Dugan v. Smerwick Sewerage Co.

• Decision Date: 16 April 1998
• Docket Number: 96-3724,Nos. 96-3618,s. 96-3618
• Citation: 142 F.3d 398
• Parties: , Pens. Plan Guide (CCH) P 23942P William E. DUGAN, Theodore Criel, et al., as Trustees of the Midwest Operating Engineers Welfare and Midwest Operating Engineers Pension Trust Funds, as Trustees of the Operating Engineers Local 150 Apprenticeship Fund, and as Trustees of the Local 150, I.U.O.E. Vacation Savings Plan, Plaintiffs-Appellants, Cross-Appellees, v. SMERWICK SEWERAGE COMPANY, Defendant-Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 398

142 F.3d 398

40 Fed.R.Serv.3d 443, Pens. Plan Guide (CCH) P 23942P

William E. DUGAN, Theodore Criel, et al., as Trustees of the Midwest Operating Engineers Welfare and Midwest Operating Engineers Pension Trust Funds, as Trustees of the Operating Engineers Local 150 Apprenticeship Fund, and as Trustees of the Local 150, I.U.O.E. Vacation Savings Plan Plaintiffs-Appellants, Cross-Appellees, v. SMERWICK SEWERAGE COMPANY, Defendant-Appellee, Cross-Appellant.

Nos. 96-3618, 96-3724.

United States Court of Appeals Seventh Circuit.

Argued Oct. 22, 1997.

Decided April 16, 1998.

Alan H. Auerbach (argued), Laura M. Finnegan, Baum, Sigman, Auerbach, Pierson & Neuman, for Plaintiffs-Appellants.

Douglas A. Darch, John T. Murray (argued), James D. Jorgensen, Joshua M. Henderson, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, IL, for Defendants-Appellees.

Before WOOD, JR., MANION, and ROVNER, Circuit Judges.

ILANA DIAMOND ROVNER, Circuit Judge.

The trustees of various union health and welfare funds filed suit against Smerwick Sewerage Co. pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq., in an effort to collect on contributions that the Funds contended were due under the "owner-operator" provision of the collective bargaining agreement to which Smerwick is a party. The district court granted summary judgment in favor of Smerwick. Dugan v. Smerwick Sewerage Co., No. 95 C 3223, 1996 WL 535306 (N.D.Ill. 1996). It concluded that Patrick Moriarty, the former owner of the company, was not a "relative" of the present owner (his wife, Elizabeth Moriarty) as that term was defined in the agreement during the relevant time periods; thus, the company did not owe additional contributions on his behalf under the "owner-operator" provision of the agreement. It also rejected the Funds' alternative contention that Patrick Moriarty remained a co-owner or a de facto officer or director of Smerwick. The trustees of the Funds appeal the district court's summary judgment ruling, and Smerwick cross-appeals from the summary denial of its request for discovery sanctions pursuant to Fed.R.Civ.P. 26(g). We affirm.

I.

Smerwick is a small construction subcontractor with two to four employees that installs sewer and water lines for homes and small businesses. Patrick Moriarty founded the company in or about 1968 and was its sole shareholder and president for a number of years. He married Elizabeth in 1976. She began performing administrative work for the company, while Patrick performed on-site labor, operated the heavy equipment, and supervised the other employees. Purportedly during or as of 1983, when Patrick was diagnosed with cancer that was expected to be fatal, Elizabeth became the sole owner of the company and elected herself president. Happily, Patrick recovered and returned to work for the company in 1984. Although there is no evidence that Patrick re-assumed any ownership interest in the company, his day-to-day responsibilities upon return were otherwise the same as they had been before he was diagnosed with cancer. He also served as a director of the company in 1988 and 1989 but held no formal office thereafter.

From at least 1984 to date, Smerwick has been obligated to make contributions on behalf of covered employees, including Patrick Moriarty, to the pension, welfare, apprenticeship, and vacation savings plan funds of the International Union of Operating Engineers, Local 150, based on the hours of work these employees performed for the company. In relevant part, the 1987 and 1990 versions of the collective bargaining agreement imposing that obligation provided as follows:

[T]he parties recognize that individuals employed by corporations who are party to this Agreement may perform both bargaining unit and non bargaining unit work. Certain of these employees receive compensation in such a manner that it is difficult to determine for purposes of fringe benefit contributions the precise number of hours which are spent performing bargaining unit work. It is therefore agreed that when an employee who is employed by a corporation, performs both bargaining unit work and non bargaining unit work and who

A. Is a shareholder, officer and/or director of the corporation or

B. Is a relative (father, mother, son, daughter, brother, sister) of a shareholder, officer and/or director of the corporation

the Employer shall be required to make contributions on behalf of such employee on the basis of 168 hours for each month in which the employee receives any compensation from the corporation based on the contribution rates established herein.

(Emphasis ours.) This is the provision referred to as the "owner/operator" provision of the agreement. In the 1995 collective bargaining agreement, the parenthetical definition of the term "relative" in this provision was modified to read "father, mother, son, daughter, brother, sister, husband, wife, in-law of a shareholder, officer and/or director of the corporation." (Emphasis again ours.)

In June 1993, Smerwick's books were audited on behalf of the Funds, which concluded that the company owed additional contributions on behalf of Patrick Moriarty for certain months in 1988 through 1993 pursuant to the owner/ operator provision of the collective bargaining agreement. The Funds believed that as the spouse of the owner of the corporation, Patrick constituted a "relative" for which the company was obligated to make contributions based on 168 hours in any month in which Patrick received compensation from Smerwick. Smerwick balked, prompting the Funds to file suit. Smerwick acknowledged that contributions were due on Patrick's behalf pursuant to the owner/operator provision for the period of time in 1988 and 1989 when Patrick himself served as a director; it similarly acknowledged that additional contributions were due for the period of time in 1992 and 1993 when Patrick's daughter Ellen served as a director. Smerwick denied that any additional contributions were due under the owner/ operator provision based on Patrick's spousal relationship with the owner and president of the company, Elizabeth Moriarty.

On summary judgment, the district court first turned to the language of the owner/operator provision. Invoking the interpretive maxim expressio unius est exclusio alterius, the court reasoned that the key term "relative" was limited by the specific examples that followed it: "father, mother, son, daughter, brother, sister." 1996 WL 535306, at * 5. No other general or inclusive terms were used to embrace other individuals who might constitute "relatives." Id. Thus, within the four corners of the collective bargaining agreement, spouses appeared to the court to have been excluded from the definition of "relative." Id.

In an effort to demonstrate an extrinsic ambiguity in the otherwise plain language of the agreement, the Funds pointed to (1) the language of the 1995 collective bargaining agreement, which as we have noted added "husband," "wife," and "in-law" to the identified examples of the term "relative" and (2) the testimony of Larry Bushmaker, administrator of the Funds and the drafter of the pre-1995 owner/operator provision, which indicated that the term "relative" was always intended and understood to include spouses. The court found that the 1995 modification demonstrated no ambiguity in the earlier version of the owner/ operator's definition of relative; it simply demonstrated that the 1995 version was substantively different. Id. at * 6. Bushmaker's testimony as to the meaning of "relative" was inherently subjective, the court reasoned, given his role as the drafter of the agreement, and thus was not the kind of objective evidence required to establish an extrinsic ambiguity in the contract language. Id. at * 6 & n. 4, citing, inter alia, AM Int'l, Inc. v. Graphic Mgmt. Assocs., Inc., 44 F.3d 572, 575 (7th Cir.1995); Central States, Southeast & Southwest Areas Pension Fund v. Central Cartage Co., 69 F.3d 1312, 1319 (7th Cir.1995) (Flaum, J., concurring in judgment), cert. denied, 517 U.S. 1134, 116 S.Ct. 1419, 134 L.Ed.2d 544 (1996). Finally, the court rejected the Funds' contention that even if Patrick Moriarty was not a "relative" of a shareholder, officer, or director as that term was defined prior to 1995, the owner/operator provision nonetheless demanded contributions on his behalf because he in fact remained a shareholder or a de facto officer or director. Although the court acknowledged that Smerwick had tendered conflicting stories as to when and how Elizabeth Moriarty had become the sole shareholder, it was clear to the court that by 1983, Elizabeth was in fact the sole owner of the company; there was accordingly no basis in the record to deem Patrick a co-owner in fact. 1996 WL 535306, at * 6. Nor did Patrick's ongoing role in company business support the notion that he amounted to a de facto officer or director of the company. Although the evidence revealed that he continued his supervisory role upon his return to the company in 1984, the court noted, there was no evidence suggesting that Patrick had held himself out as an officer or director of Smerwick. Id. at * 7.

II.

Our review of a summary judgment ruling is plenary. E.g., Giannopoulos v. Brach & Brock Confections, Inc., 109 F.3d 406, 410 (7th Cir.1997). Summary judgment "shall be rendered ... if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED.R.CIV.P. 56(c). To the extent that the facts are genuinely disputed, or the undisputed facts give rise to competing inferences, we are obliged to give the non-moving party--here, the plaintiffs--the benefit of the doubt. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513-14, 91 L.Ed.2d 202 (1986); Matsushita...