Unpublished Disposition, 859 F.2d 154 (9th Cir. 1988)

No. 87-2668.

United States Court of Appeals, Ninth Circuit.

Before EUGENE A. WRIGHT and POOLE, Circuit Judges, and DAVID W. WILLIAMS, District Judge.^* 

MEMORANDUM^** 

Defendants challenge a finding that Surveyors, Inc. is the alter ego of G.C. Wallace, Inc., and that they are obligated to make trust contributions pursuant to a collective bargaining agreement. Affirmed.

BACKGROUND

G.C. Wallace, Inc. (GCWI) performed engineering, architectural and design work, consulting, and project management. Approximately 10% of its business involved survey work. It was obligated under a collective bargaining agreement to make contributions to a pension trust on behalf of its union surveyors.

In 1985, George Wallace, the president of GCWI, proposed to form a nonunion survey company. He testified that the purpose was to help reduce construction costs for a major client by use of nonunion surveyors and to provide financial security for his sons.

GCWI and its president helped to form Surveyors, Inc. It engaged primarily in survey work and was not a party to a labor agreement. Mr. Wallace and GCWI advanced funds to Surveyors and signed a bank guarantee to obtain a loan. GCWI sold equipment and supplies to Surveyors, secured by an interest-bearing note. It also assigned to Surveyors two leased vehicles, but it remained liable on the leases.

Mr. Wallace selected and hired Fred Orban as president for Surveyors. A GCWI employee worked 8 to 12 hours over four months during Surveyors' startup. Kay Adams was vice-president of GCWI and of Surveyors.

In December 1985, GCWI transferred to Surveyors the survey portion of one of its contracts and declined to bid for survey work on two additional projects. Mr. Wallace helped Orban to prepare bids on these projects; Surveyors received the survey work and GCWI obtained the engineering work. After December 1985, Mr. Wallace was not involved with Surveyors and both companies bid on survey work. Surveyors' employees have not voted for union representation.

Surveyors made no contributions to the pension trusts. GCWI continued to make them and during the year that Surveyors was formed these contributions increased by 24%.

The trusts sought contributions from Surveyors under its contract with GCWI, alleging that Surveyors was the alter ego of GCWI. After a bench trial, the court found that Surveyors was the alter ego, and gave judgment for the trustees for $106,000 to cover pension fund contributions only for a limited time and not after the new corporation had become firmly established.

ANALYSIS

Defendants argue that the alter ego doctrine may not be applied here because it is restricted to situations where the signatory company first ceases its operations and the non-signatory company then succeeds to them. We need not decide if this issue was raised properly at trial.

We have applied the alter ego analysis where both the signatory and non-signatory companies coexist. See J.M. Tanaka Constr., Inc. v. NLRB, 675 F.2d 1029, 1034 (9th Cir. 1982) ("alter ego relationship may exist when only a portion of enterprise is purportedly transferred to a new owner"); Brick Masons Pension Trust v. Indus. Fence & Supply, Inc., 839 F.2d 1333, 1336-37 (9th Cir. 1988); accord Crest Tankers, Inc. v. Nat'l Maritime Union of America, 796 F.2d 234, 237-38 (8th Cir. 1986); see also Apex Decorating Co., 275 NLRB 1459 (1985). Defendants have not persuaded us that a different rule should apply here. The doctrine may be applied if sufficient evidence supports the ultimate finding.

Defendants argue that the evidence does not support the alter ego finding. We review for clear error. See Brick Masons Pension Trust, 839 F.2d at 1336.

The alter ego doctrine aims to prevent employers from avoiding their obligations under labor agreements through a mere technical change of ownership or a sham transaction. See Carpenters' Local Union No. 1478 v. Stevens, 743 F.2d 1271, 1277 (9th Cir. 1984), cert. denied, 471 U.S. 1015 (1985). In assessing whether the doctrine has been applied properly, we have examined four factors: common ownership, common management, interrelated operations, and centralized control over labor relations. See Brick Masons, 839 F.2d at 1336. No single factor is dispositive or necessary, but centralized control of labor relations is considered the most significant. J.M. Tanaka, 675 F.2d at 1033-34. Application of the doctrine turns on an examination of the particular factual circumstances. See NLRB v. Big Bear Supermarkets No. 3, 640 F.2d 924, 928 (9th Cir.), cert. denied, 449 U.S. 919 (1980).

Although alter ego is characterized as a finding of fact, it represents the court's ultimate conclusion that contractual obligations will be imposed upon a non-signatory employer. Because there is generally little direct evidence of an employer's motive or intent, we evaluate the court's findings and conclusions on the basis of inferences that may be drawn from its predicate factual findings. Where evidence suffices to support an inference that the non-signatory company was formed to avoid a labor agreement, the alter ego finding will be upheld.

The record contains evidence of substantial overlap in the ownership of GCWI and Surveyors. Kay Adams and Gary Sprinkelink owned 15% of GCWI and 25% of Surveyors. Kevin and Ira Wallace, sons of George Wallace, held a 70% interest in Surveyors and a beneficial interest in GCWI as two of four beneficiaries of a trust that owned 70% of its stock.

There is circumstantial evidence of common management, at least during the early part of Surveyor's existence. George Wallace formed Surveyors, hired its president, and provided personal and financial aid in starting the new enterprise. He arranged also for Surveyor to obtain work on a project that had been contracted previously by GCWI. From this evidence, the district court could have drawn a reasonable inference that George Wallace exercised management control over both companies.

The court found interrelatedness of operations significant. Other than the initial cooperative efforts to establish Surveyors, the evidence reflects minor interrelatedness. The companies shared a common officer, Kay Adams, and an attorney. Surveyors employed some former GCWI employees.

The court found compelling evidence that "George Wallace formulated and administered a common labor policy" for both businesses. We find little support in the record for this finding. Wallace and Orban discussed labor policy when Orban was first hired, but there is no evidence of further discussions regarding labor relations. Nor is there evidence of shared authority evincing common labor administration. Orban selected a benefits package for Surveyors' employees which was somewhat different from that offered to Wallace's employees.

As the case was presented, there was some evidence of a legitimate business decision to form a nonunion company. The evidence to support some relevant findings is not strong. But the record does include evidence indicating a sham transaction to avoid contractual obligations. There was common control, circumstantial evidence of common management and diversion of work from a union shop to nonunion employees. All four factors need not be demonstrated for an alter ego finding. See J.M. Tanaka, 675 F.2d at 1033-34.

During three days of trial, the court saw and heard 14 witnesses, evaluated credibility, and drew inferences from the evidence. We may not substitute our evaluation or reweigh the evidence. See Fed. R. Civ. P. 52(a). Some evidence is conflicting but we cannot say the finding was clearly erroneous. See Brick Masons, 839 F.2d at 1337.

The appellees are awarded reasonable attorney's fees pursuant to 29 U.S.C. § 1132(g) (2). See Operating Engineers Pension Trust v. Cecil Backhoe Serv., Inc., 795 F.2d 1501, 1508 (9th Cir. 1986).

The judgment is AFFIRMED.