The opinion of the court was delivered by: Irenas, Senior District Judge
Presently before the Court are four motions for summary judgment. This Opinion addresses only the principal action: Plaintiff Einhorn's suit against Defendant M.L. Ruberton Construction Company ("Ruberton"), in which cross motions for summary judgment are pending. A separate opinion will, if necessary, address the third party action, involving Ruberton's legal malpractice claims against Third Party Defendants Ronald Tobia, Esq.; Tobia & Sorger Esquires, LLC (collectively the "Tobia Defendants"); and David DeClement, Esq.
The cross motions for summary judgment in the principal action raise one central issue: in this ERISA*fn1 action,*fn2 under a theory of successor liability, may Ruberton be held liable for delinquent contributions to the Funds*fn3 administered by Plaintiff Einhorn? Because the Court holds that Ruberton may not be held liable as a matter of law, Ruberton's Motion for Summary Judgment will be granted, and Einhorn's Motion for Summary Judgment will be denied.
This suit is the third of three related cases that have been brought before this Court over the past four years. In the first suit, Teamster's Local Union No. 676 v. Statewide Hi-Way Safety, Inc., (05-4652)(JEI) ("the Injunction Suit"), Local 676, who had collective bargaining agreements with Statewide (see discussion infra), sought to enjoin Statewide from selling its assets to Ruberton. As will be discussed in further detail later, the Injunction Suit was quickly settled, and Statewide sold its assets to Ruberton shortly thereafter. It is that asset sale which, Einhorn presently alleges, created a predecessor-successor relationship between Statewide and Ruberton.
In the second suit, Einhorn v. Statewide, George R. Smith Jr., and Ruberton, (05-5774)(JEI)("the Delinquency Suit"), Einhorn sought to recover allegedly delinquent payments to the Funds, which Statewide was obligated to make pursuant to its collective bargaining agreements with Local 676. While Einhorn alleged that the delinquencies arose prior to the asset sale, he also alleged that Ruberton was liable for the delinquencies as Statewide's successor. Like the previous Injunction Suit, the Delinquency Suit was also settled. In the agreement settling the Delinquency Suit, Statewide agreed to pay the alleged delinquencies in exchange for Einhorn waiving a portion of the liquidated damages to which the Funds would otherwise be entitled, if Einhorn prevailed in the lawsuit.*fn4 Statewide never paid the full amount due under the Settlement Agreement, leading to the instant suit, where Einhorn has sued only Ruberton, attempting to recover what Statewide failed to pay ("the Successor Suit").*fn5
Statewide and Ruberton Before the Asset Sale
Statewide was a heavy highway construction company with facilities in Folsom, New Jersey. Specifically, Statewide's business consisted of highway paving, highway drainage and installation of guide rails, signage and fencing. (Pl's State. of Undisp. Facts ¶ 31-32; Def's State. of Undisp. Facts ¶ 17)
Statewide had three collective bargaining agreements (CBAs) relevant to the instant case: one with Teamsters Local Union No. 331, and two with Local 676. Statewide was required to make contributions to the Funds under all three agreements.
Statewide experienced financial trouble throughout 2003, 2004, and 2005. (Pl's State. of Undisp. Facts ¶ 36; Def's State. of Undisp. Facts ¶ 25-26)*fn6 Indeed, in 2005, Statewide's financial situation went from bad to worse when the State of New Jersey began investigating Statewide for fraud in connection with state highway projects, and Statewide faced the prospect of being debarred from public contract work in New Jersey. (Def's State. of Undisp. Facts ¶ 29)*fn7 Around the same time, the Funds began an audit of Statewide's payroll records, which revealed delinquencies owed under all three CBAs. (Pl's State. of Undisp. Facts ¶ 47; Def's Response ¶ 47) According to Einhorn, those delinquencies totaled $495,638.17, with additional liquidated damages of $94,606.02. (Pl's State. of Undisp. Facts ¶ 49; Def's Response ¶ 49)
Then Ruberton entered the picture. Ruberton, with its offices in Hammonton, New Jersey, performed general commercial construction, mainly in Southern New Jersey. (Pl's State. of Undisp. Facts ¶¶ 56-58; Def's Response ¶¶ 56-58; Def's State. of Undisp. Facts ¶ 10) Prior to 2005 and the negotiations leading up to the asset purchase, Ruberton had no CBAs with any union. (Pl's State. of Undisp. Facts ¶ 72)
In 2005, Ruberton's business, while not suffering to the same extent as Statewide, was slowing. (Def's State. of Undisp. Facts ¶ 30; Pl's State. of Undisp. Facts ¶ 60). Thus, Ruberton began looking for the right business opportunity. (Def. State. of Undisp. Facts ¶ 30; Pl's Response ¶ 30) Having heard rumors of Statewide's troubles, in July, 2005, Ruberton's President, Andrew Berenato, approached Statewide "to see if there was any opportunity there for us." (2008 A. Berenato Dep. at 146)
Not long after the first contact between Statewide and Ruberton, Local 676 apparently learned of the potential transaction between the two companies. Fearing that Ruberton (a non-union employer) would not agree to become a party to Statewide's CBA, Local 676 filed the Injunction Suit in late September, 2005.*fn8 Just two days after this Court issued a temporary restraining order enjoining the consummation of the Statewide - Ruberton transaction, negotiations among Local 676, Statewide, and Ruberton began in an effort to settle the Injunction Suit and go forward with the transaction.
Negotiations Resulting in the Settlement of the Injunction Suit
On September 29, 2005, Local 676 (through its President,*fn9 Howard Wells), Statewide (through it's President, George Smith, Jr.), Ruberton (through its President, Andrew Berenato), and the Funds (through Einhorn) attended a meeting to discuss the issues raised by the Injunction Suit.*fn10 During that meeting, Einhorn and Smith, Jr. discussed Statewide's delinquent contributions to the Funds. (2008 A. Berenato Dep. at 114-15; 2008 Einhorn Dep. at 41-42, 47-48; Smith, Jr. Dep. at 112; Sahli Dep. at 56-57)
Andrew Berenato testified that he first became aware of Statewide's defaulted obligations at this meeting. (2008 A. Berenato Dep. at 162) Indeed, Berenato testified that he specifically heard Einhorn tell Smith, Jr. that Statewide owed the Funds approximately $500,000. (Id. at 114-15)
The nature of the potential Statewide - Ruberton transaction was also discussed. Ronald Sahli, Esq., counsel for Statewide, explained that Statewide intended to only "'sell iron'" (i.e., heavy highway construction equipment) to Ruberton. (Sahli Dep. at 63; see also 2008 Einhorn Dep. at 40, 43; 2006 Wells Dep. at 16-18; Tobia Dep. at 164) Sahli explained that Statewide intended to "finish out its own jobs" using leased equipment. (Sahli Dep. at 63-64; see also 2008 Einhorn Dep. at 40, 43; 2006 Wells Dep. at 17)
On October 6, 2005, a second, longer meeting was held among the same people who attended the prior meeting.*fn11 According to Andrew Berenato, Ruberton's main objective at the meeting was to ensure that Ruberton would not be liable for Statewide's debts to the Funds. He testified, "the main thing on that meeting for M.L. Ruberton was that, since we knew there was a problem with Statewide and the Funds, that we certainly would not be held the successor to them and liable for that debt." (2008 A. Berenato Dep. at 102; see also 2008 A. Berenato Dep. at 213)
The Funds' objective at the meeting was mainly to protect their interest in delinquent and future contributions. The Funds were not a party to the Injunction Suit, therefore Einhorn's participation in the meeting, to the extent the meeting was geared toward settling the Injunction Suit, was limited. (2008 Einhorn Dep. at 80, 91) Einhorn explained the Funds' position at that meeting:
I'm not really in the driver's seat here, I'm not a party to [the Injunction Suit], but if the [StatewideRuberton] sale goes through and there are going to be funds released, we want a portion of those funds. We want the audit [of Statewide] completed. We want continuation of, if [Statewide is] going to continue operations, we don't want any further delinquencies to occur. (Id. at 80)
Local 676's objective was to ensure that if the asset sale proceeded, Ruberton would hire the ten Local 676 workers who worked for Statewide at the time, rather than hiring non-union workers. (Tobia Dep. at 156-57, 173, 178, 200)
Two separate agreements were drafted and signed at the October 6th meeting: one between Local 676 and Statewide; and one between Local 676 and Ruberton. In the Local 676 - Statewide Agreement, Local 676 agreed to dismiss the Injunction Suit without prejudice, and Statewide, among other things, agreed to cooperate fully with the Funds' payroll audit and to timely remit all future Funds contributions.*fn12 (Def's Ex. 13)
The Local 676 - Ruberton Agreement provides, in relevant part, M.L. Ruberton agrees that it will hire, subject to its work needs, the existing workforce of [Statewide] that perform work covered by Statewide's collective Bargaining agreement with Local 676, IBT. . . . Ruberton agrees that such employment shall be governed by the existing Local 676, IBT - Statewide CBA on an interim basis until a new CBA is negotiated. . . . in accordance with the above, the parties agree that a new CBA will be negotiated by Local 676, IBT and Ruberton to replace the existing agreement within a reasonable period of time but no later than the ...