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Board of Trustees of Automobile Mechanics' Local No. 701 Union and Industry Pension Funds v. Hannah Brothers

United States District Court, N.D. Illinois, Eastern Division

October 6, 2014

BOARD OF TRUSTEES OF THE AUTOMOBILE MECHANICS' LOCAL NO. 701 UNION AND INDUSTRY PENSION FUNDS, Plaintiff,
v.
HANNAH BROTHERS, an Illinois general partnership, DONALD C. HANNAH, an individual, FULL CIRCLE GROUP, INC., an Illinois limited liability company, FULL CIRCLE SHIPYARD, LLC, an Illinois limited liability company, FULL CIRCLE REPAIR, LLC, an Illinois limited liability company, FULL CIRCLE DEVELOPMENT, LLC, an Illinois limited liability company, and WATTS CHEMICAL, LLC, an Illinois limited liability company, Defendants.

MEMORANDUM OPINION

CHARLES P. KOCORAS, District Judge.

This matter comes before the Court on the motion for summary judgment of Plaintiff Board of Trustees of the Automobile Mechanics' Local No. 701 Union and Industry Pension Funds ("Plaintiff") pursuant to Federal Rule of Civil Procedure 56 ("Rule 56") against Defendants Hannah Brothers ("Hannah Brothers") and Donald C. Hannah ("Donald") (collectively the "Hannah Defendants") as to Count I of the Second Amended Complaint.[1] Plaintiff is not seeking an entry of summary judgment as to Count I against the remaining Defendants. For the following reasons, the Court grants summary judgment in favor of Plaintiff as to Count I.

BACKGROUND

I. Facts

The following facts are taken from the parties' respective statements, responses and exhibits filed pursuant to Northern District of Illinois Local Rule 56.1 ("Rule 56.1"). We review each Rule 56.1 statement and disregard any argument, conclusion or assertion unsupported by the evidence in the record. The Court is mindful of its duty to weigh the credibility of the evidence presented by both parties and only relies on relevant, admissible evidence when ruling on the motion for summary judgment.

The Hannah Defendants did not provide a Rule 56.1(b)(3)(C) statement of additional facts for the Court to consider. They responded to Plaintiff's Rule 56.1(a)(3) statement, but failed to properly dispute many of the facts in accordance with Rule 56.1(b). For any disagreements with Plaintiff's facts, the Hannah Defendants were to make specific references to affidavits, parts of the record, and other supporting materials relied upon. See N.D.Ill. L.R. 56.1(b)(3)(B). Thus, for those responses that the Hannah Defendants failed to properly dispute, Plaintiff's factual allegations are deemed admitted to the extent they are supported by the record. 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.").

Hannah Brothers was a general partnership, formed in 1952 by James A. Hannah Jr. ("James"), Donald and Margaret H. Douaire ("Margaret"). The original partnership agreement between James, Donald and Margaret stated that the "partnership shall engage in the business of... buying, selling, leasing and operating tugboats, barges, equipment related thereto, and other marine related equipment..." The sole purpose of the partnership was to purchase barges and any other property for the exclusive use of the other companies owned by the Hannah family (the "Hannah Group"). From 1952 to 2006, Hannah Brothers would receive payments from the Hannah Group to lease tugboats owned by Hannah Brothers.

Plaintiff is a plan sponsor and authorized to administer the Automobile Mechanics' Local No. 701 Union and Industry Pension Fund ("Pension Fund"). The Pension Fund is a multiemployer pension plan that receives contributions from numerous employers. A member of the Hannah Group, Hannah Maritime Company ("HMC") was a signatory to a collective bargaining agreement with the Automobile Mechanics' Local Union No. 701, which required it to submit contributions to the Pension Fund on behalf of its employees working in covered employment.

In 2006, the Hannah Group reorganized. During his deposition, William Piotrowski ("Piotrowski"), a certified public accountant ("CPA") for Hannah Brothers, provided a flow chart showing the relationship between all the entities. For instance, James and Margaret sold their ownership interest in Hannah Brothers to New Era Hannah Corporation ("New Era"), with Donald as the 100% owner of New Era. After the reorganization, New Era owned 99% of Hannah Brothers with Donald retaining the remaining 1%. At the time of withdrawal, HMC was 100% owned by James A. Hannah, Inc., which also was 100% owned by Donald.

The Hannah Defendants dispute that New Era and Donald were general partners in Hannah Brothers at the time of the withdrawal. In his deposition, John Stoeckert ("Stoeckert"), another CPA and employee of Hannah Brothers, testified that Hannah Brothers was essentially a general partnership that owned assets that were to be leased to the principal operating entity of the Hannah Group (HMC). Hannah Brothers' only assets were vessels that were used exclusively by HMC under a bareboat charter arrangement. The Hannah Defendants contest that a bareboat charter is a lease because they claim Hannah Brothers did not even own a checking account. However, Stoeckert testified that a bareboat charter is the "equivalent" of a net lease and that HMC would pay Hannah Brothers for the use of the tugboats by using intercompany journal entries.

During the plan year beginning January 1, 2009 and ending December 31, 2009, HMC withdrew from the Pension Fund. The exact date of withdrawal is in question. Pursuant to the terms of the trust agreements, contributing employers that failed to submit payment of contributions by the due date, established by a relevant collective bargaining agreement, were responsible for the payment of liquidated damages equal to 10% of the amount unpaid, plus any reasonable attorney's fees and costs of maintaining suit.

On January 25, 2010[2], Plaintiff's former counsel sent a notice and demand for withdrawal liability. The notice and demand also included a schedule for HMC to pay its liability. On September 14, 2010, Plaintiff filed suit against HMC in the United States District Court for the Northern District of Illinois and the court entered a default judgment in favor of Plaintiff and against HMC in the aggregate amount of $380, 380.38. See Trustees of the Automobile Mechanics Local No. 701 Union and Industry Pension Fund v. Hannah Maritime Corp., 10-CV-3702 (N.D. Ill. Sept. 14, 2010). Under the Pension Benefit Guaranty Corporation, the interest rate has been at 3.25% since 2009. Plaintiff is asking for $352, 485.00 for withdrawal liability, $35, 248.50 in liquidated damages, $50, 080.33 for statutory interest at a rate of 3.25% from the date that the withdrawal liability was assessed, and $19, 675.03 in attorney's fees and costs, totaling $457, 488.86.

II. Procedural History

On June 12, 2014, Plaintiff filed its Second Amended Complaint against the Hannah Defendants for the withdrawal liability owed by HMC. The lawsuit is brought pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. §§ 1301-1461. Jurisdiction is proper under 29 U.S.C. § 1451(c). Venue is proper pursuant to 29 U.S.C. §§ 1132(e)(2) and 1451(d). On July 14, 2014, Plaintiff filed the instant motion seeking an entry of summary judgment as to Count I against the Hannah Defendants, ...


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