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BAKER v. CARAVAN MOVING CORP.

United States District Court, Northern District of Illinois, E.D


April 4, 1983

ROBERT J. BAKER, HOWARD MCDOUGALL, THOMAS F. O'MALLEY, R.V. PULLIAM, MARION WINSTEAD, HAROLD J. YATES, LORAN W. ROBBINS, EARL L. JENNINGS, JR., AS TRUSTEES OF THE CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, PLAINTIFFS,
v.
CARAVAN MOVING CORPORATION AND CHARLES W. CORCORAN, DEFENDANTS.

The opinion of the court was delivered by: Aspen, District Judge:

MEMORANDUM OPINION AND ORDER

Plaintiffs in this case, trustees of the Central States, Southeast and Southwest Areas Pension Fund ("the Trustees") have brought suit to satisfy a judgment obtained against Iredale Storage and Moving Company ("Iredale"), for failure to make monthly health and welfare contributions as required by a collective bargaining agreement and multi-employer plan under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. Robert J. Baker, et al. v. Iredale Storage and Moving Co., No. 80 C 1296 (N.D.Ill. Jan. 27, 1981). Jurisdiction is asserted pursuant to 29 U.S.C. § 1132(e)(1).*fn1 Presently pending is the Trustees' motion for summary judgment to enforce its judgment against Caravan Moving Corporation ("Caravan"), a holding company, and individually against Charles W. Corcoran ("Corcoran"), president and sole shareholder of both Iredale and Caravan. For reasons set forth below, the Trustees' motion is granted in part and denied in part.

Count I of the complaint alleges that Caravan is a sham corporation, the alter ego of Iredale, and therefore should be liable for the judgment rendered against Iredale. The Trustees claim that both corporations function, in reality, as a common enterprise and that the unity of interest between the two corporations justifies piercing Caravan's corporate veil. Count II seeks to hold Corcoran personally liable as an employer through the Illinois Wage Payment Collection Act, Ill.Rev.Stat. ch. 48, ¶ 39m-1 et seq.*fn2 That Act holds an employer personally liable for failure to pay employer contributions due to an employee benefit trust as a result of a collective bargaining agreement.

In deciding motions for summary judgment, it must be emphasized that the party moving for summary judgment has the burden of clearly establishing that no genuine issues of material fact exist, and that he or she is entitled to judgment as a matter of law. Cedillo v. International Association of Bridge & Structural Iron Workers, Local Union No. 1, 603 F.2d 7, 10 (7th Cir. 1979). Doubts as to the existence of material issues of fact must be resolved against the moving party. Moutoux v. Gulling Auto Electric, Inc., 295 F.2d 573, 576 (7th Cir. 1961). At this time, defendants have not filed a response to the plaintiff's motion for summary judgment. With this in mind, we turn to an examination of the instant controversy.

COUNT I

The Trustees allege that Caravan's sole function is to serve as a buffer to protect the assets of Iredale against creditors. Caravan was incorporated sometime in the 1950's but did not engage in any business until 1978, when it purchased the land used by Iredale for its business from Roth Mortgage Co. The same property was previously owned by Corcoran until he sold it to Roth Mortgage sometime in the 1960's. Roth continues to hold the mortgage on the property. Caravan receives rent from Iredale, applying it totally to the payment of the Roth mortgage. Corcoran concedes that Caravan engages in no business, maintains no business premises, pays no salaries and has no employees other than himself. Corcoran maintains the same capacity in both corporations, being president, sole director and sole owner.

  A corporation's legal identity may be disregarded if the
corporation is used to justify wrong, protect fraud or defend
crime. Anderson v. Abbott, 321 U.S. 349, 64 S.Ct. 531, 88 L.Ed.
793 (1944). Under the alter ego doctrine, courts will "pierce
the corporate veil" and hold a defendant liable when there is:

   . . control by the parent to such a degree that
  the subsidiary has become its mere
  instrumentality; fraud or wrong by the parent
  through its subsidiary, e.g., torts, violation of
  a statute or stripping the subsidiary of its
  assets; and unjust loss or injury to the
  claimant, such as insolvency of the subsidiary.

Steven v. Roscoe Turner Aeronautical Corp., 324 F.2d 157,160 (7th Cir. 1963). This doctrine applies to affiliated corporations owned by the same individual, as well as parent/subsidiary corporations. Matter of Bowen Transports, Inc., 551 F.2d 171, 179 (7th Cir. 1977); Allied Chemical Corp. v. Randall, 321 F.2d 320, 323 (7th Cir. 1963); Holland v. Joy Candy Manufacturing. Corp., 14 Ill. App.2d 531, 145 N.E.2d 101 (1957).

In applying the alter ego doctrine, the court thus focuses on the "reality and not form" concerning the operations of affiliate corporations. Caravan has a single asset; without rental payments from Iredale, used exclusively to pay for the financing of its property, Caravan has no other function. It is dependent wholly on Iredale for its existence. Apart from Caravan, Iredale itself has no assets. Corcoran admits that Caravan has executed mortgages and liens to pay the debts of Iredale from the assets of Caravan in the past. Presently, Caravan has secured with its property liens to Reuben H. Donnelly and to Allied Van Lines for debts incurred by Iredale. And Corcoran admittedly offered to secure the Trustees' judgment by executing a mortgage against Caravan's property.*fn3

Enforcement of the Trustees' judgment against Iredale is effectively precluded because the only asset of value is held by Iredale's affiliate, Caravan. When an affiliated corporate structure is used as a shield to circumvent the intended purpose of legislation, courts will disregard the corporate entity and find a corporation liable for the debts of its affiliate. Anderson v. Abbott, 321 U.S. 349, 64 S.Ct. 531, 88 L.Ed. 793 (1944); Kavanaugh v. Ford Motor Co., 353 F.2d 710, 719 (7th Cir. 1965). A sham corporation used to escape obligations under collective bargaining agreements and ERISA may be held liable for such contributions. Carpenters Local Union No. 1846 v. Pratt-Farnsworth, 690 F.2d 489, 525-27 (5th Cir. 1982). Caravan is thus liable for the judgment rendered against Iredale, since both corporations function as a common enterprise.

COUNT II

The Trustees sued Corcoran individually in Count II, pursuant to the Illinois Wage Payment Collection Act, Ill.Rev.Stat. ch. 48 ¶ 39m-1 et seq. This Act makes an employer's wilful failure to contribute to an employee benefit program a Class C misdemeanor. See note 2, supra. But an examination of ERISA reveals Congress' explicitly stated intent to override state laws which "relate to" employee benefit plans. ERISA § 514, 29 U.S.C. § 1144;*fn4 Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981). Cf. Bucyrus-Erie Co. v. Dept. of Industry, Labor and Human Relations of the State of Wisconsin, 599 F.2d 205, 207 (7th Cir. 1979), cert. denied, 444 U.S. 1031, 100 S.Ct. 701, 62 L.Ed.2d 667 (1980) (ERISA does not preempt state fair employment laws, since preemption of such laws would impair the federal framework for prohibiting employment discrimination).*fn5 The Illinois statute at issue clearly "relates to" employee benefit plans, at least in part. While § 514(b) of ERISA, 29 U.S.C. § 1144, leaves intact state criminal laws or general applicability, see note 4, supra, the Illinois Wage Payment Collection Act is not such a law. State criminal laws aimed specifically at employee benefit plans were not meant to be left intact by § 514(b). Commonwealth of Massachusetts v. Federico, 383 Mass. 485, 419 N.E.2d 1374, 1378 (1981). The Labor Department has agreed with this analysis.*fn6 The Illinois Wage Payment Collection Act applies to the employer-employee relationship and is thus broader than the Massachusetts statute at issue in Federico, supra, but it nevertheless cannot be considered a "generally applicable" state law. It is thus not exempted by § 514(b) of ERISA from the general preemption language contained in § 514(a). As a result, the Illinois Wage Payment Collection Act, insofar as it applies to employer contributions to employee benefit plans, is preempted by ERISA. We therefore decline to grant the Trustees the relief sought in Count II. Because we hold that an action against Corcoran individually cannot be brought pursuant to the Illinois Wage Payment Collection Act, Count II is dismissed and judgment is entered for Corcoran as to that count.

Therefore, the Trustees' motion for summary judgment against Caravan Moving Corporation in the amount of $33,138.76 is granted; summary judgment against Charles W. Corcoran is denied. Judgment is hereby entered for Corcoran as to Count II. It is so ordered.


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