II. SUCCESSOR LIABILITY
In a supplement to his summary judgment response brief, defendant James Svec presents this court with a recent decision of the Illinois Supreme Court which purportedly establishes that James Svec is not required to pay delinquent contributions to the Funds for the period during which Elmer Svec was the sole proprietor of Svec & Sons Funeral Home (the relevant time period for this case being January 1, 1987 through June 29, 1987). The case cited by defendant restates the common law rule in Illinois regarding successor liability, which has also been acknowledged by the federal courts: "The well-settled general rule is that a corporation that purchases the assets of another corporation is not liable for the debts or liabilities of the transferor corporation." Vernon v. Schuster, 179 Ill. 2d 338, 688 N.E.2d 1172, 228 Ill. Dec. 195, 1997 WL 778388, at *3 (Ill. 1997) (citations omitted); see also Upholsterers' International Union Pension Fund v. Artistic Furniture of Pontiac, 920 F.2d 1323, 1325 (7th Cir. 1990). A successor corporation is, however, liable for the debts of its predecessor when (1) there is an express or implied agreement of assumption; (2) the transaction amounts to a consolidation or merger of the purchaser or seller corporation; (3) the purchaser is merely a continuation of the seller; or (4) the transaction is for the fraudulent purpose of escaping liability for the seller's obligations. Vernon v. Schuster, 179 Ill. 2d 338, 688 N.E.2d 1172, 228 Ill. Dec. 195, 1997 WL 778388 at *3.
However, "the Supreme Court and [the Seventh Circuit] have imposed liability upon successors beyond the bounds of the common law rule in a number of different employment-related contexts in order to vindicate important federal statutory policies," Artistic Furniture of Pontiac, 920 F.2d at 1326, one of which is the recovery of delinquent multiemployer pension fund contributions under ERISA, Id. at 1327. An exception to the common law rule will be applied to vindicate an important federal statutory policy where "the successor has had prior notice of the liability in question, and where there has existed sufficient evidence of continuity of operations between the predecessor and successor." Id.
As to the issue of notice by the successor regarding the existence of collective bargaining agreements entered into by his predecessor, the Seventh Circuit has noted that "there is no question that the successor knows of any collective bargaining agreements that his predecessor has signed . . . ." EEOC v. Vucitech, 842 F.2d 936, 945 (7th Cir. 1988). Therefore, James Svec would be precluded from claiming that he had no knowledge of the CBAs to which his father was a party. Regarding continuity of operations, there appears to have been no change at all in the operation of Svec & Sons Funeral Home upon the death of Elmer Svec. In fact, it is undisputed that James Svec began managing the day-to-day operations of the Funeral Home himself prior to his father's death. The Funeral Home continued providing funeral services as well as livery services after James Svec and Sharon Svec assumed ownership of the Funeral Home, and apparently, the same work force continued in their employment regardless of the change in ownership. Normally, the exceptions to successor non-liability recited in Artistic Furniture of Pontiac are used to determine successor liability when one corporation's assets are bought by another, presumably to avoid assuming the debts of the seller corporation. However, in this case, the court is not presented with such a scenario and it therefore becomes fairly easy in this instance to determine from the facts that there is indeed continuity of operations between the sole proprietorship of Elmer Svec and the partnership of James Svec and Sharon Svec. Indeed, if the instant case does not present a case of continuity of operations, then there are none which would satisfy this exception. James Svec is therefore liable as a successor to his father, Elmer Svec.
III. DELINQUENT CONTRIBUTIONS ON BEHALF OF WSL EMPLOYEES
Finally, plaintiff claims that delinquent contributions are due to the Funds for work performed by the employees of WSL in the bargaining unit. Plaintiff claims that even though WSL has never been formally a member of the FDSA, it is subject to the CBAs nonetheless because it is either an alter-ego of the Funeral Home, it has displayed an intent to be bound by the terms of the CBAs, or WSL and the Funeral Home are a single employer. The single employer test is dispositive in this case, therefore the court will not reach the other criteria raised by the plaintiff to establish WSL's liability. Courts will treat nominally distinct businesses as one when single employer status is established. When two businesses are actually a single employer, then both businesses will be equally liable under a collective bargaining agreement entered on behalf of only one of them. WSL and the Funeral Home will be considered a single employer if they comprise an integrated enterprise, the controlling criteria being: (1) interrelation of operations, (2) common management, (3) centralized control of labor relations, and (4) common ownership. South Prairie Construction Co. v. Local No. 627, International Union of Operating Engineers, AFL-CIO, 425 U.S. 800, 802 n.3, 48 L. Ed. 2d 382, 96 S. Ct. 1842 (1976) (quoting Radio and Television Broadcast Technicians Local Union 1264 v. Broadcast Service, 380 U.S. 255, 256, 13 L. Ed. 2d 789, 85 S. Ct. 876 (1965)).
WSL defendants concede that WSL and the Funeral Home are commonly owned and managed. Furthermore, as to the issue of centralized control of labor relations, it is undisputed that James Svec does the hiring and firing of all employees for both WSL and the Funeral Home, as well as deciding for which new employees contributions will be made. WSL defendants wish to make an issue of the fact that some of the paperwork relating to labor relations was handled by Sharon and Anne Svec (filing remittance reports to the Funds on behalf of Funeral Home employees, handling the payroll, and informing the FDSA of the Funeral Home's withdrawal). In support of their contention that this establishes decentralized control of labor relations, WSL defendants cite a Seventh Circuit case which applied the single employer test in a scenario involving a non-union sole proprietorship which entered into a licensing agreement with a unionized corporation for use of the latter's corporate name. In that case, Trustees of Pension, Welfare and Vacation Fringe Benefit Funds of IBEW Local 701 v. Favia Electric Co., Inc., 995 F.2d 785 (7th Cir. 1993), Thomas Miniscalcos (Thomas) was the owner of the sole proprietorship and his wife, Mary Ann Miniscalcos (Mary Ann), was elected president and sole director of the corporation. Although the court found that Thomas handled the hiring and firing for both the proprietorship and the corporation, it found that Mary Ann handled the bulk of the paperwork for the corporation's dealings with the labor union. Contrary to WSL defendants' assertion, this particular holding does not support their position. The pertinent finding by the court was that some responsibility was divided between Thomas and Mary Ann respective to the particular company or corporation which they controlled. Here, James Svec owns both companies along with his sister, Sharon Svec--no formal division of labor exists between them, nor do they perform duties which evidence any separation of responsibilities along company lines. Just because James Svec does not do all the work does not mean that control of labor relations within the two companies is decentralized. Indeed, it is undisputed by the parties that James Svec runs both businesses as if he were a sole proprietor--implying that he ultimately controls labor relations for both companies.
Regarding interrelation of operations between WSL and the Funeral Home, it appears that the left hand certainly knows what the right hand is doing. WSL operates out of the same building as the Funeral Home, and its office materials, besides a desk, can fit into a space the size of a briefcase. The Funeral Home, WSL and James Svec's apartment are all located in a single building on Cermak Road in Berwyn, Illinois. WSL does not pay rent for its office, but pays $ 1,000 a month for the use of the garage which also houses the vehicles owned by the Funeral Home. James Svec provides for the maintenance of the vehicles owned by both the Funeral Home and WSL in the same garage. As stated above, James Svec hires and fires employees for both the Funeral Home and WSL, and decides for which new employees he will make contributions to the Funds. James Svec also schedules and makes arrangements for livery services provided by both the Funeral Home and WSL. WSL has no single telephone line which has been designated for it, and WSL's telephone calls often come through the Funeral Home's telephone line. WSL also fuels and maintains proper oil levels for the Funeral Home vehicles. WSL maintains the grounds of the Funeral Home as well as providing some of the maintenance for the physical structures on the Funeral Home property, including the Funeral Home building itself. WSL is paid an indefinite amount from month to month for these services. In 1987, all of WSL's drivers were drivers employed by the Funeral Home. The Funeral Home operates vehicles of its own, however, when there is a need for additional livery, the Funeral Home will use either WSL's services or the livery services of another company. From 1987 to 1994
, the amounts which were paid out from the Funeral Home to WSL generally increased while the amounts paid to other livery services generally decreased such that in the years 1990, 1991, 1993, and 1994, the amount paid by the Funeral Home to livery services other than WSL amounted to zero. WSL and the Funeral Home do maintain separate records and bank accounts however. Regardless of these last two factors, WSL and the Funeral Home still evidence a high degree of interrelation of operations.
The Favia court, after weighing the factors involved in the single employer test, states the following: "Finally, the two businesses were not commonly owned. Neither Thomas nor Mary Ann ever held any stock in Favia Electric. . . . Therefore, this factor stands strongly against the imposition of single employer liability." Favia Electric Co., Inc., 995 F.2d at 788. In the instant case, WSL and the Funeral Home are owned by the same two people--James Svec and Sharon Svec. Although the balancing of the factors involved in the single employer analysis is a fact specific inquiry, the factors in the instant case weigh so heavily in favor of single employer status, that no reasonable fact finder could render a judgment in WSL defendants' favor. "An issue of fact is genuine only 'if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Smith v. Severn, 129 F.3d 419, 426 (7th Cir. 1997). Accordingly, summary judgment is granted in plaintiff's favor regarding the obligation to pay delinquent contributions to the Funds for work performed by the bargaining unit employees of WSL.
ORDERED: Plaintiff Thomas J. Moriarty's motion for summary judgment is granted. Plaintiff shall submit a proposed judgment in chambers no later than February 25, 1998, which shall state the amount of unpaid contributions plus interest which is owed by defendants to plaintiff with affidavits to support the amount of plaintiff's reasonable attorney's fees and costs of this action, as well as to support the fees and cost of the audit performed by plaintiff. Defendants may submit a response objecting to plaintiff's computation of damages no later than March 4, 1998.
George W. Lindberg
United States District Court
DATED: FEB 19 1998