565 F.3d 1018 (7th Cir. 2009), 08-3229, GCIU-Employer Retirement Fund v. Goldfarb Corp.
|Citation:||565 F.3d 1018|
|Party Name:||GCIU-EMPLOYER RETIREMENT FUND, Plaintiff-Appellant, v. The GOLDFARB CORPORATION, Defendant-Appellee.|
|Case Date:||May 11, 2009|
|Court:||United States Courts of Appeals, Court of Appeals for the Seventh Circuit|
Argued April 2, 2009.
[Copyrighted Material Omitted]
David S. Allen (argued), Stellato & Schwartz, Chicago, IL, for Plaintiff-Appellant.
Michael M. Conway (argued), Foley & Lardner, LLP, Chicago, IL, for Defendant-Appellee.
Before BAUER and FLAUM, Circuit Judges, and KAPALA, District Judge. [*]
KAPALA, District Judge.
On June 29, 2007, plaintiff, Graphic Communications International Union (GCIU) Employer Retirement Fund, filed a complaint against defendant, The Goldfarb Corporation, seeking to collect withdrawal liability payments under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. The district court granted defendant's motion to dismiss plaintiff's action for lack of personal jurisdiction. Plaintiff now appeals.
I. Background 1
Defendant is a Canadian company with its principal place of business in Canada. It does not maintain a place of business, employ individuals, serve customers, or have a designated agent for service inside the United States. In April 1995, defendant purchased 60% of the stock of Fleming Packaging Corporation (Fleming). Fleming was a Delaware corporation with its principal place of business in Peoria, Illinois. Defendant did not direct or control the daily affairs of Fleming. Defendant and Fleming maintained separate payrolls, bank accounts, and leases and filed separate tax returns.
Fleming, as a consequence of the collective bargaining agreements of its wholly-owned subsidiaries, was required to contribute to plaintiff, a multi-employer pension plan.2 In May 2003, Fleming filed for bankruptcy. Thereafter, Fleming's assets were sold. Plaintiff argues that when Fleming's assets, which included its subsidiaries, were sold, Fleming withdrew from the Fund, see 29 U.S.C. § 1383, and thereby incurred withdrawal liability, see id. § 1381. Plaintiff now seeks to collect from defendant for Fleming's withdrawal from the Fund.
Prior to Fleming's demise, defendant had considerable involvement with Fleming's
creditors. In 1997, Fleming entered a loan agreement with Bank One. In the years that followed, Fleming defaulted on the loan, and amended the loan agreement several times. As a result of Fleming's continuing financial difficulties, in 2001, defendant increased its ownership in Fleming to 82.2%.3In March 2001, three members of the Goldfarb family, Martin, Stanley, and Alonna, were elected as Fleming officers and also accounted for 3 of the 9 seats on its Board of Directors. At that time, Martin and Alonna were officers, directors, and shareholders of defendant. Although not an officer, Stanley was also a director and shareholder of defendant. In December 2001, defendant presented a restructuring plan to Fleming's lenders, but the lenders rejected the plan and declared Fleming in default in February 2002.
In March 2002, Fleming and Bank One amended the loan agreement to require Fleming to sell two of its businesses. On the same day, defendant and Bank One entered into a subsequent private agreement, containing a Michigan forum-selection clause, which provided that when Fleming sold these businesses, defendant would make a secured, subordinated loan to Fleming for $1.5 million.
In July 2002, the Goldfarbs met with Bank One representatives in Canada before a scheduled Fleming board meeting. At that meeting, defendant indicated that it would not fulfill its promise to infuse $1.5 million into Fleming upon the sale of its businesses. The Goldfarbs notified Bank One that they planned to use some of the profits from the sale of two divisions of Fleming to restructure Fleming and that they planned to consolidate Fleming's Peoria operations and close others. At the Fleming board meeting, Fleming learned of defendant's negotiations regarding the $1.5 million loan to Fleming. The other lenders at the meeting rejected the restructuring plan that Fleming had presented to Bank One earlier and insisted that Fleming hire an independent consultant. On August 15, 2002, Alonna Goldfarb traveled to Peoria, Illinois, on behalf of defendant. The nature of this trip is unknown.
In September 2002, Fleming sold part of its Peoria operations causing Bank One to demand the $1.5 million originally promised by defendant. Defendant sought to condition this loan on Bank One providing additional money for restructuring. After negotiations between defendant and Bank One, defendant loaned Fleming $765,000 of the $1.5 million. Defendant also agreed to advance an additional $1.5 million to Fleming if the lenders funded Fleming's operations until July 2003. However, between December 2002 and January 2003, the lenders rejected Fleming's proposals to continue operating, sought to have Fleming and its assets sold, gave notice of default, and retained bankruptcy lawyers.
In February 2003, the lenders, Fleming, some of Fleming's subsidiaries, and defendant negotiated and executed the Fifth Amendment to the Loan Agreement. In the agreement, the lenders agreed to delay exercising their default rights if defendant relinquished control of Fleming to George Gialenios, who was hired in 2002 to develop Fleming's restructuring plan. In exchange, defendant would receive 3.5% of Fleming's sale proceeds and the lenders
and Bank One agreed not to enforce defendant's remaining obligations as to the $1.5 million promised under defendant's March 2002 agreement. One of the purposes of the Fifth Amendment to the Loan Agreement was for the lenders to temporarily forebear from exercising their rights and thereby permit Fleming to develop, implement and complete a program for sale of Fleming's operations as a going concern. In early February 2003, the Goldfarbs resigned from Fleming's Board and defendant executed an irrevocable proxy permitting Gialenios to vote its shares.4
On April 7, 2003, Martin Goldfarb reported to defendant's Board of Directors that the banks had taken over Fleming and he had been informed by the investment banker that the original negotiated sale was not proceeding, but he was not otherwise informed of their progress. In May 2003, Fleming filed for bankruptcy. In July 2004, the bankruptcy trustee brought an adversary proceeding against defendant involving many of the same transactions and events alleged in this case.
According to Joanna Anderson, an asset manager for Bank One who was involved in the sale of Fleming, defendant initially did not intend to cooperate in any way in the bankruptcy, restructuring or liquidation of Fleming, but eventually agreed to give up control during the sale process. In her notes, Anderson remarked that the lenders' plan was " to set the path of how the sale will occur in the sales process before control is transferred." Anderson noted that no bankruptcy would occur until the lenders found a buyer. Thereafter, the plan was to file for...
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