The opinion of the court was delivered by: ASHMAN
On March 2, 1995, Plaintiffs, Chicago District Council of Carpenters Pension Fund, Chicago District Council of Carpenters Welfare Fund, and the Chicago and Northeast Illinois District Council of Carpenters Apprentice and Trainee Program ("the Funds"), filed their complaint alleging that Defendants, Vacala Masonry, Inc ("VMI") and Vacala Construction, Inc. ("VCI"), breached a collective bargaining agreement signed by VMI as a result of the companies' failure to make monetary contributions to the Funds for each hour worked by VMI's and VCI's carpenter employees and its non-union subcontractors and for refusing to allow the Funds access to VCI's books to verify its compliance with the terms of the agreement. The Funds effectively allege that VCI is the "alter ego" of VMI and is thus bound by the terms of VMI's collective bargaining agreement. Defendants move for summary judgment based on their contention that VCI is not, as a matter of law, the alter ego of VMI. The parties have consented in writing to the jurisdiction of this Court.
The collective bargaining agreement at issue in this case prohibits employers from subcontracting jurisdictional work to non-union subcontractors. (Funds' 12(N) Statement, P 5). If an employer hires a non-union subcontractor to perform jurisdictional work, the employer must either (1) require the subcontractor to be bound by the terms of the agreement or (2) assume responsibility for reporting the hours worked by the subcontractor's carpenters and for paying contributions to the Funds based on those hours. (Funds' 12(N) Statement, P 5). If VCI is the alter ego of VMI, it would be subject to the terms of the collective bargaining agreement, and would thus owe the Funds money for contributions it would have been obligated to make under the terms of that agreement for nonunion employees who performed work within the scope of the union's jurisdiction. Additionally, VCI would be obligated to allow the Funds to audit its books as part of the Funds' periodic audits.
VCI and VMI are owned by Pat and Chuck Vacala.
(Defendants' 12(M) Statement, PP 12-13, 20-22, 30; Funds' Response to Defendants' 12(M) Statement ("Funds' Response"), PP 12-13, 20-22, 30). Pat is the sole shareholder and President of VCI while Chuck and Pat are the majority shareholders
of VMI. VCI was incorporated in 1980 and has operated as a general contractor at all relevant times. (Defendants' 12(M) Statement, PP 12, 14-15, Funds' Response, PP 12, 14-15). VCI has never been a signatory to any union agreements and has never executed any agreement with the Carpenter's Union. (Defendants' 12(M) Statement, P 17; Funds' Response, P 17).
Until recently, Chuck Vacala was VMI's President and Pat Vacala was VMI's secretary.
(Defendants' 12(M) Statement, P 22; Funds' Response, P 22). As VMI's president, Chuck Vacala was responsible for the day-to-day running of VMI, including bidding on, obtaining, scheduling, and overseeing jobs and all hiring and firing. (Defendants' 12(M) Statement, P 24; Funds' Response, P 24). Pat Vacala's involvement with VMI's operations was limited to signing checks and other papers when Chuck was not available, providing general business advice when asked and meeting with Chuck on a monthly basis to review the financial performance of VMI. (Defendants' 12(M) Statement, PP 27-29; Funds' Response, PP 27-29).
Chuck Vacala worked for VCI from its inception until 1990, when he broke off to form his own company, VMI, to perform work as a masonry subcontractor. (Defendants' 12(M) Statement, PP 2, 12, 20; Funds' Response, PP 2, 12, 20). Although Pat helped Chuck form VMI, Chuck ultimately intended to buy out his brother's interest. (Defendants' 12(M) Statement; P 21; Funds' Response, P 21). Chuck ran VMI out of his house and from the field until 1995, when VMI acquired its own formal office space by renting space from Pat. (Defendants' 12(M) Statement; P 31; Funds' Response, P 31). During the time VMI was being run out of Chuck's home and thereafter, VCI's office staff helped VMI with its paper work and billed VMI for any time thus spent. (Defendants' 12(M) Statement, PP 58-60, 64; Funds' Response, PP 58-60, 64).
VMI has been a signatory to agreements with the Laborer's and Bricklayer's Unions from its incorporation, but did not become signatory to the agreement with the Carpenter's Union at issue in this case until October of 1993. (Defendants' 12(M) Statement, PP 2-3, 23, 36; Funds' Response, PP 2-3, 23, 36). VMI became signatory to the Carpenter's Union agreement in an effort to assist one of VCI employee's, Dean Pfaff. (Defendants' 12(M) Statement, P 42; Funds' Response, P 42). Pfaff, a member of the Carpenter's Union, was hired by VCI in early 1993. (Defendants' 12(M) Statement, P 38; Funds' Response, P 38). Pfaff knew that VCI was not a signatory to the Carpenter's Union agreement when he began to work for VCI; however, at some point, he expressed concern about losing his union benefits. (Defendants' 12(M) Statement, P 39; Funds' Response, P 39).
Pat and Chuck discussed this problem and came up with a solution that would be beneficial to both VMI and VCI. (Defendants' 12(M) Statement, PP 40-41; Funds' Response, PP 40-41). Pursuant to this discussion, VMI became signatory to an agreement with the Carpenter's Union and Pfaff went to work for VMI. (Defendants' 12(M) Statement, P 40; Funds' Response, P 40). VMI also hired additional union carpenters and then leased Pfaff and the others back to VCI on an as needed basis. (Defendants' 12(M) Statement, PP 40-41; Funds' Response, PP 40-41). This arrangement enabled Pfaff to retain his benefits and allowed VMI to maintain its own contingent of carpenters, which it could then lease to VCI. (Defendants' 12(M) Statement, PP 40-41; Funds' Response, PP 40-41).
Most of the work performed by VMI's carpenters was done under the leasing agreement with VCI. (Funds' 12(N) Statement, P 13; Defendants' Response, P 13). When VMI employees were leased to VCI, they worked under the supervision of VCI superintendents, who directed their work. (Defendants' 12(M) Statement, P 55, Funds' Response, P 55). Additionally, when VCI leased employees from VMI to perform work at construction sites where VCI was the general contractor, VCI occasionally provided tools for the leased employees if needed. (Funds' 12(N) Statement, P 10; Defendants' Response to Funds' 12(N) Statement ("Defendants' Response"), P 10).
Work done for VCI represents a sizable portion of VMI's income. From 1990-1993, approximately 50% of VMI's work was the result of subcontract work done under lease to VCI. (Defendants' 12(M) Statement, P 77; Funds' Response, P 77). In 1994, VMI completed four jobs worth approximately $ 680,000, three of which were jobs where VCI was the general contractor. (Defendants' 12(M) Statement, P 78; Funds' Response, P 78). Through October 31, 1995, VMI had completed 18 jobs totalling approximately $ 524,000, with VCI the general contractor on 7 of the 18 jobs. (Defendants' 12(M) Statement, P 79; Funds' Response, P 79). However, VCI was the general contractor on all twelve of the jobs in progress as of October 31, 1995. (Funds' 12(N) Statement, P 12; Defendants' Response, P 12). From October 1, 1993 until September 30, 1995, VCI paid VMI $ 758,915.09. (Funds' 12(N) Statement, P 12; Defendants' Response, P 12). During this same period, VCI paid VMI $ 19,957 for leased non-supervisory employees and $ 68,645 for leased carpentry employees. (Funds' 12(N) Statement, P 12; Defendants' Response, P 12).
VMI also received monetary advances from VCI, which was the only company to give VMI this type of advance. (Funds' 12(N) Statement, P 19; Defendants' Response, P 19). Other general contractors paid VMI only after the general contractor itself was paid. (Funds' 12(N) Statement, P 19; Defendants' Response, P 19). However, any advances VCI made to VMI were always repaid. (Defendants' 12(M) Statement, P 72; Funds' Response, P 72).
Whenever VMI leased employees to VCI, VMI paid the required contributions to the Carpenter's Union fringe benefit funds for all hours worked by those employees while leased to VCI. (Defendants' 12(M) Statement, P 54; Funds' Response, P 54). However, Plaintiffs contend that Defendants owe them $ 107,937.67 in unpaid contributions.
(Funds' 12(N) Statement, P 7). This breaks down to $ 105,424.50 in contributions Plaintiffs claim VCI, if found to be VMI's alter ego, would owe for jurisdictional work performed by non-union individuals and subcontractors employed by VCI and $ 2,512.33 in contributions Plaintiffs claim VMI owes for allegedly under-reporting hours worked by two of its own employees in October, November and December of 1993. (Funds' 12(N) Statement, PP 7-8; Funds' Response, P 49).
II. Standard for Summary Judgment
Summary judgment is proper only when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). In ascertaining whether summary judgment is appropriate, the Court must view the evidence, and draw all reasonable inferences therefrom, in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986); Kennedy v. United States, 965 F.2d 413, 417 (7th Cir. 1992). Summary Judgment is appropriate where the non-moving party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp., 477 U.S. at 322. Consequently, motions for summary judgement must be analyzed in light of both the applicable substantive law and the question of whether a reasonable jury could return a verdict in the non-movant's favor. Checkers, Simon & Rosner v. Lurie Corp., 864 F.2d 1338, 1344 (7th Cir. 1988). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-movant party, there is no genuine issue for trial" and summary judgment must be granted. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986).
A. The Unlawful Motive Requirement
Defendants contend that VMI had no unlawful motive or intent to avoid the terms of its collective bargaining agreement. Defendants assert that the starting point in this analysis is October 1, 1993. Prior to this date, Defendants were not signatories to any agreement with the carpenter's union. Defendants claim that VMI's actions on and after this date, namely, joining the carpenter's union and having VCI employees who were members of the carpenter's union become VMI employees who were then leased back to VCI, is not evidence of intent to avoid the terms of a bargaining agreement because there was no preexisting agreement to be avoided.
Furthermore, Defendants contend that their actions, contrary to avoiding the terms of any bargaining agreement, resulted in VMI assuming obligations it did not previously have. By signing up with the union, VMI became liable for making contributions to the Fund, an action which benefitted the Funds by giving them contributions they otherwise would not have had. Defendants claim this result is the antithesis of the unlawful motive or intent necessary to an alter-ego finding. Finally, Defendants contend there must be some evidence that the lease agreements between VCI and VMI helped VMI, the signatory company, evade its union obligations. Defendants allege that VMI has complied with its union obligations, paying contributions for the hours worked by its carpenters, including hours those employees worked while leased to VCI.
The Plaintiffs' contention that VCI is the alter ego of VMI and thus, should be held liable for its failure to comply with the terms of VMI's collective bargaining agreement forms the gravamen of Plaintiffs' claim. Under the alter-ego doctrine, two nominally distinct employers will be deemed a single entity to "'prevent an Employer from gaining an unearned advantage in his labor activities simply by altering his corporate form.'" Central ...