Threat of Bankruptcy Won’t Ease Judgment Pressure

MANHATTAN (CN) – Unsympathetic to the threat of future bankruptcy, a federal judge refused Thursday to delay enforcement of her $76 million judgment against a contractor that used an alter ego to avoid collective bargaining with its union.

Four construction unions brought the underlying challenge against Navillus Tile in 2014, saying the Midtown Manhattan construction company used a variety of alter egos — including Navillus Contracting and Advanced Contracting Solutions LLC — to avoid paying union contracts under its collective bargaining agreement.

When that case ended last week with a $76 million verdict in the Southern District of New York, Navillus  filed notices of appeal and asked to put the judgment on hold without posting a supersedeas bond. It says paying any a portion of the bond before those appeals are resolved will leave it insolvent.

Chief U.S. District Judge Colleen McMahon sided with the unions again Thursday, emphasizing why the bond requirement exists in the first place.

“Significantly, the bond requirement is not designed to protect the judgment debtor’s ability to continue in business; rather, it is designed to minimize or eliminate the risk that it will pay the judgment, only to find that it cannot get the money back pending appeal,” she wrote.

The problem for the unions, according to the ruling, is that much of the Navillus’ assets are hard assets rather than cash, making collection of the judgment without a bond “complicated and time consuming.”

McMahon poked holes in the theory that Naviullus cannot afford any amount of the bond.

 “Until this judgment was entered, Navillus was not in a precarious financial position — far from it,” McMahon wrote.

Indeed financial statements that Navillus itself provided show that the company had $109 million in assets and $62 million in liabilities as of March 31, 2017, according to the ruling.

The bond requirement would thus leave Navillus’ other creditors in a precarious financial position, but McMahon found this weak justification to leave the unions unsatisfied.

“Navillus has made no offer to post a partial bond, or even accept financial oversight or other conditions that might ameliorate the plaintiffs’ legitimate fears,” McMahon wrote. “So even if I were inclined to do so, I have no way, on this record, of fashioning an appropriate alternative form of security in this case.”

The judgment Naviullus must pay represents what the union workers would have earned on the jobs. It is meant to be split between the Metal Lathers Local 46, Cement & Concrete Workers District Council, Cement Masons’ Local 780, and the District Council of Carpenters and Teamsters Local 282.

Skeptical that Navillus lacks the resources to post a supersedeas bond, the unions argued in their opposition to Navillus’ motion that granting a stay would allow Naviullus time to hide its assets.

Willis Goldsmith, an attorney for Navillus with Jones Day, has not responded to an email seeking comment.

Thomas Kennedy, who represents the unions, also did not respond to an email seeking comment.

During the trial, McMahon scolded Eoin Moriarity, a manager of the Advanced Contracting Solutions alter ego, as “obviously lying” in some of his testimony. She also found that founder Donal O’Sullivan had backdated sales documents and feigned memory lapses during the trial to further the scheme.

“I am deeply troubled by Donal O’Sullivan’s behavior in connection with the matters in suit, in particular his false testimony to the court,” McMahon wrote in the 95-page opinion.

McMahon did not impose any personal liability on O’Sullivan, however, for the unpaid fringe benefit contributions.

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