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Central States, Southeast and v. Blue Sky Heavy Hauling

March 23, 2011

CENTRAL STATES, SOUTHEAST AND
SOUTHWEST AREAS PENSION FUND, AND HOWARD MCDOUGALL, PLAINTIFFS/COUNTER-DEFENDANTS,
v.
BLUE SKY HEAVY HAULING, INC., DEFENDANT/COUNTER-PLAINTIFF.



The opinion of the court was delivered by: Judge Joan B. Gottschall

MEMORANDUM OPINION & ORDER

The Employee Retirement Income Security Act of 1974 ("ERISA") as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. § 1001 et seq., imposes liability on employers who withdraw from a multiemployer pension plan to the extent of the employer's share of the plan's unfunded vested benefits. 29 U.S.C. § 1381. Plaintiffs Central States, Southeast and Southwest Areas Pension Fund (the "Fund") and Fund Trustee Howard McDougall (collectively, "Central States") filed this action to compel defendant Blue Sky Heavy Hauling, Inc. ("Blue Sky") to continue making withdrawal liability payments while the parties arbitrate the extent of Blue Sky's liability. Blue Sky asserted a number of counterclaims, and the parties filed cross-motions for summary judgment. Blue Sky subsequently moved to amend its counterclaims. All three motions are now fully briefed and ready for decision.

I.BACKGROUND

Mike Bates, the president of Blue Sky, has operated a trucking business known as Jackie's Transport, Inc. since 1991. (Bates Aff. ¶ 3.) The employees of Jackie's Transport have never participated in the Fund. (Id. ¶ 4.) According to Bates, in 1997, another trucking company, Holloway, was going out of business. Bates wanted to employ the Holloway truckers, but these potential employees had been paying into the Fund and did not want to lose their benefits. To accommodate these truckers, Bates formed Blue Sky, and the new entity employed the former Holloway truckers. (Id. ¶ 5.) Blue Sky signed a collective bargaining agreement and participation agreement with Local Union No. 247 of the International Brotherhood of Teamsters under which Blue Sky agreed to make contributions to the Fund for certain employees. (Answer ¶ 8; Sprau Aff. ¶¶ 11, 12.) *fn1

Some time later (the parties dispute when exactly) Central States determined that the arrangement Bates had devised violated the Fund's adverse selection rule. Pension funds provide a type of insurance for employees who pay into the system, and an adverse selection rule seeks to prevent employers from excluding workers who are less likely (probably because they are younger) to draw on the insurance. Because of Blue Sky's violation of the rule, Central States decided on November 13, 2007 to expel Blue Sky from further participation. (Id. ¶ 14.) Central States sent a Blue Sky a letter dated November 21, 2007 which purported to terminate Blue Sky's participation as of December 1. (Id. ¶ 15.)

According to Central States' calculations, the expulsion of Blue Sky triggered withdrawal liability of $963,062.89, and a demand letter was sent on February 22, 2008. (Id. ¶ 22.) Pursuant to its rights under ERISA, Blue Sky requested arbitration of this determination, and arbitration is now pending.*fn2 For a period of time, between March 2008 and January 2010, Blue Sky made interim withdrawal liability payments to the Fund of $8,796.42. (Id. ¶¶ 22, 27.) As of February 2010, Blue Sky has stopped making payments. (Id. ¶ 29.)

In addition to the present lawsuit to force Blue Sky to make interim payments and the arbitration over withdrawal liability, Central States brought another action seeking unpaid contributions of approximately $35,000. See Cent. States, Se. & Sw. Areas Pension Fund v. Blue Sky Heavy Hauling, Inc. ("Contribution Lawsuit"), Case No. 08 C 3338 (N.D. Ill. filed June 10, 2008). That case, and Central States' separate summary judgment motion, is currently pending before Judge Dow. (See Contribution Lawsuit, Doc. 102.) Blue Sky filed a motion before Judge Dow to consolidate the cases. (Id., Doc. 91.) Although that motion was pending at the time the parties briefed the motions in this case, Judge Dow has since denied Blue Sky's motion to consolidate. (See id., Doc. 114.)

II.SUMMARY JUDGMENT STANDARD

Summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "The moving party is so entitled if no reasonable fact-finder could return a verdict for the nonmoving party." Patton v. MFS/Sun Life Fin. Distribs., Inc., 480 F.3d 478, 485 (7th Cir. 2007). At the summary judgment stage, the court should view the evidence in the light most favorable to the nonmoving party, drawing all inferences in that party's favor. Cedillo v. Int'l Ass'n of Bridge & Structural Iron Works, Local Union No. 1, 603 F.2d 7, 11 (7th Cir. 1979). However, the evidence presented at this stage must comport with the Federal Rules of Evidence and be admissible at trial, United States v. 5443 Suffield Terrace, Skokie, Ill., 607 F.3d 504, 510 (7th Cir. 2010), or it must consist of affidavits or declarations "made on personal knowledge, set[ting] out facts that would be admissible in evidence, and show[ing] that the affiant or declarant is competent to testify on the matters stated," Fed. R. Civ. P. 56(c)(4).

III.ANALYSIS

Central States' brief in support of its motion makes a clear-cut case in favor of summary judgment. Under ERISA, once a multiemployer plan assesses withdrawal liability against an employer, the employer must make payments despite the fact that the employer may dispute liability and choose to arbitrate. 29 U.S.C. §§ 1399(c)(2), 1401(d) . The employer's defenses are strictly limited:

[F]ederal judges "have no equitable power to excuse interim payments." In enacting ERISA, Congress decided that interim payments were mandatory-no excuses-because the "stakes" are safer in the interim if they are held by the Fund. Funds don't go out of business the way thinly capitalized employers do, meaning they can readily refund the payments to [an employer] if an arbitrator rules against them.

Cent. States, Se. & Sw. Areas Pension Fund v. Wintz Properties, Inc., 155 F.3d 868, 875-76 (7th Cir. 1998) (citations omitted). Any dispute over the merits of the plan's claim must be settled by the arbitrator. Cent. States, Se. & Sw. Areas Pension Fund v. Bomar Nat'l, Inc., 253 F.3d 1011, 1015-16 (7th Cir. 2001). The Seventh Circuit has recognized an exception to the general rule that an employer must make interim withdrawal payments. To fit within the exception, an employer must "show both that the pension fund lacks a colorable claim and that the employer will suffer severe financial hardship if compelled to make interim payments." Id. at 1016.

Blue Sky's response brief is lengthy and complains of the unequal balance of power between a small employer and a large pension plan which is flush with cash to litigate and endowed by Congress with a heavy advantage in court. But the brief is largely devoid of any legal argument. Blue Sky contends that the Fund's adverse selection rule is really a "manipulable concept" which permits Central States to impose withdrawal liability at its whim. And, according to Blue Sky, because the participation agreement gives Central States the discretion to determine the effective date of withdrawal, Central States could have imposed any amount of liability from zero (if it chose a withdrawal date before any employees had earned vested benefits) to close to $1 million (which is the amount actually assessed). Because of the arrangement between Bates and the former Holloway truckers, Blue Sky was allegedly violating the ...


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