Ind. Elec. Workers Pension Benefit Fund v. Manweb Servs., Inc.
884 F.3d 770
7th Cir.2018Background
- In 2009 ManWeb purchased the assets of Tiernan & Hoover ("Freije") for $259,360; Freije was a small, unionized industrial refrigeration contractor that participated in a multiemployer pension fund (the Fund).
- Freije withdrew from the Fund and was assessed $661,978 in withdrawal liability under ERISA/MPPAA; Freije did not contest or pay the assessment.
- The Fund sued Freije and joined ManWeb as an alleged successor in interest, seeking to collect the withdrawal liability from ManWeb.
- On initial summary judgment the district court found ManWeb had no notice and granted judgment for ManWeb; the Seventh Circuit reversed on notice and remanded to consider continuity of business operations (successorship element).
- On remand the district court again granted summary judgment for ManWeb, finding insufficient continuity; the Seventh Circuit now vacated and remanded, holding the district court erred by focusing on the buyer’s relative size rather than on how much of the seller’s business continued.
- Key disputed facts: ManWeb acquired Freije’s intangible assets (trade name, domain, customer lists, phone numbers, goodwill), retained Freije’s senior managers and some employees, assumed ongoing contracts/warranties, and used the Freije name in marketing, but largely sold off physical assets and retained only a minority of the workforce and little of ManWeb’s post‑acquisition revenue derived from the assumed contracts.
Issues
| Issue | Plaintiff's Argument (Fund) | Defendant's Argument (ManWeb) | Held |
|---|---|---|---|
| Whether ManWeb is a successor liable for Freije’s withdrawal liability under MPPAA (requires notice + substantial continuity) | ManWeb had pre‑acquisition notice of contingent withdrawal liability and, by acquiring Freije’s intangible assets, retaining key managers, assuming contracts/warranties, and marketing under the Freije name, effectively continued Freije’s business | ManWeb lacked substantial continuity: it did not assume most physical assets, retained a small fraction of Freije’s workforce and customers, and Freije’s work represented a tiny share of ManWeb’s business | Court: Notice already established on prior appeal; vacated district court’s continuity analysis and remanded — district court erred by evaluating continuity relative to ManWeb’s overall business rather than relative to continuity of Freije’s business and intangible asset use; continuity factors must be reweighed |
| Proper measure of continuity in "big buyer" situations (whether continuity should be assessed relative to buyer’s scale) | Continuity should focus on how much of the seller’s business, workforce, services, customers, and goodwill carried forward, not what percentage those elements are of the large buyer | Measuring continuity as a percentage of the buyer’s larger business creates a “big buyer” loophole that would let large purchasers evade successor liability | Court: Agrees with Fund — district court erred by using buyer‑denominator metrics; remand required to reassess continuity with attention to seller‑centered continuity and intangible assets |
| Role of intangible assets and marketing in successor analysis | Purchasing tradename, customer lists, domain, phone numbers, using seller’s goodwill and retaining senior managers demonstrate intent and practical continuity of seller’s business | ManWeb retained assets for marketing but did not materially continue seller’s business in results (few customers shifted; low revenue from assumed contracts) | Court: Use and purpose of intangible assets and retention of senior managers weigh strongly toward continuity; district court underappreciated these factors and must reweigh equities |
| Standard of equitable balancing on successor liability | MPPAA policy (protect remaining fund contributors) supports successor liability when buyer knew of liability and continued the seller’s business | Equitable factors (facilitating asset transfers, buyer’s fiscal impact) counsel against imposing $661,978 absent meaningful customer transfer | Court: Equitable balancing is for district court, but prior legal errors tainted its balancing; remand for reweighing under correct legal framework |
Key Cases Cited
- Artistic Furniture of Pontiac v. Upholsterers’ Int’l Union Pension Fund Bd., [citation="920 F.2d 1323"] (7th Cir.) (explains MPPAA successor‑liability framework and continuity factors)
- Chicago Truck Drivers, Helpers & Warehouse Workers Union (Indep.) Pension Fund v. Tasemkin, Inc., [citation="59 F.3d 48"] (7th Cir.) (successor liability applies where buyer substantially assumes assets, continues operations, and has notice)
- Fall River Dyeing & Finishing Corp. v. N.L.R.B., [citation="482 U.S. 27"] (1987) (totality‑of‑circumstances approach to successor continuity under labor law)
- Resilient Floor Covering Pension Trust Fund Bd. of Trustees v. Michael’s Floor Covering, Inc., [citation="801 F.3d 1079"] (9th Cir.) (discussion of continuity, customer base takeover, and the risk of "big buyer" analyses)
- Worth v. Tyer, [citation="276 F.3d 249"] (7th Cir.) (presumption favoring successor liability where successor knew liability, its extent, and that predecessor could not pay)
- Golden State Bottling Co. v. N.L.R.B., [citation="414 U.S. 168"] (1973) (origin of successor liability doctrine under federal labor law)