United States District Court, D. Minnesota
Twin City Carpenters Pension Master Trust Fund, et al., Plaintiffs,
Phantom Construction Services, LLC, et al., Defendants.
Christopher L. Goodman, Amanda R. Cefalu, Anderson, Helgen, Davis & Nissen, P.A., Minneapolis, Minnesota, for Plaintiffs.
Kevin D. Hofman, Halleland Habicht PA, Minneapolis, Minnesota, for Defendants.
MEMORANDUM OPINION AND ORDER
RICHARD H. KYLE, District Judge.
Defendant Phantom Construction Services, LLC ("Phantom") performs carpentry work in the Twin Cities area. In 2002, it agreed to be bound to a collective-bargaining agreement (CBA) obligating it to make contributions to Plaintiff Twin City Carpenters Pension Master Trust Fund (the "Fund") for work performed by its employees. Phantom made the required contributions until it withdrew from the CBA in 2010, but it continued to perform carpentry work thereafter in the CBA's geographic area. As a result, the Fund asserted that Phantom had incurred "withdrawal liability" under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq.  After Phantom failed to pay, the Fund commenced this action, naming Phantom, Scott Steffen (Phantom's founder and operator), and several affiliated entities as Defendants. Presently before the Court is the Fund's Motion for Summary Judgment. For the reasons that follow, its Motion will be denied.
Viewed in the light most favorable to Defendants, the record reveals the following facts. Steffen and a partner, Thomas Rushing, formed Phantom as a limited liability company in 1999, with Steffen serving as its "chief manager." At the same time, the two formed several affiliated entities also performing construction services - namely, Defendants CR Facilities Services, LLC ("CR Facilities"), SJS Drywall, LLC ("SJS"), Carver Commercial Doors, LLC ("Carver"), and J&J Holdings Group, LLC ("J&J"). In 2000, Phantom, CR Facilities, Carver, and SJS were merged into J&J, with J&J becoming each of those companies' sole member. J&J acts as a sort of umbrella company, with the remaining entities tasked with specific types of construction work on its projects - carpentry (Phantom), drywall (SJS), clean up (CR Facilities), etc. - and their revenue filtering through J&J. Steffen bought out Rushing's interest in J&J in 2004 and became its sole member.
Through 2004, Tim Pauly served as the bookkeeper for J&J and its affiliates and also was responsible for corporate documentation, including annual corporate renewals required to be filed with the Minnesota Secretary of State under Minnesota Statutes § 322B.960. According to Pauly, even though Phantom, CR Facilities, Carver, and SJS were merged into J&J in 1999, they maintained separate bank accounts and were separately collateralized, and he kept distinct accounting records for each. In addition, each earned an annual profit during his tenure. After Pauly left his job in 2004, Steffen continued to maintain separate bank accounts and records for the companies. However, he did not know he was required to file annual renewals, and hence the Minnesota Secretary of State administratively terminated the companies in 2005. Steffen was unaware of this, however, and the businesses continued operating.
In the meantime, on September 10, 2002, Phantom signed an "independent Agreement" pursuant to which it agreed to be bound to the terms of a CBA between the North Central States Regional Council of Carpenters (the "Union") and the Carpentry Contractors Association. One such term required it to make fringe-benefit contributions - for pension, vacation, health, and other benefits - on behalf of its Union employees who performed carpentry work in the geographic area covered by the CBA. It is undisputed Phantom employees performed such work over the ensuing years, and Phantom paid all required contributions to the Fund.
In January 2010, Phantom informed the Union that it was "terminating the collective bargaining agreement" as of May 1, 2010. Nevertheless, it continued to perform carpentry work covered by the CBA until well into 2012. Accordingly, in September 2012 the Fund wrote Phantom and demanded it pay $219, 100 in withdrawal liability, in 28 quarterly installments of $9, 263. Phantom requested review of the Fund's calculation, and the Fund responded in January 2013 that its "actuary has reviewed the calculation... and has not found any error." Phantom failed to remit any of the required monthly installments thereafter.
In April 2013, the Fund commenced this action against Phantom and Steffen, asserting that Phantom was liable for the withdrawal liability and Steffen also was liable because Phantom had been administratively terminated in 2005, rendering him a "sole proprietor" when providing carpentry services under the Phantom name. (Compl. ¶¶ 30, 36.) In response, Phantom acknowledged it owed the amount calculated by the Fund, plus interest, liquidated damages, attorney fees, and costs. (See Answer (Doc. No. 7) ¶ 23.) But it and Steffen disputed that he shared any responsibility for the withdrawal liability. Indeed, according to Steffen, he was surprised by the Complaint's allegation that his companies had been administratively terminated and so, shortly after being served with process, he retroactively reinstated all of his companies by filing the required forms and paying the required fees.
Discovery then commenced, during which the Fund learned about Steffen's other companies identified above (SJS, CR Facilities, Commercial Door, J&J, and Wyaz) and the services they performed. It then amended its Complaint to name these additional entities as Defendants, asserting that they, too, were jointly and severally liable for the withdrawal liability because they were under Steffen's "common control." (2d Am. Compl. ¶¶ 56-57.) The Fund also added a claim against Steffen to pierce the veil of all these companies, alleging he used them as a "mere facade for [his] individual dealings." (Id. ¶ 77.) In response, the corporate Defendants acknowledged responsibility for Phantom's withdrawal liability, but both they and Steffen continued to maintain he could not be held personally responsible for it.
With discovery complete, the Fund now moves for summary judgment. Because the corporate Defendants have acknowledged their shared responsibility for the amount of withdrawal liability assessed by the Fund (plus interest, liquidated damages, fees, and costs), the only remaining issue is whether Steffen may be held personally ...