Trs. of the Suburban Teamsters of N. Ill. Pension Fund v. E Co.

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 18-2273
TRUSTEES OF THE SUBURBAN TEAMSTERS OF NORTHERN ILLINOIS
PENSION FUND,
Plaintiff-Appellee,
v.
THE E COMPANY, a dissolved Illinois Corporation, et al.,
Defendants-Appellants.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:15-cv-10323 — Thomas M. Durkin, Judge.
____________________
ARGUED JANUARY 18, 2019 — DECIDED JANUARY 29, 2019
____________________
Before EASTERBROOK, BARRETT, and SCUDDER, Circuit
Judges.
SCUDDER, Circuit Judge. Under the terms of a collective
bargaining agreement, T&W Edmier Corporation regularly
contributed on behalf of its employees to the Suburban
Teamsters of Northern Illinois Pension Fund. But in 2014
T&W ceased operations and cut off its pension contributions,
prompting the Pension Fund to assess withdrawal liability of
2 No. 18-2273
$640,900. The Pension Fund sought to collect payment by
mailing a notice of the withdrawal liability to T&W and
several affiliated entities, only to see their collection efforts
ignored. The Trustees of the Pension Fund eventually sued to
collect payment, and that action culminated in the district
court ordering T&W, along with several other individuals and
entities under common control, to pay the withdrawal
liability. Now seeking to vacate the district court’s judgment,
T&W and the other defendants argue that their due process
rights were violated when the Pension Fund initiated
collection of the withdrawal liability by mailing notice to
some but not all of them. Seeing no error, we affirm.
I
T&W Edmier Corporation operated a construction
business in tandem with The E Company. T&W owned the
construction equipment while The E Company hired and
provided employees. Brothers Thomas and William Edmier
each owned 50% of T&W. Kevin Edmier, William’s son,
owned and operated The E Company. Pursuant to the terms
of a collective bargaining agreement with its employees, T&W
participated in the Suburban Teamsters of Northern Illinois
multi-employer pension plan, and, for its part, The E
Company agreed to assume joint and several liability for
T&W’s obligations to the Pension Fund. In 2014, however,
T&W and The E Company ceased operations, dissolved, and
withdrew from the plan.
The Multiemployer Pension Plan Amendments to the Em-
ployee Retirement Income Security Act require a covered plan
to assess withdrawal liability against a withdrawing em-
ployer. See 29 U.S.C. § 1396. Withdrawal liability, as its name
implies, is designed to prevent shifting the financial burden
No. 18-2273 3
of employees’ vested pension benefits to other employers in
the multi-employer plan. We explained these principles at
some length in Central States, Southeast and Southwest Areas
Pension Fund v. Slotky, 956 F.2d 1369, 1371–72 (7th Cir. 1992).
Consistent with ERISA’s mandate, the Pension Fund
mailed a notice of withdrawal liability on April 30, 2015, a past
due notice on August 17, 2015, and a default and acceleration
notice on November 12, 2015. The notice went to T&W, The E
Company, and the Edmier Corporation (another entity
wholly owned by Thomas Edmier). Even more specifically,
the Pension Fund sent the notice to the attention of Thomas,
William, and Kevin Edmier, as well as attorney George
Grumley, the registered agent of both T&W and The E
Company. At their depositions, Thomas, William, and Kevin
Edmier acknowledged receiving the notice.
The Pension Fund’s notices went unanswered and, as a
result, the Pension Fund’s Trustees initiated a lawsuit in the
district court. Ignoring the Pension Fund’s requests for
payment had significant legal consequences for the
defendants. Congress has required that all disputes over
withdrawal liability be resolved through arbitration, see 29
U.S.C. § 1401(a)(1), and an employer’s failure to arbitrate
means “the plan can then immediately file suit to collect the
entire amount of withdrawal liability, and in that proceeding
the employer will have forfeited any defenses it could have
presented to the arbitrator,” Nat’l Shopmen Pension Fund v.
DISA Industries, Inc., 653 F.3d 573, 579 (7th Cir. 2011).
Our case law has recognized a narrow exception to this
general rule of forfeiture for a party who “had absolutely no
reason to believe that they might be deemed members of a
controlled group” but is nonetheless sued and alleged to be
4 No. 18-2273
liable for another party’s withdrawal liability based on
ERISA’s “controlled group” provision. See Slotky, 956 F.2d at
1373. The controlled group provision imputes liability to all
“trades or businesses” under “common control” with another
party who is liable for the withdrawal liability. See 29 U.S.C.
§ 1301(b)(1). And our decision in Slotky allows unsuspecting
defendants who are sued in district court but had no idea they
might be liable as members of a controlled group to litigate
that question—membership in a controlled group. See 956
F.2d at 1373.
Relying on this framework, the district court concluded
that T&W, The E Company, and the Edmier Corporation had
forfeited all defenses to liability, including the defense that
they were not members of a controlled group, by failing to
arbitrate after receiving the Pension Fund’s notice of with-
drawal liability. This outcome reflected a straightforward ap-
plication of these defendants not complying with the clear ar-
bitration mandate in 29 U.S.C. § 1301(b)(1).
As for each of the other defendants (Thomas, William, and
Kevin Edmier; K. Edmier & Sons LLC; The William Edmier
Trust; Lake Street Realty, Inc.; and E&E Equipment & Leas-
ing), the district court explained that they too had likely for-
feited all defenses as they were not the type of unsuspecting
defendant contemplated in Slotky. Put differently, the district
court reasoned that none of these defendants had such a cred-
ible claim of surprise (at being a member of a controlled
group) to sidestep ERISA’s arbitration requirement. Regard-
less, the district court went further and determined as a fac-
tual matter that each of these defendants was a trade or busi-
ness under common control with another party who received
the notice of withdrawal liability. This reasoning finds strong
No. 18-2273 5
support in the record and resulted in the district court con-
cluding that each of these defendants was liable under
ERISA’s controlled group provision.
In the end, the district court entered summary judgment
for the Pension Fund’s Trustees and ordered the defendants
to pay the full $640,900 of withdrawal liability, plus interest,
liquidated damages, attorneys’ fees, and costs. As members of
a controlled group, each of the defendants became jointly and
severally liable for payment. See Central States, Southeast and
Southwest Areas Pension Fund v. Koder, 969 F.2d 451, 452 (7th
Cir. 1992) (citing 29 U.S.C. § 1301(b)(1)).
II
The defendants challenge the district court’s judgment by
arguing that the Pension Fund’s notice of withdrawal liability
violated the Fifth Amendment’s Due Process Clause. In their
view, the Supreme Court’s decision in Mullane v. Central
Hanover Bank & Trust Co., 339 U.S. 306 (1950) required the
Pension Fund to serve the notice of withdrawal liability on
each of them and to explain the standard for controlled group
liability under ERISA in the notice. This contention misses the
mark.
The defendants’ reliance on Mullane is misplaced because
all parties agree that judicial proceedings commenced in the
district court with proper service of process (notice of the
complaint) to each defendant. The due process standard an-
nounced in Mullane—a decision requiring sufficient notice of
a pending judicial proceeding—was therefore satisfied. No
reading of Mullane, however, supports the view that ERISA’s
controlled group liability provisions and accompanying
6 No. 18-2273
procedural framework (in which a defendant forfeits certain
defenses by failing to arbitrate) violate due process.
A related observation is in order. The defendants colloqui-
ally and imprecisely allege a violation of due process, time
and again citing Mullane. In no way, shape, or form did any
due process violation occur here. The defendants who re-
ceived—but chose to ignore—the notice of withdrawal liabil-
ity had every opportunity to arbitrate and yet failed to do so,
resulting, by operation of ERISA, in a waiver of all defenses
to withdrawal liability. No unfairness inheres in that out-
come. And, as for the defendants who did not receive the no-
tice of withdrawal liability but nonetheless found themselves
named in a federal lawsuit, the district court provided them a
full and fair opportunity to litigate their liability as members
of a controlled group. Nothing about the path those defend-
ants traveled offends due process.
For these reasons, we AFFIRM.