                            STATE OF WEST VIRGINIA

                          SUPREME COURT OF APPEALS


Home Solution Pros, LLC,
Petitioner Below, Petitioner                                                      FILED
                                                                                April 8, 2016
vs) No. 15-0391 (Kanawha County 14-AA-2)                                       RORY L. PERRY II, CLERK
                                                                             SUPREME COURT OF APPEALS
                                                                                 OF WEST VIRGINIA
Russell Fry, Acting Executive Director,

Workforce West Virginia, Unemployment Compensation Division,

Respondent Below, Respondent



                               MEMORANDUM DECISION
       Petitioner Home Solutions Pros, LLC, by counsel William B. Summers, appeals the Final
Order of the Circuit Court of Kanawha County, entered on March 30, 2015, that affirmed the
determination that petitioner was a “successor employer” as defined by West Virginia Code §
21A-1A-26, and was also in violation of the State Unemployment Tax Act (“SUTA”) Dumping
Provision, found in West Virginia Code § 21A-5-10c. Respondent Russell Fry, Acting Executive
Director, Workforce West Virginia, Unemployment Compensation Division, by counsel Mary
Blaine McLaughlin, filed a response.

        This Court has considered the parties’ briefs and the record on appeal. The facts and legal
arguments are adequately presented, and the decisional process would not be significantly aided
by oral argument. Upon consideration of the standard of review, the briefs, and the record
presented, the Court finds no substantial question of law and no prejudicial error. For these
reasons, a memorandum decision affirming the circuit court’s order is appropriate under Rule 21
of the Rules of Appellate Procedure.

                                      Factual Background

       Home Solutions, LLC (“Home Solutions”) was a residential home building company,
which began operations on April 1, 2004, for the purpose of constructing residential homes.
Home Solutions changed its name to Quality Home Solutions, LLC (“Quality Homes Solutions”)
on January 30, 2008. Ann E. Skiles and Anthony S. Easter were members of Home Solutions,
and later renamed Quality Home Solutions. Ann E. Skiles was the managing member of both
companies. The companies’ addresses were the home addresses of Ann E. Skiles.

       On January 1, 2010, Quality Home Solutions was given notice that its contribution rate
was 7.5 percent because the company’s reserve balance was a debit balance equaling ten percent
or more of its annual taxable payroll. A surtax of one percent applied to all employers with a
debit new reserve balance, resulting in a reporting rate of 8.5 percent. Therefore, Quality Home
Solutions’ contribution rate for the year 2010 was 8.5 percent. The employees of Quality Home


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Solutions for the fourth quarter of 2009 were L. Banfield, M. Bennett, K. Bunnell, J. Cantwell,
D. Becker, L. Kreaps, and P. Mitchell.

        Quality Home Solutions was terminated by the West Virginia Secretary of State’s Office
on February 9, 2010. Petitioner Home Solutions Pros, LLC’s (“petitioner”) effective date of
business was January 21, 2010, with a business legal purpose as construction of residential
buildings. Petitioner had zero employees, and therefore, no wages for the first quarter of 2010.
Petitioner’s employees for the second quarter of 2010 were L. Banfield, M. Bennett, J. Cantwell,
and P. Mitchell -- four of the five employees that worked for Quality Home Solutions in the last
quarter of 2009. In the third quarter of 2010, petitioner added one employee, J. Sabo. In the last
quarter of 2010, petitioner’s employees were the same as the third quarter, except for the deletion
of J. Cantwell.

        Petitioner’s members are Ann E. Skiles, Anthony Easter, and William Skiles, with Ann
E. Skiles serving as managing member. Also, petitioner’s primary business address is Ann E.
Skiles’s home address, one of the same addresses that served as the address for Quality Home
Solutions. On April 28, 2012, respondent notified the petitioner that it had determined that
petitioner had acquired the entire organization, trade, or business, or substantially all of the assets
of Quality Home Solutions as of January 1, 2010, per common ownership. Respondent
concluded that petitioner had, therefore, acquired a tax liability of $1,884.14 plus interest, and
had acquired a contribution rate of 8.5 percent for the years of 2010, 2011, and 2012. Petitioner
requested reconsideration of respondent’s successorship determination and the amounts owed by
petitioner. In March 2013 respondent found petitioner liable for SUTA “dumping,” as described
in West Virginia Code § 21A-5-10c.

       The matter proceeded to an evidentiary hearing on May 24, 2013, before an
administrative law judge (“ALJ”). The ALJ found that petitioner and Quality Home Solutions
have the same managing member, the same address, and the same members. Additionally, the
ALJ found that petitioner’s employees for its first quarter of operation all came from Quality
Home Solutions. Consequently, the ALJ concluded that respondent met its burden of proving
that petitioner was a successor to Quality Home Solutions and liable for SUTA dumping
according to the applicable statutes.1 Respondent adopted the ALJ’s recommended decision.

       Petitioner appealed respondent’s decision to the circuit court. By order entered March 30,
2015, the circuit court affirmed respondent’s decision in all respects. This appeal followed.

                                             Discussion

       On appeal, petitioner argues that the circuit court erred by failing to reverse respondent’s
determination that it is a “successor employer” of Quality Home Solutions and that it is liable for



       1
        In 2004, Congress passed the State Unemployment Tax Act Dumping Prevention Act,
42 U.S.C. § 503(k), mandating that states amend their unemployment compensation laws to
prevent the practice of an employer shifting employees from an entity with a higher tax rate to
one with a lower rate to decrease its unemployment tax burden, a practice known as “dumping.”
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SUTA dumping. The standard of review for an administrative appeal is set forth in West Virginia
Code § 29A-5-4(g), which provides as follows:

       (g) The court may affirm the order or decision of the agency or remand the case
       for further proceedings. It shall reverse, vacate or modify the order or decision of
       the agency if the substantial rights of the petitioner or petitioners have been
       prejudiced because the administrative findings, inferences, conclusions, decision
       or order are:

       (1) In violation of constitutional or statutory provisions; or
       (2) In excess of the statutory authority or jurisdiction of the agency; or
       (3) Made upon unlawful procedures; or
       (4) Affected by other error of law; or
       (5) Clearly wrong in view of the reliable, probative and substantial evidence on
       the whole record; or
       (6) Arbitrary or capricious or characterized by abuse of discretion or clearly
       unwarranted exercise of discretion.

Furthermore, this Court has stated that

       [o]n appeal of an administrative order from a circuit court, this Court is bound by
       the statutory standards contained in [West Virginia] Code § 29A-5-4(a) and
       reviews questions of law presented de novo; findings of fact by the administrative
       officer are accorded deference unless the reviewing court believes the findings to
       be clearly wrong.

Syl. Pt. 1, Muscatell v. Cline, 196 W.Va. 588, 474 S.E.2d 518 (1996).

       An “employer” under the SUTA is defined, in relevant part, as

       (1) [a]ny employing unit which is or becomes a liable employer under any federal
       unemployment tax act; [or] (2) [a]ny employing unit which has acquired or
       acquires the organization, trade or business, or substantially all the assets thereof,
       of an employing unit which at the time of such acquisition was an employer
       subject to this chapter[.]

W.Va. Code § 21A-1A-15. A “successor employer” means “an employer that acquires, by sale or
otherwise, the entire organization, trade or business, or substantially all the assets thereof of
another employer.” W.Va. Code § 21A-1A-26.

       West Virginia Code § 21A-5-10b, governs the transfer of business and provides, in
relevant part, that

       [i]f a subject employer transfers his or her entire organization, trade or business,
       or substantially all the assets thereof, to another employer, the commissioner shall
       combine the contribution records and the benefit experience records of the

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       transferring and acquiring employers. The acquiring employer's contribution rate
       for the remainder of the calendar year shall not be affected by the transfer but
       such rate shall apply to the whole of his or her business, including the portion
       acquired by the transfer, through the following thirty-first day of December. If a
       subject employer makes such transfer to an employing unit which is not an
       employer on the date of the transfer, such subject employer's rate continues as the
       rate of the acquiring employing unit until the next effective rate date.

The SUTA Dumping Provision is set forth in West Virginia Code § 21A-5-10c, and provides, in
relevant part, as follows:

       Notwithstanding any other provision of law to the contrary, the following shall
       apply regarding assignment of rates and transfers of experience:

       (a)(1) If an employer transfers its trade or business, or a portion thereof, to
       another employer and, at the time of the transfer, there is substantially common
       ownership, management or control of the two employers, then the unemployment
       experience attributable to the transferred trade or business shall be transferred to
       the employer to whom such business is so transferred. The rates of both
       employers shall be recalculated and made effective immediately upon the date of
       the transfer of trade or business. The transfer of some or all of an employer's
       workforce to another employer shall be considered a transfer of trade or business
       when, as a result of such transfer, the transferring employer no longer performs
       the trade or business with respect to the transferred workforce, and such trade or
       business is performed by the employer to whom the workforce is transferred.

       (2) If, following a transfer of experience under paragraph (1) of this section, the
       commissioner determines that a substantial purpose of the transfer of trade or
       business was to obtain a reduced liability for contributions, then the experience
       rating accounts of the employers involved shall be combined into a single account
       and a single rate assigned to such account.

       (b) . . . In determining whether the business was acquired solely or primarily for
       the purpose of obtaining a lower rate of contributions, the Commissioner or his or
       her representative shall use objective factors which may include the cost of
       acquiring the business, whether the person continued the business enterprise of
       the acquired business, how long such business enterprise was continued, or
       whether a substantial number of new employees were hired for performance of
       duties unrelated to the business activity conducted prior to acquisition.

       (c)(1) If a person knowingly violates or attempts to violate subsection (a) or (b) of
       this section or any other provision of this chapter related to determining the
       assignment of a contribution rate, or if a person knowingly advises another person
       in a way that results in a violation of such provision, the person shall be subject to
       the following penalties:



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       (A) If the person is an employer, then such employer shall be assigned the highest
       rate assignable under this chapter for the rate year during which such violation or
       attempted violation occurred and the three rate years immediately following this
       rate year.

               ....

       (2) For purposes of this section, the term “knowingly” means having actual
       knowledge of or acting with deliberate ignorance or reckless disregard for the
       prohibition involved.

       (3) For purposes of this section, the term “violates or attempts to violate”
       includes, but is not limited to, intent to evade, misrepresentation or willful
       nondisclosure.

               ....

       (e) For purposes of this section:

               ....

       (2) “Trade or business” shall include the employer's workforce.

        Both parties state that Ann and William Skiles, as owners of Quality Home Solutions,
LLC, filed for bankruptcy and requested termination of Quality Home Solutions by the Secretary
of State’s Office prior to February of 2010. Petitioner contends that, while the companies are
similar, they are not the same. Petitioner states that Quality Home Solutions built homes from the
ground up and was negatively impacted by the housing crisis in 2008, resulting in bankruptcy.
Petitioner states that, unlike Quality Home Solutions, it is a renovation company that performs
installation work primarily through Lowes Home Improvement Stores. Additionally, petitioner
states that it provided testimony that its payroll is approximately $60,000, while Quality Home
Solutions was approximately $300,000. In a nutshell, petitioner argues that Quality Home
Solutions was dissolved as a result of its owners’ bankruptcy; it took some of Quality Home
Solutions’ former employees and started a new company doing similar, but not the same, type of
work; and there was never a sale, acquisition, or transfer of businesses as respondent described
because the first company ceased to exist and a new company was started.

        Upon our review of the record and the applicable statutes, we find no error in the circuit
court’s affirmation of respondent’s decision.2 In addition, in Davis v. Celotex Corp., 187 W.Va.

       2
         We note that respondent initially argues that this Court should hold that petitioner
waived its assignment of error because, when it filed its appeal to circuit court, petitioner did not
explicitly raise assignments of error as required by the West Virginia Rules of Administrative
Appeals. We have reviewed petitioner’s administrative appeal to circuit court and believe it
raised the issues that petitioner raises in its appeal to this Court. Accordingly, we reject
respondent’s argument in this regard.
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566, 420 S.E.2d 557 (1992), this Court discussed the potential liability of a corporation that
purchases the assets or a portion of the assets of a prior existing corporation. In syllabus point
two of that case, we concluded that “[a]t common law, the purchaser of all the assets of a
corporation was not liable for the debts or liabilities of the corporation purchased. This rule has
since been tempered by a number of exceptions and statutory provisions.” Id. One of the
recognized exceptions is “where the successor corporation is a mere continuation or
reincarnation of its predecessor.” Id., at Syl. Pt. 3, in part.

        The facts in this case are not in dispute. There is common management between Quality
Home Solutions and petitioner with Ann E. Skiles serving as managing member of both
companies, and Anthony Easter being a member of both companies. All of Quality Home
Solutions’ members became petitioner’s members. Petitioner took its initial employees from
Quality Home Solutions. Both companies were operated out of the residence of managing
member, Ann E. Skiles. Both companies have the same stated business purpose, that is,
residential building. Additionally, as respondent states, petitioner’s members knew that its 2010
contribution rate was 8.5 percent prior to applying to the West Virginia Secretary of State’s
Office for dissolution of Quality Home Solutions. Based on the record, we agree with respondent
that petitioner was established to avoid the 8.5 percent tax rate in favor of the rate for a new
employer, which was 2.7 percent.

        Accordingly, the circuit court did not err in concluding that petitioner is a “successor
employer” because petitioner “acquire[d], by sale or otherwise, the entire organization, trade or
business, or substantially all the assets thereof of another employer[,]” Quality Home Solutions,
LLC. See W.Va. Code § 21A-1A-26. Additionally, given the common ownership between
petitioner and Quality Home Solutions, LLC and the evidence indicating that petitioner’s
members knowingly established it “solely or primarily for the purpose of obtaining a lower rate
of contributions,” the court did not err in finding petitioner liable for SUTA dumping, in
violation of West Virginia Code § 21A-5-10c.

       For the foregoing reasons, we affirm the March 30, 2015, Final Order of the Circuit
Court of Kanawha County.

                                                                                        Affirmed.

ISSUED: April 8, 2016

CONCURRED IN BY:

Chief Justice Menis E. Ketchum
Justice Robin Jean Davis
Justice Brent D. Benjamin
Justice Margaret L. Workman
Justice Allen H. Loughry II




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