IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

LABORERS’ PENSION FUND, et al., )

)

Plaintiffs, )

)

v. ) No. 01 C 6855

)

LAY-COM, INC., et al., )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

Laborers’ Pension Fund and Laborers’ Welfare Fund of the

Health and Welfare Department of the Construction and General

Laborers’ District Council of Chicago and Vicinity and their

administrator, James Jorgensen (collectively “Funds”) have

brought suit against Lay-Com, Inc. (“Lay-Com”), Lord & Essex,

Inc. (“Lord & Essex”), John Popp Jr. (“Popp Junior”) both

individually and as Trustee of the Irrevocable Lay Trust Dated

December 26, 1995 (“Lay Trust”), Doralee King (“Doralee”) and

Gail King (“Gail”). Funds charge that it was denied benefit

contributions, union dues and payments on an installment note in

violation of the Employee Retirement Income Security Act of 1974

(“ERISA”) and the Labor Management Relations Act of 1947.

At long last the extensive proceedings in this hoary action

have reached the point at which the principal litigants have

found it possible to move for summary judgment under Fed. R. Civ.

P. (“Rule”) 56, and cross-motions have been filed (1) by Funds

and (2) by two separate pairs of defendants: (a) Lay-Com and Lay
 Gail and Doralee have not filed Rule 56 motions of their 1

own, nor have they been targeted by Funds’ Rule 56 motion. Hence

Funds’ claims against those defendants are unaffected by this

opinion.

2

Trust jointly and (b) Lord & Essex and Popp Junior jointly (for

convenience both sets of moving defendants are collectively

termed “Defendants”). For the reasons explained here, Funds’ 1

motion is granted in principal part (with a corresponding denial

of Defendants’ motions), while the converse is true as to Funds’

claim against Popp Junior in his individual capacity.

Summary Judgment Standards

Every Rule 56 movant bears the burden of establishing the

absence of any genuine issue of material fact (Celotex Corp. v.

Catrett, 477 U.S. 317, 322-23 (1986)). For that purpose courts

"consider the evidentiary record in the light most favorable to

the nonmoving party...and draw all reasonable inferences in his

favor” (Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471 (7th

Cir. 2002)). But to avoid summary judgment a nonmovant “must

produce more than a scintilla of evidence to support his

position” that a genuine issue of material fact exists (Pugh v.

City of Attica, 259 F.3d 619, 625 (7 Cir. 2001)) and “must set th

forth specific facts that demonstrate an issue of triable fact”

(id.). Ultimately summary judgment is appropriate only if a

reasonable jury could not return a verdict for the nonmovant

(Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). 
3

Finally, where as here cross-motions for summary judgment are

involved, those principles require the adoption of a Janus-like

perspective: As to each motion, the nonmovant’s version of any

disputed evidence-supported facts is credited.

Evidentiary Issues

In an effort to highlight the existence or nonexistence of

material factual disputes, this District Court’s LR 56.1 requires

both (1) that the movant file a “statement of material facts”

organized by numbered paragraphs, each with specific citation to

the evidentiary record (LR 56.1(a)(3)), and (2) that the

nonmovant file a paragraph-by-paragraph response to that

statement, also with specific record citations (LR 56.1(b)(3)(A). 

Although the nonmovant may of course advance “additional facts”

as well, that must be done in a separate statement of numbered

paragraphs, again with specific citations to the evidentiary

record (LR 56.1(b)(3)(B); Ammons v. Aramark Unif. Servs., Inc.,

368 F.3d 809, 817 (7 Cir. 2004)). th

Given the importance of LR 56.1’s function, our Court of

Appeals has consistently made clear that District Courts are

entitled to strict adherence to LR 56.1 and may penalize

violations by disregarding a party’s noncompliant factual

statements or by simply adopting the opposition’s statements

(see, e.g., Ammons, 368 F.3d at 817-18 and cases cited there). 

Here both sides, but particularly Defendants, have committed a
 While the parties did file an Agreed Stipulation of Facts 2

(“Stipulation”), Funds has also supported its Rule 56 motion with

a separate LR 56.1(a)(3) “Statement of Undisputed Material Facts”

that addresses the amount of unpaid monies at issue. This

opinion cites to that statement as “F. St. ¶--” and to the

Stipulation as “Stip. ¶--.” Funds’ memorandum of law, its

memorandum in response to Defendants’ motion and its reply

memorandum are respectively cited “F. Mem.--,” “F. Resp. Mem.--”

and “F. R. Mem --.” Those same “Mem.” and “Resp. Mem.”

designations are applied to the memoranda of law and responsive

memoranda of Lay-Com and Lay Trust (collectively “L.C.”) and

Lord & Essex and Popp Junior (collectively “L.E.”).

 Although the “Statement of Facts” contained in the Lord & 3

Essex-Popp Junior memorandum at least makes some responsive

effort, it responds not to Funds’ LR 56.1(a)(3) statement but to

the general factual narrative provided in the body of Funds’

initial Memorandum, and in any case it falls far short of meeting

the standards of LR 56.1(b)(3)(B)(L.E. Resp. Mem. 2-6, ¶¶3-15).

Indeed, even apart from the fatal defects identified in the text

that follows, the asserted shortcomings are without merit in any

event.

4

number of violations of LR 56.1. Those flaws are identified

hereafter.

Most importantly, Defendants have failed to respond

adequately to Funds’ LR 56.1(a)(3) statement of facts. Neither 2

set of Defendants has offered anything remotely resembling the

sort of separate paragraph-by-paragraph responses to that

statement that LR 56.1(b)(3)(A) requires. Indeed, the only

attempt to contest Funds’ LR 56.1(a)(3) statement in any respect

is set out in the Lord & Essex-Popp Junior responsive memorandum,

which briefly takes issue with the audit report upon which

portions of Funds’ statement is grounded (L.E. Resp. Mem. 13,

¶36). But that is wholly at odds with the purpose as well as 3
5

the express requirements of LR 56.1(b)(3)(A), as to which this

Court is entitled to require strict compliance (again see Ammons,

368 F.3d at 817-18 and cases cited there). This opinion

accordingly disregards that effort and accepts Funds’ LR 56.1

statement of facts on that score.

In addition to failing to respond properly to Funds’

statement of facts, Defendants have also failed to comply with LR

56.1 in introducing their own facts. For example, although the

Lay-Com-Lay Trust responsive memorandum purports to rely on

“facts” beyond those included in the Stipulation, those

Defendants have offered no LR 56.1(b)(3)(B) statement of those

additional facts. Instead they cite new exhibits attached to

their memorandum (see, e.g., L.C. Resp. Mem. 6-7). That same

flaw exists in the Lord & Essex-Popp Junior initial Rule 56

memorandum, though it is far more limited in scope there (see,

e.g., L.E. Mem. 4, ¶12). Again this opinion has not credited

those improperly presented (and, as discussed further below,

often ill-supported) factual claims (see, e.g., Cichon v. Exelon

Generation Co., 401 F.3d 803, 810 (7 Cir. 2005)). th

Finally, the parties have been less than diligent about

properly supporting their factual assertions--whether or not

adequately presented--with citations to the evidentiary record. 

On occasion they have cited to portions of the record that do not

actually support the facts asserted, and in other instances they
 All corporate entities referred to in this opinion were 4

incorporated in Illinois (id. ¶¶5, 7-9).

6

have offered no citations at all. On still other occasions some

parties have mischaracterized or misrepresented the cited

evidence. In all such instances this opinion has simply not

credited factual assertions by any party that are not expressly

supported by competent evidence.

Background4

King & Larsen Construction, Inc. (“King & Larsen”) was

incorporated in February 1995, and at all times relevant to this

litigation Mike King (“King”) was an officer, director and

shareholder (Stip. ¶¶5-6). In May 1995 King & Larsen entered

into a Memorandum of Joint Working Agreement (“1995 Agreement”)

with the Construction and General Laborers District Council of

Chicago and Vicinity and Laborers Local Union No. 288 (id. ¶31). 

Under the 1995 Agreement King & Larsen was required to make

monthly benefit contributions to Funds on its employees’ behalf

and to submit its books and records to Funds for periodic audits

to determine compliance with that requirement (F. St. ¶2). 

Failure to make payments on time required King & Larsen to pay

liquidated damages of 10% plus interest at a rate of 2% over

prime (id.).

Over the years at least some of the contributions owed by

King & Larsen under the 1995 Agreement were not paid (id. ¶¶7-9). 
 For that reason Popp Junior, in his capacity as Trustee of 5

Lay Trust, was substituted for Popp Senior as a defendant in

Funds’ Second Amended Complaint (“SAC”). Popp Junior is thus

being sued here (and is therefore targeted by Funds’ current

motion) in a dual capacity.

7

In February 2001 King & Larsen executed an Installment Note

payable to Funds to cover certain of those past-due contributions

(those owed for November 2000 through January 2001), and King

signed a personal guaranty of that Note (Stip. ¶32).

Other significant players in this litigation are a trio of

entities closely related to the Popp family: Lord & Essex, Lay

Trust and Lay-Com. Lord & Essex, a construction company, came

into being in April 1992, and at all times relevant here its

President and Director was John Popp Senior (“Popp Senior”),

while his son Popp Junior served as its Vice-President and

Treasurer (Stip ¶¶9, 12, 13). Lay Trust was created a few years

later (in December 1995), with Popp Senior and Loreen Popp as its

primary beneficiaries and with distributions to be made to their

surviving family members (including Popp Junior and his sister

Kari Harrison (“Harrison”)) in the event of their deaths (id..

¶¶78, 81). Popp Senior was also Trustee of Lay Trust until he

died during the pendency of this litigation, at which point Popp

Junior and Harrison became Co-trustees and Popp Senior’s assets

became part of the Lay Trust corpus (id. ¶81). Lay Trust was 5

the sole shareholder of Lord & Essex until March 2002, when Popp

Junior became its sole shareholder by a purchase from Lay Trust
 As all remaining relevant events also occurred in 2001, 6

subsequent date references will omit the year designation.

8

(id. ¶12). Lay-Com, which primarily engages in the purchase,

development and sale of properties for commercial and residential

development, was incorporated in September 1999 (id.. ¶8). At

all times relevant to this litigation Popp Senior was President,

Treasurer and a director of Lay-Com, Popp Junior was a director

and its Vice-President and Lay Trust was its sole shareholder

(id. ¶¶12-13, 81). 

Finally, M.A. King Construction (“M.A. King”) was

incorporated on March 19, 2001 (Stip. ¶7). M.A. King’s original 6

directors were Popp Senior, Popp Junior and King, and on April 1,

after adopting corporate bylaws, those directors elected King as

President and Treasurer and his then wife Gail as Vice President

and Secretary (id. ¶¶11, 21). M.A. King’s directors further

adopted a resolution to issue 25,000 M.A. King shares to the

G.A.K. Irrevocable Living Trust (“G.A.K. Trust”), an entity

created on the same day (its sole asset was to be all of M.A.

King’s issued and outstanding shares, and its start-up documents

were initially drafted by the Lay-Com-Lord & Essex attorney (id.

¶¶28, 56)), in consideration for a $25,000 promissory note (id.

¶¶21, 29). But there is no evidence that any such issuance of

stock or delivery of a promissory note ever took place (id. ¶29).

In short, although M.A. King received a corporate charter
9

from the State of Illinois, nothing supports its bona fide

corporate existence. In the same vein of the absence of normal

business and corporate attributes, Lay Trust later made a number

of outright payments to M.A. King during its life span, but there

is no evidence of any accompanying loan or other documentation

(id. ¶92).

During the April 1 organizational meeting the directors also

authorized King, as President of M.A. King, to enter into banking

relationships but prohibited him from borrowing money on the

corporation’s behalf without written consent from Lay-Com (Stip.

¶22). They further “resolved that none of the Powers and

Resolutions agreed to by the Directors conferring the various

powers to the President...could impair the corporation’s ability

to repay the debt owed to Lay-Com” (id. ¶22). Finally, the

directors entered into an Employment Agreement with King (with

King abstaining from the vote due to conflict of interest) that,

among other things, granted him a salary but denied him the power

to authorize, approve or incur on M.A. King’s behalf any $2,500

or greater “distribution, expenditure or monetary obligation”

(other than those arising from payroll or tax obligations)

without first complying with “third party distribution

procedures” to be detailed in a Master Lease and Assignment

Agreement (“Master Lease and Assignment”) between Lay-Com and
 Although King was terminated by vote of M.A. King’s 7

directors (again with King abstaining) as President and Treasurer

a month after that meeting, he remained a director, and his

employment contract with M.A. King was substantively unaffected

(id. ¶¶26, 38). King’s wife Gail was elected to fill his

positions, while King’s mother Doralee took over for Gail as Vice

President and Secretary (though Doralee herself was not aware she

had been so elected until November 2002) (id. ¶¶26, 45). 

 Although the parties stipulate that “the equipment and 8

vehicles used by M.A. King” have been appraised at just over $1

million (Stip. ¶51), it is not clear whether that appraisal

includes only the vehicles obtained from King & Larsen or also

10

M.A. King (a document discussed further below) (id. ¶¶23-25).7

Beginning on April 24 King & Larsen, Lord & Essex, Lay-Com

and M.A. King rapidly entered into a series of agreements and

transactions with one another, seeking (1) to create M.A. King as

a “new entity without union obligations” and (2) at least

initially, “to secure first priority lien position for Lord &

Essex on the assets of King & Larsen” (Stip. ¶¶53, 55). To

secure King’s cooperation in those transactions, Popp Senior

agreed to release a junior mortgage on Doralee’s house (id. ¶47). 

As that string of transactions is crucial to the analysis of

Funds’ claims, this opinion will address them in some detail.

First, King & Larsen entered into an Assignment of

Collateral and Satisfaction of Debt with Lord & Essex (“Lord &

Essex Assignment”), under which King & Larsen assigned all of its

assets to Lord & Essex, including well over $1.2 million in

“contract receivables,” an inventory of vehicles and mobile

equipment of unspecified value, over $60,000 in “shop 8
those that Lay-Com had bought on its own. 

 King & Larsen was then formally dissolved on July 2 (id. 9

¶5).

11

materials,” “general intangibles” and the policies insuring any

of the assets (Stip. ¶14). In return Lord & Essex extinguished

over $400,000 in King & Larsen debts (using money it borrowed

from Lay-Com) and agreed to assume nearly $1.5 million in

liabilities comprising accounts payable and two specified “Notes”

(id. ¶¶14, 16). Lord & Essex did not expressly assume the

remaining liabilities of King and Larsen (id.).9

On that same day Lord & Essex assigned to Lay-Com (in the

“Lay-Com Assignment”) both the assets and the liabilities it had

just received from King & Larsen under the Lord & Essex

Assignment (Stip. ¶16). In return Lay-Com deemed satisfied the

loans that Lord & Essex had obtained from it to finance the Lord

& Essex Assignment (id.). Unless there is something more to it

than meets the eye, it appears that the two successive steps

involved Lord & Essex as a mere conduit for what was really a

King & Larsen-Lay-Com transaction. In the end, some of the King

& Larsen obligations initially assumed by Lord & Essex were in

fact paid by Lay-Com (id.¶¶59-62).

Finally, on May 1 Lay-Com and M.A. King entered into the

Master Lease and Assignment (Stip. ¶18). Under the Master Lease

and Assignment Lay-Com agreed to lease to M.A. King what had been
 Indeed, Lay-Com eventually ended up also footing the bill 10

for new equipment and materials to be used by M.A. King, above

and beyond the old King & Larsen assets (see, e.g., Stip. ¶¶66-

67). 

 Those are the “third party distribution procedures” with 11

which, as mentioned earlier, King’s Employment Agreement with

12

the King & Larsen vehicles and mobile equipment and to assign to

M.A. King the other former King & Larsen assets, including all

contract receivables and work in progress accounts as well as the

former inventory (excluding vehicles and mobile equipment) (id.

¶19). In return M.A. King agreed to make lease payments to 10

Lay-Com of $17,805.24 a month starting June 1, as well as a

bimonthly “Operations Fee” equal to 50% of M.A. King’s profits

over the prior two-month period (id. ¶19)--but as matters

developed M.A. King never actually made any of those payments

(id. ¶49). In addition M.A. King also agreed to assume all the

former liabilities of King & Larsen that Lay-Com had assumed in

the transactions in which Lord & Essex was a conduit (id. ¶19). 

And significantly the Master Lease and Assignment also included a

“Third Party Distribution Restriction,” pursuant to which M.A.

King could not enter into any cash and asset transfers, payments

or distributions other than for “ordinary business expenses” to

any third party without both getting Lay-Com’s written

authorization and making a “Third Party Distribution Bonus”

payment to Lay-Com, equal in value to the proposed third party

distribution (id.).11
M.A. King required him to comply before authorizing any $2,500 or

greater “distribution, expenditure or monetary obligation.”

 In candor, the entire quickly-executed series of 12

transactions has all the flavor of a carnival sideshow, with the

rapid movement of shells (in the figurative sense) leaving the

viewer to guess which one hides the figurative pea of liability

in Funds’ favor.

13

When the dust had settled from that spate of transactions,12

M.A. King was left operating its construction business from the

same yard and office that King & Larsen had used, using the same

fax and telephone number, employing the same employees, using the

same equipment and even performing King & Larsen’s existing

contracts (Stip. ¶¶44, 82). Indeed, despite the terms of the

Master Lease and Assignment M.A. King was not always paid for the

King & Larsen contract receivables it had acquired from Lay-Com--

on two occasions Lord & Essex made payments for prior King &

Larsen services not to M.A. King, but to Lay Trust (id. ¶¶90-91). 

On another occasion, while M.A. King was paid for work it (rather

than King & Larsen) had done for Lord & Essex, that payment was

made not by Lord & Essex but by Lay-Com (id. ¶69).

Also that summer, Funds began to receive payments out of

M.A. King’s accounts on some of the obligations owed by King &

Larsen, including both the normal monthly contributions for

February and March and some of the payments due on the

Installment Note (though the last of those installments remained

outstanding) (Stip. ¶¶34-36; F. St. ¶6). On September 11 King
 Although defense counsel seek to make something of their 13

clients’ noninvolvement in the September 11 Agreement, as

explained later it is really irrelevant to the issues now before

this Court.

14

signed an Independent Construction Industry Collective Bargaining

Agreement with the Construction and General Laborers District

Council of Chicago and Vicinity (“September 11 Agreement”),

purportedly on behalf of M.A. King (id. ¶33). 

13

Aware of M.A. King’s payments to Funds, on September 21 LayCom sent a letter to King advising him that those payments had

violated the Third Party Distribution Restriction and urging him

“to take whatever action necessary to comply with” those

restrictions (Stip. ¶37). Three days later the directors of M.A.

King (including King) “entered into an informal action and

consent thereto disapproving the [September 11 Agreement]” (id.

¶38), and on October 5 Popp Senior and Popp Junior resigned from

the M.A. King Board (id. ¶39). Finally, Lay-Com filed suit

against King and M.A. King on October 12, based among other

things on M.A. King’s (1) violation of the Master Lease and

Assignment by not complying with Third Party Distribution

Restrictions and (2) failure to make its monthly lease payments

(id. ¶86). Lay-Com obtained an Agreed Judgment Order on that

claim on October 30 (id. ¶87). 

Despite those upheavals M.A. King nevertheless continued

working on projects, at least for Lord & Essex, until “the end of
15

November or early December” (Stip. ¶85). About December 3 or 4,

however, Lord & Essex informed M.A. King that it would no longer

be needed on those projects (id.), and by early in the new year

M.A. King had been dissolved (id. ¶7).

Lastly, as to the amount in controversy in this litigation,

as of the time of Funds’ F. St. ¶¶6-9 the aggregate indebtedness

owed to it came to $2,487,723.62. Though Defendants’ responsive

memoranda purport to question that figure, they have proffered no

evidence to counter it.

Procedural History

This action was brought fully five years ago--on August 31,

2001. Over that time Funds have amended their initial Complaint

twice to adjust the list of defendants, and this Court has

entered two default judgments: one against King and King &

Larsen on January 23, 2002 and one against King, King & Larsen

and M.A. King on October 30, 2003. As stated at the outset, each

of Funds and two separate pairs of Defendants--Lay-Com and Lay

Trust, and Lord & Essex and Popp Junior--have now filed Rule 56

motions for summary judgment.

M.A. King’s Liability for King & Larsen’s Obligations

In determining who is and is not liable for the obligations

at issue here, the parties have first joined battle over the

threshold question whether M.A. King was a “successor and/or

alter ego” of King & Larsen and could therefore be held liable
 That being true, this opinion need not address Funds’ 14

arguments as to alter ego liability as well.

 Defendants have offered no substantive challenge to M.A. 15

King’s successor (or alter ego) liability. Instead their

memoranda have focused on challenging Funds’ initial claim that

this Court’s October 30, 2003 entry of a default judgment against

M.A. King, King & Larsen and King had established M.A. King’s

successor or alter ego liability once and for all, precluding the

remaining defendants from contesting the merits of the issue. As

Defendants correctly argue, the majority of federal courts

(including our own Court of Appeals) hold that “default judgments

do not give rise to collateral estoppel”--at least as to those

(such as Defendants) who were not party to that default (Stephan

v. Rocky Mountain Chocolate Factory, Inc., 129 F.3d 414, 418 (7th

Cir. 1997), citing United States v. Bailey, 957 F.2d 439, 443

(7th Cir. 1992)). Yet having demonstrated that they could

potentially contest M.A. King’s successor liability on its

merits, Defendants have inexplicably failed to do so.

16

for King & Larsen’s obligations. As the ensuing analysis

reflects, the undisputed evidence confirms that M.A. King was

indeed a successor to King & Larsen.14

Pursuant to federal substantive law (which supplants state

common law in the ERISA context--see, e.g., Moriarty v. Svec, 164

F.3d 323, 328-29 (7th Cir. 1998)), successor liability applies as

long as (1) there is “substantial continuity in the operation of

the business before and after the sale” and (2) “the successor

had notice of the claim [against its predecessor] prior to

acquisition” (Chicago Truck Drivers, Helpers and Warehouse

Workers Union (Independent) Pension Fund v. Tasemkin, Inc., 59

F.3d 48, 49 (7th Cir. 1995)). Here Funds has established both

elements of that test. 

15

First, it is undisputed that M.A. King operated from the
 Nor have Defendants challenged M.A. King’s successor 16

liability by questioning the adequacy of notice--or, for that

matter, on any other merits-related ground.

17

same yard and office as King & Larsen, used the same telephone

and fax number, employed the same employees, retained a common

officer, used the same equipment, performed the same kind of work

for the same clients and even continued working on the contracts

that King & Larsen had left unfinished. There could scarcely be

a more conclusive showing of “continuity” sufficient to establish

the first element of federal successor liability (see, e.g.,

Upholsterers’ Int’l Union Pension Fund v. Artistic Furniture of

Pontiac, 920 F.2d 1323, 1329 (7th Cir. 1990) as well as Chicago

Truck Drivers, 59 F.3d at 49).

It is similarly undisputed that King was an officer and

director in both King & Larsen and (at least initially) in M.A.

King. Given King’s positions in both the predecessor and the

assertedly successor entities, there is no question that M.A.

King had notice, through King, of King & Larsen’s obligations to

Funds.16

In short, Funds have plainly satisfied their summary

judgment burden as to both elements of the federal test. M.A.

King was therefore a successor of King & Larsen, and it was

therefore bound by the latter’s agreements and liable for its
 As Funds argue, the question whether M.A. King might 17

also be liable for further obligations due to the September 11

Agreement is of no consequence. Indeed, Funds’ memoranda make

clear that the relief it seeks is the recovery of the obligations

originally incurred by King & Larsen (F. R. Mem. 4-5; F. Resp.

Mem. 3). Whether M.A. King might have incurred additional

obligations on its own (rather than as a successor entity)--an

argument to which defense counsel regrettably dedicated a

significant amount of time, energy and ink--is entirely

irrelevant to the claims pursued here by Funds.

18

obligations.17

Defendants’ Liability for King & Larsen’s Obligations

Funds next seek to extend the M.A. King liability for King &

Larsen’s obligations to Funds’ ultimate targets--Lay-Com, Lord &

Essex and Popp Junior (the latter both individually and as

Trustee of Lay Trust)--by asking this Court to “pierce the

corporate veil” of M.A. King. Unlike Funds’ “successor” claim,

which drew on federal law, that claim is evaluated under Illinois

law. All the parties have thus looked to the Illinois caselaw,

and this opinion will do the same.

Under Illinois law corporations are generally treated as

legal entities separate and distinct from their shareholders,

directors, officers and corporate parents or subsidiaries (In re

Rehabilitation of Centaur Ins. Co., 158 Ill.2d 166, 172, 632

N.E.2d 1015, 1017 (1994)). But that separate corporate identity

will be disregarded--and the “corporate veil” pierced or alter

ego status established--where two requirements are met (Van Dorn

Co. v. Future Chem. and Oil Corp., 753 F.2d 565, 569-70 (7th Cir.
19

1985), quoting an Illinois Appellate Court case that states the

Illinois rule (brackets in original)):

First, there must be such unity of interest and ownership

that the separate personalities of the corporation and the

individual [or other corporation] no longer exist; and

second, circumstances must be such that adherence to the

fiction of separate corporate existence would sanction a

fraud or promote injustice.

In determining whether sufficient “unity of interest”

exists, Illinois courts consider a number of factors, including

(In re Estate of Wallen, 262 Ill.App.3d 61, 69, 633 N.E.2d 1350,

1357 (2d Dist. 1994)): 

inadequate capitalization; failure to issue stock; failure

to observe corporate formalities; nonpayment of dividends;

insolvency of the debtor corporation; nonfunctioning of the

other officers or directors; absence of corporate records;

commingling of funds; diversion of assets from the

corporation by or to a stockholder or other person or entity

to the detriment of creditors; failure to maintain arm’s

length relationships among related entities....

As to “sanctioning fraud” or “promoting injustice,” while the

party seeking to pierce the veil need not demonstrate fraud or

“an intent to injure creditors” (Van Dorn, 753 F.2d at 571), it

must show “something more than the mere prospect of an

unsatisfied judgment,” such as “some element of unfairness...or

the existence of a compelling public interest” (Hystro Prods.,

Inc. V. MNP Corp., 18 F.3d 1384, 1390 (7th Cir. 1994), internal

quotation marks omitted). For example, courts have found that

second element satisfied when failure to pierce the veil would

(id., citations omitted):
20

unfairly enrich one of the parties; allow a parent

corporation, that had created a subsidiary’s

liabilities and was the cause of the subsidiary’s

inability to meet them, to escape responsibility;...or

uphold a corporate arrangement to keep assets in a

liability-free corporation while placing liabilities on

an asset free corporation.

Because that articulation of the doctrine speaks of the

relationships between corporations (though as explained hereafter

its scope is not limited to such relationships), this opinion

turns first to examining Lay-Com’s status in that respect. It

will then go on to look at Funds’ other targets.

Despite defense counsel’s protestations to the contrary, it

cannot be gainsaid that Funds have successfully established both

elements required to “pierce the corporate veil” embodied by M.A.

King--an exceedingly flimsy one--and to attach liability to LayCom as well. Not only was there clearly a “unity of interest”

between M.A. King and Lay-Com, but to adhere to the “fiction of

[their] separate corporate existence” would indeed “promote

injustice” here.

For example, the evidence plainly establishes that M.A. King

was undercapitalized, “a major factor in assessing whether a

legitimate separate corporate entity existed” (Fiumetto v.

Garrett Enters., Inc., 321 Ill.App.3d 946, 959, 749 N.E.2d 992,

1005 (2d Dist. 2001)). In determining whether a corporation is

undercapitalized, courts “compare the amount of capital to the

amount of business to be conducted and obligations to be
 Although Lord & Essex and Popp Junior assert that such a 18

determination requires “expert opinion,” they cite to no caselaw

in support of that proposition (L.E. Resp. Mem. 11, ¶30). 

Indeed, such cases as Fiumetto, id. at 959-60 resolve that issue

without the benefit (or detriment) of such opinion evidence.

 Lay-Com cites the deposition of King’s accountant Jim 19

Halikias (“Halikias”) (itself a violation, as noted above, of LR

56.1(b)(3)(B)) and Stip. ¶55 in support of its assertion (L.C. 

Resp. Mem. 5-6). But Lay-Com cites Halikias’ deposition only in

general, pointing to no particular section or page number, and

this Court’s review of that document revealed no evidence of such

a loan. Similarly, although the citation to Stip. ¶55 is at

21

fulfilled” (id.).18

Here the only assets to which M.A. King had access at its

inception were the inventory, work in progress accounts and

accounts receivable assigned to it by Lay-Com, against which

assets M.A. King had assumed nearly $1.5 million of accounts and

notes payable. Nor is there evidence of any actual infusion of

initial capital. Even though the G.A.K. Trust was assertedly

supposed to buy $25,000 worth of M.A. King stock, there is no

evidence that the G.A.K. Trust (or any other entity) really

purchased any stock at all. Moreover, with the G.A.K. Trust

being set up so that its sole proposed asset was M.A. King stock

purportedly “paid for” with a $25,000 promissory note from the

G.A.K. Trust itself, the entire arrangement smacks of nothing

more than self-levitation, not true corporate capitalization.

Moreover, as if to underscore that deficiency, Lay-Com

claims to have loaned $250,000 to M.A. King soon after its

creation. Although it has offered no evidence of such a loan,19
least more precise, it too offered no supportive evidence.

 In that respect, Lay-Com also footed the bill for new 20

equipment and materials to be used by M.A. King, over and above

the old King & Larsen assets it had leased to M.A. King.

22

if it is assumed arguendo to be the case it simply drives another

nail into the coffin of inadequate capitalization, for it

confirms that the claimed G.A.K. Trust note (meaningless in

economic terms) and the lease and assignment of assets--subject

to the assumption of $1.5 million in liabilities!--were

inadequate to support M.A. King’s operation as a viable entity. 

In real world terms, the arrangement was no different from LayCom’s having conducted the business with M.A. King as a front.20

Relatedly, no credence can be given to Lay-Com’s assertion

that despite M.A. King’s lack of initial capital its “business

income was sufficient for [it] to pay its debts and retain net

earnings,” so that it was not undercapitalized (L.C. Resp. Mem.

6). Not only does Lay-Com again point to no supporting evidence,

but the actual evidence is 180N opposed to that contention. 

Importantly, as Funds point out, M.A. King never made any of the

monthly lease or bimonthly “Operations Fee” payments required

under the Master Lease and Assignment. Moreover, the record

reveals that M.A. King received a number of outright payments

from Lay Trust (with no indication that they were loans or that
 Again the inadequacy of M.A. King’s purported 21

capitalization is reinforced by the transactions just referred to

in n.20.

23

there was any consideration received in return). In sum, the 21

uncontroverted evidence shows, contrary to Lay-Com’s contentions,

that M.A. King’s business income (whatever it might have been)

was insufficient to meet all of its obligations on its own (see

Fiumetto, 321 Ill.App.3d at 959-60, 749 N.E.2d at 1006). 

That conclusion is further buttressed by the evidence that

M.A. King’s internal structure and external agreements precluded

its existence as an independent entity. It has already been

shown that the record contains no evidence that anyone ever held

any actual ownership interest in M.A. King, indicating instead

that Lay-Com was really its de facto principal. Indeed, the

terms of the Master Lease and Assignment ensured that Lay-Com had

effective control over M.A. King. Under the Master Lease and

Assignment M.A. King could engage in no cash or asset transfers,

payments or distributions (other than ordinary business expenses)

to any third party without both written authorization from LayCom and the payment of a “distribution bonus” to Lay-Com. 

In addition, two of M.A. King’s three director positions

were filled by Lay-Com’s officers and directors (Popp Junior and

Popp Senior), reinforcing Lay-Com’s de facto control over the

corporation. While such overlapping directorships alone do not

necessarily demonstrate a unity of interest, the added fact that
 It is true but irrelevant, for these purposes, that King 22

violated those constraints by making payments to Funds and

entering into the September 11 Agreement: When he did so, LayCom promptly sued both King and M.A. King and obtained an Agreed

Judgment Order against them. And Lay-Com itself recognizes, and

in fact relies on, the limitations on King’s authority in other

contexts--for example, to support its superfluous claim that it

is not bound by the September 11 Agreement, it argues among other

things that King lacked the authority to enter into such a

contract on M.A. King’s behalf in the first place (see, e.g.,

L.C. Resp. Mem. 9-11; L.C. R. Mem. 4, ¶¶10, 12).

24

those overlapping directors exercised their powers to provide

Lay-Com further control over M.A. King certainly does. In

particular, the M.A. King Board of Directors expressly limited

the powers of the corporate President so that he was both

(1) prohibited from borrowing money on behalf of M.A. King

without Lay-Com’s written consent and (2) barred from authorizing

or approving any $2,500-or-over monetary obligations or

distributions of any kind without complying with the Master Lease

and Assignment’s third party distribution restrictions--which, as

already noted, also essentially gave Lay-Com final say over such

distributions (as well as a bonus payment).22

Nor did Lay-Com deal with M.A. King as an independent arm’s

length entity once the latter was up and running. Lay-Com

allowed M.A. King to use the assets it had obtained from King &

Larsen--and continued to purchase even more equipment and

material on M.A. King’s behalf--despite the fact that M.A. King

never made a single one of the lease or “Operation Fee” payments

required under the Master Lease and Assignment. Instead it was
25

not until it was discovered that King had executed agreements

with the unions on behalf of M.A. King that Lay-Com took any

action.

From every perspective, then, the unity of interest between

M.A. King and Lay-Com has been established beyond peradventure. 

And to complete the veil-piercing analysis as to Lay-Com, Funds

has also demonstrated conclusively that adhering to M.A. King’s

corporate fiction would “promote injustice.” Through the series

of structured transactions described earlier, Lay-Com was able to

acquire King & Larsen’s contract receivables and “shop

materials,” amounting to more than $1.2 million, as well as King

& Larsen’s “general intangibles” and its inventory of vehicles

and mobile equipment, all in return for forgiving loans amounting

to a fraction of those assets. And although Lay-Com purportedly

assumed nearly $1.5 million in liabilities as part of the deal,

it immediately foisted those liabilities, courtesy of the Master

Lease and Assignment, onto an undercapitalized and unowned shell

corporation--M.A. King.

Clearly any failure to pierce the corporate veil in this

instance would “uphold a corporate arrangement to keep assets in

a liability-free corporation while placing liabilities on an

asset free corporation,” thereby “promoting injustice” (Hystro

Prods., 18 F.3d at 1390). And although what has already been

said is sufficient unto the day, the situation may also fairly be
 Lay-Com’s and Lay Trust’s Rule 56 motions challenge only 23

the validity of the September 11 Agreement. As already stated

and as Funds have repeatedly made clear (F. Resp. Mem. 4; F. R.

Mem. 4-5), that challenge addresses an issue irrelevant to Funds’

claims. But it fails on its merits as well. While the “doctrine

of economic duress” may well be a “recognized affirmative

defense” to contract actions in general (L.C. Mem. 6, ¶17), it is

not available to employers in the ERISA context (Agathos v.

Starlite Motel, 977 F.2d 1500, 1505-06 (7 Cir. 1992)). th

26

said to satisfy the other branch of Hystro’s “something more”

requirement--“the existence of a compelling public interest”

(id.)--because Defendants’ effort, if successful, would subvert

the statutory goal of assuring the solvency of group employee

benefit plans.

In summary, given the evidence and arguments that Funds have

proffered, coupled with Lay-Com’s failure to rebut them in any

real sense, no reasonable jury could fail to find that M.A. King

was undercapitalized, unowned and effectively controlled by LayCom for its benefit, so that any notion of M.A. King’s

independent corporate existence must be rejected and liability

must attach to Lay-Com. This Court therefore grants Funds’

Rule 56 motion as to Lay-Com.23

What has been said up to now does not, of course,

necessarily compel the same conclusion as to Funds’ other Rule 56

targets, Lord & Essex and Popp Junior, both individually and as

Trustee of Lay Trust. This opinion turns to that subject, which

calls for a look at corporate veil-piercing other than in the

corporation-to-corporation context.
27

On that score Defendants have advanced the unsupported

contention that corporate nonshareholders--directors, officers

and others--cannot be reached by piercing the corporate veil. To

the contrary, courts of equity (which fashioned the veil-piercing

concept and remedy to begin with) are not at all as constrained

as Defendants would have it. Thus, for example, Fontana v. TLD

Builders, Inc., 362 Ill.App.3d 491, 501-03, 840 N.E.2d 767, 776-

78 (2d Dist. 2005) followed its analysis of the corporate veilpiercing doctrine generally (an analysis substantively identical

to the one already set out in this opinion) with a section

captioned “Imposition of a Liability of a Corporation on a

Nonshareholder” that articulates and applies the principle that

corporate liability can be extended to nonshareholders even where

“the unity of interest and ownership requirement of piercing the

corporate veil could not technically be met” (id. at 501, 840

N.E.2d at 776). And Fontana went on to support that proposition

not only by citing earlier Illinois caselaw but also by citing

cases elsewhere. Essentially the gravamen of the court’s holding

was the familiar one of “look[ing] to substance rather than form”

(id.), with the de facto exercise of control over the flawed

corporation (here that is M.A. King) leading to the imposition of

liability on the nonshareholder.

Application of that concept to Lord & Essex calls for a

“yes” answer to the question of its liability vel non. Its
 Funds’ R. Mem. 3 n.1 points out that counsel who 24

represented both Lay-Com and Lord & Essex drafted the Master

Lease and Assignment and all the related documents that created

the convoluted arrangement that this Court has been called upon

to untangle in such a painstaking manner. But as has been seen

here, the results arrived at in this opinion have not at all

relied on any guilt-by-association notions.

28

inextricable involvement in the series of successive transactions

that were designed to substitute M.A. King, with its inadequate

capitalization and its other more-than-suspect attributes, for

King & Larsen renders Lord & Essex as well as Lay-Com culpable in

that regard: No legitimate purpose has been proffered, nor can

any be reasonably divined, for its having acted as a conduit or

way station en route to Lay-Com’s already-described involvement,

with the totality of those transactions having been shaped in a

fashion that would have left Funds high and dry. And even 24

after those transactions were entered into, Lord & Essex (like

Lay-Com) failed to honor even the artificial structure that they

had created--twice it made payments for earlier King & Larsen

services to Lay Trust rather than to M.A. King.

As for Lay Trust, it was not directly involved (as were LayCom and Lord & Essex) in the web of transactions analyzed here,

although it was and is Lay-Com’s sole shareholder and it was also

Lord & Essex’ sole shareholder until March 2002 (after the events

recounted in this opinion). In the absence of a showing that a

corporation to which liability has been extended by piercing

another corporate veil is itself vulnerable to such veil-piercing
 This last provision is particularly appropriate in light 25

of the penchant and ability of the related entities here,

essentially under common control and often acting through common

counsel, to structure transactions and move assets around in a

way calculated to insulate them against liabilities such as those

owed to Funds. If those machinations have somehow rendered LayCom and Lord & Essex financially incapable of honoring their

legal responsibilities by correspondingly enriching Lay Trust

(something that cannot be determined from the record now before

this Court), Lay Trust must be expected to step up to the plate.

29

(and nothing of that nature has been ascribed to Lay-Com or to

Lord & Essex), it would stretch beyond any reasonable limit the

principle exemplified by Fontana and like cases if liability were

to be imposed on the second corporation’s shareholders solely on

the basis of their shareholdings.

Here however there is a plus factor: Lay Trust (like LayCom) made a number of direct payments to M.A. King during its

life span, without evidence of any loan or other documentation,

that by definition enabled M.A. King to continue its fragile

existence, thus facilitating the effort to deprive Funds of their

entitlement. Even though the question is a close one, this Court

holds that Lay Trust too is potentially liable to Funds--but in

light of its lesser complicity than that of Lay-Com and Lord &

Essex, such liability will attach only if and to the extent that

the assets of the two corporations were to prove inadequate to

satisfy the judgment to which Funds are entitled here.25

Lastly as to Popp Junior in his individual capacity, the

plus factor just identified as to Lay Trust is absent--his only
30

involvement during the relevant period was as an officer and

director of Lay-Com and an officer of Lord & Essex. That is just

not enough under the caselaw. Because Funds have put their best

foot forward and failed, that calls not only for denial of their

Rule 56 motion as to Popp Junior individually but also for the

entry of judgment in his favor as a matter of law.

Conclusion

For the reasons explained here at regrettably greater length

than this Court would have preferred, the uncontroverted

facts--with no genuine issue of material fact to blunt their

impact--compel the following results as a matter of law:

1. Judgment is ordered to be entered in favor of Funds

and against Lay-Com, Lord & Essex and Lay Trust (that is,

against Popp Junior in his capacity as its Trustee) jointly

and severally (but as to Lay Trust, on the contingent basis

previously spelled out), in the sum of $2,487,723.62. To

that extent Funds’ Rule 56 motion is granted and those

Defendants’ Rule 56 motions are denied.

2. Funds’ Rule 56 motion against Popp Junior

individually is denied, while Popp Junior’s individual

motion is granted (although not for the reason that his

memorandum had advanced). This action is ordered to be

dismissed as to Popp Junior individually.

This Court expressly orders the entry of a final judgment in
31

those respects and determines that there is no just reason for

delay (see Rule 54(b) and, e.g., Continental Cas. Co. v. Anderson

Excavating & Wrecking Co., 189 F.3d 512, 516, 517-18 (7 Cir. th

1999) and cases cited there). Finally, because there are two

remaining defendants (Gail and Doralee) who were not implicated

in the current motions, this action is set for a status hearing

at 9 a.m. September 13, 2006 to discuss further proceedings.

________________________________________

Milton I. Shadur

Senior United States District Judge

Date: September 8, 2006