85 F.3d 1374 (8th Cir. 1996), 95-2965, Berger Transfer & Storage v. Central States, Southeast and Southwest Areas Pension Fund

Docket Nº95-2965.
Citation85 F.3d 1374
Party NameBERGER TRANSFER & STORAGE, Plaintiff-Appellee, v. CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND; Central States, Southeast and Southwest Areas Health and Welfare Fund; Marion Winstead, Trustee of said Funds; Robert Sansone, Trustee of said Funds; R. Jerry Cook, Trustee of said Funds; Harold D. Leu, Trustee of said Funds; Howard McDouga
Case DateJune 18, 1996
CourtUnited States Courts of Appeals, Court of Appeals for the Eighth Circuit

Page 1374

85 F.3d 1374 (8th Cir. 1996)

BERGER TRANSFER & STORAGE, Plaintiff-Appellee,

v.

CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND;

Central States, Southeast and Southwest Areas Health and

Welfare Fund; Marion Winstead, Trustee of said Funds;

Robert Sansone, Trustee of said Funds; R. Jerry Cook,

Trustee of said Funds; Harold D. Leu, Trustee of said

Funds; Howard McDougall, Trustee of said Funds; Robert

Baker, Trustee of said Funds; R.V. Pulliam, Trustee of said

Funds; Arthur H. Bunte, Jr., Trustee of said Funds,

Defendants-Appellants.

No. 95-2965.

United States Court of Appeals, Eighth Circuit

June 18, 1996

Submitted March 14, 1996.

Page 1375

Thomas M. Weithers, Rosemont, IL, argued (Albert M. Madden, on the brief), for appellant.

Andrew R. Clark, Minneapolis, MN, argued (Carole Clark Isakson, on the brief), for appellee.

Before FAGG, JOHN R. GIBSON, and WOLLMAN, Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

The Central States, Southeast and Southwest Areas Pension and Health and Welfare Funds appeal the district court's 1 judgment in favor of Berger Transfer and Storage. The Funds appeal the court's decision that the owner-operators driving for Berger Transfer are independent contractors. The Funds argue that the district court erred in applying the common-law test for determining independent contractor status, and in holding that issue preclusion did not prevent it from deciding this issue. The Funds also

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appeal the district court's holding that the Minnesota six-year statute of limitations applied. We affirm.

Berger Transfer, a trucking company, enters into "Contractor Operating Agreements" with owner-operators engaged in its long distance hauling. After the owner-operator leases his tractor to Berger Transfer, the company then executes a sublease to Allied Van Lines.

The collective bargaining agreement in effect between May 1982 and September 1988 required Berger Transfer to make pension contributions for its employees, first to the Minneapolis Employees Benefit Association and then to the Central States, Southeast and Southwest Areas Pension and Health and Welfare Funds.

Following an audit, the Funds determined that Berger Transfer had not made payments into the Funds on behalf of all owner-operators. The Funds demanded payment on behalf of these individuals, asserting that they were all employees. Berger Transfer filed this action for declaratory judgment, asking the district court to declare the owner-operators to be independent contractors, to enjoin the Funds from collecting contributions for these individuals, and to apply the Minnesota statute of limitations in the event the owner-operators were found to be employees. The Funds counterclaimed, seeking to recover all contributions owed to it by Berger Transfer.

The district court granted partial summary judgment, holding that the six-year Minnesota statute of limitations applied. Following a bench trial, the court held that the owner-operators were independent contractors, and entered judgment in favor of Berger Transfer. The Funds appeal.

I.

The Funds argue that issue preclusion prevents the district court from deciding whether the Berger Transfer owner-operators were employees or independent contractors. The funds argue that an earlier Minnesota workers' compensation decision, which held that a Berger Transfer owner-operator was an employee, 2 prevents relitigation of this issue. See Hansford v. Berger Transfer, Findings and Order, OAH ID No. 080985, at 8 (Minn. Office of Admin. Hearings Workers Compensation Section May 2, 1991), aff'd as modified, 46 W.C.D. 303 (Minn. Workers' Comp. Ct.App.1991), aff'd, 482 N.W.2d 225 (Minn.1992).

The district court concluded that the factual issues in this case differed from those decided in the workers' compensation case. The court ruled that the Funds had failed to introduce any evidence showing that Berger Transfer treated all of its owner-operators in the same manner as the owner-operator in the workers' compensation case. The court noted that the Funds acknowledged that not all owner-operators were classified the same. Thus, the court concluded that, while the findings in Hansford might provide evidence in this case, they did not prevent Berger Transfer from litigating the question of whether all owner-operators, as a group, were employees or independent contractors.

The Funds ask us to reverse the district court's decision not to apply offensive nonmutual issue preclusion to prevent litigation of the employee-independent contractor question in this case. See Setter v. A.H. Robins Co., 748 F.2d 1328, 1330 (8th Cir.1984) (discussing the parameters of offensive nonmutual issue preclusion). 3 We reverse the district court's decision not to apply offensive nonmutual issue preclusion only for an abuse of discretion. Id.

Before [issue preclusion] will bar relitigation of a factual issue in a subsequent proceeding, the prior determination must satisfy a four-part test:

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(1) the issue sought to be precluded must be the same as that involved in the prior action;

(2) the issue must have been litigated in the prior action;

(3) the issue must have been determined by a valid and final judgment; and

(4) the determination must have been essential to the prior judgment.

The party asserting [issue preclusion] bears the burden of proving that a prior decision satisfies all four elements of the test. If the party against whom the earlier decision is being asserted did not have a full and fair opportunity to litigate the issue in question [issue preclusion] does not apply.

Farmland Indus. v. Morrison-Quirk Grain, 987 F.2d 1335, 1339 (8th Cir.1993) (internal citations omitted) (quoting Johnson v. Miera (In re Miera ), 926 F.2d 741, 743 (8th Cir.1991)).

Only when a party has had a full and fair opportunity to litigate an issue in the first proceeding do "the benefits of preclusion outweigh the countervailing due process concerns present whenever a party is estopped from raising a claim." Simmons v. O'Brien, 77 F.3d 1093, 1095-96 (8th Cir.1996). If application of offensive issue preclusion would be unfair to a defendant, a trial judge should not allow the use of offensive issue preclusion. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 331, 99 S.Ct. 645, 651-52, 58 L.Ed.2d 552 (1979). When the defendant has little incentive to defend vigorously in the first suit, later application of offensive nonmutual issue preclusion may be inappropriate. See id. at 330, 99 S.Ct. at 651.

As the district court stated, the Funds made no effort to show that the status of all Berger Transfer owner-operators was identical to that of the owner-operator in the workers' compensation case. Further, the workers' compensation case involved a single injured owner-operator in an entirely different legal setting. We are convinced that it would be unfair to extend the finding in the workers' compensation case to this ERISA case. See Parklane Hosiery Co., 439 U.S. at 331, 99 S.Ct. at 651-52; De La Fuente v. Stokely-Van Camp, Inc., 713 F.2d 225, 234 (7th Cir.1983) (refusing to apply offensive issue preclusion when the first case offered little incentive to contest the issue of whether the defendant was a farm labor contractor). The district court did not abuse its discretion in refusing to apply offensive nonmutual issue preclusion here.

II.

The parties disagree regarding the standard of review that we must apply to the ruling that the owner-operators are independent contractors. Berger argues that this is a question of fact to be reviewed under the clearly erroneous standard, relying on Sargent v. Commissioner, 929 F.2d 1252, 1254 (8th Cir.1991) (stating that in tax cases, employer-employee relationship is a mixed question of law and fact to be reviewed under the clearly erroneous standard). We believe that the context in which Sargent arises limits its applicability to this case.

In Short v. Central States, Southeast & Southwest Areas Pension Fund, 729 F.2d 567, 571 (8th Cir.1984), we stated that "[w]hether a given individual is an employee or independent contractor is a question of law, which must be decided by reviewing the particular facts of each case." We then looked to the common-law test for distinguishing employees from independent contractors, relying primarily on the enumeration of factors in the Restatement (Second) of Agency, § 220 (1957). Id. at 572. We balanced these factors to reach the ultimate legal conclusion as to whether the owner-operators were employees or independent contractors. No specific attack was made on the factors weighed to reach the ultimate conclusion in the case, so it was unnecessary to state whether the particular factual issues being weighed would, if attacked, be reviewed as questions of law or questions of fact.

It is evident that the district court's findings underlying each of the common-law factors are factual findings, while the ultimate conclusion as to whether an individual is an employee or an independent contractor

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is a question of law. The standard of review has been well expressed as follows:

The existence and degree of each factor is a question of fact while the legal conclusion to be drawn from those facts--whether workers are employees or independent contractors--is a question of law. Thus, a district court's findings as to the underlying factors must be accepted unless clearly erroneous, while review of the ultimate question of employment status is de novo.

Dole v. Snell, 875 F.2d 802, 805 (10th Cir.1989)...

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