The opinion of the court was delivered by: A. Richard Caputo United States District Judge
Presently before the Court are the Motion for Summary Judgment of Plaintiffs UNITE National Retirement Fund, Edgar Romney, and Steven Thomas (Doc. 39) and the Motion for Summary Judgment of Defendants Rose Boni, Cataldo Boni, Tonia Boni, Lorena Boni, and Pat Boni. (Doc. 43.) Because a genuine issue of material fact exists regarding whether Rosal, Inc. was simply an alter-ego of Rose Boni and whether the evasion of withdrawal liability was a principal purpose of the transactions between Rosal, Inc. and the other named defendants, the motions will be denied.
The Court has jurisdiction over the claims arising under federal law pursuant to 28 U.S.C. §§ 1331 and 1337, and the Court exercises supplemental jurisdiction over Plaintiffs' state law claims in Count I.
On April 25, 2007, Plaintiffs filed their Complaint, in which they alleged that Plaintiff UNITE National Retirement Fund is a multiemployer employee pension benefit plan within the meaning of Sections 3(2) and (37) of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. § 1002(3) and (37). (Compl., Doc. 1 ¶ 8.) Plaintiffs Edgar Romney and Steven Thomas are trustees and fiduciaries of the fund who are authorized to bring civil actions on behalf of the fund, its participants, and beneficiaries, for the purpose of collecting withdrawal liability. (Id. ¶¶ 10-11.)
Defendant Rose Boni was at all relevant times the sole shareholder and chief executive officer of Defendant Rosal, Inc ("Rosal"). (Id. ¶ 12-13.) All other defendants are members of the Boni family. (Id. ¶¶ 14-17.) Rosal was incorporated in 1984, with Rose Boni as the sole shareholder of the corporation. (Doc. 45, Ex. D; Doc. 42, Ex. F.) Rosal was engaged in the garment sewing business, and from 1991-2002, Rosal's work exclusively came from Tama Manufacturing ("Tama"). (Doc. 42, Ex. C, Aldo Boni Dep. 12:17-13:17, Apr. 20, 2009). In October 2002, Tama notified Rosal that Tama would no longer be able to provide Rosal with garment manufacturing work. (Aldo Boni Dep. 16:11-16:19.) Tama suggested that some military work might be forthcoming for Rosal, but such work never materialized. (Aldo Boni Dep: 18:6-19:1, 32:12-32:20.) Ultimately, Rosal was not able to find any work to replace the loss of the Tama account and went out of business.
After it receivednotice that it would no longer be getting work from Tama, Rosal continued to conduct various business activities through April 2003. (Doc. 42, Ex. O.)
According to Rosal's records for the fourth quarter of 2002, Rose and Cataldo ("Aldo") Boni were each paid twenty-eight thousand dollars ($28,000), Pat Boni was paid fourteen thousand dollars ($14,000) and Tonia Boni was paid ($7,000). (Doc. 42, Ex...) Q*fn1 In 2003, Rosal's payroll records show that Rose, Pat and Aldo Boni were paid twelve thousand dollars ($12,000) by Rosal. (Doc. 42, Ex. M.) Rosal's tax records for the fiscal year from October 1, 2002 to September 30, 2003, show an asset of nineteen thousand seven hundred two dollars ($19,702.00) in shareholders' loans at the beginning of the year, but no such asset at the end of the fiscal year.*fn2 (Doc. 42, Ex. E.) However, Rosal's Cash Receipts Journal for the relevant time period does not show any receipt for the repayment of these loans. (Doc. 42, Ex. N.)
The declaration provided by Defendants' CPA, Martin Rapoport, accounts for this discrepancy by claiming that Rosal wrote off the loans to Rose Boni "to clear the corporate records and recognize the loans as income to Rose Boni." (Doc. 45, Ex. C.) Mr. Rapoport points to Rosal's Out of Existence/Withdrawal Affidavit as showing a net distribution of thirty thousand two hundred thirty-six dollars ($30,236.00) to Rose Boni. (Id.) This figure represents the cash payout to Rose Boni consisting of the loan write-off and two hundred sixty-nine dollars ($269.00) from Rosal's checking account, plus the market value of Rosal's three automobiles, less seventeen thousand two hundred thirty-five dollars ($17,235.00) in "union liability." (Id.) According to Rapoport, the only cash that Boni actually received was the remaining money from Rosal's checking account. (Id.)
Rapoport's Declaration also contends that Rosal was not insolvent at the time it lost the Tama account, was well-capitalized up to the time of dissolution, did not commingle funds, and was not a sham corporation. (Id.)
Plaintiffs allege that Rosal was required to make contributions to the pension fund on behalf of its employees pursuant to Rosal's collective bargaining agreement with the International Ladies' Garment Workers' Union, and was an employer within the meaning of section 3(5) of ERISA. (Compl., Doc. 1, ¶¶ 19-20.) When Rosal permanently ceased its manufacturing operations, effecting a "complete withdrawal" from the pension fund, it became liable to the fund for withdrawal liability under section 4201(a) of ERISA. (Id. ¶¶ 21-22.)
As of August 19, 2002, the fund estimated that Rosal's potential withdrawal liability was seventeen thousand two hundred thirty-five dollars ($17,235.00). (Doc. 42., Ex. I.) According to Aldo Boni's deposition, he had received assurance that any amount of liability under fifty thousand dollars ($50,000) would likely be sufficiently small that the fund would not seek repayment. (Aldo Boni Dep., 40:11-41:4.) On March 6, 2003, after Rosal had begun winding down business operations, the pension fund notified Rosal of two hundred twenty-six thousand and eighty-six dollars ($226,086.00) in withdrawal liability and demanded payment. (Doc. 42, Ex. J.) Rosal failed to pay or to exercise its options under ERISA of requesting a review of the fund's determination or initiating arbitration. (Id. ¶¶ 25, 27.) The pension fund gave proper written notice to Rosal of its default in payment. (Id. ¶ 26.)
The pension fund then commenced a civil action in the United States District Court for the Southern District of New York to recover the withdrawal liability, along with interest, statutory liquidated damages, attorneys fees, and costs, but after service of process, Rosal failed to appear, answer, or defend this civil action. (Doc. 42, Ex. A.) As a result, on March 4, 2004, the court entered a Judgment in Default against Rosal for the liability and interest accrued to date, which equaled two hundred fifty thousand, nine hundred seventy-two dollars and thirty-two cents ($250,972.32), plus post-judgment interest. (Doc. 42, Ex. B.) On May 10, 2004, the judgment against Rosal was entered on the docket of the United States District Court for the Eastern District of Pennsylvania, and the pension fund then commenced supplemental proceedings in that court to locate assets of Rosal and related ...