Board of Trustees of Western Conference of Teamsters Pension Trust Fund v. H.F. Johnson, Inc.

• Citation: 830 F.2d 1009
• Decision Date: 16 October 1987
• Docket Number: No. 86-4394,86-4394
• Parties: , 8 Employee Benefits Ca 2593 BOARD OF TRUSTEES OF the WESTERN CONFERENCE OF TEAMSTERS PENSION TRUST FUND, Plaintiff-Appellant, v. H.F. JOHNSON, INC.; Midland Terminal Inc.; Lockwood Leasing Company; Rocky Mountain Feed Ingredients Services Inc.; First Trust Company of Montana, in its Capacity as Personal Representative of the Estate of Robert L. Mitchell for the Benefit of Sara Jayne Mitchell and Trevor Robert Newton Mitchell, and Richard L. Mitchell, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1009

830 F.2d 1009

56 USLW 2257, 8 Employee Benefits Ca 2593

BOARD OF TRUSTEES OF the WESTERN CONFERENCE OF TEAMSTERS PENSION TRUST FUND, Plaintiff-Appellant, v. H.F. JOHNSON, INC.; Midland Terminal Inc.; Lockwood Leasing Company; Rocky Mountain Feed Ingredients Services Inc.; First Trust Company of Montana, in its Capacity as Personal Representative of the Estate of Robert L. Mitchell for the Benefit of Sara Jayne Mitchell and Trevor Robert Newton Mitchell, and Richard L. Mitchell, Defendants-Appellees.

No. 86-4394.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Aug. 6, 1987.

Decided Oct. 16, 1987.

Bruce D. Corker and Christopher J. Biencourt, Perkins Coie, Seattle, Wash., for plaintiff-appellant Bd. of Trustees.

Scott A. Smith, Seattle, Wash., for defendant-appellee First Trust Co. of Montana.

Jon E. Doak, Billings, Mont., for defendant-appellee Richard Mitchell.

Jeanne K. Beck, Washington D.C., for amicus curiae Pension Benefit Guar. Corp.

Appeal from the United States District Court for the Western District of Washington.

Before CANBY, REINHARDT and BEEZER, Circuit Judges.

BEEZER, Circuit Judge:

The Board of Trustees of the Western Conference of Teamsters Pension Trust Fund (The Fund) appeals the district court's decision 1) that joint venturers may not be held personally liable for their business's withdrawal obligations under the Multiemployer Pension Plan Amendments to the Employee Retirement Income Security Act (ERISA), and 2) that the Montana non-claim statute governing actions against decedents' estates bars the Fund's action to collect withdrawal liability under ERISA from the estate of a deceased joint venturer. We reverse the judgment on both issues.

I Background

The Fund is a multiemployer pension fund, administered under ERISA, 29 U.S.C. Sec. 1001 et seq., for the benefit of employees represented by the Western Conference of Teamsters. Employers participating in the Fund must pay regular contributions based on wages earned and hours worked by employees.

The Fund in this case is a "defined benefit" fund. In such funds, benefits vested in employees typically exceed total contributions made by an employer on behalf of those employees. See Connolly v. Pension Benefit Guaranty Corp., 581 F.2d 729, 733 (9th Cir.1978), cert. denied, 440 U.S. 935, 99 S.Ct. 1278, 59 L.Ed.2d 492 (1979). In order to prevent employers from withdrawing from multiemployer funds before contributions are sufficient to cover vested benefits, Congress enacted the Multiemployer Pension Plan Amendments Act (MPPAA). MPPAA requires employers who cease to participate in multiemployer funds to pay "withdrawal liability" based on the difference between actual contributions and vested benefits of employees. Under ERISA 29 U.S.C. Sec. 1301(b)(1), all entities under common control of 5 or fewer persons are liable for a single entity's withdrawal liability. The control group is considered a single employer. Id.

Robert and Richard Mitchell were each 49.5% shareholders in H.F. Johnson, Inc. H.F. Johnson withdrew from the Fund in 1981. When H.F. Johnson failed to pay its withdrawal obligation, the Fund sued and obtained judgment against the corporation for the amount of the obligation. Board of Trustees Etc. v. H.F. Johnson, 606 F.Supp. 231 (W.D.Wash.1985). H.F. Johnson is not a party to this appeal.

While attempting to enforce the judgment, the Fund discovered that Robert and Richard Mitchell were also joint venturers with a 99% interest in Lockwood Leasing Company. The parties concede that Lockwood and H.F. Johnson were under the common control of Robert and Richard Mitchell.

Robert Mitchell died June 20, 1984. On October 1, 1985, the Fund sued Lockwood, Richard Mitchell, and First Trust Company of Montana (personal representative of Robert's estate) for H.F. Johnson's withdrawal liability.

The District Court Decision

On cross motions for summary judgment, the district court held that Lockwood was liable as a commonly controlled entity for H.F. Johnson's withdrawal liability. Lockwood does not appeal. The court further held that neither Robert Mitchell's Estate nor Richard Mitchell could be held liable for Lockwood's obligation based on their status as joint venturers in Lockwood and, in any event, that the Montana nonclaim statute barred the Fund's action against First Trust as personal representative of Robert's estate. The Fund appeals.

II Jurisdiction

The district court had jurisdiction under 29 U.S.C. Sec. 1451(c). Federal Rule of Civil Procedure 58 requires the clerk of the district court to enter judgment according to the decision of the district court in a separate document. The district court docket sheet indicates that no separate judgment concerning First Trust, Richard Mitchell or Lockwood has been entered. ¹

The separate judgment rule of Rule 58 is not jurisdictional and may be waived, either expressly or by implication. Bankers Trust Co. v. Mallis, 435 U.S. 381, 383-84, 98 S.Ct. 1117, 1119-20, 55 L.Ed.2d 357 (1978); Vernon v. Heckler, 811 F.2d 1274, 1276-77 (9th Cir.1987). The Fund has expressly waived application of the separate judgment rule in this case.

The district court granted First Trust's and Richard's motions for summary judgment on November 6, 1986. The Fund filed a notice of appeal on December 4, 1986. This appeal is timely. We have jurisdiction under 28 U.S.C. Sec. 1291.

III Analysis

A. Withdrawal Liability of Lockwood Under 29 U.S.C. Sec. 1301(b)(1)

Lockwood does not appeal the district court's ruling that Lockwood is jointly liable as an employer for H.F. Johnson's withdrawal liability. However, Richard and First Trust contend that imposition of withdrawal liability on Lockwood (and themselves by virtue of their participation in Lockwood) violates the Due Process Clause of the Fifth Amendment. ²

1. The Statutory Scheme

MPPAA, 29 U.S.C. Sec. 1381 provides that, when an employer withdraws from a multiemployer plan, "the employer is liable to the plan in the amount determined under this part to be the withdrawal liability." Section Sec. 1301(b)(1) provides that "[f]or purposes of this subchapter ... businesses (whether incorporated or unincorporated) which are under common control shall be treated ... as a single employer." 29 U.S.C. Sec. 1301(b)(1).

Congress enacted section 1301 in 1974 as part of subchapter III of ERISA. The withdrawal liability provisions, 29 U.S.C. Secs. 1381 et seq., were added to the same subchapter by MPPAA. MPPAA also amended Sec. 1301(a). Subsection (b) of Sec. 1301 (the common control provision) was purposely left unchanged. See 126 Cong.Rec. S11672 (Aug. 26, 1980) (Remarks of Senator Williams). The plain language of Sec. 1301(b) indicates that businesses under common control are to be treated as a single employer for purposes of withdrawal liability (29 U.S.C. Sec. 1381). ³ Lockwood is liable under Secs. 1301 and 1381 as a commonly controlled entity for H.F. Johnson's withdrawal liability.

2. Due Process

First Trust and Richard contend that Sec. 1301(b) violates Due Process unless the Plan can show that Lockwood derived some benefit from association with H.F. Johnson. First Trust and Richard assert injury to economic interests. Where economic interests are at stake, "the burden is on one complaining of a due process violation to establish that the legislature has acted in an arbitrary and irrational way." Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15, 96 S.Ct. 2882, 2892, 49 L.Ed.2d 752 (1976). Beyond simple rationality, no particular degree of relation between the end of economic legislation and the means used to further the end is required. See, e.g., Wickard v. Filburn, 317 U.S. 111, 63 S.Ct. 82, 87 L.Ed. 122 (1942).

Congress enacted Sec. 1301(b) in order to prevent businesses from shirking their ERISA obligations by fractionalizing operations into many separate entities:

the committee ... intends to make it clear that the coverage and antidiscrimination provisions cannot be avoided by operating through separate corporations instead of separate branches of one corporation.

S.Rep. No. 383, 93d Cong., 2d Sess. 43, reprinted in 1974 U.S. Code Cong. & Ad. News 4639, 4890, 4928; see also H.Rep. No. 807, 93d Cong., 2d Sess. 50, reprinted in 1974 U.S. Code Cong. & Ad. News, 4670, 4716; Center City Motors, 609 F.Supp. at 412. Joint liability for commonly controlled businesses is a rational means for preventing dispersion of assets used in a common enterprise. See Ouimet II, 711 F.2d at 1089.

First Trust and Richard also claim that Sec. 1301(b) violates procedural requirements of the Due Process Clause because the Fund did not sue Lockwood, First Trust and Richard until after the Fund had obtained judgment for withdrawal liability against H.F. Johnson. However, the requirement of common control in Sec. 1301(b) assures that individuals and entities who may ultimately be held liable for withdrawal liability in fact have notice and an opportunity to contest the existence and extent of that liability.

Section 1301(b) does not violate substantive or procedural Due process.

B. Personal Withdrawal Liability For Joint Venturers Under ERISA

The Fund asserts that the Robert Mitchell Estate and Richard Mitchell are personally liable as joint venturers in Lockwood. First Trust and Richard do not challenge the district court's finding that Lockwood is a joint venture.

Congress did not preclude the possibility of individual liability under MPPAA. Section 1381 is silent as to whether persons other than employers may be liable for withdrawal payments. However, 29 U.S.C. Sec. 1405(c) provides

[t]o the extent that the withdrawal liability of an employer is attributable to his obligation to contribute to or under a plan as an individual (whether as a sole proprietor or as a member of a partnership ), property which may be exempt from the estate under section 522 of Title 11 or under similar provisions of law, shall not be subject to enforcement...