Sullivan v. Cox

• Citation: 78 F.3d 322
• Decision Date: 12 March 1996
• Docket Number: No. 95-3017,95-3017
• Parties: 19 Employee Benefits Cas. 2926, Pens. Plan Guide P 23918K Gerald M. SULLIVAN, not individually but as trustee of Plumbers Pension Fund, Local 130, U.A., et al., Plaintiff-Appellee, v. Terry COX d/b/a Central Emerald, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 322

78 F.3d 322

19 Employee Benefits Cas. 2926, Pens. Plan Guide P 23918K

Gerald M. SULLIVAN, not individually but as trustee of

Plumbers Pension Fund, Local 130, U.A., et al., Plaintiff-Appellee, v. Terry COX d/b/a Central Emerald, Defendant-Appellant.

No. 95-3017.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 13, 1996.

Decided March 12, 1996.

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 94 C 2363--Ruben Castillo, Judge.

Paul V. Esposito (argued), Douglas A. Lindsay, Thomas E. Brabec, Blake T. Lynch, John William Loseman, Lewis, Overbeck & Furman, Chicago, IL, for Plaintiff-Appellee.

William F. Fitzpatrick (argued), Callahan & Fitzpatrick, Oak Lawn, IL, for Defendant-Appellant.

Before CUMMINGS, BAUER and MANION, Circuit Judges.

CUMMINGS, Circuit Judge.

At issue is whether an individual accepted personal responsibility for delinquent contributions to benefit plans under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1145 ("ERISA"), when he signed collective bargaining agreements as "President" of the corporation, but failed to provide the full legal name of the corporation as called for by the contract. The district court held that individual liability was appropriate and entered summary judgment. Because Illinois contract law is to the contrary, we now reverse.

Plaintiff Gerald M. Sullivan is trustee of four multiemployer benefit plans ("Funds") that were established under collective bargaining agreements between the Chicago Journeymen Plumbers' Union, Local 130, U.A. ("Union") and various employers and employer associations. Plaintiff as trustee filed suit against Terry Cox, an individual doing business as Central Emerald. The complaint sought a judgment against Cox personally for the amount of delinquent contributions due to the Funds in violation of ERISA, 29 U.S.C. §§ 1132, 1145. Cox denied in his answer that he was personally liable, stating that he never signed the relevant agreements in his individual capacity, but as president of Central Emerald, an Illinois corporation owned and operated by him and his wife. Because he had never employed plumbers in his individual capacity, Cox contended that only the corporation could be liable for delinquent payments.

The key document in this dispute is an Interim Agreement signed by Cox on August 5, 1992. The Agreement stated that negotiations had been concluded for an areawide collective bargaining agreement effective June 1, 1992, through May 31, 1995, but that the agreement had not yet been printed. It further stated as follows:

The Employer and Union agree to be bound by the terms and provisions of the June 1, 1992 collective bargaining agreement between the Union and the PCA [Plumbing Contractors Association] and to execute an agreement adopting the terms and provisions of said collective bargaining agreement, when printed.

In the space subtitled "Correct Legal Name of Business," Cox wrote "Central Emerald," and under the heading "Type of Entity," Cox checked the space beside "Corporation" (rather than "Proprietorship" or "Partnership"). On the Signature line, Cox signed "Terry Cox President." Cox also signed a Contractor's Registration Statement the same day using his own name in spaces marked "Firm Name" and "Signature of Contractor."

The district court entered an Agreed Order requiring an audit by the benefit plans' auditors. The audit revealed delinquent contributions of $106,746.53, plus penalties and interest. On this basis, Plaintiff successfully moved for summary judgment against Cox on its ERISA claim. Section 1145 of ERISA states,

Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement.

29 U.S.C. § 1145. ERISA essentially imposes a federal obligation on employers who contractually agree to contribute to employee pension plans. Employers who fail to meet the Section 1145 obligation are liable for federal remedies, court costs, attorney's fees, and liquidated damages or interest under 29 U.S.C. § 1132(g)(2). The parties do not dispute and indeed could not dispute, that Section 1145 only creates a federal ERISA obligation for employers who are obligated to make contributions even absent the statute--in other words, those who are obligated under state law. Levit v. Ingersoll Rand Fin. Corp., 874 F.2d 1186, 1193-1194 (7th Cir.1989); Plumbers' Pension Fund, Local 130, U.A. v. Niedrich, 891 F.2d 1297, 1299-1301 (7th Cir.1989), certiorari denied, 495 U.S. 930, 110 S.Ct. 2169, 109 L.Ed.2d 499; see also Cement & Concrete Workers Dist. Council v. Lollo, 35 F.3d 29, 36-37 (2d Cir.1994); Scarbrough v. Perez, 870 F.2d 1079 (6th Cir.1989); International Bhd. of Painters & Allied Trades Union v. George A. Kracher, Inc., 856 F.2d 1546 (D.C.Cir.1988); Massachusetts Laborers' Health & Welfare Fund v. Starrett Paving, 845 F.2d 23 (1st Cir.1988). These cases rejected claims that liability for delinquent pension contributions should extend to a corporation's chief officer under Section 1145. Judge Breyer explained the rationale for this conclusion in Starrett Paving, which rests primarily on legislative statements to the effect that ERISA was intended to impose obligations only on parties who were already contractually obligated to make contributions. 845 F.2d at 25. Thus, turning to the statute's language, not only must a potentially liable party be an "employer" under Section 1145, he must also be an "employer who is obligated to make contributions."

The cases recognize that Congress did not intend through Section 1145 to upset the general rule that individuals are not liable for corporate debt, see George A. Kracher, 856 F.2d at 1550; rather, the general rule is only upset where individuals contractually accept responsibility for corporate liability, thus becoming "employers obligated to make contributions" under Section 1145. There may be other exceptions not at issue here. For example, there are no allegations here that this is a corporate-veil piercing case-that under state or federal law Cox is the corporation or is its alter ego. Nor are there allegations that Cox, as a corporate official, committed fraud or acted in concert with a fiduciary to breach a fiduciary duty. We express no opinion as to whether such allegations would fall into an exception to the rule that Section 1145 does not itself create individual liability, though our cases suggest that such exceptions exist. See Levit, 874 F.2d at 1193-1194.

Given this understanding of the law, when the district court imposed Section 1132(g)(2) liability on Cox, it necessarily concluded that Cox was not merely an "employer," but an employer who was contractually obligated to make contributions to the Funds in his individual capacity. Cox does not dispute on appeal the conclusion that he was an employer, only that he was contractually obligated in his individual capacity. We review the district court's decision de novo, construing the record in the light most favorable to the non-moving party, East Food & Liquor, Inc. v. United States, 50 F.3d 1405, 1410 (7th Cir.1995), and we will reverse a summary judgment if a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202.

The question here is whether the district court properly concluded that no genuine issue of material fact exists as to whether Cox, by signing the Interim Agreement and the Registration Statement, bound only the corporation. The court was persuaded that no genuine issue of material fact exists for two reasons: first, Cox failed to provide the "Correct Legal Name of Business" as required by the Interim Agreement, writing only "Central Emerald" when the corporation's full name is "Central Emerald Sewer Service, Inc."; second, Central Emerald's 1992 Annual Report indicated that Jane Cox, his wife, held all offices in the corporation such that he had no authority to bind the corporation. Sullivan v. Cox, 890 F.Supp. 759, 762 (N.D.Ill.1995).

In order to determine the materiality of factual disputes, it is necessary to determine first the governing principles of law. For example, it is not clear from the district court's opinion why Cox's failure to provide the corporation's full legal name is dispositive on the issue of personal liability. If the contracting parties' intent is a relevant factor under the controlling law, failure to write the full name is certainly not dispositive; to the contrary, mention of the corporate entity might be evidence of an intent to bind the corporation. ERISA does not contain a body of law governing contract interpretation, though it does supersede all state laws that relate to employee benefit plans. 29 U.S.C. § 1144. Courts must therefore fashion federal common law to govern ERISA suits in an effort to promote uniformity, turning to state law only when consistent with the policies underlying ERISA. Fox Valley & Vicinity Constr. Workers Pension Fund v. Brown, 897 F.2d 275, 281 (7th Cir.1990) (en banc), certiorari denied, 498 U.S. 820, 111 S.Ct. 67, 112 L.Ed.2d 41. In cases arising under Section 1145, federal courts have consistently applied state contract law, so long as the state law is not contrary to ERISA. See Rockney v. Blohorn, 877 F.2d 637, 643-644 (8th Cir.1989); see also Lollo, ...