Berger Transfer & Storage v. Central States, Southeast & Southwest Areas Pension Fund

___________
No. 95-2965
___________
Berger Transfer & Storage, *
*
*
Plaintiff - Appellee, *
*
v. *
*
Central States, Southeast and *
Southwest Areas Pension Fund; *
Central States, Southeast and * Appeal from the United States
Southwest Areas Health and * District Court for the
Welfare Fund; Marion Winstead, * District of Minnesota.
Trustee of said Funds; Robert *
Sansone, Trustee of said Funds; *
R. Jerry Cook, Trustee of said *
Funds; Harold D. Leu, Trustee of*
said Funds; Howard McDougall, *
Trustee of said Funds; Robert *
Baker, Trustee of said Funds; *
R. V. Pulliam, Trustee of said *
Funds; Arthur H. Bunte, Jr., *
Trustee of said Funds, *
*
Defendants - Appellants.*
___________
Submitted: March 14, 1996
Filed: June 18, 1996
___________
Before FAGG, JOHN R. GIBSON, and WOLLMAN, Circuit Judges.
___________
JOHN R. GIBSON, Circuit Judge.
The Central States, Southeast and Southwest Areas Pension and Health
and Welfare Funds appeal the district court's1 judgment in favor of Berger
Transfer and Storage. The Funds appeal the court's decision that the
owner-operators driving for Berger Transfer are independent contractors.
The Funds argue that the district court erred in applying the common-law
test for determining independent contractor status, and in holding that
issue preclusion did not prevent it from deciding this issue. The Funds
also appeal the district court's holding that the Minnesota six-year
statute of limitations applied. We affirm.
Berger Transfer, a trucking company, enters into "Contractor
Operating Agreements" with owner-operators engaged in its long distance
hauling. After the owner-operator leases his tractor to Berger Transfer,
the company then executes a sublease to Allied Van Lines.
The collective bargaining agreement in effect between May 1982 and
September 1988 required Berger Transfer to make pension contributions for
its employees, first to the Minneapolis Employees Benefit Association and
then to the Central States, Southeast and Southwest Areas Pension and
Health and Welfare Funds.
Following an audit, the Funds determined that Berger Transfer had not
made payments into the Funds on behalf of all owner-operators. The Funds
demanded payment on behalf of these individuals, asserting that they were
all employees. Berger Transfer filed this action for declaratory judgment,
asking the district court to declare the owner-operators to be independent
contractors, to enjoin the Funds from collecting contributions for these
individuals, and to apply the Minnesota statute of limitations in the event
the owner-operators were found to be
1
The Honorable Richard H. Kyle, United States District Judge
for the District of Minnesota.
-2-
employees. The Funds counterclaimed, seeking to recover all contributions
owed to it by Berger Transfer.
The district court granted partial summary judgment, holding that the
six-year Minnesota statute of limitations applied. Following a bench
trial, the court held that the owner-operators were independent
contractors, and entered judgment in favor of Berger Transfer. The Funds
appeal.
I.
The Funds argue that issue preclusion prevents the district court
from deciding whether the Berger Transfer owner-operators were employees
or independent contractors. The funds argue that an earlier Minnesota
workers' compensation decision, which held that a Berger Transfer owner-
operator was an employee,2 prevents relitigation of this issue. See
Hansford v. Berger Transfer, Findings and Order, OAH ID No. 080985, at 8
(Minn. Office of Admin. Hearings Workers Compensation Section May 2, 1991),
aff'd as modified, 46 W.C.D. 303 (Minn. Workers' Comp. Ct. App. 1991),
aff'd, 482 N.W.2d 225 (Minn. 1992).
The district court concluded that the factual issues in this case
differed from those decided in the workers' compensation case. The court
ruled that the Funds had failed to introduce any evidence showing that
Berger Transfer treated all of its owner-operators in the same manner as
the owner-operator in the workers' compensation case. The court noted that
the Funds acknowledged that not all owner-operators were classified the
same. Thus, the court concluded that, while the findings in Hansford might
provide evidence in this case, they did not prevent Berger Transfer from
2
Berger Transfer did not challenge this finding among the
several issues raised on appeal in that case.
-3-
litigating the question of whether all owner-operators, as a group, were
employees or independent contractors.
The Funds ask us to reverse the district court's decision not to
apply offensive nonmutual issue preclusion to prevent litigation of the
employee-independent contractor question in this case. See Setter v. A.H.
Robbins Co., 748 F.2d 1328, 1330 (8th Cir. 1984) (discussing the parameters
of offensive nonmutual issue preclusion).3 We reverse the district court's
decision not to apply offensive nonmutual issue preclusion only for an
abuse of discretion. Id.
Before [issue preclusion] will bar relitigation of a
factual issue in a subsequent proceeding, the prior
determination must satisfy a four-part test:
(1) the issue sought to be precluded must be the
same as that involved in the prior action;
(2) the issue must have been litigated in the
prior action;
(3) the issue must have been determined by a valid
and final judgment; and
(4) the determination must have been essential to
the prior judgment.
The party asserting [issue preclusion] bears the burden of
proving that a prior decision satisfies all four elements of
the test. If the party against whom the earlier decision is
being asserted did not have a full and fair opportunity to
litigate the issue in question [issue preclusion] does not
apply.
Farmland Indus. v. Morrison-Quirk Grain, 987 F.2d 1335, 1339 (8th Cir.
1993) (internal citations omitted) (quoting Johnson v. Miera (In re Miera),
926 F.2d 741, 743 (8th Cir. 1991)).
3
The issue preclusion requested is nonmutual because the Funds
were not a party in the workers' compensation case. See Setter,
748 F.2d at 1330. It is offensive, because the Funds seek to
impose liability on Berger Transfer by preventing the company from
litigating an issue decided against it in the previous workers'
compensation case. Id.
-4-
Only when a party has had a full and fair opportunity to litigate an
issue in the first proceeding do "the benefits of preclusion outweigh the
countervailing due process concerns present whenever a party is estopped
from raising a claim." Simmons v. O'Brien, 77 F.3d 1093, 1095-96 (8th Cir.
1996). If application of offensive issue preclusion would be unfair to a
defendant, a trial judge should not allow the use of offensive issue
preclusion. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 331 (1979). When
the defendant has little incentive to defend vigorously in the first suit,
later application of offensive nonmutual issue preclusion may be
inappropriate. See id. at 330.
As the district court stated, the Funds made no effort to show that
the status of all Berger Transfer owner-operators was identical to that of
the owner-operator in the workers' compensation case. Further, the
workers' compensation case involved a single injured owner-operator in an
entirely different legal setting. We are convinced that it would be unfair
to extend the finding in the workers' compensation case to this ERISA case.
See Parklane Hosiery Co., 439 U.S. at 331; De La Fuente v. Stokley- Van
Camp, Inc., 713 F.2d 225, 234 (7th Cir. 1983) (refusing to apply offensive
issue preclusion when the first case offered little incentive to contest
the issue of whether the defendant was a farm labor contractor). The
district court did not abuse its discretion in refusing to apply offensive
nonmutual issue preclusion here.
II.
The parties disagree regarding the standard of review that we must
apply to the ruling that the owner-operators are independent contractors.
Berger argues that this is a question of fact to be reviewed under the
clearly erroneous standard, relying on Sargent v. Commissioner, 929 F.2d
1252, 1254 (8th Cir. 1991) (stating that in tax cases, employer-employee
relationship is a mixed question of law and fact to be reviewed under the
clearly erroneous standard).
-5-
We believe that the context in which Sargent arises limits its
applicability to this case.
In Short v. Central States, Southeast & Southwest Areas Pension Fund,
729 F.2d 567, 571 (8th Cir. 1984), we stated that "[w]hether a given
individual is an employee or independent contractor is a question of law,
which must be decided by reviewing the particular facts of each case." We
then looked to the common-law test for distinguishing employees from
independent contractors, relying primarily on the enumeration of factors
in the Restatement (Second) of Agency, § 220 (1957). Id. at 572. We
balanced these factors to reach the ultimate legal conclusion as to whether
the owner-operators were employees or independent contractors. No specific
attack was made on the factors weighed to reach the ultimate conclusion in
the case, so it was unnecessary to state whether the particular factual
issues being weighed would, if attacked, be reviewed as questions of law
or questions of fact.
It is evident that the district court's findings underlying each of
the common-law factors are factual findings, while the ultimate conclusion
as to whether an individual is an employee or an independent contractor is
a question of law. The standard of review has been well expressed as
follows:
The existence and degree of each factor is a question of fact
while the legal conclusion to be drawn from those facts--
whether workers are employees or independent contractors--is a
question of law. Thus, a district court's findings as to the
underlying factors must be accepted unless clearly erroneous,
while review of the ultimate question of employment status is
de novo.
Dole v. Snell, 875 F.2d 802, 805 (10th Cir. 1989) (deciding employee-
independent contractor status under Fair Labor Standards Act) (quoting
Brock v. Superior Care, Inc., 840 F.2d 1054, 1059 (2d Cir. 1988)); see also
Henderson v. Inter-Chem Coal Co., 41 F.3d 567, 571 (10th Cir. 1994); Martin
v. Selker Bros., Inc., 949 F.2d
-6-
1286, 1292 (3d Cir. 1991); Waxman v. Luna, 881 F.2d 237, 240 (6th Cir.
1989).
Some years after we decided Short, the Supreme Court held that a
common-law test should be applied to determine who qualifies as an employee
under ERISA. Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318, 323-
24 (1992). The Court instructed:
In determining whether a hired party is an employee under the
general common law of agency, we consider the hiring party's
right to control the manner and means by which the product is
accomplished. Among the other factors relevant to this inquiry
are the skill required; the source of the instrumentalities and
tools; the location of the work; the duration of the
relationship between the parties; whether the hiring party has
the right to assign additional projects to the hired party; the
extent of the hired party's discretion over when and how long
to work; the method of payment; the hired party's role in
hiring and paying assistants; whether the work is part of the
regular business of the hiring party; whether the hiring party
is in business; the provision of employee benefits; and the tax
treatment of the hired party.
Id. (quoting Community for Creative Non-Violence v. Reid, 490 U.S. 730,
751-52 (1989) (footnotes omitted)). As the district court recognized,
"[s]ince the common-law test contains ``no shorthand formula or magic phrase
that can be applied to find the answer, . . . all of the incidents of the
relationship must be assessed and weighed with no one factor being
decisive.'" Id. at 324 (quoting NLRB v. United Ins. Co. of Am., 390 U.S.
254, 258 (1968)).
The district court recognized that the proper inquiry was the hiring
party's right to control the manner and means by which a task is
accomplished. The court then balanced the Darden factors on each side of
the employee-independent contractor question to reach its conclusion.
-7-
The court noted that the owner-operator agreement specifically
provided that the owner-operator was responsible for determining the means
used to provide transportation services to Berger Transfer. The owner-
operators were responsible for hiring and supervising drivers and other
workers, loading and unloading the trucks, purchasing and maintaining the
leased equipment, paying operating expenses such as fuel and repairs, and
paying workers' compensation and withholding employment taxes for drivers.
The district court also found that the owner-operators possessed
"considerable autonomy regarding when and how long they would work." For
example, owner-operators could refuse to take trip assignments, and they
frequently refused assignments offered by the company dispatcher. They
were not penalized for refusing a trip, but were instead offered another
assignment. In addition, the company paid the owner-operators a percentage
of the revenue from each trip, and the owner-operators were not on Berger
Transfer's payroll. The company reported the owner-operators' income to
the Internal Revenue Service on Form 1099, instead of on Form W-2 which is
used to report employee earnings.
The district court next examined the nature of Berger Transfer's
control over the leased tractor and the owner-operator. The court noted
that because federal regulations required exclusive contract language in
the Contractor Operating Agreement, it was necessary to look at the actual
nature of the relationship to determine the extent of Berger Transfer's
control. The court found that it was not uncommon for owner-operators to
make trips for other carriers, as often as once or twice a month. The
court also noted that although Berger Transfer may have stated that owner-
operators were required to paint their trucks in Allied Van Lines colors
and wear Allied uniforms, in practice they were not required to do so.
Further, owner-operators were required to pay for the license obtained by
Berger Transfer. The court concluded its findings by stating that the
Funds had produced no evidence of
-8-
restrictions on the owner-operators' personal use of their tractors, or on
soliciting business from other brokers. The record failed to show that
Berger Transfer had ever unilaterally terminated an owner-operator or
retained control of a tractor after the owner-operator wished to no longer
drive for the company.
The Funds argue that the district court erred in its analysis because
it is the existence of the right to control, not the exercise of that right
which is determinative of employee or independent contractor status.
Darden, 503 U.S. at 323, establishes the fundamental inquiry as whether the
hiring party has the "right to control the manner and means by which the
product is accomplished." In so deciding, we must consider the common-law
factors and assess "all of the incidents of the relationship . . . with no
one factor being decisive." Id. at 324 (quoting United Ins. Co. of Am.,
390 U.S. at 258). The district court recognized these principles in its
opinion, and we believe that they were properly applied throughout.
Further, the district court's findings of fact regarding the relationship
between Berger Transfer and the owner-operators were not clearly erroneous.
The Funds rely on Yeldell v. Tutt, 913 F.2d 533, 541-42 (8th Cir.
1990), which dealt with a jury instruction submitting the question of the
existence of a master-servant relationship to the jury. Yeldell has
limited applicability to the issues before us. It is the actual nature of
the relationship that is determinative. Yeldell, 913 F.2d at 542. "Self-
serving statements concerning how an individual is characterized, unrelated
and unsupported by the actual working relationship, fall[ ] well short of
the mark." Richardson v. Central States, Southeast & Southwest Areas
Pension Fund, 645 F.2d 660, 663 (8th Cir. 1981).
Darden sets out a nonexhaustive list of factors for a district court
to consider in its analysis. See Darden, 503 U.S. at 324; Loomis Cabinet
Co. v. Occupational Safety & Health Review Comm'n,
-9-
20 F.3d 938, 942 (9th Cir. 1994). In its opinion, the district court
expressly discusses the following Darden factors: the source of the
instrumentalities or tools; the hired party's role in hiring and paying
assistants; the extent of the hired party's discretion over when and how
long to work; the method of payment; the tax treatment of the hired party;
and the duration of the relationship between the parties. In addition, our
review of the record makes it clear that the district court also considered
the other relevant Darden factors, such as the skill required; the right
to assign additional projects to the hired party; whether the work was part
of the regular business of the hired party; and the provision of employee
benefits. Following this detailed analysis, the court held that after
"[v]iewing all of the factors presented by the evidence in this case," the
owner-operators were not employees under the common-law test.
The Funds now argue that "the district court focused solely on the
factors that it believed supported a finding that the owner-operators were
independent contractors."
The Funds argue that the district court failed to consider that
Berger Transfer had previously contributed into the Funds on behalf of four
of its drivers, and later certified their employment status to allow them
to begin collecting pensions. The Funds consider this a significant
admission by Berger Transfer that the owner-operators are actually
4
employees. Berger Transfer flatly denies that it made contributions on
behalf of these owner-operators. The company explains that the owner-
operators made these contributions themselves, as part of a grandfather
agreement
4
On several occasions during the life of the pension plans,
non-employee owner-operators made self-contributions into the
Funds. When these individuals were discovered, the Funds would
refund the amount of the ineligible contributions. At least two of
these refunds involved claims of individuals associated with Berger
Transfer.
-10-
in existence since 1958.5 The district court made no findings regarding
6
these issues.
The Funds also argue that because Berger Transfer provided training
programs and assessed penalties for violating company rules, we should find
that the owner-operators are employees. Further, the Funds believe that
the integration present between the operations of Berger Transfer and the
owner-operators establishes the existence of an employer-employee
relationship. The Funds argue that the owner-operators are responsible for
the entire long haul operation of Berger Transfer, which is atypical of the
usual supplemental nature of the work performed by independent contractors.
In addition, Berger Transfer received revenue when
5
At trial, the president of Berger Transfer testified that a
grandfather agreement existed, allowing some owner-operators to
contribute to the plan on their own behalf. He indicated that he
had been informed that an employee who was covered by the plan in
1958 could continue to make self-contributions to the plan after
becoming an independent contractor. He testified that he was told
to simply list that individual as an employee on the company's
contribution sheet, make the contribution on behalf of the
individual, and then deduct the contribution from that person's
earnings. This was the method followed in submitting the four
individuals' self-contributions under what he believed the
grandfather agreement to be.
In a 1976 letter to employers, which addressed the ongoing
problem of owner-operator self-contributions, the plan
administrator explained the Funds understanding of the 1958
exception as follows:
As a general rule, no self-contributions are permitted.
In 1958, there existed in the Household Goods section a
specific problem, which was resolved by agreement between
the Union and Employers which provided that drivers then
employed by a participant, who purchased a truck from the
employer or elsewhere and continued to operate for that
employer, could make self-contributions.
6
The status of these individuals and their continued right to
receive pension payments are not properly before us, and we decline
to address this question on the basis of the record before us.
-11-
the owner-operators performed work directly for Allied, which the Funds
assert would not be the case if the owner-operators were independent
contractors.
We have carefully considered each of these arguments in our decision.
Under Darden, these are facts to be weighed with all of the other evidence
in the record in reaching a conclusion on the employee-independent
contractor issue. While some of these facts may favor employee status,
they do not compel such a conclusion. Certainly, in our weighing of the
evidence, they do not tip the scale in that direction.
Finally, the core of the Funds' argument is that the district court
erred in its conclusion, because this case is indistinguishable from Short,
729 F.2d at 567-74, which also decided if owner-operators were employees
under ERISA. The panel in Short, 729 F.2d at 573-74, also applied the
common-law test with many of the factors being the same as here. As the
district court noted, the panel in Short found the existence of an
exclusive contract a significant factor in the common-law analysis. Short,
729 F.2d at 574 (discussing Munts v. Fitzsimmons, 323 N.E.2d 153 (Ill. App.
Ct. 1975)). In Short, 729 F.2d at 574, both drivers "operated under
exclusive contracts and each drove for their employers for several years."
Here, the district court found that the owner-operators would sometimes
drive for other companies. We believe this to be a key distinction between
this case and Short. See Short, 729 F.2d at 574 (noting that the existence
of an exclusive contract becomes "crucial when the factor of exclusive
employment is weighed with the other factors indicating employee status and
against the factors indicating independent contractor status"). While
Short provides an excellent framework for our analysis, the result must be
distinguished on its facts.
Having carefully reviewed the record and "all of the incidents of the
relationship," Darden, 503 U.S. at 323, between Berger
-12-
Transfer and the owner-operators, we conclude that the district court did
not err in holding that the owner-operators are independent contractors.
We affirm the judgment of the district court. Since we conclude that the
owner-operators were independent contractors, we need not reach the statute
of limitations question.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
-13-