In March, the Sixth Circuit applied the NLRA’s alter ego test to determine that the similar business of adult children was the alter ego of the parents’ business for purposes of imposing ERISA pension plan withdrawal liability. Trustees of Operating Engineers Local 324 Pension Fund v. Bourdow Contracting, Inc., No. 18-1491 (6th Cir. 3-21-19). The defendant company waived its objection to the application of the NLRA standard because it argued in favor of that standard to the trial court.
Moreover, according to the Court’s opinion, the facts showed that the two businesses shared common management and ownership, although the parents were not owners or managers of the new business and had been the majority owners of the bankrupt business. The new business was formed just days after the parent’s company missed their first withdrawal payment and bid for their first job days before the parent’s company filed for bankruptcy. 90% of the new business operations overlapped with 50% of the parents’ company business. Although the new business operated out of a new location, it retained over 50% of the former employees and hired the same outside advisers. The new company purchased all new equipment because the parents’ equipment was sold in bankruptcy. Almost 70% of the customers of the new company had been customers of the bankrupt company. The owners of the new company were involved in preparing the bankruptcy petition of their parents’ company and used the family name in their business name in order to capitalize on the good will created by their parents’ business. Because more factors weighed in favor of liability than against, the Court affirmed alter ego liability being imposed. The Court also rejected a res judicata defense based on the discharge in bankruptcy of the parent company’s withdrawal liability because there was not an overlap in the cause of action. The operative facts of the alter ego theory were not the same claim for withdrawal liability asserted in the bankruptcy proceeding.
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