Ind. Elec. Workers Pension Benefit Fund v. Manweb Servs., Inc.

• Decision Date: 12 March 2018
• Docket Number: No. 16-2840,16-2840
• Parties: INDIANA ELECTRICAL WORKERS PENSION BENEFIT FUND, et al., Plaintiffs-Appellants, v. MANWEB SERVICES, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

884 F.3d 770

INDIANA ELECTRICAL WORKERS PENSION BENEFIT FUND, et al., Plaintiffs-Appellants,

v.MANWEB SERVICES, INC., Defendant-Appellee.

No. 16-2840

United States Court of Appeals, Seventh Circuit.

Argued December 8, 2016

Decided March 12, 2018

Rachel Renee Parisi, Rena Guarnieri Sauer, Attorneys, Ledbetter Parisi Sollars, LLC, Miamisburg, OH, for Plaintiffs-Appellants.

James Harold Hanson, James T. Spolyar, Attorneys, Scopelitis, Garvin, Light, Hanson & Feary, P.C., Indianapolis, IN, for Defendant-Appellee.

Before Manion, Kanne, and Hamilton, Circuit Judges.

Hamilton, Circuit Judge.

For a second time in this case, we consider whether defendant-appellee ManWeb Services, Inc. is a successor in interest to a defunct employer that owes withdrawal charges to a multiemployer pension plan. The original employer was Tiernan & Hoover, but everyone refers to it as "Freije" after its key founder, William Freije, and his son Richard. ManWeb entered into an asset purchase agreement with Freije in 2009. Freije was a small contractor specializing in refrigeration and cold-storage engineering for commercial and industrial projects. ManWeb was a larger company offering a wider range of contracting services, with the notable exception, before it acquired Freije’s assets, of refrigeration projects such as cold-storage warehouses. Freije’s unionized electricians were covered by a multiemployer pension plan.

The Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multiemployer Pension Plan Amendments Act of 1980 ( MPPAA ), establishes withdrawal liability for employers leaving a multiemployer pension plan. 29 U.S.C. § 1381. In this case, Freije withdrew from the Indiana Electrical Workers Benefit Fund ("the Fund"). The Fund assessed withdrawal liability of $661,978 against Freije. When Freije failed to pay, the Fund brought this action against both Freije and ManWeb as a successor in interest to Freije. Successor liability can apply under the MPPAA when the purchaser had notice of the liability and there is continuity of business operations. Upholsterers’ Int’l Union Pension Fund v. Artistic Furniture of Pontiac , 920 F.2d 1323, 1329 (7th Cir. 1990). At this point, the only issue in the case is the claim against ManWeb based on successor liability.

The district court granted summary judgment for ManWeb in 2013, finding it lacked notice of Freije’s withdrawal liability. In the first appeal, we remanded, finding that "ManWeb had sufficient pre-acquisition notice of [Freije’s] contingent withdrawal liability to satisfy the federal successor liability notice requirement." Tsareff v. ManWeb Services, Inc. , 794 F.3d 841, 848 (7th Cir. 2015) (" ManWeb I "). On remand, the district court again granted summary judgment for ManWeb, concluding that the Fund had not shown sufficient continuity of business operations to support successor liability. The Fund has appealed again. We find ourselves in respectful disagreement with our colleague on the district court. In the totality of relevant circumstances, ManWeb’s purchase of and use of Freije’s intangible assets—its name, goodwill, trademarks, supplier and customer data, trade secrets, telephone numbers and websites—and its retention of Freije’s principals to promote ManWeb to existing and potential customers as carrying on the Freije business under ManWeb’s larger umbrella, weigh more heavily in favor of successor liability than the district court recognized. We vacate the district court’s decision and remand for further consideration of this equitable determination.

I. Undisputed Facts and Procedural Background

ManWeb is an Indianapolis company that now performs a range of industrial construction services. In August 2009, ManWeb paid $259,360 for the assets of Tiernan & Hoover, another, much smaller Indianapolis construction company specializing in cold-storage facilities. ManWeb I , 794 F.3d at 843. Tiernan & Hoover did business under the name The Freije Company, and like everyone else in this case, we refer to it as Freije. Freije was a party to a collective bargaining agreement with International Brotherhood of Electrical Workers Local 481; ManWeb was non-union. As a union employer, Freije contributed to the Fund and under the MPPAA was required to pay withdrawal liability of $661,978 when it ceased operations. See ManWeb I , 794 F.3d at 843–44. ManWeb did not make any contributions to the Fund after its purchase of Freije. Id. at 844.

A. The Fund’s First Appeal

Neither Freije nor ManWeb made payments to satisfy the withdrawal liability, and Freije never took advantage of its right to seek review of the assessment amount or to challenge the assessment in arbitration. See 29 U.S.C. §§ 1399(b)(2)(A) & 1401(a)(1). The assessment therefore became due when the statutory deadline for contesting the liability passed. See 29 U.S.C. § 1401(b). The Fund then filed this suit against Freije and added ManWeb as a defendant based on successor liability. See 29 U.S.C. §§ 1132(e) – (f) & 1451(c) (authorizing jurisdiction). Both sides filed cross-motions for summary judgment.

The district court granted the Fund’s motion against Freije, finding that Freije owed the withdrawal liability assessment in full. The district court also held, however, that ManWeb was not responsible for successor liability, and the court granted ManWeb’s motion for judgment as a matter of law. Successor liability is an equitable doctrine and is imposed when "there exist sufficient indicia of continuity between the two companies and ... the successor firm had notice of its predecessor’s liability." Artistic Furniture , 920 F.2d at 1329. Finding that "it was impossible for ManWeb to have notice of any existing withdrawal liability," the court found no successor liability without evaluating whether there was substantial continuity of business operations. See ManWeb I , 794 F.3d at 845.

The Fund appealed the denial of successor liability. Because successor liability is an equitable doctrine, our decision rested on an analysis of MPPAA policy goals that seek to ensure "the responsibility for a withdrawing employer’s share of unfunded vested pension benefits is not shifted to remaining employers." Id. at 846. We concluded that ManWeb had notice of Freije’s contingent withdrawal liability. Id. at 848. That liability was included in the Asset Purchase Agreement and financial statements, and ManWeb had included in the agreement a provision trying expressly to disclaim that liability. We reversed and remanded for analysis of the continuity requirement. Id. at 850.

B. Remand and the Current Appeal

On remand, the district court again found in favor of ManWeb on cross-motions for summary judgment, this time finding no substantial continuity of business operations from Freije to ManWeb. The district court evaluated five clusters of continuity factors: business processes and services, facilities and equipment, workforce, management and ownership, and customers. The court concluded that "ManWeb did not and has not continued [Freije’s] business without interruption or substantial change." The court then addressed the balance of equities and found that the factors and policies weighed against successor liability.

II. Analysis

Summary judgment is appropriate only where there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(a) ; Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). We review de novo the district court’s grant of summary judgment. McDougall v. Pioneer Ranch Ltd. Partnership , 494 F.3d 571, 575 (7th Cir. 2007). Here the material facts are not disputed.

A. MPPAA Policy Goals and Successor Liability

Multiemployer pension plans are based on defined contributions and pay defined benefits. If one employer defaults on its contributions, whether by delinquency or withdrawal, other employers must make up the difference to cover the defined benefits owed to participants. Artistic Furniture, 920 F.2d at 1327–28, citing Central States, Southeast and Southwest Areas Pension Fund v. Gerber Truck Service Inc. , 870 F.2d 1148, 1151 (7th Cir. 1989). Unpaid contributions also result in the loss of investment income that could have been earned by the plan. Id. at 1328. Both types of losses put financial pressure on the remaining employers and discourage new employers from joining. The financial stability of the plan is put in jeopardy, and plan beneficiaries risk losing their pension benefits.

The MPPAA amended ERISA to protect multiemployer plans from these damaging consequences of withdrawal. See Pension Benefit Guaranty Corp. v. R.A. Gray & Co ., 467 U.S. 717, 723–25, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984) ; H.R. Rep. 96–869, Part 1, at 67–68, 75, 1980 U.S.C.C.A.N. 2918, 2935–36. In enacting the MPPAA, Congress showed "a desire to (1) relieve the financial burden placed upon remaining contributors to a multiemployer fund when one or more of them withdraws from the plan; (2) avoid creating a severe disincentive to new employers entering the plan; and (3) prevent the creation of funding deficiencies." ManWeb I , 794 F.3d at 845–46 (internal citations and quotation marks omitted). Withdrawal liability, a company’s share of unfunded vested benefits, is imposed on an employer that ends its participation in a multiemployer plan. ManWeb I , 794 F.3d at 845 ; Artistic Furniture , 920 F.2d at 1328. The House Committee on Education and Labor explained in enacting the MPPAA : "Employer withdrawal liability will help to insulate a plan from the adverse effects of a sustained decline in the contribution base." H.R. Rep. 96–689, Part 1, at 67, 1980 U.S.C.C.A.N. at 2395. Successor liability may be imposed to prevent other employers from having to make up the difference left by employers who have left the fund without paying their liabilities but whose businesses continue. Artistic Furniture , 920 F.2d at 1328. (In extreme cases of plan failure, the...