Twin City Pipe Trades Service Association, Inc., Plaintiff- Appellee,
Wenner Quality Services, Inc., a Minnesota corporation, doing business as Mr. Rooter of South Central MN, Defendant-Appellant.
Submitted: May 9, 2017
from United States District Court for the District of
Minnesota - Minneapolis
SMITH, Chief Judge, COLLOTON and KELLY, Circuit Judges.
COLLOTON, Circuit Judge.
City Pipe Trades Service Association is attempting to recover
unpaid fringe-benefit contributions allegedly due under a
collective bargaining agreement. The district court granted
summary judgment for the Association on the ground that
Wenner Quality Services, Inc., was precluded by a previous
lawsuit from disputing liability for the contributions as an
alter ego of a signatory of the agreement. The court then
awarded damages and injunctive relief to the Association. We
agree that the Association was entitled to judgment on
liability, but we conclude that the court erred in awarding
certain damages to the Association. Accordingly, we affirm in
part and reverse in part.
2004, Shawn and Sara Wenner purchased Mankato Plumbing &
Heating, Inc. The Wenners were Mankato Plumbing's only
shareholders. Mankato Plumbing was party to a collective
bargaining agreement with two local unions for plumbers and
pipefitters. In 2006, the Wenners purchased a Mr. Rooter
franchise and signed the franchise agreement individually as
the designated franchisees. They operated the franchise using
Mankato Plumbing's facility, employees, and equipment,
while Mankato Plumbing paid fringe-benefit contributions
pursuant to the CBA on behalf of Mr. Rooter.
2010, the Wenners reorganized their businesses. At the end of
January, Mankato Plumbing ceased operations, and the Wenners
formed S&S Thermo Dynamics, Inc., to take over the
commercial plumbing operations. Around that same time, the
Wenners formed Wenner Quality Services, Inc., (WQS) to
provide residential plumbing services. Shawn wrote to the
unions that Mankato Plumbing was ceasing operations, but that
S&S would assume Mankato Plumbing's responsibility
under the CBA. In a separate letter, Shawn informed the
unions that Mr. Rooter would be discontinuing its operations;
in fact, however, WQS continued to use the Mr. Rooter name in
its residential plumbing operations.
2011, the Association, which served as a trustee responsible
for collecting the fringe-benefit contributions due under the
CBA, discovered that Mr. Rooter was still operating. It sued
S&S, Mankato Plumbing, and Shawn Wenner under the
Employee Retirement Income Security Act, 29 U.S.C.
§§ 1132, 1145, alleging that they had failed to pay
fringe-benefit contributions arising from work performed for
Mr. Rooter from February 2010 onward. The Association did not
sue WQS in the S&S Litigation, because it was not aware
of WQS until Shawn Wenner disclosed that entity's
existence after the deadline to amend pleadings had passed.
defendants in the S&S Litigation moved for summary
judgment, and the district court held a hearing. The court
granted summary judgment for Mankato Plumbing, because
Mankato Plumbing was no longer doing business, and there was
no claim that the entity failed to make contributions before
it ceased operations in January 2010. The court, however,
denied S&S's motion for summary judgment and
effectively granted summary judgment for the Association on
the issue of liability. The court concluded that S&S, as
the successor signatory to the CBA, and WQS, as Mr.
Rooter's operator, were alter egos of one another. In
other words, the court determined that the companies were
independent of each other in form only, and that they were
used as a subterfuge to justify wrongdoing. On that basis,
the court held S&S liable for the past-due contributions
on behalf of Mr. Rooter.
subsequent order, the district court clarified that
"[h]aving resolved the liability issue in favor of [the
Association], . . . the only outstanding issue before the
Court is the amount of damages owed to [the
Association]." The court never made an award of damages,
however, because S&S and Shawn Wenner filed for
bankruptcy, and the case was administratively terminated.
2014, the Association brought this action under ERISA against
WQS and Sara Wenner. The complaint sought the same unpaid
fringe-benefit contributions that the Association pursued in
the S&S Litigation, plus injunctive relief. The district
court dismissed Sara Wenner pursuant to a stipulation after
she filed for bankruptcy. On cross-motions for summary
judgment, the district court then determined that issue
preclusion prevented WQS from disputing its liability as an
alter ego of S&S.
court awarded the Association unpaid fringe-benefit
contributions, interest, and attorney's fees and costs,
but denied its request for liquidated damages. The court also
enjoined WQS from refusing to submit monthly fringe-benefit
contributions to the Association for Mr. Rooter employees or
other covered employees for so long as WQS has a contribution
obligation. The court ordered WQS to post a bond of $18, 000
"as a security for three months' future
contributions." The court later issued an order amending
its judgment, clarifying its previous judgment and stating
more broadly that WQS was enjoined from failing to comply
with its obligations under the CBA. The injunction forbade
WQS from refusing to submit monthly ...