Opinion
No. 90 C 3795
June 14, 1991
MEMORANDUM OPINION AND ORDER
I. FACTS
Plaintiff Central States, Southeast and Southwest Areas Pension Fund ("Central States") is a multi-employer pension fund and plaintiff Howard McDougall is one of Central States' trustees. Plaintiffs brought suit pursuant to the Employee Retirement and Income Security Act of 1974 ("ERISA"), as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPA"), against defendant Hoosier Dairy, Inc. ("Hoosier"). This ERISA dispute arises from a series of collective bargaining agreements between Hoosier and Local Union No. 135 of the International Brotherhood of Teamsters.
Hoosier and Teamsters Local 135 entered into a collective bargaining agreement effective March 1, 1984 until March 26, 1987 (the "1984 CBA"). In the 1984 CBA, Hoosier and Local 135 agreed to the following language:
Section 21.1. The Company will contribute to the Central States, Southeast and Southwest Areas Pension Fund provided the Company receives a proper statement from the administrator of said Fund that the Company is subject to the "six year free look provisions" of 29 U.S.C. § 1384, and should the Company withdraw from the Fund during the said six-year period the Company would not be subject to any withdrawal liability.
In 1987, a second CBA was negotiated (the "1987 CBA"), which was effective March 26, 1987 until March 26, 1991 and contained the same language as Section 21.1 above. Both of these agreements required Hoosier to make certain contributions to the pension fund on behalf of covered employees. From March of 1984 to February of 1990, Hoosier made contributions to the pension fund pursuant to the CBAs.
In 1986, non-party Prairie Farms, Inc. ("Prairie Farms") purchased all of the stock of Eastside Jersey Dairy, Hoosier's parent, making Prairie Farms Hoosier's parent. Prairie Farms had contributed to the pension fund prior to 1980, the enactment year of the MPPA. On January 31, 1990, Central States informed Hoosier that Hoosier might be subject to withdrawal liability because of the stock sale that had occurred in 1986. On February 3, 1990, Hoosier stopped making payments to the pension fund stating that previous payments were based upon the availability of the "six-year free look provision" of ERISA. Hoosier claimed that it was no longer obligated to make contributions to the pension fund because the fund had breached the contract. Central States sued for continued contributions under the 1987 CBA and recovery of past due payments, calculated for the months of February, 1990 to December, 1990, as well as interest and liquidated damages, for a total of $13,212.12. Hoosier filed a counterclaim to recover all amounts contributed to the pension fund based upon breach of the Pension Fund Trust Agreement ("Trust Agreement"). All parties are now before the court on cross-motions for summary judgment.
Defendant does not seek to "withdraw" from the pension fund. Rather, defendant argues that it was never a member of the fund because of plaintiffs' failure to perform a condition. Plaintiffs only seek to enforce payments of contributions, which are now past due under the 1987 CBA.
II. SUMMARY JUDGMENT
Summary judgment is appropriate where "there is no genuine issue as to any material fact" and "the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The purpose of summary judgment is to determine whether a trial will be necessary. "The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original). Conversely, when confronted with a motion for summary judgment, the party who bears the burden of proof on a particular issue must affirmatively demonstrate that there is a genuine issue of material fact. Mechnig v. Sears, Roebuck Co., 864 F.2d 1359, 1363 (7th Cir. 1988) ( citing Celotex Corp. v. Catrett, 477 U.S. 317 (1986)). When presented with a motion for summary judgment, a court must examine the evidence in a light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Bowyer v. United States Dept. of Air Force, 804 F.2d 428, 430 (7th Cir. 1986).
III. DISCUSSION
Hoosier argues that its obligation to contribute to the pension fund under the 1984 and 1987 CBAs is contingent upon not being subject to any withdrawal liability under ERISA's "six-year free look" provision. In short, Hoosier contends that both of the CBAs are void and, therefore, unenforceable because of Central States' failure to perform a condition: provide a proper statement that Hoosier "is subject to the 'six-year free look provisions' of 29 U.S.C. § 1384." Each CBA is a separate contract, and Hoosier's contract arguments fail concerning both of them. The reasoning, however, is different for each CBA.
ERISA's six-year free look provision is codified at 29 U.S.C. § 1390(a) and reads:
(a) An employer who withdraws from a plan in complete or partial withdrawal is not liable to the plan if the employer —
(1) first had an obligation to contribute to the plan after September 26, 1980,
(2) had an obligation to contribute to the plan for no more than the lesser of —
(A) 6 consecutive plan years preceding the date on which the employer withdraws, or
(B) the number of years required for vesting under the plan,
(3) was required to make contributions to the plan for each such plan year in an amount equal to less than 2 percent of the sum of all employer contributions made to the plan for each such year, and
(4) has never avoided withdrawal liability because of the application of this section with respect to the plan.
In 1984, Central States did provide Hoosier with a statement concerning the six-year free look provision. In that statement, Central States wrote:
[B]ased on the information contained in [your letter of April 24, 1984], it is my opinion that East Side Jersey Dairy, Inc. would be entitled to the advantage of the six-year free look, which would allow withdrawal without liability in less than six years. . . . Again, presuming the facts are as you have stated them, it is the position of the Fund that this bargaining unit would be entitled to that advantage.
Letter from Alan M. Levy, Director, Plan Development Compliance Group to Jack H. Rogers, Esq., Attorney for East Side Jersey Dairy, Inc., d/b/a Hoosier Dairy, Inc. (May 7, 1984) (emphasis added).
The information contained in Hoosier's letter of April 24, 1984 concerned the corporate status of East Side Jersey Dairy and Hoosier. In that letter, Hoosier specifically stated: "Neither East Side Jersey Dairy, Inc. nor Hoosier Dairy, Inc. have ever been a participant in the Central States, Southeast and Southwest Areas Pension Fund." After receipt of this information, Central States provided the above statement regarding the six-year free look provision. Thus, in 1984, Central States performed the condition, and the 1984 CBA was validly formed.
In 1986, however, Prairie Farms purchased 100% of Hoosier's stock becoming Hoosier's "parent." Because Prairie Farms entered the pension fund before 1980, it could not meet the requirements of the six-year free look provision. After Prairie Farm's stock purchase, Hoosier and Prairie Farms became a single employer under ERISA. See 29 U.S.C. § 1301(b)(1) (the "controlled group" provision). Section 1301(b)(1) of Title 29 provides that "employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer and all such trades and businesses as a single employer." "Trades or businesses under common control" has been defined by regulation to include parent-subsidiary relationships. 26 C.F.R. § 1.414(c)-2(b). Hoosier and Prairie Farms are therefore under common control and must be treated as a single employer. Since Prairie Farms was not eligible for the six-year free look, under § 1301(b)(1), Hoosier was also not eligible. See Trustees of the Chicago Truck Drivers, Helpers Warehouse Workers Union (Indep.) Pension Fund v. Central Transport, Inc., 888 F.2d 1161 (7th Cir.1989).
Section 1301(b)(1) reads in pertinent part:
For purposes of this subchapter, under regulations prescribed by the corporation, all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer and all such trades and businesses as a single employer.
The term "parent-subsidiary" is defined in the regulations as follows:
(b) Parent-subsidiary group of trades or businesses under common control — (1) In general. The term "parent-subsidiary group of trades or businesses under common control" means one or more chains of organizations conducting trades or businesses connected through ownership of a controlling interest with a common parent organization if —
(i) A controlling interest in each of the organizations, except the common parent organization, is owned . . . by one or more of the other organizations; and
(ii) The common parent organization owns . . . a controlling interest in at least one of the other organizations, excluding, in computing such controlling interest, any direct ownership interest by such other organizations.
As a member of a controlled group with Prairie Farms, Hoosier is subject to withdrawal liability if Hoosier withdraws from the pension fund. Hoosier, however, is not withdrawing from the fund, and plaintiffs are not suing on a theory of withdrawal liability, but for collection of past due contributions.
Hoosier did not inform Central States of its change of status. In a "controlled group" case concerning an employer's duty to inform a fund, the Seventh Circuit agreed with the Third Circuit and held that a fund "should not have to bear the burden of determining all other possible entities that later may be determined to be in a control group with the employer company. On the other hand, a company is aware of other entities that are under common control with it." Id. at 1163 n. 3 (citing IUE AFL-CIO Pension Fund v. Barker Williamson, 788 F.2d 118, 128 (3d Cir.1986)).
In 1987, Central States did not provide a statement. Hoosier, however, did not request a statement from Central States and, therefore, waived this condition by continuing to perform under the 1987 CBA. See Robbins v. Lynch, 836 F.2d 330, 332 (7th Cir. 1988) (employers may adopt a CBA by course of conduct); see also Osteopathic Medicine v. George A. Fuller, Co., 776 F.2d 198, 202 (7th Cir. 1985) ("Waiver may be proven by words or deeds of the party against whom waiver is invoked that are inconsistent with an intention to insist on that party's contractual rights."). Although waiver is a factual determination, reasonable minds could not differ and the parties do not dispute that Hoosier continued to perform under the 1987 CBA until February of 1990. Since Hoosier waived the condition, the 1987 CBA is also valid, and Hoosier's contract argument fails.
This ruling does not resolve any issue that might arise in the future with respect to possible withdrawal liability. The pension fund states at page nine in its Memorandum in Support of Summary judgment:
In addition, Hoosier cannot assert that its entry into the Pension Fund has caused it to incur any withdrawal liability. In fact, if Hoosier Dairy were to close, it would not trigger a complete or partial withdrawal under Section 4203 or 4205 of ERISA, 29 U.S.C. § 1381, 1385. Thus, Hoosier Dairy would not even incur any withdrawal liability and it has no basis to claim that no contributions are due because it would be subject to such liability. (Exhibit B, ¶ 8.)
Hoosier also makes the procedural argument that Central States never alleged in its complaint that the fund performed all conditions precedent, and that such affirmative allegations must be pled and proven by the plaintiff in a contract dispute. Such defect in pleading, however, is not fatal to Central States claim. See Fed.R.Civ.P. 15(a) (leave to amend shall be freely granted when justice so requires). Central States may move to conform its complaint to the evidence even after a judgment on the issues presented. Fed.R.Civ.P. 15(b).
Both CBAs are valid and enforceable contracts. Central States, as a third-party beneficiary, may enforce the CBAs as written. Central States, S.E. S.W. v. Gerber Truck, 870 F.2d 1148, 1149 (7th Cir. 1989). As Congress provided under ERISA:
Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement. 29 U.S.C. § 1145 (emphasis added).
Both parties agree that there are no genuine issues of material fact and that, if valid, the CBAs are still in effect and require Hoosier to contribute to the pension fund. As a matter of law, it is held that both CBAs are valid and, therefore, Hoosier is liable to Central States for contributions due.
IT IS THEREFORE ORDERED that:
(1) Defendant Hoosier's motion for summary judgment is denied.
(2) Plaintiffs Central States' and Howard McDougall's motion for summary judgment is granted.
(3) The Clerk of the Court is directed to entered judgment in favor of plaintiffs/counter-defendants Central States Southeast and Southwest Areas Pension Fund and Howard McDougall and against defendant/counter-plaintiff Hoosier Dairy, Inc. on both plaintiff's claim and defendant's counterclaim in the amount of $13,212.12. Plaintiffs may move within 10 days of the date of this order to amend the judgment amount to include additional amounts due.