United States District Court, N.D. Illinois
January 28, 2004.
WILLIAM E. DUGAN, et al., Plaintiffs, v., CARL M. QUANSTROM, individually and d/b/a Monee Nursery Co., a/k/a Monee Nursery & Landscape Company, and MONEE NURSERY, LLC, an Illinois limited liability company, Defendants
The opinion of the court was delivered by: ROBERT GETTLEMAN, District Judge
MEMORANDUM OPINION AND ORDER
In their second amended complaint,*fn1 plaintiffs, the Trustees of
the Midwest Operating Engineers Welfare Fund, the Midwest Operating
Engineers Pension Trust Fund, the Operating Engineers Local 150
Apprenticeship Fund and the Local 150, I.U.O.E., Vacation Savings Plan
("Trustees") allege that defendants Carl M. Quanstrom, individually and
doing business as ("d/b/a") Monee Nursery Co. ("Monee Nursery"), also
known as Monee Nursery and Landscape Company, and Monee Nursery, LLC, are
liable under the Employee Retirement Income Security Act of 1974
("ERISA"), 29 U.S.C. § 1132, 1145, for neglecting obligations to an
executed Landscaping Memorandum of Agreement with International Union of
Operating Engineers Local 150, AFL-CIO ("Local 150"). Defendants have
moved to dismiss the second amended complaint, arguing that (1) res
judicata bars the claims for fringe benefits prior to September 20,
2000; and (2) plaintiffs failed to plead in accordance with FED. R.
CIV. P. 10(b). For the reasons stated below, the court denies the
defendants' motion to dismiss in its entirety.
According to plaintiffs' second amended complaint, Monee Nursery was
initially owned by defendant Quanstrom's parents as co-owners and then by
Quanstrom as sole proprietor. On July 12, 1984, Quanstrom's mother,
Myrene Quanstrom, executed a Landscaping Memorandum of Agreement (the
"Agreement") with Local 150 as "co-owner" of Monee Nursery. The
Agreement, attached as Exhibit A to the second amended complaint, was
entered into by Monee Nursery, its successors and assigns. The Agreement
incorporated the Master Agreement with Local 150, which set the wages,
benefits and grievance procedures between Local 150 and a member
contractor. According to the second amended complaint, the Master
Agreement provides that the employer agrees to be bound by the terms of
the Trust Agreement of the Fringe Benefit Funds and to make prompt
payment of the per-hour contributions with respect to each Trust
Fund. Plaintiffs allege that Monee Nursery never contributed to the
Midwest Operating Engineers Fringe Benefit Funds.
Concerned that Monee Nursery was performing bargaining unit work
without using Local 150 unit operating engineers, Local 150 requested
arbitration of a collective bargaining agreement with Monee Nursery in
December 1993. Monee Nursery subsequently filed suit in the Circuit Court
of Cook County, Illinois, to stay the arbitration proceedings, arguing
that the Agreement was invalid and, alternatively, had been abandoned by
the parties. The circuit court ruled that the Agreement bound Monee
Nursery. In October 1998, the Illinois Appellate Court affirmed the
circuit court's decision.
On September 19, 2000, an arbitrator found that Monee Nursery violated
the underlying Master Agreement and failed to properly terminate the
Agreement pursuant to its terms. On December 14, 2000, Monee Nursery
filed a Complaint against Local 150 and the American Arbitration
Association in the Circuit Court of Cook Country to vacate the
arbitration award. On January 26, 2001, Local 150 filed a Notice of
Removal, and the case was subsequently removed to this court. On
September 12, 2002, Judge Norgle denied Monee Nursery's motion for
summary judgment seeking to vacate the arbitration award and granted
Local 150's cross-motion for summary judgment seeking enforcement of
the arbitration award. Monee Nursery & Landscape Co. v. Int'l
Union of Engineers, Local 150 AFL-CIO, 2002 WL 31085091 (N.D. III.
2002). On November 7, 2003, the United States Court of Appeals for
the Seventh Circuit affirmed Judge Norgle's decision. Monee Nursery
& Landscape Co. v. Int'l Union of Operating Engineers, Local 150,
AFL-CIO, 348 F.3d 671 (7th Cir. 2003).
On June 10, 2002, Monee Nursery organized under the Illinois Limited
Liability Company Act. Plaintiffs allege that Monee Nursery, LLC
maintains its offices at the same address and engages in the same
business as Monee Nursery, and that Monee Nursery, LLC never contributed
to the Midwest Operating Engineers Fringe Benefit Funds. Plaintiffs
allege that defendant undertook to continue the business of Monee Nursery
through Monee Nursery, LLC to avoid the obligations of Monee Nursery,
cognizant of Monee Nursery's continuing liability to the funds.
Plaintiffs' second amended complaint alleges that Monee Nursery, LLC is a
successor and/or alter ego of Monee Nursery, which renders the LLC bound
to the same contract with Local 150.
On October 20, 2003, plaintiffs filed their second amended complaint
against defendants Quanstrom, individually and d/b/a Monee Nursery, and
Monee Nursery, LLC, seeking delinquent fringe benefit contributions and
an audit pursuant to ERISA.
(1) Res Judicata
Defendants have moved to dismiss plaintiffs' second amended complaint,
invoking the doctrine of res judicata. "Under res
judicata, a `final judgment on the merits bars further claims by
parties or their privies based on the same cause of action.'" Brown
v. Felsen, 442 U.S. 127, 131 (1979) (quoting Montana v. United
States, 440 U.S. 147, 153 (1979)). A successful res
judicata defense must meet three elements: "1) an identity of the
parties or their privies, 2) an identity of the causes of action, and 3)
a final judgment on the merits." People Who Care v. Rockford Bd.
of Educ., 68 F.3d 172, 177 (7th Cir. 1995).
In their motion,*fn2 defendants argue that the prior arbitration award
to Local 150 bars the present ERISA action by the Trustees. Specifically,
defendants assert that: 1) Local 150 and the plaintiffs are in privity
because plaintiffs, not Local 150, are the true beneficiaries of the
arbitration award for fringe benefits and the Trustees were represented
by Local 150 in the arbitration; 2) the causes of action are identical
because the present ERISA action seeks the same fringe benefits awarded
in the arbitration; and 3) the arbitration award, affirmed by both the
district court and court of appeals, is a final judgment.
With respect to his privity argument, defendants direct the court's
attention to Chicago Dist. Council of Carpenters Pension Fund v.
Pientka, 1985 WL 2320 (N.D. Ill. 1985). In Pientka, the
plaintiffs were multiple union trust funds, trustees of the trust funds
and the union that established the trust. Id. The defendants
were a corporation and its president, who were obligated to make
contributions to the trust funds pursuant to a collective bargaining
agreement. Id. When the defendants failed to make the
contributions, the plaintiffs sued pursuant to ERISA and Section 301 of
the Taft Hartley Act (29 U.S.C. § 185 and 1132) to collect
delinquent benefit payments ("Suit 2") Id. However,
prior to Suit 2, a default judgment had already been entered against the
corporation in a separate action brought by the trust funds to recover
the missing contributions ("Suit 1"), Id. The defendants
successfully argued that res judicata barred Suit 2.
The Pientka court stated that privity of parties is often
determined by the interest that is litigated and not merely by the names
of the parties as they appear in the pleadings. Pientka 1985 WL
2320. The rule is that "a person whose interest is put in litigation by
one entitled to represent him is bound by the judgment as though he was
named as a party." Id. In finding privity between the parties,
the court noted that the trust funds were nominally and effectively
parties to both actions. Id. Merely joining additional
plaintiffs in Suit 2 did not change the fact that a judgment was already
entered against the defendants in favor of the trust funds in Suit 1. Id
The court specifically stated that "the legal effect of any judgment will
be that the defendants will have to pay monies to the Trust Funds."
The instant action differs from Pientka in several important
aspects. In Pientka, the court readily found privity because
the trust funds were named plaintiffs in both suits. Here, however,
the Trustees were not named plaintiffs in the arbitration. Only
Local 150 was a named plaintiff in arbitration. Defendants assert that
Local 150 and the Trustees are in privity because Local 150 represented
the interests of the Trustees in the arbitration, winning an award for
wage contributions and fringe benefit funds.
At first blush, defendant's contention that Local 150 and the Trustees
are in privity is somewhat persuasive due to both actions seeking payment
of delinquent contributions to the fringe benefit funds. Defendants
contend that because Local 150 sought compensation for delinquent
contributions, the Trustees' interest in such compensation was already
represented by Local 150, thus placing Local 150 and the Trustees in
privity. However, caselaw subsequent to Pientka makes clear
that a union does not represent the same interests as a trust fund.
Moreover, the Seventh Circuit frowns on the concept of what it calls
"virtual representation." Central States. Southeast and Southwest
Areas Pension Fund v. D Investments. Inc., 2002 WL 1759938, at *5
(N.D. Ill. July 30, 2002) (citing DeBraska v. City of Milwaukee
, 189 F.3d 650, 653 (7th Cir. 1999)).
In Central States, Southeast and Southwest Areas Pension Fund v.
Central Transport, Inc., 472 U.S. 559, 575-576 (U.S. 1985), the
Supreme Court noted that:
[C]ompelling benefit plans to rely on unions would
erode the protections ERISA assures to
beneficiaries . . . ERISA places strict duties on
trustees with respect to the interests of
beneficiaries, and unions' duties toward
beneficiaries are of a quite different scope . . .
A trustee's duty extends to all participants and
beneficiaries of a multiemployer plan, while a
local union's duty is confined to current
employees employed in the bargaining unit in which
is has representational rights."
The Court explained that requiring benefit plans to rely on union
enforcement runs contrary to the core principles of ERISA and federal
labor policy. ERISA exists in large part to
ensure that a worker will actually receive a promised pension
benefit. Id. at 569, 577. See also Schneider Moving & Storage
Co. v. Robbins. 466 U.S. 364
(1984) (benefit plans can bring
independent actions and need not rely on union grievance and arbitration
procedures). In Pipe Fitters' Welfare Fund. Local Union 597 v.
Mosbeck Industrial Equipment, Inc., 856 F.2d 837
, 854 (7th Cir.
1988), the Seventh Circuit, citing to Central States, noted
that "[W]e cannot say that the Trust Funds are the representative of the
Union for purpose of enforcing employer contributions." Conversely, it
follows that a union is not the representative of a trust fund. These
authorities compel the conclusion that Local 150 did not represent the
interest of the Trustees in arbitration. Local 150 represented its own
interest, primarily concerned with Monee Nursery's assignment of workers.
According to the Labor Arbitration Opinion and Award attached as an
exhibit to plaintiffs' response to the instant motion, the issues Local
150 presented for resolution were:
1. Whether the Employer violated Article 1,
Article 6, and Article 13 of the Illinois and
Indiana Landscape Contractors Labor Agreement when
it assigned non-bargaining unit members to
bargaining unit work on November 16, 1993 and
continuing to date?
2. If so, what is the appropriate remedy?
After concluding that from November 1993 through September 2000 Monee
Nursery "violated Articles 6, 12, and 13 of the Agreement when it
utilized non-union members to perform bargaining unit work," the
arbitrator ordered Monee Nursery "to pay damages to the Union in the
amount of $133,168 for non payment to fringe benefit plans and under
payment of wages from November 17, 1993 to [September 19, 2000]." In
their res judicata argument, defendants essentially contend that
a present judgment for failure to pay fringe benefits would render Monee
Nursery doubly liable for its failure to make payments to the Funds.
Notwithstanding the fact
that defendant has yet to pay any of the arbitration award, the
risk of a double reward is eliminated by the fact that the arbitrator did
not award any monetary damages for the violations of Article 12 of the
collective bargaining agreement entitled Fringe Benefit Contributions
("Therefore, despite the Article 12 violation I cannot order a monetary
remedy"). Since monetary damages were not actually awarded for Monee
Nursery's failure to pay fringe benefits, this court runs no risk of
awarding monetary damages twice for the same conduct.
Because defendants have failed to demonstrate privity, the court need
not discuss the other two elements of res judicata, namely
identity of causes of action or final judgment on the merits. Defendants'
motion to dismiss on grounds of res judicata is therefore
(2) FED. R. Civ. P. 10(b) Form of Pleadings.
Paragraphs; Separate Statements.
Defendants have also moved to dismiss pursuant to FED. R. Civ. P.
10(b), arguing that plaintiffs should draft their complaint to make
separate claims against Monee Nursery, LLC and Quanstrom. Defendants
argue that the claims against Monee Nursery, LLC and Quanstrom are
founded on separate transactions or occurrences. Defendants overlook the
complete language of the portion of Rule 10(b) that they invoke.
Rule 10(b) states, "Each claim founded upon a separate transaction or
occurrence and each defense other than denials shall be stated in a
separate count or defense whenever a separation facilitates the clear
presentation of the matters set forth." Defendants misconstrue the
meaning of "separate transaction or occurrence" by focusing on the
parties named as defendants. In fact, one transaction, Monee Nursery's
alleged participation in a collective bargaining agreement and subsequent
non-payment under that contract, creates this ERISA claim.
Plaintiffs need not bring separate claims against Monee Nursery, LLC and
Quanstrom, since plaintiffs allege that Monee Nursery and all its
and/or alter egos are parties to that one transaction. Requiring
plaintiffs to raise separate claims against Quanstrom and Monee Nursery,
LLC would not serve the purpose of Rule 10(b) because separation would
not facilitate a "clear presentation of the matters set forth."
Separation would likely confuse the matter further.
For the reasons stated herein, defendants' motion to dismiss is denied.
Defendants are directed to file their answers to the second amended
complaint on or before February 20, 2004. This matter is set for a report
on status on February 24, 2004, at 9:00 a.m., at which time the parties
are to have conferred and shall present a definitive proposed discovery