Opinion ID: 1203071
Heading Depth: 1
Heading Rank: 4

Heading: $2 2 million + $25,000 «

Text: Further, M.A. King's failure to meet its debtsM.A. King failed to make payments to both the funds and to Lay-Comwas additional evidence that it could not pay its debts and was therefore undercapitalized. The defendants argue that if M.A. King had operated the way it was contractually obligated to operate under the Master Lease and Assignment Agreement, i.e., if Mike King had refrained from making unauthorized payments to the funds and from taking on King & Larsen's pension and union obligations, then the company would have been able to meet its obligations in other words, it would have been adequately capitalized. But again, the defendants have conceded that M.A. King was King & Larsen's successor and therefore liable for its union obligations. M.A. King was not permitted to abandon those obligations, either by entering into a contract not to pay them or otherwise. [10] Undercapitalization is almost never the only factor in a decision to pierce the corporate veil. See Browning-Ferris, 195 F.3d at 961. Indeed, this case illustrates how undercapitalization tends to go hand in hand with the control factor discussed above. Lay-Com kept M.A. King undercapitalized as one mechanism of its control over the company. The defendants ignore the interaction between these two factors, and in doing so they make contradictory arguments. They argue that they had no control over M.A. King, as shown by Mike King's payments to the funds and his unilateral agreement with the union in September 2001. But they also argue that M.A. King was not undercapitalized because Mike King was not supposed to make such paymentsthe third-party distribution restriction was meant to keep him hemmed in. They cannot have it both ways. All of this discussion risks ignoring the forest for the trees. M.A. King shut down less than a year after it set up shop, following a series of transactions that, admittedly, avoided King & Larsen's union obligations and attempted to keep Mike King on a short leash. Right off the bat, M.A. King needed a steady influx of cash loans from the defendants to keep going. These are all marks of an undercapitalized corporation, propped up by its parent or shareholders. The parties argue about whether the defendants reaped more value from M.A. King than they sowed, but this is beside the point. Also irrelevant is the defendants' contention that the funds would have been in the same or a worse position regardless of the defendants' actions because King & Larsen was failing before the defendants stepped in to create M.A. King and it would have been unable to pay the funds in any event. [11] What is clear is that the failure to pierce M.A. King's veil to reach Lay-Com would uphold a corporate arrangement to keep assets in a liability-free corporation while placing liabilities on an asset-free corporation. Hystro, 18 F.3d at 1390 (discussing Sea-Land, 941 F.2d at 524, further discussing Van Dorn, 753 F.2d at 569). M.A. King was the (relatively) liability-free corporation and King & Larsen was the asset-free corporation. The defendants arranged things this way. They cannot avoid liability by hiding behind such an arrangement. Lord & Essex presents a more difficult case. It was not a party to the Master Lease and Assignment Agreement, and therefore it did not exert the same level of control over M.A. King as did Lay-Com. Moreover, there is no contention that Lay-Com and Lord & Essex were in fact a single entity, or that Lay-Com's veil should be pierced to reach Lord & Essex. Nevertheless, Lord & Essex was an integral part of the scheme of transactions that stripped King & Larsen of its assets and left it with nothing but its tax and union liabilities. Lord & Essex also extended credit to King & Larsen (the $347,000 loan) when King & Larsen was struggling financially, suggesting that Lord & Essex did not maintain an arm's length relationship with King & Larsen and, hence, with M.A. King. The district court also points out that twice Lord & Essex made payments to the Lay Trust that should have gone instead to M.A. King for King & Larsen's prior work, showing a lack of corporate formality. It is a closer case, but we agree that it was appropriate to pierce M.A. King's veil to reach Lord & Essex. If not for its role in the scheme of transactions, however, Lord & Essex would have escaped liability, for its disregard of corporate formalities was not enough, on its own, to warrant piercing the veil. That leads us to the Lay Trust. Unlike the other two corporate defendants, the Lay Trust played no role in the scheme of transactions at issue. The district court relies on a plus factor: that the Lay Trust made several undocumented payments to M.A. King in the summer of 2001. But this is not really a plus factor if it is not coupled with something else supporting the theory that the Lay Trust, too, controlled M.A. King, disregarded its corporate form, and kept it undercapitalized. [12] No other facts, other than the trust's association with the other defendantsnot in itself a sufficient basis for piercing the veilare in this record. To be sure, the district court assigned only contingent liability to the Lay Trust (the trust was to be held liable only if the other two corporate defendants were unable to satisfy the judgment), but we find no basis for any liability. A court may not make up for a lack of evidence by assigning only contingent liability to an otherwise blameless defendant. The lack of evidence here means the Lay Trust must be dismissed from the suit. Likewise, the district court correctly dismissed Popp Jr. from the suit, as he played no role in the events at issue other than in his capacity as an officer and director of Lord & Essex, Lay-Com and M.A. King. He did not use M.A. King for his personal benefit, or commingle personal funds with funds in M.A. King's accounts, or do anything else to suggest that he personally was a dominant personality deserving of individual liability. We therefore affirm the dismissal of Popp Jr. from suit. One detail remains: the award of attorneys' fees to the funds. We review a district court's decision to award attorneys' fees for an abuse of discretion. See Senese v. Chicago Area I. B. of Pension Fund, 237 F.3d 819, 826 (7th Cir.2001); 29 U.S.C. § 1132(g)(1). There is a `modest presumption' in favor of awarding fees to the prevailing party, but that presumption may be rebutted. Senese, 237 F.3d at 826 (quoting Harris Trust & Sav. Bank v. Provident Life & Accident Ins. Co., 57 F.3d 608, 617 (7th Cir.1995)). The defendants have not rebutted the presumption. Rather, they have argued that if we reversed, we should also reverse the fee award. We are reversing in part, but the funds may still be found to be prevailing parties, see J.B. Esker & Sons, Inc. v. Cle-Pa's P'ship, 325 Ill.App.3d 276, 259 Ill.Dec. 136, 757 N.E.2d 1271, 1276 (2001) (The fact that the court ruled in plaintiff's favor on some issues does not create a basis for a reduction in the award of attorney fees.). We find no abuse of discretion in the district court's fee award, nor do we find a requirement for reversing it in light of our modification of the merits.