Ragan v. Tri-County Excavating, Inc.

RAGAN, as Administrator Michael J.

Fiduciary the International Union of Engineers

Operating Local No. 542 Pen

sion, Welfare, Apprentice Health and Safety, Supplemental

ship, Training and Annuity

Unemployment Benefit

Funds; Operat International Union of

ing Engineers, Local 542 INC.; EXCAVATING,

TRI-COUNTY Fidelity Guaranty

United States

Company; Hartford Fire Insurance

Company, Hartford Fire Insurance

Company, Appellant.

Nos. 94-1388 and 95-1189. Appeals,

United States Court

Third Circuit.

Argued Oct. Aug.

Decided Mele. Hartford president of

of John claim, rejected roughly made Local 542’s work, days after Local 542 ceased because contract” 542 was not in “direct with Local give notice of its required Mele and so was days per- of the last labor claim within 90 responded that Local 542 Tri- formed. ego” “alter County was Mele, as Local had and that inasmuch had, facto, ipso contracted with Mele. contracted with trial, court Following a bench the district the alter was indeed held of Mele and entered ego/instrumentality judgment in favor Local 542. The of the the terms bond court held under Local 542 for Tri- Hartford was liable “fringe County’s unpaid benefit” contribu- dues, tions, liquidated damages union and attorney fees. argu- three appeal, advances

On Hartford first, court erred ments: that the district Warshawer, (argued), Edward Pennsylva- L. Jr. determination Sam its Warshawer, Venzie, Phila- Phillips law; second, Seglias, Employees & Retire- nia that the PA, appellant. Act, delphia, for Security Income U.S.C. ment (“ERISA”), preempts §§ Local 1001-1461 McAleese, Carlton, (argued), T. Jr. Robert third, bond; and action on 542’s state-law Prussia, PA, Susanin, King of McGoldriek obligate not Hartford that the bond does appellees. for attorney damages pay liquidated and fees. HUTCHINSON, STAPLETON, Before district court’s agree with We all GARTH, Judges. Circuit and holding that Hartford holdings except its damages liquidated and attor- obliged pay THE OF COURT OPINION Consequently, we will affirm ney fees. fringe benefit unpaid award district court’s GARTH, Judge: Circuit However, be- and union dues. contributions Insur- Defendant-Appellant Fire Hartford Hartford cannot be conclude that cause we surety on a labor Company is the ance liquidated attorney fees and for held liable by Mele purchased payment bond material so much of damages, we will reverse (“Mele”). Hartford’s Inc. Construction of March court’s orders who prospective claimants required bond judgment granted February with Mele in a “direct contract” not were damages. We will those claims within notice of their give written to the district with accordingly remand Plaintiffs-Ap- days after ceased work. judgment against Hartford directions bond, Hartford’s tardy pellees, claimants IV be 542 on Count in favor of Local Operating En- Union the International attorney fees awards of to delete all modified Ragan as J. gineers, Local 542 Michael damages. liquidated “fringe benefit” of various administrator (collectively, with associated Local funds I. 542”). “Local Bond”) (“the bond purchased the Mele bargaining a collective had wage cover Mele’s Hartford to from Tri-County Excavating, with agreement with earth connection obligations in labor daughters three by the corporation owned required Funds as to the perform on contributions Mele hired work which (Crown’s) the CBA. Corporation’s America Crown Coun- project in Lackawanna Mall Viewmont project foundered The Viewmont obligee Pennsylvania. is named as ty, Crown results: with disastrous spring of on the bond. Mele, fell behind stopped paying Mele Crown twenty years past For' the Tri-County, and progress payments to moving equipment, has heavy owns earth fringe failed to make the Tri-County in turn job-by- Tri-County on a sub-contracted for the to the Funds benefit contributions Tri-County provided oper- job whereby basis months, March-June, 1991. Within period operate Mele’s mov- ating engineers to earth bankruptcy and Tri-Coun- filed for Mele had part Tri-County is of ing equipment. Funds By this time the ty insolvent. became by companies five owned group of at least $78,000.00 unpaid in con- roughly were owed family. the esctended Mele tributions. Mele, Tri- with its contracts with Under Local November or about On Tri-County County Mele with would furnish Tri-County it by having informed been 542. members of Local employees who were obligations to the satisfy its to was unable subject Tri-County employees were and Funds, payment. Hartford for to turned Bargaining the terms of a Collective to (“CBA”), negotiated between Lo- Agreement following Bond contained Hartford’s Tri-County a Pen- in cal 542 and provision: (“PFA”) entered into Agreement sion Fund here- or action shall commenced No suit Building the General Local 542 and between (a) claimant, claimant, by any unless and the Contractors Association Contractors having contract a direct other than one Pennsylvania and De- Association of Eastern given written principal, shall have with the in laware following: the any two of the notice to hired Mele for Viewmont Crown ..., When the owner or the principal, 1990, Mele looked project in the of summer days such claimant ninety vnthin after and, engineers Tri-County operating to the last the work performed did or of Tri-County past, en- done in the had claim is made. ... for which said labor pursuant to the of Local 542 gaged members added). (emphases App. 97 particularly relevant As is 'CBA and PFA. obligated dispute, the CBA present to the had provision, all who claimants Under “fringe Tri-County regular benefit” to make directly Mele were re- with not contracted Pension, Health Local 542’s contributions to any two of give written quired notice Welfare, Training and Apprenticeship, days or Crown within 90 Hartford Safety, Unemployment Bene- Supplemental ceasing after work. (the “Funds”) fit, during Annuity funds records, Tri-County the “last by As shown in 542 members were the time that Local on the View- provided Local 542 labor” re- Tri-County’s employ. The CBA also ending job June mont was for week “supplemental un- Tri-County pay quired give notice of its did not 1991. Local 542 payment for the provided ion dues” 1, 1991, on or about claim until November monetary penalty should specific was days after “last labor” more than fringe con- delinquent in its benefit become rejected Local 542’s performed. provided PFA tributions. The had ground that Local 542 request on the employer an á lawsuit event of timely of its claim. make notice failed to contributions, employer unpaid collect at- and reasonable obliged pay costs 542 commenced January Local On torney fees. district court for the in the federal this action Pennsylvania on the basis District of project Eastern commenced Work on the Viewmont citizenship, seeking delinquent diversity August in some time contributions, dues, liqui- fringe union fringe benefit benefit making required began jurisdiction preliminary consideration attorney damages and fees.1. dated merits.”). was Mele’s 542 claimed in a was therefore that Local 542 ego, and attorney award of fees The district court’s was not Mele and so “direct contract” provision in the Pension premised on day provision. to the Bond’s notice subject Tri- Agreement between Local 542 and Fund in of a agreed County provides with Local 542. the event which The district court, trial, delinquent contributions Following a the district lawsuit to bench collect 2,1994, judgment pay entered all costs and reasonable employer March “shall order dated App. Local 542 incurred.” attorney’s and awarded fees against Hartford fringe contribu- $78,794.79 unpaid in benefit Machinery v. Travel In Beckwith Co. dues, tions, $5,719.11 unpaid union (3d Cir.1987), Co., 815 F.2d 286 ers Indem. $42,190.21 damages, less liquidated $480.00 attorney fees when award we held that court also prepayment. provision and is on a contractual is based attorney to Local fees reasonable awarded “integral part of the contractual relief until it quantify fees did not those but final and order does not become sought,” 13,1995, February its order entered quanti attorney are the fees appealable until $19,881.73. attorney at fees set Vargas v. 287. Accord Hudson fied. Id. at Hartford, court’s from the district appealed Elections, 665, 670 949 F.2d County Bd. of 1994, 29, 2, and on March 1994 order March Cir.1991) (where (3d attorney sought fees 13, February 1995 or- timely appealed damages, prevailing not as and part as der.2 v. Dickin of Budinich Becton party, the rule 1717, 100 196, 108 S.Ct. and 486 U.S. son Appellate Jurisdiction II. (1988), apply does not and L.Ed.2d 178 final above, ruling is not until court’s court’s the district noted As fixed); Corp. accord SPM judgment in amount of fees is entered 1994 order March (3d Moon, Ming F.2d things among v. and other of Local 542 M/V favor Cir.1992). attorney but did not fees reasonable awarded Although those fees. the amount of quantify this attorney fees awarded in Because the order the March appealed Hartford damages contractual of the part case were February not until it was on March delay court’s sought by the district Local court entered the district 1995 that until of such fees the amount quantifying in $19,881.73. attorney fees setting at order 13,1995 rendered the earlier order February jurisdiction of questioned party Neither appeal. purposes non-final for Howev appeal. hear Hartford’s court to not fatal Hart This defect was jurisdic appellate er, our must consider we though the however. Even appeal, Realty ford’s Trent matter. See as a threshold tion final was not when order March Loan Ass’n Fed. Sav. and v. First Associates entry Cir.1981) entered, upon (3d final it became 29, 36 Philadelphia, 657 F.2d of (“A attorney fixing fees February 1995 order its own to consider court is bound federal quanti- order court entered its After the district 542's com- defendants named as 1. Also II) fees, (Counts appeal attorney another fying and Hartford filed Tri-County I and plaint were Guaranty Company challenged Fidelity which no. 95-1189 States at docket United ("USF G”), itself, Mele on another but did not contest amount award III). (Count project Tri- construction "the appeal different County limited That awarded. fees below, a default defend itself did not to attor- Funds’ entitlement Benefit issue of the against judgment was entered (Stip- argued,” ney previously briefed as fees appealed. has not court. Appeals, for Consolidation ulation Counsel following of this the commencement Sometime present 9),¶ with the consolidated been and has & G entered into and USF Local 542 action agreed the issue raised parties appeal. Both 542 dismissed agreement and Local settlement attorney respect fees is identi- in 95-1189 pursuant to & G Federal USF action attorney in the earlier fees issue raised cal to 41(a)(1). Accordingly, Procedure of Civil Rule appeal at 94-1388. only IV of appeal Count concerns instant naming Complaint, Hartford defendant. was an officer County, Karen Darbenzio $19,881.73. at We therefore expenses and Tri-Coun- Mele pursuant 28 and shareholder both jurisdiction our exercise ty- principle expressed § 1291 and the U.S.C. Warren, Greene, Inc. Cape May Tri-County, there are addition (3d Cir.1983), this Court 184-85 family-owned corporations other least four or- appeal from a nonfinal

may entertain Corporation, “group”: Eleven-7 the Mele subsequently which is final is der if an order and Bert Oc- by Stephen Searantino owned mer- adjudication on the before our entered Beverly, re- culto, Angela and husbands its. by owned spectively; Sal also John Corp., of daughters; Melback three Mele Ego III. Alter president, and West Mele is the which John argues that the district appeal Inc., of Aggregates, Stone & Mountain Sand ego is infected determination president. is the which Bert Occulto underlying findings, clearly factual erroneous Ti'i-County, operates from a trailer mis- any district court and that in event the land corporation on from Eleven-7 leased Pennsylvania law to the facts as applied Sal, Inc., equip- no owned owned John found. twenty years, past of its own. ment For a district court’s considering When supply operating has been to its sole function determinations, we review law alter state Tri-County has under- engineers to Mele. error, findings factual for clear the court’s projects since Mele’s demise. taken no legal plenary over exercise review but paid a has never dividend Craig those facts. it draws from conclusions undercapitalized for the work grossly Ltd., Quebec, Asbestos Lake result, perform. As a contracted to had Cir.1988). (3d 145, 148-49 shortly stopped after Mele insolvent became job. payments on the Viewmont A. Angela The district court found Scar- receiving taking and testi- evidence After antino, Tri-County’s president, had little Stanley members mony from Local 542 day-to-day knowledge of the business affairs Gilette, Tri-County’s and Edwai'd Stracham Tri-County. Although the facts are dis- Searantino, Angela Hartford bond president Hartford, unable, by was puted Searantino super- John Johnson claims underwriter instance, Tri-County’s whether for state Powei's, Ragan, and Michael Dennis visor audited or unau- financial statements were Funds, the district court administrator of the dited, Tri-County could make or whether following facts: found the Bond, the or how claim Mele under always appro- Ti'i-County maintained has Tri-County billed for the Viewmont Mele Both Mele and priate corporate formalities. job. Tri-County duly are authorized also found that Mele had The district court incoi’po- filed articles of corporations. Each Occulto, Tri-County’s project Bert treated ration, kept regular corporate meetings, held the manager and of one of three husband records, and took care own their employee. daughters, Mele More Mele as a intermingle not to funds. participate him to point, to the Mele enlisted daugh- Tri-County by the three is owned negotiations Mele and Hart- between president and ma- ters John Mele’s regarding the Bond. ford daugh- three Mele

jority The shareholder. Tri-County Searantino, Occulto, solicited Bevei’ly Local 542 ters, Angela members also Darbenzio, jobs at Mele’s offices. The court found own 11% of the each also Karen in participated had Tri-Coun- the stock- that John Mele Mele. The remainder of shares of ty hiring, greeted with the Stracham holdings in in the name of John Mele Mele is (14%). salutation, (53%) “glad you working for wife, The to have our and his Cathei'ine seeking Tri- bankruptcy. company” when in Stracham corporation has filed Mele court con- County employment. The district president of Tri- Angela Scai’antino given by Tri-County ties like the one are only contact Local mem- eluded that Tri-County commonplace industry. in bers had with were the construction paid Tri-County with checks. We will not find clear error of fact Bond negotiating Mele was When unless a review of the record leaves us with Hartford, requested and received firm “definite and conviction a mis Tri-County family-owned from other been Bes take has committed.” Anderson v. corporations any pay- for indemnification 573, 105 City, 470 semer S.Ct. have make on ments Hartford would (1985). Although we 84 L.Ed.2d indemnity effectively precluded Bond. The record, by aspects are troubled some Tri-County making itself a claim on the from persuaded by argu we are not Hartford’s Moreover, Tri-County Bond. it made liable independent ment. Our review of record for all incurred debts labor materials does not convince us the district court regardless by project, Mele on Viewmont was mistaken or committed clear error in its the' owed to whether debt'was factual determinations. company. The district court de- or another agreement as a “financial alba- scribed dissent, although acknowledging the The independent” “truly corpora- tross” no court, findings made the district assesses Dist.Ct.Op. 13. tion would assume. differently did the evidence than district court, court also observed that Mele differently also reads the record unilaterally proposed that, had subordinate its than do we. The dissent concludes $75,000.00 Tri-County to debt to those of opinion, its district court was mistaken plan of proposed other in its bank- 516-17, creditors findings. See Dissent at 519-20. ruptcy reorganization. has not Despite position taken subordination,

objected nor to the has it dissent, to the we bound defer bankruptcy. made Mele a claim the supports factfinding if evidence those Finally, the court found that Hartford it- findings. clearly Under the erroneous stan Tri-County as one self considered Mele and dard, finding fact reversed company. Dist.Ct.Op. Hartford’s inter- appeal only completely “if it is devoid of correspondence nal referred to evidentiary no credible basis or bears ration Mele,” arm as the “union Hartford relationship supporting al to the data.” compos- issued credit Mele on basis 81, Liggett Group, Haines v. 975 F.2d Mele/Tri-County financial ite statements. (3d Cir.1992). findings When are based challenges a number of these fac- Hartford credibility regarding determinations error, findings calling as our tual clear atten- 52(a) witnesses, great demands even Rule tion to evidence which contends district findings. er to the trial court’s deference account, fully into ignored, court did not take Anderson, 575, at 105 S.Ct. at 1512. incorrectly. or evaluated See Hartford’s Thus, appellate may not substitute empha- also pp. seq.. Brief at 19 et Hartford court, findings for of the but its that district corporate scrupu- were sizes that formalities making wheth is limited assessment lously throughout Tri-County’s maintained enough on record to er there is evidence existence, year and that there is no evi- Tard, findings. Cooper v. support such siphoning of commingling or funds dence of (3d Here, Cir.1988). 125, 126 there is F.2d adequate or transfers without consideration. to sus more than sufficient credible evidence name, Tri-County separate had Under every finding made tain each amicably dealing with Local 542 for been court. Further, twenty years. Although may indemnity be true that an veil,” “piercing corporate holds that one alone, agreement, standing is insufficient to corporation ego individual or is the alter of status, ego alter see establish United States another: Bldg. Supply, ex Rel. Global Inc. v. WNH legal separate Th[e] fiction of a corporate (4th Partnership, Ltd. 995 F.2d 516-17 entity designed was to serve convenience Cir.1993), this fact alone cannot blunt justice ... disregarded and and will impact Tri-County’s general willingness of justice whenever public policy or demand sacrifice its own interests for those of Mele. rights and parties where of innocent are by Tri-County’s This view is confirmed fail- prejudiced theory corpo- not nor the of the object proposed plan ure to to Mele’s in entity rate rendered useless.... We have bankruptcy proceedings to subordinate said whenever one in control of a Mele’s debt to to that all of other control, corporation uses that or uses the creditors. assets, corporate to further his or her own interests, personal sepa- agree the fiction of the We with the district court that the corporate entity may properly rate family enterprise be dis- record reveals a divided regarded. into formal “divisions” but nonetheless eon- many pri in important restrictions mirrored people—John Mele trolled same First, payment employed Tri vate like Hartford’s family—and that Mele bonds. his Bond, coverage Act Tri Miller bond’s limited County to own business ends. Mele’s (such as Tru- entirely for its exis to “first-tier” subcontractors County relied on Mele County) In tence, financially operationally. and those who contract them both Co., (such 542). function, as Inc. nothing than Local J.W. Bateson was more ex light of v. United States rel. Board Trustees “personnel” arm Mele. of of Sprinkler Industry findings undercapitaliza Nat. Automatic Pension officers, Fund, 434 873, 877-78, 586, 594, 98 tion, non-functioning independent S.Ct. (1978). dividends, Tri-County’s con 55 L.Ed.2d 50 non-payment of sequent insolvency, and the subordination 270b(a) Second, imposes § Act Tri-County’s financial interests those essentially timely requirement identi- notice of which survive clear error scruti all Bond, in which re- cal Hartford’s 542 met its ny, are that Local we satisfied quires contract with first-tier sub- tho'sé who Pennsylvania showing law of burden contractors, but not the first-tier subcontrac- separate sta wholly ignored the that “[Mele] themselves, to their claims give tors notice of [Tri-County] tus so dominated they days provided after last labor within 90 separate exis its affairs that controlled materials. Wheeling-Pitts awas mere sham.” tence given These rise to cases limitations Intersteel, Inc., 758 Corp. v. burgh Steel payment in which claimants on a bond seek (W.D.Pa.1990); accord F.Supp. party with whom to characterize the Home, A.2d Lycoming County Nursing of a Miller Act contracted as alter at 243-44. subcontractor in order avoid contractor or day requirement or the either the 90 notice C. See, coverage e.g., limitation of Act. if argues that even Hartford next Casualty v. United States ex Co. Continental egos in the Mele Co., Creosoting 308 F.2d rel. Conroe sense, inequitable for the it was traditional (5th Cir.1962) (claim per Miller Act bond Hartford liable to district court to hold by supplier of subcontractor when mitted argues, Bond. Hartford 542 under the merely a was sub-subcontractor “shadow” essence, party” guaran it is “third subcontractor); Ins. Co. v. Glens Falls to Local Tri-County’s obligations tor of Co., Mfg. 388 F.2d Newton Lumber & dis reached. We Hartford’s Bond cannot be denied, (10th Cir.1967), 905, 88 390 U.S. cert. agree. (1968) (when 821, 19 claim L.Ed.2d 873 S.Ct. arisen a number particular issue has This negotiated primarily with subcon ants had Act, 40 with the Miller of times connection awith sub-subcontrac tractor but contracted seq., § 270a et U.S.C. sub-subcontractor, tor, principal whose Act upon these Miller have relied courts of the contrac president a relative of the pierce determining whether to decisions tor, “sham” and was held be a payment in non-Miller Act veil bond); Na to them on the therefore liable Carry, Inc. Lezzer bond cases. See Cash States Surety Corporation United tional Pa.Super. Ins. v. Aetna (5th Panama, S.A., Way rel. ex 666, denied, 857, Pa. 548 appeal 519 A.2d denied, 1004, Cir.), 88 S.Ct. cert. (1988). A.2d 256 (1967) (90 day notice 19 L.Ed.2d 598 (the “Act”) binding plaintiff when con provision not on requires prime Act The Miller “operated essen tractor and subcontractor any on construction contract contractors entity”); rel. $25,000 United States ex tially as one exceeding to-exe- States United Management Fed Environmental persons Gilarde protection all a bond “for cute 89-1473, Co., U.S.Dist. No. eral Ins. and materials.” 40 U.S.C. labor supplying (M.D.Pa.1990) (same).3 270a(a)(2) (1986). Act two LEXIS § The contains ties evidence of familial corporate was "no pierce veil when there Court has declined to This The Fourth Circuit has held that Tri-County Miller A.2d at 862. Because itself could may ordinary Hartford, Act sureties be reached “where make no claim this risk principles corporate permit law the courts was absent from the outset. disregard corporate forms.” Global having After treated Mele and Building Supply, Inc. v. Ltd. Partner WNH essentially company, the same (4th Cir.1993). ship, 995 F.2d The Tri-County’s indepen- cannot now assert findings upheld, that we have and the conclu avoiding liability. dence as a means of lead, sion to obliged which have tous district court determined that the facts and hold Mele and were alter equities required in this piercing case egos ordinary principles Pennsylva holding veil and Mele to be Tri- nia law. It follows that Hartford County’s ego. agree.4 alter We and,

held liable on the despite bond Hart argument, ford’s we are satisfied that Preemption IV. ERISA equities suggest contrary do not result. Hartford next contends that Lo Further, Tri-County’s indemnity obviated cal preempted 542’s action under the Bond is very purpose provision, of the notice by Employees Retirement Income Secu which is to remove the risk that the Act, (“ERISA”).5 rity §§ 29 U.S.C. 1001-1461 up would end “double-compensating” both reject argument. We must also subcontractors, Tri-County, such as suppliers, their such as Local 542. See Unit West, ed States ex rel. Blue Circle Inc. v. A. Inc., Contracting Tucson Mechanical exceptions here, With several not relevant (9th Cir.1990). F.2d 911 As the United 514(a) § ERISA, 1144(a), § 29 U.S.C. Supreme explained States Court in J.W. “preempts ‘any and all State laws insofar as Co., Bateson Inc. v. United States ex rel. they may now any or hereafter relate to

Board 434 U.S. 98 S.Ct. Trustees, employee plan’ benefits covered the stat- (1978), provisions L.Ed.2d 50 bond notice Mackey ute.” Agency v. Lanier Collection function repose, “per much like a statute of Service, Inc., 825, 829, 486 U.S. 108 S.Ct. mit[ting] surety], waiting ninety [the after (1988) (quoting 100 L.Ed.2d 836 days, safely pay [the] with subcontractors 514(a)). § out liability fear of additional to sub-subcon provision tractors .... pre The notice recently thus We stated that a rule of law “re- payments’ by vents both ‘double plan [sureties] lates to” an specifically ERISA “if it is and the delay designed alternative of employee interminable plans, affect if benefits settlements between singles contractors and subcon plans out such special treat- ment, tractors.” Id. at 590-91 n. rights 98 S.Ct. at 876 or if the or restrictions it cre- (citations omitted). Lezzer, n. 4 predicated See also 537 ates are on the existence of such a any suggesting or of other attempted facts" that the con- liability to limit its on the Bond tractor and subcontractor had considered their seeking Tri-County’s indemnification. own contractual relations to be other than "seri- obligations." ous enforceable United States relationship The dissent claims ”[t]he be- Corp. Gregos, ex rel. K & M v. A & M deprive tween Mele and does not (3d Cir.1979). Gregos, recog- party.” Hartford of its status as an innocent third right nized the limitations on the of remote sub- analy- Dissent at 518. We are confident that our imposed by Supreme contractors to sue sis, which relies on the Miller Act cases and interpretation Court’s of the Miller Act in J.W. liability, which leads to Hartford's would be fol- Bateson v. United Inc. States ex rel. Board of by Pennsylvania lowed courts. Trustees, 434 U.S. 98 S.Ct. 55 L.Ed.2d (1978), also turned on a lack of evidence that persuaded by argument 5. We are not the contractor had Local 542’s been motivated to limit its Here, liability preserve preemption Hartford failed to the bond. Id. different find- ings regarding appeal claim for because Hartford been made. The first raised the proposed findings court found Mele issue in its to be of fact after all just company, strong family one Accordingly, evidence had ties and been adduced. we with clear indicia of domination preemption argument and control. address Hartford’s on the Moreover, gainsaid it cannot be that Hartford merits in text.

511 . Wire, “predicated is on Machine Nor the cause action Metal and plan.” United plan. of’ an the existence ERISA United Fund v. Morristown Health and Welfare Wire, (3d 1179, Ingersoll-Rand F.2d at 1192. In 995 Hospital, 1192 Memorial 995 - denied, - U.S. -, Supreme held that ERISA Cir.), Court 114 S.Ct. cert. (footnotes preempted (1993) Texas’ common law action 382, omit 126 L.Ed.2d 332 ted). employer terminating employee for an in an pension paying to fund benefits.

order avoid given by the One of -the two reasons Court addition, In state causes of action why preempted was for the Texas action was 502(a) § ERISA which conflict with prevail [in that “in the cause of order mechanism) (ERISA’s civil are enforcement action], plead, plaintiff and the court [must] Ins. v. preempted. also Pilot Co. De Life find, plan an exists and [must] that ERISA 1549, deaux, 41, 54, 481 107 1556- U.S. S.Ct. pension-defeating employer motive had (1987); 57, Ingersoll- also L.Ed.2d 39 see 95 terminating employment.” Id. at in McClendon, 133, 142, v. 498 U.S. Rand Co. of action 111 S.Ct. at 483. Such cause 478, 484-85, 111 112 L.Ed.2d 474 S.Ct. benefits, merely pension “relates not but (1990). pension plan itself.” to the essence of Although party neither has briefed is- (emphasis original). in The Id. Court sue, proceeding is we assume that Local 542 inquiry “[b]ecause concluded beneficiary third-party law as at common plan, judicially be to the this must directed Philadelphia v. Smith bond. See an ‘relate[s] action to’ created cause of A.2d 229 Roofing, Pa.Super. 410 599 plan.” inquiry No is neces ERISA Id. such (1991). sary present action. outset, it cause of is clear that the Here, only At deter the district court need upon by 542 is neither action relied obligations the Bond. mine Hartford’s designed employee “specifically validity to affect ben inquiry into need make no It (or plans plans” “singles they nor out” such efits indeed status of the funds whether Wire, funds), special 995 F.2d at explore treatment. United nor it Hart are need ERISA Rather, regarding employee such common law causes benefits. ford’s motives applicable” “generally laws that claimant under the bond action The fact that the to, kind no func an ERISA fund is not the happens [and] reference indeed to be “make[] of, establishing liability” of an in irrespective the existence of “critical factor tion[] Ingersoll- in prompted preemption at plan.” Ingersoll-Rand, 498 U.S. ERISA 139-40, at at 111 482-84.6 Rand. Id. S.Ct. 111 at 483. S.Ct. Nobers, reason, brought plaintiffs a contract various Hartford’s reference our 6. For they Bricklayers seeking damages equivalent In in Allied to what decisions action Craftsmen Funds v. plan Union Local 33 ternational had received under ERISA would have Benefits Source, Inc., (3d 950 F.2d 114 America's Marble allegedly under certain not been terminated Cir.1991) v. Retirement Plan Salaried improper Court deter This circumstances. denied, Cir.1992), Nobers, (3d - F.2d 401 cert. mined, Ingersoll-Rand, following that the action -, L.Ed.2d 113 S.Ct. U.S. "depend[ed] preempted on was because (1993) Bricklayers inapposite. held that plan” “if there were of an existence ERISA Jersey preempted Construction the New ERISA plan, no there would have been cause no Act, Security Fringe Benefit N.J.Stat. Workers' Nobers, at 406. We find 968 F.2d action.” 34:11A-1—34:11A-12, imposed § which Ann. distinguishable. state contract Nobers to prime obligations contractors and certain challenged predicated on Nobers was action pay projects to assure owners construction allegedly available of benefits the existence by subcontractors-employers owed ments Thus, plans. employees under the ERISA certain ERISA-regulated fringe funds. The New benefit plaintiff required [to] “a would have Nobers Bricklayers "spe challenged Jersey statute find, plead, [to] and the district employee cifically designed affect benefit plaintiffs plan would exists" ERISA (quoting Bricklayers, plans,” 950 F.2d plan, the under the entitled to benefits Serv., have been Mackey Agency Lanier Collection prompted preemption In very exercise 100 L.Ed.2d S.Ct. such, S.Ct. at 483- and; gersoll-Rand, U.S. at (1988)), clearly within the here. no such exercise We need undertake preemption doctrine. 512 recent Kaupp

Our decision Haberern v. men International Union Local 33 Benefits Plan, Surgeons Source, Inc., Vascular Pension 24 F.3d Funds v. America’s Marble 950 (3d Cir.1994) 1491, 114, 117(3d Cir.1991) added). 1497 (emphasis is instructive on this F.2d point. employer Ms. Haberern’s made con- ERISA, 1002(5), § Section 3 of 29 U.S.C. pension plan tributions to her based on the “employer” “any defines person acting salary excluding size of her By bonus. re- directly employer, as an indirectly characterizing portion compensation of her employer, interest of an in relation to an “bonus,” as a employer effectively re- employee plan.” benefit Courts that have paid duced the amount it pension into her considered the matter all but unani- plan. Ms. Haberern claimed that this consti- mously held that sureties do not fall within tuted a violation of ERISA. The defendant See, this e.g., Carpenters definition. So. Cal. argued that Ms. Haberern’s status as at- Corp. Camp Admin. v. D & L Construction employee will under law al- Co., Inc., (9th Cir.1984) 738 F.2d change compensation lowed it to any her (legislative history of ERISA revealed no responded time. Ms. Haberern that ERISA Congressional “expand intent to concept preempted Pennsylvania law on at-will em- employer sureties, ... to include whose ployment regard. appeal, On we held obligations by are regulat- fixed contract and Pennsylvania’s common presumption law by protection ed state law for the employment of at-will relationships was not public”). preempted by presump- ERISA because the The emphasized Eleventh Circuit has tion was “unrelated to the existence vel non signatories sureties who are not to the collec- any pension plan.” Id. at very 1497. The bargaining tive agreement between the em- may same be said of Local 542’s cause of ployer and the claimants do not fall within Simply action. because the sums collected the ERISA definition of “employer,” stating may ultimately ERISA-governed feed into an as follows: fund does not in itself mean that the cause phrase, “in the interests of the em- upon rights sued creates or restrictions ployer” operative is the one here. The “predicated which are on” the existence of an surety does not indirectly act in the inter- plan.7 ERISA employer, ests of the but rather acts di- rectly in

B. employees interests of dam- aged by employer’s pay. failure to Nor is the cause of action asserted here subject Fidelity Co., Xaros v. Guaranty what we have termed “conflict (11th Cir.1987); preemption” 820 F.2d under ERISA. See La PAS v. cf. borers Local 938 Joint Company Travelers Insurance Health & 7 F.3d Welfare (3d Cir.1993). Co., Trust Fund v. B.R. Starnes ERISA’s civil 827 F.2d enforce (11th Cir.1987); ment remedies were meant to Giardiello v. Bal be exclusive. (11th Cir.1988). boa Life, Pilot Ins. 837 F.2d 481 U.S. at 107 S.Ct. at 1554- Thus, But see 55. even Greenblatt v. Plumbing a common law Delta cause of action Heating preempted Corp., F.Supp. if directly ERISA it conflicts (S.D.N.Y.1993) (rejecting reasoning ERISA cause of Inger See action. soll-Rand, the Eleventh and Ninth holding U.S. at Circuits and S.Ct. at 484- surety qualified that a employer as an ERISA). Together, (29 §§ ERISA 502 and 515 §§ U.S.C. respectively) “pro agree We with the Ninth and Elev vide a cause of action and remedies for an enth Circuits that a surety does not act “in employer’s obligations failure to fulfill its employer.” interest of an Although it is pension make or welfare fund surety’s contributions true that the pur services often pursuant plan to a bargaining or collective chased employer order that it agreement.” Bricklayers and proceed business, Allied with its the ultimate bene- Crafts Indeed, paid by funds, should not be overlooked that the just Hartford include not benefit damages sought by Local 542 and ordered to be but union dues as well.

513 any responsibility has for on ford disavowed are the claimants fieiaries of contract provides in as not stand these items. Hartford’s bond does the bond. claimants, relationship to nor is follows: employer the Thus, employer. Hart- agent the agrees] every claimant.... [Hartford ford, employer is the of Local neither the paid has not been in full before who “in engineers acting nor the operating 542’s (90) period ninety days of expiration of employer, claim of’ their cannot interests last after date on which the of such the preemption. ERISA per- work or labor was done or claimant’s may ... ... sue on this bond for formed Damages

V. justly may sum or sums as be due such claimant.... appeal argument final on Hartford’s liability under of its the concerns the extent App. obliged 97. Hartford is thus to render court awarded Bond. The district is all sums which Local 542 Local 542 $126,224.11, $78,794.79 including in a total of “justly for labor. The district due” contributions, $5,719.11in union dues unpaid that as Local members would reasoned $42,190.21 liquidated damages, all de “paid full” until all of not be for their labor (Collec the provisions rived from the of CBA Tri-County’s obligations under CBA Bargaining Agreement) less tive $480.00 damages at- (including liquidated PFA The court also awarded rea prepayment.8 fees) satisfied, Hartford torney had been $19,881.73 costs attorney fees and sonable Although the must be liable for these items. (Pension the PFA according to the terms of parties pointed us to decisions of the no Agreement).9 Hartford contends that Fund Supreme treating the is- Pennsylvania Court Pennsylvania obligations do not law its under here, the law presented sues we believe that damages liquidated, payment of extend to Pennsylvania is otherwise. specific of a attorney fees in the absence noted, si previously the bond is As contrary. agree. provision We bond attorney liquidated dam lent as to fees and law, language ages, and it is the bond Pennsylvania at an least - Thus, courts, controlling is law. by intermediate nounced that State’s n necessarily question becomes: surety’s obligations to detailed the central limits a those Universal, justly for itself, obligations What are “sums due” Inc. v. in the Reliance bond Inc., surety’s obli answer is that the Contracting labor? One Renda Ernest (1982), gations are with to the claimant co-extensive Pa.Super. A.2d not simply employer. But this those of the agreement between those contained fully obligations are de say that Hartford’s the claimant. Snave contractor and J.C. E, agreements Tri Sons, by M & 406 termined between ly Inc. v. Web noted, (1991). already County and Local 542. As Pa.Super. A.2d Lo (and reject recently) expressly predi has are this been claims cal 542’s Such cated, by Pennsylvania’s lower courts. Tri-County’s ed part, least in on obli precedent, persuasive National the PFA. decisions gations to it under CBA and Bank, 551 F.2d Surety Corp. v. Midland makes no reference Because the Bond (3d Cir.1977), disre- fees, are “not attorney Hart- damages or liquidated right ... have the shall Bargaining Agree- The Board Trustees VI of Collective 8. Article any proceed- employer (Tri-County) prosecute ... requires to make ... to institute and ment timely fringe Employer. the Funds .against any benefit contributions to ... ing ... at law among up wages” divided vari- of "26.6% ous be or unpaid collect contributions which funds, equall- as a Union Check-Off as well Agreement.... Such become due under wages. VI ing Section seven of Article 3.2% Employer pay and reasonable shall all costs surcharge per provides annum or for of 20% by attorney's Board Trustees incurred fees rate, higher, prime whichever is above 2% certain litigation. any such in connection App. late contributions. added) App. (emphasis VIII, pension fund trust 1 of the 9. Article section employer agreement and the between union provides that:

garded a federal court unless it is con plaintiff when a expenditures must make persuasive vinced other data attorney’s fees to recover a debt it will highest court of the state would decide other not be made whole unless its fees are also Telephone Further, wise.” West v. American & Tele recovered. person whenever a is Co., graph 311 U.S. 61 S.Ct. indebted to another the sum owed be (1940).10 regarded 85 L.Ed. 139 justly fact, due.... In we hardly 'can conceive of a how bond could be Nevertheless, it is clear that what Local written to a authorize claimant to sue for “justly 542 is due” turns part at least in on anything justly less than a sum due. We Tri-County promised what Local 542. And also observe that in some contracts ex- inevitably this will be determined refer- press provision recovery is made for agreements ence to the between them. In- .attorney’s fees in the event of an for action deed, Hartford does not contest that Local breach. in Yet [the bond] no reference “justly 542 is due” fringe benefit contri- attorney’s made to fees. In the cir- specified butions and union dues which are cumstances, we attorney’s conclude that detail in the question CBA. The thus be- fees are not recoverable in this action. Tri-County’s comes what of obligations to Local 542 justly are “sums due” for labor. Knecht, Id. at 80-81. Pennsylvania Since Superior Court has attorney held that fees regard attorney fees, In we have al- “justly are not sums Suavely, due.” ready they held that justly are not “sums A.2d at 334-37. As we are unable to discern so, doing rejected due.” In argument we meaningful a difference present between the very much proffered by like that Local 542 action and the cause of action asserted in accepted by the district court. In Knecht, we are constrained to reverse the Knecht, Inc. v. United Insurance Pacific district court’s attorney award of fees. (3d Company, Cir.1988), sup- a plier brought surety suit on a bond covering similarly We must reverse the district due,” justly alia, “sums seeking, inter attor- “liquidated court’s award of damages,” a sum ney fees. We stated as follows: which the CBA refers to “penalty” as a to be judge The district noted that unless the against Tri-County assessed in the event of

[attorney] paid, fees were [the payment late fringe claimant] benefit contribu- not would be made whole. This undoubt- tions.11 On at least three Pennsyl- occasions edly (or judge’s correct but holding vania courts applying Pennsylvania courts - much, proved law) too always as it is rejected true that liability surety of a for Supreme The district court attorney considered the compensation fees were for labor. 353 interpretation Court’s of the Miller Act in United Finally, 77 S.Ct. at 798-99. whether Sherman, Carter, States et al. v. Carter can proposition stand for the broader for Benefit al., et 353 U.S. 77 S.Ct. always "justly such sums are ques- due” must 1 L.Ed.2d (1957) just "persuasive Co., to be such data.” The tioned in the aftermath of P.D. Rich Inc. v. States, requires public Miller Act contractors on works United 417 U.S. 94 S.Ct. projects post (1974), covering a bond the "sum or L.Ed.2d 703 which held that an award of (cid:127) justly suppliers sums due” attorney of material and labor. fees under the Act Miller would in ordi- 270a(a)(2). § See 40 nary U.S.C. Carter inappropriate held circumstances be abroga- justly "sums due" 130-31, under the Miller Act included tion American rule. Id. at only delinquent fringe not contributions to bene S.Ct. at 2165-66. funds, liquidated damages fits but also and attor ney CBA, fees. 11. Section seven of Article VI of the enti- Clause,” "Penalty provides tled as follows: apposite We are not convinced that Carter is First, present imposes Fringe case. the Miller Act All [Pjayments Benefits Funds. are due policy-driven statutory obligations princi on the ... later not than the 25th of the month.... pal implicated which are delinquency not here. continuing [of the event until] Second, implicitly rejected month, this Court view succeeding the 15th of the next there Knecht, Compa Inc. v. penalty United Insurance will be due ... a in the amount of Pacific (3d Cir.1988), ny, (20%) F.2d 74 twenty percent per concluded annum or above 2% rate, attorney that under prime law higher, fees are whichever is of the justly payment original not "sums due” bond. contributions which will be assessed Further, parties delinquency Id. at 80-81. in Carter the had until the ... [is] resolved. expressly stipulated liquidated damages App. VI. percent some add obligations which default See underlying debt. to the age accretion n the ar- record and Having considered Ernest Universal, Ohio Inc. Reliance will affirm we parties, guments Pa.Super. Contracting Renda February 2, 1994 and court’s March (1982) (surety bond 39, 44-46 454 A.2d judg- entered 13,1995 insofar as orders used” material labor and of “all covering cost and in IV.against Hartford Count ment on charge” for late “service for not liable Ué% unpaid contributions for favor of between in contract provided accounts dues, prepayments. less union part of not supplier because and contractor materials); Lite-Air labor and the “cost” however, district will, the reverse We Deposit Co. Products, Fidelity & Inc. v. liqui- they grant insofar as orders court’s (E.D.Pa. 801, F.Supp. 804 437 Maryland, to Local attorney fees damages and dated due covering “amount 1977) (surety on bond court the to district 542, remand we will not or material” labor for such the claimant 2, 1994 order the March that directions with charges” payments late on “finance liable for 13,1995 judgment mod- February and the more charges are such because for materials to Local awarded amounts delete all ified to they are than damages or penalties akin to fees, attorney damages liquidated 542 for materials); J.C. of the the value related to opinion. foregoing the with consistent (surety Sons, A.2d 335-37 594 Snavely & justly may be as covering “sums bond on finance fees and attorney for liable not due” dissenting. HUTCHINSON, Judge, Circuit between agreement charges accrued de- the Court’s dissent from respectfully I detailed not because contractor claimant 2, March court’s the district affirm bond). to Salvino cision also See payment in the Sons, view, court my the district Works, In Fletcher order. Inc. v. 1994 & Iron Steel 853, piercing the 856 86, A.2d of law a Inc., Pa.Super. as matter erred to involve covering payment not case does (1990) bond This (surety on veil. corporate per or circumstances, the material “furnished nor demand who exceptional those delay for impose liable remedy not supplied labor” extraordinary or formed this use of because to contractor third- Hartford, independent attributable damages liability on of the language express the Moreover, within not the district surety. party bond).12 awith definite findings leave me factual commit- a mistake that on conviction firm reluctance a clear reveal cases These embraces, Court opinion, the expand my In courts to ted. Pennsylvania part of the law, Pennsylvania or beyond contrary applicable the base a liability of per- that In- doctrine contractor. of the overly view obligations broad essential hold a veil declined deed, pierce the court in Lite-Air mits court delin- in- charges” for or fraud “finance extraordinary prevent for surety liable cases in the nature they addition, were Court’s as I believe the payments quent In justice. how precisely “penalty” is the reasonable penalty likely to unsettle holding is —and in the are described damages” “liquidated bonds secure parties who expectations provision express of an the absence suppliers In CBA. materialmen payment such additional Bond, that we conclude in the others) projects (as in construction as well “penalties” “fees” “charges,” contractual industry.1 competition and reduce justly due” “sums be considered cannot give not it did 542 concedes surety un- from a recoverable not hence claims of its ninety days notice Hartford will Accordingly, we law. Pennsylvania der Pennsylvania bond terms. accord with as ground court on reverse type of with this compliance requires law well. law, Court agree 1. I many distinguished 12. The ERISA, concur with I also case. governs this not in- ground that cases above-cited not be could Hartford conclusion Court's material, We are not labor. suppliers of volved damages. liquidated fees or for counsel liable by this distinction. persuaded not provision precedent notice condition standard has been followed several dis recovery payment Int’l, on a bond. See Lezzer Jiffy trict courts. See Lube Inc. v. Pa., Carry, Cash & Inc. v. Aetna Jiffy Ins. F.Supp Lube (“The Pa.Super. (E.D.Pa.1994); Sales, Inc., 537 A.2d May notice v. Club Med provision specifically at issue here (E.D.Pa.1993); stated F.Supp. 938-39 Stin ninety day written notice within period Corp., F.Supp. son v. GAF 645-46 (W.D.Pa.1990). precedent was a condition liability to Aetna’s suggests This to me that the obliged on the bond. We are to enforce the ego determination involves elements of denied, agreement.”), terms of appeal law as well as fact. (1988). Therefore, 519 Pa. 548 A.2d 256 event, any compa the treatment of two Local 542 cannot recover egos extraordinary nies as alter “an reme prevail

unless it can under an alter theo dy preserved involving exceptional for eases ry. Village Property circumstances.” at Camelback Ass’n, Carr, Pennsylvania law ners Inc. v. is unclear as to Pa.Su whether Ow (1988), finding per. ego question per of alter 538 A.2d 533 is a of fact aff'd curiam, 330, (1990); or law. I am not 524 Pa. 572 A.2d 1 insensitive to this see Court’s Realvest, statement, Builders, law, applying Avery also First Inc. v. federal that “[a] Inc., 572, 601, finding ego Pa.Super. of an 410 alter 600 A.2d 604 situation is factual (1991) (characterizing supported by ego remedy one and must be the alter the record.”2 “extreme”); Peles, Carpenters Health as v. F.Supp. & Fund v. Connors 724 Ken Welfare (W.D.Pa.1989) (“The Ambrose, Inc., 1538, 279, (3d neth R. 1559 727 F.2d decision of a 283 Cir.1983) (citation omitted). pierce court corporate to ... recently, More veil is to be however, reluctantly cautiously.”). we exercised stated: A party attempting negate separate to exis

Assuming Pennsylvania permit that will corporate entity tence of a has burden of recovery an alter-ego theory on on a show “clear, direct, presenting precise and believa ing injustice, opposed of as to fraud or (a corporate ble evidence that the veil should be point yet deceit not decided pierced.” Iron Worker’s Sav. & Loan Ass’n Pennsylvania Supreme Court), it is never IWS, Inc., 367, (1993); v. 622 A.2d 376 see plain Pennsylvania, theless that like New Realvest, also (party First 600 at A.2d 604 Jersey, recovery does not allow unless the support failed to state sufficient facts to alter party seeking pierce corporate veil Health, ego theory); Carpenters 727 F.2d at alter-ego theory on an establishes that the (burden proof 284 party attempt of rests on controlling corporation wholly ignored the veil). ing pierce the corporate separate corpora status of the controlled tion and so dominated and controlled its Pennsylvania variety law considers a of separate that affairs its existence was a corporation factors to determine whether one mere sham. See In re Penn Cent. Sec. ego They is the alter of another. include the (E.D.Pa. 1026, Litig., F.Supp. 335 1035 formalities, ignoring corporate gross un- 1971); Ashley 228, Ashley, v. 482 Pa. 236- dercapitalization, records, corporate a lack of (1978). 393 A.2d 641 In other non-functioning directors, officers and non- words, both Jersey and New arms-length transactions between corpo require showing a threshold that the con rations, especially day- domination and corporation trolled puppet- acted robot- or to-day deprive control sufficient to the alter response like mechanical to the control ego corporate identity. Village See at tugs strings pressure ler’s on its or on its Camelback, 533; 538 A.2d at see also Car buttons. Health, penters 284; 727 F.2d at United Ltd., (3d v. (Pty) Pisani, Culbreth Amosa 898 F.2d States v. 646 F.2d 88 Cir. (3d Cir.1990) curiam); 1981). (per 14-15 see also concluding corporation Before is Craig Quebec, Ltd., v. Lake another, Asbestos 843 the alter the trial court must (3d Cir.1988). conclude, 150 record, The Culbreth upon be able to based statement, dictum, arguably eveiy legal This can be read sition that conclusion must have fac- standing propo- for no more than the support. obvious tual cover. See agree not it did debts pay the use policy-demands public justice or Camelback, 533; First A.2d at Village at remedy, that extraordinary of such 604; Realvest, Lezzer Cash & at preju 600 A.2d will not be parties innocent rights of Carry, A.2d at 861. corporate theory of the diced, that the Lezzer useless. rendered entity not be will the Court’s statement I also believe (quoting at 861 A.2d Carry, 537 Cash required illegality is finding fraud or “no 641). -extraordi Absent A.2d at Ashley, 393 pierced, but may be veil corporate before circumstances, a court nary unusual dis- entity rather, corporate that the separate and maintain recognize should necessary avoid it is regarded ‘whenever Realvest, A.2d identity. First corporate (quoting Majority at 508 Op. injustice,’” Tomra Vending v. 604; Assoc. Reverse Rinck, A.2d Pa.Super. Rinck US, F.Supp. Systems (1987)), statement an incorrect (E.D.Pa.1987). Court Culbreth Pennsylvania law. The Tri-County was determining whether pierce Pennsylvania would did assume expressly ego, the Mele’s injustice showing upon veil consistently complied found party had nevertheless, that a but, concluded Despite this corporate formalities. with all showing subor- that the a threshold make to conclude however, it then went finding, completely controlled company was dinate It egos. were alter corporations two that the puppet- robot- or or “acted dominated (1) on Mele Tri-County only worked found: I not Culbreth, 14-15. do F.2d at like.” (2) grossly under- Tri-County was projects; Neither has shown. so Local 542 think (3) treated Hartford capitalized; attempt to involved nor Culbreth Rinck (4) Tri-County’s company; as one and Mele through the third-party on a impose liability daughter of Mele’s the who was president, ego. alter dealings with an third-party’s company’s the knowledge of owner, lacked more flexi- is “injustice” standard Though an (5) hiring Tri- business; assisted Mele nevertheless, “fraud,” a than standard ble (6) Tri-County had never County employees; pierced under is corporate veil the when employees dividends; (7) Tri-County’s paid usually pointed standard, the knife either name Tri-County- was its with only contact behind who stands at the shareholder (8) companies’ the two paychecks; on their share- with veil, who contract not those (9) Mele interchanged; were employees ego. alter holder’s Tri- its debt to all of proposed to subordinate without proceedings bankruptcy County in conclusion, I believe reaching its In knowledge or authorization. Tri-County’s to induced improperly court district Inc., No. Excavating, Ragan v. activi- participant a full make Hartford 4-7, 15, WL 67703 92-0066, op. at slip on Tri-County by its fixation of Mele and ties 1994). (E.D.Pa. March to attempting 542 was Local fact that benefit and other money pension for recover findings are court’s I district believe instance, the hearing, for plans. During theory. ego support to insufficient “nothing is more that stated its to meet failed simply, Local Put pension a country than this today in sacred Mele that showing burden threshold - many by ignored too it’s been plan because of [Tri separate status “wholly ignored the Appellant’s important.” people and that’s its controlled County] and so dominated that It also stated at 585. (“App.”) Appendix mere was a1 existence separate its affairs claim would recovery their on preclude did “[t]o 14. Nor Culbreth, at sham.” pensions and their impact on a serious ro Tri-County “acted 542 show Local Ragan, No. 92- benefits.” and other to health response mechanical puppet-like bot- or Though 0066, slip op. WL its pressure on strings or tugs on its [Mele’s] I important, rights are pension the workers’ opinion, my In Id. at buttons.” placed too decision think “exception so are not circumstances present be- persons in whose emphasis on of much extension warrant as to “unusual” al” or problem pension sued. The half remedy force extraordinary this ERISA, should have left which knowledge been we all did so with ability of or the agree apply does not here.3 payment learn the bond terms which had been issued Aetna. As between finding exceptional In addition to circum- Lezzer, Aetna parties, both innocent exist, stances I where none believe the dis- pierce there no corpo- reason legal utilizing trict court committed error rate veils of SGA and Oreland order to ego theory impose liability the alter on an alter the terms of the bond which Aetna (Hartford). third-party Ordinarily, innocent agreed protect designated had to write .to apply ego theory impose courts the alter tó subcontractors and materialmen. liability upon a shareholder who manipulates Carry, Lezzer Cash & 537 A.2d at 861. ego. present so-called alter These cases corporate governance. issues of The district determining In that Hartford in was not court, however, made no distinction between nocent because' it Tri “considered Mele and corporate governance the issue of and the County company,” Ragan, as one No. 92- law, issue of contract con- 0066, slip op. at 1994 WL Instead, simply trols this case. treated upon Tri-County’s district court relied in involving ego this matter as one the alter demnity agreement, -an internal memoran doctrine and then used doctrine to dum from Hartford that referred to Tri change the a text of contract between Hart- County Mele, part and Hartford’s re ford and It allowed Local 542 Mele. Tri-County’s view of financial statements. pierce corporate impose liability veil and view, my support is insufficient to Hartford, third-party contracting finding that Hartford was not an innocent ordinary Mele in the course of its business as McFadden, third-party. See James E. Inc. surety, manipu- rather than on Contractors, Inc., F.Supp. Baltimore responsi- lative shareholder who is (E.D.Pa.1985) (inter-office memoranda injustice, any, ble for the if largely issue); to alter irrelevant present here. Use and Building Supply, Global Benefit of Inc. v. Partnership, WNH Ltd. 995 F.2d 515 so, In doing adequately it failed to consider . (4th Cir.1993) (name association insufficient Pennsylvania’s general against piercing rule alter, other). company to find ego one of corporate prejudice veil to the of inno surety As Carry, with Lezzer Cash & parties. 641; Ashley, cent See 393 A.2d at payment Hartford a containing issued bond Carry, Lezzer Cash In & 537 A.2d at 861. agreeable terms to not Local 542. The Carry, Superior Lezzer Cash & Court of relationship between Tri-County Mele and pattern a fact addressed simi deprive does not Hartford of its status as an lar to this one. It stated: third-party. innocent pierce is no corporate [T]here need to injustice.

veil in order to avoid As respect, to the In this I recognize Pennsylvania’s corporate enterprises [principal tendency of SGA to look to federal interpreting cases general and persuasive contractor] [sub- and Oreland the Miller authority, Act as I contractor], quarrel whatever their relationship principle have no with the that “sure- be, may [surety] both Aetna and Lezzer ties ordinary princi- be reached ‘where ples [materialman] are not involved. corporate permit On the of law the courts to ” contrary, parties. both are innocent disregard corporate Aetna Majority Op. forms.’ payment requested by issued a (quoting bond as at Building Global Supply, 519). However, SGA and included therein terms which 995 Pennsylvania, at F.2d SGA, satisfactory principal, were “ordinary to principles law” seem PHP, obligee. preclude Lezzer entered a to me use of alter doctrine to Independence contract to sell impose liability materials to on innocent third-parties. [sub-subcontractor]; 641; with whom it Ashley, had See 393 A.2d at Lezzer Cash & doing prior been Carry, business on It particular, occasions. 537 A.2d at I do dropped 3. The ERISA pension payments issues seem to have out of for the due Local 542. Tri-County liability the case when conceded its family’s corporations. other and the Mele eases Act Miller those persuasive find not indicates, though, that Tri-Coun- The record Cash Ashley and Lezzer pre-date that reasonably thought ty its owners Building Supply, Carry. See Global financially if Mele obtained as cases pre-Raíesora benefit (describing would Thus, I project. non-compli performed bonding and prove to excuse “arguably” more is insuffi- indemnity agreement than provision conclude bond’s notice ance with a Bateson). that Tri-Coun- justify the conclusion came after cient that those ego. ty was Mele’s accept the unable to I Additionally, am (as third- a Hartford conclusion Court’s testimony relied on court The district also pay be compelled to surety) can be party were Tri-County’s employees that some corporation of a “in control party cause the The Mele’s offices. hired at interviewed corporate as control, uses the uses that however, inter- record, that these also shows inter personal sets, own his or her to further Tri-County employee, by a done views were _” Ash Op. (quoting at 508 Majority ests Moreover, to hire. decision made the who 641). general state Such A.2d at ley, 393 it com- effect that was testimony to the best, it At dictum. me as obiter strikes ment Tri-County Mele knowledge that mon seriously, worst, if taken At truism. is a easily just as can company the same were fiction ignore the permit courts would showing Local 542 dealt as taken That at will. corporate existence separate open. See Lezzer eyes with its Tri-County and, my utility proven is one fiction The fact at 861. Carry, A.2d &Cash functioning aof essential judgment, Tri-County employee attended society. industrial market free modern concerning the meeting with the, only not court Hart- Finally, I as believe me appear unusual not bond does law, its ultimate but that indemnify it. a matter asking erred ford were alter Mele finding that Tri-County’s course, that recognize, of I somewhat Put erroneous. egos is clearly the district responses to president’s as a whole record viewing the differently, any detailed lacked that she could indicate conviction and firm a “definite me to leads Tri-County’s operations. knowledge of committed.” been has a mistake to con- responses court used these Bessemer, City Anderson figure- was a mere president clude that 84 L.Ed.2d S.Ct. however, times, her answers Many head. omitted). (internal (1985) quote the nature over merely confusion indicated corpo- all followed Specifically, manner and the district question legitimate and maintained rate formalities asking it. in Although Mele corporate records. set that Tri-Coun- court believed The district Tri-County’s man- in participated to subor- proposal ignorance of Mele’s ty’s clear indication is no there agement, bankruptcy in its Tri-County’s debt dinate dominated corporation his John Mele how see I fail to significant. proceeding extent that Tri-County to such controlled by Mele to subordinate offer “unilateral” McFadden, See or a sham. facade it was a Tri-County’s Tri-County, without debt to (mere in participation F.Supp. at 1105 Tri-County’s par- evidence knowledge, is Further, insufficient). nei- management is form ticipation abuse owned corporation his Mele nor ther John ego doc- application warranting the court Tri-County; nor can any stock trine. Mele interest to John a financial attribute his because simply corporation Mele Tri- and the conclusion court’s The district Tri-County’s sole daughters were is three Mele projects with only worked on County corporations family Related shareholders. The by the record. out not borne stockholders. grossly common often have court’s belief reality the economic ignores undercapitalized rely court seemed fact twenty- successfully for -operated that it had indemnity agree- strongly was upon most Tri-County’s So, too, failure years. three from demanded ment Hartford pay nothing dividends strikes me as unusual family corporations whose owners are

acquainted tax laws. with our income hand, undisputed

On the other fact commingling of

that there was no funds and recently incorporated in- was not

dicate, corpo- along with their observance formalities, separate corporate

rate that the Tri-County should not

existence of Mele and together, ignored. Taking all these facts pro-

I am that Local 542 unable to conclude clear, precise

duced evidence that piercing

convincing enough to warrant

corporate veil.

Accordingly, I reverse the district would judgment respects. all AREA SCHOOL

CARLISLE

v. P., By Through His

SCOTT Guard- P.,

ians, P. and Richard E. BESS

Appellant in No. 94-7520. DISTRICT, AREA

CARLISLE SCHOOL 94-7539,

Appellant in No. P., By Through

SCOTT Guardians,

His P. BESS E. P.

and Richard 94-7520, 94-7539.

Nos. Appeals,

United States Court of

Third Circuit.

Argued March 1995. Aug.

Decided

As Amended Oct. over notes judge heard the wit- employees district court testifying two union who that the and, nesses, credibility, on the Tri-County assessed their supposedly had contact with no evidence, made detailed of the credible beyond receiving paychecks listed Tri- basis their obliged to defer. Mele, findings to which we employer their on their County, not as findings, the dis- on those historical Hartford also Based unemployment claim forms. facts that “the found as ultimate argument that trict court represented at oral indemni- (citations omitted). interrelationship between Mele and Tri- Id. 393 A.2d at 641 County Pennsylvania was such that Mele controlled Tri- largely courts have embraced County,” Dist.Ct.Op. Tri-County standard, and that Ashley the flexible tenor of the “merely instance, was an extension of Mele and not a holding, finding that no of fraud ” truly independent corporation.... Dist.Ct. illegality required corporate or is before the held, Op. consequently 17. The district court rather, pierced, veil that but be, relying legal on the same authorities as does entity may disregarded “when dissent, Tri-County that was the alter necessary injustice.” ever it to avoid ego of Mele. Rinck, Pa.Super. v. Rinck 526 A.2d (1987). Lycoming County Accord findings These and this conclusion were Ass’n, Com., Nursing Dept. Home Inc. v. recognition argu reached after full Industry, Prevailing Wage Ap Labor and ments on the evidence made Hartford. Bd., peal 156 Pa.Cmwlth. 627 A.2d Giving appropriate deference to the dis (1993). Pennsylva 243-44 We said findings holding trict court’s mandates a ego requires showing nia alter law that the Anderson, no mistake has been committed. company pup subordinate “acted robot- or 470 U.S. at 105 S.Ct. at 1511. pet-like response in mechanical to the con True, we, court, if rather than the district tugs strings pressure troller’s on its on its assigned finding, were the task of fact we Ltd., (Pty) buttons.” v. Culbreth Amosa arguably might have found the facts differ- (3d Cir.1990). ently. charged But are not we with that task, being and we are satisfied there no Despite nominally separate formal ex- fact, and, below, clear explain error of as we Tri-County, istence of the record to which error, legal no the district court’s factual supports we have referred the district court’s findings legal ego and its conclusion of alter findings and conclusion that upheld. should be ego. emphasize, Mele’s alter We did the court, willing, B. Hartford, request' of John Mele and indemnify any obligations Hartford for alsoWe do not find that the district might trigger liability Mele which Hartford’s legal holding court committed error in Tri effectively merged under the Bond. This County Pennsyl to be Mele’s alter obligations Tri-County pre- Ashley Ashley, vania law. Pa. making any vented from claim (1978), 393 A.2d 637 Su result, Tri-County under the Bond. As a forth, preme Court set in a formula familiar so, though has not done even Mele is indebt- state, following to the courts of that $75,000. ed to it for over principles applied which are to be when a disregards and, trial court corporate forms

Case Details

Case Name: Ragan v. Tri-County Excavating, Inc.

Court Name: Court of Appeals for the Third Circuit

Date Published: Aug 7, 1995

Citation: 62 F.3d 501

Docket Number: 94-1388 and 95-1189

Court Abbreviation: 3rd Cir.