Gambino v. Index Sales Corp., 87 C 3998.
| Decision Date | 23 November 1987 |
| Docket Number | No. 87 C 3998.,87 C 3998. |
| Citation | 673 F. Supp. 1450 |
| Parties | Carmen GAMBINO, et al., Plaintiffs, v. INDEX SALES CORPORATION, et al., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Michael H. Slutsky, Wesley Kennedy, George W. Terrell, Jr., Cotton, Watt, Jones & King, Chicago, for plaintiffs.
James E. Sykes, Richard A. Cowen, Cowen, Crowley, Nord & Doane, Chicago, for defendants.
Carmen Gambino ("Gambino") and his fellow trustees (collectively "Trustees") of the Graphic Arts Industry Joint Pension Trust ("Trust") have sued Index Sales Corporation ("Index") and Donald Keenan ("Keenan") for unpaid and delinquent contributions to Trust, an employee benefit plan under Employment Retirement Income Security Act ("ERISA"). In response to Trustees' motion for summary judgment, Index admits liability while Keenan (who has filed a cross-motion for summary judgment) disputes his own individual responsibility for the delinquent contributions. For the reasons stated in this memorandum opinion and order, summary judgment as to liability and as to the principal amount due is granted against both Index and Keenan, subject to further proof as to the amounts to be awarded over and above the delinquent contributions themselves.
Index is an employer signatory to the collective bargaining agreement ("CBA") negotiated between Union Employers Association of the Printing Industry of Illinois and Local 458 of the Graphic Communications International Union, AFL-CIO. Keenan—who is Index's President, Director and sole stockholder—is not.2 Under the CBA each employer is bound to the Trust Agreement establishing Trust and is obligated to make periodic contributions to Trust. Trustees' rule as to delinquent payments (a rule authorized by CBA Art. 40, § 4 and Trust Agreement Art. VII, § 4) provides in part:
Index is concededly delinquent in its contributions. Though the parties began with a dispute as to the principal amount of the delinquency, Trustees have now accepted defendants' contentions (1) that the month of November 1984 is not included in the delinquent category (R. Mem. 2 n. 1) and (2) that the past-due delinquency from March 1985 through May 1987 aggregates $12,416.84 in principal amount (R. Mem. 13).
Index has been in existence and operation for more than 60 years, and it has all the hallmarks of corporate regularity. There is no factual basis for "piercing the corporate veil" under common-law principles calling that doctrine into play—Keenan's affidavit establishes that, and Trustees do not dispute it. However, it is equally undisputed (from both Keenan's and Gambino's affidavits) that Keenan has been and is Index' Chief Operating Officer, having not only technical responsibility over but also actually carrying out all of Index' labor relations and all its negotiations with Trustees and their representatives as to the CBA and Trust, all corporate operations and affairs, all corporate financial transactions and decisions and all matters relating to Trust (including the making of, and the failure to make, contributions).
"Employer" Under ERISA
ERISA imposes liability for employee benefit plan contributions on "employers." This Court is called on to determine whether an individual such as Keenan—not directly an "employer" in the conventional sense—may nonetheless be an "employer" in statutory terms. For that purpose two statutory definitions (respectively Sections 1002(5) and 1002(9)3) become relevant:
It is frankly astonishing to discover the paucity of decisions that have considered whether individuals exercising principal or sole control over corporate employers may or may not be held personally responsible for their corporations' ERISA contributions, on the ground that such individuals are or are not themselves statutory "employers" under ERISA. Especially in times of economic stress with failing corporate businesses, the vulnerability of individual officers, directors or stockholders to such personal liability must assume major significance. Yet the judicial decisions are scarce enough to impose no burden of retrieval on the Lexis or Westlaw user.
All courts that have considered the different question of corporate veil piercing in the ERISA context have had no difficulty in attaching personal liability for delinquent contributions to individuals who are vulnerable to that kind of common-law liability for all obligations of their corporations—hardly a surprising result. But absent that common-law predicate for liability, the few courts that have examined the exposure of individual controlling persons for such delinquencies have split on the issue.4 No Court of Appeals decision has imposed such liability to a broader extent (though for reasons discussed later in this opinion the First Circuit must be viewed as having pointed the way to that result in Donovan v. Agnew, 712 F.2d 1509, 1514 (1st Cir.1983)), while the Third Circuit (Solomon v. Klein, 770 F.2d 352, 354 (3d Cir. 1985)) and the Ninth Circuit (e.g., Operating Engineers Pension Fund v. Reid, 726 F.2d 513, 515 (9th Cir.1984)) have rejected personal liability except where traditional grounds are present for piercing the corporate veil.5 Because our own Court of Appeals has not been called upon to address the issue, this Court really writes on a clean slate.6
Before this opinion turns to the effect of Section 1002(5) on the personal liability question, one issue not identified by the litigants—or, so far as this Court is aware, discussed by any of the reported decisions—should be mentioned. If read in purely literal terms, Section 1145 might be viewed as requiring payment only by the entity that has signed a CBA:
Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement.
But such a reading (1) would allow no room at all for the Section 1002(5) definition of "employer" to include persons "acting indirectly ... in the interest of an employer" and (2) would not permit even corporate veil piercing, which every court to have considered the issue has found a predicate for imposing personal liability. After all, the corporate "employer" that is obligated to make contributions because it signs a CBA is by definition "acting directly as an employer." To limit ERISA liability solely to that signatory would render the enactment of the ensuing statutory language ("acting ... indirectly in the interest of an employer") a nullity. And it is not simply a principle of statutory construction to say Congress will not be considered to have spoken in a wholly idle manner. Accordingly this Court, like the other courts that have found some room for personal liability, will consider that a "person" within the Section 1002(5) definition of "employer" in relation to his or her corporation may be responsible for contributions even though only the corporation is the CBA signatory.
Only Index is liable for the delinquent contributions in straight contract terms: Keenan was not a signatory to the CBA and was not, then, the "employer" designated in that agreement. Instead Trustees contend the Section 1002(5) inclusion, in the statutory definition of "employer," of "any person acting ... indirectly in the interest of an employer, in relation to an employee benefit plan" sweeps up Keenan. Thus under the analysis of the preceding paragraph the question becomes one of giving content to that statutory language, for which purpose Trustees invoke the long-standing precedents that have defined the substantively identical language under the Fair Labor Standards Act ("FLSA").
In enacting ERISA Congress specified an intended broad sweep of the legislation in social-purpose terms (see Section 1001(a))— an intention courts have honored by acting to insure employers' making of plan contributions and workers' receipt of benefits to which they are entitled—just as Congress had stated for FLSA and workers' entitlement to overtime. That does not, of course, justify an expansion of ERISA's coverage beyond its terms.7 But it does justify application of the normal rule in reading statutes: that when a statutory provision tracks an earlier one, the judicial construction of that earlier one also carries over to the later statute.
FLSA's relevant definitions of "employer" (Section 203(d)8) and of "person" (Section 203(a)) are startlingly parallel to those already quoted from ERISA. Here are the FLSA definitions (emphasis added):
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