Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-12-17675/USCOURTS-ca9-12-17675-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

RESILIENT FLOOR COVERING

PENSION TRUST FUND BOARD OF

TRUSTEES; RESILIENT FLOOR

COVERING PENSION TRUST FUND,

Plaintiffs-Appellants,

v.

MICHAEL’S FLOOR COVERING, INC.,

Defendant-Appellee.

No. 12-17675

D.C. No.

3:11-cv-05200-

JSC

OPINION

Appeal from the United States District Court

for the Northern District of California

Jacqueline Scott Corley, Magistrate Judge, Presiding

Argued and Submitted

February 10, 2015—San Francisco, California

Filed September 11, 2015

Before: Richard A. Paez and Marsha S. Berzon, Circuit

Judges and David A. Ezra,* District Judge.

Opinion by Judge Berzon

* The Honorable David A. Ezra, District Judge for the U.S. District

Court for the Western District of Texas, sitting by designation.

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SUMMARY**

Labor Law

The panel reversed the district court’s judgment, after a

bench trial, holding that a construction industry employer was

not subject to “withdrawal liability” under the Multiemployer

Pension Plan Amendments Act.

The MPPAA amendments to the Employee Retirement

Income Security Act provide that if an employer withdraws

from a multiemployer pension plan, then it is liable to the

plan for “withdrawal liability.” There is an exception to

withdrawal liability for a construction industry employer that

ceases operations entirely for at least five years. 

Agreeing with the Seventh Circuit, the panel held that a

bona fide successor employer in general, and a construction

industry successor employer in particular, can be subject to

MPPAA withdrawal liability, so long as the successor took

over the business with notice of the liability. The panel held

that the most important factor in assessing whether an

employer is a successor for purposes of withdrawal liability

is whether there was substantial continuity in the business

operations between the predecessor and the successor, as

determined in large part by whether the new employer has

taken over the economically critical bulk of the prior

employer’s customer base.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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The panel held that the district court erred in weighing

continuity of the workforce as the most important factor, and,

moreover, applied an incorrect test to determine whether

there was continuity of the workforce. The panel reversed

and remanded for further proceedings applying the correct

standards.

COUNSEL

Donna L. Kirchner (argued), Katherine McDonough, George

M. Kraw, Kraw and Kraw Law Group, Mountain View,

California, for Plaintiffs-Appellants.

Robert B. Miller (argued), Kilmer, Voorhees & Laurick, PC,

Portland, Oregon, for Defendant-Appellees.

OPINION

BERZON, Circuit Judge:

We decide in this case two related issues: (1) whether a

successor employer, both generally and in the construction

industry in particular, can be subject to withdrawal liability

under the Multiemployer Pension Plan Amendments Act

(“MPPAA”), 29 U.S.C. § 1381–1453, amendments to the

Employee Retirement Income Security Act (“ERISA”),

29 U.S.C. § 1001 et seq.; and (2) if so, what factors are most

relevant to determining whether a construction industry

employer is a successor for purposes of imposing MPPAA

withdrawal liability. We conclude that a construction

industry successor employer can be subject to MPPAA

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withdrawal liability, so long as the successor took over the

business with notice of the liability. We also hold that the

most important factor in assessing whether an employer is a

successor for purposes of imposing MPPAA withdrawal

liability is whether there is substantial continuity in the

business operations between the predecessor and the

successor, as determined in large part by whether the new

employer has taken over the economically critical bulk of the

prior employer’s customer base.

The district court, after a bench trial, held DefendantAppellee Michael’s Floor Covering, Inc. (“Michael’s”) not

liable as a successor employer. In doing so, the district court

weighed continuity of the workforce as the most important

factor, and, moreover, applied an incorrect test to determine

whether there was continuity of the workforce. We therefore

reverse and remand for further proceedings applying the

correct standards.

I.

A.

Studer’s Floor Covering, Inc. (“Studer’s”) was a

construction industry employer that sold and installed floor

covering materials to commercial and residential customers. 

From the 1960s until it ceased doing business on December

31, 2009, Studer’s operated out of a storefront and warehouse

on Anderson Avenue in Vancouver, Washington. At the time

of its closing, Studer’s was a party to a collective bargaining

agreement with the Linoleum, Carpet and Soft Tile

Applicators Local Union No. 1236, pursuant to which

Studer’s made contributions to the Resilient Floor Covering

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Pension Trust Fund (“the Fund”), a multiemployer defined

benefit pension plan covered by the MPPAA amendments to

ERISA. See 29 U.S.C. § 1002(37)(A).

Toward the end of 2009, the president and chairman of

Studer’s, Scott Studer, informed his sales staff that Studer’s

would close at the end of the year. Shortly after that

announcement, one of those staff members, Michael Haasl,

told Studer “that he intended to bid for projects for the sale

and installation of floor covering materials for his own

company,” Michael’s Floor Covering, LLC (“Michael’s”). 

Haasl incorporated Michael’s in October 2009.1

On November 30, 2009, while Studer’s was still in

operation, Michael’s obtained a lease on the same storefront

and warehouse Studer’s had long occupied. That lease’s term

began on January 1, 2010, the day immediately after

1 We note that the record in this case was sealed in the district court. 

Under this Court’s rules, that sealing remains in effect on appeal unless we

rule otherwise, which neither party in this case asked us to do. 9th Cir. R.

27-13. We note, however, that the sealing of several key documents,

including Michael’s’ business plan, has somewhat hampered our ability

fully to explain our ruling in this precedential opinion. Further, we have

noticed an overall tendency recently for parties to request, and district

courts to grant, the sealing of records in instances in which it is hard to see

any significant privacy or trade secret justification.

We could, of course, request the parties to show cause as to why the

record should not be unsealed in whole or in part. But that process would

take time and effort away from the preparation of the opinion. We have

therefore chosen instead to issue an opinion that does not contain all the

facts in the record supporting it. Our need to choose between undesirable

options suggests the need to reconsider record sealing practices both in the

district courts and in this court.

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Studer’s’ lease terminated. Around the same time, Haasl

purchased signs for the Michael’s location very similar to

those that Studer’s used. Both spelled out the name

“Michael’s”/“Studer’s” in red cursive, and “Floor Coverings”

in black block capitals, on a white background. Additionally,

at Michael’s’ request, Studer’s gave its authorization to

Quest, Studer’s’ telephone service provider, for Michael’s to

take over Studer’s’ business telephone numbers at the end of

2009.

Studer’s sold most, though not all, of its tools, equipment,

and inventory at a publicly advertised liquidation sale in the

fall of 2009. At that sale, Michael’s purchased about 30% of

Studer’s’ tools, equipment and inventory.

Accordingto Scott Studer, although “Studer’s did not sell,

give[,] or otherwise assign its customer lists or any portion of

its customer information to Michael’s[,] Mike Haasl knew the

identity of many of Studer’s[’] customers and suppliers

through his work over the course of 19 years as a salesman

for Studer’s.” Michael’s used those existing business

relationships in developing its business.

The district court found that “Michael’s performs much

the same work as Studer’s,” though Michael’s added product

lines to its showroom that Studer’s had not carried. For

example, the purchasing manager for one major business

customer of both Studer’s and Michael’s, New Tradition

Homes, testified that Michael’s was asked to “pick up where

[Studer’s] left off” and did; that “the type of work done” by

Michael’s and Studer’s was “[t]he same”; and that there were

no “differences in the type of work done by Michael’s Floor

Covering as opposed to what was done by Studer’s Floor

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Covering.” That same purchasing manager also reported that

New Tradition Homes did not “put out a request for bids to

replace Studer’s.” Although New Tradition Homes’ “usual

bid process” did involve competitive bidding from “a broader

number of potential suppliers,” it did not require bidding in

this instance, because a “sales rep that [they] were very

comfortable with was starting his business,” referring to

Haasl and Michael’s. He also noted that there was only

“[v]ery minimal” “disruption caused by the transition from

Studer’s to Michael’s”: “[m]ostly it was internal with our

systems. We had to make sure that our purchase orders went

out on one day to Studer’s and then on the next day to

Michael’s Floor Coverings.”

In Michael’s’ first two years of operation, it employed

eight installers; otherwise, Michael’s outsourced installation

work to independent contractors. Of the eight employee

installers, five had previouslyworked for Studer’s at one time

or another. Several of those installers stated that the range of

work they did for Michael’s was substantially similar to,

although slightly broader than, the work they had previously

done for Studer’s.

The proportion of Studer’s customers retained by

Michael’s depends on the mode of calculation used. The

district court found that “many of Studer’s[’] customers

became Michael’s[’] customers.” The Fund asserts that

Michael’s obtained the bulk of its business during its start-up

phase from Studer’s’ customers, largely business customers.

For example, all but seven of Michael’s’ business customers

in its first three months of operation had been Studer’s’

customers during Studer’s last year of business. Michael’s

counters that only 80 or so of the 868 customers Michael’s

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served in its first two years were former Studer’s clients; this

head count includes both large commercial customers with

repeat contracts for housing developments and apartment

buildings, and individual homeowners, who are more likely

to contract on a one-time basis and for fairly small jobs.

B.

The MPPAA amendments to ERISA provide, in part, that

“[i]f an employer withdraws from a multiemployer [pension]

plan in a complete withdrawal . . . , then the employer is

liable to the plan” for “withdrawal liability.” 29 U.S.C.

§ 1381(a).

2 Withdrawal liability “is the amount determined

[under the statutory calculation method] . . . to be the

allocable amount of unfunded vested benefits” accrued at the

time of the employer’s withdrawal. § 1381(b); see also

§ 1391. For “employer[s] that ha[ve] an obligation to

contribute under a plan for work performed in the building

and construction industry,” however, there is no withdrawal

liability if they cease operations entirely for at least five

years. § 1383(b)(1). The dispute in this case concerns

whether this construction industry exception applies here

because Studer’s permanently ceased performing work

covered by the Fund, or whether, instead, it does not apply,

because Michael’s essentially took over the work Studer’s

would have done, yet did not make contributions to the Fund.

Taking the latter position, the Fund, believing Michael’s

to be Studer’s’ successor, assessed withdrawal liability in the

amount of $2,291,014.00 against Studer’s and Michael’s and

2 Hereafter, all statutory references are to Chapter 29 of the United

States Code unless otherwise indicated.

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sued Michael’s to recover that amount. After discovery, the

Fund and Michael’s filed cross-motions for summary

judgment. Michael’s moved for summary judgment on the

grounds that the Fund could not establish that Michael’s was

a successor of Studer’s, and, even if Michael’s were Studer’s’

successor, the Fund could not show Michael’s was subject to

its predecessor’s withdrawal liability, for two reasons: first,

Studer’s had not itself continued business in the area; and

second, Michael’s did not have adequate notice of Studer’s’

liability. The Fund moved for partial summary judgment on

the ground that Michael’s was a successor to Studer’s, so a

statutory withdrawal triggering liability occurred when

Michael’s continued Studer’s’ business but failed to make

contributions to the Fund.

At the hearing on the parties’ cross-motions for summary

judgment, the district court suggested that the parties consent

to converting the motion to a bench trial on the successorship

question only (that is, not on the question whether, if a

successor, Michael’s had sufficient notice of the liability). 

The parties orally agreed to a bench trial “on the record.”

About two weeks after the summary judgment hearing,

the Fund filed a motion for leave to supplement the record

with additional invoices from Michael’s and Studer’s. The

Fund noted that the possibility of a bench trial on the record

was first raised at the summary judgment hearing, and

explained that, “[h]aving given the matter consideration after

the hearing,” the Fund wished to supplement the record with

these additional invoices. The Fund had previously included

Studer’s invoices from the last three months of 2009 and

Michael’s invoices from the first three months of 2010. 

“[F]or purposes of creating a more complete trial record,” the

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Fund explained, it was seeking to submit Michael’s’ invoices

for the remainder of 2010 and the entirety of 2011, and some

additional Studer’s invoices as well. Michael’s opposed the

motion on the grounds that (1) it was “premature” and (2) the

evidence “lack[ed] relevance, materiality or probity” because

there was no “basis for imposing withdrawal liability on

Studer’s,” when Studer’s did not continue work as Studer’s

after 2009.

The district court issued findings of fact and conclusions

of law on November 1, 2012. It determined that Michael’s

was not a successor to Studer’s and therefore not subject to

withdrawal liability. Applying the multi-factor successorship

test set forth in NLRB v. Jeffries Lithograph Co., 752 F.2d

459, 463 (9th Cir. 1985), the district court concluded that,

although Michael’s used the same plant that Studer’s had, the

other factors either weighed against a finding of

successorship (continuity of the workforce; whether the same

jobs exist under the same working conditions; whether the

same supervisors were employed) or were neutral (whether

the same machinery, equipment, and methods of production

are used; whether the same service is offered; and whether

there was substantial continuity of the business). The district

court characterized the inquiry as concerning whether the

successor has “‘basically the same owners and operators as

. . . the predecessor employer,’” and that the “changes

between predecessor and successor were technical in nature

rather than a substantive change in the management.’”

(quoting New England Mech., Inc. v. Laborers Local Union

294, 909 F.2d 1339, 1343 (9th Cir. 1990)). According to the

district court, “[t]he question here is whether Michael’s is

‘essentially the same’ as Studer’s. . . . It is not.”

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The district court also denied the Fund’s motion to

supplement the record, because the Fund had not shown

“good cause for the late filing,” and because the “customer

issue [wa]s not dispositive of the successor employer

determination.”

II.

“We review the district court’s findings of fact after a

bench trial for clear error.” OneBeacon Ins. Co. v. Haas

Indus., Inc., 634 F.3d 1092, 1096 (9th Cir. 2011). “Questions

of law and mixed questions of fact and law are reviewed de

novo.” M.M. v. Lafayette Sch. Dist., 767 F.3d 842, 851 (9th

Cir. 2014) (as amended). Additionally, “[w]e review for

abuse of discretion a district court’s denial of a motion to

supplement the record.” E.E.O.C. v. Peabody W. Coal Co.,

773 F.3d 977, 982 (9th Cir. 2014). A district court abuses its

discretion where it applies the wrong legal standard or where

its “application of the correct legal standard was

(1) ‘illogical,’ (2) ‘implausible,’ or (3) without ‘support in

inferences that may be drawn from the facts in the record.’” 

United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009)

(en banc) (quoting Anderson v. City of Bessemer City,

470 U.S. 564, 577 (1985)). Additionally, “‘[i]f an exercise of

discretion is based on an erroneous interpretation of the law,

the ruling should be overturned.’” Estate of Darulis v.

Garate, 401 F.3d 1060, 1063 (9th Cir. 2005) (quoting Miles

v. California, 320 F.3d 986, 988 (9th Cir. 2003)); see also

Conservation N.W. v. Sherman, 715 F.3d 1181, 1185 (9th Cir.

2013).

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III.

A.

ERISA, the federal comprehensive private employee

benefits statute, includes provisions designed “to ensure that

employees and their beneficiaries would not be deprived of

anticipated retirement benefits by the termination of pension

plans before sufficient funds have been accumulated in the

plans.” Pension Benefit Guar. Corp. v. R.A. Gray & Co.,

467 U.S. 717, 720 (1984). ERISA originally sought to

accomplish this purpose by creating an insurance program for

pension plans, administered by the Pension Benefit Guaranty

Corporation (“PBGC”); the insurance program initially

covered only single-employer plans, but was later extended

to multiemployer plans. See id. at 720–22 (noting that the

provision obligating the PBGC to pay benefits for single

employer plans took effect immediately when ERISA was

enacted in 1974 and that mandatory coverage of

multiemployer pension plans was to take effect in 1978).

The MPPAA amendments to ERISA were prompted by

Congress’s realization that in some instances, ERISA as it

stood did “not adequately protect [multiemployer pension]

plans from the adverse consequences that resulted when

individual employers terminate[d] their participation in, or

withdr[e]w from, multiemployer plans.” Id. at 722. The

concern was that “a significant number of [multiemployer]

plans were experiencing extreme financial hardship” as a

result of individual employer withdrawals from the plans,

which saddled the remaining employers with increased

funding obligations. Id. at 721. These withdrawals caused a

domino effect of cascading additional withdrawals that

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eventually “could have resulted in the termination of

numerous plans.” Id. Large numbers of plan terminations, in

turn, could have jeopardized the entire PBGC insurance

program once the provision extending coverage to

multiemployer plans became effective. See id.

To address this dilemma, Congress enacted the MPPAA,

which imposed “new rules under which a withdrawing

employer would be required to pay whatever share of the

plan’s unfunded vested liabilities was attributable to that

employer’s participation,” thereby protecting the financial

health of the plan and safeguarding the PBGC insurance

program. Id. at 723. The MPPAA amendments to ERISA

make employers liable for unfunded vested benefits if they

withdraw from a multiemployer plan. § 1381; see also

§ 1391. In general, a complete withdrawal triggers

withdrawal liability where an employer “permanently ceases

to have an obligation to contribute under the plan” or

“permanently ceases all covered operations under the plan.” 

§ 1383(a).

But that general standard for withdrawal, and so for

withdrawal liability, does not always apply. Central to this

case is the special MPPAA rule for “employer[s] that ha[ve]

an obligation to contribute under a plan for work performed

in the building and construction industry.” § 1383(b)(1). 

Under that rule, a complete withdrawal occurs only if:

(A) an employer ceases to have an obligation

to contribute under the plan, and

(B) the employer—

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(i) continues to perform work in the

jurisdiction of the collective bargaining

agreement of the type for which contributions

were previously required, or

(ii) resumes such work within 5 years after the

date on which the obligation to contribute

under the plan ceases, and does not renew the

obligation at the time of the resumption.

§ 1383(b)(2). In other words, under § 1383(b), known as “the

MPPAA construction industry exception,” employers in that

industry who entirely cease operations are not subject to the

withdrawal liability that § 1381 would otherwise impose,

unless they resume construction work within five years

without also renewing their obligation to contribute to the

plan. See Carpenters Pension Trust Fund for N. Cal. v.

Underground Constr. Co., 31 F.3d 776, 779 (9th Cir. 1994).

In enacting the MPPAA, Congress “recognized the

transitory nature of contracts and employment in the building

and construction industry.” Id. at 778. The exception is

rooted in the understanding that “[construction industry]

employers [will] come and go[,] [but] as long as the base of

construction projects in the area covered by the plan

[continues] funding the plan’s obligations, the plan is not

threatened” by an individual employer’s departure. Id. It is

on this premise that § 1383(b) “aims to extract withdrawal

contributions only from those employers who may threaten

the plan by reducing the plan’s contribution base,” that is,

those employers who continue to do work in the area covered

by the plan without contributing to it. Id. The “contribution

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base” concept is thus at the core of the MPPAA construction

industry withdrawal liability concept.

We have previously recognized the centrality of the

contribution base in applying the construction industry

exception to MPPAA withdrawal liability. In H.C. Elliott,

Inc. v. Carpenters Pension Trust Fund for Northern

California, 859 F.2d 808 (9th Cir. 1988), we observed that

“[i]n the construction industry, the funding base of the plan

is the construction projects in the area” where the plan is

administered. Id. at 812 (quoting H.R. Rep. No. 96-869, 96th

Cong., 2d Sess., pt. 1, at 75 (1980)). We noted further that

“as long as contributions are made for whatever work is done

in the area,” there is no threat to the plan’s future funding

viability; if an individual employer withdraws and goes out

of business, other employers who contribute to the pension

plan on behalf of their employees will perform that work. Id.

(quoting H.R. Rep. No. 96-869, at 75).

As we have also explained, “[t]he withdrawal of an[]

employer from the plan does decrease the [funding] base . . .

if the employer stays in the industry but goes non-union and

ceases making payments to the plan.” Id. (emphasis added). 

In that case, employers continue to undertake construction

work without contributing to the plan. So, assuming a

constant number of construction projects in a locale, the

number of employee hours for which contributions are made

will go down.

In short, because of concern about shrinking contribution

bases, the § 1383(b) construction industry exception imposes

withdrawal liability on employers who cease making

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payments to the plan while continuing to do business in the

area.

B.

In the fields of labor and employment law, federal courts

have developed a common-law doctrine of successorship

liability that “provides an exception from the general rule that

a purchaser of assets does not acquire a seller’s liabilities.”

Chi. Truck Drivers, Helpers & Warehouse Workers Union

(Indep.) Pension Fund v. Tasemkin, Inc., 59 F.3d 48, 49 (7th

Cir. 1995). The successorship doctrine extends to legal

obligations arising under the National Labor Relations Act

(“NLRA”), the Fair Labor Standards Act (“FLSA”), Title VII

of the Civil Rights Act of 1964 (“Title VII”), and the Family

and Medical Leave Act (“FMLA”), among others. See, e.g.,

Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27

(1987) (NLRA); Steinbach v. Hubbard, 51 F.3d 843 (9th Cir.

1995) (FLSA); Bates v. Pac. Maritime Ass’n, 744 F.2d 705

(9th Cir. 1984) (Title VII); Sullivan v. Dollar Tree Stores,

Inc., 623 F.3d 770, 780–81 (9th Cir. 2010) (recognizing

regulations that incorporate common law successorship

principles in defining successors-in-interest for purposes of

FMLA liability).

Striking a “balance between the need to effectuate federal

labor and employment . . . policies and the need . . . to

facilitate the fluid transfer of corporate assets,” the

successorship doctrine, when applicable, holds legally

responsible for obligations arising under federal labor and

employment statutes businesses that are substantial

continuations of entities with such obligations. Upholsterers’

Int’l Union Pension Fund v. Artistic Furniture of Pontiac,

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920 F.2d 1323, 1326 (7th Cir. 1990). “The inquiry [in these

successorship cases] is [therefore] not merely whether the

new employer is a ‘successor’ in the strict corporate-law

sense of the term. The successorship inquiry in the labor-law

context is much broader.” Sullivan, 623 F.3d at 781.

“The primary question in [labor and employment]

successorship cases is whether, under the totality of the

circumstances, there is ‘substantial continuity’ between the

old and new enterprise.” Haw. Carpenters Trust Funds v.

Waiola Carpenter Shop, Inc., 823 F.2d 289, 294 (9th Cir.

1987); see also New England Mech., Inc. v. Laborers Local

Union 294, 909 F.2d 1339, 1342 (9th Cir. 1990); Steinbach,

51 F.3d at 846. To address whether the new business is the

successor of an old business, we consider the following

factors, which are “not . . . exhaustive”:

[Whether] there has been a substantial

continuity of the same business operations[;]

[whether] the new employer uses the same

plant; [whether] the same or substantially the

same work force is employed; [whether] the

same jobs exist under the same working

conditions; [whether]the same supervisors are

employed; [whether] the same machinery,

equipment, and methods of production are

used; and [whether] the same product is

manufactured or the same service [is] offered.

Jeffries Lithograph, 752 F.2d at 463 (quoting Premium

Foods, Inc., 260 N.L.R.B. 708, 714 (1982), enforced 709 F.2d

623 (9th Cir. 1983)) (last alteration in original); see also Haw.

Carpenters, 823 F.2d at 294. Other cases have considered

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whether the body of customers is the same. See, e.g., Fall

River Dyeing, 482 U.S. at 43.

“There is, and can be, no single definition of ‘successor’

which is applicable in every legal context. A new employer

. . . may be a successor for some purposes and not for others.” 

Howard Johnson Co. v. Detroit Local Joint Exec. Bd., Hotel

& Rest. Emps. & Bartenders Int’l Union, AFL-CIO, 417 U.S.

249, 262 n. 9 (1974). “[D]ecisions on successorship must

balance, inter alia, the national policies underlying the statute

at issue and the interests of the affected parties,” Sullivan,

623 F.3d at 782 (quoting Steinbach, 51 F.3d at 846)

(alteration in original). “Because the origins of successor

liability are equitable, fairness is a prime consideration in its

application.” Id. (Quoting Criswell v. Delta Air Lines, Inc.,

868 F.2d 1093, 1094 (9th Cir. 1989)). Thus, these decisions

require[] analysis of the interests of the new

employer and the employees and of the

policies of the labor laws in light of the facts

of each case and the particular legal obligation

which is at issue, whether it be the duty to

recognize and bargain with the union, the duty

to remedy unfair labor practices, the duty to

arbitrate, etc.

Id. (quoting Howard Johnson, 417 U.S. at 262 n.9). The

individual successorship factors outlined in Jeffries are,

accordingly, given greater or lesser weight depending on the

statutory context.

Moreover, “in light of . . . the myriad factual

circumstances and legal contexts in which [the employment

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law successorship issue] can arise, and the absence of

congressional guidance as to its resolution, emphasis on the

facts of each case as it arises is especially appropriate.” 

Howard Johnson, 417 U.S. at 256. Finally, as the

successorship test is “more functional than formal,” “the

absence of one . . . factor” does not compel a particular

conclusion. Hawaii Carpenters, 823 F.2d at 293, 294.

Depending on the statutory context and the type of claim,

certain factors may warrant greater or lesser emphasis. For

example, under § 8(a)(5) of the NLRA, which imposes on

employers a duty to bargain in good faith with the chosen

representative of their employees, the NLRB has determined

“substantial continuity” with an emphasis on “the employees’

perspective.” Fall River Dyeing, 482 U.S. at 43. The reason

for this emphasis is that a successor’s § 8(a)(5) duty to

bargain in good faith derives from the rebuttable presumption

of majority support a union obtains once it has been certified

as the unit’s bargaining representative. Id. at 37–38. The

majority presumption generally furthers the NLRA’s

“overriding policy” of “‘industrial peace’” by “promot[ing]

stability in collective-bargaining relationships.” Id. at 38

(quoting Terrell Machine Co., 173 N.L.R.B. 1480 (1969),

enf’d, 427 F.2d 1088 (4th Cir.), cert. denied, 398 U.S. 929

(1970)) (some internal quotation marks omitted) (alteration

in original). Requiring a successor to bargain with the

incumbent union even after a change in corporate structure

assures employees that their choice of representative is not

“subject to the vagaries of an enterprise’s transformation,”

and so promotes industrial peace. Id. at 39–40. Further, “a

mere change in ownership, without an essential change in

working conditions, is not likely to change employees’

attitudes toward union representation.” Jeffries Lithograph,

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752 F.2d at 463. Consequently, when determining whether

a company is a successor with a duty to recognize and

bargain with the incumbent union, “the touchstone remains

whether there was an ‘essential change in the business

that could have affected employee attitudes toward

representation.’” Id. at 464.

At the same time, in the collective bargaining context, a

successor is only obligated to bargain when “the new

employer makes a conscious decision to maintain generally

the same business and to hire a majority of its employees

from the predecessor . . . [and indeed] intends to take

advantage of the trained work force of its predecessor.” Fall

River Dyeing, 482 U.S. at 41. Thus limited, the doctrine

safeguards employers’ interest in being able to rearrange or

sell their business for legitimate purposes. Id. Balancing

these pertinent considerations, courts determine successorship

in the context of the NLRA duty to bargain by examining,

among other factors, “whether the business of both employers

is essentially the same; whether the employees of the new

company are doing the same jobs in the same working

conditions under the same supervisors; and whether the new

entity has the same production process, produces the same

products, and basically has the same body of customers,” Fall

River Dyeing, 482 U.S. at 43, all while “keep[ing] in mind the

question whether those employees who have been retained

will understandably view their job situations as essentially

unaltered.” Id. (quoting Golden State Bottling Co. v. NLRB,

414 U.S. 168, 184 (1993)).

By contrast, in a different NLRA context—deciding

whether to impose successor liability for a predecessor’s

unfair labor practices—the Supreme Court placed the

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emphasis on the employers’ economic considerations, while

continuing to take the employees’ perspective into account.

Golden State Bottling determined that a successor could be

required to remedy its predecessor’s unlawful discharge of an

employee under §§ 8(a)(3) and (1) of the NLRA so long as

(1) the successor had obtained substantial assets of the

predecessor; (2) there were sufficient indicia of substantial

continuity of business operations; and (3) the successor took

over with notice of the unfair labor practice liability. 

414 U.S. at 184–85. Golden State Bottling explained that the

policies that allow employees to engage in protected

concerted activity without incurring retribution support this

approach where the predecessor entityengaged in unfair labor

practices. “Avoidance of labor strife, prevention of a deterrent

effect on the exercise of rights guaranteed by § 7 of the

[NLRA], . . . and protection for the victimized employee”

were all “important policies” that would be undermined

absent the imposition of successor liability for unfair labor

practices. Id. at 185. Taking those policies into account,

Golden State Bottling held that a successor employer is liable

for remedying a predecessor’s violation of its employees’

organizational rights “[w]hen a new employer . . . has

acquired substantial assets of its predecessor and continued,

without interruption or substantial change, the predecessor’s

business operations.” Id. at 184. If successor liability were

not imposed under those circumstances, “the successor may

benefit from the unfair labor practices due to a continuing

deterrent effect on union activities.” Id.

Turning to fairness to employers, Golden State Bottling

held that successor employers would be held liable onlywhen

they took over the business with notice of the liability. Id. at

185. With that protection, the liability could “be reflected in

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the price [it] pays for the [predecessor’s] business” assets. Id.

By focusing on the economic realities of the business

transition, Golden State Bottling adapted the successorship

doctrine to address a successor’s liability for a predecessor’s

unfair labor practice.

The Title VII employment discrimination context

provides another example of tailoring successorship factors.

There, the “three principal factors [that] bear[] on the

appropriateness of successor liability for employment

discrimination [are]: (1) the continuityin operations and work

force of the successor and predecessor employers, (2) the

notice to the successor employer of its predecessor’s legal

obligation, and (3) the ability of the predecessor to provide

adequate relief directly.” Bates, 744 F.2d at 709–10. 

Imposing successor liability under those circumstances is fair,

Bates held, even where the successor did not purchase or

merge with the predecessor, because a successor “well

aware” of its predecessor’s liability is able to consider that

information before deciding to continue the predecessor’s

business. See id. at 710. Where such notice is provided, the

successor’s “choice to take over [its predecessor’s] operations

informally through the hiring of its former employees and the

purchase of some of its equipment, rather than through a

more formal acquisition, [does] not shield it from

successorship liability.” Id.

In sum, the cases that have considered in various labor

and employment law contexts whether an employer is a

successor have tailored their analyses to the particular policy

concerns underlying the applicable statute and to the

particular claim. The successorship standards are flexible and

must be tailored to the circumstances at hand.

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C.

We have not previously decided whether a successor

employer can be subject to MPPAA withdrawal liability.

3

We have, however, held, in a closely related context, that a

successor can be liable for its predecessor’s delinquent

ERISA contributions. See Trs. for Alaska Laborers–Constr.

Indus. Health & Sec. Fund v. Ferrell, 812 F.2d 512, 516 (9th

Cir. 1987); Hawaii Carpenters, 823 F.2d at 293. Other

circuits agree with that result. See Einhorn v. M.L. Ruberton

Constr. Co., 632 F.3d 89, 98–99 (3d Cir. 2011); Stotter Div.

of Graduate Plastics Co. v. Dist. 65, UAW, AFL-CIO,

991 F.2d 997, 1002 (2d Cir. 1993); Artistic Furniture,

920 F.2d at 1327–29.

We see no reason why the successorship doctrine should

not apply to MPPAA withdrawal liability just as it does to the

obligation to make delinquent ERISA contributions. The

primary reason for making a successor responsible for its

predecessor’s delinquent ERISA contributions is that,

“[a]bsent the imposition of successor liability, present and

future employer participants in the union pension plan will

bear the burden of [the predecessor’s] failure to pay its

share,” which will threaten the health of the plan while the

successor reaps a windfall. Artistic Furniture, 920 F.2d at

1328. That rationale applies with equal, if not greater, force

3 Resilient Floor Covering Pension Fund v. M&M Installation, Inc.,

630 F.3d 848, 852 (9th Cir. 2010) assumed without deciding that a

company could be held responsible for another entity’s withdrawal

liability under an alter ego theory. M&M Installation also noted that it was

not presented with the question whether there were other ways in which

a company could be responsible for another entity’s ERISA withdrawal

liability. Id. at 855.

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to a predecessor’s MPPAA withdrawal liability. A primary

purpose of ERISA is “to ensure that employees and their

beneficiaries [a]re not . . . deprived of anticipated retirement

benefits by the termination of pension plans before sufficient

funds have been accumulated in the plans.” R.A. Gray &Co.,

467 U.S. at 722. The MPPAA’s purpose is better to effectuate

ERISA’s purposes. By assessing proportional liability to

individual employers who withdraw from a plan, the MPPAA

avoids overburdening the remaining participating employers

and increases the likelihood that multiemployer plans remain

fully funded. See id. at 722–25.

Contrary to Michael’s’ submissions, “there is no

underlying congressional policy here militating against the

imposition of [successor] liability.” Golden State Bottling,

414 U.S. at 181. Although Michael’s argues that ERISA

§ 1384, is in tension with application of the traditional

employment law successorship doctrine to impose withdrawal

liability on successors, that is not so. First, 28 U.S.C. § 1384

allows a contributing employer to avoid withdrawal liability

where it sells its assets in “a bona fide, arm’s-length sale” and

the purchaser both takes on “an obligation to contribute to the

plan . . . for substantially the same number of contribution

base units for which the seller had an obligation to contribute

to the plan,” § 1384(a)(1), and provides a bond or other

financial assurance sufficient to cover five years of

contributions. If the purchaser withdraws from the plan

within five years, the seller is subject to withdrawal liability

along with the purchaser. § 1384(a)(1)(C). Although § 1384

establishes one circumstance in which an employer who

might—but would not necessarily—otherwise fit into the

successor category is not liable for withdrawal payments, it

does not address whether the broader employment and labor

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law successorship doctrine applies where those stringent

conditions are not met.

Nor does § 1392, which imposes withdrawal liability on

an employer who engages in “any transaction” for which the

“principal purpose . . . is to evade or avoid liability under [the

MPPAA],” suggest any basis for holding the employment and

labor law successor liability doctrine inapplicable to MPPAA

withdrawal liability. Section 1392 is essentially punitive. It

imposes withdrawal liability for “any” purposely evasive or

devious transaction, regardless of the potential impact on the

contribution base or on the employees covered by the pension

plan. Given its punitive focus, § 1392 does not suggest any

intention to displace the usual employment and labor law

successorship doctrine, which is remedial rather than punitive

and so focuses on objective factors, not on the employer’s

purpose in engaging in the transaction.

Finally, the narrow construction industry exception to

MPPAA withdrawal liability is fully consistent with the

generally applicable successorship doctrine. As explained

above, the exception recognizes that, so long as a previously

contributing construction employer ceases doing business at

the time it withdraws, the funding will remain relatively

constant. Where that occurs, other contributing employers

are likely to pick up the construction projects that would

previously have gone to the withdrawing employer. H.C.

Elliott, 859 F.2d at 812. But “[t]he withdrawal of a[]

[construction] employer from the plan does decrease the

[funding] base . . . if the employer stays in the industry but

goes non-union and ceases making payments to the plan.” Id.

(emphasis added). Then, contributions are not made for the

construction jobs the employer is continuing to do in the area. 

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Id. The same detrimental impact occurs where a successor

business picks up the work the predecessor would have

performed. Like § 1383(b), which imposes withdrawal

liability on employers who cease contributing but continue

working in the area, imposing traditional employment and

labor law successor liability on employers who substantially

continue the business of a construction industry predecessor

without contributing to the plan protects the viability of

pension funds in the face of a shrinking contribution base.

For all these reasons, we hold that a bona fide successor

can be liable for its predecessor’s MPPAA withdrawal

liability, both in general and with regard to the special

building and construction trade provisions in particular, so

long as the successor had notice of the liability.

4

D.

We now consider how the established successorship

factors are to be weighed in the context of MPPAA

withdrawal liability in the construction industry context.

Keeping in mind the flexible successorship inquiry discussed

4 The Seventh Circuit has so indicated as well. See Chicago Truck

Drivers, 59 F.3d at 49; see also Artistic Furniture, 920 F.2d at 1327. No

circuit has held otherwise. Several district courts have reached the same

conclusion. See, e.g., Cent. States, Se. & Sw. Areas Pension Fund v.

Hayes, 789 F. Supp. 1430, 1436 (N.D. Ill. 1992) (holding that a successor

can be subject to predecessor’s unpaid MPPAA withdrawal liability so

long as there exists substantial continuity and notice); Auto. Indus.

Pension Trust Fund v. S. City Ford, Inc., No. C 11-04590 CW, 2012 WL

1232109 (N.D. Cal. Apr. 12, 2012) (same); Trs. of Utah Carpenters’ &

Cement Masons’ Pension Trust v. Daw, Inc., No. 2:07-CV-87 TC, 2009

WL 77856, at *3 (D. Utah Jan. 7, 2009) (same).

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above, “substantial continuity” is “the primaryquestion,” and

so the most important consideration, in assessing whether an

employer is a successor for purposes of imposing other labor

law liabilities. Id.

Fall River Dyeing determined “substantial continuity” by

examining, inter alia, “whether the business of both

employers is essentially the same; whether the employees of

the new company are doing the same jobs in the same

working conditions under the same supervisors; and whether

the new entity has the same production process, produces the

same products, and basically has the same body of

customers.” 482 U.S. at 43. This definition of “substantial

continuity” contains an element Jeffries did not expressly

enumerate—whether the successor has “basically the same

body of customers” as the predecessor. Id. But Jeffries was

decided before Fall River Dyeing, and Jeffries’ list of the

pertinent factors was expressly “not . . . exhaustive.” Jeffries

Lithograph, 752 F.2d at 463. In the current context, we

conclude, the “same body of customers” factor is of special

significance when determining successorship for purposes of

withdrawal liability under the MPPAA construction industry

exception.

The consideration whether the successor deliberately

takes over “basically the same body of customers,” Fall River

Dyeing, 482 U.S. at 43, dovetails more precisely than any

other Fall River Dyeing or Jeffries factors with the underlying

rationale for the construction industry exception to MPPAA

withdrawal liability—that an employer’s complete

withdrawal and cessation of work usually does not harm the

plan because other contributing employers will pick up the

construction jobs (i.e. the customers) that would have gone to

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the withdrawing company. If, instead, an employer uses its

insider knowledge to draw a great many of the predecessor’s

customers, and so can “pick up where [the predecessor] left

off,” doing “[t]he same” “type of work” as the predecessor, 

yet neither contributes to the pension plan nor pays

withdrawal liability, the assumption that animates the

construction industry exception collapses. Instead, the plan’s

contribution base is compromised, and the plan’s financial

stability threatened. For that reason, focusing the

successorship inquiry on business retention through

exploitation of the predecessor’s contacts, public

presentation, and good will effectuates the purposes of the

MPPAA construction industry withdrawal provisions.

It is possible, of course, for a new employer to inherit a

substantial portion of a prior employer’s customer base

without making any deliberate attempt to do so. Where that

is the case, the entrepreneurial interests of putative successor

employers predominate, just as they do in the NLRA

successorship context when there is no intention “to take

advantage of the trained work force of [their] predecessor[s].”

Fall River Dyeing, 482 U.S. at 41. Where, however, the

objective factors indicate that the new employer “ma[de] a

conscious decision,” id., to take over the predecessor’s

customer base, the equitable origins of the successor liability

doctrine support the conclussion that the successor must pay

withdrawal liability.

Certain discrete factors, including whether “the new

employer uses the same plant” and whether “the same

product is manufactured or the same service [is] offered” are

pertinent to determining whether the successor has in fact

actively and successfully captured its predecessor’s market

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share. See Jeffries Lithograph, 752 F.2d at 463 (alterations

in original). The more closely the successor models itself on

its predecessor—for example, by taking over its location and

offering the same services as before—the more likely it will

succeed in capturing its predecessor’s customers. Where

putative successors do not similarly rely on insider

knowledge, similar public presentation, and deliberate

continuityof business operations to corner their predecessor’s

market share, it cannot be said that they set out to capture the

predecessor’s customer base, and the successor doctrine does

not apply.

The other Jeffries factors are more relevant to NLRA

contexts than to the MPPAA withdrawal liability context. 

Although the composition of the workforce is of preeminent

importance in successorship cases involving, for example, the

duty to bargain under the NLRA, that factor is not of special

relevance here. As we explained above, this factor is relevant

to the duty to bargain because “a mere change of ownership,

without an essential change in working conditions, is not

likely to change employees’ attitudes toward union

representation.” Jeffries Lithograph, 752 F.2d at 463. In

light of the presumption of continued majority support, see

id., it is fair to require the successor to bargain with an

incumbent union if it hires a majority of its workforce from

its predecessor’s employee base.

Here, by contrast, whether Michael’s hired a majority of

its workforce from Studer’s’ employee base is not especially

informative in determining whether the premises underlying

withdrawal liability in the construction industry apply. The

funding base of the Plan is not the particular individuals

employed, but, rather, the construction projects in the area.

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See H.C. Elliott, 859 F.2d at 812. Given the MPPAA’s

primary purpose of protecting the plan’s funding base, the

composition of the workforce factor may well, depending on

the circumstances, deserve less weight than in the NLRA

context.

Finally, whether “the same jobs exist under the same

working conditions” may be quite informative as to whether

customers will continue to hire the new contractor. Still, as

that consideration has a different significance than in the

NLRA context, the particular job similarities that are relevant

may differ as well. Again, the focus in the MPPAA context

must be on whether the successor is threatening the plan’s

funding base by successfully leveraging factors pertinent to

obtaining its predecessor’s market share.

E.

The district court did not properly identify or weigh the

successorship factors as applicable to the MPPAA context.

First, and most significantly, the district court did not

weigh market share capture as a prime consideration, and so

did not make any finding as to whether Michael’s had

retained a significant portion of Studer’s’ business or body of

customers. Instead, the district court viewed composition of

the workforce as “perhaps the most crucial” factor.

The parties disagree about the significance of the number

of Studer’s customers captured by Michael’s. The Fund

asserts that the bulk of Michael’s’ revenue in its first quarter

came from former Studer’s clients, and, further, that by far

most of Michael’s’ business customers in its first quarter had

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been Studer’s’ customers recently. The spotlight, maintains

the Fund, should be on the relative amount of revenue

generation by Studer’s’ former customers, rather than on a

simple head count of all customers, including one-time

customers. Michael’s responds that only 81 of the 868

customers Michael’s served in its first two years were former

Studer’s clients, and that Michael’s ability to attract large

numbers of individual customers is what matters for the

successorship determination.

The Fund’s approach is better aligned with the policies

underlying the MPPAA withdrawal liability successorship

analysis than Michael’s. The customer base inquiry is critical

in this context because it is pertinent to the statutory concern

with continuity of contribution rates when business changes

take place. Economically, a simple headcount of the number

of customers does not synchronize with that concern. 

Instead, a measure of the billings on the jobs worked for

continuing customers by the old and new companies is more

useful, as pension fund contributions are usually made based

on the total employee hours worked. See, e.g., Bd. of Trustees

of W. Conference of Teamsters Pension Trust Fund v. H.F.

Johnson, Inc., 830 F.2d 1009, 1011 (9th Cir. 1987).5

The district court did find, however, that Michael’s was

able to retain many of Studer’s’ customers, in large part

because of its “personal and business relationships” with

5

Individual, nonrepeat customers may also reflect a functional

continuity of the customer base. Word-of-mouth or professional referrals

of residential customers may recommend a successor business because of

the transfer of reputation and goodwill. Such factors are also not captured

by a simple customer headcount, but are likely to be hard to demonstrate

other than anecdotally.

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large customers of Studer’s. New Tradition Homes did not

put out bids to other contractors after Studer’s closed. 

Instead, New Tradition Homes gave its business to Michael’s

without further inquiry, because New Tradition Homes knew

Michael’s’ owner, Haasl, from his time as a salesman at

Studer’s. Michael’s may also have been able to capture other

Studer’s customers, as the district court recognized, because

Michael’s “use[d] . . . the same location with the same

telephone number and a similar looking sign,” while offering

virtually the same service. As they relate to a focus on

purposeful takeover of the customer base, these

considerations are significant, and point toward finding

Michael’s was a successor. The district court considered

them, however, only as isolated, independent factors, and so

did not find them weighty.

Moreover, by denying the Fund’s motion to supplement

the record in part because the “customer issue [wa]s not

dispositive of the successor employer determination,” the

district court further undermined its consideration of

customer base continuity. As we have explained, the

“customer issue” could very well be “dispositive” of the

successor employer determination. Substantial continuity,

measured in large part by capture of Studer’s share of the

construction projects in the area, is a critical factor to

consider in assessing successorship for purposes of imposing

MPPAA withdrawal liability. Because the district court’s

“exercise of discretion [in denying the motion to supplement

the record was] based on an erroneous interpretation of the

law,” it cannot stand. Estate of Darulis, 401 F.3d at 1063.

Further, in considering the “continuity of workforce”

factor, the district court used an erroneous method of

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calculation. Its conclusion that there was no “continuity of

the workforce” between Studer’s and Michael’s rested on a

determination that “Michael’s did not employ a majority, or

even a substantial portion of Studer’s workforce.” The

district court also noted that “the majority of Michael’s

installation work is performed by independent contractors

rather than employees,” and concluded that this factor also

weighed against finding continuity of the workforce.

The district court made two errors of law in its method of

determining workforce continuity. First, the appropriate test

for determining “continuity of the workforce” is whether “a

majority of the new workforce once worked for the old

employer,” not whether the successor employs a majority of

the predecessor’s workforce. Jeffries Lithograph, 752 F.2d

at 464; see also Fall River Dyeing, 482 U.S. at 46 n. 12

(noting that the NLRB, “with the approval of the Courts of

Appeals,” has adopted the interpretation that “work force

continuity . . . turn[s] on whether a majority of the successor’s

employees were those of the predecessor”); NLRB v.

Advanced Stretchforming Int’l, Inc., 233 F.3d 1176, 1180 (9th

Cir. 2000); Williams Enters., Inc. v. NLRB, 956 F.2d 1226,

1232 (D.C. Cir. 1992). Second, only employees in the

“bargaining unit,”—that is, the installers actually employed

by Michael’s who are the individuals as to whom pension

fund contributions would be due—should be included in the

workforce continuity test. See Small v. Avanti Health Sys.,

LLC, 661 F.3d 1180, 1188 (9th Cir. 2011) (stating, in context

of duty to bargain, that whether there was continuity of the

workforce is determined by examining employees within the

relevant bargaining unit).

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If it had used the correct metrics, the district court might

well have found there was workforce continuity here. It

appears that five of Michael’s eight employee installers had

previously worked for Studer’s. That some of these

employees did not “move[] directly from Studer’s to

Michael’s,” is not dispositive; “a hiatus” between employers

“is only one factor in the ‘substantial continuity’ calculus.” 

Fall River Dyeing, 428 U.S. at 45.

Finally, the district court also stated that “the successor

employer determination . . . involv[es] [a finding that the

successor has] ‘basically the same owners and operators as

. . . the predecessor employer,’” and that the “changes

between predecessor and successor were technical in nature

rather than a substantive change in the management.’”

(quoting New England Mech., 909 F.2d at 1343). The

reliance on New England Mechanical for these propositions

was mistaken. New England Mechanical concerns the

question whether a successor employer is so similar to its

predecessor that it is bound by the substantive provisions of

its predecessor’s collective bargaining agreement with a

union. 909 F.2d at 1343. Generally, although a successor

may have a duty to bargain with an incumbent union,

successors are not bound by the substantive contractual terms

of their predecessors’ collective bargaining agreements, to

which they were not signatories. Id. at 1342; see also Fall

River Dyeing, 482 U.S. at 40; NLRB v. Burns Int’l Sec. Servs.,

Inc., 406 U.S. 272, 284 (1972). A successor may be bound

by the terms of its predecessor’s collective bargaining

agreement if it has exhibited an intent to be bound, or if it is

so closely related to the prior business that it is effectively an

“alter ego” of that business. New England Mech., 909 F.2d

at 1342.

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New England Mechanical thus did not disturb our general

rule that “[t]he successorship inquiry in [other employment

and] labor-law context[s] is much broader” than the “strict

corporate-law sense of [successorship].” Sullivan, 623 F.3d

at 781. The successorship test in the MPPAA context does

not require that the changes between Studer’s and Michael’s

be merely “technical in nature,” nor does it require that both

entities have “basically the same owners and operators.” 

Instead, the district court must apply the Jeffries/Fall River

Dyeing successorship factors, with special emphasis on

substantial continuity as measured by customer retention.

IV.

The district court took an erroneously narrow view of the

successorship inquiry, applied the successorship factors

acontextually, miscalculated the continuity of the workforce

factor, and imposed the unwarranted requirement that the

change of ownership be merely “technical in nature.” We

therefore reverse and remand for application of the labor and

employment law successorship factors as appropriately

weighted for MPPAA construction industry withdrawal

liability purposes, and to take additional evidence as

necessary to decide the relevant factual issues.

REVERSED AND REMANDED.

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