Transpersonnel Inc v. Roadway Express Inc ( 2005 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 04-2321
TRANSPERSONNEL, INC.,
Plaintiff-Appellee,
v.
ROADWAY EXPRESS, INC.,
a Delaware Corporation,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 03 C 611—Amy J. St. Eve, Judge.
____________
ARGUED NOVEMBER 29, 2004—DECIDED AUGUST 29, 2005
____________
Before KANNE, EVANS, and SYKES, Circuit Judges.
SYKES, Circuit Judge. This is an action for declaratory
judgment pursuant to 28 U.S.C. § 2201 by Transpersonnel,
Inc., an employer of truck drivers, against Roadway Ex-
press, Inc., a motor carrier that leased drivers from
Transpersonnel. The two-count complaint sought judicial
declarations that: (1) Roadway was an “employer” of the
leased drivers for purposes of potential withdrawal liability
under a multiemployer pension plan governed by the
Employee Retirement Income Security Act (“ERISA”),
pursuant to the Multiemployer Pension Plan Amendments
Act of 1980 (“MPPAA”), 29 U.S.C. §§ 1381, et seq.; and (2)
Roadway was required to indemnify Transpersonnel for
2 No. 04-2321
potential future liability Transpersonnel may incur pursu-
ant to the MPPAA. The district court granted summary
judgment in favor of Transpersonnel with respect to the
first question and declined to decide the second because it
was either premature or moot. We reverse.
I. Background
Transpersonnel employs truck drivers and Roadway is
a motor carrier. In 1986 the parties entered into a writ-
ten agreement under which Roadway would lease drivers
employed by Transpersonnel for use in Roadway’s trucking
operation. At the time the lease was executed, Trans-
personnel, in its capacity as the employer of the leased
drivers, was party to a collective bargaining agreement
(“CBA”) with the Teamsters Local Union No. 705. Under the
terms of the CBA, Transpersonnel was obligated to make
contributions to the Union’s pension fund on behalf of the
employees. Roadway was not a party to the CBA and had no
contractual relationship with Teamsters Local 705. The
lease agreement between Transpersonnel and Roadway
addressed the obligation to contribute to the pension fund
as follows:
[Transpersonnel] will have sole control and responsibil-
ity for and will be sole signatory under and connected
with all labor negotiations, grievances, collective
bargaining agreements and related items concerning
drivers furnished to [Roadway] under this Agreement.
....
[Transpersonnel] will pay the drivers’ wages and
provide any of the benefits required by any applicable
bargaining agreement between [Transpersonnel] and
any authorized representative of any collective bargain-
ing unit which may be in effect . . . .
No. 04-2321 3
....
[Roadway] agrees to reimburse [Transpersonnel], at
cost, for all applicable employee benefits, including . . .
pension fund contributions, and other similar items
paid to or on behalf of [Transpersonnel’s] employees
as a result of a union agreement obligation . . . .
In 1992 Roadway terminated the lease agreement, and
the parties apparently went their separate ways. At some
point after the lease agreement was terminated, Trans-
personnel ceased making contributions to the pension fund,
although the record does not disclose the reason for the
discontinuation or precisely when payments stopped. Ten
years after the lease agreement was terminated, the
pension fund issued a demand on Transpersonnel for
partial withdrawal liability in the amount of $441,846.96,
pursuant to the MPPAA, 29 U.S.C. §§ 1381, 1382. With-
drawal liability is the amount owed a pension plan by
an employer which reduces or ceases its plan contribu-
tions prior to fully funding the liabilities of the plan
attributable to the employer. 29 U.S.C. §§ 1383, 1385. The
pension fund has made no claim against Roadway and has
never suggested that Roadway bears any withdrawal
liability under the MPPAA. Transpersonnel has denied
liability to the pension fund and requested arbitration
of the pension fund’s demand pursuant to 29 U.S.C.
§ 1401(a)(1). Arbitration has not yet taken place, and the
issues of whether Transpersonnel has incurred withdrawal
liability and, if so, the amount of that liability, have yet
to be determined.
Pending arbitration, Transpersonnel filed a two-count
complaint seeking declaratory judgments that Roadway was
an “employer” of the personnel at issue for purposes of
potential withdrawal liability under the MPPAA and that
Roadway was contractually obligated to reimburse
Transpersonnel for any withdrawal liability that may
4 No. 04-2321
possibly be assessed by an arbitrator at a later date.1
The parties filed cross-motions for summary judgment,
and the district court granted Transpersonnel’s motion with
respect to its claim in Count I that Roadway was
an employer of the leased drivers for purposes of the
MPPAA. The district court held that Transpersonnel and
Roadway were “joint employers” for purposes of withdrawal
liability under the MPPAA by virtue of Roadway’s obliga-
tion under the lease agreement to reimburse
Transpersonnel for contributions required of Transper-
sonnel under its CBAs with the Teamsters.
With respect to Count II of the complaint, the district
court held that the claim was premature and would not
ripen until an arbitrator had determined whether a with-
drawal for purposes of the MPPAA had occurred and the
amount, if any, of Transpersonnel’s withdrawal liability.
The court also held that even if the issue were ripe for
adjudication, it need not address the merits because its
conclusion that Roadway was an MPPAA “employer” had
provided Transpersonnel all the relief it was seek-
ing—namely, a declaration effectively compelling Roadway
1
Although 29 U.S.C. § 1401(a)(1) specifies that “[a]ny dispute
between an employer and the plan sponsor of a multiemployer
plan . . . shall be resolved through arbitration,” the threshold
question of whether a company is an “employer” may be submitted
to a court prior to arbitration. See Banner Indus. v. Cent. States
Pension Fund, 875 F.2d 1285, 1293 (7th Cir.), cert. denied, 493
U.S. 1003 (1989); see also Rheem Mfg. Co. v. Cent. States SE & SW
Areas Pension Fund, 63 F.3d 703, 705-06 (8th Cir. 1995); Bd. of
Tr. of Trucking Employees of North Jersey Welfare Fund,
Inc.–Pension Fund v. Centra, 983 F.2d 495, 501 (3rd Cir. 1992);
Mason & Dixon Tank Lines, Inc. v. Cent. States Pension Fund, 852
F.2d 156, 167 (6th Cir. 1988). “Since only an ‘employer’ is required
to arbitrate, the district court may address this threshold question
before arbitration.” Mason & Dixon Tank Lines, 852 F.2d at 167.
No. 04-2321 5
to participate in the arbitration. Accordingly, the district
court held in the alternative that Count II was moot.2
II. Discussion
We review the district court’s award of summary judg-
ment de novo. Hildebrandt v. Ill. Dep’t of Natural Res., 347
F.3d 1014, 1024 (7th Cir. 2003). The issue presented is
whether Roadway’s relationship with the leased drivers, the
obligations of which were defined by its written lease
agreement with Transpersonnel, brings Roadway within the
ambit of an “employer” as that term is used in the MPPAA.
As mentioned briefly above, the MPPAA imposes liability on
an employer withdrawing from a multiemployer pension
plan in order to ensure that the withdrawing employer does
not leave a plan with vested pension obligations that are
only partially funded. Cent. States, SE & SW Areas Pension
Fund v. Bomar Nat’l, Inc., 253 F.3d 1011, 1014 (7th Cir.
2001). The concept of withdrawal liability attempts to avoid
a situation in which the financial burden of funding vested
pension benefits is shifted onto other employers participat-
ing in the multiemployer plan and, ultimately, to the
Pension Benefit Guaranty Corporation. Id. The pertinent
portion of the MPPAA provides: “If an employer withdraws
from a multiemployer plan in a complete withdrawal or a
partial withdrawal, then the employer is liable to the plan
in the amount determined under this part to be the with-
drawal liability.” 29 U.S.C. § 1381(a).
The MPPAA itself does not define the word “employer,”
but this court has done so, adopting a definition consistent
with that used in other circuits. In Central States, SE & SW
Areas Pension Fund v. Central Transport, Inc. (“Central
Transport”), we held that an “employer” under the MPPAA
2
The parties have not raised the dismissal of Count II on appeal,
and therefore we do not address it further.
6 No. 04-2321
is “a person who is obligated to contribute to a plan either
as a direct employer or in the interest of an employer of the
plan’s participants.” 85 F.3d 1282, 1287 (7th Cir. 1996)
(emphasis added) (quoting Seaway Port Authority v.
Duluth-Superior ILA Marine Ass’n Restated Pension Plan,
920 F.2d 503, 507 (8th Cir. 1990), cert. denied, 501 U.S.
1218 (1991)). See also Carriers Container Council, Inc. v.
Mobile Steamship Ass’n-Int’l Longshoremen’s Ass’n, AFL-
CIO Pension Plan & Trust, 896 F.2d 1330, 1343 (11th Cir.),
cert. denied, 498 U.S. 926 (1990); Korea Shipping Corp. v.
N.Y. Shipping Ass’n-Int’l Longshoremen’s Ass’n Pension
Trust Fund, 880 F.2d 1531, 1537 (2nd Cir. 1989).
We emphasized in Central Transport that “[t]he appropri-
ate inquiry is whether the alleged employer had an obliga-
tion to contribute [to the pension fund] as well as the
nature of that obligation.” 85 F.3d at 1287. The “obligation
to contribute” is created by contract: “[T]he nature of the
obligation to contribute [is] contractual, and therefore
the party ‘who is signatory to a contract creating the
obligation to contribute is the employer for purposes of
establishing withdrawal liability.’ ” Id. (quoting Rheem Mfg.
Co. v. Cent. States, SE & SW Areas Pension Fund, 63 F.3d
703, 707 (8th Cir. 1995)).
The import of the decision in Central Transport is
clear—an “employer” for purposes of MPPAA liability is
an entity that has assumed a contractual obligation to make
contributions to a pension fund. In explaining this conclu-
sion, the Central Transport panel drew heavily on the
Eighth Circuit’s decision in Rheem, a case involving a fact
pattern very similar to that presented here. In Rheem, the
plaintiff leased fifteen truck drivers from a lessor that was
signatory to a CBA, establishing the lessor’s obligation to
contribute to a pension fund on behalf of the leased drivers.
When the lessor withdrew from the pension fund, the fund
asserted that the plaintiff lessee, by virtue of its lease
agreement, was a “joint employer” for purposes of liability
No. 04-2321 7
under the MPPAA. The Eighth Circuit rejected the pension
fund’s position, holding that it was the lessor, and not the
plaintiff lessee, that “was contractually bound to make
pension contributions,” and that it was the lessor, not the
lessee, that had “signed the collective bargaining agreement
creating the obligation to contribute to [the pension fund].”
Rheem, 63 F.3d at 707. The Eighth Circuit concluded that
the pension fund’s attempt to impose liability on the lessee
failed because there was “no document that could create a
contractual obligation for Rheem to contribute to [the
fund].” Id.Transpersonnel contends that Central Transport and
Rheem are distinguishable because here there is a provision
in the lease agreement requiring Roadway as lessee to
reimburse the lessor/employer Transpersonnnel for the
latter’s contributions to the drivers’ pension fund. The
district court relied upon Roadway’s reimbursement
obligation to conclude that Roadway was a “joint employer”
for purposes of the MPPAA.
In our view, however, Roadway’s reimbursement obliga-
tion does not take this case outside the core holdings of
Central Transport and Rheem. Stated differently, the
obligation to reimburse for contributions made by another
is not the equivalent of an obligation to contribute in the
first instance, and this distinction is important for purposes
of Central Transport’s definition of “employer” under the
MPPAA.
It is undisputed in this case that Roadway had no agree-
ment whatsoever with the Union and no contractual
obligation to make contributions to the pension fund. In
its lease agreement with Transpersonnel, Roadway agreed
to reimburse Transpersonnel for whatever pension plan
contributions Transpersonnel made for the employees in
question pursuant to its own contractual obligation to
the Union. More specifically, the lease agreement states
that Roadway “agrees to reimburse Lessor, at cost, for
8 No. 04-2321
all . . . pension fund contributions . . . paid . . . on behalf of
Lessor’s employees as a result of a union agreement obliga-
tion.” By its terms, this obligation of reimbursement does
not arise until after a contribution has been made, and
extends only to amounts actually contributed. If
Transpersonnel made pension fund contributions that
were too small, or omitted contributions, the pension
fund could not look to Roadway for the balance as Roadway
was only contractually obligated to reimburse Trans-
personnel for the actual amounts Transpersonnel contrib-
uted. Roadway would have no obligation to make up the
difference because it was not contractually obligated to
contribute to the pension fund in the first place. Central
States, 85 F.3d at 1287.
Moreover, under the terms of the lease agreement,
Transpersonnel retained sole responsibility for calculat-
ing the amounts it owed to the pension fund pursuant to its
CBA with the Union, and Transpersonnel was required to
make those payments with its own funds.3 After the
calculations were made and payments contributed,
Transpersonnel could turn to Roadway for reimbursement
of amounts actually paid, but the lease agreement did not
permit Transpersonnel to bill Roadway for amounts owed
to the fund that had not previously been paid by
Transpersonnel pursuant to its contractual obligation to
contribute. There is nothing in the parties’ contract that
would have permitted Roadway to dispute the amounts paid
into the fund by Transpersonnel, to make its own calcula-
tion of the amount owed, to request a refund of erroneously
large payments, to have any input into the terms of the
CBA, or, most importantly, to make any payments directly
3
The lease agreement provides that “Lessor will have sole control
and responsibility for . . . collective bargaining agreements and
related items concerning drivers furnished to Lessee under this
Agreement.”
No. 04-2321 9
to the pension fund at all.
Accordingly, we find no merit to Transpersonnel’s sugges-
tion that it was “merely a conduit” through which pension
plan payments passed from Roadway to the fund.4 The
terms of the lease agreement establish that Transpersonnel
was the sole entity “contractually bound to make pension
contributions” for purposes of “employer” status under the
MPPAA. Rheem, 63 F.3d at 707. Simply put, nothing in the
reimbursement provision of the lease agreement imposes a
contractual obligation upon Roadway to make contributions
to the pension fund.
The district court cited Central Transport but did not
apply it, concluding that the case did not answer the
question of whether “more than one entity may qualify as
an ‘employer’ under the MPPAA.” But the definition of
“employer” adopted in Central Transport is one of general
application and does not turn on whether only one—or more
than one—putative MPPAA “employer” is asserted. Indeed,
Rheem—cited at length and with approval in Central
Transport—specifically addressed whether more than one
entity may qualify as an employer under the MPPAA.
As we have noted, at issue in Rheem was whether the
lessor and lessee of truck drivers could be considered “joint
4
This case is distinguishable from Korea Shipping Corp. v.
NYSA-ILA Pension Trust Fund, 880 F.2d 1531, 1539 (2nd Cir.
1989), which involved cargo shippers that were contractually
obligated to make pension fund contributions but whose con-
tributions were processed through the New York Shipping
Association (“NYSA”) for “immediate transmittal” to the New
York Shipping Association–International Longshoremen’s
Association Pension Fund. The Second Circuit held that under
these circumstances the NYSA was merely a “conduit” for the
shipper’s contractually required pension contributions. Id. Here,
Transpersonnel had the sole and complete contribution obliga-
tion and can hardly be characterized as a mere “conduit.”
10 No. 04-2321
employers” for purposes of MPPAA withdrawal liabil-
ity—exactly the same question presented here. See Rheem,
63 F.3d at 705. In Central Transport, this court was
faced with the question of whether to disregard the cor-
porate form of the contractual obligor as a means to ascer-
tain the “true employer” and avoid a potentially fraudulent
a r r a n g e m e nt i nv o l v i n g i n s o l v e n t , a l t e r e g o
shell corporations. Central Transport, 85 F.3d at 1287.
We characterized the possibility of fraud as constituting
an exception to the general rule established in Rheem,
and held that in the absence of fraud allegations, an en-
tity not contractually obligated to make contributions to
a pension fund would not be considered an “employer”
for purposes of withdrawal liability under the MPPAA. Id.In Rheem there was no occasion to “look behind the contrac-
tual obligor” because there were no allegations that the
relationship between the lessor and lessee was a “sham” or
a “potentially fraudulent arrangement.” Rheem, 63 F.3d at707 n.5. The same is true here.
The district court found support for its conclusion that
Roadway was an MPPAA “employer” in the holdings of
three district court cases, each of which predate our de-
cision in Central Transport and the Eighth Circuit’s
decision in Rheem. To the extent that these cases apply
a definition of an MPPAA “employer” that differs from
that adopted by this court in Central Transport, they
are inconsistent with currently applicable circuit prece-
dent and, in any event, are not controlling here.5
5
The cases cited by the district court were Am. Stevedoring Corp.
v. Burlington Indus., Inc., No. 85 C 4180, 1985 WL 5057 (N.D. Ill.
Dec. 19, 1985); Cent. Pa. Teamster’s Pension Fund v. Serv. Group,
Inc., 645 F. Supp. 996 (E.D. Pa. 1985); and Schaffer v. Eagle
Indus., Inc., 726 F. Supp. 113 (E.D. Pa. 1989).
(continued...)
No. 04-2321 11
Accordingly, for the foregoing reasons, the judgment of
the district court is REVERSED and the case is REMANDED for
further proceedings consistent with this opinion.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
5
(...continued)
USCA-02-C-0072—8-29-05