TRUSTEES OF THE B.A.C. LOCAL 4 PENSION FUND v. DEMZA MASONRY, LLC
3:18-cv-17302
| D.N.J. | Jan 31, 2021Background
- Speranza Brickwork, Inc. (Speranza Inc.) owed multiemployer trust funds (the Funds) delinquent ERISA contributions; the Funds obtained judgments and filed a bankruptcy proof of claim but recovered only a small amount.
- Joseph Speranza owned and ran Speranza Inc.; after financial trouble he ran or worked with successor enterprises (Building Barriers; Dempsey O'Brien Speranza Masonry) and ultimately became Vice President (no ownership) of Demza Masonry, LLC (Demza).
- Demza was formed in July 2016 by investor Willie Dempsey; it operates from the same facility, uses the same insurance broker, employed many former Speranza Inc. employees (accounting for ~53% of Demza hours in 2017), performed work for several former Speranza customers, and used some smaller Speranza equipment.
- The Funds sued Demza under ERISA, alleging successor and alter ego liability for Speranza Inc.’s unpaid contributions; discovery closed and the parties filed cross-motions for summary judgment.
- The NLRB (Regional Director and General Counsel) previously rejected an alter-ego unfair-labor-charge against Demza, but the Funds were not a party to that proceeding.
- The District Court denied Demza’s summary-judgment motion and granted the Funds’ motion, holding Demza liable as a successor to Speranza Inc.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Demza is an alter ego of Speranza Inc. | Demza functionally continued Speranza’s business and thus is alter ego liable | Demza pointed to NLRB rulings and lack of common ownership to argue no alter-ego relationship | Court did not decide alter-ego in plaintiffs' favor; relied on successor theory instead and found NLRB findings not dispositive here |
| Whether Demza is a successor liable under ERISA (notice element) | Notice is imputed because Speranza (who knew of debts) runs Demza as VP | Demza disputed implication of notice | Court found Demza had notice (Speranza ran Demza and knew of Speranza Inc.’s debts) |
| Whether Demza is a successor liable under ERISA (substantial continuity element) | Substantial continuity exists (same facility, many same employees, same customers, use of equipment, Speranza’s managerial control and name value) | Demza argued factual distinctions, relied on NLRB findings and argued Einhorn inapplicable | Court found undisputed facts show substantial continuity and granted successor liability |
| Whether NLRB decision and asset-sale-focused precedent bar successor liability | Funds: NLRB nonbinding; successor test differs from alter-ego and applies beyond asset sales | Demza: relied on NLRB letters and argued successorship limited to asset-sales cases like Einhorn | Court held NLRB decision not binding or persuasive here and rejected the claim that successorship is limited to asset-sales; Einhorn supports successor liability beyond asset sales |
Key Cases Cited
- Einhorn v. M.L. Ruberton Constr. Co., 632 F.3d 89 (3d Cir. 2011) (recognizes ERISA successor-liability doctrine; two-part test: notice and substantial continuity)
- Sullivan v. Running Waters Irrigation, 739 F.3d 354 (7th Cir. 2014) (notice may be actual or implied from circumstances such as common control or proximity)
- EEOC v. G-K-G, Inc., 39 F.3d 740 (7th Cir. 1994) (imputing principal’s knowledge to related entity under certain circumstances)
- Stardyne, Inc. v. NLRB, 41 F.3d 141 (3d Cir. 1994) (lists alter-ego factors; common ownership is significant in NLRA alter-ego analysis)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (summary-judgment standard on genuine disputes of material fact)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (movant’s initial burden in summary judgment)