Manufacturers' Indus. Relations Ass'n v. East Akron Casting Co.

• Decision Date: 03 August 1995
• Docket Number: Nos. 93-4260,s. 93-4260
• Citation: 58 F.3d 204
• Parties: MANUFACTURERS' INDUSTRIAL RELATIONS ASSOCIATION and the Trustees of M.I.R.A.-G.M.P. Allied Workers Pension Trust, Plaintiffs-Appellants (93-4260/94-3998), Appellees, v. EAST AKRON CASTING COMPANY and Howard Wenk, Defendants-Appellees, East Akron Casting Company, Defendant-Appellant (93-4293). /4293, 94-3998.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 204

58 F.3d 204

31 Fed.R.Serv.3d 1378

MANUFACTURERS' INDUSTRIAL RELATIONS ASSOCIATION and the

Trustees of M.I.R.A.-G.M.P. Allied Workers Pension

Trust, Plaintiffs-Appellants (93-4260/94-3998), Appellees, v. EAST AKRON CASTING COMPANY and Howard Wenk, Defendants-Appellees,

East Akron Casting Company,

Defendant-Appellant

(93-4293).

Nos. 93-4260/4293, 94-3998.

United States Court of Appeals, Sixth Circuit.

Argued May 8, 1995.

Decided June 21, 1995.

Rehearing and Suggestion for

Rehearing En Banc

Denied Aug. 3, 1995.

Lawrence F. Raniszeski, Bloomfield Hills, MI, Edward J. Riegler, Grisi & Riegler, Akron, OH, Harold G. Belsheim (argued), Harold G. Belsheim, William D. Shultz (briefed), Suelthaus & Kaplan, Fairview Heights, IL, for plaintiffs-appellants.

Helmut A. Rothenbuecher (argued and briefed), Brouse & McDowell, Akron, OH, for defendants-appellees.

Before: SUHRHEINRICH and DAUGHTREY, Circuit Judges; HEYBURN, District Judge. ^*

DAUGHTREY, Circuit Judge.

This ERISA appeal had its genesis in default judgments originally entered by the district court in favor of the plaintiffs, the Manufacturers' Industrial Relations Association and the MIRA-GMP Allied Workers' Pension Trust (collectively "MIRA"), under the Multiemployer Pension Plan Amendments Act of 1980 ("the MPPAA"), 29 U.S.C. Secs. 1381 et seq. Eleven months after the default judgments were entered, the defendants, the East Akron Casting Company and its president and principal shareholder, Howard Wenk, moved to set aside the default judgments under Fed.R.Civ.P. 60(b). The district court granted the motion and later granted summary judgment on the merits to Wenk, finding that he was not liable to MIRA under the MPPAA. The district court did find that East Akron Casting was liable, however, and granted summary judgment to MIRA, awarding the pension fund approximately $256,000 plus interest. The district court also awarded attorneys fees and costs to Wenk, but denied costs and fees to MIRA as against East Akron Casting.

MIRA now appeals the order granting summary judgment to Wenk, and Akron Casting cross-appeals the order granting summary judgment to MIRA. Because we conclude that the district court erred in setting aside the original default judgments in MIRA's favor, we reverse the judgments on the merits entered below and reinstate the default judgments.

I. Factual and Procedural Background

There is no dispute concerning the applicability of the MPPAA to the parties in this case. The 1980 amendments to ERISA were designed to prevent employers from withdrawing from a multiemployer pension plan without paying their share of unfunded, vested benefit liability, thereby threatening the solvency of such plans. See Mason and Dixon Tank Lines, Inc. v. Central States Pension Fund, 852 F.2d 156, 158-59 (6th Cir.1988) (the MPPAA "requires employers who withdraw, completely or partially, from a multiemployer pension plan to contribute to the plan a proportionate share of the unfunded, vested benefits").

Nor is there any dispute concerning the facts that gave rise to the litigation between MIRA and the two defendants. During the 1980's, East Akron Casting Co., a small Ohio corporation, operated a foundry which employed a number of MIRA plan participants. During this time, Wenk was the president, CEO, and major shareholder of the company, which was obligated by certain collective bargaining agreements to contribute to the plan.

On May 1, 1987, East Akron Casting ceased its manufacturing operations and leased out its foundry to another casting company. Four days later, on May 5, 1987, MIRA first alerted the defendants as to their potential withdrawal liability. Then, in January 1988, pursuant to 29 U.S.C. Secs. 1382 & 1399(b), MIRA sent a notice and demand letter to the defendants concerning their withdrawal liability, which MIRA determined to be $255,999. By this same letter, MIRA also informed the defendants that they had a right to contest their liability by arbitration within 60 days, pursuant to 29 U.S.C. Sec. 1401(a)(1), and that the failure to exercise this right would cause the assessment to become due and owing, pursuant to 29 U.S.C. Sec. 1401(b)(1).

Wenk responded in two substantially identical handwritten letters, dated April 25 and 29, 1988. In the April 25 letter, Wenk wrote:

As I have stated before, East Akron Casting Co. is no longer a foundry. It is a leasing company. The fee of $256,000 for pension withdrawal is much too high and impossible to pay. I would like some information on ways other foundries have handled this liability in the past.

However, at no time did the defendants request arbitration.

MIRA declined to provide the defendants with the requested information and, on October 28, 1988, notified the defendants that it was filing an action in federal court seeking declaration of withdrawal liability pursuant to 29 U.S.C. Sec. 1451(a)(1). Suit was filed on April 27, 1989. On September 19, 1989, the defendants having failed to respond, MIRA moved for a default judgment, which was granted on September 22, 1989. The court held the defendants jointly and severally liable for $257,376, plus interest and attorney fees and costs.

In August 1990, seeking satisfaction of its judgment, MIRA filed an action in state court. On August 22, 1990, 16 months after the complaint was filed, the defendants appeared in district court and moved, pursuant to Fed.R.Civ.P. 60(b), for relief from the default judgment, but did not specify under which subsection of the rule they were seeking relief.

On June 11, 1991, also without proper specification, the court granted the defendants' Rule 60(b) motion. In doing so, the district court applied the three-factor test set forth in United Coin Meter Co., Inc. v. Seaboard Coastline RR, 705 F.2d 839, 845 (6th Cir.1983):

1. Whether the plaintiff will be prejudiced;

2. Whether the defendant has a meritorious defense; and

3. Whether culpable conduct of the defendant led to the default.

As to the first factor, the court found that the "plaintiff has failed to show any prejudice which might result to it if the case were reopened." As to the second factor, the court found that the defendants' arguments--that Wenk, as an individual, could not be an employer within the meaning of the MPPAA and that East Akron Casting's continued operation as a lessor precluded the finding of a withdrawal within the meaning of the MPPAA--constituted meritorious defenses. As to the third factor, the court found that the defendants' conduct amounted to "reckless disregard," noting that "it cannot seriously be argued that Wenk was unable to grasp the seriousness of the situation." However, despite this finding of culpability and relying on Berthelsen v. Kane, 907 F.2d 617 (6th Cir.1990) (per curiam ), the court set aside the default judgment, saying:

Willful evasion of service of process amounts to behavior which is certainly more reprehensible than failure to answer a complaint, regardless of a defendants' contemplation of the gravity of the lawsuit. If the Sixth Circuit in Berthelsen was willing to set aside a default judgment even though the defendant willfully evaded service of process, then this court has no choice but to do likewise in the case at bar.

Subsequently, Wenk moved for summary judgment, arguing that he was not an employer within the meaning of the MPPAA and, therefore, could not be individually responsible for withdrawal liability. The district court granted the motion, relying primarily on the ruling in Scarbrough v. Perez, 870 F.2d 1079 (6th Cir.1989), that, under the MPPAA, the term "employer" does not encompass corporate officers who, therefore, can not be held individually responsible for withdrawal liability absent the personal assumption of corporate debt or fraud or misconduct separate from the issue of withdrawal liability. The district court then granted MIRA's summary judgment motion against East Akron Casting and imposed withdrawal liability in the amount of $255,999, plus interest.

Still later, in January 1994, Wenk moved for fees and costs against MIRA, and MIRA moved for fees and costs against East Akron Casting. The district court awarded fees and costs to Wenk but denied MIRA's motion, citing its discretionary authority to do so under 29 U.S.C. Sec. 1451(e).

II. Analysis

Although the district court did not indicate the subsection of Rule 60(b) under which it was granting relief in setting aside the default judgments in this case, even a cursory reading of the rule would indicate that only subsection (b)(1) is relevant to the facts of this case. ¹ Rule 60(b)(1) provides:

On motion and upon such terms as are just, the court may relieve a party or a party's legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect ...

We review the grant or denial of a Rule 60(b) motion for abuse of discretion. Lewis v. Alexander, 987 F.2d 392, 396 (6th Cir.1993). However, "[a] party seeking relief from judgment under Rule 60(b) must show that its case comes within the provisions of the Rule." Id. (citing In re Salem Mortgage Co., 791 F.2d 456, 459 (6th Cir.1986)). Because we are convinced that the defendants wholly failed to carry their burden in this respect, we must conclude that the district court abused its discretion in granting relief under Rule 60(b)(1).

The district court did not err in deciding to apply the three-factor test in United Coin Meter, supra, to the facts in this case. Instead, the error occurred when the court, in reviewing the "culpability factor," looked to the Berthelsen case as controlling and, additionally, constructed an otherwise legally non-existent distinction between "reckless disregard" and "willful culpability" or "intentional disregard." Moreover, our decision in Waifersong, Ltd. v. Classic Music Vending, 976 F.2d 290 (6th Cir.1992), decided after the district court's entry of final...