By Ronald Miller, J.D. The NLRB pierced the corporate veil of alter ego companies and held the owners and other family members individually liable for the companies’ remedial obligations for breaching the provisions of three collective bargaining agreements. First, the Board concluded that an owner was not permitted to use New York State’s Lien Law to shield funds from being recovered to satisfy make-whole remedies. Further, although the owner’s husband did not have an ownership interest, his controlling role in the company’s operations was sufficient to impose individual liability. A third family member was ordered to disgorge funds transferred to his company under the fraudulent conveyance doctrine. Member Miscimarra dissented in part (Ace Masonry, Inc. dba Ace Unlimited, May 3, 2016). CBAs breached. In the original case, Bella Masonry, LLC, was held to be the alter ego of Ace Masonry Inc. dba Ace Unlimited, and both companies were found to have violated Section 8(a)(5) of the Act when they refused to abide by three CBAs with various unions. The companies were ordered to make whole the employees covered by the respective contracts for any differences in their pay resulting from the employer’s failure to apply the terms of the respective CBAs to them. They were also ordered to make whole certain union benefit funds where the employers had defaulted on their contractually obligated contributions. However, Ace Masonry and Bella Masonry did not comply with the Board’s order, both companies having ceased operations. Thus, the question was whether individuals connected with these corporate entities should be held derivatively and personally liable for the amounts determined to be owed in an NLRB specification. Individual liability. It was alleged that Henry Bellavigna, Lisa Bellavigna, and Robert P. Bellavigna should be individually liable because, among other things, they commingled their own personal assets with the respective corporate entities and transferred funds to and from these corporations to either themselves or to their family members in order to evade liability. Another family member, Domenick Bellavigna, allegedly was liable for the amount that he received for services he rendered to Bella Masonry at a rate greatly in excess of market value. The Board agreed with an administrative law judge that it was appropriate to pierce Ace’s corporate veil and hold both Lisa and Robert Bellavigna individually liable for Ace’s remedial obligations. They did not except to the ALJ’s finding of liability regarding Lisa as the sole owner of Ace. Rather, they contended only that she was justified in removing more than $242,000 from Ace’s bank accounts under New York State’s Lien Law in order to satisfy the claims of Ace’s subcontractors. However, the Board agreed with the law judge that the state statute did not permit her to shield the funds from being recovered to satisfy their liability. With respect to Robert, the Board observed that it has pierced the corporate veil of closely held corporations that are essentially owned and controlled by members of one family to reach nonowner family members who play an active role in the corporation’s operation and in the underlying misconduct. Both Ace and Bella Masonry were solely owned corporations, and Robert, though not an owner of either entity, played an active and even controlling role in the operation of both. As Ace’s project coordinator and field supervisor, he actively participated in Ace’s unfair labor practices. Moreover, he participated in Lisa’s efforts to escape Ace’s related liability through misuse of the corporate form by helping to divert more than $74,000 of Ace’s assets into his and Lisa’s personal bank accounts. Thus, both Lisa and Robert were jointly and severally liable for the remedial payments at issue. Fraudulent conveyance. On the other hand, Domenick Bellavigna was not jointly and severally liable under the veil-piercing doctrine because his solely owned company, Bella Furniture, was too far removed from the ownership and management of Bella Masonry and Ace Masonry to support this equitable remedy. However, Domenick and Bella Furniture were jointly and severally liable for the amount of Bella Masonry’s assets fraudulently conveyed to them. Domenick purportedly performed two services for Bella Masonry and billed it a total of $34,100, payable to Bella Furniture. Although the work was allegedly performed prior to July 2012, Bella Masonry did not pay the invoice until August 28, 2012, a few days after Henry Bellavigna publicly announced that his company was going out of business. Finding this amount grossly inflated, the Board held that Henry and Domenick fraudulently transferred Bella Masonry’s assets to Domenick and Bella Furniture in order to evade Henry and Bella Masonry’s liability. Moreover, the Board saw no reason to limit application of the fraudulent conveyance doctrine to corporate officers and shareholders. Where a family member participates in a fraudulent conveyance by improperly receiving assets of a family-owned corporate entity from the relative controlling the corporation, the Board may recover those assets under either an “actual fraud” or “constructive fraud” theory. Here, there was ample evidence of Domenick’s improper motive and lack of good faith. Further, he failed to show that he provided reasonably equivalent value for most of the money that he received from Henry. Partial dissent. Member Miscimarra agreed that it was appropriate to apply the fraudulent conveyance doctrine to recover a portion of the $34,100 transferred to Domenick Bellavigna from Bella Masonry. However, he argued that the majority impermissibly infringed on his due process rights by applying a theory of “actual fraud,” under which the burden of proof was placed on Domenick to establish that he provided reasonably equivalent value in exchange for monies received. To avoid this infringement on Domenick’s due process rights, Miscimarra argued that the General Counsel must bear the burden of proof to establish the extent to which Domenick did not provide fair consideration.
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