Pension Benefit Guar. Corp. v. Don's Trucking Co., Inc.

• Decision Date: 12 March 2004
• Docket Number: No. CIV.A. 3:03CV631.,CIV.A. 3:03CV631.
• Citation: 309 F.Supp.2d 827
• Parties: PENSION BENEFIT GUARANTY CORPORATION Plaintiff. v. DON'S TRUCKING COMPANY, INC., et al. Defendants.
• Court: U.S. District Court — Eastern District of Virginia

309 F.Supp.2d 827

PENSION BENEFIT GUARANTY CORPORATION Plaintiff. v. DON'S TRUCKING COMPANY, INC., et al. Defendants.

No. CIV.A. 3:03CV631.

United States District Court, E.D. Virginia, Richmond Division.

March 12, 2004.

COPYRIGHT MATERIAL OMITTED

Nathaniel Rayle, Pension Benefit Guaranty Corporation, Office of the General Counsel, Merrill Debs Boone, Pension Benefit Guaranty Corporation, Office of the General Counsel, Washington, DC, Charles Manley Allen, Jr., Anthony Tacconi, Goodman Allen & Filetti PLLC, Glen Allen, for Pension Benefit Guaranty Corporation, plaintiff.

Robert Allen Canfield, Paul McCourt Curley, Canfield Shapiro Baer Heller & Johnston, Richmond, VA, for Don's Trucking Company, Inc., Donald R. Beverly, Martha H. Beverley, A General Partnership Between Donald R. Beverley and Martha H. Beverley for the Leasing of Real Estate, Name, If Any, Unknown, defendants.

MEMORANDUM OPINION

SPENCER, District Judge.

THIS MATTER comes before the Court on Cross Motions for Summary Judgment filed by Plaintiff Pension Benefit Guaranty Corporation and by Defendants Donald Beverley and Martha Beverley. For the reasons discussed below, Plaintiff's Motion for Summary Judgment is GRANTED and Defendants' Motion for Summary Judgment is DENIED.

I.

Pension Benefit Guaranty Corporation ("PBGC") is a wholly-owned United States government corporation established under 29 U.S.C. § 1302(a) to administer and enforce the pension plan termination insurance program created by Title IV of the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1301-1461 ("ERISA"). PBGC assures the timely payment of guaranteed pension benefits to participants in pension plans that terminate when covered by Title IV. Defendant Don's Trucking Company, Inc. ("Don's Trucking") is a Virginia corporation owned by Defendants Donald and Martha Beverley. Donald and Martha Beverley (the "Beverleys") are married. Together they owned 100% of the voting stock of Don's Trucking. The Beverleys continuously leased to Don's Trucking property of which they are record owners ("Leasing Activity").¹

Don's Trucking sponsored the Don's Trucking Defined Benefit Pension Plan (the "Plan"), which was covered by the pension plan termination insurance program established under Title IV of ERISA. Donald Beverley withdrew $224,440.19 in assets from the Plan. By agreement dated August 19, 1997, the Plan terminated with insufficient assets, with a termination date of July 29, 1997. PBGC, as the appointed statutory trustee of the Plan, sued Donald Beverley in federal court to collect his fiduciary liability, pursuant to 29 U.S.C §§ 1105(a)(3), 1106(a)(1)(D), 1106(b)(1), and 1109(a).² On April 11, 2001, PBGC obtained a judgment against Donald Beverley in the amount of $358,044.40, plus post-judgment interest. To date, the judgment has not been satisfied. On July 28, 2003, PBGC commenced this civil action against Donald Beverley and others to collect the statutory liability arising under 29 U.S.C. § 1362(a) and (b), as result of the termination of the Plan (the "Employer Liability"). PBGC claims that all of the Defendants are jointly and severally liable to PBGC for damages in the amount of $366,181.51, as of June 30, 2003, plus continually accruing interest.

PBGC now moves for summary judgment arguing: (1) that each of the Defendants are jointly and severally liable for the amount of Employer Liability; and (2) that the Defendants' Affirmative Defenses are insufficient as a matter of law.³ In turn, Donald and Martha Beverley move for summary judgment, asserting that PBGC is barred from pursuing this action against Mr. Beverley by res judicata and by the election of remedies doctrine.

II.

A motion for summary judgment lies only where "there is no genuine issue as to any material fact" and where the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). See also Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Haavistola v. Cmty. Fire Co. of Rising Sun, Inc., 6 F.3d 211, 214 (4th Cir.1993); Beale v. Hardy, 769 F.2d 213, 214 (4th Cir.1985). The Court must view the facts and the inferences drawn therefrom in the light most favorable to the party opposing the motion. Ballinger v. North Carolina Agr. Extension Serv., 815 F.2d 1001, 1004 (4th Cir.1987), cert. denied, 484 U.S. 897, 108 S.Ct. 232, 98 L.Ed.2d 191 (1987). While viewing the facts in such a manner, courts look to the affidavits or other specific facts to determine whether a triable issue exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). According to the Fourth Circuit,

In determining whether summary judgment may be granted, the district court must perform a dual inquiry into the genuineness and materiality of any purported factual issues. Whether an issue is genuine calls for an examination of the entire record then before the court in the form of pleadings, depositions, answers to interrogatories, admissions on file and affidavits, under Rule 56(c) and (e) .... Genuineness means that the evidence must create fair doubt; wholly speculative assertions will not suffice. A trial, after all, is not an entitlement. It exists to resolve what reasonable minds would recognize as real factual disputes.

Ross v. Communications Satellite Corp., 759 F.2d 355, 364 (4th Cir.1985) (emphasis in original). Summary judgment is not appropriate if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248, 106 S.Ct. 2505.

III.

A. Each of the Defendants are jointly and severally liable as a matter of law.

When a pension plan terminates under 29 U.S.C. § 1342, the plan's contributing sponsor and each member of its controlled group become jointly and severally liable for the Employer Liability — i.e., the amount of unmet pension obligations as of termination, plus continually accruing interest. 29 U.S.C. § 1362(a) & (b)(1). Here, PBGC alleges that Don's Trucking, as contributing sponsor, and the Leasing Activity, as a business in the sponsor's controlled group, are jointly and severally liable for the Employer Liability. PGBC further argues that the Beverleys are each personally liable because they intended to be partners in the Leasing Activity.

The Beverleys concede that Don's Trucking was the Plan's contributing sponsor, and that the amount of Employer Liability was $366,181.51 as of June 30, 2003.⁴ Therefore, Don's Trucking is indisputably liable for the Employer Liability. However, the Beverleys claim that they did not intend to be partners in the Leasing Activity and that therefore Martha Beverley cannot be held personally liable. The liability of the Leasing Activity and the Beverleys will now be addressed in turn.

1. The Leasing Activity is jointly and severally liable under the applicable PBGC regulations.

The Leasing Activity⁵ is subject to Employer Liability because it qualifies as a member of the Don's Trucking controlled group under the applicable PBGC regulations, which are coextensive with Treasury Regulations under IRC § 414(b) and (c). All trades or businesses in the same controlled group are subject to Employer Liability. See 29 U.S.C. § 1362. A "controlled group" is defined as all organizations under common control. 29 U.S.C. § 1301(a)(14)(A) & (B).

The Leasing Activity was a member of a "brother-sister" type of controlled group. Two organizations belong to a brother-sister group if the same five or fewer individuals own a "controlling interest" in each organization (at least 80 percent of the stock), and exercise "effective control" over each organization (own more than 50 percent of the stock). Central States, Southeast and Southwest Areas Pension Fund v. Ditello, 974 F.2d 887, 891 (7th Cir.1992); 26 C.F.R. § 1.414(c)-2(b)(2) & (c)(2).

Incorporating these definitions, the Leasing Activity was a business under common control with Don's Trucking. First, both the Leasing Activity and Don's Trucking qualify as trades or businesses.⁶ See Ditello, 974 F.2d at 890 ("[F]ederal courts ... have uniformly held that leasing property to a withdrawing employer is a `trade or business' for purposes of section 1301(b)(1).").⁷ Second, the Beverleys owned 100 percent of both entities. Thus the same two individuals owned a controlling interest in, and were in effective control of, both Don's Trucking and the Leasing Activity. See 26 C.F.R. 1.414(c)-2(b)(2) & (c)(2). Therefore, the Leasing Activity was a member of the Don's Trucking controlled group under 29 U.S.C. § 1301(a)(14)(A) and (B). As such, the Leasing Activity is jointly and severally liable for the Employer Liability.

2. Donald and Martha Beverley are also jointly and severally liable.

As for Donald and Martha Beverley, they are likewise personally liable for the Employer Liability because they evinced an intent to be partners in the Leasing Activity. Central States, Southeast and Southwest Areas Pension Fund v. Johnson, 991 F.2d 387, 388 (7th Cir.1993). Under federal common law, a partnership is found when two parties intend to join together to conduct an enterprise. Connors v. Ryan's Coal Co., Inc., 923 F.2d 1461, 1467 (11th Cir.1991). Intent "may be determined with reference to an express agreement or from the circumstances surrounding the purported partnership arrangement." Id.

The circumstances of this case closely mirror the facts in the Johnson case, wherein the Seventh Circuit held that intent to form a partnership may be found from: (1) the husband and wife's purchase of the leasing business with jointly-owned funds; (2) the rental income from the business going into joint accounts; (3) losses from the leasing activity being deducted on the couple's joint tax return; (4) the wife doing some clerical or administrative work at her husband's office; and (5) the husband and wife each owning 50% of another business. Johnson, 991 F.2d at 392-93.

The Johnson factors are...