CENT. STATES, SE & SW PENS. v. CENT. TRANSPORT, 91 C 6232.

• Decision Date: 25 August 1994
• Docket Number: No. 91 C 6232.,91 C 6232.
• Parties: CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, Central States, Southeast and Southwest Areas Health and Welfare Fund and Robert Baker, Trustee, Plaintiffs, v. CENTRAL TRANSPORT, INC., and Central Cartage Co., Defendants.
• Court: U.S. District Court — Northern District of Illinois

861 F. Supp. 1402

CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, Central States, Southeast and Southwest Areas Health and Welfare Fund and Robert Baker, Trustee, Plaintiffs, v. CENTRAL TRANSPORT, INC., and Central Cartage Co., Defendants.

No. 91 C 6232.

United States District Court, N.D. Illinois, Eastern Division.

August 25, 1994.

COPYRIGHT MATERIAL OMITTED

Francis Joseph Carey, Cent. States Law Dept., Rosemont, IL, for Robert J. Baker, trustee.

Grady B. Murdock, Jr., Earl L. Neal & Associates, Leonard R. Kofkin, Donald Joseph Vogel, Fagel & Haber, Chicago, IL, Patrick A. Moran, Evans & Luptak, Detroit, MI, for Cent. Transport Inc., Cent. Cartage Co.

MEMORANDUM OPINION AND ORDER

LEINENWEBER, District Judge.

BACKGROUND

Plaintiffs, Central States, Southeast and Southwest Areas Pension Fund ("Pension Fund"), Central States, Southeast and Southwest Areas Health and Welfare Fund ("Health & Welfare Fund"), and the trustee of both funds, Robert Baker, (hereinafter collectively the "funds"), have brought an action against defendants, Central Transport, Inc. ("Transport") and Central Cartage Co. ("Cartage"), to collect audit-revealed delinquent contributions from both defendants and to enforce a bankruptcy plan of reorganization and a guarantee against Transport. The funds claim that Transport and Cartage are liable for such delinquent contributions under section 515 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1145.

Plaintiffs are multi-employer funds and third-party beneficiaries to collective bargaining agreements negotiated between participating employers and local unions. The funds provide pension coverage and health benefits to employees covered by the collective bargaining agreements. Transport and Cartage are participating Michigan corporations. Both companies are parties to the National Master Freight Agreement ("NMFA") — the collective bargaining agreement between the local unions and the participating employers — and various addenda and contracts that supplement the NMFA.

The funds move the court to grant a motion for summary judgment on three of the four counts of their Second Amended Complaint ("complaint"). With regard to Count I, the funds have moved for summary judgment against both Transport and Cartage. In Count I, the funds seek to collect audit-revealed, delinquent contributions from both defendants. The funds move for summary judgment in Counts III and IV solely against Transport. From Transport only, the funds seek to recover a debt originally incurred by a company that underwent bankruptcy reorganization and subsequently merged with Transport. The funds seek to recover this amount on two alternative theories. In Count III, the funds seek to enforce Transport's guarantee of the delinquent contributions. In Count IV, the funds seek to collect the delinquent contributions directly from Transport as an "employer," as defined by ERISA, and as the principal debtor. Additionally, Transport moves the court for summary judgment against the funds in Counts III and IV. In an Order entered July 17, 1992, this court granted the funds' motion for summary judgment against both defendants on Count II. Count II, therefore, is not at issue in this motion for summary judgment.

I. Jurisdiction

The first question the court must consider is whether it has jurisdiction to hear this case. With respect to Count I ("audit-revealed delinquent contributions"), sought from each defendant pursuant to section 515 of ERISA, the court has jurisdiction over this matter as provided in section 502(e)(1) of ERISA (29 U.S.C. § 1132(e)(1)). In pertinent part, section 502(e)(1) provides that "the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter brought ... by a fiduciary." 29 U.S.C. § 1132(e)(1); Laborers Health & Welfare Trust Fund v. Advanced Lightweight Concrete Co., 484 U.S. 539, 547, 108 S.Ct. 830, 835, 98 L.Ed.2d 936 (1988) ("the liability created by Section 515 of ERISA may be enforced by the trustees of a plan by bringing an action in Federal District Court pursuant to Section 502 of ERISA").

The funds assert that jurisdiction under Counts III and IV is proper either under section 502(e)(1) of ERISA, under federal common law pursuant to 28 U.S.C. § 1331, or under the court's supplemental jurisdiction pursuant to 28 U.S.C. § 1367. Complaint at ¶ 26. Transport denies such jurisdiction exists. Answer to Second Amended Complaint ("answer") at ¶ 26.

The court also properly has original jurisdiction over the guarantee claim. See Laborers' Pension Fund v. Concrete Structures of the Midwest, Inc., 999 F.2d 1209, 1211 (7th Cir.1993). In Laborers' Pension Fund, a general contractor had agreed to guarantee the payments of its sub-contractor. When the sub-contractor fell behind in its contribution obligations, the pension fund secured a note from the sub-contractor's owner (not the general contractor). Id. After making several payments, the sub-contractor and its owner went bankrupt. Id. The general contractor was obligated by a previous guarantee agreement with the pension funds to make payments for the sub-contractor if the sub-contractor failed to make contributions. Id. The court held that the general contractor was liable for the guarantee under section 515 of ERISA. Id. Despite the fact that the payments sought from the general contractor were pursuant to a guarantee, the court, nevertheless, held that the pension fund had the right to collect "delinquent contributions" under section 515 of ERISA. Id. Because the guarantee claim sought to be enforced by the pension funds was for delinquent contributions, jurisdiction was proper under section 502(e) of ERISA. Id. Like the pension funds in Laborers' Pension Fund, in Count III plaintiffs also seek to enforce a guarantee of delinquent contribution payments. Accordingly, the court has jurisdiction under section 502(e) of ERISA. Id.

Finally, jurisdiction is also proper over Count IV of the complaint. In the employer contribution claim, the funds seek to recover delinquent contributions based on a successor liability theory. See complaint at ¶ 41. The Seventh Circuit Court of Appeals has tacitly approved jurisdiction in successor liability cases under section 502 of ERISA. See Upholsterers' Union Pension Fund v. Artistic Furniture, 920 F.2d 1323, 1328 (7th Cir.1990) (recognizing the statutory authority to recover delinquent contributions under ERISA in a successor liability action). Because jurisdiction lies for claims to recover delinquent contributions on a theory of successor liability, the court has jurisdiction over Count IV of the complaint. Id.

II. Summary Judgment Standard

Summary judgment is appropriate if no issue of material fact exists warranting a trial on the merits. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). No material issue of fact exists for trial if, in viewing the evidence in a light most favorable to the non-moving party, a reasonable jury could not return a verdict in the non-movant's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2514, 91 L.Ed.2d 202 (1986). The party moving for summary judgment bears the initial burden of supporting its motion that no genuine issue of material fact exists. Celotex, 477 U.S. at 322, 106 S.Ct. at 2553. If that burden is met, the non-moving party must come forward with specific facts to rebut that showing. The party resisting the motion "may not rest upon mere allegations or denials of his pleadings" to avoid summary judgment. Anderson, 477 U.S. at 255, 106 S.Ct. at 2514. The court will examine the funds' summary judgment motion in a light most favorable to defendants, and will examine Transport's summary judgment motion in a light most favorable to the funds.

III. The Funds' Motion for Summary Judgment Against Transport and Cartage for Audit-Revealed Delinquent Contributions (Count I)

As an initial matter, it should be noted that Transport has incorporated by reference the arguments included in Cartage's Memorandum in Opposition to Plaintiffs' Motion for Summary Judgment. Here, although a majority of the arguments in opposition to summary judgment on Count I are presented in Cartage's memorandum, since Transport incorporated those arguments by reference, the court will refer to them as "defendants'" arguments.¹

In Count I, the funds seek to recover audit-revealed delinquent contributions from both defendants. The amounts sought in the funds' motion for summary judgment against both Transport and Cartage can be divided into three categories. The funds seek to recover amounts owed for: 1) non-union casual employees; 2) regular employees for vacations, holidays, and sick days; and 3) employees whom defendants argue were "probationary." In an attempt to stave off summary judgment, defendants argue that: 1) the parties to the collective bargaining agreement did not intend contributions to be made for non-union casuals; 2) contributions are linked to productivity and, therefore, amounts are not owed for regular employees for vacations, holidays, and sick days; and 3) certain employees had extended their probation period and, thus, contributions were not owed for those employees. The court will address each of the funds' claims, and defendants' arguments in response to these claims, in turn.

A. Non-Union Casual Employees

The first issue presented in the funds' motion for summary judgment concerns contributions due from defendants for non-union casual employees. In its 1992 decision, the court ruled that the NMFA, on its face, requires contributions on "each casual employee" including non-union employees. Central States SE & SW Areas Pension Fund v. Central Transport, Inc., 1992 WL 175499 at *1, 1992 U.S.Dist. LEXIS 10768 at *2 (N.D.Ill.1992) (citing NMFA Art. 3, § 1(e)(2)). The Seventh Circuit Court of Appeals has also found that the NMFA...