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Perez v. Wallis

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

December 30, 2014

THOMAS E. PEREZ, Secretary of Labor, United States Department of Labor, Plaintiff,
v.
SCOTT WALLIS, et al., Defendants

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For Hilda L Solis, Secretary of Labor, United States Department of Labor, Plaintiff: Bruce C. Canetti, LEAD ATTORNEY, U.s. Department Of Labor, Office Of The Solicitor, Chicago, IL; Marla J. Haley, United States Department of Labor, Office of the Solicitor, Chicago, IL.

Scott Wallis, Defendant, Pro se, West Dundee, IL.

Ronald Eriksen, Defendant, Pro se, Aurora, IL.

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MEMORANDUM OPINION AND ORDER

Ruben Castillo, Chief United States District Judge.

The Secretary of the U.S. Department of Labor (" the Secretary" ) brought this action against Scott Wallis (" Wallis" ), Ronald Eriksen (" Eriksen" ), USA Baby, Inc., USA Baby, Inc. 401(k) Plan, and USA Baby, Inc. Health Plan for violations of the Employee Retirement Income Security Act of 1974 (" ERISA" ), 29 U.S.C. § 1001 et seq. (R. 1, Compl. ¶ 1.) Presently before the Court are the Secretary's separate

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motions seeking summary judgment against Wallis and Eriksen (collectively " Defendants" ). (R. 137, Sec'y's Mot. Summ. J. against Wallis; R. 132, Sec'y's Mot. Summ. J. against Eriksen.) For the reasons set forth below, the motions are granted.

RELEVANT FACTS

I. Northern District of Illinois Local Rule 56.1

Before summarizing the material facts, the Court must address Local Rule 56.1, which imposes " certain requirements for supporting and opposing motions for summary judgment." Bordelon v. Chi. Sch. Reform Bd. of Trs., 233 F.3d 524, 527 (7th Cir. 2000). Local Rule 56.1 assists the Court " by organizing the evidence, identifying undisputed facts, and demonstrating precisely how each side propose[s] to prove a disputed fact with admissible evidence." Id. (quoting Markham v. White, 172 F.3d 486, 490 (7th Cir. 1999)). The U.S. Court of Appeals for the Seventh Circuit has emphasized that Local Rule 56.1 is " not a mere formality." Delapaz v. Richardson, 634 F.3d 895, 899 (7th Cir. 2011) (quoting Waldridge v. Am. Hoechst Corp., 24 F.3d 918, 924 (7th Cir. 1994)). Rather, it " is designed . . . to aid the district court, 'which does not have the advantage of the parties' familiarity with the record and often cannot afford to spend the time combing the record to locate the relevant information,' in determining whether a trial is necessary." Id. (quoting Waldridge, 24 F.3d at 923-24).

To that end, Local Rule 56.1 requires a party moving for summary judgment to submit, among other things, a statement of undisputed material facts consisting of " short numbered paragraphs, including within each paragraph specific references to the affidavits, parts of the record, and other supporting materials relied upon to support the facts set forth in that paragraph." N.D.Ill. L.R. 56.1(a)(3). The opposing party must then submit, among other things, a concise response to the movant's statement of facts containing " a response to each numbered paragraph in the moving party's statement, including, in the case of any disagreement, specific references to the affidavits, parts of the record, and other supporting materials relied upon." N.D.Ill. L.R. 56.1(b)(3)(B). Unless controverted in this manner, " all material facts set forth in the movant's statement are deemed admitted." Bordelon, 233 F.3d at 527. " Thus, a general denial is insufficient to rebut a movant's factual allegations; the nonmovant must cite specific evidentiary materials justifying the denial." Malec v. Sanford, 191 F.R.D. 581, 584 (N.D. Ill. 2000); see also Butts v. Aurora Health Care, Inc., 387 F.3d 921, 924 (7th Cir. 2004) (" The mere existence of an alleged factual dispute will not defeat a summary judgment motion; instead, the nonmovant must present definite, competent evidence in rebuttal." ).

In addition, a Local Rule 56.1(b)(3) response " is not the place for purely argumentative denials," Malec, 191 F.R.D. at 584, nor is it the place for submitting additional facts, Ciomber v. Coop. Plus, Inc., 527 F.3d 635, 643-44 (7th Cir. 2008). Instead, to properly present additional facts to the Court, the non-moving party must submit a separate statement, " consisting of short numbered paragraphs, of any additional facts that require the denial of summary judgment, including references to the affidavits, parts of the record, and other supporting materials relied upon." N.D.Ill. L.R. 56.1(b)(3)(C). The Seventh Circuit has " consistently upheld a district court's discretion to require strict compliance" with Local Rule 56.1. Bordelon, 233 F.3d at 527.

Here, Defendants failed to comply with Local Rule 56.1. While they filed a

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joint response to the Secretary's motions, they did not provide any supporting evidence or point to specific documents in the record; instead, they offer general denials, irrelevant arguments, and inflammatory statements about alleged misconduct by the Secretary. ( See R. 147, Defs.' Resp. at 1-89.) As required by Local Rule 56.2, the Secretary served Defendants with the notice required for pro se litigants, which explains how to prepare a proper response, how to defeat a summary judgment motion, and the consequences of not complying with the Local and Federal Rules. ( See R. 135, Notice; R. 140, Notice.) The fact that Defendants are proceeding pro se does not excuse their failure to comply with the Rules. See McNeil v. U.S., 508 U.S. 106, 113, 113 S.Ct. 1980, 124 L.Ed.2d 21 (1993) (" [W]e have never suggested that procedural rules in ordinary civil litigation should be interpreted so as to excuse mistakes by those who proceed without counsel." ); Cady v. Sheahan, 467 F.3d 1057, 1061 (7th Cir. 2006) (district court did not abuse its discretion in adopting moving party's version of the facts where pro se litigant failed to comply with Local Rule 56.1); Lumpkins-Benford v. Allstate Ins. Co., 987 F.Supp.2d 807, 812 (N.D. Ill. 2013) (deeming movant's facts admitted where non-movant, a pro se litigant, failed to support her response with citations to admissible evidence, and instead offered " conclusory assertions, conjecture, additional facts, or argumentative denials" ). Accordingly, the Secretary's facts are deemed admitted.

II. Relevant Facts

U.S.A. Baby, Inc. (" USA Baby" ), a company specializing in the retail of infant and toddler furniture, was incorporated in Illinois on October 16, 2001. (R. 138, Sec'y's Facts ¶ ¶ 3-4; R. 138-24, Illinois Secretary of State Search; R. 133, Sec'y's Facts ¶ ¶ 3-4; R. 133-19, 2010 USA Baby Website Printout.) On September 5, 2008, USA Baby filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Northern District of Illinois. (R. 138, Sec'y's Facts ¶ 6; R. 133, Sec'y's Facts ¶ 6.) On February 11, 2009, the case was converted to a Chapter 7 bankruptcy. (R. 138, Sec'y's Facts ¶ 6; R. 133, Sec'y's Facts ¶ 6.) On October 3, 2012, the bankruptcy case was closed, and USA Baby ceased to exist as a corporate entity. (R. 138, Sec'y's Facts ¶ 6; R. 133, Sec'y's Facts ¶ 6.)

From 2005 to 2009, Wallis served various roles within USA Baby, including: Chief Financial Officer from January 2005 to November 2008; Chief Operating Officer from August 2005 to November 2008; and President from November 2008 to April 2009. (R. 138, Sec'y's Facts ¶ 8.) Wallis was also a five percent shareholder of USA Baby stock. (R. 138, Sec'y's Facts ¶ 8; R. 138-16, Def. Eriksen's Answer to Interrogs. ¶ ¶ 7-8; R. 138-17, Def. Wallis' Answer to Interrogs., ¶ ¶ 3, 7; R. 133, Sec'y's Facts ¶ 9.) In addition to his positions with USA Baby, Wallis also provided consulting services to USA Baby though various corporate entities, including Scott Wallis & Associates and Lighthouse Publications, Inc. (R. 138, Sec'y's Facts ¶ ¶ 52-53; R. 138-26, Wallis Dep. at 15-16.)

From 2001 to 2008, Eriksen served various roles at USA Baby, including: Chairman of the Board from 2001 to 2008; Chief Executive Officer from May 2004 to December 2008; and President from October 2007 to November 2008. (R. 138, Sec'y's Facts ¶ 7; R. 138-15, Defs.' Joint Answer ¶ 9; R. 138-16, Def. Eriksen's Answer to Interrogs. ¶ ¶ 7-8; R. 133, Sec'y's Facts ¶ ¶ 7-8; R. 133-8, Payroll Rs., at 12-28.) Eriksen was also a 78.23% majority shareholder of USA Baby stock, and earned a weekly salary of $3,202.22. (R. 138, Sec'y's Facts ¶ 7; R. 138-15, Defs.' Joint Answer ¶ 9; R. 138-16, Def. Eriksen's Answer

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to Interrogs. ¶ ¶ 3, 7-8; R. 133, Sec'y's Facts ¶ ¶ 7-8; R. 133-8, Payroll Rs., at 12-28.)

A. The 401(k) Plan, Health Plans, and Accounting Procedures of USA Baby

On May 18, 2004, USA Baby established a 401(k) plan (" the 401(k) Plan" ) in order to provide retirement and other incidental benefits to its employees. (R. 138, Sec'y's Facts ¶ 18; R. 138-2, USA Baby 401(k) Plan at 35; R. 133, Sec'y's Facts ¶ 15.) Employees could make salary deferral contributions to the 401(k) Plan. (R. 138, Sec'y's Facts ¶ 19; R. 138-2, USA Baby 401(k) Plan at 35; R. 138-3, Summ. Plan Description of USA Baby 401(k) Plan at 3; R. 133, Sec'y's Facts ¶ 16.) Qualified Plan Consultants (" QPC" ) was the third-party administrator of the 401(k) Plan. (R. 138, Sec'y's Facts ¶ 14; R. 138-5, John Hancock Letter at 2; R. 133, Sec'y's Facts ¶ 13; R. 133-6, QPC Letter and Authorization.) John Hancock Life Insurance Company (" John Hancock" ) was the asset custodian of the 401(k) Plan. (R. 138, Sec'y's Facts ¶ 15; R. 138-5, John Hancock Letter at 2; R. 133, Sec'y's Facts ¶ 14.)

From February 1, 2004, to May 1, 2008, USA Baby held a group health insurance policy (" Blue Cross Health Plan" ) with Blue Cross Blue Shield of Illinois. (R. 138, Sec'y's Facts ¶ ¶ 16,20; R. 138-11, Appl. to Blue Cross Benefit Program at 2.) USA Baby established the Blue Cross Health Plan " in order to provide medical benefits to employees of USA Baby." (R. 138, Sec'y's Facts ¶ ¶ 16,20.) Under the Blue Cross Health Plan, premiums were due on the first calendar day of each month. (R. 138, Sec'y's Facts ¶ 23; R. 138-11, Appl. to Blue Cross Blue Shield of Ill. Benefit Program at 3.) Effective May 1, 2008, Blue Cross terminated the policy because USA Baby failed to pay the required premiums. (R. 138, Sec'y's Facts ¶ 24; R. 138-12, Letter from Blue Cross and Invoices at 2, 7.) On October 1, 2008, USA Baby obtained a group health insurance policy from Humana (" Humana Health Plan" ). (R. 138, Sec'y's Facts ¶ 17; R. 138-9, Humana Engagement Letter, at 2.) However, on October 31, 2008, Humana terminated the policy because USA Baby failed to pay the required premiums. (R. 138, Sec'y's Facts ¶ ¶ 17, 26; R. 138-19, Courtney Decl. ¶ 10; R. 138-10, Humana Invoice at 2; R. 138-15, Defs.' Joint Answer ¶ 28.)

In his various capacities at the company, Wallis had control and authority to send checks to the 401(k) Plan, as well as to the Blue Cross and Humana Health Plans (collectively " the Health Plans" ). (R. 138. Sec'y's Facts ¶ ¶ 28-29; R. 138-18, Benard Decl. ¶ 10; R. 138-20, Courtney Decl. ¶ 13.) As the named trustee of the 401(k) Plan, Eriksen had the power to invest, manage, and control assets of the Plan. (R. 133, Sec'y's Facts ¶ ¶ 17-18; R. 133-2, USA Baby 401 (k) Plan at 7; R. 133-7, Letter from Eriksen.)

From February 2008 through December 2008, USA Baby's accounting department provided Wallis with a list of payables each week, including the employee salary deferrals to the 401(k) Plan and the Health Plans. (R. 138, Sec'y's Facts ¶ 27; R. 138-18, Benard Decl. ¶ 6; R. 138-19, Courtney Decl. ¶ 5; R. 138-20, Horstman Decl. ¶ 7.) Wallis reviewed the lists of payables and directed which bills to pay, and which bills not to pay. (R. 138, Sec'y's Facts ¶ 27; R. 138-18, Benard Decl. ¶ ¶ 6-7; R. 138-20, Horstman Decl. ¶ ¶ 6-7; R. 138-19, Courtney Decl. ¶ ¶ 5, 7; R. 138-21, Rivera Decl. ¶ ¶ 7-10.) Accounting department staff would then present checks to Eriksen for his signature. (R. 138, Sec'y's Facts ¶ 27; R. 138-18, Benard Decl. ¶ 6; R. 138-19, Courtney Decl. ¶ 5; R. 138-20, Horstman Decl. ¶ 6; R. 138-21, Rivera Decl. ¶ ¶ 7-10.)

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B. Wallis's and Eriksen's Conduct In Connection With The ...


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