Central States, Southeast and Southwest Areas Pension Fund v. Ditello, 91-2072

• Citation: 974 F.2d 887
• Decision Date: 08 September 1992
• Docket Number: No. 91-2072,91-2072
• Parties: CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, a Pension Trust, Loran W. Robbins, Marion M. Winstead, et al., Plaintiffs-Appellees, v. Jean DITELLO and Angelo Ditello, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

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974 F.2d 887 CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND,
a Pension Trust, Loran W. Robbins, Marion M.
Winstead, et al., Plaintiffs-Appellees,
v.
Jean DITELLO and Angelo Ditello, Defendants-Appellants. No. 91-2072. United States Court of Appeals,
Seventh Circuit. Argued Jan. 24, 1992.
Decided Sept. 8, 1992.

Page 888

Terence G. Craig, Thomas C. Nyhan, Francis J. Carey, Thomas J. Angell, James P. Condon (argued), Central States, Southeast & Southwest Area Pension Fund Law Dept., Rosemont, Ill., for plaintiffs-appellees.

Dennis A. Marks, Donald Gancer, Querry, Harrow, Gulanick & Kennedy, Chicago, Ill., Gregory Gramling, Jr. (argued), Milwaukee, Wis., for defendants-appellants.

Before CUMMINGS, EASTERBROOK and MANION, Circuit Judges.

MANION, Circuit Judge.

Plaintiff-appellee Central States, Southeast and Southwest Areas Pension Fund, a multi-employer pension plan, and its trustees (collectively, "Central States") filed this Employee Retirement Income Security Act action to collect withdrawal liability from Angelo and Jean Ditello. The district court granted summary judgment for Central States, and the Ditellos appeal. We affirm.

I.

The Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1368, as amended by the Multiemployer Pension Plan Amendments Act ("MPPAA"), 29 U.S.C. §§ 1381-1461, provides that an employer who ceases contributing to a multiemployer pension plan governed by ERISA is liable for "withdrawal liability," which is his proportionate share of "unfunded vested benefits." 29 U.S.C. § 1381. Withdrawal liability ensures that "the financial burden of his employees' vested pension benefits will not be shifted to the other employers in the plan, and ultimately, to the Pension Benefit Guaranty Corporation, which insures such benefits." Central States, Southeast and Southwest Areas Pension Fund v. Slotky, 956 F.2d 1369, 1371 (7th Cir.1992).

To collect withdrawal liability under the MPPAA, a pension plan must determine the amount of withdrawal liability owed by a withdrawing employer, 29 U.S.C. §§ 1382, 1391, and send the employer a notice and demand for payment of that amount, 29 U.S.C. § 1399(b)(1). An employer who disagrees with a plan's determination of withdrawal liability may ask the plan to review its assessment, 29 U.S.C. § 1399(b)(2), and if still dissatisfied, may initiate arbitration. 29 U.S.C. § 1401(a)(1). Arbitration of any dispute concerning a plan's determination of withdrawal liability is mandatory. Id. If an employer fails to timely initiate arbitration, the amount of withdrawal liability assessed by the plan becomes due and owing, and the plan can sue to collect it. 29 U.S.C. § 1401(b)(1). See generally, Robbins v. Admiral Merchants Motor Freight, Inc., 846 F.2d 1054, 1056 (7th Cir.1988).

The withdrawing employer in this case is National Transit Cartage Company, Inc. ("National Transit"). National Transit is a Wisconsin trucking company that, pursuant to a collective bargaining agreement, made

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contributions to the Central States Pension Fund. Sometime in 1982, National Transit went out of business and stopped contributing to the pension fund. Central States determined that National Transit completely withdrew from the pension fund on or about December 25, 1982 and assessed over $200,000 in withdrawal liability. As required by the MPPAA, in August 1984, Central States sent a notice and demand for payment of this amount to National Transit. National Transit contested the amount of withdrawal liability, claiming it had withdrawn from the plan before December 25, 1982. Central States and National Transit tried to resolve the dispute informally and entered a stipulation extending National Transit's time to initiate arbitration to August 16, 1988.

On August 16, 1988, National Transit sent a letter requesting arbitration to Central States. But Central States received the letter on August 17, 1988, and National Transit did not notify the American Arbitration Association ("AAA") of its request for arbitration or pay the AAA's fee until September 9, 1988. Contending that this request for arbitration was untimely and, therefore, that the assessed withdrawal liability was due and owing, Central States brought suit against National Transit to collect the withdrawal liability.

II.

One may inquire why the Ditellos are now the only defendants in this suit. After the district court, pursuant to 29 U.S.C. § 1399(c)(2), ordered National Transit to make interim withdrawal liability payments, National Transit filed bankruptcy and the suit against it was stayed. Instead of waiting in line with the rest of National Transit's creditors, Central States filed suit against the Ditellos--National Transit's sole shareholders. Later, Central States voluntarily dismissed its claims against National Transit.

Central States was able to seek recovery of National Transit's withdrawal liability from the Ditellos by virtue of 29 U.S.C. § 1301(b)(1). "Under 29 U.S.C. § 1301(b)(1), all members of a 'common control' group of 'trades or businesses' are jointly and severally liable for the withdrawal liability incurred by any one member of the controlled group." Central States, Southeast and Southwest Areas Pension Fund v. Koder, 969 F.2d 451, 452 (7th Cir.1992) (citing Board of Trustees of Western Conference of Teamsters Pension Trust Fund v. Lafrenz, 837 F.2d 892, 893 (9th Cir.1988)). This is sometimes referred to as "control group" liability. The Ditellos own commercial real estate which they lease to National Transit. The district court held that this real estate proprietorship is a trade or business under common control with National Transit, and thus, the Ditellos are liable for National Transit's withdrawal liability. The Ditellos argue that leasing property is not a "trade or business" and that the real estate proprietorship was not under "common control" with National Transit.

A. "Trade or Business"

ERISA does not contain a definition of the term "trade or business." Section 1301(b)(1) provides that the phrase "trades or businesses (whether or not incorporated) which are under common control" has the same meaning as that provided in the regulations promulgated under section 414(c) of the Internal Revenue Code. Unfortunately, those regulations do not define the term "trade or business"; rather, they are concerned only with determining when businesses are commonly controlled. Thus, there is no hint to the meaning of the term "trade or business" in the language of the statute or its regulations.

The Ditellos invite us to apply cases interpreting the term "trade or business" as used in various other Internal Revenue Code sections. The problem with this suggestion is that the term "trade or business" is used throughout the Internal Revenue Code, and "the precise meaning or connotation of the term appears to vary depending upon the provision in which it is used." Groetzinger v. C.I.R., 771 F.2d 269, 271 & n. 4 (7th Cir.1985) (term "trade or business" appears in the tax code at least 170 times, in 60 different sections), aff'd, 480

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U.S. 23, 107 S.Ct. 980, 94 L.Ed.2d 25 (1987). As one court has stated, "[s]ince the meaning of 'trade or business' varies somewhat from one Code section to another, a suggestion that courts should look anywhere in the Code for guidance is an invitation to mass confusion." United Food and Commercial Workers Union v. Progressive Supermarkets, 644 F.Supp. 633, 638 (D.N.J.1986) (citations omitted). The Ditellos offer no guidance (and neither does our own research) as to which Code section interpretation we should choose and why it would be preferable over others. Thus, we think the wisest course is to abandon the Internal Revenue Code as an interpretive tool.

We will instead construe the term "trade or business" in light of the purpose of the MPPAA. The purpose of the MPPAA "is to prevent dissipation of assets required to secure vested pension benefits." Slotky, 956 F.2d at 1374. See also Central States, Southeast and Southwest Areas Pension Fund v. Lloyd L. Sztanyo Trust, 693 F.Supp. 531, 537 (E.D.Mich.1988) ("s 1301(b) utilizes control group liability to prevent businesses from 'juggling their activities to eviscerate the termination liability provisions of ERISA' "); Pension Benefit Guaranty Corp. v. Center City Motors, Inc., 609 F.Supp. 409, 412 (S.D.Cal.1984) ("When Congress defined all members of a controlled group as a single 'employer,' it clearly intended to prevent a business from limiting its responsibilities under ERISA by the fractionalization of its business operations."). Leasing property to a...