Court Opinion

ID: 3064504
Source: CourtListenerOpinion
Date Created: 2015-10-14 22:25:10.544417+00
Date Added: 2024-06-11T11:17:50.991401
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

SOUTHERN CALIFORNIA PAINTERS &          
ALLIED TRADES, DISTRICT COUNCIL
NO. 36,
                                             No. 06-56246
                 Plaintiff-Appellant,
                                               D.C. No.
                 v.
                                           CV-04-129 AHM
RODIN & CO., INC., a California                 (PLAx)
corporation; SOUTHERN CALIFORNIA
                                               OPINION
PAINTING, INC., a California
corporation,
             Defendants-Appellees.
                                        
        Appeal from the United States District Court
            for the Central District of California
         A. Howard Matz, District Judge, Presiding

                   Argued and Submitted
            April 7, 2008—Pasadena, California

                    Filed March 10, 2009

    Before: Alfred T. Goodwin, Andrew J. Kleinfeld, and
                Jay S. Bybee, Circuit Judges.

                  Opinion by Judge Bybee

                             3081
           SOUTHERN CALIFORNIA PAINTERS v. RODIN     3083

                       COUNSEL

Ellen Greenstone, Rothner, Segall, & Greenstone, Pasadena,
California, for the plaintiff-appellant.
3084           SOUTHERN CALIFORNIA PAINTERS v. RODIN
John J. Strumreiter and Barbara J. Klass, Brown, Brown, &
Klass, Agoura Hills, California, for defendant-appellee Rodin
& Co., Inc.

Gregory J. Khougaz, Santa Monica, California, for defendant-
appellee Southern California Painting, Inc.

                             OPINION

BYBEE, Circuit Judge:

   Plaintiff-appellant Southern California Painters & Allied
Trades, District Council No. 36 (“the Union”) brought suit,
alleging that defendants-appellees Rodin & Co., Inc.
(“Rodin”) and Southern California Painting, Inc. (“SCP”)
were alter egos, and that Rodin was therefore bound by the
Master Labor Agreement signed by SCP. For the reasons set
forth below, we affirm the district court’s judgment in favor
of Rodin and SCP.

                       I.   BACKGROUND

A.     Facts

   Rodin is a commercial painting contractor in Los Angeles.
It has been in business for over eighteen years, employs more
than seventy people, and completes more than one thousand
commercial painting jobs each year. Fred Rodin1 is the sole
shareholder of Rodin and is responsible for its daily opera-
tions. Rodin is not a party to any union collective bargaining
agreements. Ron Benveniste and Fred Rodin have been
friends since the mid-1980s. Benveniste established a residen-
tial painting business in 1979. In 2001, he wanted to expand
his business to include commercial painting services, so he
  1
   Because Fred Rodin named his company after himself, we will refer to
him as “Fred Rodin” or “Fred” and the company simply as “Rodin.”
            SOUTHERN CALIFORNIA PAINTERS v. RODIN          3085
consulted with Fred, who already had experience in the com-
mercial painting market. He told Benveniste that there were
painting jobs Rodin could not perform as a non-union con-
tractor, and recommended that Benveniste create a union
company. Fred also advised that starting a union company
would allow Benveniste to call the union when he needed
painters rather than maintain a standing workforce.

   On September 21, 2001, Benveniste formed SCP. In March
2002, Benveniste signed the Union’s Master Labor Agree-
ment (“MLA”) on behalf of SCP, which allowed SCP to bid
on Union projects and required SCP to meet certain obliga-
tions, such as paying union wages on all of its projects. The
MLA prohibited SCP from “double-breasting,” that is, run-
ning both union and non-union painting businesses. When the
first MLA expired in 2003, SCP signed a second MLA, which
was in effect from 2003 until June 30, 2006.

   SCP rented office space separate from Benveniste’s resi-
dential painting business, and bought furniture, purchased
supplies, and installed telephone and fax lines at its office.
Fred introduced Benveniste to contractors who performed
Union jobs. He asked some Rodin employees to provide star-
tup help to SCP, and calls and faxes to SCP were often for-
warded to Rodin’s offices. Fred also informally asked one of
his employees, Candace Weisz, to help Benveniste set up his
bookkeeping. Weisz set up payroll, payables and receivables,
and helped Benveniste complete Union paperwork, for which
she was not compensated. Rodin employees were not asked
to track the time they spent on SCP matters; they believed that
the time they spent handling SCP matters was trivial and
would last only until SCP had sufficient capital to hire its own
staff. The parties dispute whether Fred Rodin also contributed
several thousand dollars in start-up money for SCP. Neither
Fred nor Rodin, however, had an ownership interest in or
received any benefits from SCP.

  Aside from this assistance, the Union alleged that Rodin
and SCP worked together or overlapped on several jobs. One
3086         SOUTHERN CALIFORNIA PAINTERS v. RODIN
was the “Ticketmaster job.” SCP had been hired to paint
Ticketmaster’s offices and needed to use a specific product to
complete the job according to the contract. SCP contacted the
Union several times over a two-week period, but the Union
was unable to provide anyone familiar with the product. To
finish the contract, SCP hired four non-union painters who
were familiar with the product. Some of the non-Union work-
ers SCP hired also had worked for Rodin, although Rodin
played no role in hiring these painters and received no com-
pensation for their work. Benveniste does not recall if he paid
the non-Union painters the prevailing Union wage. After a
hearing, the Union fined SCP $2,524 for hiring non-union
painters. SCP paid the fine.

  The second job in which SCP and Rodin both were
involved was the “Bank of America job.” Rodin had received
an invitation to bid on the job, but could not because it was
a Union job. SCP, however, successfully bid on the job and
executed a contract on September 25, 2003. A year later, in
September 2004, the contractor issued a change order specify-
ing that Rodin would complete some touch-up work. In Octo-
ber 2004, Rodin entered a subcontract to perform additional
work on the Bank of America project.

  From 2001 to 2004, SCP performed only seventeen jobs.
During the same period Rodin performed over 2500 jobs. In
mid 2004, Benveniste concluded that it was not profitable to
run SCP, and SCP ceased operations.

B.     Procedural History

   The Union brought suit against Rodin and SCP seeking a
declaratory judgment that Rodin and SCP were a single
employer and/or alter egos, monetary damages and other
relief for breach of the collective bargaining agreement and
violations of California law. The Union alleged that as a sin-
gle employer or alter egos, Rodin and SCP were both bound
by the MLA. The Union further alleged that Rodin formed
             SOUTHERN CALIFORNIA PAINTERS v. RODIN            3087
SCP to avoid Rodin’s obligations under the MLA. Finally, the
Union alleged that Rodin and SCP breached the MLA by run-
ning a “dual shop” and that Rodin failed to abide by the MLA
in a variety of ways.

   Rodin, joined by SCP, and the Union filed cross-motions
for summary judgment. The district court ruled only on the
federal claims for declaratory relief and breach of the MLA.
It found that SCP and Rodin were not alter egos, and therefore
granted summary judgment in favor of Rodin and SCP on
those claims.

   In response to the district court’s order, the Union filed
another motion for summary judgment, focusing on the “sin-
gle employer” theory of liability against SCP only. In July
2006, the district court requested a status report addressing
whether SCP was still a signatory to any MLA. In response,
SCP contended that it was no longer bound by the MLA
because it had given notice to the Union of its cessation of
operations and the MLA had expired June 30, 2006. The
Union claimed that because SCP had not given proper notice
of its inactive status, the MLA had automatically renewed and
SCP was bound by the successor MLA. On August 4, 2006,
the district court found that SCP was no longer a signatory to
any MLA still in effect and had not conducted business since
2004. It then denied as moot the remaining claims because the
Union failed to show it was entitled to any damages or declar-
atory relief. The district court entered judgment in favor of
Rodin and SCP on all federal claims and dismissed the state
law claims. The Union timely appealed.

                        II.   ANALYSIS

   There are two related but distinct theories, the alter ego and
single employer doctrines, that prevent contractors from using
double-breasted operations to avoid collective bargaining obli-
gations.2 UA Local 343 v. Nor-Cal Plumbing, Inc., 48 F.3d
2
  Double-breasted operations are those in which the same contractor
owns both union and non-union companies. UA Local 343 v. Nor-Cal
3088           SOUTHERN CALIFORNIA PAINTERS v. RODIN
1465, 1469-70 (9th Cir. 1995). Both theories, which overlap
substantially, require the district court first to determine
whether the two entities are a single employer. Id. at 1470; A.
Dariano & Sons, Inc. v. Dist. Council of Painters No. 33, 869
F.2d 514, 519 (9th Cir. 1989). This determination entails
examining “the degree of common ownership, management,
operations, and labor relations.” Nor-Cal Plumbing, Inc., 48
F.3d at 1470. If the threshold single employer requirement is
met, the next step depends on the theory of liability pursued.
Id.

   The district court assumed without deciding that Rodin and
SCP met the single employer requirement.3 We also assume
without deciding that Rodin and SCP were a single employer.
With that assumption, we address below the alter ego and sin-
gle employer doctrines. We then turn to whether the Union’s
claim for declaratory relief against SCP is moot. Finally, we
address whether the district court properly dismissed the
remaining state law claims.

A.     Alter Ego and Single Employer Liability of Rodin and
       SCP

  1.    Alter Ego Liability

   [1] The alter ego doctrine is “designed to prevent employ-
ers from escaping their collective bargaining obligations by
shifting work to non-union firms they also own.” Nor-Cal
Plumbing, Inc., 48 F.3d at 1475. Employers may not create

Plumbing, Inc., 48 F.3d 1465, 1469 (9th Cir. 1995). Double-breasting is
legal as long as it is not engaged in for the purpose of avoiding collective
bargaining obligations. Id. at 1469-70. We review de novo the grant of
summary judgment. Id. at 1471.
   3
     It is bound to cause confusion, but the single employer theory of liabil-
ity and the first step of the analysis share the same name. The district court
assumed single employer status for purposes of the first step of the analy-
sis; it did not assume liability under the single employer theory.
             SOUTHERN CALIFORNIA PAINTERS v. RODIN            3089
non-union “alter egos” for the fraudulent purpose of shifting
union work to a non-union company and thereby engaging in
a sham to avoid their collective bargaining obligations. Id. at
1470; see also Howard Johnson Co., Inc. v. Detroit Local
Joint Executive Bd., 417 U.S. 249, 259 n.5 (1974) (describing
an alter ego as a “paper transaction without any meaningful
impact on the ownership or operation of the enterprise” for
the purpose of avoiding a unionized company’s collective bar-
gaining agreements); Brick Masons Pension Trust v. Indus.
Fence & Supply, Inc., 839 F.2d 1333, 1337 (9th Cir. 1988).

    [2] The alter ego doctrine applies if two entities function as
a single employer and the non-union entity is “being used in
a sham effort to avoid collective bargaining obligations,
. . . rather than for the pursuit of legitimate business objectives
untainted by ‘union animus.’ ” Nor-Cal Plumbing, Inc., 48
F.3d at 1470 (internal quotation marks and citation omitted).
The plaintiff has the burden of proving a “disguised continua-
tion,” technical change, or sham undertaken for the purpose
of shifting union work to a non-union company. A. Dariano
& Sons, Inc., 869 F.2d at 519; Brick Masons Pension Trust,
839 F.2d at 1337.

   [3] The Union’s alter ego claim does not fit within this
established framework. Rather, the Union brings what it terms
a “reverse” alter ego claim. Whereas a traditional alter ego
claim consists of a union employer opening a non-union com-
pany to avoid existing collective bargaining obligations, the
Union’s novel “reverse” alter ego claim consists of a non-
union employer allegedly opening a union company to avoid
future collective bargaining obligations.

    [4] We know of no court that has recognized a reverse alter
ego doctrine, and at least one court that has explicitly rejected
it. See Chicago Dist. Council of Carpenters Pension Fund v.
Vacala Masonry, Inc., 946 F. Supp. 612, 618 (N.D. Ill. 1996).
The Northern District of Illinois reasoned that to recognize a
“reverse” alter ego doctrine would be “patently inequitable
3090        SOUTHERN CALIFORNIA PAINTERS v. RODIN
and illogical,” because a company that has not signed a col-
lective bargaining agreement cannot simultaneously be avoid-
ing a collective bargaining agreement. Id. at 618 (citation
omitted).

    [T]he alter ego doctrine was not intended to be used
    as a means of coercing a non-union company into
    becoming a union company by requiring it to sign a
    collective bargaining agreement or by requiring it to
    comply with the terms of a collective bargaining
    agreement which it never signed, absent proof that
    the non-signatory company was being used by the
    signatory to avoid its collective bargaining agree-
    ment obligations.

Id. We find this reasoning persuasive. Because the alter ego
doctrine prevents union employers from avoiding collective
bargaining obligations, it does not apply in the “reverse”
where a non-union employer creates a union company
because the non-union employer has no collective bargaining
obligations to avoid. Absent some indication that SCP was
using Rodin to avoid SCP’s union obligations, the alter ego
doctrine is simply inapposite.

   [5] We decline to recognize a “reverse” alter ego doctrine.
The alter ego doctrine was never intended to coerce a non-
union company into becoming a union company by requiring
its compliance with a collective bargaining agreement it never
signed, with a union its employees never authorized to repre-
sent them. Rodin is not bound by the MLA or liable under the
alter ego doctrine because a non-union company cannot be
guilty of evading a collective bargaining agreement that it
never entered into. The doctrine is also inapplicable to SCP
because SCP did not use Rodin to avoid SCP’s union obliga-
tions.

  [6] Nor has the Union made out a claim under the alter ego
doctrine. There is no evidence that joint operations between
              SOUTHERN CALIFORNIA PAINTERS v. RODIN                 3091
Rodin and SCP were for the purpose of avoiding SCP’s obli-
gations under the MLA. Likewise, there is no evidence that
Rodin diverted union work from SCP at all, let alone that
Rodin did so to help SCP avoid SCP’s obligations under the
MLA. The only examples that the Union can provide of work
originally intended for SCP but completed by Rodin are the
Bank of America and Ticketmaster projects. However, the
Bank of America project was completed only after SCP had
ceased business operations entirely, so SCP could not have
been avoiding obligations it had under the MLA. The Ticket-
master job is similarly unhelpful for the Union’s argument.
SCP admits to having hired moonlighting non-Union painters
to complete the Ticketmaster job, some of whom also worked
for Rodin. However, it did so only after attempting to employ
Union painters, and there is no evidence that Rodin benefited
from that arrangement. Only the individual moonlighting
painters were paid. Moreover, the Union fined SCP and SCP
paid the fine. In neither case did jobs go to Rodin that would
have gone to SCP.

  Finally, SCP—the union company—was created fifteen
years after Rodin, and SCP never came close to generating the
quantity of business that Rodin consistently performed. Dur-
ing the three years SCP operated, it handled seventeen jobs;
during the same period, Rodin accepted more than 2500 jobs.
There is no evidence of any shift in business from SCP to
Rodin. Although there may have been tension between Rodin
and the Union, that tension does not support a finding that
SCP violated the MLA.4
  4
    The Union points to statements by Fred Rodin indicating his displea-
sure with the Union’s organizing activities and his perception that the
Union had a “continued campaign of harassment against him.” Fred stated
that he “felt that [the Union] was out to get him” and attributed the loss
of jobs to Union employers to the union. Yet these statements do nothing
more than show that Fred was displeased with the efforts of the Union to
organize, even if those organizing activities were perfectly legal. The
statements provide no basis to conclude that Fred actively took steps to
undermine legitimate Union activities or that SCP attempted to avoid its
MLA obligations by using Rodin improperly. See, e.g., Nor-Cal Plumb-
ing, Inc., 48 F.3d at 1471-72.
3092          SOUTHERN CALIFORNIA PAINTERS v. RODIN
   [7] Likewise the evidence does not suggest that SCP used
Rodin to avoid SCP’s obligations under the MLA, or that
Rodin used SCP to benefit from SCP’s Union labor force.
That some Rodin employees offered clerical assistance to
SCP does not support the Union’s claim because SCP satis-
fied its obligations under the MLA. Not a single Union wit-
ness contended that SCP diverted Union jobs to Rodin to
avoid obligations under the MLA; in fact, at least one witness
indicated that any shift in jobs that occurred went in the other
direction—from Rodin, the non-union company, to SCP, the
union company. The district court therefore did not err in
granting summary judgment in favor of Rodin and SCP on the
alter ego doctrine.

  2.   Single Employer Liability

    [8] Under the single employer theory, a collective bargain-
ing agreement can extend to a non-union company only if the
NLRB finds that the employees of both the union and non-
union companies constitute a single bargaining unit. Nor-Cal
Plumbing, Inc., 48 F.3d at 1470. That the companies in ques-
tion “may constitute a single employer does not necessarily
. . . make them a single bargaining unit.” The bargaining unit
question is a “representational question [that] must be decided
by the NLRB in the first instance.” Id. Without an NLRB
determination that the employees of the union and non-union
entities constitute a single bargaining unit, the doctrine of pri-
mary jurisdiction bars the district court from extending a col-
lective bargaining agreement to a non-union entity. Id. at
1469-70.

   [9] The Union has not shown that the NLRB determined
that the employees of Rodin and SCP constituted a single bar-
gaining unit. The district court could not have extended the
MLA to Rodin, and the Union’s claim under the single
employer theory cannot be maintained.5
  5
   The district court entered judgment in favor of SCP and Rodin, but did
not separately address the single employer theory. However, “[w]e may
              SOUTHERN CALIFORNIA PAINTERS v. RODIN                3093
  [10] Because Rodin and SCP do not satisfy the require-
ments for alter ego or single employer liability, the district
court properly granted summary judgment in their favor.

B.     Mootness of the Remaining Claims Against SCP

   The Union also appeals the district court’s ruling that its
claims for declaratory relief and damages against SCP alone
are moot.6 The Union claims that Rodin and SCP were a sin-
gle employer operating a dual shop and sought a declaration
to that effect and damages for SCP’s alleged violation of the
MLA. We examine each issue in turn.

  1.    Declaratory Relief

   The district court ruled that the Union’s claim for declara-
tory relief was moot because SCP ceased operations in 2004,
and the MLA to which SCP was a signatory expired on June
30, 2006. The Union argues that the declaratory relief claim
is not moot because SCP voluntarily ceased its operations and
could restart them at any time. The Union further argues that
SCP did not give formal notice to the Union of its intent to
not continue as a signatory to the MLA, so it remains a party
to a renewed MLA that took effect on July 1, 2006. We reject
these arguments.

   Federal courts lack jurisdiction “[i]f an event occurs during
the pendency of the appeal that renders the case moot.” Ctr.
for Biological Diversity v. Lohn, 511 F.3d 960, 963 (9th Cir.
2007). “When a plaintiff seeks declaratory relief . . . the ‘test
for mootness . . . is whether the facts alleged, under all the cir-

affirm on any ground supported by the record, even if it differs from the
district court’s rationale.” Downs v. Hoyt, 232 F.3d 1031, 1036 (9th Cir.
2000).
   6
     We review de novo questions of mootness. Foster v. Carson, 347 F.3d
742, 745 (9th Cir. 2003).
3094        SOUTHERN CALIFORNIA PAINTERS v. RODIN
cumstances, show that there is a substantial controversy,
between parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a declaratory
judgment.’ ” Id. (quoting Biodiversity Legal Found. v. Badg-
ley, 309 F.3d 1166, 1174-75 (9th Cir. 2002) (internal quota-
tions omitted; second ellipsis in original)). “Stated another
way, the central question . . . is whether changes in the cir-
cumstances that prevailed at the beginning of litigation have
forestalled any occasion for meaningful relief.” Gator.com
Corp. v. L.L. Bean, Inc., 398 F.3d 1125, 1129 (9th Cir. 2005)
(en banc) (internal quotation marks removed).

   SCP ceased operations in 2004, and there is no evidence
that SCP will begin operations again. Even if SCP were to
resume operations under the same relationship with Rodin,
the MLA to which SCP was a party expired over two years
ago.

   There is no basis for awarding declaratory relief on an
expired agreement. The Union argues that SCP automatically
became a party to the successor MLA because it did not pro-
vide formal notice of its intent to withdraw from the MLA to
the Union. This argument is without merit. The MLA pro-
vides that a signatory to the agreement may withdraw by giv-
ing written notice to the Union. Termination of the agreement
would be effective the following June 30. By August 5, 2004,
SCP provided notice to the Labor Management Cooperating
Committee (“LMCC”)—the entity that maintains the Union’s
collective bargaining agreements for painting contrac-
tors—that SCP was no longer doing business. This notice was
plainly sufficient. Benveniste had joined the Union by tender-
ing its application to the LMCC and by meeting with Wiley
Zagajeski, a Union employee. Likewise, SCP tendered its
notice of termination to the LMCC and Zagajeski. Accord-
ingly, the Union’s argument that SCP did not notify it of the
cessation of SCP’s business operations is formalistic and dis-
ingenuous. SCP is not a signatory to an unexpired MLA.
              SOUTHERN CALIFORNIA PAINTERS v. RODIN        3095
   [11] A declaratory judgment that SCP and Rodin consti-
tuted a single employer therefore would not resolve adverse
legal issues between SCP and the Union. The Union stated,
however, that although SCP is no longer in business, it could
use such a judgment in its dealings with other contractors and
it would strengthen the Union’s position in future dealings.
We decline to use our authority in this way. This sort of
declaratory relief would constitute an advisory opinion and
does not evidence a live dispute between the parties in this
case. Because SCP has been out of business for over four
years, and is no longer a party to a current MLA, there is no
longer a “substantial controversy” for this court to resolve and
no “occasion for meaningful relief.” Gator.com Corp., 398
F.3d at 1129. The district court therefore did not err in dis-
missing the Union’s declaratory relief claim against SCP as
moot.

  2.    Damages

   [12] The Union argues that two claims for damages against
SCP are still viable. First, the Union claims that SCP underre-
ported the number of hours Union employees worked and
therefore owes $625.71 in back dues. However, SCP paid the
back dues under protest, and does not seek a refund from the
Union of the $625.71. Accordingly, the Union would not
recover any damages from SCP even if this court were to
resolve the single employer issue in the Union’s favor.

   Second, the Union claims that it is owed damages as a
result of work Rodin performed on the Bank of America proj-
ect. However, the Union does not claim that jobs improperly
went to Rodin rather than SCP. Rather, it claims that all jobs
Rodin performed were governed by the MLA, a claim we
have rejected. The district court properly dismissed this claim.

C.     Supplemental Jurisdiction

   [13] Finally, the Union asks us to reinstate the state law
claims the district court dismissed without prejudice after
3096        SOUTHERN CALIFORNIA PAINTERS v. RODIN
resolving all of the federal claims. Because the district court
appropriately dismissed all of the federal claims, it acted
within its discretion in declining to resolve the state law
claims under its supplemental jurisdiction. See, e.g., Fichman
v. Media Ctr., 512 F.3d 1157, 1162-63 (9th Cir. 2008).

                    III.   CONCLUSION

  The judgment of the district court is AFFIRMED.