-PAL Trustees of the Operating Engineers Pension Trust et al v. Sagebrush Property Ventures, LLC et al, No. 2:2011cv01179 - Document 56 (D. Nev. 2012)
Court Description: ORDER Granting 34 Motion for Summary Judgment and 46 Motion for Partial Summary Judgment. Defendants must recalculate the amount due and submit the recalculation to the court within 7 days of entry of this order. Plaintiffs may respond with any corrections within 7 days of defendants recalculation. Signed by Judge James C. Mahan on 8/1/2012. (Copies have been distributed pursuant to the NEF - SLR)
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-PAL Trustees of the Operating Engineers Pension Trust et al v. Sagebrush...rty Ventures, LLC et al Doc. 56 1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 7 TRUSTEES OF THE OPERATING ENGINEERS PENSION TRUST, et al., 8 2:11-CV-1179 JCM (PAL) 9 Plaintiff, 10 11 v. 12 SEQUOIA ELECTRIC, LLC, et al., 13 Defendants. 14 15 ORDER 16 Presently before the court is plaintiffs Trustees of the Operating Engineers Pension Trust; 17 Trustees of the Operating Engineers Health and Welfare Fund; Trustees of the Operating Engineers 18 Journeyman and Apprentice Training Trust; and Vacation-Holiday Savings Trust’s motion for 19 summary judgment. (Doc. #34). Defendants Sequoia Electric, LLC; Sequoia Electric Underground, 20 LLC; Desert Seguro, LLC; Sagebrush Property Ventures, LLC; and Blake Barsy filed a response 21 (doc. #39), to which plaintiffs replied (doc. #41). Subsequently, defendants filed a motion for partial 22 summary judgment (doc. #46), to which plaintiffs responded (doc. #50), and defendants again replied 23 (doc. #53). 24 I. Background 25 a. Overview of parties 26 Plaintiffs are collectively bargained, multi-employer fringe benefit trust funds–commonly 27 called Taft Hartley Trust Funds. Defendants Sequoia Electric Underground (“Underground”) and 28 James C. Mahan U.S. District Judge Dockets.Justia.com 1 Desert Seguro (“Seguro”) are both Nevada limited liability companies. Defendant Blake Barsy d/b/a 2 Sequoia Electric (“Sequoia”) is a sole proprietorship and a signatory employer to a collective 3 bargaining agreement with the International Union of Operating Engineers Local No. 12 (“Local 4 12"). Sequoia Electric, LLC (“Sequoia LLC”) is also a Nevada limited liability company and 5 signatory employer to the collective bargaining agreement with Local 12. 6 Barsy manages each of the aforementioned corporations, and the companies are operated 7 from the same business address on North Rainbow Blvd. in Las Vegas. (Doc. #34, Ex. 4, no. 13; Ex. 8 6, no. 13; Ex. 11, no. 13; Ex. 17, no. 4). Barsy is an individual doing business as Sequoia. Barsy is 9 also the president of Seguro, which is entirely owned by Clear Diamond, LLC. Clear Diamond LLC 10 is owned by the Barsy Family Trust, of which Barsy is the primary beneficiary. Barsy manages 11 Underground, which is owned by Sequoia LLC. Barsy owned Sequoia LLC, prior to placing it within 12 the res of the Barsy Family Trust. 13 Seguro provides office personnel to Sequoia and Sequoia LLC, who are both electrical 14 contractor corporations in the construction industry doing public works. (Doc. #34, pg. 2). The 15 NLRB has designated Sequoia, Sequoia LLC, and Seguro as a “single employer” under the National 16 Labor Relations Act (NLRA). (Doc. #34, ex. 15, pg. 2). Though Underground was not designated 17 a “single-employer” with the aforementioned corporations, the company works as a contractor and 18 subcontractor with Sequoia and Sequoia LLC. (Doc. #34, Ex. 17, pg. 5). 19 b. Master Labor Agreement 20 In October 2003, Sequoia LLC executed a Master Labor Agreement (MLA) with Local 12. 21 In 2008, Sequoia also agreed to be bound to the terms of the MLA. The primary facets of the 22 agreement required Sequoia LLC and Sequoia to submit written reports to plaintiffs detailing work 23 covered by the MLA. (Doc. #1, pg. 3-4). The agreement also required the payment of fringe benefit 24 contributions to plaintiffs on a monthly basis and at specified rates for each hour worked by or paid 25 to these employees. Id. 26 Plaintiffs contend that defendants failed to meet their obligations to contribute fringe benefits, 27 as required by the MLA. Specifically, plaintiffs argue that defendants used Seguro and Underground 28 James C. Mahan U.S. District Judge -2- 1 to avoid Sequoia and Sequoia LLC’s obligations under the MLA by transferring Local 12 2 dispatched-employees to Seguro and Underground’s payrolls. Plaintiffs also argue that Sequoia 3 failed to properly report hours worked by employees performing covered work. 4 Pursuant to a professional audit, plaintiffs assert that Sequoia, Sequoia LLC, and related 5 entities have accrued $651,254.60 in unpaid fringe benefit contributions from May 2006, to 6 September 2011. (Doc. #46, pg. 33). Plaintiffs also allege that there are $13,212.92 in errors on 7 Sequoia’s payroll. Id. Plaintiffs request $65,125.46 in liquidated damages and $2,000 in audit costs. 8 Id. Plaintiffs further request prejudgment interest on the amount of unpaid contributions in the 9 amount of $33,098.91 and attorney’s fees and costs expended in the amounts of $66,453.50 and 10 $10,064.10, respectively. (Doc.#34, pg. 27). 11 Defendants also move for partial summary judgment, claiming that the MLA expired on June 12 30, 2010, and, consequently, this court does not have jurisdiction over disputes arising out of post- 13 contract contributions following the expiration of a collective bargaining agreement. 14 II. Discussion 15 A. 16 Summary judgment is appropriate when, viewing the facts in the light most favorable to the 17 nonmoving party, there is no genuine issue of material fact which would preclude summary 18 judgment as a matter of law. Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir. 1996); FED. R. CIV. P. 19 56(c); Matsushita Elec. Indus. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); T.W. Elec. Serv., 20 Inc. v. Pacific Elec. Contractors Assn., 809 F.2d 626, 630 (9th Cir.1987). The purpose of summary 21 judgment is to “pierce the pleadings and assess the proof in order to see whether there is a genuine 22 need for trial.” Matsushita Elec., 475 U.S. at 586; International Union of 23 Bricklayers v. Martin Jaska, Inc., 752 F.2d 1401, 1405 (9th Cir. 1985). 24 Legal Standard The moving party bears the burden of informing the court of the basis for its motion, 25 together with evidence demonstrating the absence of any genuine issue of material fact. Celotex 26 Corp.v. Catrett, 477 U.S. 317, 323 (1986); see also Orr v. Bank of America, 285 F.3d 764 (9th Cir. 27 2002) (expressing the standard for authentication of evidence on a motion for summary 28 James C. Mahan U.S. District Judge -3- 1 judgment). A trial court can only consider admissible evidence in ruling on a motion for 2 summary judgment. Orr, 285 F.3d at 773. 3 B. 4 Plaintiffs assert that Sequoia LLC, Sequoia, Underground, and Seguro have operated as alter- 5 egos of one another in order to evade contractual obligations under the MLA. Plaintiffs cite common 6 ownership, common management, centralized control of labor relations, and an interrelation of 7 operations in support of their argument. Furthermore, plaintiffs argue, the operation of Underground 8 and Seguro has been initiated by defendants as a technical change in operation to avoid the 9 obligations of the MLA. Consequently, plaintiffs contend that Sequoia LLC, Sequoia, Seguro and 10 Underground are jointly and severally liable to the trusts for all unpaid fringe benefit contributions, 11 contract damages, audit costs, liquidated damages, and attorney’s fees. Discussion 12 1. Determining alter-ego status 13 The alter-ego test focuses on the existence of a “disguised continuance of the same business 14 or an attempt to avoid the obligations of a collective bargaining agreement through a technical 15 change in operations.” Dariano & Sons v. District Council of Painters, 869 F.2d 514, 518 (9th Cir. 16 1989). It is the plaintiff’s burden to prove that one business is operating as the alter-ego of the other. 17 S. Cal. Painters & Allied Trades v. Rodin & Co., Inc., 558 F.3d 1028, 1032 (9th Cir. 2009). Courts 18 in the Ninth Circuit perform a two-step analysis to determine whether one business is acting as the 19 alter-ego of another. 20 First, the court must make a threshold determination, which is based on whether two or more 21 businesses are substantially owned and operated by identical parties. Haley & Haley, Inc. v. NLRB, 22 880 F.2d 1147, 1150 (9th Cir. 1989); see also Dariano, 869 F.2d at 518 (“[W]e ask: is the alleged 23 second business entity under the actual or constructive control of the first company?”). 24 Once the court has determined that plaintiff has established this threshold, the court analyzes 25 four criteria to determine alter-ego status: (1) interrelation of operations; (2) common management; 26 (3) centralized control of labor relations; and (4) common ownership. Haley, 880 F.2d at 1150. This 27 analysis is identical to the test the National Labor Relations Board (NLRB) performs to determine 28 James C. Mahan U.S. District Judge -4- 1 two or more business’ “single-employer” status. Dariano, 869 F.2d at 518; see also Operating 2 Engineers Pension Trust v. Moulder Bros., Inc., 717 F. Supp. 697, 699 (C.D. Cal. 1989) (“[I]n 3 deciding whether two firms are alter egos for the purpose of federal labor law, the Ninth Circuit 4 directs district courts to consider such NLRB criteria.”). The weight given to each criteria varies and 5 is determined on a case-by-case basis. See Johnstown Corp. 313 N.L.R.B. 170, 170 (1993) (“Clearly 6 each case must turn on its own facts.”). 7 The NLRB considers a similar, yet broader, set of factors to determine whether one business 8 is a disguised continuance of the other. If two or more entities “have ‘substantially identical’ 9 management, business purpose, operation, equipment, customers, and supervision, as well as 10 ownership,” the NLRB will generally find alter-ego status. Johnstown, 313 N.L.R.B. at 170; see also 11 Vario v. Petrolic Constr. Co., 1988 U.S. Dist. LEXIS 3642 (E.D.N.Y. Apr. 6, 1988) (“To determine 12 whether one company is the alter ego of another the Court must weigh a number of factors. The most 13 important factors are "whether the two enterprises have substantially identical management, business 14 purpose, operation, equipment, customers, supervision, and ownership.”). 15 Here, it is clear from the record that defendants meet the initial threshold that “two or more 16 businesses are substantially owned and operated by identical parties,” as required by the Ninth 17 Circuit. Haley, 880 F.2d at 1150. Barsy either owns or has a substantial third-party interest in the 18 ownership of each of the entities, and manages each of the companies. 19 Further, the court finds at the second step of this analysis that defendants are alter-egos. The 20 NLRB has already deemed Seguro, Sequoia LLC, and Sequoia to have “single-employer” status. 21 (Doc. #34, ex. 15, pg. 2). As noted above, the NLRB single-employer analysis is identical to the test 22 the Ninth Circuit performs to determine whether a business is an alter-ego of another. Operating 23 Engineers, 717 F. Supp. at 699. Further, defendants do not challenge, nor dispute, the NLRB ruling, 24 and courts generally do not disturb such NLRB rulings. See Packard Motor Car Co. v. NLRB, 330 25 U.S. 485, 491 (1947) (“[T]he decision of the Board, if not final, is rarely to be disturbed.”). As such, 26 this court finds that Seguro, Sequoia, and Sequoia LLC are alter-egos. 27 ... 28 James C. Mahan U.S. District Judge -5- 1 Though Underground was not a part of the NLRB’s single-employer original determination, 2 the record demonstrates that the company is managed by Barsy and is operated out of the same 3 location as the other three entities. Further, defendants do not dispute that they placed Sequoia 4 employees on Underground’s payroll simultaneously, demonstrating a centralized control of 5 employees. Thus, it is clear that Underground meets the single-employer criteria and is an alter-ego 6 of Sequoia and Sequoia LLC. 7 This court comes to the same conclusion when it analyzes the relationship between the 8 defendants under the broader criteria of the NLRB (identical management, business purpose, 9 operation, equipment, customers, supervision, and ownership). Seguro and Underground are alter- 10 egos of Sequoia and Sequoia LLC. The NLRB established–and defendants do not dispute–that 11 Seguro, Sequoia, and Sequoia LLC each perform the same work and contract employees between 12 one another. 13 It is clear that defendants share a common business purpose and operation in addition to 14 being under the same supervision and ownership. Underground also performs work similar to that 15 of Seguro, Sequoia, and Sequoia LLC, and defendants have not shown a clear distinction between 16 any of the companies. Each company works as underground contractors in public works, utilizes the 17 same equipment, and even employs the same workers. 18 Barsy contends that the employees at issue in this dispute worked for Seguro before he 19 entered into the agreement with Local 12. (Doc. #39, pg. 30, at ¶ 10). For this reason, Barsy claims, 20 Seguro cannot be the alter-ego of Sequoia and Sequoia LLC because the non-union companies lost 21 employees to the union companies. 22 When an employer entered into an MLA is not the focus of the alter-ego test. Rather, the 23 Ninth Circuit considers whether an entity is “a disguised continuance of the same business” or if 24 there was an “attempt to avoid the obligations of a collective bargaining agreement through a sham 25 transaction or technical change in operations.” Dariano, 869 F.2d at 518. Defendants do not argue 26 that they did not later place employees dispatched by Local 12 on Seguro and Underground’s payroll 27 after the execution of the MLA. Doing so, in fact, constitutes a technical change in operations. 28 James C. Mahan U.S. District Judge -6- 1 In following the guidelines as set forth by the Ninth Circuit and NLRB, this court finds that 2 defendants are alter-egos of Sequoia and Sequoia LLC. Accordingly, it is clear that Seguro and 3 Underground are equally liable under the MLA and are liable for unpaid fringe benefits and related 4 damages. 5 Defendants, however, claim that several material facts are still in dispute, thus preventing 6 summary judgment. First, plaintiffs claim that Seguro is an “umbrella company.” In contrast, 7 defendants claim that Seguro is a “management company that provides management services to 8 certain companies [and has] no ownership interest in any of the companies it manages.” Second, 9 defendants claim that the four companies at issue do not share common office staff, but that “Seguro 10 provides office management services, for a fee, to the other entities.” Third, defendants argue that 11 plaintiffs’ claim that Seguro obtained equipment from Sequoia LLC for approximately $600,000 12 under market value did not include the fact that Seguro also assumed $738,673.56 in liability. 13 As noted earlier, the NLRB has already found that Seguro, Sequoia, and Sequoia LLC have 14 single-employer status, and defendants’ arguments here do not challenge that ruling. See Packard, 15 330 U.S. 485, 491 (“Our power of review also is circumscribed by the provision that findings of the 16 Board as to the facts, if supported by evidence, shall be conclusive.”). Accordingly, this court finds 17 these arguments immaterial to the present motion for summary judgment. 18 In considering plaintiffs’ motion for summary judgment, this court also notes that defendants 19 failed to address several material facts in plaintiffs’ motion for summary judgment. For instance, 20 defendants do not negate or even address plaintiffs’ claims that employees were dispatched to 21 Sequoia or Sequoia LLC and then placed on Seguro or Underground’s payroll. Defendants also do 22 not dispute that such employees performed work covered by the MLA while on Seguro or 23 Underground’s payroll. 24 2. Defendant’s motion for partial summary judgment 25 Defendants’ motion for partial summary judgment asserts that damages should be restricted 26 to dates prior to July 1, 2010. Defendants contend that the MLA contained a clause that would cause 27 the agreement to expire on June 30, 2010 as follows: 28 James C. Mahan U.S. District Judge -7- 1 “...[this agreement] shall continue from year-to-year . . . unless either of the collective 2 bargaining representatives shall give written notice to the other of a desire to change, amend, 3 modify or terminate this agreement...” 4 5 6 (Doc. #39, pg 21). On April 6, 2010, plaintiffs sent a letter to defendants stating that “Local 12 does not wish to include Sequoia Electric LLC in future multi-employer bargaining.” 7 Plaintiffs and defendants agree that plaintiffs’ letter effectively ended the agreement on June 8 30, and that defendants are not liable for payments after the expiration of the MLA. Plaintiffs only 9 have one objection to the motion for partial summary judgment. Plaintiffs assert that they should not 10 be required to recalculate the benefits owed by subtracting claimed amounts after the June 30, 2010, 11 expiration of the contract. (Doc. #50, pg. 2). 12 The Ninth Circuit has consistently held that the burden shifts to the employer to “show the 13 extent of the unreported covered work” once the trustees show that the employer failed to keep 14 adequate records. Motion Picture Indus. Pension and Health Plans v. N.T. Audio Visual Supply, Inc. 15 259 F.3d 1063, 1066 (9th Cir. 2001); see also Operating Engineers Pension Trust v. Moulder Bros. 16 Inc., 1991 U.S. App. Lexis 16187, at *4 (9th Cir. 1991). (“[The employer] furnished no invoices 17 during the 1988 audit, and only furnished some invoices during the 1989 audit. [The employer] has 18 the burden of coming forward with the invoices to prove any inaccuracy in the audits.”); Brick 19 Masons Pension Trust v. Industrial Fence & Supply, Inc., 839 F.2d 1333, 1338 (9th Cir.1988) 20 (“[O]nce the trustees produce evidence raising genuine questions about the accuracy of the 21 employer's records . . . the burden shifts to the employer to come forward with evidence of the 22 precise amount of work performed.”). 23 Here, the audit revealed–and defendants do not challenge–that defendants failed to keep 24 proper records by under-reporting hours employees worked on Sequoia and Sequoia, LLC’s payroll. 25 (Doc. #34, Ex. 23-A). Defendants also do not dispute that they placed union workers on non-union 26 payrolls, thereby failing to properly report hours to Local 12. Thus, the burden shifts to defendants 27 to recalculate the damages owed. Brick Masons, 839 F.2d at 1338. 28 James C. Mahan U.S. District Judge -8- 1 Accordingly, this court grants defendants’ motion for partial summary judgment, restricting 2 the damages owed to dates prior to July 1, 2010. However, defendants will be responsible for 3 recalculating damages. 4 Accordingly, 5 IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that plaintiffs Trustees of the 6 Operating Engineers Pension Trust, et al’s motion for summary judgment (doc. #34) be, and the 7 same hereby is, GRANTED. 8 IT IS FURTHER ORDERED that defendants Sequoia LLC, et al’s motion for partial 9 summary judgment (doc. #46) be, and the same hereby is, GRANTED. However, defendants are 10 responsible for recalculating damages owed. 11 IT IS FURTHER ORDERED that defendants must recalculate the amount due and submit 12 the recalculation to the court within 7 days of entry of this order. Plaintiffs may respond with any 13 corrections within 7 days of defendants’ recalculation. 14 DATED August 1, 2012. 15 16 UNITED STATES DISTRICT JUDGE 17 18 19 20 21 22 23 24 25 26 27 28 James C. Mahan U.S. District Judge -9-
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