United States District Court, N.D. Illinois, Eastern Division
Midwest Operating Engineers Fringe Benefit Funds, et al., Plaintiffs,
Sulzberger Excavating Co., et al., Defendants.
MEMORANDUM OPINION AND ORDER
S. Shah, United States District Judge
Operating Engineers Fringe Benefit Funds and the Construction
Industry Research and Service Trust Fund sue defendants
Sulzberger Excavating, Inc., and SulzCo, LLC, under the
Employee Retirement Income Security Act, 29 U.S.C.
§§ 1132, 1145, for delinquent
contributions. The International Union of Operating
Engineers, Local 150, AFL-CIO sues defendants for union dues
under the Labor Management Relations Act, 29 U.S.C. §
185. Plaintiffs and defendants cross-move for summary
judgment solely on the issue of whether SulzCo is liable for
SEI's obligations to the union and the funds. For the
following reasons, plaintiffs' motion for summary
judgment is denied and defendants' motions for summary
judgment are granted.
judgment is appropriate if the movant shows that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law. Spurling v. C
& M Fine Pack, Inc., 739 F.3d 1055, 1060 (7th Cir.
2014); Fed.R.Civ.P. 56(a). A genuine dispute as to any
material fact exists if “the evidence is such that a
reasonable jury could return a verdict for the nonmoving
party.” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986). The party seeking summary judgment has
the burden of establishing that there is no genuine dispute
as to any material fact. See Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). “Cross-motions
must be evaluated together, and the court may not grant
summary judgment for either side unless the admissible
evidence as a whole-from both motions-establishes that no
material facts are in dispute.” Bloodworth v.
Village of Greendale, 475 Fed. App'x 92, 95 (7th
Excavating, Inc. was an excavating company that conducted
business in the area around Muscatine, Iowa.  ¶ 1.
SEI's president, Jerry Sulzberger, founded the company in
1960. Id. ¶ 4;  ¶ 3. Jerry was the
majority shareholder of SEI, owning 55%, with the remaining
shares divided among his five sons.  ¶ 7; 
¶ 8. Throughout the years, Jerry employed various family
members at SEI, including his son Barry Sulzberger, who was
SEI's Vice President.  ¶¶ 8, 10. Jerry and
Barry are members of the International Union of Operating
Engineers, Local 150, AFL-CIO (Local 150), and SEI was a
signatory to contracts with the union.  ¶ 8; 
¶¶ 6-7. Jerry also employed his grandson
(Barry's son), Zack Sulzberger, as an estimator and
Jerry's grand-nephew, Tyler Sulzberger, in accounting.
 ¶¶ 13-14;  ¶¶ 10-11. The parties
dispute the extent of Tyler's role,  ¶ 14; 
¶ 10, although there is no dispute that his CFO title
was self-appointed. [45-2] at 8:22-9:4.
2014, Jerry had made it clear that he was retiring. 
¶¶ 12, 22;  ¶ 14;  ¶ 17. The
following year, SEI stopped bidding on jobs and began slowly
selling its equipment (there is some dispute as to whether
SEI began selling large pieces of equipment even earlier,
 ¶ 14), beginning a drawn-out liquidation process to
minimize the tax consequences of winding up the business.
 ¶¶ 12, 42;  ¶ 14. In May 2016, Jerry
informed Local 150 that SEI was shutting down.  ¶ 9.
By September 2016, SEI had sold most of its machines and had
entered into a contract to sell the office and yard.
Id. ¶ 14. Jerry was the only employee left, and
he expected SEI to be completely liquidated by the end of
Jerry announced his retirement, Zack and Tyler began
discussing carrying on in the excavating industry with their
own, new company, instead of purchasing SEI.  ¶ 19.
Zack and Tyler intended to start a non-union company. 
¶ 15. The parties dispute whether the men were concerned
about their employment if SEI closed.  ¶ 16; 
¶¶ 9-10. The parties agree that Tyler had observed
some “bad blood” and “family drama”
at SEI, that he viewed starting a new company as a
“clean slate, ” free from SEI's tarnished
reputation, and that Zack thought the business was a
“mess.”  ¶ 11. Plaintiffs dispute that
these were the sole (or main) reasons for starting a new
company.  ¶¶ 13-14;  ¶¶ 10-12.
The parties also dispute whether Barry was interested in
buying SEI and whether Zack and Tyler thought that Jerry
would refuse to let anyone else run SEI.  ¶ 15; 
¶¶ 13-14;  ¶ 13. According to Jerry, Zack
and Tyler did not want to buy SEI because they did not want
to assume SEI's union contract, which made the company
“basically like a dinosaur” and made it difficult
to compete with local, largely non-union competitors. 
¶ 15;  ¶ 14; [45-2] at 87:22-88:1. Also,
Tyler's father, Tim Sulzberger (Jerry's nephew),
would not assist with financing and start-up unless the new
company was non-union. [45-3] at 5:8-13.
2014, Zack and Tyler formed SulzCo, LLC.  ¶ 20; 
¶¶ 5, 17;  ¶ 8. Zack is SulzCo's
president, estimator, and project manager, and Tyler is Vice
President and CFO.  ¶ 5. At the time they registered
SulzCo, Zack and Tyler were still on full-time payroll at
SEI. Id. ¶ 13. Zack was employed by SEI until
early May 2015.  ¶ 36;  ¶¶ 10, 28.
Tyler continued at SEI until late June 2015. 
¶¶ 10, 28. From June 2015 to June 2016, he assisted
SEI with payroll and accounting matters as a consultant,
billing SEI around $16, 000 for his services and working on
SEI computers (though he occasionally logged in to SEI's
computers remotely).  ¶ 37;  ¶¶ 10,
35;  ¶ 20. According to Jerry, Tyler was helping SEI
until Jerry could find a replacement because he was
“caught pretty flat footed.”  ¶ 20. At
some point in 2015, Zack and Tyler told Jerry that SulzCo had
been formed and Jerry reportedly was “fine with
it.”  ¶ 27.
early 2015, Zack and Tyler drafted a business plan, which was
based off of SEI's work and research tools and which
listed many of the same competitors. Id.
¶¶ 23-24. The business plan included arrangements
to buy construction equipment from SEI because SEI was going
out of business. Id. ¶ 25. Zack and Tyler also
considered storing SulzCo's equipment at Barry's
(Zack's father's) yard. Id. The business
plan was drafted on either Tyler's personal computer or
computers purchased by Zack and Tyler for SulzCo.  ¶
19. In February 2015, Tyler, Zack, and Tyler's father,
Tim Sulzberger (Jerry's nephew), presented the business
plan to a bank. Id. ¶ 18. To obtain loans for
starting up SulzCo and purchasing equipment, Tyler and Zack
put up their personal assets as collateral.  ¶¶
18, 37;  ¶ 20. Tim also took out a personal loan to
purchase SulzCo's first pieces of equipment, and he
personally guaranteed loans for purchasing equipment and
obtaining an operating line of credit for SulzCo. 
¶¶ 29-30;  ¶ 18;  ¶¶ 21-22.
Eventually, in 2016, SulzCo adopted an operating agreement
giving Tim one-third ownership in SulzCo in exchange for
financing; Zack and Tyler each own one-third as well. 
¶ 32;  ¶ 1. Tyler, Zack, and Tim do not own any
interest in SEI.  ¶ 5. Jerry and Barry do not own
any interest in SulzCo. Id. SEI has never applied
for, guaranteed, or co-signed any application for a loan, or
line of credit, for SulzCo.  ¶ 49. In late 2014 or
early 2015, Jerry offered to assist Zack and Tyler with
securing bonding for SulzCo projects, but nothing ever came
of it, and the parties dispute whether Jerry's offer was
serious.  ¶ 22.
spring of 2015, SEI had stopped bidding for work and focused
on finishing lingering projects. Id. ¶ 14.
Unbeknownst to Jerry, SulzCo began bidding on work in April
2015. Id. ¶¶ 27-28; [39-1] at 45:14-22.
SulzCo performed work in SEI's and Local 150's
geographic jurisdiction, near Muscatine, Iowa (where both SEI
and SulzCo are based).  ¶¶ 3-5. Zack worked as
an estimator, and Tyler helped with numbers, bid bonds when
necessary, insurance, and packing bids. Id. ¶
28. Barry also helped Zack with estimates. Id.
SulzCo bid on projects similar to those SEI performed, for
similar or the same customers. Id. ¶¶ 28,
33. Plaintiffs and defendants dispute whether SulzCo performs
the exact same work as SEI. Id. ¶ 5. Defendants
contend that they only have three pieces of heavy equipment
(fewer than SEI) and have started out only doing small repair
jobs, though they plan to expand to do work similar to SEI.
Id. SEI has never assigned an excavating job to
SulzCo.  ¶ 45. To generate business for SulzCo, Zack
and Tyler advertised their company by making calls to
engineers, businesses, and cities and by taking out a
phonebook ad.  ¶ 34.
2015, Zack and Tyler purchased insurance for the company and
SulzCo hired some former SEI employees, including Chad
Estabrook (a Local 150 member), and two others. Id.
¶¶ 20-21, 38;  ¶¶ 8-9. None of these
new employees were directly hired from SEI. For example,
Estabrook left SEI in December 2014 and did not start at
SulzCo until May 2015.  ¶¶ 37-38. In October
2015, SulzCo hired Zack's brother, Jeremy, who had also
previously worked for SEI.  ¶ 40. Zack and Tyler
were interested in hiring at least three other SEI employees,
but because they were Local 150 union members, Zack and Tyler
did not think they would be interested in working for
non-union SulzCo. Id. ¶ 39. Tyler drafted
at-will, non-union employment agreements for SulzCo's
employees, and he established SulzCo's pay scales based
on non-union pay rates in the area construction industry.
Id. ¶¶ 41-42. The Local 150 operator scale
at SEI was $29.40 per hour, but SulzCo offered operator rates
from $18.00 to $22.00 per hour based on years of experience.
Id. ¶ 42. SulzCo, operating non-union, did not
pay the union pension or retiree medical savings plans
benefits for its employees, including Estabrook (a Local 150
member). Id. ¶ 44. In September 2015, SulzCo
paid Estabrook a $4, 069.79 bonus-another employee was given
a bonus as well. Id.;  ¶ 22. Plaintiffs
assert that this bonus effectively compensated Estabrook for
unpaid union pension and retiree medical savings plan
contributions, minus SulzCo's health insurance
contributions for Estabrook.  ¶ 44. Defendants
assert that this was an incentive bonus for project
first project also began in May 2015 and was a small repair
job for a former customer of SEI. Id. ¶ 45;
 ¶ 24. Tyler, although still a full-time SEI
employee, went to the SulzCo jobsite to photograph the
start-up.  ¶ 46. (At that time, Zack was no longer
employed by SEI. Id. ¶ 10.) That same month, a
local newspaper published an online news story, interviewing
Zack and Tyler about SulzCo. Id. ¶ 36. In the
article, Zack and Tyler stated that they were
“carry[ing] on” the business and the family name.
Id.; [45-6] at 10-11. SulzCo did not request any
clarifications to the article.  ¶ 36. The article
also stated that Zack and Tyler decided to move forward with
a new company and a new name because they had no ownership
stake in SEI, and Jerry's children were themselves
approaching retirement age and uninterested in continuing
SEI. [45-6] at 11.
same month, SulzCo also began purchasing equipment from SEI,
using money from a loan obtained by Tim.  ¶ 49. From
May to October 2015, SulzCo owned just three pieces of heavy
equipment, all purchased from SEI.  ¶ 34. Tyler
prepared for SEI, and executed on SulzCo's behalf, a bill
of sale for SulzCo's purchase of a backhoe and excavator
from SEI.  ¶ 49. SulzCo purchased the backhoe for
$20, 000 and the excavator for $25, 000, although SEI had
insured this equipment at actual cash values of $22, 000 and
$45, 000, respectively. Id. ¶ 50. In October
2015, SulzCo purchased a front end loader from SEI for $27,
780. [45-7] at 36. SulzCo had previously rented the machine
from SEI for $14, 220.  ¶ 52. SEI had insured it for
$50, 000. Id.
time, SulzCo rented and purchased more equipment from SEI and
from various auctions.  ¶ 38;  ¶ 70; 
¶ 25. Jerry used auction sales prices to estimate fair
market value of the equipment SEI sold to SulzCo.  ¶
53;  24. SEI also sold equipment to other companies and
at auctions, but Jerry preferred to sell SEI's equipment
to other companies because he had been “burned”
at auctions in the ...