Operating Eng'rs Local 324 v. Bourdow Contracting, Inc.
- Summarized by Ryan Heilman , Heilman Law PLLC
- 5 years 9 months ago
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 18-1491 (6th Circuit, Mar 21,2019) Published
- Tag(s):
-
- Ruling:
- Applying the alter-ego test of the NLRA, the Sixth Circuit affirmed the District Court's finding that the defendant is an alter-ego of a related bankrupt company for purposes of pension fund withdrawal liability. The Sixth Circuit also found that the pension fund's allowed proof of claim in the related company's bankruptcy case did not bar relitigation of the amount of the pension fund's claim against the non-bankruptcy company. In reaching this decision, the Sixth Circuit also held that allowance of an uncontested proof of claim is a final judgment for res judicata purposes.
- Procedural context:
- The pension fund filed a lawsuit against Bourdow Contracting Inc. ("Contracting") alleging that it was an alter-ego of Bourdow Trucking, Inc. ("Trucking") and was created for the purpose of evading Trucking's withdrawal liability.
The District Court determined, based on cross motions for summary judgment, that Contracting is the alter-ego of Trucking under the alter-ego test of the National Labor Relations Act of 1935 ("NLRA"). In affirming this determination, the Sixth Circuit specifically does not find that the alter-ego test of the NLRA is the correct test under these circumstances, but instead finds that this issue has been waived by the defendant and should not be revisited on appeal.
Although the pension fund filed a proof of claim in Trucking's bankruptcy case for $1,272,187, which amount was not subject to any objection and thus allowed, the pension fund sought damages from Contracting in the amount of $3,221,981. Contracting argued that the pension fund was barred from relitigating the amount owed because of the res judicata effect of its earlier allowed proof of claim.
The Sixth Circuit followed the Second, Fifth and Ninth Circuits in determining that an uncontested proof of claim allowed under 11 U.S.C. § 502(a) is a final judgment for res judicata purposes. The judgment was between the same parites or their privies because the defendant was found to be the alter-ego of the bankrupt company. The issue could have and should have been litigated in the bankruptcy case. However, the Sixth Circuit found that there was not an identity of the causes of action because the facts creating the alter-ego action differed significantly from the facts giving rise to the withdrawal liability claim. The Sixth Circuit, though, specifically pointed out in a footnote that the defendant had raised only res judicata and had not raise issue preclusion or collateral estoppel until its reply brief, which "may have been a more successful argument for Defendant."
- Facts:
- Bourdow Trucking, Inc. ("Trucking") employed a unionized workforce. In 2007, Trucking terminated its collective bargaining agreement, but continued to make fringe benefit payments to the union pension fund until 2011. In 2012, the fund determined that Trucking had completely withdrawn from the pension fund and assessed Trucking $1,163,279 in withdrawal liability under ERISA, 29U.S.C §1381(a).
Trucking failed to make any withdrawal liability payments and was sued by the pension fund. In March, 2013, Trucking filed a voluntary Chapter 7 bankruptcy case. The pension fund filed a proof of claim against Trucking in the amount of $1,272,187 - the amount of the withdrawal liability plus interest. The pension fund received a small distribution on this claim.
Bourdow Contracting Inc. was incorporated in November, 2012, after Trucking was assessed with withdrawal liability and before its bankruptcy filing. The pension fund brought suit against Contracting for the amounts owed by Trucking in 2015.
- Judge(s):
- CLAY, COOK, and LARSEN
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