182 F. Supp. 3d 855
N.D. Ill.2016Background
- Central States Pension Fund sued Sidney Truck & Storage, Inc. and related entities to collect withdrawal liability after Sidney Truck completely withdrew from the multiemployer pension plan in 2009. Plaintiffs seek joint and several liability for trades or businesses under common control.
- In 2007 Steven Woodruff acquired Sidney Truck; at that time he formed Sidney Transport, Sidney Transportation, and Equipment Leasing. Sidney Transport owned at least 80% of Sidney Truck.
- Equipment Leasing purchased ~90 tractors and trailers and leased that Truck Equipment to Sidney Truck and Sidney Transportation from 2007–2009; lease payments were below market, undocumented, and there was no active enforcement when defaults occurred.
- All of Equipment Leasing’s gross income during the relevant period came from those leases; its federal tax returns identified its principal activity as equipment leasing and reported rental income and related expenses.
- The Fund assessed $3,459,880.63 in withdrawal liability; plaintiffs moved for summary judgment against all defendants. Common control between Equipment Leasing and Sidney Truck is conceded; the dispute centered on whether Equipment Leasing was a “trade or business” under 29 U.S.C. § 1301(b)(1).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Sidney Truck (and affiliated companies) are liable for withdrawal liability | Fund: Sidney Truck triggered withdrawal liability and proper notice was given; no arbitration | Defendants did not contest liability for Sidney Truck, Sidney Transport, Sidney Transportation | Court: Summary judgment for Fund — Sidney Truck, Sidney Transport, Sidney Transportation liable |
| Whether Equipment Leasing is a “trade or business” under §1301(b)(1) and therefore jointly/severally liable | Fund: Leasing property to the withdrawing employer is categorically a trade or business; Equipment Leasing leased directly to Sidney Truck/Transportation | Equipment Leasing: Court should apply Groetzinger (fact-intensive) test; no intent to fractionalize; carryover from prior ownership undermines liability | Court: Applied Seventh Circuit’s categorical rule — Equipment Leasing is a trade or business because it leased property to the withdrawing employer; judgment for Fund |
Key Cases Cited
- Cent. States, Se. & Sw. Areas Pension Fund v. Messina Products, LLC, 706 F.3d 874 (7th Cir. 2013) (leasing to withdrawing employer treated as a means to fractionalize assets)
- Cent. States, Se. & Sw. Areas Pension Fund v. Ditello, 974 F.2d 887 (7th Cir. 1992) (leasing property to withdrawing employer is a trade or business)
- SCOFBP, LLC v. Central States, Se. & Sw. Areas Pension Fund, 668 F.3d 873 (7th Cir. 2011) (bright-line rule that leasing to withdrawing employer is categorically covered)
- Commissioner v. Groetzinger, 480 U.S. 23 (U.S. 1987) (test for trade or business: primary purpose profit; continuity and regularity)
- Cent. States, Se. & Sw. Areas Pension Fund v. Nagy, 714 F.3d 545 (7th Cir. 2013) (explains when categorical leasing rule applies vs. Groetzinger)
- Central States, Se. & Sw. Areas Pension Fund v. Slotky, 956 F.2d 1369 (7th Cir. 1992) (MPPAA purpose: prevent dissipation of assets securing pension benefits)