Moriarty, Thomas J. v. Pepper, George , 256 F.3d 554 ( 2001 )

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 01-1034 and 01-1080
Thomas J. Moriarty, Trustee, on behalf of
the Trustees of the Local Union No. 727
I.B.T. Pension Trust and the Trustees of
the Teamsters Local Union No. 727 Health
and Welfare Trust,
Plaintiff-Appellee,
v.
George Pepper, individually, as sole proprietor of
Hills Funeral Home, and Hills Funeral Home, Ltd.,
Defendants-Appellants.
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 98 C 773--Milton I. Shadur, Judge.
Argued June 5, 2001--Decided July 2, 2001
Before Flaum, Chief Judge, and Manion and
Rovner, Circuit Judges.
Flaum, Chief Judge. Thomas J. Moriarty,
in his capacity as Trustee for the Local
Union No. 727 I.B.T. Pension Trust and
the Teamsters Local Union No. 727 Health
and Welfare Trust (the "Funds"), filed
suit against George Pepper and Hills
Funeral Home, Ltd. ("Hills"), pursuant to
the Labor Management Relations Act
("LMRA"), 28 U.S.C. sec. 185 and the
Employee Retirement Income Security Act
of 1974 ("ERISA"), 29 U.S.C. sec.
1132(a)(3), seeking to recover employer
contributions owed to the Funds. The
district court granted Moriarty’s summary
judgment motion with regard to liability
and entered judgment in favor of the
Funds against Pepper and Hills, jointly
and severally, in the amount of
$157,753.95./1 Hills attempted to avoid
being held liable; however, the district
court determined in a summary judgment
motion that Hills, who had purchased
Pepper’s funeral home business, was a
successor to Pepper for liability
purposes. For the reasons stated herein,
we reverse the judgment of the district
court with respect to its conclusion that
Pepper and Hills are jointly and
severally liable and remand for further
proceedings in light of this opinion. At
this juncture, for the reasons stated
below, we will not address the district
court’s successor liability decision with
regard to Hills.
I. Background
Pepper, in approximately February of
1979, began operating Olympic Hill Chapel
(later changing the name to Hills Funeral
Home in 1982) in Palos, Illinois.
Moriarty, who was Executive Director of
the Funeral Directors Services
Association of Greater Chicago ("FDSA" or
the "Association"), learned that Pepper
was considering acquiring a funeral home
business and sent him in December of 1978
an application for membership in the
FDSA. Pepper signed and returned the
application; thereby, he was elected to
FDSA membership in February of 1979. The
FDSA is a multi-employer organization of
funeral homes located in the Chicago
metropolitan area, which among its other
services, negotiates labor agreements for
its members, provides them with a pre-
need funeral arrangement trust fund, and
continuing education programs. The Funds
are third-party beneficiaries of
collective bargaining agreements ("CBAs")
entered into between the FDSA and the
union for funeral workers (the
"Union")./2
To fully comprehend the current dispute
between Moriarty and Pepper, one needs to
fast forward in time to 1997. It is at
this point that the Funds’ auditor
informed Pepper that the Funds wanted to
conduct an audit (covering the period
from January 1, 1990 through June 30,
1997) of Hills Funeral Home’s payroll
records. The auditor determined that
Pepper, as the sole proprietor of Hills
Funeral Home, owed $38,575.53 to the
Pension Fund and $65,780.24 to the Health
and Welfare Fund in contributions,
interest, liquidated damages, and audit
fees. Sometime between October 22 and
November 5, 1997, Pepper received a copy
of the audit report, and in January 1998
Pepper submitted his resignation to the
FDSA, which was accepted on February 18,
1998. In the meantime, Pepper sold his
funeral home business to Jason and Frank
Leonard in late January of 1998.
The question that the district court
confronted on summary judgment was
whether Pepper manifested an unequivocal
intention to be bound by the FDSA’s
collective bargaining activities with the
Union, thereby causing him to owe the
Funds contributions. The district court
answered this question in the
affirmative. Thus, the district court
found Pepper was liable to the Funds for
unpaid contributions. In addition, the
district court on summary judgment ruled
in favor of the Funds when it found that
"Hills is a successor to Pepper’s funeral
home business as a matter of law and, as
such, it is also liable under ERISA for
any employer contributions that Pepper
owes to [the] Funds." Moriarty v. Hills
Funeral Home, Ltd., 93 F.Supp. 2d 910,
916 (N.D. Ill. 2000). It is our task to
assess whether the district court
properly granted summary judgment in
favor of the Funds on both of these
issues.
II. Discussion
A. Liability Claim
We review the district court’s grant of
summary judgment de novo, construing all
of the facts and reasonable inferences
that can be drawn from those facts in
favor of the nonmoving party. See Central
States, Southeast & Southwest Areas
Pension Fund v. Fulkerson, 238 F.3d 891,
894 (7th Cir. 2001). A grant of summary
judgment is appropriate if the pleadings,
depositions, answers to interrogatories,
admissions, and affidavits leave no
genuine issue of material fact, and the
moving party is entitled to a judgment as
a matter of law. Fed.R.Civ.P. 56(c).
The district court concluded that Pepper
expressed an unequivocal intent to be
bound by the FDSA’s collective bargaining
activities. To reach such a position, the
district court analyzed the parallels
between Pepper’s situation and that of
George Bliudzius, President of G.
Bliudzius Contractors, Inc., in
International Union of Operating Eng’rs,
Local 150 v. G. Bliudzius Contractors,
Inc., 730 F.2d 1093 (7th Cir. 1984). As
the district judge explained, in
Bliudzius, the employer signed a
membership application that said,
"members of the [Builders’] Association
[of Chicago], delegated and assigned to
the [Builders’] Association certain of
its rights to bargain collectively with
labor organizations," id. at 1095, and
that it "agrees to be governed by and
abides by the provisions of the
Constitution and By-Laws of the Builders’
Association . . . ." Id. at 1094.
Further, as the district court pointed
out, the By-Laws provided that "[e]ach
member shall, as a condition of
membership in the [Builders’]
Association, and while a member thereof
be deemed to have designated the
[Builders’] Association as the exclusive
collective bargaining representative for
the purpose of negotiating collective
bargaining agreements . . . ." Id. at
1094 n.1. When Pepper joined the FDSA in
1979, he signed a membership application
that said he "agrees, if elected to
membership, to abide and be bound by the
provisions of the Constitution, By-Laws,
Rules and Regulations of the
Association." At that time, the FDSA’s
Constitution, in relevant part, said:
"Labor Negotiations. The Association,
through action by the General Executive
Board, shall authorize the President to
appoint a committee to represent the
members of the Association in labor
negotiations or any dispute or grievance
which may arise from such labor
negotiations and to enter into such
agreements as a result of the
negotiations, subject to the approval of
the membership." According to the
district court, "As in Bliudzius, that
provision [Labor Negotiations] was an
express delegation of bargaining
authority that bound Pepper to the CBAs.
And no communication that ensued between
Pepper and [the] Association during the
nearly two decades of Pepper’s
Association membership ever changed that
original bargain . . . ." Hills, 93
F.Supp. 2d at 917. Evidently, the
district court read the language of the
Labor Negotiations provision as an
express indication that Pepper intended
to be bound by the bargaining activities
between the FDSA and the Union.
To be sure, the district court was
careful not to ignore Moriarty v.
Glueckert Funeral Home, Ltd., 155 F.3d
859 (7th Cir. 1998), the case that
outlines how one discerns if an employer
who is a member of a multi-employer
organization has manifested an
unequivocal intent to be bound by a
contract that an association negotiates.
The district court distinguished
Glueckert on the basis that when
Glueckert joined the FDSA, the Labor
Negotiations provision was not contained
within FDSA’s Constitution, but rather
was located in the FDSA’s separate
Official Statements of Policy. However,
at the time Pepper joined the FDSA, the
Labor Negotiations provision was part of
the Constitution and he agreed to abide
by and be bound by the provisions of the
Constitution. The district court appears
to suggest that the absence of the Labor
Negotiations provision within the FDSA’s
Constitution is what precipitated us to
find that Glueckert had not expressed an
unequivocal intention to be bound by the
FDSA’s collective bargaining activities.
The district court also noted that we
considered a "group of inferential
factors" that also led us to the
conclusion that Glueckert had not
expressed an intent to be bound by the
FDSA’s collective bargaining agreements.
Hills, 93 F.Supp.2d at 918. Such
distinctions are of import, as the
district court found, "By total contrast
[from Glueckert], Pepper’s express
contractual undertaking to abide by and
be bound by [the] Association’s Constitu
tion, coupled with the Constitution’s
then-existing express provisions
authorizing CBAs to be negotiated and
entered into by [the] Association
(subject to approval by the membership
generally, which was obtained in every
instance), created a contract that
satisfied the ’unequivocal intention to
be bound’ test--and Pepper cannot escape
that result by his ostrichlike head-in-
the-sand arguments . . . ." Id. Quite
clearly, the district court had firmly
resolved that Pepper had granted the FDSA
express actual authority to bargain on
his behalf.
Upon review, we cannot concur with the
district court’s conclusion that Pepper
expressed an unequivocal intent to be
bound by the FDSA’s collective bargaining
activities. It appears that the district
court found that Pepper’s signing of the
Association’s membership application and
the language in the Constitution
regarding Labor Negotiations resulted in
an express delegation of authority by
Pepper to the FDSA permitting it to
bargain on Pepper’s behalf. Although the
district court believes there are strong
similarities between this case and
Bliudzius, the two cases differ in
important ways. For instance, in
Bliudzius there is a specific reference
in the application that a member is dele
gating and assigning certain of his or
her collective bargaining rights to the
Builders’ Association. 730 F.2d at 1095.
In addition, the By-Laws in Bliudzius
speak of membership in the Builders’
Association being conditioned upon each
member designating the Builders’
Association as his or her exclusive
collective bargaining representative. Id.at 1094 n.1. It is rather clear in
Bliudzius that there was an express
delegation of authority to the Builders’
Association. The same cannot be said of
the relationship between Pepper and the
FDSA. The application that Pepper signed
does not specifically state that he
agreed to delegate and assign his
bargaining rights to the FDSA nor does
the Labor Negotiations provision in the
FDSA’s Constitution refer to each member
having to designate for the purposes of
collective bargaining the FDSA as its
representative. While the Labor
Negotiations clause makes mention that
the FDSA will engage in collective
bargaining, it does not state or imply
that all members or any particular member
will be bound by such collective
bargaining activity. Therefore, we cannot
conclude that the application that Pepper
signed and the Labor Negotiations clause
reveals an express intention on Pepper’s
part to be bound by the FDSA’s collective
bargaining activities.
Although we have determined that Pepper
did not expressly authorize the FDSA to
bargain on his behalf, there still
remains the question of whether he
manifested his unequivocal intent to be
bound in some other fashion. Because the
district court found that Pepper had
expressly authorized the FDSA to bargain
on his behalf, it never addressed the
myriad of factors discussed in Glueckert
regarding whether an employer has
manifested an unequivocal intent to be
bound by the FDSA’s collective bargaining
activities. Indeed, we have said that
"the framework of agency law, especially
the concepts of implied actual or
apparent authority, will provide, as a
practical matter, the basic matrix of the
court’s analysis. Nevertheless, the
’unequivocal intent to be bound’
principle must inform that analysis by
requiring substantially more factual
precision than might be true in other
agency situations. It requires that
certainty by focusing the judicial
inquiry on factors that are peculiarly
relevant to determining whether an
employer member of a multi-employer
organization can be said to have
consented to be bound by the contract
negotiated by the association."
Glueckert, 155 F.3d at 866. At this
stage, such factors still remain a point
of contention between the parties that
have yet to be resolved. Thus, the
dispute between Pepper and Moriarty
remains.
B. Successor Liability
The district court determined that Hills
was a successor to Pepper’s funeral home
and therefore liable under ERISA and the
LMRA for any employer contributions that
Pepper owed to the Funds. According to
the district court, "Hills has not raised
a fact issue for trial, either as to the
continuity of business operations as
between itself and Pepper’s sole
proprietorship or as to [the] Leonards[ ]
being on express notice of [the] Funds’
claim prior to the sale." Hills, 93
F.Supp.2d at 916. In light of our remand,
it would be premature for us at this
point to address the successor liability
issue. See Deveraux v. City of Chicago,
14 F.3d 328, 330 (7th Cir. 1994) (citing
U.S. National Bank of Oregon v.
Independent Insurance Agents, 508 U.S.
439, 446 (1993)) (The Supreme Court has
said that "[t]he exercise of judicial
power under Art. III of the Constitution
depends on the existence of a case or
controversy," and "a federal court
[lacks] the power to render advisory
opinions.").
III. Conclusion
We Reverse the district court’s decision
to grant summary judgment in favor of
Moriarty with regard to Pepper and
Hills’, joint and several, liability owed
to the Funds and Remand this case to the
district court for proceedings consistent
with this opinion. We do not reach the
successor liability question and so
express no opinion on whether the issue
was correctly decided by the district
court.
FOOTNOTES
/1 The district court arrived at the amount of
$157,753.95 in the following manner: "This amount
consists of: (A) under Plaintiff’s ERISA claim
(i) $51,765.00 in principal ($32,878.00 - Health
and Welfare Trust, $18,887.00 - Pension Trust);
(ii) $36,491.03 in interest ($22,979.30 - Health
and Welfare Trust, $13,511.73 - Pension Trust);
(iii) $36,491.03 in double interest ($22,979.30
- Health and Welfare Trust, $13,511.73 - Pension
Trust), as allowed pursuant to 29 U.S.C. sec.
1132(g)(2); (iv) $5,575.26 in costs for
prosecuting this suit; and (v) $2,998.00 in audit
costs; (B) and under Plaintiff’s LMRA claim (i)
$13,732.02 in principal ($8,567.30 - Health and
Welfare Trust, $5,164.72 - Pension Trust); and
(ii) $10,701.61 in interest ($6,572.10 - Health
and Welfare Trust, $4,129.51 - Pension Trust)."
/2 The Union’s full name is: Auto Livery
Chauffeurs, Embalmers, Funeral Directors, Appren
tices, Ambulance Drivers and Helpers, Taxicab
Drivers, Miscellaneous Garage Employees, Car
Washers, Greasers, Polishers and Wash Rack Atten
dants Union, Local No. 727, I.B.T.