Trustees of the Graphic Comm. v. Bjorkedal

• Decision Date: 22 February 2008
• Docket Number: No. 07-1258.,No. 07-1256.,07-1256.,07-1258.
• Citation: 516 F.3d 719
• Parties: TRUSTEES OF THE GRAPHIC COMMUNICATIONS INTERNATIONAL UNION UPPER MIDWEST LOCAL 1M HEALTH AND WELFARE PLAN, Appellants/Cross-Appellees, v. Olaf BJORKEDAL; Tamara Bjorkedal, Appellees/Cross-Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

516 F.3d 719

TRUSTEES OF THE GRAPHIC COMMUNICATIONS INTERNATIONAL UNION UPPER MIDWEST LOCAL 1M HEALTH AND WELFARE PLAN, Appellants/Cross-Appellees, v. Olaf BJORKEDAL; Tamara Bjorkedal, Appellees/Cross-Appellants.

No. 07-1256.

No. 07-1258.

United States Court of Appeals, Eighth Circuit.

Submitted: November 15, 2007.

Filed: February 22, 2008.

Ruth S. Marcott, argued, William K. Ecklund and Donald G. Heeman, on the brief, Minneapolis, MN, for appellant.

Corey J. Ayling, argued, Carl S. Wosmek, on the brief, Minneapolis, MN, for appellee.

Before MURPHY, HANSEN, and GRUENDER, Circuit Judges.

[PUBLISHED]

HANSEN, Circuit Judge.

The Trustees of the Graphic Communications International Union Upper Midwest Local 1M Health and Welfare. Plan (Trustees) brought an action against Olaf and Tamara Bjorkedal, shareholders of Nordic Printing and Packaging, Inc., under the Employee Retirement Income Security Act (ERISA) after Nordic Printing and Packaging stopped making payments to the Graphic Communications International Union Upper Midwest Local 1M Health and Welfare Fund. The Trustees sought relief based on breach of contract, breach of fiduciary duty, and piercing the corporate veil theories of liability. The Trustees now appeal the district court's¹ grant of summary judgment in favor of the Bjorkedals, and the Bjorkedals cross-appeal the district court's denial of their motion for attorney's fees. We affirm.

I.

Olaf Bjorkedal and Harry Jacobson incorporated Nordic Press, Inc. in 1968, which they operated as a printing shop. They also incorporated two other printing-related businesses, Nordic Packaging, Inc. and Nordic Pak, Inc., as well as a fourth business, Nordic Leasing, Inc., which was not involved in the printing business but which leased cars and specialized equipment. Bjorkedal and Jacobson both served as officers and directors of each corporation, and each owned 50% of the stock of Nordic Press and Nordic Packaging. Nordic Pak and Nordic Leasing were owned 40% by Bjorkedal, 40% by Jacobson, and 20% by Alvin Vander Plaats, who served as the general manager and eventually became the financial controller and secretary of the various corporations. Bjorkedal and Jacobson each gifted part of their stock to family members, but all of the Nordic Press and Nordic Packaging stock, and 80% of the Nordic Pak and Nordic Leasing stock, remained within the two families.

In the early 1970s, Olaf and Tamara Bjorkedal and Harry Jacobson and his wife, acting as individuals, together built a warehouse at 5017 Boone Avenue North, New Hope, Minnesota, which they leased to the Nordic companies. The Bjorkedals and Jacobsons also owned as individuals a building at 8501 54th Avenue North in New Hope, and the two families leased space in it to Nordic Packaging and Nordic Pak. The buildings were treated as rental properties on the Bjorkedals' and Jacobsons' personal income tax returns. No written agreement controlled the rental activities, but the rental activities were operated as a general partnership.

Jacobson died in 1993, and his share of the corporations was placed in a trust for his family. Vander Plaats retired in 1997 and was replaced by Dave McKay. Business declined substantially following Vander Plaats' retirement, and the Nordic companies faced serious financial trouble. Bjorkedal stopped taking a salary from any of the entities in September 2001 and made numerous cash infusions of his own money during that time. McKay was replaced by Dee Dee Foster as chief financial officer (CFO) in December 2001. In 2002, Bjorkedal acquired 100% of the stock of Nordic Press, Nordic Packaging, and Nordic Pak and consolidated them into a company called Nordic Printing and Packaging, Inc. (P & P). Nordic Leasing ceased operations in 2002. At that time, Bjorkedal also acquired 100% ownership in the Boone Avenue Warehouse, and the 54th Avenue Warehouse was sold and the proceeds paid to the Jacobson family trust. Bjorkedal continued to advance his own money to P & P, contributing $350,000 in June 2003 and pledging his personally owned real estate in an attempt to keep the company afloat. P & P filed for bankruptcy protection in September 2003 and was ultimately sold to Marcom, a company owned 40% by Foster.

Prior to its consolidation with P & P, Nordic Press had employed union labor. Pursuant to a series of Collective Bargaining Agreements (CBAs), Nordic Press participated in the Graphic Communications International Union Upper Midwest Local 1-M Health and Welfare Fund (the Fund), which provided health and medical benefits to the union employees. The CBAs required Nordic Press to pay for sixty months of health coverage for employees following their retirement. In 1988, the Fund and Nordic Press entered into an Adoption Agreement Contract (Agreement), which amended the then-current CBA. The Agreement incorporated the Rules and Regulations of the Trustees, attached as an exhibit to the Agreement. The Rules and Regulations obligated employers who withdrew from the Fund to pay a lump-sum withdrawal contribution to the Fund to cover the sixty months of retiree health coverage.

P & P, as Nordic Press's successor, had continued to employ union labor and took over Nordic Press's obligations under the CBAs and the Agreement. Faced with financial trouble, P & P stopped making contributions for health benefits to the Fund in March 2003, resulting in a delinquency owed for health benefit premiums of $75,005. It also failed to remit payments withheld from employees' wages for the employees' portion of the health benefit premiums totaling $6,440. The Fund's Trustees notified P & P of its contractual withdrawal liability, estimating the liability needed to cover the sixty months' worth of retiree health benefits at approximately $260,000. The Trustees brought an adversarial proceeding within the bankruptcy proceeding against P & P, Bjorkedal, and Foster for statutory withdrawal liability related to P & P's pension obligations. The pension liability dispute was settled with the Marcom sale. P & P's contractual liability for health and welfare benefits, however, was not litigated within the bankruptcy proceeding.

Following P & P's bankruptcy, the Trustees brought suit against the Bjorkedals personally, claiming that they were liable for P & P's corporate obligations to the health and welfare plan under breach of contract, breach of fiduciary duty, and alter ego/piercing the corporate veil theories of liability. The district court granted summary judgment to the Bjorkedals, finding that P & P was a valid, separate entity, and that the Bjorkedals were not personally liable for P & P's obligations under any of the asserted theories. The district court denied the Bjorkedals' claim for attorney's fees, finding that the Trustees had acted properly in asserting the claims. Both parties appeal.

II.

We review the district court's order granting summary judgment de novo. LaSalle v. Mercantile Bancorporation, Inc. Long Term Disability Plan, 498 F.3d 805, 808 (8th Cir.2007). The Trustees characterize their action as involving two types of payments: contractual obligations based on the premiums owed but not paid to the Fund, and withdrawal liability, which arose when P & P withdrew from the Fund and became obligated to cover the cost of health benefit premiums for retirees for a period of five years. This is something of a mischaracterization. The withdrawal liability at issue is wholly contractual in nature. Although ERISA imposes statutory withdrawal liability on employers who withdraw from pension plans, see 29 U.S.C. § 1381; see also Hughes v. 3M Retiree Med. Plan, 281 F.3d 786, 790 (8th Cir.2002) (explaining that pension plans have required vesting requirements while welfare plans do not), the Fund at issue here is a welfare plan, not a pension plan and the § 1381 statutory withdrawal liability does not apply to P & P's withdrawal from the Fund, see Manchester Knitted Fashions, Inc. v. Amalgamated Cotton Garment & Allied Indus. Fund, 967 F.2d 688, 694 n. 8 (1st Cir.1992) (noting that § 1381 applies to pension funds, not welfare funds). Thus, P & P faced withdrawal liability only because it agreed to it in the Agreement. Both types of claims involved in this case — the delinquent premiums and the withdrawal liability — are really only contractual claims.

A. ERISA § 515 liability

The Trustees style their complaint as an ERISA § 515 action, which requires that "[e]very employer who is obligated to make contributions to a multiemployer plan under the terms of the plan . . . shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan." 29 U.S.C. § 1145. While P & P was certainly an employer obligated to make contributions to a multiemployer plan, this action is against the Bjorkedals personally. The Trustees try to reach the Bjorkedals personally by defining "employer" within § 1145 by reference to 29 U.S.C. § 1301, which treats trades or businesses under common control as a single employer. See 29 U.S.C. § 1301(b)(1). The Trustees link the two statutory provisions by asserting that the Bjorkedals jointly owned a separate entity that owned the building leased to P & P, that that separate entity was under common control with. P & P because both were owned by Olaf Bjorkedal and managed by Vander Plaats, and that Olaf and Tamara Bjorkedal, who operated the rental activity as' a partnership at the time of the delinquency in the welfare payments, are therefore the employers of P & P's employees.

The first problem with the Trustees' argument is that § 1301 applies only to subchapter III of ERISA, see § 1301(b)(1) ("For purposes of this subchapter, . . . all employees of trades or business (whether or not incorporated) which are under common control shall be treated as employed by a single employer"), and that subchapter explicitly applies only to pension plans, see 29 U.S.C. § 1321(a) (limiting...