DocketNumber： Case No. 13-cv-03703-WHO
Judges： Orrick
Filed Date： 11/7/2014
Status： Precedential
Modified Date： 11/7/2024
ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT
Re: Dkt. Nos. 29, 30
INTRODUCTION
Defendants Steven and Rena Van Tuyl (“the Van Tuyls”) owned three residential properties that they leased to third parties. The Van Tuyls also owned a controlling interest in defendant Tractor Equipment Sales, Inc. (“TES”), which participated in plaintiff Automotive Industries Pension Trust Fund (collectively with the plaintiff trustees, the “.Fund”), a multiemployer pension plan as defined under 29 U.S.C. § 1002(37)(A). The properties and TES were in all respects unrelated except for their common ownership by the Van Tuyls. TES withdrew from the Fund in 2010, triggering withdrawal liability pursuant to the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq., as amended by the Multiemployer Pension Plan Amendments Act (“MPPAA”), 29 U.S.C. § 1381 et. seq., that remains unpaid. The question I must answer is whether the Fund may enforce the withdrawal liability against the three rental properties because they constitute a “trade or business” under the controlled group theory as defined by 29 U.S.C. § 1301(b)(1). Because the Van
BACKGROUND
I. FACTUAL BACKGROUND
The Fund provides retirement benefits for employees on whose behalf employers make contributions to the Fund. Schu-macher Deck ¶ 3 (Dkt. No. 32). Beginning in July 1998, TES was required to participate in the Fund pursuant to a collective bargaining agreement with a union. Id. ¶¶ 4-5. TES regularly made its required contributions until April 2011, when TES withdrew from the Fund. Id. ¶ 5. TES subsequently ceased all operations and, in May 2012, declared bankruptcy. Van Tuyl Deck ¶ 2 (Dkt. No. 29-1). TES had been in the business of selling and servicing construction equipment. Id. ¶ 3.
By letter dated February 22, 2012, the Fund notified TES and “each member of its controlled group” of the withdrawal liability assessed against them under ERISA’s withdrawal liability provisions. Schumacher Deck, Ex. G. The letter demanded payment and set forth a payment schedule. Id. TES did not request review of the withdrawal liability assessed against it and did not initiate arbitration. Bevington Deck ¶ 12 (Dkt. No. 31). No part of TES’s withdrawal liability has been paid to date. Schumacher Deck ¶ 14.
Steven and Rena Van Tuyl are husband and wife. Van Tuyl Deck ¶ 2. At all times relevant to this case, the Van Tuyls owned a controlling interest in TES. Id. The Van Tuyls also own or previously owned controlling interests in three residential properties located in different parts of California. Id. ¶¶ 3-5. A declaration submitted by Rena states the following about the properties:
In 1998, the Van Tuyls purchased a residential property in San Jose, California after a church organization reached out to them and requested that they provide a location for the church’s youth center. Van Tuyl Deck ¶ 3. The property has since been used exclusively by the church as a youth center and as a residential facility for the youth center’s staff. Id. The church pays “well-below-market-value” rent to the Van Tuyls for use of the property. Id. Rena states that she and her husband consider their leasing of the property to the church to be a charitable donation. Id. Rena also states that the Van Tuyls “spend virtually no time maintaining or increasing the value of the property; we merely deposit the rent we receive.” Id. There is no evidence of any economic relationship between the San Jose property and TES.
In 1980, the Van Tuyls purchased a single-family residence in Merced, California. Van Tuyl Deck ¶ 4. The Van Tuyls rented the property to another family from 1990 to August 2013. Id. The property is currently vacant. Id. Rena states that the Van Tuyls do not “actively take part in ... maintaining [the] property.” Id. From 2009 to 2012, the Van Tuyls “spent no time maintaining or improving the value of the property” except to deposit the rent they received and to occasionally pay a handyman to perform minor repairs. Id. Rena states that the Van Tuyls consider the property “a passive property holding for retirement purposes.” Id. There is no evidence of any economic relationship between the Merced property and TES.
In 1976, the Van Tuyls purchased a single-family residence in Carnelian Bay, California, in the Lake Tahoe area. Van Tuyl
The Van Tuyls’ Schedule E tax returns for 2010 and 2011 show that in both years, the Van Tuyls reported substantial rents received from all three properties and claimed various deductions on account of the properties, including deductions for travel expenses, insurance, repairs, taxes, utilities, gardening, and depreciation. See Bevington Decl. I, Ex. C (Dkt. No. 31-3). On their 2010 Schedule E tax return, the Van Tuyls reported $47,620 in rents received from the San Jose property, $10,932 in rents received from the Merced property, and $19,417 in rents received from the Tahoe property. Id On their 2011 Schedule E tax return, the Van Tuyls reported $47,790 in rents received from the San Jose property, $11,049 in rents received from the Merced property, and $18,600 in rents received from the Tahoe property. Id The Van Tuyls did not claim deductions for advertising in connection with any of the three properties in either year. Id
On their 2010 Schedule E tax return, in response to an item asking whether they had used each property during the tax year “for personal purposes” for more than the greater of fourteen days or ten percent of the total days the property was rented at fair rental value, the Van Tuyls answered,. “No,” for all three properties. Id On their 2011 Schedule E tax return, the Van Tuyls reported 365 “fair rental days” and zero “personal use days” for all three properties. Id The Van Tuyls admit the Schedule E tax returns are true and correct and state that they are “one hundred percent consistent” with Rena’s declaration. Van Tuyls’ Reply 9-10 (Dkt. No. 38) (“The tax documents do not undermine [Rena’s declaration]; rather, they corroborate and are one hundred percent consistent with it.”).
II. PROCEDURAL BACKGROUND
On August 9, 2013, the Fund filed its first amended complaint, naming TES and the Van Tuyls as defendants. Dkt. No. 1. The complaint asserts two causes of action: (1) withdrawal liability under 29 U.S.C. § 1381; and (2) failure to provide required information in violation of 29 U.S.C. § 1399(a). The complaint seeks damages under 29 U.S.C. § 1132(g)(2) for (i) unpaid contributions; (ii) interest on the unpaid contributions as provided for under the plan; (iii) an amount equal to the greater of interest on the unpaid contributions or liquidated damages as provided for under the plan; and (iv) reasonable attorney fees and costs. Id at 10. The complaint also requests injunctive relief in the form of an order requiring defendants “to provide documentation of all trades or business ... within [defendants’ controlled group as defined in ... 29 U.S.C. § 1301(b)(1).” Id According to the Fund’s summary judgment motion, damages currently amount to more than $1,400,000. Fund’s Mot. 2 (Dkt. No. 30).
On July 30, 2014, TES and the Van Tuyls moved for summary judgment on both causes of action. Van Tuyls’ Mot. (Dkt. No. 29). The Fund moved for summary judgment on the same date. Dkt.
LEGAL STANDARD
Summary judgment is proper where the pleadings, discovery, and affidavits demonstrate that there is “no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A dispute is genuine if it could reasonably be resolved in favor of either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is material where it could affect the outcome of the case. Id.
The party moving for summary judgment has the initial burden of demonstrating the absence of a genuine issue of material fact .as to an essential element of the nonmoving party’s claim. See Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the movant has made this showing, the burden shifts to the nonmoving party to identify specific evidence showing there is a genuine issue of material fact for trial. Id. If the nonmoving party cannot do so, the movant “is entitled to ... judgment as a matter of law because the nonmoving party has failed to make a sufficient showing on an essential element of her case.” Id. (internal quotation marks omitted).
On summary judgment, the court draws all reasonable factual inferences in favor of the nonmoving party. Anderson, 477 U.S. at 255, 106 S.Ct. 2505. “Credibility determinations, the weighing of the evidence, and the. drawing of legitimate inferences from the facts are jury functions, not those of a judge.” Id. However, conclusory and speculative testimony does not raise genuine issues of fact and is insufficient to defeat summary judgment. See Thornhill Publ’g Co., Inc. v. GTE Corp., 594 F.2d 730, 738-39 (9th Cir.1979).
Where the determination of whether an activity constitutes a trade or business under 29 U.S.C. § 1301(b)(1) is ultimately a question of the characterization of a group of undisputed facts, it is properly resolved by summary judgment. Cent. States, Se. & Sw. Areas Pension Fund v. Slotky, 956 F.2d 1369, 1373-74 (7th Cir.1992); Cent. States, Se. & Sw. Areas Pension Fund v. Miller, 868 F.Supp. 995, 1001 (N.D.Ill.1994).
DISCUSSION
Pension plans like the Fund in this case are federally regulated under ERISA, 29 U.S.C. § 1001 et seq. The MPPAA, 29 U.S.C. § 1381 et seq., amended ERISA to allow pension plans “to impose proportional liability on withdrawing employers for the unfunded vested benefit obligations of multiemployer plans.” Carpenters Pension Trust Fund for N. California v. Underground Const. Co., Inc., 31 F.3d 776, 778 (9th Cir.1994). Where a withdrawing employer’s past contributions are insufficient to fund pension plan obligations that have already vested at the time of withdrawal, the MPPAA amendments enable plans “to make withdrawing employers pay their proportionate share of the deficit such that remaining employers [will] not be unfairly saddled with increased payments.” Id.
This “withdrawal liability” is assessed against the withdrawing employer, and 29 U.S.C. § 1301(b)(1) defines “employer” to include not only the entity obligated to contribute to the pension plan, but also all “trades or businesses” that are under “common control” with that entity. See 29 U.S.C. § 1301(b)(1). Congress enacted section 1301(b)(1) “to prevent businesses from shirking their ERISA obli
There is no dispute in this case over whether withdrawal liability may be assessed against the withdrawing employer, TES; the parties agree that TES is liable to the Fund under 29 U.S.C. § 1381. Van Tuyls’ Mot. 6; Fund’s Reply 3 (Dkt. No. 37). The dispute is whether the Van Tuyls also may be held liable .for TES’s withdrawal liability based on the Van Tuyls’ leasing activities in connection with their three properties.
The Fund asserts that summary judgment in their favor is appropriate because the Van Tuyls commonly controlled TES and the three properties, and the Van Tuyls’ leasing activities constitute a trade or business for the purposes of section 1301(b)(1). The Van Tuyls concede that section 1301(b)(l)’s common control element is satisfied but assert that their leasing of the properties cannot be properly characterized as a trade or business. Van Tuyls’ Mot. 6. On this ground, the Van Tuyls oppose the Fund’s motion for. summary judgment and, in addition, move for summary judgment themselves. The upshot is that both summary judgment motions at issue in this order boh down to a single question: whether the Van Tuyls’ leasing of the San Jose, Merced, and Tahoe properties qualifies as a trade or business under section 1301(b)(1).
I. EVIDENTIARY AND PROCEDURAL ISSUES
The Fund raises three initial matters. The Fund makes relevance objections against certain items of evidence submitted by the Van Tuyls and argues the same items should also be excluded under Federal Rule of Civil Procedure 37(c)(1) because the Van Tuyls did not timely disclose them. Fund’s Opp. 3-4 (Dkt. No. 35). In addition, the Fund asserts the Van Tuyls waived their right to challenge withdrawal liability because they failed to comply with ERISA’s arbitration requirement. Fund’s Mot. 8-9.
A. Relevance Objections
The Fund argues that certain statements and two documents submitted by the Van Tuyls concerning their use of the properties are inadmissible as irrelevant under Federal Rule of Evidence 401. Fund’s Opp. 3-4. The contested statements are those in which Rena describes the church’s use of the San Jose property as a youth center and the Van Tuyls’ minimal involvement . with the San Jose,
As discussed in more detail below, I agree with the Fund that Groet-zinger does not govern section 1301(b)(1) trade or business determinations within the Ninth Circuit. This does not mean, however, that the contested evidence is irrelevant. Under Ninth Circuit precedent, section 1301(b)(1) “trade or business” determinations are made by a fact-intensive inquiry into the activity at issue. See Lafrenz, 837 F.2d at 894 n. 6. Evidence concerning the Van Tuyls’ use of then-properties, and their purpose in owning and leasing them, is relevant in this inquiry. See Fed. R. Evid. 401. The Fund’s relevance objection is OVERRULED.
The Fund makes two additional relevance objections. One is against statements in Rena’s declaration concerning TES’s manager at the time the business ceased operations. Fund’s Opp. 3-4. The other is against unsupported factual assertions in the Van Tuyls’. motion concerning the current funding level of the Fund. Id. These objections are SUSTAINED. I will not consider this evidence in deciding these motions.-
B. Failure to Disclose
The Fund also argues that the same statements and documents concerning the Van Tuyls’ use of their properties should be excluded under Federal Rule of Civil Procedure 37(c)(1). Fund’s Opp. 3-4. Rule 37(c)(1) provides that a party who “fails to provide information ... as' required by Rule 26(a) or (e) ... is not allowed to use that information ... to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1). Rule 26(a) requires each party, “without awaiting a discovery request,” to identify “each individual likely to have discoverable information” and “all documents, electronically stored information, and tangible things” that the “disclosing party may use to support its claims or defenses.” Fed. R. Civ. P. 26(a)(1)(A). Rule 26(e) creates an obligation to supplement all Rule 26(a) disclosures. Fed. R. Civ. P. 26(e)(1). Supplemental disclosures must be made “in a timely manner” when a “party learns that in some material respect the disclosure ... is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing.” Id.
Under Rule 37(c)(1), the party whose evidence may be excluded has the burden of proving that its failure to disclose was substantially justified or is harmless. R & R Sails, Inc. v. Ins. Co. of Pennsylvania, 673 F.3d 1240, 1246 (9th Cir.2012). “The determination of whether a failure to disclose is justified or harmless is entrusted to the broad discretion of the district court.” San Francisco Bay Area Rapid Transit Dist. v. Spencer, No. 04-
The Fund argues the Van Tuyls were required to disclose the statements and documents concerning their use of the properties either as part of their Rule 26(a) initial disclosures or in response to the Fund’s interrogatories requesting “all facts” and “all documents that evidénee, refer, or relate to any ... facts” on which the Van Tuyls base their contention that they and TES are not part of a controlled group. Fund’s Opp. 3-4. The Van Tuyls responded to these interrogatories by informing the Fund that they “do not own any other trades or businesses” and “are not involved with any property other than [TES] with any measure of continuity or regularity ... sufficient to invoke the controlled group theory doctrine.” See Bev-ington Decl. I, Exs. H, I. However, the Van Tuyls did not provide any more specific information concerning their use of the properties. See id. Nor did the Van Tuyls provide the email and letter they now submit as evidence of the church’s use of the San Jose property as a youth center. See Bevington Deck II ¶ 12 (Dkt. No. 36). The Fund argues this nondisclosure “is not harmless because it prevented [the Fund] from ascertaining the facts and documents on which [the Van Tuyls] would rely for a dispositive motion ... and from conducting further discovery concerning these facts and documents.” Fund’s Opp. 4.
The Van Tuyls assert that their response to the interrogatories was sufficient, and that they were “substantially justified in any supposed ‘failure to disclose’ every fact related in any way to every property they own,” in particular after having properly objected to the Fund’s interrogatories as “vague, ambiguous, overbroad, and unduly burdensome.” Van Tuyls’ Reply 4-6. The Van Tuyls further argue that any failure to disclose was harmless. Id. at 5-6. The Van Tuyls submit a letter, dated June 11, 2013 and addressed to the Fund’s counsel, in which counsel for the Van Tuyls writes that the San Jose property is dedicated to “nonprofit church use. [The Van Tuyls] are not involved with the property with any measure of business continuity or regularity and they do not maintain it for the purpose of creating income or profit.” Boggs Deck, Ex. A (Dkt. No. 38-1). Although the letter speaks only to the San Jose property, the Van Tuyls contend it shows that the Fund was not prejudiced by the Van Tuyls’ failure to provide more detailed information during discovery about their use of any of the three residential properties. Van Tuyls’ Reply 5-6.
As to the contested statements in Rena’s declaration, I conclude that any failure to disclose, assuming one occurred, is harmless. The contested statements all concern the Van Tuyls’ use of the three properties. The Fund knew the Van Tuyls owned these properties; indeed, the Fund had been given tax documents which included substantial information about the Van Tuyls’ use of each of the properties. See Fund’s Opp. 4-5; Bevington Decl. I, Ex. C. The Fund had also been sent a letter stating that the San Jose property is dedicated to “nonprofit church use” and that the Van Tuyls “are not involved with the property with any measure of business continuity or regularity and they do not maintain it for the purpose of creating income or profit.” Boggs Deck, Ex. A. Had the Fund decided to inquire more into the Van Tuyls’ use of the properties, the Fund easily could have done so, for example, by propounding targeted interrogatories or by deposing either (or both) of the Van Tuyls. Instead, the Fund cancelled its scheduled depositions of Steven and Rena Van Tuyl the night before they were set to occur. Boggs Deck ¶ 4. The Fund cannot say now it was surprised to learn additional details about the Van Tuyls’ use of their properties. Any failure by the Van Tuyls to disclose the contested statements is harmless within the meaning of Rule 37(c)(1), and I will consider the statements in deciding the instant motions.
C. ERISA’s Arbitration Requirement
The Fund asserts the Van Tuyls failed to follow the proper procedures for challenging their withdrawal liability, thereby waiving their right to do so now. Fund’s Mot. 8-9. Under 29 U.S.C. § 1401(a)(1), “[a]ny dispute over withdrawal liability as determined under the enumerated statutory provisions shall be arbitrated.” Allyn Transp. Co., 832 F.2d at 504. “If an employer fails to initiate arbitration, the employer waives the opportunity to assert any defenses that could have been raised before the arbitrator.” Pension Plan for Pension Trust Fund for Operating Engineers v. Galletti Concrete, Inc., No. 13-cv-03176-SI, 2013 WL 5289017, at *2 (N.D.Cal. Sept. 19, 2013).
To comply with ERISA’s arbitration requirement, the Van Tuyls were required to do two things: first, timely and properly request review; and second, timely and properly initiate arbitration. See 29 U.S.C. §§ 1399(b)(2)(A), 1401(a)(1); Pension Plan for Pension Trust Fund for Operating Engineers v. Weldway Const., Inc., 920 F.Supp.2d 1034, 1044 (N.D.Cal.2013). The Fund is correct that the Van Tuyls failed to comply with these requirements. There is no indication in the record that the Van Tuyls either requested review or made any attempt to initiate arbitration. See Bevington Deck ¶ 12.
Nevertheless, the Van Tuyls have not waived their right to contest the issue of controlled group liability. As noted above, under 29 U.S.C. § 1401(a)(1), “[a]ny dispute over withdrawal liability as determined under the enumerated statutory
II. “TRADE OR BUSINESS” UNDER 29 U.S.C. § 1301(b)(1)
ERISA does not defíne the term “trade or business.” See Lafrenz, 837 F.2d at 894 n. 6. Section 1301(b)(1) provides that the phrase “trades or businesses, (whether or not incorporated) which are under common control” has the same meaning as that provided in the regulations promulgated under section 414(c) of the Internal Revenue Code. 29 U.S.C. § 1301(b)(1). But “trade or business” is not defined in either section 414(c) or the regulations promulgated thereunder. See Lafrenz, 837 F.2d at 894 n. 6 (observing same). The Ninth Circuit has also provided little guidance as to what constitutes a “trade or business” under section 1301(b)(1) except to note that it is an “essentially factual inquiry.” Id. In the absence of clear authority, the parties offer different tests for determining whether the Van Tuyls’ leasing activities qualify as a trade or business.
The Van Tuyls argue I should apply the test from Groetzinger. Van Tuyls’ Mot. 7-10. In Groetzinger, the Supreme Court interpreted Internal Revenue Code sections 62(1) and 162(a) and held that for an activity to be a “trade or business” under those provisions, the activity must be performed (i) for the primary purpose of income or profit, and (ii) with continuity and regularity. 480 U.S. at 35, 107 S.Ct. 980. The Court distinguished between “a sporadic activity, a hobby, or an amusement diversion,” on the one hand, and a trade or business, on the other. Id. The Seventh Circuit has adopted the Groetzinger test for determining whether an activity is a trade or business under section 1301(b)(1), reasoning that “while Groetzinger was interpreting only a specific provision in the tax code, its test comports with the common meaning of trade or business and thus can be used more generally.” Fulkerson, 238 F.3d at 895. The D.C. Circuit has also applied the Groetzinger test in the section 1301(b)(1) context. See Connors v. Incoal, Inc., 995 F.2d 245, 251 (D.C.Cir.1993) (“[T]he [Supreme Court’s] construction of ‘trade or business’ is the most authoritative pronouncement available, and we therefore rely on it.”).
There is little question that, if I were to apply Groetzinger to the instant case, the Van Tuyls would be entitled to summary judgment. Applying Groetzinger, the Seventh Circuit has rejected controlled group liability in circumstances similar to the ones at issue here on at least two occasions. See Fulkerson, 238 F.3d at 893-96; Cent. States, Se. & Sw. Areas Pension Fund v. White, 258 F.3d 636, 643-44 (7th Cir.2001).
In Fulkerson, the defendant owners of the withdrawing employer, a trucking business called' Holmes Freight Lines,
The Seventh Circuit reversed, holding that the facts concerning Tom’s leasing activities were not sufficient to satisfy the “continuous and regular” prong of the Groetzinger test, at least not as a matter of law. Id. at 895-97. Noting that “one purpose of the Groetzinger test is to distinguish trades or business from investments,” the court held that the mere ownership of a property “is the hallmark of an investment” and thus “cannot be considered in determining whether conduct is regular or continuous.” Id. at 895-96. The court concluded that, once Tom’s mere ownership of the leases was “removed from the equation, a reasonable factfinder could determine that the leasing activities were not sufficiently continuous and regular to constitute a trade or business.” Id. at 896. In reaching this conclusion, the court emphasized that “the leases were an investment that rarely required the time or attention of the Fulkersons,” and that Tom “never spent more than five hours in a year dealing with the leases or the leased properties.” Id. The court also observed that “[g]iven the prevalence of investing, permitting the holding of investments ... without more to be considered regular and continuous activity would eviscerate the limitations placed in the text of section 1301(b)(1).” Id. at 896.
The 'Seventh Circuit again considered whether a husband and wife’s property leasing constituted a trade or business under section 1301(b)(1) in White. See 258 F.3d at 639-45. The properties in question were two apartments located over the garage of the Whites’ home which the Whites rented primarily to students at a nearby university. Id. at 638. The district court found that the Whites leasing of the garage apartments was sufficient to impose controlled group liability and granted summary judgment for the plaintiff pension fund. Id. at 639.
As in Fulkerson, the Seventh Circuit reversed, holding that the Whites’ leasing activities were “more akin to a purely personal investment” and thus were “not sufficiently continuous or regular to constitute a trade or business.” Id. at 643. The court recognized that the Whites spent more time maintaining their leased properties than did the defendants in Fulker-son but found that this was legally insignificant given that the Whites’ activities “did not benefit a trade or business that could be easily separated from the normal maintenance and upkeep that every homeowner performs. The Whites’ activities, however extensive, in the upkeep and maintenance of their investment in their primary residence were personal in nature, and as such, do not rise to the level of a trade or business.” Id. at 643-644. The court disregarded evidence that the
Fulkerson and White indicate that, under the Givetzinger test, the Van Tuyls’ leasing activities do not rise to the level of a trade or business. Like the defendants in those cases, the Van Tuyls have presented evidence showing that the properties they leased were not economically related to the withdrawing employer, and that the Van Tuyls spent minimal time managing or maintaining the properties except to deposit the rent they received. See Van Tuyl Decl. ¶¶ 3-5. The Fund has not presented evidence indicating otherwise. The Fund merely points to the Van Tuyls’ Schedule E tax returns, but the tax returns neither contradict Rena’s testimony nor provide a basis from which a fact-finder could reasonably conclude, under the Groetzinger test, that the Van Tuyls’ leasing activities constitute a trade or business. See Fund’s Opp. 5, 10; Bevington Decl. I, Ex. C. The tax returns indicate that the Van Tuyls generally leased the properties instead of retaining them for personal use, but this is clearly not enough to trigger controlled group liability, as both the Fulkersons and the Whites leased their properties continuously. The tax returns also demonstrate that the Van Tuyls reported rental income and claimed deductions based on the properties, but this is also insufficient, as “the same such arguments could be made about any other traditional investment activity.” White, 258 F.3d at 644. Given the factual similarities between this case and Fulkerson and White, the absence of disputed facts in the record, and the concession from both parties at the September 3, 2014 hearing that no additional evidence is necessary to properly resolve their motions, the Van Tuyls would be entitled to summary judgment under the Groetzinger test.
The Fund does not seriously dispute this conclusion. Instead, the Fund contends that the Groetzinger test does not apply in the Ninth Circuit. On this point, the Fund appears to be correct. Although the Van Tuyls cite to a number of cases applying the Groetzinger test to assess controlled group liability under section 1301(b)(1), none are from the Ninth Circuit or any district within it. See Van Tuyls’ Mot. 7-8; Van Tuyls’ Reply 8-9. In Lafrenz — which was decided nearly one year after Groet-zinger and which continues be the only published decision by the Ninth Circuit squarely addressing the proper definition of trade or business under section 1301(b)(1) — the court conducted a trade or business analysis without referring once to Groetzinger. See 837 F.2d at 893-95. With one exception, recent cases in this district have either explicitly declined to apply Groetzinger in making section 1301(b)(1) determinations, or, like Lafren z, have made them without reference to Groetzinger. See Galletti Concrete, 2013 WL 5289017, at *3 n. 4 (declining to apply Groetzinger to determine whether defendants were section 1301(b)(1) trades or businesses); Carpenters Pension Trust Fund for N. California v. Lindquist, No. 10-03386-SC, 2011 WL 2884850, at *4 n. 7 (N.D.Cal. July 19, 2011), aff'd, 491 Fed.Appx. 830 (9th Cir.2012) (“[T]he Ninth Circuit has not adopted [the Groetzinger test], and the Court declines to do so here.”);
While I agree with the Fund that La-frenz, as opposed to Ch’oetzinger, must guide my inquiry, I disagree that this makes any difference in the outcome in this case. Even under Lafrenz, the Van Tuyls’ leasing activities do not rise to the level of a trade or business within the meaning of section 1301(b)(1).
In addition to owning the withdrawing employer, the defendants in Lafrenz owned two trucks, which they leased back to the withdrawing employer for profit. 837 F.2d at 893. The district court granted summary judgment for the plaintiff pension fund on the ground that the defendants’ truck-leasing constituted a commonly-controlled trade or business under section 1301(b)(1). Id. The defendants argued on appeal that their truck-leasing was not a trade or business because it was a “passive investment.” Id. at 893-95. The Ninth Circuit disagreed. Id. The court approvingly cited two district court cases holding that a commonly controlled entity which leases property to another entity within the same controlled group qualifies as a trade or business under section 1301(b)(1). Id. at 894 (citing United Food v. Progressive Supermarkets, 644 F.Supp. 633 (D.N.J.1986); Pension Benefit Guaranty Corp. v. Cent. City Motors, 609 F.Supp. 409 (S.D.Cal.1984)). The court reasoned: “The [defendants] own the trucks, arranged for the truck leases and admittedly leased the trucks for profit. That is plainly sufficient to make the truck-leasing operation a trade or business.” Id. (internal quotation marks omitted). The court was careful to clarify that not every “passive investment” is necessarily a trade or business, however. Id. at 894 n.7. The court described the section 1301(b)(1) analysis as “an essentially factual inquiry” and narrowly held that “the facts in this case justify the conclusion that the truck-leasing operation is a trade or business” within the meaning of the statute. Id. at 894 n.6, n.7 (internal quotation marks omitted).
The district court in Lindquist considered similar facts and reached the same result. See 2011 WL 2884850, at *4-7. There, in addition to the withdrawing employer, the defendant owned a commercial property, which he leased back to the withdrawing employer. Id. at *4. The defendant argued “his involvement with the [commercial property] was so minimal as to render [it] a passive investment rather than a trade or business.” Id. at *4 (internal quotation marks omitted). The district court rejected this argument, concluding that “there is simply no significant basis for distinguishing this case from Lafrenz or a multitude of other cases that have uniformly found property leases between
Lafrenz and Lindquist provide a basic framework for making section 1301(b)(1) determinations within the Ninth Circuit: It is an “essentially factual inquiry.” Lafrenz, 837 F.2d at 894 n. 6. In making this inquiry, “courts look to Congress’s purpose in enacting section 1301(b)(1): ‘to prevent- the controlling group ... from avoiding withdrawal liability by shifting corporate assets into other business ventures under its control.’ ” Lindquist, 2011 WL 2884850, at *4 (citing Lafrenz, 837 F.2d at 894). “[PJroperty leases between two commonly-controlled entities ... constitute a trade or business.” Id. at *6. But “the mere ownership” of property, without more, is insufficient to trigger controlled group liability under section 1301(b). Nautical Eng’g, 2014 WL 120637, at *3; Galletti Concrete, 2013 WL 5289017, at *4.
Applying this framework to the instant case, a factfinder could not reasonably conclude that the Van Tuyls’ leasing activities rise to the level of a trade or business under section 1301(b)(1). The Van Tuyls have presented evidence showing that throughout the period of TES’s participation in the Fund, both the San Jose property and the Merced property were leased to a single, continuous tenant, while the Tahoe property was either used as the Van Tuyls’ own vacation home or was leased to friends and family. Van Tuyl Decl. ¶¶ 3-5. The evidence also-shows that the Van Tuyls spent minimal time maintaining or managing the properties except to deposit the rent they received, and that the Van Tuyls considered the Tahoe and Merced properties to be “passive property holdings” and their leasing of the San Jose property to be a charitable donation. Id. There is no evidence of any economic relationship between any of the three properties and TES. These facts do not go far enough beyond “the mere ownership” of property to present the sort of “fractionalization threat that section 1301(b)(1) was designed to address” and to trigger controlled group liability under the statute. Lindquist, 2011 WL 2884850, at *7; Galletti Concrete, 2013 WL 5289017, at *4.
The Fund has not submitted evidence indicating otherwise. There is no evidence that the Van Tuyls’ leasing activities were performed in the name of a formally recognized business organization. Fulkerson, 238 F.3d at 895 (noting that section 1301(b)(1) “presents no interpretive difficulties when it is used to impute withdrawal liability to another corporation or other formally recognized business organization”). There is no evidence that the Van Tuyls conducted frequent real estate transactions or engaged in any advertising of their properties. See Cent. States, Se. & Sw. Pension Fund v. Pers., Inc., 974 F.2d 789, 794-96 (7th Cir.1992) (holding that defendant’s real estate activities constituted a trade or business under section 1301(b)(1) where defendant bought, sold and leased multiple properties annually during the relevant time period and claimed advertising deductions for several of the properties). Nor is there evidence that the minimal amount of time the Van Tuyls claim to have spent in managing and maintaining the properties is inaccurate, or that the Van Tuyls in fact considered their leasing activities to be a trade or business. Cent. States, Se. & Sw. Areas Pension Fund v. Pioneer Ranch Ltd. P’ship, No. 05-cv05908, 2006 WL 2054385, at *4 (N.D.Ill. July 20, 2006), aff'd sub nom., McDougall v. Pioneer Ranch Ltd. P’ship,
The only evidence the Fund presents in support of its assertion that the Van Tuyls’ leasing activities constitute a trade or business is the Schedule E tax returns. But the tax returns merely show that the Van Tuyls received rental income from the properties, claimed certain deductions on account of the properties, and generally leased the properties instead of retaining them for personal use. See Bevington Decl. I, Ex. C. As the Van Tuyls state in their papers, this information is not inconsistent with Rena’s declaration. See Van Tuyls’ Reply 9-10. It is also unclear how this information, without more, is enough to transform the Van Tuyls’ leasing activities from an investment into a trade or business. Standing against Rena’s sworn declaration, and the utter lack of other evidence presented by the Fund, the Schedule E tax returns are not sufficient to create a triable issue on whether the leasing of the properties may be reasonably characterized as a trade or business under section 1301(b)(1).
It is true that the leasing activities at issue in Lafrenz and Lindquist, like the leasing activities at issue here, were relatively insubstantial. The defendants in Lafrenz leased only two trucks, while the defendant in Lindquist leased a single commercial property and testified that he “spent less than [five] hours per. year” dealing with it. Lindquist, 2011 WL 2884850, at *5. The crucial difference between those cases and this one, however, is that there is no evidence here of any economic relationship between the leased properties and the withdrawing employer, TES. The Van Tuyls’ leasing activities are thus beyond the scope of what has become a categorical rule that “property leases between two commonly-controlled entities ... constitute a trade or business under section 1301(b)(1).” Lindquist, 2011 WL 2884850, at *6; see also, Cent. States Se. & Sw. Areas Pension Fund v. Messina Products, LLC, 706 F.3d 874, 881-83 (7th Cir.2013) (“leasing property to a withdrawing employer itself is categorically a trade or business”) (internal quotation marks omitted); Cent. States, Se. & Sw. Areas Pension Fund v. SCOFBP, LLC, 668 F.3d 873, 879 (7th Cir.2011) (same); Bd. of Trustees, Sheet Metal Workers’ Nat. Pension Fund v. Delaware Valley Sign Corp., 945 F.Supp.2d 649, 653 (E.D.Va.2013) (“Although the Fourth Circuit has not yet addressed this issue, those circuit and district courts that have done so are in accord that renting property to a withdrawing employer is categorically a trade or business.”) (internal quotation marks and modifications omitted) (listing cases); Trustees of Amalgamated Ins. Fund v. Saltz, 760 F.Supp. 55, 57 (S.D.N.Y.1991) (“[T]he rental of property to a corporation under common control with the property owner ... is sufficient to make the rental a trade or business.”). The Fund has not brought to the Court’s attention a single case, from this circuit or any other, in which leasing activities as limited as the Van Tuyls’ were found to constitute a trade or business under section 1301(b)(1) where there was no economic relationship between the leased property and the withdrawing employer, and the Court has found none.
This is not to say that there must be an economic nexus for a given activity to provide the basis for controlled group liability. The plain language of the statute indicates that an economic nexus is not required,
Because the Van Tuyls have plausibly demonstrated that their leasing activities do not constitute a trade or business within the meaning of section 1301(b)(1), and the Fund has failed to present material evidence to the contrary, the Fund may not assess controlled group liability against the Van Tuyls, and the Van Tuyls are entitled to summary judgment.
IV. DAMAGES AGAINST TES
TES concedes liability. See Van Tuyls’ Mot. 6; Fund’s Reply 3. Accordingly, the Fund is entitled to damages against TES under 29 U.S.C. § 1451(b), which provides that “in any action under this section to compel an employer to pay withdrawal liability, any failure of the employer to make any withdrawal liability payment within the time prescribed shall be treated in the same manner as a delinquent contribution.” 29 U.S.C. § 1451(b). The statute concerning delinquent contributions requires the award of the following damages: (i) unpaid contributions; (ii) interest on the unpaid contributions as provided for under the plan; (iii) an amount equal to the greater of interest on the unpaid contributions or liquidated damages as provided for under the plan; and (iv) reasonable attorney fees and costs. See 29 U.S.C. § 1132(g)(2). “Under ERISA, the award of attorney fees to a pension plan is mandatory in all actions to collect delinquent contributions ..., including actions to collect unpaid employer withdrawal liabilities.” Trs. of Amalgamated Ins. Fund v. Geltman Indus., Inc., 784 F.2d 926, 932 (9th Cir.1986).
The Fund seeks damages in the following amounts: (i) $1,040,160.00 in unpaid contributions; (ii) $176,739.28 in accrued interest on the unpaid contributions, plus an additional $199.48 per day in interest from September 3, 2014 through the date of judgment; (iii) $208,032.00 in liquidated damages as provided for under the plan; and (iv) $49,375.93 in reasonable attorney’s fees and costs incurred through July 7, 2014, plus additional fees and costs incurred after that date. Fund’s Mot. 16-17. TES did not dispute these amounts either in its papers or during oral argument.
CONCLUSION
For the foregoing reasons, summary judgment is GRANTED for the Van Tuyls and DENIED for the Fund as against the Van Tuyls. Summary judgment is GRANTED for the Fund as' against TES.
IT IS SO ORDERED.
. This order is being issued in conjunction with another “Order on Cross Motions for Summary Judgment” in the related case, Pension Trust Fund for Operating Engineers v. Tractor Equipment Sales, Inc., No. 12-cv-01056-WHO, 2012 WL 5228827 (N.D.Cal. Mar. 1, 2012). Apart from being brought by a different pension fund, that case is largely indistinguishable from this one. Counsel is the same in both cases, the briefing is virtually identical, and the material legal and factual issues overlap completely. The differences between the orders are accordingly minor.
. The Van Tuyls also contend their failure to disclose was harmless because of information shared between the parties during a court-ordered mediation session on February 7, 2014. Van Tuyls’Reply 5-6; Boggs Deck ¶ 3. The Fund responds that under ADR Local Rule 6-12(a), "anything that happened or was said ... in connection with any mediation” cannot be disclosed by the parties or "[u]sed for any purpose ... in any pending or future proceeding in this court.” Fund’s Mot. to Strike 1 (Dkt. No. 39); ADR L.R. 6-12(a). On this ground, the .Fund moves to strike all references to events occurring during the February 7, 2014 mediation session contained in the Van Tuyls' reply brief and attached decía-