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Trustees of Chicago Plastering Institute Pension Trust v. Elite Plastering Co.

March 20, 2009

TRUSTEES OF CHICAGO PLASTERING INSTITUTE PENSION TRUST, ET AL., PLAINTIFFS,
v.
ELITE PLASTERING CO., INC., DEFENDANT.



The opinion of the court was delivered by: Milton I. Shadur Senior United States District Judge

MEMORANDUM OPINION AND ORDER

This action has been brought by a group of funds and other organizations that represent workers in the plastering industry (collectively "Funds" for convenience, although certain of the organizations (including a union) are not actually employee benefit funds) against Elite Plastering Co., Inc. ("Elite") under Labor Management Relations Act ("LMRA") §301 (29 U.S.C. §185) and Section 502(a)(3) of the Employee Retirement Income Security Act of 1974 ("ERISA") §502(a)(3)(29 U.S.C. §1132(a)(3)) to collect, under a theory of successor liability, allegedly delinquent employee benefit fund contributions, union dues and other amounts. Each side has moved for summary judgment under Fed. R. Civ. P. ("Rule") 56. For the reasons stated in this memorandum opinion and order, Elite's motion is granted, Funds' is denied and this action is dismissed.

Summary Judgment Standards

Every Rule 56 movant bears the burden of establishing the absence of any genuine issue of material fact (Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)). For that purpose courts consider evidentiary records in the light most favorable to nonmovants and draw all reasonable inferences in their favor (Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471 (7th Cir. 2002)). But to avoid summary judgment a non-movant "must produce more than a scintilla of evidence to support his position" that a genuine issue of material fact exists (Pugh v. City of Attica, 259 F.3d 619, 625 (7th Cir. 2001)) and "must set forth specific facts that demonstrate a genuine issue of triable fact" (id.). Ultimately summary judgment is warranted only if a reasonable jury could not return a verdict for the non-movant (Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).

One more complexity is potentially added here, where cross-motions for summary judgment are involved. Those same principles require the adoption of a dual perspective that this Court has sometimes referred to as Janus-like: As to each motion the non-movant's version of any disputed fact must be credited. In this instance, though, any potential difficulty created by that requirement has been obviated by the litigants' entry into a Joint Statement of Stipulated Facts.*fn1

Background

Funds' Action Against G&J

Cork Plastering Co., Inc. ("Cork") is an Illinois corporation that was known as G and J Plastering Co., Inc. ("G&J") until April 3, 2006 (Stip. ¶4). G&J operated as a construction-plastering contractor (id.). From 1993 onward G&J was bound by the terms of a series of collective bargaining agreements ("CBAs") negotiated by plaintiff Journeyman Plasterers Protective and Benevolent Society of Chicago, Local No. 5 ("Local 5") and a contractors' association (Stip. ¶¶6, 7, 11). Under the CBAs G&J was to remit dues to Local 5 and contributions to the Funds (Stip. ¶¶9-10). Those obligations lasted until November 14, 2002, when the NLRB certified the International Union of Bricklayers and Allied Craftworkers, Locals 56 and 74, AFL-CIO ("Local 56") as the exclusive collective bargaining representative for G&J's employees (Stip. ¶¶12, 14).

Funds sued G&J in 2003 in this District Court, charging that G&J had not cooperated with a request to audit its records to determine compliance with its contribution obligations (Stip. ¶15). After a bench trial in 2007, G&J was found delinquent in the payment of dues and contributions for thousands of hours of covered work, and judgment was entered in favor of Funds for $1,109,466.23 plus costs and attorneys' fees (Stip. ¶¶17-20). Cork (as G&J is now known) has no assets with which to satisfy the judgment, and G&J had insufficient assets as of April 3, 2006 to have paid the judgment in full (Stip. ¶21).

G&J's Asset Sale to Elite

Beginning in late 2005 G&J's majority shareholder George Palicsek ("Palicsek") complained several times to longtime acquaintance Nandor Vodnak ("Vodnak") about the financial state of G&J and told Vodnak that he intended to auction off the company's equipment and close the business (Stip. ¶¶25-28). During one of their phone conversations, Vodnak asked Palicsek what he thought the assets would be worth at auction (Stip. ¶29). Palicsek described the inventory and said he thought it would fetch $150,000 (Stip. ¶¶29-30). After the two had discussed the company's equipment in some detail, Vodnak offered to purchase the assets for $120,000 and Palicsek accepted (Stip. ¶31). That was the entire extent of their negotiations (Stip. ¶42). Vodnak, who had no experience running a construction business or working as a plasterer, traveled from his California home to Illinois in early April 2006 to close the deal (Stip. ¶¶33-34, 40).

Palicsek retained attorney Alan Garrow ("Garrow") to prepare an asset purchase agreement ("Agreement") and to represent him at closing (Stip. ¶44). Garrow was also representing G&J in its ongoing litigation with Funds, so of course he knew of Funds' claims against G&J for delinquent contributions (Stip. ¶¶44, 47). Vodnak (who was not separately represented), Palicsek and Garrow met for closing at Garrow's office on April 3, 2006 (Stip. ¶¶45, 50).

During the meeting Vodnak asked Garrow to prepare articles of incorporation for Elite, the new company that would purchase the assets (Stip. ¶46). All parties consented to the dual representation arrangement via a consent form, which sharply limited the scope of Garrow's representation of Elite (id.).*fn2

Garrow then served as Elite's registered agent for a few months and maintained Elite's corporate minute book for some unspecified period (Stip. ¶¶46, 48). Neither Garrow nor Palicsek told Vodnak about Funds' lawsuit against G&J (Stip. ¶51). Under the purchase Agreement Elite acquired substantially all of G&J's assets, including the right to do business ...


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