United States District Court, N.D. Illinois, Eastern Division
October 13, 2004.
JOHN W. WILHELM, et al., Plaintiff,
McANN'S W. 48TH STREET RESTAURANT CORP., A NEW YORK CORPORATION, et al., Defendant.
The opinion of the court was delivered by: MARVIN ASPEN, Chief Judge, District
MEMORANDUM OPINION AND ORDER
The Hotel Employees and Restaurant Employees International
Union Pension Plan (the "Fund") and the trustees of the Fund
(collectively the "Plaintiffs") filed this action for collection
of withdrawal liability payments allegedly due under the Employee
Retirement Income Security Act ("ERISA") as amended by the
Multiemployer Pension Plan Amendment Act of 1980,
29 U.S.C. §§ 1001-1453. While Plaintiffs brought this action against over two
dozen corporate entities and several individuals, Joseph
Spadafina ("Defendant") is now the only remaining
defendant.*fn1 Presently before us is Plaintiffs' Motion for
Summary Judgment. Plaintiffs have also moved to strike portions
of Defendant's response to its Local Rule 56.1(a) Statement of
Facts. For the reasons stated below, Plaintiffs' Motion to Strike
is granted in part and denied in part. Plaintiffs' Motion for
Summary Judgment is denied. I. PLAINTIFFS' OBJECTIONS AND MOTION TO STRIKE
Before reaching the merits of Plaintiffs' Motion for Summary
Judgment, we first address their objections and Motion to Strike.
On a motion for summary judgment in this District, the moving
party must submit a statement of material facts. L.R. 56.1(a)(3).
Each fact in this statement must be supported by "specific
references to the affidavits, parts of the record, and other
supporting materials. . . ." L.R. 56.1(a)(3). The non-moving
party then must file a response as well as a statement of any
additional facts. L.R. 56.1(b)(3). In its response, the
non-moving party must either admit or deny each fact presented by
the movant. See Brasic v. Heinemann's, Inc., 121 F.3d 281, 284
(7th Cir. 1997). Any other response may be deemed an admission.
See id. Thus, a response asserting that the party lacks
information sufficient to form a belief is treated as an
admission. See Williams v. Elyea, 163 F.Supp.2d 992, 994 (N.D.
Ill. 2001). In addition, denials or additional facts presented in
the non-moving party's response must likewise be supported by
specific references to the record or affidavits. L.R. 56.1(b)(3).
The Seventh Circuit has repeatedly upheld a district court's
strict enforcement of Local Rule 56.1. Bordelon v. Chicago Sch.
Reform Bd. of Trustees, 233 F.3d 524, 527 (7th Cir. 2000).
At the outset, we observe that Defendant did not respond to
Plaintiffs' Statement of Facts, paragraphs 1-7, 9-13, and 18-22.
Therefore, the facts in these paragraphs are deemed admitted.
See Brasic, 121 F.3d at 284. Plaintiffs next object to
Defendant's response to paragraph 8 on the grounds that
Defendant's denial of paragraph 8 is based on an inaccurate and
irrelevant citation to Plaintiffs' Statement of Facts. However,
Defendant's denial is supported by an accurate citation to a
separate exhibit.*fn2 Paragraph 8 of Plaintiffs' Statement
of Facts is therefore deemed denied. Plaintiffs also object to and move to strike Defendant's
response to paragraphs 14-17 and 23-41 of Plaintiffs' Statement
of Facts. Paragraphs 14-17 and 23-41 of Plaintiffs' Statement are
supported by citations to Exhibit E. This Exhibit is a previous
stipulation between Plaintiff and certain stipulating defendants,
none of whom are still involved in this action.*fn3
Defendant's response to these paragraphs states two objections:
(1) Exhibit E was not attested to by a witness; and (2) Exhibit E
was not adopted by the Defendant. Defendant's arguments both miss
the mark. Defendant's first objection is simply irrelevant as it
deals with the sufficiency of an affidavit under Federal Rule of
Civil Procedure 56(e). Exhibit E is a stipulation, not an
affidavit; therefore, Exhibit E need not be attested to by a
witness. The thrust of Defendant's second objection is that since
he was not a party to this stipulation, Plaintiffs cannot use
Exhibit E to support his statement of facts. However, Defendant
need not have adopted Exhibit E, through stipulation or
otherwise, in order for Plaintiffs to cite it in support of their
Statement of Facts. Defendant, of course, is not bound by the
stipulation, but is free to deny the facts in Plaintiffs'
Statement that are supported by Exhibit E. Defendant's objections
to Plaintiffs' reliance on Exhibit E are therefore dismissed.
Plaintiffs next contend that Defendant's response to paragraphs
14-17 and 23-41 fails to cite specific portions of the record or
affidavits as required by Local Rule 56.1(b)(3)(A). We agree.
Moroever, Defendant did not admit or deny the statement of facts
contained in these paragraphs but only denied having knowledge or
information sufficient to form a belief as to their truth. As
stated earlier, such responses are deemed admissions under Local
Rule 56.1. See Williams, 163 F.Supp.2d at 994. Therefore, for
the purpose of this summary judgment motion, the Defendant has
admitted the facts in paragraphs 14-17 and 23-41 of Plaintiffs'
Statement of Facts. In their response to Defendant's Statement of Additional Facts,
Plaintiffs object to paragraphs 42-44 and 46-52 of Defendant's
Statement on the grounds that the facts contained in these
paragraphs are irrelevant and immaterial. A statement of
additional facts under 56.1(b)(3)(B) should be limited to
material facts. See Malec v. Sanford, 191 F.R.D. 581, 583 (N.D.
Ill. 2000). Paragraphs 42-44 and 46-52 of Defendant's Statement
all relate generally to Defendant's level of involvement in 11
Stone Street Corp. ("Stone Street"), one of the corporate
defendants no longer in this action. For reasons we discuss in
the Part II(C) below, we find that the facts in these paragraphs
are material to the action. Therefore, Plaintiffs' Motion to
Strike paragraphs 42-44 and 46-52 of Defendant's Statement is
denied. Furthermore, Plaintiffs did not admit or deny paragraphs
42-44 and 46-52 of Defendant's Statement, but rather asserted a
lack of knowledge sufficient to admit or deny. Paragraphs 42-44
and 46-52 are, therefore, deemed admitted. See Williams,
163 F.Supp. 2d at 994.
Finally, Plaintiffs move to strike paragraph 45 of Defendant's
Statement because it is inconsistent with other evidence in the
record.*fn4 Paragraph 45 asserts that the Defendant was
never an officer or director of Stone Street and is supported by
citation to Exhibit O, an affidavit sworn to by the Defendant.
Plaintiffs argue that this paragraph should be stricken because
it is inconsistent with the evidence they present in Exhibit E.
Plaintiffs argument misplaced. The fact that the non-movant
presents evidence that conflicts with that provided by the movant
does not mean that a court must disregard or strike the
non-movant's evidence in deciding a motion for summary judgment.
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)
(noting that judges should not weigh the evidence or make
credibility determinations in deciding a motion for summary
judgment). If this were the case, summary judgment would always
be granted so long as the movant could establish its prima facie case or defense by citations to the record. This, of
course, is not the law. Therefore, Plaintiffs' Motion to Strike
paragraph 45 of Defendant's Statement is denied.
II. PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT
Plaintiffs are the Trustees of the Hotel Employees and
Restaurant Employees International Union Pension Fund (the
"Fund"). (Pls.' Statement of Material Facts ¶ 6.) Stone Street
Corp. ("Stone Street") was a New York corporation engaged in the
restaurant business. (Pls.' Statement of Material Facts ¶¶
10-11.) Defendant was a shareholder in Stone Street. (Pls.'
Statement of Material Facts ¶ 12.) Every three years beginning in
1981 and ending in 1990, Stone Street entered into a collective
bargaining agreement ("CBA") with various local units of the
Hotel Employees and Restaurant Employees International Union.
(Pls.' Statement of Material Facts ¶¶ 14-17.) Under these
agreements, Stone Street was to pay monthly pension contributions
to the Fund on behalf of employees covered under the CBA.
On December 24, 1991, Stone Street was dissolved by the state
of New York for failure to pay franchise taxes. (Pls.' Statement
of Material Facts ¶¶ 18-19.) Despite its dissolution, Stone
Street continued its restaurant operations. (Pls.' Statement of
Material Facts ¶ 23.) In addition, Stone Street continued to
submit monthly contributions to the Fund through April 1992.
(Pls.' Statement of Material Facts ¶¶ 25-26.) After Stone Street
failed to make its contribution payments for several months,
however, Plaintiffs terminated Stone Street from the Pension Plan
in December 1992. (Pls.' Statement of Material Facts ¶ 26.)
Stone Street was part of a larger network of restaurants in New
York City. (Pls.' Statement of Material Facts ¶ 29.)
Collectively, these restaurants were called the McAnn's Control
Group ("Control Group"). (Pls.' Statement of Material Facts ¶ 29;
Pls.' Ex. E ¶ 451.) The Control Group was also a participating employer under the Pension Plan. (Pls.' Statement
of Material Facts ¶ 29.) The Control Group, however, made a
complete withdrawal from the Pension Plan, as defined in ERISA,
on April 5, 1999. 29 U.S.C. § 1383(a); (Pls.' Statement of
Material Facts ¶ 31.) As a result of this withdrawal, the Control
Group incurred approximately $3 million in withdrawal liability
to the Pension Plan.*fn6 (Pls.' Statement of Material Facts
¶ 32.) Other shareholders of Stone Street have admitted that
members of the Control Group, including Stone Street, are jointly
and severally liable for the Control Group's withdrawal
liability. (Pls.' Statement of Material Facts ¶ 33.) Defendant
does not deny this.*fn7
Defendant was a minority shareholder of Stone Street. In 1972,
he invested $6,000 in Stone Street (Pls.' Statement of Material
Facts ¶ 12)*fn8 and received 25 percent of its shares
(Defendant's Counterstatement ¶ 43). While the parties dispute
whether Defendant was actually an officer or director of Stone
Street, the record shows that Defendant was not engaged in the
management of Stone Street and conducted no business on behalf of
Stone Street. (Def.'s Counterstatement ¶¶ 44, 46.) Ultimately,
Defendant lost his entire $6,000 investment in Stone Street.
(Def.'s Counterstatement ¶ 49.) B. Standard of Review
Summary judgment is appropriate only when "there is no genuine
issue as to any material fact and the moving party is entitled to
judgment as a matter of law." Fed.R. Civ. P. 56(c). The moving
party bears the initial burden of identifying portions of the
record which demonstrate the "absence of a genuine issue of
material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986) (citations omitted). If the moving party satisfies this
burden of production, the non-movant must "set forth specific
facts showing that there is a genuine issue for trial."
Fed.R.Civ. P. 56(e). In considering a motion for summary judgment, we
accept the non-movant's evidence as true and draw all reasonable
inferences in his favor. See Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 255 (1986).
Plaintiffs present a three-step argument in support of their
Motion for Summary Judgment. First, the McAnn's Control Group has
incurred undisputed withdrawal liability of approximately $3
million. Second, the record unequivocally shows that members of
the Control Group, including Stone Street, are jointly and
severally liable for the Control Group's withdrawal liability.
Therefore, there is no dispute that Stone Street is liable for
the entire amount of the Control Group's $3 million liability.
Third, under New York law*fn9 Stone Street's shareholders
are each personally liable for Stone Street's post-dissolution
debts, including its withdrawal liability incurred through the
Control Group. Therefore, Spadafina is liable for the entire
amount of the withdrawal liability. Because we disagree with
Plaintiffs' application of New York law regarding shareholder
liability to the facts of this case, Plaintiffs' Motion for
Summary Judgment is denied. The central issue for purposes of this motion is whether, under
New York law, all of a corporation's shareholders are liable for
the post-dissolution debts of that corporation. Plaintiffs argue
that all shareholders are liable for such debts and, in support,
cite WorldCom, Inc. v. Sandoval, 701 N.Y.S.2d 834 (N.Y.
Sup. Ct. 1999). In WorldCom, the defendants were the sole owners,
officers, and directors of a corporation that had been dissolved
in 1993. Id. at 835. In 1996, this corporation, despite its
dissolution three years earlier, entered into a contract with the
plaintiff. Id. This contract was subsequently breached, and
WorldCom filed suit against the defendants, claiming that they
were personally liable for the contract entered into after the
corporation's dissolution. Id. at 836. The court agreed with
WorldCom, and stated the following: "Under New York law, the
individual shareholders and officers of a corporation are legally
responsible for contractual obligations where the contract was
entered into after the corporation was dissolved. . . ." Id. at
While the court's broad language quoted above suggests that New
York law may hold all shareholders personally liable for
post-dissolution contract obligations, we must interpret this
language in light of the factual context of the case. The
WorldCom defendants were actively involved in the dissolved
corporation; moreover, they seem to have been instrumental in
securing the post-dissolution contract that was the subject of
the action. Id. at 835-36. Thus, while WorldCom recognizes
that individual shareholders and officers may be held liable for
the post-dissolution debt of a corporation when they played a
role in incurring that debt, it would be a stretch, after
analyzing the facts of the case, to say that WorldCom holds ALL
shareholders liable for all of the corporation's debt incurred
Other cases cited by both parties involve facts similar to
WorldCom. In Brandes Meat Corp. v. Cromer, a New York
appellate decision, the defendant Edward J. Cromer personally
received goods and signed accompanying invoices purportedly on
behalf of Edward J. Cromer, Inc., a dissolved corporation. 146 A.D.2d 666 (N.Y.App. Div. 1989). When plaintiff sued
defendant personally for failing to pay for these goods, the
court held that the defendant was personally liable on this
account. Id. at 667. While the defendant's exact role in the
corporation was never specified, it is apparent that it was an
active one since the corporation took his name. More importantly,
however, the defendant himself actually accepted the goods and
signed the invoices for the dissolved corporation. Thus, the
court ruled that the defendant was "personally responsible for
the obligations which he incurred. . . ." Id. (emphasis added).
Similarly, in Klein v. Guglielmi, the court relied on Brandes
Meat Corp. and held the defendants, the only shareholders of a
dissolved corporation, personally liable because they had held
themselves out as acting on behalf of a dissolved corporation.
2001 WL 1682934 (N.Y. Sup. Ct. 2001).
Two additional cases support the notion that only certain
shareholders are liable for debts of a corporation incurred after
dissolution. In J.M. Lynne Co., Inc. v. Geraghty, a Connecticut
Supreme Court case interpreting New York law, the defendant,
president and sole shareholder of the dissolved corporation at
issue, was held personally liable for the corporation's debt
because he continued to conduct corporate business after
dissolution. 528 A.2d 786, 791-93 (Conn. 1987). Likewise,
Annicet Assocs., Inc. v. Rapid Access Consulting, Inc. held a
corporation's only officer personally liable for debts incurred
after dissolution. 656 N.Y.S.2d 152, 153 (N.Y. Sup. Ct. 1997).
Implicit in the court's reasoning was that the defendant's
liability stemmed from his continuation of the corporation's
business even after it was dissolved. See id. at 154. From a
policy perspective, the court recognized that "fraud and abuse
would be encouraged if an officer of a dissolved corporation
[was] allowed to conduct business in the corporate name" while
shielding himself from personal liability with the veil of a
non-existent corporation. Id. (citations omitted).
The above cases easily establish that New York law holds
corporate shareholders, officers, and directors personally liable
when they incur post-dissolution debts on behalf of a dissolved
corporation. However, there is no indication that New York courts would hold
personally liable for post-dissolution obligations a minority
shareholder with absolutely no involvement in the corporation.
Plaintiffs have cited no case in which a completely passive
shareholder was held personally liable. Moreover, when the
individual is not at least minimally involved in incurring the
post-dissolution debt, the policy articulated in Annicet
Assocs., Inc. of preventing fraud and abuse would not be served.
See id. Thus, under our interpretation of New York law,
minority shareholders who have not acted on behalf of the
dissolved corporation in some manner cannot be held personally
liable for the corporation's post-dissolution debts.
Turning now to the case before us, Plaintiffs have presented no
facts indicating that the Defendant was involved in incurring
Stone Street's post-dissolution debt related to the Control
Group's withdrawal liability. Further, while Plaintiffs have
presented evidence that the Defendant was an officer of Stone
Street, we have already observed that the Defendant has presented
evidence to the contrary.*fn10 Thus, a genuine dispute
regarding a material fact exists. Fed.R. Civ. P. 56(c).
Accordingly, Plaintiffs' Motion for Summary Judgment is denied.
For the foregoing reasons, we grant in part and deny in part
Plaintiffs' Motion to Strike. We deny Plaintiffs' Motion for
Summary Judgment. It is so ordered.