their initial burden of establishing facts that, if left

uncontroverted, would show that North Bay was the alter

ego of Nor-Cal.

Single Employer

As explained above, the “alter ego” theory requires a

threshold showing that Nor-Cal and North Bay constitute a

single employer. The criteria for determining whether two

firms constitute a single employer are (1) common

ownership, (2) common management, (3) interrelation of

operations, and (4) centralized control of labor relations. See

NLRB vy. Don Burgess Constr. Corp., 596 F.2d 378, 384 (9th

Cir.), cert. denied, 444 U.S. 940, 62 L. Ed. 2d 306, 100 S. Ct.

293 (1979). No one factor is controlling nor need all criteria

be present. See id. The most important factor is centralized

control of labor relations, which can be demonstrated either

by showing common control of day-to-day labor matters, see

J.M. Tanaka Constr., Inc. v. NLRB, 675 F.2d 1029, 1034 (9th

Cir. 1982), or by showing that the person in charge of the

union company’s labor relations made the decision that the

second company would be non-union, see Don Burgess, 596

F.2d at 385-86.

Appellees produced ample evidence that Nor-Cal and

North Bay constitute a single employer. As for the first two

factors - common ownership and common management -

appellees have introduced evidence showing that Elmar Lee

Pettit owned both Nor-Cal and North Bay, and that he

managed both businesses. In sworn testimony in the Solano

6la

County Municipal Court, Elmar Lee Pettit testified: “I own

North Bay Plumbing. . . . I presently own three plumbing

companies, including North Bay Plumbing.” (S.E.R. Tab 8,

at 3.) He has operated North Bay under three different

contractor’s licenses, two of which also name Audrey Pettit.

But even those licenses listing Audrey Pettit as co-owner

record Elmar Lee Pettit as the “Qualifying Partner or

Responsible Managing Officer,” which means that he

certified, under penalty of perjury, that he would “exercise at

all times during [his] employment such supervision and

control of . . . construction operations as is necessary to

secure full compliance with the provisions of Section 7068. 1

[of the California Business and Professions Code] .. . .” (See

S.E.R. Tab 55, at 13.) The licensing form that Elmar Lee

Pettit signed explains that

supervision and control includes any one or

any combination of the following activities:

supervising construction, running jobs,

making installations, supervising employees,

overseeing sub-contractors, checking jobs for

proper workmanship, managing contracting

activities or working fulltime on jobs.

(/d.) Moreover, sworn declarations from several former

employees and customers of North Bay state that Elmar Lee

Pettit exercised this kind of control over North Bay’s day-to-

day operations. (S.E.R. Tabs 13; 41-44; 50-53.)

As for the third factor - interrelation of operations between

the two companies - appellees presented evidence to show

that Nor-Cal’s purchasing agent established North Bay’s

accounts on the strength of Nor-Cal’s credit and served

briefly as purchasing agent for both companies. (See S.E.R.

Tab 16.) The two companies exchanged materials and

supplies and kept a running tab without charging each other

for overhead or handling. (See S.E.R. Tab 14, at 4-5.) And as

62a

elaborated below, the two corporations and the Pettits

commingled their finances. (See S.E.R. Tab 24, Exh. 21.)

Finally, as for the fourth and most important factor -

centralized control of labor relations - three North Bay

plumbers testified that Elmar Lee Pettit hired them, (see

S.E.R. Tabs 41-43), and four testified that he supervised,

trained, or fired them, (see S.E.R. Tabs 41-44). In addition to

such day-to-day control over labor relations, Elmar Lee Pettit

apparently made the decision that North Bay would be a

non-union shop. According to affidavits submitted by

appellees, Elmar Lee Pettit told associates that a non-union

shop was the only way he could make any money. (See

S.E.R. Tab 16, at 14-16; Tab 41, at 9] 2, 10; Tab 42, at J 6.)

Intent

To establish North Bay as the alter ego of Nor-Cal,

appellees must not only make the threshold showing that the

two firms constituted a single employer but also must show

that North Bay was created in “an attempt to avoid the

obligations of [Nor-Cal’s] collective bargaining agreement

through a sham transaction or a technical change in

operations.” A. Dariano & Sons, Inc. v. District Council of

Painters No. 33, 869 F.2d 514, 518 (9th Cir. 1989). The

appellees presented significant evidence of Elmar Lee

Pettit’s anti-union animus and his intent to avoid the

collective bargaining agreement with Local 343. Evidence

was presented to show that on numerous occasions he

declared “I’m gonna close that fucking Union shop!” (S.E.R.

Tab 42, at J 6.) Further evidence was presented that he even

told a customer that he had to take care to “conceal his

involvement with North Bay so that he would not get caught

at double breasting.” (S.E.R. Tab 13, at J 11.) The appellees

also presented evidence that Elmar Lee Pettit used North Bay

63a

to do work that would have been performed by Nor-Cal if

North Bay had not been created. In fact, their evidence

showed that several Nor-Cal projects were transferred to

North Bay abruptly, in the middle of the job. (See S.E.R. Tab

13, at J] 8-11; Tab 14, at 9] 40-43; Tab 52, at 3.) Finally,

the appellees presented evidence that Nor-Cal stopped

bidding on jobs and shut down its operations in 1987. (See

S.E.R. Tab 29, at 9 8-12).

Appellants argue that this evidence is insufficient as a

matter of law given that the two firms coexisted for a

significant period of time. They argue that the “alter ego”

theory is appropriate only in situations in which the union

firm is closed and a new non-union firm is immediately

opened in its place. Although the “alter ego” theory is

commonly applied in successorship situations, it is not

limited to this context. Indeed, some period of simultaneous

Operations is not uncommon even when the non-union firm

is alleged to be the successor of the union firm. For example,

in Haley & Haley, Inc. v. NLRB, 880 F.2d 1147 (9th Cir.

1989) (per curiam), a union trucker continued in business for

sixteen months after its non-union alter ego successor was

established. See id. at 1148. In this case, the period of

simultaneous operation was admittedly much longer.

However, by itself, simultaneous operation does not preclude

a finding of alter ego.

In sum, appellees have produced substantial evidence that

North Bay and Nor-Cal constituted a single employer and

that Elmar Lee Pettit’s purpose in establishing North Bay

was to effect a technical change in operations that would

enable him to continue his plumbing business while avoiding

his obligations under the collective bargaining agreement

with the employees of Nor-Cal. Accordingly, we hold that

appellees have borne their initial burden of providing

evidence that, if uncontroverted, would entitled [sic] them to

prevail on the “alter ego” theory.

64a ©

Appellants’ Burden

Once the appellees have made their initial showing, the

burden shifts to the appellants to show that they presented

specific facts that raise a genuine issue of material fact for

trial. While we hold that the appellants have failed to create a

genuine issue of material fact as to whether North Bay and

Nor-Cal constituted a single employer, we do hold that the

appellants have produced evidence sufficient to raise such an

issue with respect to Elmar Lee Pettit’s intent to create and

operate North Bay in an attempt to avoid the obligations of

Nor-Cal’s collective bargaining agreement.

]

Single Employer

Appellants argue that the marital relationship between

Elmar Lee and Audrey Pettit should not create a presumption

that North Bay and Nor-Cal are a single employer, which is

true, but this argument ignores Elmar Lee Pettit’s sworn

statements that Ae owned and managed North Bay.

Appellants also argue that Dave Adams managed Nor-Cal

with Elmar Lee Pettit, while North Bay had a series of

managers who worked for Audrey Pettit. But the evidence

they cite does not contradict appellees’ evidence that Elmar

Lee Pettit owned and controlled Nor-Cal and was at the same

time the driving force behind North Bay. In particular, it

does not contradict appellees’ evidence that Elmar Lee Pettit

hired, trained, and fired North Bay’s employees, and that

Elmar Lee Pettit made the decision that North Bay would be

non-union. Nor does appellants’ evidence contradict

65a

appellees’ proffer that Elmar Lee Pettit transferred Nor-Cal

accounts to North Bay.

Elmar Lee Pettit does declare that “I told [customers] I

could not help them, that they should call North Bay

Plumbing.” (C.R. 229.) But these general denials of

involvement in North Bay’s affairs conflict with his sworn

statements on North Bay’s business license that he would

“supervis[e] and control” North Bay’s plumbers. Such

internal inconsistencies in a party’s own testimony fail to

create a genuine issue of material fact as to whether North

Bay was the alter ego of Nor-Cal. See Radobenko y.

Automated Equip. Corp., 520 F.2d 540, 544 (9th Cir. 1975)

. (holding that “the necessity of choosing between the

' [appellants’] two conflicting versions” of a material fact does

not defeat summary judgment).

Intent

Even though the district court correctly ruled that there was

no triable issue as to whether North Bay and Nor-Cal were a

single employer, we believe that the court erred in ruling that

there was no material issue regarding Elmar Lee Pettit’s

intent. Pettit’s testimony presents an alternate explanation of

the reasons why North Bay was created and for the eventual

demise of Nor-Cal. He states that North Bay was created at

the suggestion of John Adams, who wanted to go into

business with Audrey Pettit as a way of making ends meet

during a strike of Nor-Cal employees. (See C.R. 115, at ¥ 2).

Elmar Lee Pettit testified that Audrey Pettit thought starting

the business was a good idea and that John Adams was the

“driving power behind North Bay.” (/d). He further testified

that North Bay concentrated on residential work, while Nor-

Cal did more commercial projects. (See id. at 1] 28-30).

66a

While the fact that North Bay coexisted with Nor-Cal for a

number of years does not preclude a finding of alter ego, the

continued operation of Nor-Cal after the creation of North

Bay is probative of Pettit’s intent in creating North Bay. Had

Pettit created North Bay with the intention of diverting all of

Nor-Cal’s business to his new, non-union shop, one would

expect to find a relatively quick decrease in Nor-Cal’s

business accompanied by a corresponding increase in the

business of North Bay. However, Pettit testified that Nor-Cal

not only continued in operation for more than five years after

the creation of North Bay, but that its workforce and gross

earnings increased significantly over that time period. (See

id. at J 15). He stated that employment grew from about ten

men to 25-30 men and gross income increased from

$688,000 to over $2,500,000. (See id). This evidence is

sufficient to raise a genuine issue of fact, precluding

summary judgment.

Finally, Elmar Lee Pettit’s testimony contradicts the

appellees’ suggestion that Nor-Cal’s demise was the result of

his intentional actions designed to close down the union shop

in favor of North Bay. He testified that the dramatic decline

in Nor-Cal’s business in 1987 resulted from union organizers

talking Nor-Cal employees into quitting their jobs in protest

when Pettit refused to turn North Bay into a union shop. (See

id. at Fj 26-30).

Drawing the inferences most favorable to the nonmoving

party, as we are required to do on summary judgment, we

hold that the appellants’ evidence creates a genuine issue of

material fact regarding whether Pettit created and operated

North Bay with the intention of avoiding Nor-Cal’s

collective bargaining obligations. Therefore, we reverse the

district court’s summary judgment against Nor-Cal.

67a

Statute of Limitations

Appellants also argue that the district court should have

found the union’s claims barred by the statute of limitations.°

Actions brought under § 301 of the LMRA are governed by

the relevant statute of limitations of the forum state, in this

case, California’s four-year period for breach of contract

claims. See Cal. Civ. Proc. Code § 337 (West 1993);

Waggoner v. Dallaire, 649 F.2d 1362, 1367 (9th Cir. 1981).

The limitations period may be tolled, however, if appellants

mislead the appellees. See Waggoner, 649 F.2d at 1368.

We agree with the district court that the doctrine of

- equitable tolling applies here. As early as December 1980,

Local 343 officers suspected Elmar Lee Pettit of illegal

double-breasting, but when they confronted him with their

suspicions, he denied owning North Bay and explained that

it was his wife’s business. (See C.R. 58, Exh. C.) The union

nevertheless lodged an unfair labor practice charge with the

NLRB, and withdrew the charge only when the Board stated

that it lacked sufficient evidence to support a complaint and

would dismiss the charge if it were not withdrawn. (See

S.E.R. Tab 1, at 9] 5-7.) The NLRB’s determination that it

lacked sufficient evidence rested, in turn, on two swom

Statements from Elmar Lee Pettit, in which he denied having

any ownership interest in North Bay or having substantial

knowledge of its operations or its interrelationship with Nor-

Cal. (See S.E.R. Tabs 6 & 7.) Appellants offered no evidence

* Appellants also argue laches, but laches is an equitable defense

unavailable in actions at law governed by a statute of limitations. See

International Tel. & Tel. Corp. v. General Tel. & Elecs. Corp., 518 F.2d

913, 925-26 (9th Cir. 1975); County of Los Angeles v. City of Alhambra,

27 Cal. 3d 184, 612 P.2d 24, 31, 165 Cal. Rptr. 440 (1980).

68a

to establish a genuine issue of fact as to whether these

statements fraudulently concealed the facts from appellees.

Appellants contend that, once on notice of a potential

claim, the appellees had an obligation to make a reasonable

effort to investigate the facts. Specifically, they fault

appellees for not enforcing an information request under

their collective bargaining agreement. We reject this

argument because the record shows that appellees went

several times to Elmar Lee Pettit for information, both

directly and through the NLRB, and were met with

misleading assurances that he had nothing to do with North

Bay. Where a plaintiff suspects the truth but investigates

unsuccessfully, fraudulent concealment will toll the statute.

See Sears, Roebuck & Co. v. Blade, 139 Cal. App. 2d 580,

294 P.2d 140, 146-47 (1956). Accordingly, the statute of

limitations does not bar this action.

Piercing the Corporate Veil

We now consider the district court’s ruling that there was no

genuine issue of fact material to whether the union was

entitled to pierce the corporate veil of Nor-Cal and impose

personal liability upon the Pettits. In deciding whether to

pierce the corporate veil, we consider three factors: “[1] the

amount of respect given to the separate identity 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.” Seymour

y. Hull & Moreland Eng'g, 605 F.2d 1105, 1111 (9th Cir.

1979). Appellees must prevail on the first threshold factor

and on one of the other two. See Board of Trustees V. Valley

Cabinet & Mfg. Co., 877 F.2d 769, 773 (9th Cir. 1989). In

this case, the district court concluded that there was no

genuine issue of fact as to any of the three factors and

69a

pierced the veil. We reverse the summary judgment on the

veil-piercing claim because at a minimum, there are disputed

fact issues regarding both the fraud and justice factors.

First, we conclude that the district court erred in holding

that it was undisputed that “[t]he evidence establishes that

North Bay was formed for the purpose of defrauding the

union and the trust funds.” Order Granting Summary

Judgment at 10. In the context of the alter ego determination,

we have held that there remains a genuine issue of fact as to

whether Elmar Lee Pettit intended to evade the obligations of

the collective bargaining agreement.” The fraudulent intent

element of the veil-piercing doctrine would not be satisfied,

however, merely by appellees’ establishment of an

entitlement to summary judgment against Nor-Cal and North

Bay under the alter ego doctrine. The doctrines are

analytically distinct and require different factual inquiries.

The alter ego doctrine as developed in labor law is

analytically different from the traditional veil-piercing

doctrine as developed in corporate law. The alter ego

doctrine is designed to prevent employers from escaping

their collective bargaining obligations by shifting work to

non-union firms they also own. This doctrine has nothing to

do with the doctrine that allows creditors of corporations to

pierce the corporate shell to hold. shareholders liable for

* Appellees also argue that the Pettits should be held personally

liable as participating tortfeasors and for fraudulent misrepresentation

under § 301 of the LMRA. These arguments were not addressed by the

district court. However, both theories depend upon proving that the

Pettits undertook to fraudulently evade their collective bargaining

obligations. Since there remains a dispute regarding Elmar Lee Pettit’s

intent, summary judgment on these alternative grounds is also

inappropriate.

70a

corporate debts if they abuse the corporate form to defraud

creditors.”

When unions invoke the alter ego doctrine to enforce

collective bargaining obligations on behalf of their members,

it is irrelevant whether or not the employers are corporations.

The doctrine may be invoked regardless whether employers

are corporations, partnerships, or wholly owned

proprietorships. In this case, for example, appellees could

have invoked the alter ego doctrine even if the Pettits were

conducting their plumbing businesses as sole proprietorships

rather than as corporations, and even if Nor-Cal and North

Bay were financially healthy corporations.

The veil-piercing doctrine does not come into play in this

case unless and until appellees establish their mght to a

money judgment against Nor-Cal and North Bay under the

alter ego doctrine. As we said in Seymour, the traditional

rules on piercing the corporate shell at most affect the quality

of a labor organization’s remedy if it finds itself with a

judgment against an insolvent corporate shell. See Seymour,

605 F.2d at 1111.

Appellees argue, however, that other acts of undisputed

fraud can support their veil piercing claim. First, they argue

that the Pettits committed tax fraud by paying personal

expenses out of the corporate accounts and underpaying

income taxes. However, this characterization of the business

records is in dispute. See Declaration of Sam Gallina, C.R.

119

5 See Valley Cabinet, 877 F.2d at 773 (“Garden variety fraud

should be insufficient to pierce the corporate veil in the absence of

evidence of shareholder abuse of the corporate form to defraud

creditors.”).

PE eee Oe ee Be ee he ee ee ee eee SY eee ntti

Tla

Second, Appellees argue that the Pettits’ fraudulent

concealment of the relationship between North Bay and Nor-

Cal satisfies the fraud factor. However, we have held that

“[g]arden variety fraud should be insufficient to pierce the

corporate veil in the absence of evidence of shareholder

abuse of the corporate form to defraud creditors.” Valley

Cabinet, 877 F.2d at 773. Thus, it is not enough that the

Pettits committed acts of fraud during the operation of their

businesses. Instead, the plaintiffs must show that the

“shareholder misused the corporate form to perpetrate the[ ]

fraud.” Jd. Whether the Pettits misused the corporate form to

fraudulently evade the obligations of the collective

bargaining agreement is in dispute. However, false

Statements about the relationship between the Pettits’

corporations do not, in themselves, constitute misuse of the

corporate form to perpetrate a fraud.

Thus, summary judgment on the veil-piercing issue cannot

be supported under a fraud theory.°

However, appellees’ argue that the injustice factor of the

veil-piercing inquiry has been satisfied. They contend that

not piercing the corporate veil would allow the Pettits to

retain the financial rewards of their fraudulent scheme. But

this presumes the truth of what is in genuine dispute - that

the Pettits misused the corporate form to drain corporate

assets. Appellees also claim that it would be unjust not to

pierce the veil because they would not be able to recover

damages otherwise. But our precedents do not recognize that

the “inability to collect . . . by itself, constitute[{s] an

inequitable result.” Seymour, 605 F.2d at 1113.

* We have reviewed Appellees’ other claims of fraud and find

them to be meritless.

72a

Viewed in a light most favorable to the Pettits, the

evidence raises genuine issues of fact on both the fraud and

injustice factors of the traditional veil-piercing inquiry.

Accordingly, the Pettits cannot be held personally liable for

the obligations of their corporations at summary judgment.

Punitive Damages

Because we reverse the summary judgments entered against

all defendants, we necessarily vacate the award of punitive

damages. We therefore do not reach the issues raised by

appellants regarding availability cf punitive damages as a

matter of law.

CONCLUSION

The summary judgment against all defendants is

VACATED. The cause is REMANDED for further

proceedings consistent with this opinion.

73a

Law Office of

HENRY F. TELFEIAN

1247 Alvarado Road

Berkeley, California 94705

Tel: (510) 848-0542

Fax: (510) 848-5011

September 9, 1999

Ms. Cathy A. Catterson, Clerk

U.S. Court of Appeals for the Ninth Circuit

P.O. Box 193939

San Francisco, CA 94119-3939

Re: Bay Area Pipe Trades Pension

Trust Fund et. al. v. Nor-Cal

Plumbing, Inc., et al.

Court of Appeals Docket Nos.

96-16172, 96-16284

Dear Ms. Catterson:

I am writing pursuant to Circuit Rule 36-4, on behalf

of all Appellant

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