Appeal from the United States District Court for the Eastern District of Pennsylvania Civil Action No. 00-2301 District Judge: Honorable Marvin Katz
Before: Roth, Smith, and CUDAHY,*fn1 Circuit Judges
The opinion of the court was delivered by: Smith, Circuit Judge
On this appeal, the sole issue raised by defendant Andrew Lutyk is whether the record of a non-jury trial justified piercing the corporate veil of the American Elevator Company to impose personal liability on him as its sole shareholder for unpaid contributions the corporation owed to health, benefit, and pension funds established by a collective bargaining agreement. Because we believe that the District Court did not base its decision on clearly erroneous factual findings, we will affirm.
Defendant Andrew Lutyk was the president, sole director, and sole shareholder of the American Elevator Company ("American"), a small, closely-held corporation which performed elevator service and repair. Lutyk incorporated American in late 1992. Pursuant to various agreements between American and the International Union of Elevator Constructors, AFL-CIO, in addition to the regular wages paid to its employees, American was obligated to make monthly contributions to various benefit and pension funds. American was also required to make certain wage deductions from the employees' salaries, then remit those deductions to the pension fund.
The benefit and pension funds — the National Elevator Industry Pension Fund, the National Elevator Industry Health Benefit Fund, and the National Elevator Industry Educational Fund (collectively, the "NEI Funds") — were created and maintained pursuant to § 302(c)(5) of the Labor Management Relations Act, 29 U.S.C. § 186(c)(5), and administered by a Board of Trustees, the plaintiff in this action. The Pension Fund is an employee pension benefit plan as defined by § 3(2) of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1002(2). The Health Fund and Educational Fund are employee welfare benefit plans as defined in § 3(1) of ERISA, 29 U.S.C. § 1002(1). All the NEI Funds are also multiemployer plans as defined in § 3(37)(A) of ERISA, 29 U.S.C. § 1002(37)(A).
In 1996, American began to experience financial difficulties due to an unrelated lawsuit and misconduct by the company's former controller. While corporate equity nominally included $25,000 in "Common Stock" and $141,000 in "Additional Paid In Capital" at the end of 1995, American's 1996 tax return listed negative retained earnings of $373,420, which rose to negative $433,051 by the end of 1996. In short, by at least December 31, 1995, no equity remained in the company. Nonetheless, American was carrying $133,268 in supposed "Loans from shareholders" in 1995. The available corporate records showed that these loans rose to at least $174,881.00 at the end of 1996 and remained there at least until December 31, 1997, but dropped to a mere $24,356.00 by the end of 1998. The District Court found that, beginning at least in 1996 and continuing until American ceased operations in late 1999, the corporation was insolvent.
At this time, American fell behind in meeting its contractual obligations to contribute to the NEI Funds. In 1998, the Board of Trustees sued American to recover these unpaid benefit contributions. That civil action culminated in a consent judgment whereby American agreed to pay the NEI Funds a total of $280,284.60. However, in 1999, American ceased business operations. Although subsequent payments were made to the NEI Funds, American paid only $40,000 pursuant to the consent judgment, along with $2,524.74 that had been deducted from the employees' paychecks after the consent judgment, but not immediately paid to the NEI Funds.
On May 4, 2000, the Board of Trustees initiated the present lawsuit against defendant Lutyk personally, alleging that he was also liable to the NEI Funds as a fiduciary under § 409 of ERISA, § 29 U.S.C. § 1109(a). Plaintiff sought to recover from Lutyk the full amount of what it had been unable to collect from American, as well as additional contributions accrued but never paid by American after the consent judgment. The District Court denied plaintiff 's motion for summary judgment on the ERISA claims, concluding that there were material issues of fact in dispute concerning whether the unpaid contributions to the benefit funds were plan "assets." Tr. of the Nat'l Elevator Indus. Pension v. Lutyk, 140 F. Supp. 2d 407, 412 (E.D. Pa. 2001) (" Lutyk I "). While reasoning that this potentially prohibited Lutyk from having any direct liability under ERISA, the District Court sua sponte read our opinion in Solomon v. Klein, 770 F.2d 352 (3d Cir. 1985), to provide that by "piercing the corporate veil," the claims against Lutyk might be sustained. Lutyk I, 140 F. Supp. 2d at 412-13. Although also declining to grant summary judgment on that ground, the District Court established piercing the corporate veil as an issue for trial. Id. at 413-14.*fn2
After a non-jury trial, the District Court concluded that, under the terms of the parties' agreements, the unpaid contributions in this case were not plan "assets" within the meaning of 29 U.S.C. § 1002(21)(A)(i). Tr. of the Nat'l Elevator Indus. Pension v. Lutyk, 140 F. Supp. 2d 447, 456 (E.D. Pa. 2001) (" Lutyk II "). Therefore, Lutyk was not a "fiduciary" of those funds under § 409 of ERISA, 29 U.S.C. § 1109(a), and was not directly liable for all but $332.54 of the debt that American owed to the NEI Funds.*fn3
Nonetheless, because the District Court concluded that the circumstances of the case justified piercing the corporate veil of American, the District Court found Lutyk personally liable for the remainder of the ...