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Central States, Southeast and Southwest Areas v. Ehlers Dist.

July 9, 2012


The opinion of the court was delivered by: Judge Feinerman


In 2008, The Dairy Trust Co. withdrew from the Central States, Southeast and Southwest Areas Pension Fund, a multiemployer pension plan. The Pension Fund sued Dairy Trust in Central States, Southeast & Southwest Areas Pension Fund v. The Dairy Trust Co., 09 C 7657 (N.D. Ill. filed Dec. 10, 2009), to recover Dairy Trust's proportionate share of the Pension Fund's unfunded vested benefits, an amount referred to as "withdrawal liability" under the Multiemployer Pension Plan Amendments Act ("MPPAA"), 29 U.S.C. § 1381 et seq. The court entered judgment for the Pension Fund in the amount of $293,723.07, of which $226,972.52 constituted withdrawal liability. Dairy Trust, 09 C 7657, Doc. 31 (June 16, 2010) (St. Eve, J.).

Dairy Trust never satisfied the judgment. The Pension Fund (and its trustee, who for simplicity's sake will be ignored) brought this suit against Ehlers Dist., Inc. and two individuals, Kevin Ehlers and Terry Ehlers, to recover the withdrawal liability owed by Dairy Trust. The Pension Fund alleges that Ehlers Dist. is the successor to Dairy Trust, that Dairy Trust sold its assets to Ehlers Dist. in order to evade its withdrawal liability from the earlier suit, and that Dairy Trust and Ehlers Dist. distributed funds to Kevin and Terry for the same reason.

The Pension Fund has moved for summary judgment. Doc. 29. While the motion was pending, Kevin and Terry sought Chapter 7 bankruptcy protection. See In re Kevin Edward Ehlers, 2:12-bk-01105 (N.D. Iowa. Bankr. filed June 1, 2012); In re Terry Lee Ehlers, 2:12-bk-01091 (N.D. Iowa Bankr. filed May 31, 2012);. The Pension Fund acknowledges that the proceedings against Kevin and Terry must be stayed under 11 U.S.C. § 362(a)(1). Doc. 32 at 2. The case will proceed against Ehlers Dist. Ehlers Dist. filed no Local Rule 56.1(b)(3)(B) response to the Pension Fund's Local Rule 56.1(a)(3) statement of facts, so the facts set forth in the Pension Fund's statement are deemed admitted. See N.D. Ill. L.R. 56.1(b)(3)(C) ("All material facts set forth in the statement required of the moving party will be deemed to be admitted unless controverted by the statement of the opposing party."); Keeton v. Morningstar, Inc., 667 F.3d 877, 880-81, 884-85 (7th Cir. 2012); Parra v. Neal, 614 F.3d 635, 636 (7th Cir. 2010); Rao v. BP Prods. N. Am., Inc., 589 F.3d 389, 393 (7th Cir. 2009); Raymond v. Ameritech Corp., 442 F.3d 600, 608 (7th Cir. 2006); Schrott v. Bristol-Myers Squibb Co., 403 F.3d 940, 943-44 (7th Cir. 2005); Koszola v. Bd. of Educ. of City of Chi., 385 F.3d 1104, 1109 (7th Cir. 2004); Smith v. Lamz, 321 F.3d 680, 682-83 (7th Cir. 2003). The pertinent facts are as follows. Ehlers Dist. and Dairy Trust had the same owners and officers: Kevin was President, Terry was Secretary, and each held a 50% ownership interest. Doc. 31 at ¶¶ 9-12, 29. While the prior suit was pending against Dairy Trust, Kevin and Terry formed Ehlers Dist. and caused Dairy Trust to transfer substantially all of its assets to Ehlers Dist. for $67,016.93. Id. at ¶¶ 22-23. Ehlers Dist. was aware of Dairy Trust's withdrawal liability at the time of the transfer. Id. at ¶ 24. Despite the transfer, the business carried on without change: Ehlers Dist. assumed Dairy Trust's business, conducted the same type of business (the delivery of fluid dairy products), operated from the same location, employed the same individuals, used the same delivery trucks, served substantially the same customers, used the same suppliers and on the same contractual terms, relied on the same professional advisors, and used the same vendors. Id. at ¶¶ 26-35.

Ehlers Dist. filed no brief in opposition to the Pension Fund's summary judgment motion. This failure to respond "does not . automatically result in judgment for" the Pension Fund, which "must still demonstrate that it is entitled to judgment as a matter of law." Keeton, 667 F.3d at 884 (internal quotation marks omitted). The Pension Fund invokes two legal theories against Ehlers Dist.: successor liability, and engaging in a transaction with the principal purpose of evading or avoiding Dairy Trust's withdrawal liability, see 29 U.S.C. § 1392(c). Because the Pension Fund prevails under successor liability, there is no need to address the other ground.

Successor liability is an equitable doctrine that "provides an exception from the general rule that a purchaser of assets does not acquire a seller's liabilities." Chi. Truck Drivers, Helpers & Warehouse Workers Union (Indep.) Pension Fund v. Tasemkin, Inc., 59 F.3d 48, 49 (7th Cir. 1995). "[U]nder federal common law[,] . in order to protect federal rights or effectuate federal policies, this theory allows lawsuits against even a genuinely distinct purchaser of a business if (1) the successor had notice of the claim before the acquisition; and (2) there was substantial continuity in the operation of the business before and after the sale." Ibid. (internal quotation marks omitted); see also Feinberg v. RM Acquisition, LLC, 629 F.3d 671, 674 (7th Cir. 2011); Moriarty v. Svec, 164 F.3d 323, 327 (7th Cir. 1998); EEOC v. G-K-G, Inc., 39 F.3d 740, 747-48 (7th Cir. 1994); Upholsterers' Int'l Union Pension Fund v. Artistic Furniture of Pontiac, 920 F.2d 1323, 1329 (7th Cir. 1990). Summary judgment is appropriate on the Pension Fund's successor liability theory given the undisputed facts-specifically, the fact that Ehlers Dist. had notice of Dairy Trust's withdrawal liability when purchasing Dairy Trust's assets, and the facts pertaining to the continuity of the two entities' business operations. See ibid. (the continuity of business operations was established where two companies had the same management and work force, used the same location and equipment, manufactured the same products, and serviced the same customers); Sullivan v. Alpine Irrigation Co., 2011 WL 5599504, at *2 (N.D. Ill. Nov. 14, 2011) (citing cases finding continuity of business operations on similar facts).

In addition to recovering the amount of Dairy Trust's withdrawal liability, the Pension Fund seeks interest, liquidated damages, attorney fees, and costs pursuant to 29 U.S.C. § 1132(g)(2). Section 1451(b) of Title 29 provides: "In any action under this section to compel an employer to pay withdrawal liability, any failure of the employer to make any withdrawal liability payment within the time prescribed shall be treated in the same manner as a delinquent contribution (within the meaning of section 1145 of this title)." 29 U.S.C. § 1451(b). Section 1132(g)(2) of Title 29, in turn, dictates mandatory remedies for pension funds that succeed in recovering delinquent contributions under § 1145:

In any action under this subchapter . to enforce section 1145 of this title in which a judgment in favor of the plan is awarded, the court shall award the plan-

(A) the unpaid contributions,

(B) interest on the unpaid contributions,

(C) an amount equal to the greater of-

(i) interest on the unpaid contributions, or

(ii) liquidated damages provided for under the plan in an amount not in excess of 20 percent (or such higher percentage as may be permitted under Federal or State law) of the ...

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