“Alter Ego” Theory May Be Used to Impose Withdrawal Liability
In a recent case, Local 134 Board of Trustees of the Toledo Roofers Pension Plan v. Enterprise Roofing & Sheet Metal, the U.S. District Court for the Northern District of Ohio ruled that the trustees of a multiemployer pension plan can use the alter-ego theory to seek a withdrawal liability judgment totaling $624,079 from a company owned by the same family that owned the withdrawing employer. According to the court opinion, the alter-ego liability is an equitable doctrine that allows a court to “bind an employer to a collective bargaining agreement if it finds the employer an alter ego of a signatory employer.” The alter-ego test requires a plaintiff to show “pervasive intermingling of funds and operations” between the two entities. In this case, the court noted that the owner of one of the companies actually played a “major role” in managing both companies, serving as vice president of one of the entities and simultaneously as president and board chairman of the other. Further, the owner served “important managerial functions at both companies” and that there was “nominal consideration” paid when the withdrawing entity’s business was transferred to the second entity.