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Central States, Southeast and Southwest Areas Pension Fund v. Blue Sky Heavy Hauling

October 28, 2010

CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, ET AL.
v.
BLUE SKY HEAVY HAULING, INC.



Name of Assigned Judge Robert M. Dow, Jr. Sitting Judge if Other or Magistrate Judge than Assigned Judge

DOCKET ENTRY TEXT

This matter is before the Court on Defendant Blue Sky Heavy Hauling, Inc.'s motion for reassignment and consolidation [91]. For the reasons stated below, the Court denies Defendant's motion for reassignment and consolidation [91].

O[ For further details see text below.] Docketing to mail notices.

STATEMENT

I. Factual Background

Plaintiffs Central States, Southeast and Southwest Areas Pension Fund, and Howard McDougall (collectively referred to as "Central States" or the "Fund") filed the instant suit ("Central States I") on June 10, 2008, to collect approximately $29,000 in pension contributions that Plaintiffs claim are owed pursuant to an audit covering January 2002 to December 1, 2007.

On February 24, 2010, Blue Sky filed three counterclaims for the return of pension contributions that Defendant contends were made but not owed. The counterclaim alleges that some of the overpayments were made as a result of clerical errors on Blue Sky's part. The counterclaim also alleges that other overpayments were made because Blue Sky unilaterally withdrew from the Fund many years before it ceased remitting contributions to the Fund in November 2007. Blue Sky's theory is based on the Fund's rule that prohibits "adverse selection." According to Blue Sky, it violated the adverse selection rule long before November 2007 and it therefore effectuated a unilateral withdrawal from the Fund by 2002 (or earlier). Blue Sky alleges that payments that it made as contributions to Central States after the adverse selection rule violation began in 2002 (or earlier) were not owed as contributions and were made based upon mistakes of law, fact, or both. As a result, Blue Sky seeks restitution (Count I), recoupment (Count II), and setoff (Count III) of contributions paid to the Fund after the adverse selection rule violation allegedly began. Thus, one issue before the Court may be the date on which Blue Sky withdrew from the Fund, and resolution of that issue may affect both the Fund's contribution claim and Blue Sky's refund claim. Discovery in the present case closed on July 6, 2010, and the parties' cross-motions for summary judgment were filed on September 17, 2010.

In another case pending before Judge Gottschall in this district ("Central States II"), Central States sued to collect interim withdrawal liability payments. In its Complaint, Central States alleges that Blue Sky withdrew from the Fund on December 1, 2007, thereby triggering withdrawal liability of $963,062.89. The Fund alleges (and Blue Sky admits) that the Fund served a notice and demand for payment of withdrawal liability on Blue Sky in February 2008, which informed Blue Sky that it was required to discharge its liability in a lump sum or monthly interim payments of $8,796.42 beginning March 1, 2008. The Fund alleges (and Blue Sky admits) that the monthly interim payments were made from March 2008 through January 2010, but no payments were made after January 2010. In addition, the Fund alleges (and Blue Sky admits) that Blue Sky has initiated arbitration to dispute its liability and that the arbitration is pending.

Blue Sky also filed a counterclaim in Central States II that, as Blue Sky acknowledges, "substantial[ly] overlaps" with the counterclaim in the present case. Indeed, many of the paragraphs of the counterclaim in Central States II are identical to the paragraphs of the counterclaim in this case; however, there also are numerous additional allegations in Central States II. In particular, Blue Sky's counterclaim in Central States II seeks a declaratory judgment determining the date of its withdrawal and a recalculation of the amount of its liability based upon a corrected date, as well as a credit for any overpayment of withdrawal liability. Blue Sky also seeks an "Equitable Stay" of the Fund's complaint in Central States II until the recalculation occurs. Blue Sky further asserts that the Fund should be estopped from asserting that the withdrawal occurred after 2004 and that the Fund's selection of the 2007 withdrawal date violates an implied covenant of good faith and fair dealing. Counts I through IV challenge the merits of the withdrawal liability assessment; Count V asserts that Blue Sky is entitled to "setoff/recoupment" of all contributions paid to the Fund after the correct date of withdrawal.

The Fund filed a summary judgment motion in Central States II on July 24, 2010. Citing Central States, Southeast and Southwest Areas Pension Fund v. Warner and Sons, Inc., 2008 WL 4201014, at *2 (N.D. Ill. Sept. 9, 2008) and related authority, the Fund argues that Blue Sky had to show both that the assessment based upon the selection of the 2007 withdrawal date was frivolous and that the payments would cause irreparable harm, a task that the Fund insists Blue Sky cannot accomplish. Further, the Fund contends that Counts I through IV of the Counterclaim should be dismissed because they attack the merits of the assessment, which can only be challenged in arbitration. Finally, the Fund argues that Count V, which seeks the contribution refund, should be dismissed because it is duplicative of the counterclaim filed in the present case. In support of the last argument, the Fund cited Serlin v. Arthur Andersen & Company, 3 F.3d 221, 223 (7th Cir. 1993), where the court indicated that "[a]s a general rule, a federal suit may be dismissed for reasons of wise judicial administration * * * whenever it is duplicative of a parallel action already pending in another federal court."

Blue Sky filed a motion to strike the Fund's summary judgment motion in Central States II, which Judge Gottschall denied on August 18, 2010. However, she granted Blue Sky's motion for an extension of time until September 17, 2010, to file its response to the Fund's summary judgment motion. The Fund's reply was due on October 1, 2010.

On September 17, 2010, the Fund filed a motion for summary judgment in the present case, and Blue Sky filed its response on October 15. The Fund's reply is due on October 29. Therefore, both Central States I and II have pending motions for summary judgment that are or soon will be fully briefed.

As noted above, Blue Sky has initiated an arbitration concerning the withdrawal liability assessment in October 2008 ("Blue Sky's Arbitration Case"). An arbitrator was selected in November 2008 but after twenty-two months, it does not appear that any activity has taken place and no dates or deadlines have been scheduled. In May 2010, the American Arbitration Association requested a status report. Other than notifying the American ...


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