801 F.3d 1079
9th Cir.2015Background
- Studer’s Floor Covering (a contributing employer to a multiemployer pension Fund under ERISA/MPPAA) closed at the end of 2009; Michael Haasl (a former Studer’s salesman) incorporated Michael’s Floor Covering and began operating from Studer’s former storefront on January 1, 2010.
- Michael’s used similar signage, obtained Studer’s telephone numbers, purchased about 30% of Studer’s tools/equipment at liquidation, and hired some former Studer’s installers; many of Michael’s early business customers had recently been Studer’s customers.
- The Fund assessed $2,291,014 in withdrawal liability against Studer’s and Michael’s, claiming Michael’s was a successor that continued Studer’s business without contributing to the Fund.
- The district court (bench trial) found Michael’s was not a successor and denied the Fund’s motion to supplement customer-invoice evidence; it weighed workforce continuity most heavily and applied an incorrect test for that factor.
- On appeal, the Ninth Circuit reversed and remanded, holding that successor liability can apply to MPPAA withdrawal liability (including in the construction context) when the successor continues the business with notice of liability and emphasizing customer-base continuity as the primary factor.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can a successor employer be held liable for a predecessor’s MPPAA withdrawal liability? | Successor can be liable; equitable and funding reasons support imposing liability on successors who continue business without contributing. | Successorship doctrine shouldn’t extend to MPPAA withdrawal liability or is limited by statutory provisions like §1384. | Yes; successor liability applies to MPPAA withdrawal liability generally, and in construction cases, if successor had notice. |
| In construction cases, what is the controlling test for successor liability? | Focus on whether successor captured the predecessor’s contribution base (customers/projects) — substantial continuity of business operations. | Emphasize workforce continuity and other Jeffries factors equally. | Substantial continuity is primary; capture of predecessor’s customer base (market share) is especially important under the construction exception. |
| How should workforce continuity be measured? | Fund: workforce continuity relevant but should be measured appropriately. | Michael’s: lack of majority hire from Studer’s means no continuity. | Use the correct test: whether a majority of the successor’s relevant workforce formerly worked for the predecessor (look to bargaining-unit employees), not whether a majority of predecessor’s workforce joined the successor. |
| Was the district court’s denial to supplement the record appropriate given the importance of customer evidence? | Fund: customer billing evidence is material and potentially dispositive on substantial continuity. | Michael’s: late-filed invoices were irrelevant; successor status fails regardless. | Denial was an abuse of discretion because the district court misread the law and undervalued customer-continuity evidence. Case remanded to apply proper standards and take evidence as needed. |
Key Cases Cited
- Jeffries Lithograph Co. v. NLRB, 752 F.2d 459 (9th Cir. 1985) (lists multi-factor successor inquiry used in labor-law contexts)
- Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27 (1987) (defines "substantial continuity" and emphasizes employees’ perspective/customer body in successor analysis)
- Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973) (successor liability for unfair labor practices requires asset acquisition, substantial continuity, and notice)
- H.C. Elliott, Inc. v. Carpenters Pension Trust Fund for N. Cal., 859 F.2d 808 (9th Cir. 1988) (explains construction-industry contribution base and §1383(b) rationale)
- Artistic Furniture of Pontiac v. Upholsterers’ Int’l Union Pension Fund, 920 F.2d 1323 (7th Cir. 1990) (supports imposition of successor liability for delinquent ERISA contributions)