Cent. States, Se & Sw Areas Pension v. Sara Lee

• Decision Date: 28 September 2009
• Docket Number: Case No. 07 C 5880.
• Citation: 660 F.Supp.2d 900
• Parties: CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND and Howard McDougall, Trustee, Plaintiffs, v. SARA LEE BAKERY GROUP, INC., a Delaware corporation (f/k/a The Earthgrains Company), as Successor in Interest to Metz Baking Company, Defendant.
• Court: U.S. District Court — Northern District of Illinois

660 F.Supp.2d 900

CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND and Howard McDougall, Trustee, Plaintiffs, v. SARA LEE BAKERY GROUP, INC., a Delaware corporation (f/k/a The Earthgrains Company), as Successor in Interest to Metz Baking Company, Defendant.

Case No. 07 C 5880.

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

September 28, 2009.

COPYRIGHT MATERIAL OMITTED

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Edward H. Bogle, Central States Funds, Albert M. Madden, Brad R. Berliner, Charles H. Lee, Central States Law Department, Rosemont, IL, for Plaintiffs.

Corey L. Franklin, The Lowenbaum Partnership, LLC, St. Louis, MO, Erika Dillon, Michael Irving Leonard, Meckler Bulger Tilson Marick & Pearson LLP, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

VIRGINIA M. KENDALL, District Judge.

Central States, Southeast and Southwest Areas Pension Fund and Howard McDougall, Trustee, (collectively "Central States" or "the Fund") filed suit against Sara Lee Bakery Group, Inc. ("Sara Lee") pursuant to Section 515 of the Employee Retirement Income Security Act, 29 U.S.C. § 1145 ("ERISA") to collect allegedly delinquent pension contributions. Pursuant to Federal Rule of Civil Procedure 56 and Local Rule 56.1, Sara Lee and Central States have filed cross-motions for summary judgment on Central States' Complaint. For the reasons stated herein, Sara Lee's Motion for Summary Judgement is denied and Central States' Motion for Summary Judgment is granted.

STATEMENT OF UNDISPUTED FACTS¹

I. The Parties

Central States is a multiemployer pension plan that pays pension benefits to its participants and their beneficiaries. (CS 56.1 Resp. ¶ 1; 29 U.S.C. §§ 1002(2), (37)(A).) Howard McDougall is a Trustee and fiduciary of the Fund. (SL 56.1 Resp. ¶ 4.) The Fund is funded in part by contributions remitted by multiple participating employers pursuant to negotiated collective bargaining agreements with local unions affiliated with the International Brotherhood of Teamsters. (CS 56.1 Resp. ¶ 2.) Employer contributions are held and used for the exclusive purpose of providing pension benefits to participants and beneficiaries of the Fund and for administrative expenses. (SL 56.1 Resp. ¶ 3.)

Sara Lee Bakery Group Inc. is a participating and contributing employer under the Fund. (CS 56.1 Resp. ¶ 11.) Sara Lee Bakery Group Inc. is the parent company to The Earthgrains Co. ("Earthgrains") and Metz Holdings Inc. ("Metz"). (SL 56.1 Resp. ¶ 6.) By way of brief background, Metz Baking Co. is a manufacturer, marketer, distributor and wholesaler of fresh bread and baked goods and is a wholly-owned subsidiary of Metz. (CS 56.1 Resp. ¶ 4.) In November 1999, Metz became a wholly owned subsidiary of Earthgrains. (CS 56.1 Resp. ¶ 4.) During August 2002, Sara Lee Corporation acquired Earthgrains and as a result of the merger, Earthgrains merged into and became The Earthgrains Baking Companies, Inc. which became the direct successor to Earthgrains. (CS 56.1 Resp. ¶ 5.) Following Sara Lee Corporation's acquisition of Earthgrains and the creation of The Earthgrains Baking Companies, Inc., Sara Lee Corporation created Sara Lee Bakery Group, Inc. ("Sara Lee") as its wholly-owned subsidiary. (CS 56.1 Resp. ¶ 6.) Earthgrains Baking Companies, Inc. then became a wholly owned subsidiary of Sara Lee, and as such, Metz Holdings, Inc. and its subsidiary Metz Baking Company became second and third tier subsidiaries. (CS 56.1 Resp. ¶ 6; SL 56.1 Resp. ¶ 6.)

II. The Metz's Distribution Depot and the Local 955 CBA

Until February 14, 2001, Metz and Earthgrains owned and operated separate bread distribution depots in Topeka, Kansas. (CS Resp. ¶¶ 7, 8, 13, 21.) Route Sales Representatives ("RSRs") at Metz were represented by Teamsters Local 955 ("Local 955"), a labor union and local affiliate of the International Brotherhood of Teamsters. (CS 56.1 Resp. ¶¶ 15, 16, 17; SL 56.1 Resp. ¶ 7.) Metz's RSRs were covered by a collective bargaining agreement ("CBA") with Local 955, whose term commenced on March 22, 1998 and continued through March 23, 2002, and "remain[ed] in full force and effect from year to year thereafter unless either party . . . give[s] notice in writing sixty (60) days prior to March 23, 2002, or any subsequent anniversary date, to the other party of intention to amend, change, or termination [sic] this Agreement." (CS 56.1 Resp. ¶ 14; SL 56.1 Resp. ¶¶ 15, 20; Def. Ex. A, Art. XXX, § A.)

Pursuant to the CBA, Metz was required to make pension contributions to the Fund on behalf of Local 955 employees that have been on its payroll for thirty days or more. (CS 56.1 Resp. ¶ 19; SL 56.1 Resp. ¶ 16; Def. Ex. A, Art. XXIII, § A.) Specifically, the CBA provides that Metz was required to contribute to the Fund "for each week on each regular or extra employee, even though such employee may work only part time . . ., including weeks where work is performed for [Metz] but not under the provisions of this contract . . . ." (CS 56.1 Resp. ¶ 19; SL 56.1 Resp. ¶ 19; Def. Ex. A, Art. XXIII, § F.) The CBA also mandates that Metz continue to make the required contributions for a period of four weeks if an employee is absent because of illness or off-the-job injury and notifies Metz of such absence, and that Metz continue to make the required contributions until the employee returns to work if the employee is injured on the job; however, such contributions shall not exceed six months. (Def. Ex. A, Art. XXIII, § D.) Under the terms of the CBA, Metz was required to continue to contribute to the Fund at a rate of $65.00 per week for each covered employee, for at least one year after the expiration of the Agreement, provided Metz is still doing business in Kansas City and there is an extension to the contract. (SL 56.1 Resp. ¶ 17; Def. Ex. A, Art. XXIII, § A(1).) Prior to February 2001, Metz was making contributions to the Fund on behalf of six of its employees: Nick Burnet, Elmer Burnett, Russell Griffin, Jason Porter, Rich Roberts, and Larry Starkebaum (the "Local 955 employees"). (CS 56.1 Resp ¶ 20, 32; SL 56.1 Resp. ¶¶ 27, 28.) The Fund was accepting these contributions and awarding Pension Credit to these six employees because the Fund had approved of and accepted the Local 955 CBA. (SL 56.1 Reply ¶ 37.)

Pursuant to the Local 955 CBA, Metz entered into a pre-existing "Trust Agreement" with the Fund for the purpose of administering the fund. (SL 56.1 Resp. ¶ 18; Def. Ex. A, Art. XXIII, § C.) The Trust Agreement provides:

[Metz] shall remit continuing and prompt contributions to the Trust Fund as required by the applicable collective bargaining agreement to which [Metz] is a party, applicable law and all rules and requirements for participation by Employers in the Fund as established and interpreted by the Trustees in accordance with their authority . . . . Any agreement or understanding between the parties that in any way alters or affects [Metz's] contribution obligation as set forth in the collective bargaining agreement shall be submitted promptly to the Fund [by certified mail to the Contracts Department]; any such agreement or understanding between the parties that has not been disclosed to the Fund as required by this paragraph shall not be binding on the Trustees and shall not affect the terms of the collective bargaining agreement which alone shall be enforceable. The obligation to make such contributions shall continue during periods when the collective bargaining agreement is being negotiated, but such contributions shall not be required in case of strike after contract termination, unless the parties mutually agree otherwise.

(SL 56.1 Resp. ¶ 22; Pl. Ex. A, Trust Agreement, Art. III, § 1.)

III. The Earthgrains Distribution Depot and the Local 795 CBA

RSRs at Earthgrains' bread depot are represented by Teamsters Local 795 ("Local 795"), a labor union, and are covered by a Local 795 CBA. (CS 56.1 Resp. ¶ 22; SL 56.1 Resp. ¶ 8.) Under the Local 795 CBA, Earthgrains was required to submit pension contributions on behalf of its covered employees to the American Bakers Association Pension Fund. (CS 56.1 Resp. ¶ 23.)

IV. The Consolidation of Metz and Earthgrains

In late 2000, Earthgrains began contemplating consolidating its bread depot with Metz's. (CS 56.1 Resp. ¶ 24.) Economically, merging the two depots made a great deal of sense, including providing for more efficient operational distribution. (CS 56.1 Resp. ¶ 24.) In February 2001, representatives from Earthgrains and Metz met with Local 955's business agent, James Shoaf ("Shoaf") to discuss the possibility of closing the Metz depot and relocating the Local 955 drivers to Earthgrains' depot. (CS 56.1 Resp. ¶¶ 25, 26.) To effectuate the consolidation and relocation of the drivers, Earthgrains and Metz told Shoaf they wanted to fire all of the Local 955 Metz employees and rehire them at the Earthgrains' depot under a new CBA-the Local 795 CBA. (CS 56.1 Resp. ¶ 22.) On February 13, 2001, despite Shoaf's protestation, Earthgrains and Metz closed the Metz depot. (CS 56.1 Resp. ¶ 29.) The next day, Metz fired all of its employees, including the six Local 955 employees, and Earthgrains rehired them to perform work under the Local 795 CBA. (CS 56.1 Resp. ¶¶ 30, 32; SL 56.1 Resp. ¶¶ 29, 30.) At no time prior to, or after February 14, 2001, did either Metz or Local 955 serve each other with a written termination notice of their CBA. (CS 56.1 Resp. ¶ 31; SL 56.1 Resp. ¶ 31.)

After February 21, 2001, the six former Metz Local 955 employees did not perform any work out of the Metz distribution depot. (CS 56.1 Resp. ¶ 31; SL 56.1 Resp. ¶ 31.) After a short transition period from February 21 through April 21, 2001, where Metz was still paying its former Local 955 employees, Earthgrains put them on its payroll. (CS 56.1 Resp. ¶ 33.) Beginning in June 2001, Earthgrains paid union dues on behalf of the former Metz Local 955 employees to Local 795, rather than Local 955. (CS 56.1 Resp. ¶ 36; SL ...