Board of Trustees of the PAMCAH-UA Local 675 Pension Fund v. SMAC Hawaii, Inc.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAI‘I
BOARD OF TRUSTEES OF THE PAMCAH-
UA LOCAL 675 PENSION FUND,
Plaintiff,
vs.
SMAC HAWAII, INC., et al.,
Defendants.
Civil No. 23-00076 MWJS-KJM
POST-TRIAL FINDINGS OF FACT AND
CONCLUSIONS OF LAW
INTRODUCTION
When a union employer withdraws from an underfunded multiemployer
pension plan covered by the Employee Retirement Income Security Act of 1974
(“ERISA”), it generally becomes responsible for its share of the pension plan’s financial
deficit, an obligation known as “withdrawal liability.” In 2018, Defendant SMAC
Hawaii, Inc. (“SMAC”), a sheet metal and air conditioning company on O‘ahu,
withdrew from the PAMCAH-UA Local 675 Pension Fund (the “Pension Fund”) and
incurred substantial withdrawal liability. This decision is about how far the Board of
Trustees of the Pension Fund (the “Board”) may go to collect it.
At an earlier point in the case, this court granted partial summary judgment to
the Board, finding that it could recover withdrawal liability not only from Defendant
SMAC, but also from Defendants R&M Air Conditioning, LLC (“R&M”), M&M Sheet
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Metal Company (“M&M”), and Defendants Melvin E. Mung Lim, Jr. (“Melvin”) and
Margaret T. Mung Lim (“Margaret”), a married couple who owned and operated
SMAC, R&M, and M&M in one combination or another. Dkt. No. 116. But the Board
asserts that it is entitled to recover withdrawal liability from two additional sources. It
contends that the court should pierce the corporate veil of R&M, which the Board
alleges is a shell company, so that the Board may recover withdrawal liability from
Defendant Meghan M. Mung Lim (“Meghan”), who owns R&M with her mother,
Margaret. And the Board also asserts that it should be able to recover without regard to
the transfer of a 98 percent interest in a Kapolei townhouse from Melvin and Margaret
to Meghan—a transaction which the Board argues had a principal purpose of evading
or avoiding withdrawal liability.
The court denied summary judgment on these two issues in July 2025 because
each turned on disputed issues of material fact. Dkt. No. 116, at PageID.3825-26. A
four-day bench trial was held in November 2025 to resolve the factual disputes, and the
parties filed their Proposed Findings of Fact and Conclusions of Law, as well as post-
trial briefs, on January 14, 2026. Dkt. Nos. 179, 180, 181, 182.
The court has carefully considered the evidence presented at trial, as well as the
parties’ post-trial submissions, and now issues its Findings of Fact and Conclusions of
Law as required by Federal Rule of Civil Procedure 52(a). For the reasons that follow,
the court concludes that R&M’s corporate veil should not be pierced, but that
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withdrawal liability must be collected without regard to the challenged property
transfer.
FINDINGS OF FACT
Melvin, Margaret, and Meghan all testified at trial, and portions of their earlier
deposition testimony were also admitted as evidence, along with portions of the
deposition testimony of Glenda Yoza (a longtime SMAC employee) and Erinn Liu (the
Pension Fund administrator). The testimony largely focused on SMAC’s operations
and closure; the formation, operation, and finances of R&M; and transfer of the Kapolei
property. In addition to this testimony, the court admitted over a hundred stipulated
exhibits, and several others were moved into evidence for the first time during trial.
In the paragraphs that follow, the court lays out its Findings of Fact. The
Findings rely, in part, on witness testimony. Having observed the demeanor of Melvin,
Margaret, and Meghan at trial, and having compared the substance of their testimony
to the other admitted evidence, the court concludes that each of these witnesses tried—
in good faith—to uphold their oaths to testify truthfully. As to Melvin and Margaret,
however, the court concludes that their recall of some events and their offered
justifications for some past actions—though, in the court’s view, honest renderings of
their current beliefs and feelings—did not always provide a factually reliable historical
record. Indeed, at various points during trial, Plaintiff’s counsel marshaled
documentary evidence showing that portions of Melvin’s and Margaret’s testimony
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was factually incorrect. For that reason, the court relies on some aspects of Melvin’s
and Margaret’s testimony, but does not rely on others. As to Meghan, by contrast, the
court concludes that she not only sought to testify truthfully, but also accomplished that
objective; the court finds that Meghan’s testimony was reliable.
With these observations, and based on the admitted exhibits and credited aspects
of witness testimony, the court makes the following Findings of Fact:
A. 	The Board and the Pension Fund
1. 	The Pension Fund is a multiemployer employee benefit plan established
in 1963 and maintained under ERISA and the Multiemployer Pension Plan
Amendments Act of 1980 (“MPPAA”).
2. 	The Board administers the Pension Fund under a trust agreement and
ERISA, which impose certain fiduciary duties on the Board—including the fiduciary
duty to collect liabilities to the Pension Fund. Employers that agree to be contributing
employers to the Pension Fund must make fringe benefit contributions, including for
pension benefits, on behalf of their union employees.
B. 	The Winding Down of SMAC and Formation of R&M
3. 	SMAC was a sheet metal and air conditioning contractor that operated in
Hawaiʻi from 1969 until it ceased operations in late 2018. It was founded and owned by
Melvin’s father, until Melvin eventually took over the business. Margaret is Melvin’s
wife and worked as SMAC’s office manager during the period relevant to the Board’s
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claims. SMAC was a union shop—and longtime contributor to the Pension Fund—and
as a result of its union status, was eligible for large projects, including federal and state
projects.
4. 	R&M is a limited liability company formed in March 2017 by Margaret
and Meghan, who is the daughter of Melvin and Margaret. Unlike SMAC, it is not a
union shop, and is not eligible for (or capable of handling) large projects. R&M was still
in operation as of the date of trial.
5. 	SMAC’s cessation was not a single abrupt event; rather, it reflected a
wind-down period in which SMAC’s operations were diminishing while R&M began
limited activity.
6. 	Between 2011 and 2016, no representatives of the Pension Fund visited the
SMAC office to discuss contribution obligations with Margaret when she was serving as
SMAC’s office manager. Nor did any representatives of the underlying union visit the
office to discuss SMAC’s obligations. As Margaret testified, neither she nor Melvin
received calls from representatives of the Pension Fund between 2011 and 2016
regarding contribution obligations. Trial Transcript, Day 2, 87:13-88:17. The same was
true of 2017 through 2019, when SMAC transitioned to R&M. Id. at 89:14-90:19.
7. 	In 2012, SMAC’s then-bookkeeper, Kathy Funtila, embezzled a substantial
amount of money from SMAC. The embezzlement continued until Margaret had
retired from her work at a bank and joined SMAC to assist Melvin. Once at SMAC,
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Margaret sensed that there was a problem with Funtila, looked into records, and then
contacted the Federal Bureau of Investigation, which eventually uncovered the
embezzlement.
8. 	Before the embezzlement, SMAC had been a successful union shop. But
after the embezzlement, and by no later than approximately 2016, Margaret recognized
that SMAC was unlikely to recover from the effects of the embezzlement. Based on her
work in the office, she observed that the company’s financial condition continued to
deteriorate, including unpaid taxes, increasing difficulty paying vendors, pressure from
banks seeking repayment on loans and lines of credit, and costs associated with the
property at 2176 Lauwiliwili Street, Kapolei, where SMAC maintained its office. As
Margaret explained, the financial “hole” facing the company continued to grow during
this period. Trial Tr. Day 2, 84:25-85:5.
9. 	Although Margaret perceived the seriousness of SMAC’s financial
condition by 2016, she did not discuss her concerns or her plans to form a separate
business with Melvin at that time. As she testified, Melvin was not prepared to
confront the possibility of SMAC’s failure and felt a strong sense of responsibility to
keep the company operating because it had been founded by his father in 1969.
Margaret understood that Melvin needed to reach that realization on his own. Acting
independently alongside Meghan, Margaret decided to form R&M, anticipating that
Melvin would perform the hands-on work. Trial Tr. Day 2, 85:15-87:3.
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10. 	As Margaret testified, she formed R&M after it became clear to her that
SMAC could not continue operating as it previously had, and by late 2016 she believed
SMAC would need to close.
11. 	As both Melvin and Margaret testified, SMAC faced significant financial
pressures during the 2016-2017 period, including from creditors and federal tax liens.
Trial Tr. Day 2, 84:22-85:5. The inability to address those liens, Melvin explained, was
the result of the fallout from the 2012 embezzlement. Trial Tr. Day 1, 85:6-22, 91:24-92:3.
C. 	The Sale of SMAC’s Shop at 2176 Lauwiliwili Street
12. 	Melvin and Margaret began negotiations in March 2017 with Jean-Claude
Drui, associated with Euram, Inc. (doing business as Hawaiian Paradise Coffee) and
Letzeburg Properties, to sell units nine and ten at 2176 Lauwiliwili Street, Kapolei,
where SMAC operated its shop. They executed a purchase and sale agreement in July
2017. Exs. 40, 41, 46; Trial Tr. Day 1, 34:6-36:19, 140:12-141:13. As Margaret testified,
she, Melvin, and Drui corresponded by email in March and April 2017 regarding the
sale.
13. 	The Lauwiliwili Street property was owned by Margaret and Melvin
personally and leased to SMAC. Drui initiated the discussions by reaching out to
express interest in purchasing the property. Ex. 41; Trial Tr. Day 1, 141:10-13.
14. 	As Melvin testified, he and Margaret agreed to sell the Lauwiliwili Street
property to Jean-Claude Drui for a price that exceeded the appraised value of the
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property. Trial Tr. Day 1, 86:24-87:3. The property appraised for less than the agreed
sale price, leaving an approximate $100,000 difference between the appraisal and the
purchase price.
15. 	As Melvin testified, because Drui was unable to finance the full purchase
price based on the appraisal, the parties agreed that Drui would pay approximately
$9,000 per month to cover the balance above the appraised value. As Melvin explained,
these payments were divided over time and applied to satisfy the remaining $100,000
portion of the purchase price, which was paid off over approximately one to one-and-a-
half years.
16. 	In connection with the sale, SMAC entered into a written agreement with
Letzeburg Properties LLC, an entity associated with Drui, permitting SMAC to remain
on the Lauwiliwili Street property for up to twelve months following the closing of the
sale. Ex. 46. As Melvin testified, the agreement provided for monthly rent of $1 during
that occupancy period.
17. 	After the sale of the property, SMAC entered into a service agreement
with Euram, Inc., also associated with Drui, under which SMAC agreed to provide
quarterly air-conditioning services for $265 per service. Ex. 39.
18. 	The $9,000 monthly payments were associated with air-conditioning
services for the building where the Lauwiliwili Street property was located. The
building housed multiple units, including some associated with Hawaiian Paradise
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Coffee. As Melvin testified, the $265 quarterly payments reflected a separate service
arrangement for a smaller residential system, and that those service payments were
distinct from the amounts applied toward the purchase price balance. Trial Tr. Day 1,
89:1-7.
19. 	As Margaret testified, SMAC vacated the Lauwiliwili Street property in
November 2018. SMAC removed its equipment from the premises at that time,
disposing of some equipment through recycling and transferring other equipment to
R&M’s shop at 91291 Kalaeloa Boulevard. As she further testified, R&M did not
operate out of the Lauwiliwili Street property and used the address only as a mailing
address. Trial Tr. Day 1, 153:12-24.
D. 	R&M’s Operations
20. 	In planning the formation of R&M, Margaret determined that the business
required a Responsible Managing Employee (“RME”). She learned that the RME
license attaches to the individual rather than the business entity, discovered that
Melvin’s license was suspended, and contacted the Contractors License Board to
determine the steps necessary for reinstatement. Trial Tr. Day 2, 93:3-11. Margaret
began the process in the beginning of 2018 and received approval in October or
November 2018. Id. at 94:24-95:8.
21. 	During the Pension Fund’s pre-lawsuit inquiry, Margaret provided
records reflecting that Margaret and Melvin’s last day with SMAC was December 31,
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2018, and their first day with R&M was January 1, 2019. Exs. 29, 51; Trial Tr. Day 2,
53:18-56:2; Trial Tr. Day 3, 40:1-22. Those records reflected how Margaret and Melvin
described the transition in formal employment terms. The evidence at trial established,
however, that some SMAC-related work continued beyond the end of 2018 in a limited
capacity. Trial Tr. Day 3, 9:21-10:6.
22. 	The evidence also established that Meghan’s involvement in R&M’s
formation and operations was limited. As Meghan testified, she did not review R&M’s
articles of organization before they were filed, and she did not have conversations with
Margaret about opening R&M. Trial Tr. Day 3, 85:4-13; Meghan Depo., 84:8-85:7.
23. 	Meghan accompanied Margaret to open R&M’s Central Pacific Bank
account in January 2018. Ex. 64; Trial Tr. Day 4, 44:4-8; Meghan Depo., 49:13-50:16,
54:1-5, 111:2-4. The bank documentation identified Margaret and Meghan as authorized
signers and reflected Meghan as “member manager.” Ex. 64.
24. 	R&M’s Operating Agreement identified Margaret and Meghan as
members with a 50% ownership interest and listed capital contributions in an amount
of zero. Ex. 14, at 14. Consistent with that document, the evidence reflected that neither
Margaret nor Meghan contributed monetary capital at formation. Id.
25. 	When R&M began limited activity, Melvin was still completing certain
remaining SMAC work. As Margaret testified, the 2019 SMAC documents admitted as
Exhibit 121 reflected jobs Melvin was “finishing up” as SMAC closed, because “there
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were still jobs on the books that he, as the owner of SMAC Hawaii, was responsible
for.” Trial Tr. Day 3, 9:18-10:1. There were “two or three” such jobs at the time, but that
work was a “drop in the bucket” compared to what SMAC had handled when fully
operational. Id. at 10:2-14. And as Melvin testified, his contracting work was subject to
warranties, which required him to return to completed projects to perform corrective
work when necessary, even years after the installations, and including after his formal
cessation of work for SMAC. Trial Tr. Day 1, 68:10-25; 71:1-21.
26. 	R&M was a small, family-run operation, and Melvin was the primary
individual performing the field work. See, e.g., Trial Tr. Day 3, 14:14-25. Melvin had
served primarily as a supervisor and manager at SMAC, but later transitioned to
performing field labor when he began working at R&M.
27. 	With that backdrop, R&M was not intended to be a large business, but
rather a “mom and pop” operation focused on sustaining the family; limiting the
workforce to Melvin was a way to control expenses. Trial Tr. Day 3, 14:14-25. When
additional labor was needed, R&M would subcontract work for larger projects.
28. 	As Margaret also testified, R&M was not seeking large-scale work and did
not pursue union participation because it was not “looking at doing big jobs.” Trial Tr.
Day 3, 15:1-2. Although SMAC, as a union business, had been eligible for substantially
larger jobs, R&M would not qualify for those jobs as a non-union shop and would not
be able to “handle” them. Trial Tr. Day 3, 15:3-17:7. Consistent with those differences,
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during the period between 2020 and the trial in this case, R&M did not seek or qualify
for such jobs.
29. 	Margaret sometimes spoke about R&M in personal terms—referring to it
as “my shop,” its income at times as “my funds” or “my own money,” and Melvin as
“my worker.” Trial Tr. Day 1, 123:6, 146:7, 163:20; Trial Tr. Day 2, 9:21-24, 12:2; Trial Tr.
Day 3, 66:3-4.
E. 	R&M’s Finances
30. 	The evidence at trial established that, after the 2017 property sale
agreement, Melvin performed air conditioning service work for Euram during 2018 in
connection with R&M, during a period when SMAC was still winding down. The
evidence included service agreements reflecting the Drui/Euram relationship, as well as
an R&M service agreement covering broader air conditioning services and a SMAC
agreement relating to a smaller scope of service at Drui’s residence. Exs. 28, 39; Trial Tr.
Day 1, 88:13-89:7.
31. 	The evidence also established that R&M’s Central Pacific Bank (“CPB”)
account was opened in January 2018. Ex. 64. As Margaret testified, early deposits into
the CPB account included funds connected to the Drui/Euram relationship. In
particular, she acknowledged that a $9,000 check from Euram to R&M corresponded to
the $9,000 deposit reflected on CPB records, and she testified that the funds became
available shortly after the account opening. Exs. 65, 95. Margaret disputed details
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regarding the mechanics of the deposit (including handwriting on a deposit slip), but
she did not dispute that the Euram check corresponded to the deposit. Id.
32. 	As Margaret testified, she understood the $9,000 payments associated
with the Drui/Euram arrangement to be amounts owed to her and Melvin in connection
with the prior property-sale transaction, including what she described as a shortfall the
parties sought to address through that arrangement. Trial Tr. Day 2, 15:9-19, 18:1-4.
Based on her understanding, she did not view the use of those funds for personal
expenses as improper, even though corporate formalities were not respected and the
funds were deposited into and disbursed from R&M’s account. Id. at 15:2-19, 17:24-18:4.
33. 	CPB statements show purchases that were personal in nature, including
travel and entertainment-related charges. See, e.g., Exs. 97-99. But as Margaret testified,
she associated those expenditures with the Drui/Euram funds that she understood to be
owed to her and Melvin, rather than as revenue generated by R&M’s ongoing
operations. When asked about expenses related to a dinner and trip, she acknowledged
them as a “treat” for “my worker.” Trial Tr. Day 2, 15:2-19, 17:20-23. Here again,
though, corporate formalities were not properly followed.
34. 	The evidence also included check images and “cashed check” exhibits
reflecting checks written from R&M’s account to “cash,” “petty cash,” and in some
instances to family members, with memo lines that were blank or contained brief
descriptors such as “taxes.” See, e.g., Exs. 68-72, 74-76, 78-79. And QuickBooks-
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generated reports reflect “disbursement transactions” to the Mung Lim family
members. Exs. 9, 10; Trial Tr. Day 1, 120:21-123:7. But as Margaret testified, these
“cash” withdrawals and similar transactions were used for business-related purposes—
such as startup costs and job-related expenses—and were not personal distributions.
35. 	The record also reflected that, when comparing certain check images with
QuickBooks reports, some checks did not appear in the relevant QuickBooks
summaries. See, e.g., Exs. 9, 10, 71-72, 74-76. At other points, when shown a check and a
corresponding QuickBooks line item together, Margaret acknowledged the match.
Margaret also acknowledged that the Operating Agreement contemplated capital
accounts for members, but she testified that R&M did not maintain those accounts in
practice. She testified that she was not “tech savvy” and described the Operating
Agreement as having been generated by LegalZoom. Trial Tr. Day 2, 7:18.
36. 	The evidence presented at trial also reflected transactions labeled
“member draw” or “owner’s equity draw,” along with mortgage payments made from
the R&M account. See, e.g., Exs. 10, 72, 74, 78-79. As Margaret testified, she sometimes
took “owner’s equity draw” because she was not receiving a paycheck. And as she
testified, certain mortgage-related expenditures reflected efforts to stay current on
essential expenses during a period of financial strain, including difficulties obtaining
business credit and the use of pre-existing credit arrangements associated with SMAC.
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37. 	The record further reflected that, at certain points, the CPB account
incurred insufficient funds fees. But as Margaret testified, the overdraft episodes were
not anticipated and were driven by timing and variability of payments and purchases.
The record shows that R&M’s accounts were not consistently underfunded, but instead
became underfunded on certain specific (and time-limited) occasions.
38. 	Margaret testified regarding R&M’s balances over time, as reflected in Ex.
9. The document reflected a balance of approximately $41,725 in 2019; $49,725 in 2020;
and $60,825 in 2021, which, as Margaret explained, were attributable to loans during the
2020–2021 period. As Margaret testified, these figures are consistent with R&M
continuing to operate and pay its expenses.
F. 	Meghan’s Role in R&M
39. 	As noted earlier, Meghan is the daughter of Melvin and Margaret. She
was identified in R&M’s Operating Agreement as a member with a 50% ownership
interest. Ex. 14, at 14. The Operating Agreement also identified R&M as manager-
managed and listed both Margaret and Meghan as managers. Ex. 14.
40. 	Meghan’s participation at the outset of R&M consisted of accompanying
Margaret to the bank to open R&M’s operating account at CPB in January 2018. As
Meghan testified, she went to the bank and signed the bank paperwork at her mother’s
request. She did not have any role in establishing R&M’s accounting practices, selecting
vendors, negotiating contracts, or managing the company’s finances at that time.
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41. 	As Margaret and Meghan testified, when R&M was formed, they
contemplated that Meghan might eventually have a role in the business. Meghan had
grown up around the family business (SMAC Hawaii) and had, at one point,
considered working with her parents. As Meghan further testified, however, her plans
changed after she began attending university and later obtained employment at a law
firm, and she did not pursue a role in R&M’s operations or management. As her
professional plans developed, Meghan deferred to her mother on R&M’s business
affairs and did not take part in running the company.
42. 	Meghan did not participate in R&M’s day-to-day operations. As she
testified, she did not really participate in the decision-making for R&M and it was
Margaret who made business decisions. Nor did she participate in decisions to hire
R&M’s employees. This was consistent with deposition testimony from R&M’s project
manager, Glenda Yoza, who testified that Meghan had “no role” in R&M’s operations.
Yoza Depo., 75:11-24.
43. 	Meghan had limited knowledge of R&M’s activities and finances. As she
testified, she did not know whether R&M had taken loans from her parents, whether
Margaret had made capital contributions, or whether Margaret had taken distributions
from R&M. Although Meghan was listed as a manager, she was unclear as to whether
she was a “manager” or a “member-manager.”
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44. 	As Meghan testified, her mother would occasionally inform her of broader
developments “here and there,” including during the COVID-19 period and in
connection with potential loan activity, but Meghan did not manage the business’
operations or finances. As she also testified, she did not receive regular updates about
R&M’s finances and did not review bank statements or QuickBooks records.
45. 	The record established that payments were made to Meghan from the
R&M account, including a $530 check in February 2019 payable to “Cash – Meghan
Mung Lim,” and a preschool-related payment. The record also established that Meghan
later loaned funds to R&M, including an $8,000 loan in October 2020 that was repaid.
Exs. 11, 27; Trial Tr. Day 3, 48:24–50:12. As Meghan testified, she expected repayment
and any documentation for intra-family loans was informal.
46. 	As both Meghan and Margaret testified, Meghan was a “silent member”
or “silent partner.” See Trial Tr. Day 3, 95:16-23. As Meghan testified, in her
understanding, a “silent member” is someone who does not engage in day-to-day
operations. Id. Meghan relied on the Operating Agreement’s indemnification
provisions and believed those provisions would protect her from personal liability
arising from R&M’s operations.
//
//
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G. 	The Kapolei Property Transfer
47. 	In the early 1990s, Melvin and Margaret purchased a townhome located at
92-1031 Alaa Street, Apartment 17104, in Kapolei, Hawai‘i (the “Kapolei property”1).
Melvin and Margaret resided in the Kapolei property for several years, welcoming their
eldest daughter there, before purchasing a nearby home on Oloa Place in 1996. Around
that time, Margaret became pregnant with Meghan, and the family moved into the Oloa
Place residence in order to have more space for their growing family. Shortly
thereafter, Melvin and Margaret began renting the newly vacant Kapolei property to
tenants. They maintained it as a rental property until around 2020.
48. 	In 2009, Melvin and Margaret took out a mortgage loan on the Kapolei
property. The loan application indicates that the property’s value at the time was
$235,000. Ex. 31.
49. 	In 2015, the Board brought an action against both SMAC and Melvin
individually to collect delinquent contributions owed to the Pension Fund; that action
was resolved through a stipulated judgment in March of the same year. Ex. 32. As
Margaret testified, after the stipulated judgment was entered, then-Union Trustee
Reginald Castanares demanded that she sign a personal guaranty for the delinquent
1 	At trial and throughout this case, the parties used different terms to refer to the
property located at 92-1031 Alaa Street: the Board referred to the property as the
“Investment Property,” while Defendants referred to it as the “Alaa Street Property.”
Rather than adopt either party’s preferred terminology, the court refers to it as the
“Kapolei property.”
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amounts owed. When Margaret resisted signing a guaranty for a debt that she believed
was not hers, given that she was not part of the Union, Castanares slammed his hand on
the table and insisted, “if you don’t have skin in the game, we can’t help you!” Trial Tr.
Day 3, 29:4-13. Margaret testified that this was the sort of thing that “stick[s] with you.”
Id. at 29:11.
50. 	As both Margaret and Meghan testified, by the time the last rental tenant
moved out of the Kapolei property in 2020, the unit had become so run down as to be
essentially uninhabitable. Trial Tr. Day 2, 142:13-18; Trial Tr. Day 3, 144:24-145:9.
Although it was no longer viable as a rental, the Kapolei property had sentimental
value and Margaret and Melvin wanted to keep it in the family. Trial Tr. Day 2, 140:13-
141:8, 143:12-18.
51. 	Over the course of the next few years, Margaret and Melvin began
experiencing financial hardship that impacted their ability to keep up with their
obligations on the Kapolei property. As Margaret testified, they owed several thousand
dollars in HOA back dues. Additionally, a substantial tax lien had been placed on the
Kapolei property at some point prior to 2023, but no one in the family was aware of the
lien until several years after the property was transferred to her and she attempted to
refinance the mortgage. Trial Tr. Day 4, 6:11-17; 8:19-25.
52. 	Margaret initially testified that by August 2021, the family had fallen
about four payments behind on the Kapolei property mortgage. But after the Board
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introduced evidence of the mortgage payments that had been timely made between
January and August 2021, Margaret amended her testimony: although the payments
had kept the mortgage current through August 2021, the payments had been made by
Meghan because Melvin and Margaret could not afford them. Trial Tr. Day 3, 32:9-
38:19, 56:22-57:9. Meghan corroborated this testimony, explaining that she would
provide funds to her mother to help pay the Kapolei property mortgage, as well as to
cover basic household expenses. Id. at 140:10-141:1, Trial Tr. Day 4, 6:18-25. Meghan,
who was living at home with her parents during this time, explained that she did not
formally pay rent to her parents, but considered helping them to afford their day-to-day
necessities and financial obligations to be part of her “rent.” Trial Tr. Day 4, 25:16-26:14.
Neither Margaret nor Meghan had previously testified about these details, including in
their depositions. Nonetheless, the court finds that while Margaret and Melvin did not
fall behind on the Kapolei property mortgage during this time, they were able to keep
up with their mortgage payments due at least in part to Meghan’s financial support.
53. 	As Margaret and Meghan testified, Melvin and Margaret were
experiencing financial hardship during 2020 and 2021 that adversely affected their
ability to retain the Kapolei property. In addition to the HOA back dues and mortgage
challenges on the Kapolei property, Margaret and Melvin were struggling to make the
mortgage payments on their own Oloa Place residence and were suffering ongoing
financial consequences from the SMAC embezzlement. Trial Tr. Day 2, 142:19-144:23.
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While the Board introduced evidence showing that Margaret received occasional
influxes of funds, enabling her to make various purchases and payments or to transfer
funds to Meghan, the court finds that this evidence does not discredit Margaret and
Meghan’s testimony that on the whole, Melvin and Margaret were experiencing
significant financial hardship during that same time period.
54. 	By June 2020, Margaret notified the Union that SMAC had ceased
operations. In response, the Union asked SMAC to send a termination letter. Ex. 54.
After that letter was received by the Union, Ex. 55, Pension Fund administrator Erinn
Liu contacted Margaret in October 2020 to confirm SMAC’s termination and to inform
her about potential withdrawal liability. Ex. 56.
55. 	In February 2021, the Pension Fund’s attorneys sent Margaret (as a
representative of both SMAC and R&M) a letter requesting information to determine
whether withdrawal liability would be assessed. Ex. 57. Margaret did not initially
respond to the February 2021 request for information, leading Erinn Liu to follow up
with Margaret via email. In her follow-up email, Liu stated that the Pension Fund
“want[s] to be sure SMAC is not obligated to pay withdrawal liability and there is a
chance this liability is not applicable to your company.” Ex. 58. Following her
communications with Liu, Margaret began providing information to the Pension Fund’s
attorneys in March and April 2021. Id.; Trial Tr. Day 2, 53:8-56:2.
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56. 	Around this same time, during the first quarter of 2021—January,
February, and March—Margaret, Melvin, and Meghan began discussing the possibility
of transferring the Kapolei property to Meghan. Trial Tr. Day 3, 140:4-9. By June 2021,
Meghan was in contact with an attorney regarding the details of such a transfer. Ex. 59.
And in August 2021, the transfer was finalized, with Melvin and Margaret transferring
98% of their interest in the Kapolei property to Meghan.
57. 	The deed recording the transfer indicates that the transfer was made for
ten dollars “and other valuable consideration.” Ex. 60. But as Meghan testified in her
deposition, she paid no money for the transfer—an assertion not inconsistent with her
testimony at trial. Meghan Depo., 9:20-22. Instead, as Meghan explained during her
trial testimony, she considered the consideration for the transfer to be her willingness to
assume the mortgage on the property, which was a major liability. Trial Tr. Day 3,
146:7-147:2. Whether or not any monetary consideration was paid for the transfer, the
court finds that Meghan believed some consideration—namely, the assumption of the
mortgage—was being given for the transfer.
58. 	By 2021, Meghan was living with Melvin and Margaret and raising her
young daughter in her parents’ Oloa Place home. As Margaret testified, she wanted
Meghan and her daughter to have their own place to live, and it had always been her
intent to keep the Kapolei property within the family and never to sell it. Trial Tr. Day
2, 140:13-25. As Margaret explained in her testimony, those factors and the financial
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difficulties she and Melvin were experiencing at the time were the factors motivating
the property transfer. Trial Tr. Day 2, 143:9-144:11.
59. 	Meghan likewise testified that her intent in the property transfer was to
acquire a place to live with her daughter. Trial Tr. Day 3, 144:15-19. But the
“uninhabitable” condition of the property has impeded that goal: at the time of the
transfer, the unit was “disgusting,” pest-ridden, and in need of extensive repairs. Id. at
144:24-145:8. To date, Meghan has invested a substantial amount of money in the
property—by her own estimation, she has spent at least $50,000 on renovations with a
projected total spend of $150,000, in addition to an unspecified amount of mortgage
payments and HOA dues—but she has never lived there. Trial Tr. Day 4, 11:20-24,
12:18-24.
60. 	The Pension Fund ultimately made a formal demand for withdrawal
liability in the amount of $610,225 on January 3, 2022, roughly five months after the
property transfer occurred. Ex. 61.
61. 	The Board filed this lawsuit on February 8, 2023. As Meghan testified, the
first time she learned about withdrawal liability was when she was given service of the
lawsuit. Trial Tr. Day 4, 20:14-21:19.
62. 	Although Meghan testified that she has provided the funds for her
parents to pay the mortgage on the Kapolei property since at least 2021, she was not
added to the mortgage until August 2023. But as Margaret and Meghan both testified,
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Meghan’s late addition to the mortgage was the result of the family’s attempt, at their
bank’s suggestion, to secure a loan modification. When the bank performed a title
search on the Kapolei property as part of the loan modification process, it informed the
family that Meghan needed to be on not only the property deed but also the mortgage
itself. At that point, Meghan was added to the mortgage. Trial Tr. Day 2, 138:1-140:12.
CONCLUSIONS OF LAW
A. 	Piercing the Corporate Veil
1. 	At trial, the Plaintiff has the burden to prove by a preponderance of the
evidence that R&M’s veil should be pierced as to Meghan. To determine whether
R&M’s corporate veil should be pierced, the court considers three factors: “(1) the
amount of respect given to the separate identity of the corporation by its shareholders,
(2) the degree of injustice visited on the litigants by recognition of the corporate entity,
and (3) the fraudulent intent of the incorporators.” UA Loc. 343 United Ass’n of
Journeymen & Apprentices of Plumbing & Pipefitting Indus. of U.S. & Can. v. Nor-Cal
Plumbing, Inc., 48 F.3d 1465, 1475 (9th Cir. 1994) (cleaned up). To make this showing, a
plaintiff “must prevail on the first threshold factor and on one of the other two.” Id.; see
also Bd. of Trs. of Mill Cabinet Pension Tr. Fund for N. Cal. v. Valley Cabinet & Mfg. Co., 877
F.2d 769, 773 (9th Cir. 1989).
2. 	“The Ninth Circuit has applied a relatively rigorous veil-piercing
standard, and ought to be placed among the circuits where it is relatively difficult to
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pierce the veil.” Viera v. Chehaiber, No. CV:08-00182, 2010 WL 960347, at *3 (C.D. Cal.
Mar. 16, 2010) (cleaned up).
3. 	Although federal common law governs, courts “may look to state law for
guidance.” Valley Cabinet, 877 F.2d at 772 (cleaned up). Hawaiʻi courts have historically
applied a cautious veil-piercing standard and pierce the corporate veil “only where
recognition of the corporate fiction would bring about injustice and inequity or when
there is evidence that the corporate fiction has been used to perpetrate a fraud or defeat
a rightful claim.” Chung v. Animal Clinic, Inc., 63 Haw. 642, 645, 636 P.2d 721, 723 (1981).
4. 	The first veil-piercing factor analyzes the amount of respect given to the
separate identity of the corporation. It asks whether “there is such a unity of interest
and ownership between the corporation and the shareholder that the two no longer
exist as separate entities,” and is therefore often described as a “unity of interest”
inquiry. Seymour v. Hull & Moreland Eng’g, 605 F.2d 1105, 1111 (9th Cir. 1979). Relevant
considerations include commingling of funds, failure to maintain corporate records or
capital accounts, disregard of corporate formalities, and treatment of corporate assets as
personal assets. Valley Cabinet, 877 F.2d at 773.
5. 	The evidence on this prong does not favor R&M. The court finds that the
Board has met their burden to establish this factor for the following reasons.
6. 	The evidence established that R&M was formed in March 2017 during a
gradual wind-down of SMAC. SMAC’s operations diminished over time while R&M
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began operating. Margaret testified that by late 2016 she believed SMAC would need to
close and that it was facing significant financial pressures, including creditor demands
and federal tax liens. Melvin attributed SMAC’s inability to resolve those liens to
financial fallout from the prior embezzlement.
7. 	The sale of the Lauwiliwili Street property—where SMAC had operated
its shop—further marked the transition. Melvin and Margaret began negotiations to
sell the property in March 2017 and executed a sale agreement in July 2017. Although
pre-lawsuit records reflected that Melvin’s last day with SMAC was December 31, 2018,
and that his first day with R&M was January 1, 2019, trial testimony established that
some SMAC-related work continued beyond that date in a limited capacity as Melvin
finished a small number of remaining jobs. Margaret also testified that she used some
equipment and supplies in R&M’s office that has previously belonged to SMAC
Hawaiʻi.
8. 	R&M’s financial practices evidence a commingling of assets between
Margaret and Melvin’s personal assets and those of R&M. Early deposits into R&M’s
CPB account included funds associated with the Drui/Euram account, including a
$9,000 check from Euram that Margaret acknowledged corresponded to the deposit
reflected in CPB records. To be sure, Margaret testified that she understood those funds
to be owed to her and Melvin personally in connection with the prior property sale
arrangements and therefore believed they could be used for personal expenses even
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though they were deposited into, and disbursed from, the R&M account. But while the
court accepts this aspect of Margaret’s testimony as true, it nonetheless demonstrates
the failure to abide by required corporate formalities.
9. 	CPB statements reflected expenditures that appeared personal in nature,
including travel and entertainment-related charges, as well as checks written to “cash,”
“petty cash,” and family members. QuickBooks reports also revealed “member draws”
or “owner’s equity draws.” Margaret acknowledged that R&M did not maintain
member capital accounts in practice, despite the Operating Agreement’s contemplation
of such accounts. This, too, reveals a failure to abide by required corporate formalities.
10. 	Taken together, the evidence supports a finding that R&M did not
consistently observe corporate formalities and that its finances were oftentimes
intertwined with family arrangements.
11. 	Accordingly, the court concludes that Plaintiff has satisfied the threshold
unity-of-interest factor. In reaching this conclusion, however, the court recognizes that
the evidence supporting a unity of interest is materially stronger as to Margaret than as
to Meghan. The record reflects that Margaret frequently described R&M in personal
terms—referring to it as “my shop,” its income as “my income,” and Melvin as “my
worker”—and the financial and operational evidence demonstrated that Margaret’s
relationship with the business was closely intertwined with her personal and family
obligations.
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12. 	The same cannot be said as to Meghan. Unlike Margaret, Meghan did not
hold herself out to be operating the business, did not manage R&M’s day-to-day affairs,
did not control its finances, and did not treat the company as an extension of her
personal activities. Her involvement in R&M was limited and passive, and the record
does not reflect the kind of pervasive intertwinement between individual and entity
that typically supports a finding of unity of interest as to a shareholder.
13. 	In any event, a finding in the Board’s favor on the first prong alone does
not resolve the veil-piercing inquiry. Ninth Circuit precedent makes clear that
commingling and disregard of corporate formalities, without more, do not justify
imposing personal liability on a shareholder. Valley Cabinet, 877 F.2d at 773; Audit
Servs., Inc. v. Rolfson, 641 F.2d 757, 764 (9th Cir. 1981).
14. 	The second part of the veil-piercing test asks whether the corporation was
permeated by fraudulent intent. The fraudulent intent prong may be satisfied “either
by proof of fraud in the formation of the corporation or fraudulent misuse of the
corporate form after incorporation.” Valley Cabinet, 877 F.2d at 773. The inquiry focuses
on shareholder abuse of the corporate form; financial distress or “[g]arden variety
fraud,” standing alone, is insufficient. Id.
15. 	In Seymour v. Hull & Moreland Eng’g, the Ninth Circuit rejected a veil-
piercing argument despite evidence from which bad faith in meeting fringe benefit
obligations might have been inferred. The Ninth Circuit emphasized that there was no
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evidence of fraudulent intent at formation, that the corporation operated as an ongoing
enterprise for several years, and that fraud could not be inferred merely from bleak
financial circumstances or business decline. Seymour, 605 F.2d at 1113. The same
principles guide the court’s analysis here.
16. 	The Board does not offer any direct evidence of fraudulent intent. But it
argues that fraudulent intent should be inferred from the circumstances. Its primary
theory is that R&M was created as a “shell” entity to evade SMAC’s obligations to the
Pension Fund. See Dkt. No. 179, at PageID.4964. The evidence at trial does not support
this characterization.
17. 	The evidence showed that R&M was formed during a period in which
SMAC was winding down, and not as an overnight replacement or sham entity.
Although SMAC and R&M overlapped for a time, the record reflects that SMAC’s
operations were diminishing as R&M began limited activity, and that SMAC eventually
ceased operations altogether. This evidence is consistent with the court’s conclusion, at
summary judgment, that R&M was essentially a successor to SMAC (though
conducting a much more limited amount and type of work). But it does not support the
Board’s contention that R&M was “shell” used to evade SMAC’s obligations. It is
undisputed that at the time Melvin began performing work for R&M, he could no
longer perform work on behalf of SMAC. Any work he performed for R&M, then, was
not work that was siphoned away from SMAC; it was, instead, work that Melvin
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simply could not have performed at all if he had been limited to SMAC. Of course,
some other union shop could have picked up the work in SMAC’s place, which is why
R&M acted essentially as a successor to SMAC. But there is no evidentiary support for
the proposition that R&M took any jobs away from SMAC. Nor is there any evidence
that any significant amount of property or funds belonging to SMAC were rerouted
through R&M.
18. 	What is more, R&M has continued operating in the years since its
formation in 2018, including through periods of financial strain and the COVID-19
pandemic. This is strong evidence that R&M is no “shell.” As Seymour instructs, “[t]he
very fact of continuing to do business for a period of . . . years tends to indicate a good
faith use of the corporation to conduct a legitimate business enterprise.” 605 F.2d at
1113.
19. 	Furthermore, the evidence demonstrated that R&M obtained insurance
coverage, that Melvin obtained his required RME and contractor’s license, and that
R&M entered into service agreements and pursued jobs consistent with a small, non-
union operation. These facts are inconsistent with the characterization of R&M as a
“shell” entity created solely to evade obligations. While R&M’s initial capitalization
and informal practices may have been flawed, the record supports that it was an
operational business.
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20. 	To be sure, evidence of insurance coverage is not enough, standing alone,
to save R&M from veil piercing. Barnes v. Sea Hawaiʻi Rafting, LLC, Civ. No. 13-00002,
2020 WL 6585889, at *8 (D. Haw. Nov. 9, 2020). But in the circumstances of this case, the
insurance evidence is probative of intent. Maintaining insurance, obtaining licensure,
and securing loans are indicia that the owners sought to operate R&M as a legitimate
business capable of performing work and assuming ordinary business risks, not as a
“shell.” In short, the court rejects the Board’s characterization of R&M as a mere
“shell.”
21. 	Shifting gears, the Board points to R&M’s dealings with Euram and the
fact that Melvin performed work for R&M during the wind-down period as evidence of
fraudulent intent. But the existence of overlapping clients during a transition period
does not, standing alone, establish an intent to defraud. The evidence reflected that
Melvin completed certain remaining SMAC jobs as SMAC closed, but that R&M also
entered into its own service agreements. The court declines to infer fraud from a period
of overlap that is consistent with a finding that R&M operated as a successor business to
SMAC. That is especially so because, as noted, there is no evidence that Melvin took on
work for R&M that he could lawfully have performed for SMAC.
22. 	The Board also emphasizes the evidence of undercapitalization and
informal or inaccurate recordkeeping. But inadequate capitalization, without evidence
that the corporation was formed or operated to defraud creditors, is insufficient to establish
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fraudulent intent. Seymour, 605 F.2d at 1113; Laborers Clean-Up Cont. Admin. Tr. Fund v.
Uriarte Clean-Up Serv., Inc., 736 F.2d 516, 524 (9th Cir. 1984).
23. 	The facts here are unlike those in Uriarte. There, the Ninth Circuit
emphasized that the corporation failed to infuse any working capital in the form of cash
or other liquid assets at inception, rendering it unable to operate or meet its obligations.
Uriarte, 736 F.2d at 524-25. The record here does not support a comparable finding.
24. 	Here, the record supports that R&M operated with limited resources,
relied at times on loans, and experienced financial difficulty. The court cannot infer
fraud “simply on the basis of bad financial times.” Seymour, 605 F.2d at 1113. Contrary
to the Board’s assertion, the use of cash flow or loans to cover operating expenses, even
during periods of negative income, does not support an inference of fraudulent intent,
as such circumstances are commonplace in small businesses and reflect financial strain
rather than misuse of the corporate form. Indeed, there was ample evidence from
which the court can reasonably infer that R&M endured periods of slow business and
financial strain—“perhaps the most common risk in the business world.” Id.
25. 	Plaintiff further argues that R&M was created to avoid obligations to the
Pension Fund, and that Margaret continued submitting zero-hour reports after SMAC
ceased operations to avoid withdrawal liability. Even assuming arguendo that such
conduct reflected bad faith or noncompliance by Margaret, the fraudulent-intent
inquiry requires evidence that the shareholder against whom veil piercing is sought
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used the corporate form to perpetrate a fraud. Valley Cabinet, 877 F.2d at 773-74. The
record does not support a finding that Meghan created R&M, directed its formation, or
participated in any scheme to evade Pension Fund obligations. She did not submit
reports to the Pension Fund or indeed have any communications with the Pension Fund
at all.
26. 	The Pension Fund’s reliance on Meghan’s limited involvement, and its
characterization of her role as “manager in name only,” does not establish fraudulent
intent. The absence of joint decision-making or formal adherence to the Operating
Agreement’s managerial provisions may reflect informality or poor corporate
governance, but it does not, without more, demonstrate a scheme to defraud creditors.
Ninth Circuit cases finding fraud under this prong tend to involve shareholders who
were the “driving force” behind corporate formation, created entities with the purpose
of avoiding obligations, or actively participated in their misuse. See, e.g., NLRB v.
O’Neill, 965 F.2d 1522, 1531 (9th Cir. 1992) (“courts . . . have looked beyond
organizational form where an individual . . . was in active concert or participation in a
scheme or plan of evasion.”). The evidence here supports the opposite conclusion as to
Meghan: she was not a driving force or controlling shareholder of R&M, as she did not
manage R&M’s operations or play a role in its finances. The record does not support an
inference that Meghan’s designation as a manager—whether nominal or not—was
intended to create an “illusion of distance” or to perpetrate fraud, Dkt. No. 179, at
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PageID.4986, and the fact that Margaret exercised primary control over the business
cannot be transformed into evidence of fraudulent intent on Meghan’s part.
27. 	Nor does the evidence concerning inaccurate or incomplete internal
recordkeeping establish fraudulent intent as to Meghan. The testimony regarding
bookkeeping inaccuracies focused on Margaret’s preparation of records and her
explanations for errors in QuickBooks and tax filings. Plaintiff did not establish that
Meghan prepared those records, directed how they were maintained, or participated in
any effort to falsify them. Absent evidence tying Meghan to intentional misuse of the
corporate form, such as the check paid for her daughter’s pre-school or the $8,000
personal loan Meghan gave R&M, those deficiencies do not support veil piercing as to
her.
28. 	Finally, as the analysis in Valley Cabinet underscores, the timing of events
does not support an inference of fraudulent intent at formation. There, the Ninth
Circuit affirmed a finding of no fraudulent intent where the evidence supported a good-
faith belief that no withdrawal liability was owed at the time the shareholder in
question transferred corporate assets, even though the same evidence could have
supported a contrary inference. Valley Cabinet, 877 F.2d at 773-74. Similarly, the record
here does not support a finding that R&M—or Meghan—misused the corporate form
with fraudulent intent. The evidence at trial showed that Margaret formed R&M after it
became apparent that SMAC could no longer continue operating and would need to
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close. But the record does not support a finding that R&M was formed in anticipation
of, or to evade, withdrawal liability to the Pension Fund. At the time R&M was formed,
withdrawal liability had not been discussed or assessed (and indeed was not assessed
until 2022), so the circumstances do not support an inference that such liability was
imminent or being deliberately avoided.
29. 	In the end, the Board’s strongest argument is that the court should infer
fraudulent intent based on the sheer volume of evidence presented as to the first prong
(the amount of respect given to the separate identity of the corporation). The court is
legally permitted to draw the inference on that basis, but having carefully considered
the evidence presented at trial, it declines the invitation. In the court’s view, the
evidence did not demonstrate a “common scheme to perpetrate fraud on third parties.”
Chan v. Soc’y Expeditions, Inc., 123 F.3d 1287, 1294 (9th Cir. 1997). The Board has not
satisfied the fraudulent intent prong.
30. 	The final part of the veil-piercing inquiry asks whether respecting the
corporate entity would produce injustice or an inequitable result. “Shareholders and
officers of a corporation may be liable for the company's contribution obligations in
situations in which justice requires piercing the corporate veil.” Trs. of Screen Actors
Guild-Producers Pension & Health Plans v. NYCA, Inc., 572 F.3d 771, 776 (9th Cir. 2009); see
also Bd. of Trs. of W. Conf. of Teamsters Pension Tr. Fund v. H.F. Johnson, Inc., 830 F.2d 1009,
1015 n.4 (9th Cir. 1987). But Ninth Circuit precedent is clear that an inability to collect
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on a judgment, standing alone, “does not, by itself, constitute an inequitable result.”
Seymour, 605 F.2d at 1113; see also Valley Cabinet, 877 F.2d at 774. Hawaiʻi courts likewise
require more than insolvency or nonpayment to justify veil piercing. Chung, 63 Haw. at
645, 636 P.2d at 723.
31. 	As an initial matter, the court has already held Margaret and Melvin
jointly and severally liable for the withdrawal liability at issue. Veil piercing at this
stage would not serve to prevent injustice or avoid an inequitable result; rather, it
would merely afford the Board an additional avenue of recovery against a third
individual. The relevant inquiry is not whether the Board faces difficulty collecting its
judgment, but whether respecting R&M’s separate corporate existence as to Meghan
would itself work an inequity.
32. 	Here, the record does not support a finding that respecting R&M’s
corporate form as to Meghan would produce injustice. Meghan had no control over
R&M’s finances or its day-to-day operations, nor did she hold herself out as operating
the business or use the corporate form to shield wrongful conduct. The evidence
instead showed that Meghan’s involvement was limited as a “silent partner,” and that
she deferred to her mother on business matters.
33. 	It is true that courts have found the injustice prong satisfied where “a
corporation is so undercapitalized that it is unable to meet debts that may reasonably be
expected to arise in the normal course of business.” Uriarte, 736 F.2d at 525 (cleaned
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up). But Uriarte and the cases that follow it illustrate a narrow category of
circumstances: situations in which a corporation was effectively a shell from inception,
or where owners actively stripped assets or diverted funds to avoid known obligations,
leaving creditors with no meaningful recourse. See, e.g., Bd. of Trs. of Emps.-Shopmen's
Loc. 516 Pension Tr. through Galton v. Columbia Wire & Iron Works, Inc., 233 F. Supp. 3d
873, 886 (D. Or. 2017).
34. 	Those circumstances are not present here. This is not a case in which
R&M was held out as an empty shell incapable of operating in the ordinary course, nor
one in which assets were siphoned off to render the corporation judgment-proof. R&M
has operated as a functioning business and pursued work consistent with its size and
scope. Whatever R&M’s financial limitations, the record does not establish that the
company was deliberately structured to ensure that reasonably foreseeable obligations
could never be met.
35. 	Ultimately, “[c]orporate separateness is respected unless doing so would
work injustice upon an innocent third party.” Kilkenny v. Arco Marine Inc., 800 F.2d 853,
859 (9th Cir. 1986). Respecting the corporate form here does not leave the Board
without recourse. The court has already held Margaret and Melvin jointly and
severally liable. The injustice prong is not satisfied merely because veil piercing would
deliver an additional person from whom to collect.
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36. 	Because the Board must satisfy the unity-of-interest factor and at least one
additional prong, and because it has not done so, veil piercing is not appropriate. Nor-
Cal Plumbing, 48 F.3d at 1475. Although the court finds that R&M did not consistently
observe corporate formalities, Plaintiff has failed to prove by a preponderance of the
evidence that either fraudulent intent or an inequitable result would warrant piercing
the corporate veil. The court therefore declines to pierce R&M’s corporate veil.
B. 	The Kapolei Property Transfer and Section 1392(c)
37. 	The Board separately asserts that the Kapolei property transfer was “a
transaction with a principal purpose to evade or avoid withdrawal liability” and should
therefore be disregarded for withdrawal liability purposes pursuant to 29 U.S.C.
§ 1392(c). Dkt. No. 179, at PageID.4993. Section 1392(c) provides: “If a principal
purpose of any transaction is to evade or avoid liability under this part, this part shall
be applied (and liability shall be determined and collected) without regard to such
transaction.”
38. 	Defendants suggest that such a transfer only “may be disregarded,” Dkt.
No. 182, at PageID.5057 (emphasis added), but the language of § 1392(c) is mandatory.
If a transaction is determined to have evasion or avoidance as a principal purpose,
withdrawal liability “shall be determined and collected” without regard to the
transaction. 29 U.S.C. § 1392(c); see also, e.g., Teamsters Pension Tr. Fund of Phila. &
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Vicinity v. Laidlaw Indus., Inc., 745 F. Supp. 1016, 1024-25 (D. Del. 1990) (finding that
where § 1392(c) applied, the transaction “must be disregarded” (emphasis added)).
39. 	The determination of a transaction’s “purpose” must be made in light of
the testimony at trial and other evidence. But as both the legislative history and
statutory text make clear, § 1392(c) “requires only that a principal purpose of the sale be
to escape withdrawal liability.” Santa Fe Pac. Corp. v. Cent. States, Se. & Sw. Areas
Pension Fund, 22 F.3d 725, 727 (7th Cir. 1994). As Defendants acknowledge, evasion
need not be the “sole purpose” of the transaction. Dkt. No. 181, at PageID.5052; see
Santa Fe, 22 F.3d at 727. But they elsewhere assert that for § 1392(c) to apply, the
evidence must show that the transaction was “primarily motivated by an intent to
evade liability.” Dkt. No 182, at PageID.5057. To the extent they suggest evasion must
be the most significant motivation, Defendants go astray. So long as evasion or
avoidance is “one of the factors that weighed heavily in the seller’s thinking,” § 1392(c)
applies. Santa Fe, 22 F.3d at 727. At the same time, an employer should be let “off the
hook even if one of his purposes was to beat withdrawal liability, provided however
that it was a minor, subordinate purpose.” Id. In other words, the question is not
whether evasion or avoidance was the most significant purpose, but rather whether it
was “a major purpose,” even if merely one among others. Id.
40. 	The legislative history of the MPPAA reveals a clear intent for “courts [to]
follow the substance rather than the form of such transactions in determining, assessing,
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and collecting withdrawal liability,” with § 1392(c) applying whenever “evasion of
liability is a principal purpose of a transaction, whether or not the transaction has other
purposes as well.” 126 Cong. Rec. H7898 (daily ed. Aug. 26, 1980) (statement of Rep.
Frank Thompson); see CIC-TOC Pension Plan v. Weyerhaeuser Co., 911 F. Supp. 2d 1088,
1096-98 (D. Or. 2012). Congress further intended that “employers not be able to evade
or avoid withdrawal liability through changes in identity, form, or control, or through
transactions which are less than bona fide and arm’s length.” Id. Drawing on this
legislative history, the Ninth Circuit has suggested that courts applying § 1392(c)
should consider at least two factors: (1) whether the transaction was “bona fide” and
“arm’s-length,” and (2) whether respecting the transaction would frustrate the purposes
of the MPPAA. Cuyamaca Meats, Inc. v. San Diego & Imperial Cntys. Butchers & Food
Empls. Pension Tr. Fund, 827 F.2d 491, 499 (9th Cir. 1987).
41. 	Beyond the general guidance provided in Cuyamaca Meats, “[t]he Ninth
Circuit has not articulated a test to determine whether a transaction's principal purpose
was to avoid liability under the MPPAA.” Carpenters Pension Tr. Fund for N. Cal. v.
Lindquist Fam. LLC, No. 13-CV-01063, 2014 WL 2601648, at *2 (N.D. Cal. June 10, 2014).
Accordingly, courts look to a range of factors to determine whether a transaction is
bona fide and arms-length. Defendants correctly identify several relevant
considerations which other courts have assessed in the § 1392(c) context. See Dkt. No.
182, at PageID.5057. These include (1) the consideration exchanged in the transaction,
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(2) the relationship between the parties involved, and (3) the timing of the transaction.
See Carpenters, 2014 WL 2601648, at *2; Connors v. Vick, Civ. A. No. 91-0289, 1992 WL
200853, at *3-4 (S.D.W. Va. Mar. 13, 1992) (consideration and timing); Teamsters Joint
Council No. 83 of Va. Pension Fund v. Empire Beef Co., Inc., No. 08CV340, 2011 WL 201492,
at *4 (E.D. Va. Jan. 20, 2011) (same). Other relevant factors have included (4) the size of
the withdrawal liability relative to the value of the transaction in question. Empire Beef,
2011 WL 201492, at *3.
42. 	In addition to these considerations, some courts have “interpreted the
statute to require intent or knowledge.” Carpenters, 2014 WL 2601648, at *2 (discussing
Resilient Floor Covering Pension Fund v. M & M Installation, Inc., C08-5561, 2012 WL
669765 (N.D. Cal. Feb. 29, 2012)). The Board appears to agree that intent should be
considered, but asserts that “[t]he intent of the transferors (Margaret and Melvin) is the
relevant intent, not that of Meghan,” Dkt. No. 180, at PageID.5040. Courts vary on
“whether the relevant intent is that of the seller alone, or whether courts must consider
the intent of both the transferor and the transferee.” Empire Beef, 2011 WL 201492, at *4
n.7 (acknowledging conflicting approaches of the Third and Seventh Circuits). At least
one district court within the Ninth Circuit has concluded that although “prior decisions
applying Section 1392(c) have tended to focus on the employer's intentions, there is no
reason that the other parties' intentions should not determine the principal purposes of
the transaction.” Carpenters, 2014 WL 2601648, at *5. The court adopts that approach
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and therefore considers the intent of both Melvin and Margaret (as transferors) and
Meghan (as transferee). This factor, along with the four described supra, will be used to
determine whether a principal purpose of the Kapolei property transfer was to evade or
avoid withdrawal liability under the MPPAA. Cf. Carpenters, 2014 WL 2601648, at *2.
43. 	The statute does not clearly establish who bears the burden of proof. The
Board asserts that “once the Pension Fund determined that a transaction was to evade
or avoid withdrawal liability, Defendants had the ‘burden of rebutting this
presumption and [failed to] prove, by a preponderance of the evidence, that [the
Board’s] determination was incorrect.’” Dkt. No. 180, at PageID.5027 (quoting Sherwin-
Williams Co. v. N.Y. State Teamsters Conf. Pension, Ret. Fund, 158 F.3d 387, 396 (6th Cir.
1998) and citing 29 U.S.C. § 1401(a)(3)(A)). But both the case and statutory provision
upon which the Board relies for this proposition relate exclusively to disputes between
plans and employers submitted to arbitration. See Sherwin-Williams, 158 F.3d at 391-92
(describing submission to arbitration); 29 U.S.C. § 1401(a) (describing procedures
applicable to arbitration proceedings). This case was not submitted to arbitration, so
there is no cause to apply the statutory presumption of correctness in favor of the
Board, or the corresponding requirement that Defendants prove by a preponderance of
the evidence that the Board’s § 1392(c) determination was unreasonable or clearly
erroneous. See 29 U.S.C. § 1401(a)(3)(A).
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44. 	But Defendants’ arguments concerning the burden of proof also miss the
mark. Defendants adopt the Board’s recitation of the burden of proof at some points,
but also assert that “the plaintiff must prove” with “clear evidence” that evasion or
avoidance was a principal purpose of the transaction at others. Compare Dkt. No. 181, at
PageID.5052 with Dkt. No. 182, at PageID.5057. It is not clear from where Defendants
derive a “clear evidence” standard, as no caselaw or statutory provision is cited in
support, and the court is aware of none.
45. 	Because neither party appears to have identified the correct statutory
burden of proof, and since the court cannot conclude that the parties jointly consented
to the application of a different standard of proof, the court must determine the
applicable burden of proof. Very few cases appear to have dealt with the circumstances
of a § 1392(c) issue that was never submitted to arbitration.2 The rare cases that have
done so tend to apply a different provision of § 1401, which explains in relevant part
that in “certain disputes,” a determination by the plan sponsor “shall not be presumed
to be correct, and the plan sponsor shall have the burden to establish, by a
preponderance of the evidence, the elements of the claim under section 1392(c) of this
2 	At least one court has concluded that because § 1392(c) is subject to mandatory
arbitration, the failure of an employer to submit such a claim to arbitration “will result
in a waiver of the right to assert the defense . . . that [a transaction] did not constitute an
evade or avoid transaction.” Laidlaw Indus., 745 F. Supp. at 1024-25. Very few other
courts appear to have adopted such a draconian view of the statute, and the Board has
not requested that this court do so here. The court therefore assumes that Defendants
may assert defenses to the application of § 1392(c) in the first instance.
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title that a principal purpose of the transaction was to evade or avoid withdrawal
liability under this subtitle.” 29 U.S.C. § 1401(e)(2). But that determination only applies
in narrowly prescribed situations not present here. It applies when arbitration
proceedings have been commenced, see id. at § 1401(e)(1) (“the special rules under
paragraph (2) shall be used in applying subsections (a) and (d) of this section,” both of
which pertain to arbitration), and only when the § 1392(c) determination is “based in
whole or in part” on a transaction that occurred “before January 1, 1999,” id. at
§ 1401(e)(1)(B), and at least five years before the date of withdrawal from the plan, id. at
§ 1401(e)(1)(C). See also Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Tr.
for S. Cal., 508 U.S. 602, 611 (1993) (noting that these presumptions “attend the
arbitration”). The cases which have applied § 1401(e) to non-arbitration cases and
transactions post-dating January 1, 1999, do not appear to have grappled with these
statutory limitations. See, e.g., Lopresti v. Pace Press, Inc., 868 F. Supp. 2d 188, 202
(S.D.N.Y. 2012).
46. 	In determining what burden of proof applies, the court begins with the
statutory text. Section 1392(c) does not itself contain any statutory presumption or
designated burden of proof, and for the reasons discussed above, none of the provisions
in § 1401 apply where, as here, the § 1392(c) issue was not first submitted to arbitration.3
3 	29 U.S.C. § 1401(f) contains an additional special rule for § 1392(c) cases. It
provides that for transactions occurring after December 31, 1998, and more than five
years before the withdrawal, the employer may elect to use the “special rules” set out in
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And when a statute contains no explicit provision setting out the appropriate burden of
proof, there is a strong presumption that the plaintiff should bear the burden. See
Schaffer ex rel. Schaffer v. Weast, 546 U.S. 49 (2005); Tourgeman v. Nelson & Kennard, 900
F.3d 1105 (9th Cir. 2018). This presumption applies unless Congress clearly manifests a
contrary intent. Id. Congress has not done so here. To the contrary, the existence of
§ 1401 shows that Congress recognized the default standard of proof and intended—in
certain specific circumstances—to reallocate that burden to the defendant. In other
words, it establishes that Congress knew how to shift the burden of proof to the
defendant, but chose not to do so outside of the arbitration context. Cf. Tourgeman, 900
F.3d at 1112. And § 1401 further demonstrates how narrowly Congress meant to limit
the statutory burden-shifting: its provisions are not only limited to arbitration
proceedings, but also categorically exclude certain transactions and conditionally
exclude others. See 29 U.S.C. §§ 1401(e)-(f).
47. 	The bottom line is that nothing in the MPPAA suggests that Congress
intended to invert the traditional burden of proof for § 1392(c) disputes that were never
submitted to arbitration. As a result, the court applies the default presumption and
concludes that plaintiffs bear the burden of proof on their § 1392(c) claims.
§ 1401(e)(2). But here, the challenged transaction occurred within five years of the
withdrawal, and Defendants never made any election to use the special rules in
§ 1401(e)(2). Additionally, § 1401(f) also modifies only paragraphs (a) and (d) of § 1401.
Like § 1401(e), then, § 1401(f) cannot apply here in any event.
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48. 	If a transaction is ultimately found to have evasion or avoidance as a
principal purpose, “liability will be determined as if the transaction to evade or avoid
liability never occurred, and a plaintiff can reach those assets that were transferred in
order to evade or avoid liability, as well as the parties to whom they were improperly
transferred,” so long as the transferees are properly included as defendants in the
action. Pension Plan of Loc. Union 786 Ret. Fund v. Lee Lumber & Bldg. Material Corp., No.
19-cv-06933, 2021 WL 949343, at *7 (N.D. Ill. Mar. 12, 2021) (cleaned up); see Connors v.
Marontha Coal Co., Inc., 670 F. Supp. 45, 47 (D.D.C. 1987). Meghan is properly joined in
this action, and no one contends otherwise.
49. 	Courts applying § 1392(c) generally recognize that struggling or winding-
down businesses may commonly engage in transactions that have the effect of lessening
withdrawal liability for entirely legitimate reasons. For example, a shuttering logistics
company may sell off its fleet of company trucks in order to dispose of assets it no
longer needs or to satisfy obligations to creditors. Such a transaction might naturally
decrease the pool of assets from which a pension fund could recover withdrawal
liability, but that is not enough for the transaction to be set aside. For § 1392(c) to apply,
the transaction must have evasion or avoidance of withdrawal liability as a principal
purpose, not a mere incidental purpose or effect. A transaction entered into for
legitimate business reasons is often less likely to come within the reach of § 1392(c), so
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courts frequently assess whether consideration was given for the transaction as part of
their analysis. See, e.g., Empire Beef, 2011 WL 201492, at *4.
50. 	In simple terms, a transaction is supported by consideration if the
transferor gains some benefit or the transferee suffers some detriment. See Estate of
Tahilan v. Friendly Care Home Health Servs., Inc., 731 F. Supp. 2d 1000, 1010 (D. Haw.
2010) (quoting Young v. Allstate Ins. Co., 119 Haw. 403, 198 P.3d 666 (2008)). A lack of
consideration suggests a transaction that is merely a change in identity, form, or control,
lacking in true economic substance. Cuyamaca Meats, 827 F.2d at 499; Carpenters, 2014
WL 2601648, at *3.
51. 	The Kapolei property transfer was not supported by consideration.
Defendants offer two explanations for what consideration was given for the transfer,
but neither is supported by the evidence. Defendants first point to the deed of transfer,
which shows that Melvin and Margaret transferred 98 percent of their interest in the
Kapolei property to Meghan in exchange for ten dollars “and other valuable
consideration.” Ex. 60. A little more than a decade prior, the property had been
appraised at a value of $235,000. Ex. 31. Defendants do not suggest that the property
had so drastically declined in value as to be essentially worthless by the time of the 2021
transfer. (And for good reason: uninhabitable as the property may have been, it would
not be credible to suggest that its market value was anywhere near ten dollars at the
time of the transfer.)
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52. 	Instead, Defendants point to the presence of hundreds of thousands of
dollars’ worth of tax liens on the Kapolei property. See Dkt. No. 181, at PageID.5049,
Dkt. No. 182, at PageID.5062. Those liens could have substantially reduced the actual
value of the townhouse, but Defendants did not know about the tax liens until several
years after the transfer. Trial Tr. Day 4, 6:11-17; 8:19-25. They could not have believed,
therefore, that value was being exchanged when they accepted ten dollars in exchange
for 98 percent of a property they would have understood to be valued at several
thousand times that price. Even if they had concluded that ten dollars was the
appropriate amount, in any event, Meghan acknowledged that she never paid even that
small amount of money for the property transfer. Meghan Depo., 9:20-22.
53. 	The deed of transfer also refers to “other valuable consideration” given for
the property transfer. At trial, Meghan testified that she believed this to be her
assumption of the mortgage on the Kapolei property. But Meghan was not added to
the mortgage until 2023, when the family attempted to do a loan modification on the
property. Although the court accepts that the failure to add Meghan was an oversight
and is not indicative of any deceptive intent, the fact that Meghan was not a party to the
mortgage for several years undermines the argument that her assumption of the
mortgage on the Kapolei property provided consideration for the transfer.
54. 	Even if she had been immediately added to the mortgage, that would not
have amounted to valuable consideration. Meghan testified at trial that she had been
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regularly paying the mortgage on the Kapolei property both before and after the
transfer. Trial Tr. Day 3, 140:10-18; Trial Tr. Day 4, 6:18-25. She explained that she
considered this to be part of her “rent” while she was living in her parents’ house. But
that would mean that she was already obligated to pay the mortgage at the time of the
transfer, and such a preexisting duty cannot serve as consideration for a transaction.
See State v. Nakanelua, 134 Haw. 489, 508-09, 345 P.3d 155, 173-74 (2015). Moreover, the
fact that the financial state of affairs at the Kapolei property remained the same both
before and after the transfer—that is, with the mortgage being paid by Meghan on her
parents’ behalf—suggests a change in identity, form, or control rather than a bona fide
transaction. See Carpenters, 2014 WL 2601648, at *3. The court therefore finds that
consideration was not given for the Kapolei property transfer. This factor favors the
Board.
55. 	“Whether a transaction is bona fide and arm’s-length depends on the
relationships between the parties and the bargaining process . . . .” Carpenters, 2014 WL
2601648, at *3. Here, the lack of consideration for the Kapolei property transfer cannot
be easily separated from the relationship between Melvin, Margaret, and Meghan. A
parent-to-child transaction in which no negotiation occurred and no value was
exchanged simply cannot be considered a bona fide or “arms-length” transaction. See
id. (transaction was not bona fide and arms-length where “there was a close familial
relationship among the parties to the transaction, and there was no bargaining at all”).
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Defendants argue that “[w]hile the consideration was nominal . . . , this is common in
family transfers and does not, by itself, establish fraudulent intent.” Dkt. No. 182, at
PageID.5063. That is true, but it also does not support—and in fact undermines—a
conclusion that the transfer was a bona fide, arms-length transaction.
56. 	Defendants observe that the transfer “was executed with proper legal
formalities, including signatures, notarization, and recording with the appropriate
authorities,” in an apparent effort to establish that it was bona fide. Dkt. No. 182, at
PageID.5063. Those facts do not appear to be in dispute. But as other courts applying
§ 1392(c) have observed, “Congress explicitly called on courts to follow the substance
rather than the form of transactions in determining, assessing, and collecting
withdrawal liability.” Weyerhaeuser Co., 911 F. Supp. 2d at 1098 (cleaned up). The
Kapolei property transfer may have been executed in a formally appropriate manner,
but that does not suggest that its substance was appropriate. Cf. Carpenters, 2014 WL
2601648, at *3 (“Defendants also argue repeatedly that the transaction itself was legal.
. . . [T]hey may be correct, but the legality of the transaction does not help their case.”).
57. 	To be clear, there is nothing inherently wrong with an intrafamily asset
transfer. Indeed, given Melvin and Margaret’s longstanding and commendable desire
to give the Kapolei property to Meghan as a place for their daughter to raise her own
family, the fact that the transfer was made in exchange for little to no value is entirely
understandable. But that transaction is best characterized as a gift. In other words, it
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simply cannot be credibly suggested that Melvin and Margaret would have parted with
their 98 percent interest in the Kapolei property if a stranger had come along and
offered identical terms in exchange for it. Again, that does not make the property
transfer wrong. But § 1392(c) is not limited to deceptive or nefarious transactions; it
distinguishes only between “bona fide business dealings” and transactions “lacking
economic substance.” Weyerhaeuser Co., 911 F. Supp. 2d at 1096. The property transfer
here was not a bona fide, arms-length transaction with genuine economic substance, so
it falls into the latter category. This factor therefore favors the Board.
58. 	In light of these considerations, the court cannot say that the Kapolei
property transfer was bona fide and arms-length. It must therefore turn to the second
part of the Cuyamaca analysis: whether respecting the transaction would frustrate the
purposes of the MPPAA. 827 F.2d at 499.
59. 	There are at least three factors for the court to consider here. First, does
the timing of the Kapolei property transfer suggest that a principal purpose of the
transaction was to evade or avoid withdrawal liability? Even a transaction that is less
than bona fide and arms-length should not be set aside if evasion or avoidance was not
a principal purpose; its timing can shed critical light on its purpose. Second, how does
the size of the transaction compare to the prospective liability? Where withdrawal
liability “pales in comparison” to the transaction at issue, courts are less likely to find
that evasion or avoidance of that liability was a principal purpose of the transaction.
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Empire Beef, 2011 WL 201492, at *3. And finally, is there evidence that the parties
actually intended to evade or avoid such liability? If so, respecting the transaction
would plainly frustrate the purposes of the MPPAA.
60. 	The timing of the Kapolei property transfer suggests a principal purpose
to evade or avoid withdrawal liability. A transaction that takes place well before (or
long after) withdrawal liability is contemplated or assessed is much less likely to have a
principal purpose to evade or avoid. See, e.g., Empire Beef, 2011 WL 201492, at *4; M & M
Installation, 2012 WL 669765, at *1-2. By contrast, a transaction that follows on the heels
of a warning that withdrawal liability may be coming, an assessment of that liability, or
a realization that an employer’s personal assets may be reached by the liability is much
more likely to be found to have a principal purpose to evade or avoid. See Lee Lumber,
2021 WL 949343, at *8; Vick, 1992 WL 200853, at *3-4; Carpenters, 2014 WL 2601648, at *4.
61. 	The evidence shows that around June 2020, Margaret informed the
Pension Fund that SMAC had ceased operations. By October 2020, in response to
SMAC’s termination, Margaret had been sent information by the Pension Fund
explaining that SMAC might be subject to withdrawal liability. In February 2021, the
Pension Fund’s attorneys sent Margaret a letter requesting information “to determine
whether SMAC Hawaii and/or R&M Air Condition [sic], LLC are subject to withdrawal
liability.” Ex. 57. Margaret responded to this request by providing information to the
Pension Fund’s attorneys through March and April 2021.
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62. 	Virtually all of the key events surrounding the Kapolei property transfer
occurred during this same timeframe. Meghan testified that the family first began
discussing transferring the Kapolei property to her sometime during the first quarter of
2021, which she described as January, February, and March of that year. This was only
a few months after Margaret had first been informed about potential withdrawal
liability in the fall of 2020. And Meghan’s recollections about the family beginning to
discuss the property transfer in the first quarter of 2021 suggest that those conversations
were likely concurrent with or immediately subsequent to Margaret’s receipt of the
Pension Fund’s demand letter requesting information for withdrawal liability purposes.
The actual process of transferring the Kapolei property—beginning with Meghan
obtaining the services of an attorney in June 2021 and culminating in the August 2021
transfer—took place after Margaret had been supplying information to the Pension
Fund’s attorneys for several months.
63. 	The timing of these events strongly supports the Board’s claim. It appears
that discussions began a short time after Margaret was first notified by the Pension
Fund that SMAC might be on the hook for withdrawal liability. The mere closeness in
time between these events alone might be enough to suggest that a principal purpose of
the transfer was to evade or avoid withdrawal liability. Cf. Vick, 1992 WL 200853, at *4
(finding that the timing of a transaction which took place four to five weeks after the
defendant was served in a withdrawal liability action “render[ed] the conveyances
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inherently suspect”). But that is not the only coincidence favoring the Board’s claim.
Also significant is the fact that the first conversations about transferring the Kapolei
property coincided with Margaret receiving a withdrawal liability-related demand
letter from the Pension Fund’s attorneys. And the legal maneuvering to effectuate the
transfer did not begin until Margaret had spent several months responding to the
Pension Fund’s requests for information to determine whether withdrawal liability
would be assessed. When considered as a whole, the timing of these events creates the
unmistakable impression that an impending withdrawal liability assessment was at
least a major reason why Defendants wanted to transfer the Kapolei property to
Meghan. That supports the inference that evading or avoiding withdrawal liability was
more likely than not a principal purpose of the transfer itself.
64. 	Defendants have not offered any compelling alternative explanation for
the timing of the transfer. They submit that the “timing of the transfer, while occurring
after the Pension Fund began investigating withdrawal liability, was primarily driven
by the family’s ongoing financial struggles rather than an attempt to evade liability.”
Dkt. No. 182, at PageID.5063. And the court agrees that the “evidence shows that the
Mung Lim family had been dealing with financial hardship for years before the
transfer.” Id. But this argument ultimately begs the question it is intended to answer.
If the transfer was motivated by “ongoing financial struggles” that the family had been
dealing with “for years,” id., why did they choose the moment that the Pension Fund
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notified Margaret about withdrawal liability to start maneuvering to transfer the
Kapolei property?
65. 	The evidence at trial did not suggest any answer that would weigh against
the Board’s claim. It is beyond question that Defendants were devastated by the
embezzlement at SMAC. But that took place in 2012, and the financial hardship that it
created had existed for years by the time of the property transfer in 2021. There was no
evidence that other extraordinary financial circumstances were present at or near the
time of the transfer; although Margaret originally testified that the mortgage on the
Kapolei property was in arrears for several months immediately preceding the transfer,
she amended her testimony to acknowledge that she had been current on the mortgage
through 2021. And although the court credits the testimony that the mortgage only
remained in good standing because Meghan was helping with the payments, it is
undisputed that Meghan was assisting with the mortgage well before the transfer
occurred. That still does not explain, then, what happened in 2021 to spur Defendants
to transfer the Kapolei property to Meghan.
66. 	The only other explanation offered by Defendants is that the property
transfer was intended to provide Meghan and her daughter with a place to live. But
Margaret testified that she had always intended to keep the property in the family, so
that does not explain why the transfer ultimately occurred in 2021 specifically. The
townhouse had been vacant for roughly a year after the final tenant moved out in 2020,
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and the property was in an “uninhabitable” condition. It therefore was not as if the
property was suddenly available or move-in ready at the time of the transfer. Nor does
the evidence suggest that a major life event caused a change in circumstances in 2021
necessitating a separate place for Meghan to live; Meghan’s daughter was five or six
years old at the time, and Meghan had been living with her at Melvin and Margaret’s
house since at least 2019.
67. 	Defendants nonetheless contend that the transfer “was motivated by
legitimate financial concerns and was consistent with the family’s ongoing efforts to
address their financial difficulties.” Dkt. No. 182, at PageID.5063. The court accepts this
contention, and furthermore acknowledges that Margaret’s entirely reasonable desire to
keep the property within the family and to provide a place for her daughter and
granddaughter to live provided another reason for the transfer. But the inquiry is not
whether evasion or avoidance was the only reason for a transaction; it is whether
evasion or avoidance was “a principal purpose” for the transaction. The timing of the
property transfer strongly suggests that evading or avoiding withdrawal liability was
indeed a principal purpose. The existence of other legitimate purposes, whether major
or minor, does not preclude or otherwise neutralize the conclusion that evasion or
avoidance was also a principal purpose. Cf. Cent. States, Se. & Sw. Areas Pension Fund v.
Bergquist, No. 17 C 2054, 2019 WL 1787525, at *2 (N.D. Ill. Apr. 24, 2019) (concluding
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that § 1392(c) applied where a transfer was motivated by a combination of filial piety,
financial hardship, and a desire to avoid withdrawal liability).
68. 	In Defendants’ view, the timing of the transaction cuts the other way.
They observe that the property transfer occurred “nearly a year before the official notice
of withdrawal liability in July 2022.” Dkt. No. 182, at PageID.5062. And they conclude
that this “temporal gap” between the transfer and notice “undermines any inference of
evasive purpose, as one cannot evade a liability that has not yet been formally
asserted.” Id. This conclusion is incorrect. As with all aspects of the analysis under
§ 1392(c), the touchstone is whether the evidence establishes that evading or avoiding
withdrawal liability was a principal purpose of the transaction. The question, then, is
whether the timing suggests that withdrawal liability was a principal consideration
behind the property transfer. It is not necessary for withdrawal liability to have been
formally imposed at the time of the transaction. And while a transaction that took place
immediately after a formal notice of withdrawal liability would undoubtedly suggest
that such liability was a major consideration behind the transfer, it is by no means the
only way in which an evasive action may be proven under § 1392(c).
69. 	Courts reject the notion that a transaction which predates a demand for
withdrawal liability cannot have evasion or avoidance as a principal purpose. For
example, in Lee Lumber, the court considered a transfer that had undisputedly “occurred
before the Pension Fund issued its notice and demand for withdrawal liability.” 2021
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WL 949343, at *8. The defendant argued that the timing “undermine[d] Plaintiffs’
argument that the principal purposes of the transfer was to evade or avoid liability.” Id.
The court disagreed, observing that “[a]lthough Plaintiffs had not yet sent [defendant] a
notice and demand for withdrawal [] liability at the time of the transfer of the Property,
[defendant] had actively engaged in the process to determine its withdrawal liability,”
including by “exchang[ing] written statements of business affairs” with the Pension
Fund, in the several months before the transfer. Id. As a result, the court found it was
reasonable to “infer that [defendant] knew such a notice and demand was
forthcoming.” Id.
70. 	Those circumstances are present here. The Kapolei property transfer took
place several months before Defendants were served with a formal notice of withdrawal
liability. But in the months leading up to the property transfer, Margaret provided
written statements of business affairs in response to the Pension Fund’s requests and
corresponded at some length with Pension Fund representatives about withdrawal
liability. This activity amounted to active engagement in the process to determine
SMAC’s withdrawal liability. As in Lee Lumber, these details suggest that—although no
formal demand had yet been made—Margaret knew at the time of the transfer that a
notice and demand was likely forthcoming. Accordingly, the court concludes that the
timing of the transaction supports the inference that a principal purpose of the Kapolei
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property transfer was to evade or avoid withdrawal liability. This factor therefore
favors the Board.
71. 	The size of the transaction does not clearly support a finding in either
direction. Although such evidence is hardly dispositive, some courts have considered it
useful to “assess[] the size of the withdrawal liability relative to the size of the allegedly
fraudulent transaction.” Carpenters, 2014 WL 2601648, at *2. When a transaction dwarfs
the potential withdrawal liability at issue, courts are more likely to find that evading or
avoiding that liability was “likely only a minor consideration.” Id.; Empire Beef, 2014
WL 2601648, at *3.
72. 	It is not clear what the Kapolei property was valued at in 2021, but it
seems fair to say that its worth was likely in the hundreds of thousands given its
appraised value of $235,000 a dozen years prior. SMAC’s withdrawal liability was
ultimately assessed at over $600,000. Ultimately, the size of the transaction was likely
roughly on par with the size of the withdrawal liability.
73. 	Although the relative values of Kapolei property and withdrawal were
probably similar, little can be inferred from that observation. Defendants did not know
the actual degree of their exposure until months after the transfer, when they received
the notice and demand for withdrawal liability from the Pension Fund. A person does
not need to know the precise amount of withdrawal liability they are facing in order to
take action to avoid it. But when, as here, they did not actually know how much their
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withdrawal liability would be, one cannot draw conclusions about what the value of the
transfer says about Defendants intent to evade or avoid withdrawal liability. And
while it might be fair to assume that Defendants could have predicted that withdrawal
liability, if incurred, might be substantial (in light of their prior six-figure stipulated
judgment with the Board), the court declines to draw that inference here. Instead, the
court limits its conclusion to observing that the transaction and withdrawal liability
were not so disproportionate in size as to suggest anything about whether evasion or
avoidance was a principal purpose. This factor favors neither party, and the court
assigns minimal weight to it.
74. 	The final factor looks to the transacting parties’ intent. Several courts have
concluded that § 1392(c) contains “an intent or knowledge requirement,” such that “in
order to be found liable under this section, an employer must have been aware of its
withdrawal liability and must have entered into a transaction, a principal purpose of
which was to evade or avoid the liability.” M & M Installation, 2012 WL 669765, at *2;
see also Carpenters, 2014 WL 2601648, at *2. Put differently, § 1392 does not “apply to
situations where an employer engages in a transaction, the effect of which is to evade or
avoid withdrawal liability, unless the employer was aware of its liability and factored
that into its decision.” Id.; see also Empire Beef, 2011 WL 201492, at *3 & n.5. In some
ways, this factor is an agglomeration of all the other factors, since intent can be inferred
from the timing of the transaction, its size, and other like factors. But it may also be
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proven by direct evidence of knowledge or intent, revealing what the parties actually
had in mind when they entered into the challenged transaction.
75. 	Margaret was at least aware of withdrawal liability by the time the
Kapolei property transfer took place. On the one hand, Margaret testified that she did
not have actual knowledge of any withdrawal liability until she received the formal
notice in January 2022. And certain evidence could suggest that prior to that time,
Margaret may not have known with certainty that SMAC was likely to be assessed
withdrawal liability.4 But it cannot be said that Margaret was unaware of withdrawal
liability at the time the family was mulling the transfer. As the court explained in its
summary judgment order, it is not necessary for a person to have actual knowledge in
order for them to be treated as if they did: if “a reasonable person in Margaret's
position would have been aware of the fact of withdrawal liability,” that is enough to
conclude that Margaret had “constructive knowledge.” Bd. of Trs. of the PAMCAH-UA
Loc. 675 Pension Fund v. SMAC Hawaii, Inc., Civ. No. 23-00076, 2025 WL 2021750, at *13
(D. Haw. July 18, 2025). Here, a reasonable person who had been emailing with the
Pension Fund about withdrawal liability and responding to its withdrawal liability-
4 	In fact, the Pension Fund’s equivocal tone may have at times fairly suggested to
Margaret that SMAC could possibly escape withdrawal liability altogether by
cooperating with the Fund. See, e.g., Ex. 58 (“We want to be sure SMAC is not obligated
to pay withdrawal liability and there is a chance this liability is not applicable to your
company.” (emphasis added)).
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related information requests for months would have been aware, at a minimum, that
withdrawal liability might be looming—even if they were not actually certain of that fact.
76. 	While mere awareness, without more, is “not equivalent to evasive
intent,” Lopresti, 868 F. Supp. 2d at 202 (quoting Empire Beef, 2011 WL 201492, at *5),
there is substantial additional evidence of intent here. As discussed earlier, the timing
of the transaction, lack of consideration, and relationship between the parties all suggest
that a principal purpose of the Kapolei property transfer was to evade or avoid
withdrawal liability. And there is another independent reason to conclude that the
transfer was actually motivated by a desire to evade withdrawal liability. Several years
before the property transfer, Melvin and Margaret had been (in their telling) strong-
armed by the Board into signing personal guaranties for SMAC’s delinquent
contributions to the Pension Fund. Margaret credibly testified about her vivid memory
of a Trustee slamming the table and demanding that she sign a personal guaranty so
that she would have “skin in the game.” It would have been only natural for Margaret
to worry, in light of this experience, that the Board might once again press her to put
personal assets on the line in order to satisfy the new financial obligation of withdrawal
liability.
77. 	Courts in analogous circumstances have found a principal purpose to
evade or avoid in transactions undertaken in response to a concern that personal assets
might be vulnerable due to withdrawal liability. See Carpenters, 2014 WL 2601648, at *4.
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In Carpenters, the defendant had entered into a transaction to protect his personal assets
after the plaintiff fund had obtained a judgment against the defendant’s company for
withdrawal liability. At the time of the transaction, “more steps” would have been
required to reach the defendant personally, and the court accepted that the defendant
“was not certain that the Pension fund could reach his personal assets.” Id.
Nonetheless, the court concluded that the defendant “had to be aware of the risk to his
personal assets” due to the circumstances surrounding the transaction. Id.
78. 	The same is true here. While Margaret likely did not know for certain
whether the Board could reach her personal assets, and although she might have
understood that more steps (for example, the execution of a new personal guaranty)
would be required before it could do so, she must have been aware that her personal
assets could ultimately be at stake if withdrawal liability was ultimately assessed
against SMAC. That provides a strong motive for the Kapolei property transfer.
79. 	Whether Meghan intended to evade or avoid withdrawal liability as the
transferee in the property transfer is also relevant. It is beyond question that she did
not. Meghan offered undisputed and credible testimony at trial that she first became
aware that she might be subject to withdrawal liability was when she was served with
the complaint in this action in 2023. And there is zero evidence that Meghan had any
idea at the time of the transfer that SMAC, R&M, or herself or her parents might be on
the hook for any sort of obligation to the Pension Fund. Nor is there any reason why
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she would have had any such notion. As discussed above, Meghan was only minimally
involved in R&M’s operations. Her role was not the sort that would create the
expectation that she would be aware of withdrawal liability or party to discussions or
decisions that might implicate it. Moreover, she never received any notice or
information from the Pension Fund warning her that she might be subject to
withdrawal liability. See Trial Tr. Day 4, 20:14-21:19.
80. 	The fact that Meghan was unaware of any potential withdrawal liability
until years after the transfer clearly establishes that she could not have intended to
evade or avoid that withdrawal liability. Moreover, the court credits Meghan’s
testimony that she intended to restore the property as place for her to live with her
daughter. Although she has not lived in the Kapolei property to date, she credibly
testified that she had retained the services of an architect and invested over $50,000 in
renovations since obtaining the property. Trial Tr. Day 4, 10:4-13:2. Contrary to what
the Board suggests, the fact that renovations have not been completed and Meghan has
not lived in the property does not remotely undermine her testimony, especially given
that the Kapolei property has been the subject of yearslong litigation which threatens to
divest her of her property interest in it. The court therefore finds that Meghan did not
intend to evade or avoid withdrawal liability when she accepted the transfer of the
Kapolei property.
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81. 	Even so, the court cannot accept the leap in Defendants’ argument that
Meghan’s lack of intent renders the transfer legitimate. They contend that “Meghan’s
substantial investment in renovating the property (approximately $50,000 to $60,000)
demonstrates a legitimate purpose for the transfer.” Dkt. No. 181, at PageID.5052. As
discussed above, that evidence strongly suggests that Meghan’s intentions were pure.
The same can be said for Meghan’s testimony that “she intended to live in the property
with her daughter once renovations were completed,” which Defendants assert “further
supports a legitimate purpose for the transfer.” Id. But this evidence speaks only to
Meghan’s intent; it does not establish that the transfer itself was legitimate.
82. 	In situations where only the transferor, but not the transferee, intended to
evade or avoid withdrawal liability, § 1392(c) still applies. See Vick, 1992 WL 200853, at
*3 (“To allow [a transferee] to claim ignorance of the law so as to permit [a transferor] to
convey his property interests would . . . thwart the policy of the MPPAA.”). And while
the consequence of applying § 1392(c)—depriving a blameless party of property they
obtained in good faith and invested substantial time, money, and effort into—strikes the
court as draconian, the court concludes that it is the result intended by Congress.
83. 	“Section 1392 is essentially punitive.” Resilient Floor Covering Pension Tr.
Fund Bd. of Trs. v. Michael’s Floor Covering, Inc., 801 F.3d 1079, 1094 (9th Cir. 2015). It
must be applied against “’any’ purposely evasive or devious transaction, regardless of
the potential impact.” Id. And as a remedial statute, it must also be “liberally construed
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in favor of protecting the participants in employee benefit plans.” Einhorn v. M.L.
Ruberton Constr. Co., 632 F.3d 89, 98 (3d Cir. 2011) (cleaned up). It therefore must be
applied broadly to punish and deter evasive transactions. That is so even when, as
here, the result is to deliver a potentially unfair windfall for the Board (which will now
be able to collect from an improved and more valuable property, thanks to Meghan’s
pointless improvements to it) and to punish a well-intentioned transferee.
84. 	The intent factor therefore favors the Board, albeit less strongly than it
otherwise would have if Meghan had been shown to share an intent to evade or avoid
withdrawal liability.
85. 	On balance, these factors favor the Board. And while the evidence that the
property transfer had evasion or avoidance as a principal purpose is hardly
overwhelming, it is the only conclusion that the court can draw from the facts before it.
The timing of the transfer strongly supports the conclusion that it was more likely than
not the result of an evasive purpose, and Defendants have offered no compelling facts
from which an alternative purpose can be perceived. Similarly, the evidence that
Melvin and Margaret were concerned that their personal assets could be at risk due to
withdrawal liability and wanted to shield the Kapolei property is not ironclad. But
there is sufficient evidence for the court to conclude that evasion or avoidance was a
principal purpose of the transfer. And while the court accepts that Melvin and
Margaret had other legitimate purposes for the transfer—namely, attempting to lessen
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the financial hardship they were enduring, and to provide a future home for their
daughter and grandchild—the court concludes, on these facts, that minimizing their
potential withdrawal liability was not a mere minor consideration.
86. 	A transaction designed to shield personal assets from judgment prevents
the Board from obtaining the withdrawal liability owed and “creates precisely the
problem the MPPAA was designed to solve: a pension fund being unable to pay
benefits because of an employer’s withdrawal.” Carpenters, 2014 WL 2601648, at *4.
Because a principal purpose of the Kapolei property transfer was to evade or avoid
withdrawal liability, respecting that transaction would frustrate the purposes of the
MPPAA. Id.
87. 	In light of the foregoing, the court finds that both elements of Cuyamaca
Meats have been met. The Kapolei property transfer was not a bona fide, arms-length
transaction, and respecting the transfer would frustrate the purposes of the MPPAA.
Put differently, the court finds that a principal purpose of the Kapolei property transfer
was to evade or avoid withdrawal liability. The transaction therefore must be aside.
CONCLUSION
Following the conclusion of the bench trial in this matter, and in light of the
foregoing Findings of Fact and Conclusions of Law, the court declines to pierce R&M’s
corporate veil, but concludes that a principal purpose of the Kapolei Property transfer
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was to evade or avoid withdrawal liability. Accordingly, it is HEREBY ORDERED that
judgment shall be entered immediately as follows:
1. 	As to the Board’s request to pierce R&M’s corporate veil (Count V of the First
Amended Complaint), judgment shall be entered immediately in favor of
Defendant; and
2. 	As to the Board’s claim that the Kapolei Property transfer was a transaction to
evade or avoid withdrawal liability under 29 U.S.C. § 1392(c) (Count VII of
the First Amended Complaint), judgment shall be entered immediately in
favor of Plaintiff.
IT IS SO ORDERED.
DATED: February 25, 2026, at Honolulu, Hawai‘i.
Civil No. 23-00076 MWJS-KJM; Board of Trustees of the PAMCAH-UA Local 675 Pension
Fund v. SMAC Hawaii, Inc., et al.; POST-TRIAL FINDINGS OF FACT AND
CONCLUSIONS OF LAW
/s/ Micah W.J. Smith
Micah W.J. Smith
United States District Judge
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