McDougall v. Pioneer Ranch Ltd. Partnership

• Decision Date: 12 July 2007
• Docket Number: No. 06-3757.,06-3757.
• Citation: 494 F.3d 571
• Parties: Howard McDOUGALL and Central States, Southeast and Southwest Areas Pension Fund, Plaintiffs-Appellees, v. PIONEER RANCH LIMITED PARTNERSHIP and Robert S. Whiting, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

494 F.3d 571

Howard McDOUGALL and Central States, Southeast and Southwest Areas Pension Fund, Plaintiffs-Appellees, v. PIONEER RANCH LIMITED PARTNERSHIP and Robert S. Whiting, Defendants-Appellants.

No. 06-3757.

United States Court of Appeals, Seventh Circuit.

Argued May 25, 2007.

Decided July 12, 2007.

John J. Franczyk, Jr., Central States, Southeast & Southwest Areas Pension Fund, Timothy C. Reuter (argued), Central States Law Dept., Rosemont, IL, for Plaintiffs-Appellees.

Scott G. Graham (argued), Howard & Howard, Kalamazoo, MI, for Defendants-Appellants.

Before BAUER, CUDAHY, and FLAUM, Circuit Judges.

FLAUM, Circuit Judge.

Elaine and Robert Whiting owned Pioneer Ranch Limited Partnership, a vacation property on which they farmed and raised cattle. The Whitings also owned a trucking company, which, after several years of operation, became bankrupt and ceased doing business. The Central States, Southeast and Southwest Areas Pension Fund ("the Fund"), a multi-employer pension fund, assessed substantial withdrawal liability on the trucking company, but could not collect any of the amount owed. The Fund sued Pioneer Ranch and Robert Whiting for the withdrawal liability. The district court granted the Fund's motion for summary judgment, concluding that Pioneer Ranch was responsible for the trucking company's liability under the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. §§ 1381-1461 (1980). Pioneer Ranch appeals. For the following reasons, we affirm.

I. BACKGROUND

A. Statutory Background

Congress passed the MPPAA as an amendment to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1371. Under ERISA, the Pension Benefit Guaranty Corporation ("PBGC"), a government corporation, protects covered employees by insuring their benefits against fund insolvency or premature termination. Prior to 1980, ERISA's contingent liability provisions gave employers an incentive to withdraw from financially weak multi-employer plans to avoid liability if the plan terminated in the future. As a result, the PBGC reported to Congress that the premiums paid to it were insufficient to cover its expected future liabilities. Congress then passed the MPPAA, seeking to discourage voluntary withdrawals from multi-employer plans by imposing a mandatory liability on all withdrawing employers. See Cent. States, Se. and Sw. Areas Pension Fund v. Ditello, 974 F.2d 887, 888 (7th Cir.1992). The Act holds such employers liable for their proportionate share of "unfunded vested benefits." 29 U.S.C. § 1381.

Upon an employer's withdrawal from a plan, the trustees of the fund must promptly determine the amount of an employer's liability and create a payment schedule. Within 90 days of notification, the employer may request that the trustees review their determination. 29 U.S.C. § 1399(b)(2)(A). If either party is dissatisfied with the outcome of the review, the MPPAA mandates arbitration proceedings. 29 U.S.C. § 1401(a)(1) ("Any dispute between an employer and the plan sponsor . . . shall be resolved through arbitration."). After arbitration, or if no arbitration proceeding has been initiated, either party may bring an action in federal district court "to enforce, vacate, or modify the arbitrator's award." 29 U.S.C. § 1401(b)(2).

Section 1301(b)(1) provides that all "employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer and all such trades and businesses as a single employer." 29 U.S.C. § 1301(b)(1). Under this section, each trade or business under common control is jointly and severally liable for the withdrawal liability of the others. See Ditello, 974 F.2d at 889.

B. Facts

In 1970, Robert and Elaine Whiting¹ purchased property located in Cheboygan County, Michigan to use as a vacation home. The Whitings kept a number of cattle and other livestock on the property and conducted some farming and ranching activities. In 1973, the Whitings hired David McCormick to care for the property and assist with the farming and livestock. Over the next twenty years, the Whitings used the property as a vacation home and developed a small cattle herd by buying and selling a few cattle each year.

In 1993, the Whitings established the Pioneer Ranch Limited Partnership. Elaine and Robert were both general and limited partners, and their four children, R. Scott Whiting, Daniel Whiting, Jo Ann Skandalaris, and Jane Whiting were limited partners. Pioneer Ranch's partnership agreement stated that the partnership's purpose was as follows:

(a) acquiring and holding certain real property located in the Township of Aloha, Cheboygan County, Michigan, heretofore owned and managed as a cattle farm by the General Partners.

(b) acquiring additional real and personal property to be used in operating, managing, and expanding the Property, and to engage in the business of farming, ranching, and any agricultural pursuit or undertaking; and

(c) doing any and all things and carrying on any and all other activities necessary, convenient, or incidental to accomplish any of the preceding purposes and powers or to protect and benefit the Partnership.

After the Whitings established the partnership, they handled the livestock on the ranch the same way they handled it before 1993.

From 1994 through 2003, Pioneer Ranch filed tax returns that contained a schedule listing profits and losses from farming. The schedule indicated that Pioneer Ranch lost money every year after the Whitings established the partnership. On its tax returns, the partnership listed "cattle farm" as its principal business activity, claimed farm expenses, and certified that it was entitled to an agricultural production exemption.

The Whitings also owned a trucking company called Whiting Distribution Services ("WDS"), which operated in Detroit, Michigan. In 2003, WDS, which had been experiencing financial difficulties, entered bankruptcy and wound up its operations. WDS was subject to a series of collective bargaining agreements requiring pension contributions to the Fund. On December 6, 2003, WDS withdrew from the Fund. On January 30, 2004, the Fund demanded that the Whiting Controlled Group pay $3,708,184.81 worth of withdrawal liability pursuant to ERISA, 29 U.S.C. §§ 1382(2) and 1399(b). On August 23, 2005, the Fund issued another notice and demand to the Whiting Controlled Group that was served on Pioneer Ranch and Robert Whiting. On February 15, 2006, the Whiting Controlled Group, through Pioneer Ranch, received a notice that the withdrawal liability payments were past due. When the Whiting Controlled Group failed to pay the withdrawal liability, the Fund filed suit in federal district court, arguing that it could collect the withdrawal liability from Pioneer Ranch and Robert Whiting because Pioneer Ranch was a "trade or business" under § 1301(b)(1).

On June 15, 2006, the parties filed cross-motions for summary judgment. On July 20, 2006, the district court granted the plaintiffs' motion for summary judgment and denied the defendants' motion, holding that Pioneer Ranch was a trade or business under § 1301(b)(1).

II. DISCUSSION

A. Standard of Review

The initial question presented in this case is the standard by which we review the district court's decision. We ordinarily review a district court's grant of summary judgment in an ERISA case de novo. Santaella v. Metro. Life Ins. Co., 123 F.3d 456, 460 (7th Cir.1997). However, in Central States, Southeast and Southwest Areas Pension Fund v. Slotky, 956 F.2d 1369, 1373-74 (7th Cir.1992), this Court held that the clearly erroneous standard of review applies when the only issue before the district court is the characterization of undisputed subsidiary facts and where a party does not have the right to a jury trial. In Slotky, the Court stated that although the fact of whether or not an enterprise is a trade or business is not ordinarily resolved on summary judgment, "[delaying judgment] does not make sense in a case in which the only factual issue is one of characterization, . . . and the opponent of summary judgment claims no right to a jury trial." Id. at 1374. In that scenario, "both the record and the fact-finder are the same in the summary judgment proceeding as they would be in a trial. There is no more evidence to put in and no different trier to evaluate it." Id. As we explain below, there is no dispute over the underlying facts in this case. Thus, to determine the appropriate standard of review, we must analyze whether the defendants are entitled to a jury trial.²

The Seventh Amendment provides that "[in] Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved." U.S. Const. amend. VII. The Supreme Court has long understood "`suits at common law' to refer not merely to suits that the common law recognized among its old and settled proceedings, but to suits in which legal rights were to be ascertained and determined, in contrast to those where equitable rights and remedies were recognized." Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340, 348, 118 S.Ct. 1279, 140 L.Ed.2d 438 (1998) (quoting Parsons v. Bedford, 28 U.S. 433, 447, 3 Pet. 433, 7 L.Ed. 732 (1830)). The general rule in ERISA cases is that there is no right to a jury trial because "ERISA's antecedents are equitable," not legal. Mathews v. Sears Pension Plan, 144 F.3d 461, 468 (7th Cir.1998). However, § 4301(a)(1) permits plan fiduciaries, employers, participants, or beneficiaries to bring civil suits under Title IV of ERISA and seek appropriate legal or equitable relief with respect to a multi-employer plan. 29 U.S.C. § 1451(a)(1). Though § 4301(a)(1) provides for both legal and equitable remedies in the case of multi-employer pension plan disputes, the few courts that have considered the question have determined that the Seventh Amendment does not guarantee a...