Moriarty v. Larry G. Lewis Funeral Directors Ltd., 727

• Decision Date: 29 July 1998
• Docket Number: No. 727,No. 97-3894,727,97-3894
• Citation: 150 F.3d 773
• Parties: Thomas J. MORIARTY, Trustee of the Local UnionI.B.T. Pension Trust and of the Teamsters Local UnionHealth and Welfare Fund, Plaintiff-Appellant, v. LARRY G. LEWIS FUNERAL DIRECTORS LTD. and Leyden Livery Service, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 773

150 F.3d 773

Thomas J. MORIARTY, Trustee of the Local Union No. 727 I.B.T. Pension Trust and of the Teamsters Local Union No. 727 Health and Welfare Fund Plaintiff-Appellant, v. LARRY G. LEWIS FUNERAL DIRECTORS LTD. and Leyden Livery Service, Inc., Defendants-Appellees.

No. 97-3894.

United States Court of Appeals Seventh Circuit.

Argued June 1, 1998.

Decided July 29, 1998.

David S. Allen (argued), Jacobs, Burns, Sugarman, Orlove & Stanton, Chicago, IL, for Plaintiff-Appellant.

Alex V. Barbour (argued), Bates, Meckler, Bulger & Tilson, Chicago, IL, for Defendants-Appellees.

Before CUDAHY, EASTERBROOK, and KANNE, Circuit Judges.

EASTERBROOK, Circuit Judge.

Pension and health coverage through multi-employer plans is expensive--for the Teamsters' funeral industry plan in Chicago, about $7,000 per employee per year. Many firms therefore seek to limit coverage to the employees closest to retirement or at greatest risk of illness. Pension and welfare funds resist such efforts to leave them saddled with the bad risks, shorn of contributions from younger and healthier persons. In a series of cases we have held that a particular firm's employees must be in or out as a (bargaining) unit, if the collective bargaining agreements and ERISA plans so provide. Central States Pension Fund v. Gerber Truck Service, Inc., 870 F.2d 1148 (7th Cir.1989) (en banc); Central States Pension Fund v. Joe McClelland, Inc., 23 F.3d 1256 (7th Cir.1994); Central States Pension Fund v. Central Cartage Co., 69 F.3d 1312 (7th Cir.1995). The funeral-industry funds believe that Larry G. Lewis and his daughter Gina Lewis are playing a corporate shell game to secure coverage for themselves but not their employees. By this suit the Funds demand access to the corporate books for an audit (and any additional contributions warranted in light of the audit's findings).

According to the complaint, whose allegations we must accept, Larry and Gina Lewis worked as funeral directors at Cuneo-Columbian Funeral Home, Inc., until October 1993, when Larry's sister Ann Cuneo, the head of Cuneo-Columbian, fired them. The two Lewises went into business for themselves, establishing Larry G. Lewis Funeral Directors Ltd. (LGLFD), which joined the Funeral Directors Services Association of Greater Chicago (FDSA). The FDSA, a multi-employer association, has a collective bargaining agreement with Local 727 of the Teamsters Union. LGLFD accepted these agreements and began making pension and welfare contributions on behalf of the two Lewises, its only employees. But the business did not flourish; during its year of operation it took in only $12,000, less than it owed the Funds for the Lewises' fringe benefits, and it ceased operations before the end of 1994. But it made pension and welfare contributions anyway, apparently financed out of Larry Lewis's pocket (though LGLFD remitted the money to the Funds).

In April 1995 the Lewises rejoined Cuneo-Columbian. Leyden Livery, Inc., took over LGLFD's accounts payable--a category that apparently included only its pension and welfare contributions. An exchange of letters states that Leyden Livery was lending this money to LGLFD until it could get back on its feet, but the "loan" is not evidenced by a note and LGLFD never attempted to resuscitate its business. Understood most favorably to the Funds, this step effectively merged LGLFD into Leyden Livery, a corporation that nominally provided hearse services to Cuneo-Columbian. We say nominally because, according to the complaint, Leyden Livery has no salaried employees and uses the same address, telephone number, and ownership as Cuneo-Columbian. Since January 1995 Leyden Livery has sent pension and welfare contributions to the Funds on behalf of Larry and Gina Lewis; no money has been remitted on behalf of any other employee of Cuneo-Columbian. At the end of April 1995 Larry Lewis became the sole owner of Cuneo-Columbian and Leyden Livery. LGLFD was dissolved by Illinois on June 1, 1996, for failure to pay its corporate franchise taxes.

Each month the pension and welfare plans send "remittance reports" preprinted with the name of the employer and the covered employees. Employers correct, sign, and return the forms, with payment. The employer identified on these reports is "Larry G. Lewis Funeral Directors, Ltd."; its address is Cuneo-Columbian's; the checks accompanying the reports are drawn on the account of Leyden Livery; and most reports are signed by Gina R. Lewis immediately below this language:

I hereby certify that the information contained in this report is true and correct, and hereby agree to accept and abide by the terms of the Trust Agreement of the Pension Plan, Local 727, I.B. of T., and by the terms of the applicable Local 727, I.B. of T., Labor Agreement, and any amendments.

The Welfare Fund's report has an equivalent statement, with its name substituted for the Pension Plan's. These certifications assure the Funds that the contributions are lawful--for no employer may contribute to a union pension plan without a "written agreement" under § 302(c)(5)(B) of the Labor-Management Relations Act, 29 U.S.C. § 186(c)(5)(B).

Plaintiffs failed to persuade the district judge to let the case get past the pleading stage. The judge ultimately denied the Funds leave to file the second version of their proposed second amended complaint--ruling that new allegations did not cure its predecessors' legal problems--and then dismissed the first amended complaint under Fed.R.Civ.P. 12(b)(6). That is why the caption of this opinion has only LGLFD and Leyden Livery as defendants; Cuneo-Columbian was not added as a defendant until the second amended complaint. But we have recited the facts alleged in that document because it was the one whose legal sufficiency the district judge evaluated. Proceedings would have been cleaner had the district judge allowed its filing and then dismissed it, rather than evaluating the second amended complaint while dismissing the first.

The judge gave two reasons why, in his view, the second amended complaint is deficient. First, the judge thought that the court lacks jurisdiction to the extent the complaint contends that Larry and Gina Lewis are in the same bargaining unit as other employees of Cuneo-Columbian, and that contributions therefore must be made on behalf of all. Only the National Labor Relations Board can decide which employees belong in what bargaining unit, the judge stated. Second, the "proposed complaint alleges only that plaintiff [sic] continued to contribute on behalf of Lewis' former employees, not that it agreed to adopt the agreement for all of its employees. As such, plaintiff's claim that defendant owes contributions for employees that never worked for Lewis is futile." In a later ruling the judge added that the Funds "may not bootstrap liability for all employees because Cuneo-Columbian continued to make contributions for LGLFD's former employees."

The second reason supposes that an employer may choose on whose behalf it will make contributions, despite all-or-none clauses in collective bargaining agreements and ERISA plans. Gerber Truck Service, Joe McClelland, and Central Cartage, none of which the district judge mentioned, show that employers lack this option. Gerber held that even an explicit side agreement between the employer and the local union that pension and welfare contributions would be made for only three members of the bargaining unit was unenforceable against the plans. It follows directly that defendants' private intention to limit coverage to the Lewises is irrelevant. Any particular employer is bound by the collective bargaining agreement (and thus obliged to contribute on behalf of all employees covered by the agreement) or it is not; there is no middle ground. As for the district court's first reason: we don't perceive its relevance...