Board of Trustees v. Elite Erectors, Inc.

• Decision Date: 18 August 1999
• Docket Number: No. IP 98-298-C H/G.,IP 98-298-C H/G.
• Citation: 64 F.Supp.2d 839
• Court: U.S. District Court — Southern District of Indiana
• Parties: BOARD OF TRUSTEES, SHEET METAL WORKERS' NATIONAL PENSION FUND; Board of Trustees, National Training Fund for the Sheet Metal and Air Conditioning Industry; Board of Trustees, National Energy Management Institute Committee; Board of Trustees, Sheet Metal Occupational Health Institute Trust Fund; and Board of Trustees, Sheet Metal Workers' International Association Scholarship Fund, Plaintiffs. v. ELITE ERECTORS, INC., Skylight Consultants of America, Inc., and Mary Lowry, Defendants.

64 F.Supp.2d 839

BOARD OF TRUSTEES, SHEET METAL WORKERS' NATIONAL PENSION FUND; Board of Trustees, National Training Fund for the Sheet Metal and Air Conditioning Industry; Board of Trustees, National Energy Management Institute Committee; Board of Trustees, Sheet Metal Occupational Health Institute Trust Fund; and Board of Trustees, Sheet Metal Workers' International Association Scholarship Fund, Plaintiffs. v. ELITE ERECTORS, INC., Skylight Consultants of America, Inc., and Mary Lowry, Defendants.

No. IP 98-298-C H/G.

United States District Court, S.D. Indiana, Indianapolis Division.

August 18, 1999.

COPYRIGHT MATERIAL OMITTED

Christopher A. Poling Kunz & Opperman, Indianapolis, IN, Brian D. Black, Office of General Counsel, Sheet Metal Workers' National Pension, Alexandria, VA, for Plaintiffs.

Bret S. Clement Buschmann Carr & Shanks, Indianapolis, IN, for Defendants.

ENTRY ON PLAINTIFFS' MOTION TO ALTER OR AMEND JUDGMENT

HAMILTON, District Judge.

This court previously granted the motion of defendants Skylight Consultants of America, Inc. and Mary Lowry to set aside a default judgment against them entered by the United States District Court for the Eastern District of Virginia. The Virginia court had held that both Skylight Consultants and Lowry were alter egos of defendant Elite Erectors, Inc. so that they were both responsible for debts that Elite Erectors owed to the plaintiffs, who are trustees of employee benefit plans. This court held that the Eastern District of Virginia lacked personal jurisdiction over Skylight Consultants and Lowry so that its judgment against them was void. See Board of Trustees, Sheet Metal Workers' National Pension Fund v. Elite Erectors, Inc., 46 F.Supp.2d 852 (S.D.Ind.1999).

This court concluded in essence that, notwithstanding the default judgment, Skylight Consultants and Lowry were entitled to one fair chance to litigate any facts and legal issues that were essential to plaintiffs' claims that they were alter egos of defendant Elite Erectors so as to make them proper defendants subject to ERISA's provision for nationwide service of process. Neither this court nor the parties have identified directly controlling authority on this question, which has practical implications for enforcement and collection of debts under ERISA. The plaintiff trustees have moved for reconsideration. Defendants Skylight Consultants and Lowry have not responded to the motion to reconsider.

Plaintiffs argue that whether Lowry and Skylight Consultants were alter egos of Elite Erectors is a matter going to the merits of plaintiffs' claims and not to personal jurisdiction, so that the default judgment against Lowry and Skylight Consultants barred them from litigating the alter ego issue in this proceeding to enforce the judgment.

Plaintiffs' theory would give administrators of employee benefit plans extraordinary power to force persons and firms associated with ERISA employers, as distinct from the employers themselves, to respond to lawsuits across the country to collect delinquent plan contributions. Under plaintiffs' theory, if a plan administrator merely alleges on "information and belief," as plaintiffs did here, that a person is the alter ego of an ERISA employer delinquent in its plan contributions, that allegation alone enables the plan administrator to take advantage of ERISA's provision for nationwide service of process to force the defendant to respond to litigation across the country.

Under plaintiffs' theory, if the defendant does not appear, the plan administrator can then obtain a default judgment based on the allegations on information and belief, and can then, in a proceeding to enforce the judgment, bar any challenge to the judgment based on lack of personal jurisdiction. The only limits on the plan administrator's ability to force distant defendants to respond to thin "information and belief" allegations that they are alter egos for proper defendants would come from Federal Rules of Civil Procedure 11 (signature on filing certifies that factual contentions have evidentiary support) and 60(b)(3) (allowing relief from judgment procured by fraud on the court).¹

Plaintiffs' motion to alter this court's judgment is denied. This court holds that when a plaintiff seeks to enforce a default judgment on a claim against a distant defendant alleged only to have been an alter ego of the relevant ERISA employer, the default judgment does not prevent the defendant from presenting evidence to show that he or she or was not in fact an alter ego of the employer.

First, as the court discussed in its initial opinion, it is an open question whether plaintiffs' claims against Lowry and Skylight Consultants arise under state law or under ERISA. This court reads the Supreme Court's comments in Peacock v. Thomas, 516 U.S. 349, 353-54, 116 S.Ct. 862, 133 L.Ed.2d 817 (1996), as implying (though not deciding) that ERISA itself does not create a claim for relief on the theory that an ERISA employer's corporate veil should be pierced to reach a defendant. See also Plumbers' Pension Fund, Local 130 v. Niedrich, 891 F.2d 1297, 1301-02 (7th Cir.1989) (whether corporate officers who are not parties to collective bargaining agreement requiring contributions to plan may be held liable for delinquent plan contributions is to be determined under state law); Levit v. Ingersoll Rand Financial Corp., 874 F.2d 1186, 1192-94 (7th Cir.1989) (same). If that interpretation is correct, then plaintiffs' claims against Lowry and Skylight Consultants do not arise under ERISA and there is no basis for subjecting Lowry and Skylight Consultants to ERISA's nationwide service of process provision, 29 U.S.C. § 1132(e)(2).²

Plaintiffs point out correctly that nationwide service of process is an important element of ERISA's enforcement mechanisms. The House and Senate committee reports concerning ERISA explain in identical language:

The intent of the Committee is to provide the full range of legal and equitable remedies available in both state and federal courts and to remove jurisdictional and procedural obstacles which in the past appear to have hampered effective enforcement of fiduciary responsibilities under state law [for] recovery of benefits due to participants. For actions in federal courts, nationwide service of process is provided in order to remove a possible procedural obstacle to having all proper parties before the court.

H.R.Rep. No. 93-533 (1973), reprinted in 1974 U.S.C.C.A.N. 4639, 4655; Sen. Rep. No. 93-127 (1973), reprinted in 1974 U.S.C.C.A.N. 4838, 4871.

This committee language does not mean, however, that ERISA should be construed to remove anything a plan administrator perceives to be a jurisdictional or procedural obstacle. The Seventh Circuit has explained in an analogous context:

The intention of Congress was to extend service of process nationwide in ERISA matters because public policy justifies requiring persons who violate its provisions to defend themselves in courts across the country. This reasoning was not intended to apply to a party, such as respondent, who has no involvement whatsoever with the pension or profit sharing plan.

Rodd v. Region Construction Co., 783 F.2d 89, 91 (7th Cir.1986). In Rodd the Seventh Circuit held that plan trustees could not use ERISA's nationwide service of process against a party to a post-judgment supplemental proceeding. A bank had been served with a citation in supplemental proceedings seeking information about the judgment-defendant's assets, and the bank did not respond. The district court entered a finding of contempt against the bank and entered a judgment holding the bank liable for the full amount of the judgment-defendant's outstanding liability. When the bank moved to set aside the contempt finding and judgment for lack of jurisdiction, the issuing court granted that relief. The Seventh Circuit affirmed. Id. at 91-92.

Rodd does not control this case, but its reasoning is instructive here. Congress could have reasonably expected that most "employers" who establish or agree to plans under ERISA have consciously and voluntarily submitted to ERISA's terms — by the very act of establishing a retirement or employee benefit plan, or by signing a plan that is already established. That is, for an employer who indisputably has agreed to be subject to ERISA, use of the nationwide service of process provision simply comes with the territory. See Green v. William Mason & Co., 996 F.Supp. 394, 397 (D.N.J.1998) (stating that ERISA gives fair notice to parties who engage in covered activities that they may be sued in any district court, but granting motion to dismiss ERISA claim against employer's parent company). Courts may fairly consider such an employer to have consented to the nationwide service of process, just as a party to a contract may, in the terms of the contract, consent to jurisdiction in a particular forum.

There is no persuasive reason, however, to construe ERISA as applying those same burdens of nationwide service of process to persons who have not established or agreed to the employee benefit plan in question, and who are merely alleged (but not proven) to have acted as alter egos of an ERISA employer. Based on this reasoning, then, treating the plaintiffs' claims against Lowry and Skylight Consultants as arising under state law rather than ERISA is the simplest and, in this court's view, fairest resolution of the problem here.

Even if a veil-piercing claim for delinquent plan contributions were treated as a claim arising under ERISA, however, plaintiffs would still not be entitled to enforce in this district the default judgment they obtained in Virginia. The governing general principle here is that a defendant is entitled to one fair opportunity to litigate issues of fact and law essential to a court's exercise of personal jurisdiction over that defendant. The defendant may take that opportunity in the original court or may take the...