Central States, Southeast & Southwest Areas Pension Fund v. Scofbp, LLC
668 F.3d 873
7th Cir.2011Background
- Three solvent affiliates (MCRI/Illinois, MCOF/Missouri) and insolvent SCOFBP, LLC were at issue for withdrawal liability under the MPPAA after SCOFBP’s cessation of payments in 2001.
- SCOFBP incurred withdrawal liability for unfunded pension benefits; Central States Pension Fund was the claimant.
- Court assesses whether related entities under common control are liable for withdrawal liability of a withdrawing employer.
- The district court held MCRI and MCOF were trades or businesses under common control with SCOFBP, making them liable.
- The parties argued that MCRI and MCOF were passive investments and that Cappy’s personal bankruptcy disrupted common control.
- Court affirms judgment against all three entities, finding they are trades or businesses and were under common control at the relevant time.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are MCRI and MCOF trades or businesses under MPPAA? | Plaintiff argues both are trades or businesses. | Defendants argue they are passive investments. | Yes, both are trades or businesses. |
| Is MCOF a trade or business under Groetzinger test? | MCOF engages in ongoing income-generating activity. | Formality of LLC structure undermines trade status. | Yes, MCOF is a trade or business. |
| Is MCRI a trade or business under Groetzinger test? | MCRI earns income, pays management fees, and holds leases. | LLC structure as investment vehicle precludes trade status. | Yes, MCRI is a trade or business. |
| Were MCRI and MCOF under common control with SCOFBP at withdrawal? | Common control existed via Cappy and trusts before 2001. | Control was not present at the time of withdrawal. | Yes, under common control for ERISA purposes. |
| What is the appropriate standard of review for the district court’s summary judgment on these undisputed facts? | Review under clearly erroneous standard for undisputed facts; de novo otherwise. |
Key Cases Cited
- Groetzinger v. Commissioner, 480 U.S. 23 (1987) (test for trade or business: continuity/regularity and primary purpose of income or profit)
- Pioneer Ranch Ltd. Partnership v. McDougall, 494 F.3d 571 (7th Cir. 2007) (applied Groetzinger to a formal business entity (LP) for trade or business status)
- Ditello v. Central States, Southeast & Southwest Areas Pension Fund, 974 F.2d 887 (7th Cir. 1992) (leasing to withdrawing employer as trade or business; role in common control context)
- Fulkerson v. Central States, Southeast & Southwest Areas Pension Fund, 238 F.3d 891 (7th Cir. 2001) (examines investment vs. business activity; factors for trade or business status)
- Personnel, Inc. v. Central States, Southeast & Southwest Areas Pension Fund, 974 F.2d 789 (7th Cir. 1992) (investor activity versus business activity; timing of investment factors)
- Slotky v. Central States, Southeast & Southwest Areas Pension Fund, 956 F.2d 1369 (7th Cir. 1992) (ERISA asset protection and purpose of MPPAA)