The opinion of the court was delivered by: JOHN F. GRADY
This action, for the collection of assessed withdrawal liability under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1368, as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. §§ 1381-1461, comes before the court on the motion of defendants Larry A. Hayes and Katrina O. Hayes d/b/a Chicago Heights Leasing to dismiss Count I of plaintiffs' complaint, and plaintiffs' cross motion for summary judgment. The court denies defendants' motion and grants plaintiffs' motion.
During the relevant time period, defendants, Larry A. Hayes and Katrina O. Hayes (collectively the "Hayes"), were the owners and operators of a tractor/trailer sole proprietorship d/b/a Chicago Heights Leasing ("CHL"). During 1982, Larry A. Hayes and (by spousal attribution) Katrina O. Hayes owned 100 percent of the stock of Lincoln Transfer Company, Inc. ("Lincoln").
Lincoln was party to a collective bargaining agreement -- executed between itself and various Teamsters local units -- under which Lincoln was required to make contributions to plaintiffs, Central States, Southeast and Southwest Areas Pension Fund (the "Fund"), for employees falling under the terms of that agreement.
During June of 1982, Lincoln's contractual obligation to contribute to the Fund ended and it ceased making contributions, and no other Lincoln Controlled Group member continued contributing to the Fund. Thus, the Fund treated this cessation as a "complete withdrawal" from the Fund, as defined in § 4203 of the MPPAA, 29 U.S.C. § 1383, and assessed the Group's withdrawal liability. In April of 1985, the Fund issued a notice and demand to the Lincoln Controlled Group for payment of withdrawal liability in accordance with §§ 4202(2) and 4219(b)(1), 29 U.S.C. §§ 1382 and 1399(b)(1). During July of 1985, the Fund issued a past due notice and demand for payment of the assessed amount pursuant to § 4219(c)(5)(A), 29 U.S.C. § 1399(c)(5)(A), which, among other things, warned the employer of the consequences of its failure to pay such liability.
Neither the Lincoln Controlled Group nor any of its members initiated arbitration to dispute this assessment within the time period prescribed by § 4221(1), 29 U.S.C. § 1401(a)(1); yet they failed (and to this day, have failed) to pay any portion of the assessment. The Fund argues that the Group is in default and the full amount of the assessment is now due and owing. See § 4219(c)(5), 29 U.S.C. § 1399(c)(5).
In 1988, the Fund filed suit to collect the outstanding assessment against defendants, Midland Transport, Inc. n/k/a Midwest Transport, Inc. and Joyce Trucking, Inc. ("Joyce"), which were both members of the Lincoln Controlled Group.
Summons for both defendants was personally served on Larry A. Hayes, who was then the president of both businesses.
In July of 1989, the United States District Court for the Northern District of Illinois entered a consent judgment against the above parties as members of the Lincoln Controlled Group. See Central States, Southeast and Southwest Areas Pension Fund v. Midland Transport, Inc. and Joyce Trucking, Inc., No. 88-5526, slip op. (N.D. Ill. July 13, 1989) (Rovner, J.). Apparently, neither Midland n/k/a Midwest Transport, Inc. nor Joyce has paid the judgment in that action.
Midwest Transport, Inc. n/k/a Midland Transport, Inc. began business in March of 1989. Then in December of 1990 (after the consent judgment was entered in the above mentioned case), Midland Transport, Inc. ("Old Midland") (defendant in the prior action) changed its name to Midwest Transport, Inc., and Midwest Transport, Inc. changed its name to Midland Transport, Inc. ("New Midland") (one of the defendants herein). Katrina Hayes owns 100 percent of the stock of New Midland and Larry Hayes is the president and treasurer.
The Fund asserts that the day after Old Midland ceased its operations, New Midland took over. Specifically, the Fund offers the testimony of Larry Hayes taken during a sworn Citation to Discover Assets, to establish that, beginning on October 1, 1990, defendant New Midland operated from the same business premises; employed many of the same employees; serviced many of the same customers; operated with the same equipment; and paid business obligations and employee salaries from the same accounts, as Old Midland. Even though New Midland conducted business (and held itself out to the public) as Midwest Transport, Inc. after October 1, 1990, it did not officially change its business name until the middle of December of that same year.
After being unable to collect from either Old Midland or Joyce, the Fund filed the present two count complaint seeking recovery from both CHL and New Midland of the full amount of the assessed withdrawal liability. Count I alleges that CHL was a member of the Lincoln Controlled Group and, therefore, is jointly and severally liable with its co-members for the full amount of the assessed liability. In addition to the withdrawal liability, the Fund requests the court to require CHL to pay interest, costs, attorney's fees, and liquidated damages pursuant to § 502(g)(2), 29 U.S.C. § 1132(g)(2). Count II alleges that defendant New Midland is the successor to Old Midland -- which was a member of the Lincoln Controlled Group against which a judgment of withdrawal liability has been entered -- and (the Fund argues) that as successor to Old Midland, New Midland is liable for its predecessor's withdrawal liability.
I. CHL's Motion to Dismiss
The court must accept the facts alleged in the plaintiff's complaint as true and must draw all reasonable inferences from the pleadings in plaintiff's favor when considering a motion to dismiss. See Gillman v. Burlington N. R.R. Co., 878 F.2d 1020, 1022 (7th Cir. 1989). Dismissal is appropriate "'only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" Kunik v. Racine County, 946 F.2d 1574, 1579 (7th Cir. 1991) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 81 L. Ed. 2d 59, 104 S. Ct. 2229 (1984)).
As stated previously, CHL argues that, because is was not made party to the earlier collection action against two other members of the Lincoln Controlled Group, the Fund is now either collaterally estopped or barred by the doctrine of res judicata from asserting the present collection claim against it. CHL is in essence arguing that it was a necessary and indispensable party to the earlier proceeding, and that the Fund knew that it was such a party, yet failed to join it in that action; it frames this argument, however, as a res judicata defense to the present action. The Fund denies knowing, or being reasonably able to learn, that CHL was part of the controlled group in question -- because of the nature of CHL's business -- until after the earlier claim had been litigated and judgment was entered. For purposes of ruling on the present motion, the court must accept the allegations of the complaint as true and, on that basis, the court agrees with the Fund that CHL's res judicata and collateral estoppel arguments are without merit.
The defendant correctly points out the premise upon which res judicata is based:
The principle of res judicata . . . treats a judgment on the merits as an absolute bar to relitigation between the parties and those in privity with them of every matter offered and received to sustain or defeat the claim or demand and to every matter which might have been received for that purpose.
Martino v. McDonald's System, Inc., 598 F.2d 1079, 1083 (7th Cir. 1979) (citations omitted; emphasis added), cert. denied, 444 U.S. 966, 100 S. Ct. 455, 62 L. Ed. 2d 379 (1979). CHL argues that the Fund itself acknowledges (in its complaint) that CHL was in privity with Lincoln and other Lincoln Controlled Group members at the time of Lincoln's withdrawal from the Fund. The Fund disputes this characterization of the assertions made in its complaint, but does not argue that CHL was not in privity with Lincoln. Even if CHL was in privity with Lincoln at the time of the latter's withdrawal from the Fund, so that res judicata were applicable to the present claim, the court fails to see how the doctrine would aid CHL; if anything, the doctrine would preclude the court from relitigating the question of CHL's liability, and this action would be reduced to a matter of enforcing the judgment obtained by the Fund in the earlier action against CHL's privies.
See generally Cromwell v. County of Sac, 94 U.S. 351, 352, 24 L. Ed. 195 (1877) (discussing the effect of res judicata on subsequent litigation). Because res judicata would not help CHL and because CHL has not raised any other defense to the ...