Chicago Truck Drivers v. Brotherhood Labor Leasing

• Decision Date: 04 December 1996
• Docket Number: No. 4:93 CV 2376 DDN.,4:93 CV 2376 DDN.
• Citation: 950 F.Supp. 1454
• Parties: CHICAGO TRUCK DRIVERS, HELPERS AND WAREHOUSE WORKERS UNION (INDEPENDENT) PENSION FUND, et al., Plaintiffs, v. BROTHERHOOD LABOR LEASING, MFI Leasing Company, Falls City Industries, Inc., Middlewest Freightways, Inc., Defendants and Counterclaim Plaintiffs, v. CHICAGO TRUCK DRIVERS, HELPERS, AND WAREHOUSE WORKERS UNION (INDEPENDENT) PENSION FUND, et al., Counterclaim Defendants.
• Court: U.S. District Court — Eastern District of Missouri

950 F.Supp. 1454

CHICAGO TRUCK DRIVERS, HELPERS AND WAREHOUSE WORKERS UNION (INDEPENDENT) PENSION FUND, et al., Plaintiffs, v. BROTHERHOOD LABOR LEASING, MFI Leasing Company, Falls City Industries, Inc., Middlewest Freightways, Inc., Defendants and Counterclaim Plaintiffs, v. CHICAGO TRUCK DRIVERS, HELPERS, AND WAREHOUSE WORKERS UNION (INDEPENDENT) PENSION FUND, et al., Counterclaim Defendants.

No. 4:93 CV 2376 DDN.

United States District Court, E.D. Missouri, Eastern Division.

December 4, 1996.

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Nelson L. Mitten, Riezman and Blitz, St. Louis, MO, David S. Allen, Joseph M. Burns, Jacobs and Burns, Chicago, IL, for Chicago Truck Drivers, Helpers & Warehouse Workers Union Pension Fund, George Ossey, Tony Cullotta, John Broderick and William H. Carpenter.

Terrance J. Good, Vice-President, Lashly and Baer, St. Louis, MO, Matthew B. Moore, Howard D. Lay, Brian H. Schmidt, Dysart and Taylor, Kansas City, MO, Leonard R. Kofkin, Chicago, IL, Steven J. Teplinsky, Donald J. Vogel, Mary Elizabeth Gardner, Fagel and Haber, Chicago, IL, for Brotherhood Labor Leasing, MFI Leasing Company, Falls City Industries, Inc. and Middlewest Freightways, Inc.

MEMORANDUM

NOCE, United States Magistrate Judge.

This action is before the court upon the motions (1) of the plaintiffs to compel discovery from witnesses Taylor and Helt; (2) of the plaintiffs to correct a deposition transcript; (3) of the plaintiffs to dismiss defendants' state law counterclaims; (4) of the plaintiffs to dismiss defendants' RICO counterclaim; (5) of the defendants to amend their counterclaims; (6) of the defendants for summary judgment; and (7) of the plaintiffs for summary judgment. The parties have consented to the exercise of authority by a United States Magistrate Judge under 28 U.S.C. § 636(c)(3).

Plaintiffs are the Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent) Pension Fund and its Trustees (Pension Fund or Fund). They have brought this action against defendants Brotherhood Labor Leasing (Brotherhood); MFI Leasing Company (MFI); Falls City Industries, Inc. (Falls City); and Middlewest Freightways, Inc. (Middlewest), for the collection of withdrawal liability under the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), 29 U.S.C. § 1381 et seq. In the original complaint, which was filed in the United States District Court for the Northern District of Illinois, plaintiffs sought $962,523.00, payable in 24 quarterly installments, plus liquidated damages, attorneys fees and costs.

In their second amended complaint, filed in this court, plaintiffs allege that on December 21, 1992, Be-Mac Transport Company, Inc. (Be-Mac), which had been in the business of motor transportation, ceased its operations. Be-Mac had previously entered a collective bargaining agreement with the Chicago Truck Drivers, Helpers and Warehouse Workers Union (Union). This collective bargaining agreement was to be in effect from April 1, 1991, to March 31, 1994. Under the terms of the collective bargaining agreement and a related Trust Agreement, Be-Mac was to make contributions to the Pension Fund.

The amended complaint alleges that on February 11, 1993, and October 14, 1995, respectively, the shareholders of Be-Mac received from plaintiffs the original notice and the revised notice and demand for the payment of withdrawal liability, ultimately reduced to $455,719.00, for completely withdrawing from participation in the Pension Fund. Plaintiffs seek the recovery of withdrawal liability of $455,719.00, payable in 36 quarterly installments, damages resulting from the failure to make the installment payments, plus liquidated damages, attorneys' fees, and costs.

Plaintiffs allege that on December 21, 1992, when Be-Mac ceased operations and thus withdrew from the Pension Fund, controlling amounts of voting stock of Be-Mac were owned by William H. Behrens, Steven M. Gula, and Robert L. Ferguson; that on December 21, 1992, Mssrs. Behrens, Gula, and Ferguson also owned the stock of defendants Brotherhood and MFI; that defendant Falls City was wholly owned by MFI; and that defendant Middlewest was wholly owned by Falls City. Plaintiffs allege that Be-Mac, Brotherhood, MFI, Falls City, and Middlewest, therefore, are liable for Be-Mac's withdrawal liability because they comprise a "single employer" entity responsible for the withdrawal, as prescribed by 29 U.S.C. § 1301(b)(1).

Defendants allege and argue that the stock of Be-Mac was never owned by Behrens, Gula, and Ferguson; or, if ever owned, the transfer of ownership was rescinded by a judgment of the United States District Court for the Western District of Missouri; and that the defendants are not liable as participants in a controlled group with Be-Mac.

1. Defendants' Proposed Counterclaims.

In response to plaintiffs' second amended complaint, defendants filed four counterclaims, three under state law and one under the Racketeer Influenced and Corrupt Organizations (RICO) Act, 18 U.S.C. §§ 1961-1968. In response to plaintiffs' motions to dismiss, defendants have abjured their original counterclaims and have moved for leave to file proposed amended counterclaims. In this procedural context, the court will grant the plaintiffs' motions to dismiss the defendants' original counterclaims and will consider the relevant arguments, pro and con, concerning whether the proposed amended counterclaims should be allowed to be filed.

In general, defendants' proposed¹ counterclaims are founded upon proposed allegations which describe a history of improprieties in the operation of the Union, the plaintiff Pension Fund, and the Production and Maintenance Local Union 101 (Local 101), which the individual fund trustee plaintiffs control. In addition, defendants would add as parties (counterclaim defendants) John Johnson and Paul Glover, former trustees of the plaintiff Fund.

Defendants would allege that the unions and the Fund are separate entities and are enterprises which affect interstate and foreign commerce. Defendants would allege further that:

(a) The plaintiff Trustees had allowed Glover, Johnson, the Union, and Local 101 to conspire and dissipate the monies of the plaintiff Fund, in violation of 18 U.S.C. §§ 1954, 1964(c), and 1962.

(b) Plaintiffs engaged in "bad investments, sweetheart deals, personal kickbacks, overspending, excessive directors fees and expenses, excessive attorney fees and general squandering of already inadequate funds with no exercise of audits, bonding requirements or supervision to monitor the resources and expenses of the Fund causing great damage to the taxpaying public, beneficiaries, contributors, potential contributors, and control group parties who, by contracts with the Union, are required to contribute to the Fund and who have no protection or input except to rely upon the two Union and two Management designated Trustees."

See Proposed Counterclaims, ¶¶ 2 and 3, filed January 19, 1996.

Defendants further allege that in 1988 U.S. Truck Lines, Inc. of Delaware (UST), the parent of Be-Mac and Motor Express, Inc. of Indiana (MXI), attempted to "absorb" MXI into Be-Mac to evade the application of a collective bargaining agreement to which Be-Mac was a party and to create the illusion that employees of Be-Mac were employees of MXI for the purposes of Fund contributions and the check-off of union dues. In spite of this arrangement, which defendants allege was unlawful, plaintiffs have in this judicial action pursued defendants for the withdrawal liability of MXI, which is the subject of arbitration proceedings in the Northern District of Illinois. Defendants allege that all of this was known to the individual plaintiffs.

Defendants further allege that in 1992 Glover and Johnson were defeated for re-election to official positions in the Union, in part because they had unlawfully approved union salaries for themselves. In 1992, one Sue Bennett, a stock broker handling Fund investments, sued Johnson and Glover for extorting money from her, and in 1992 she pled guilty to paying kickbacks to Johnson and Glover from Fund investment commissions she earned. In 1995, Glover and Johnson were convicted of a "labor racketeering" conspiracy and income tax evasion relating to the Fund investments, which defendants would allege

was all in violation of federal law generally known as ERISA, and the LMRA 29 U.S.C. 401 et seq. and 501 and 502 and laws of Illinois and the failure to report income as a violation of federal and state tax laws.

See Proposed Counterclaims, ¶ 4, filed January 19, 1996.

Defendant would allege that the identified current and former Fund trustees

have been grossly negligent and have knowingly and in bad faith breached their fiduciary duties by ignoring, approving, ratifying, and failing to stop, inquire or investigate and, probably in some instances, participating in wrongful and illegal labor racketeering patterns or schemes (including the 18 counts where Glover was convicted and counts where Johnson pleaded guilty) to deplete the Fund and incur excessive expenses, knowing the ultimate source of replacement funding was to assess excessive and prohibitive withdrawal liability, raise assessments and, if all else failed, to let PGBF [(the Pension Guaranty Benefit Fund)] (which is the taxpaying public) pay the shortages under ERISA.

Id. at ¶ 6. Defendants would further allege that the lack of knowledge about the specific facts of this judicial action by the Fund trustees (demonstrated in their depositions), the October 1995 reduction of the claim to $455,719 by plaintiffs, and the failure of the plaintiffs to formally acknowledge that defendants have placed $300,000 in escrow in this action, demonstrates that there was insufficient investigation of the claims before they were filed and that this failing was with "a total outrageous, evil...