CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND and Arthur H. Bunte, Jr., Trustee, Plaintiffs-Appellees, v. CLP VENTURE LLC, et al., Defendants-Appellants.
Nos. 13-3010, 13-3776.
United States Court of Appeals, Seventh Circuit.
Decided July 29, 2014.
745 F.3d 745
Argued June 4, 2014.
III. CONCLUSION
The district court properly admitted evidence regarding Equipment Source checks written to cash or to the currency exchange, the three challenged jury instructions were proper, and the district court had the statutory authority necessary to order restitution payable to Palos Bank. The judgment of the district court is AFFIRMED.
Thomas M. Weithers, Attorney, Central States, Southeast & Southwest Areas Pension Fund, Rosemont, IL, for Plaintiffs-Appellees.
Before WOOD, Chief Judge, and CUDAHY and ROVNER, Circuit Judges.
CUDAHY, Circuit Judge.
This case arises under the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA); we must determine primarily whether or not the various co-defendants were under common control, and therefore are jointly and severally liable for the withdrawal liability indisputably incurred by General Warehouse, Inc. Because there is overwhelming evidence that these entities were under common control, we now affirm.
This appeal originated with General Warehouse, which as an employer was obligated to contribute to the Central States Pension Fund (the Fund) on behalf of certain employees. In 2005 it ceased to have an obligation to the fund, which led to a complete withdrawal, incurring withdrawal liability in the amount of $1,262,568. The Fund filed suit to collect from General Warehouse, as well as GEOBEO and other businesses under common control. The parties to that litigation entered into a consent judgment, acknowledging that the named defendants were jointly and severally liable. The Fund then initiated this action to add the defendants to the group of business entities from which it can collect.
The only other pеrtinent facts in this case pertain to George Cibula‘s ownership of GEOBEO, and the rather convoluted Stock Redemption Agreement that resulted in his acquiring the right to acquire at least 80% of GEOBEO shares. In 1997, Cibula owned 65% (650 shares) of GEOBEO, while Robert Pieranunzi owned the remaining 35% (350 shares). That same
The district court granted summary judgment in favor of the Fund and struck the defendants’ jury demand. The defendants now appeal the district court‘s finding that Cibula had a controlling interest in GEOBEO, the characterization of the defendants as “trades” or “businesses” and 2 the order striking their jury demand. While а grant of summary judgment is typically reviewed de novo, because the only issue before the district court was the characterization of undisputed subsidiary facts, we review for clear error. Cent. States, Se. & Sw. Areas Pension Fund v. SCOFBP, 668 F.3d 873 (7th Cir.2011). We review the order striking the jury demand de novo.
I.
Under
There are a few pieces to this analysis; however, the only real question before us is whether the district court properly concluded that Cibula had a controlling interest in GEOBEO. If Cibula did in fact have a controlling interest in GEOBEO, then the defendants are part of a combined group under Cibula‘s common control and are jointly and severally
In this context, a controlling interest is defined as having ownership of stock representing at least 80% of voting pоwer of all classes3 of stock or 80% of the total value of all shares.
Paragraphs four and five of the Assignment Agreement make Cibula‘s interest in the shares abundantly clear. Those paragraphs provide that Pieranunzi transfers to Cibula all rights he had in the shares crеated by the Stock Redemption Agreement, “including the right to demand a transfer from GEOBEO to Assignee of Assignor‘s Shares in the event of a default under the Note.” The Agreement also provides that Pieranunzi “relinquishes, waives and releases and rights which Assignor may have under the Stock Redemption Agreement.” Thus, under the clear terms of the agreement, Cibula can elect to demand the transfer of the shares to himself.
The defendants contend that despite having the right to demand the release of the escrowed shares to himself, Cibula never exercised that right. What the defendants misunderstand is that the regulatiоns concerning common control for purposes of the MPPAA provide that “if a person has an option to acquire any outstanding interest in an organization, such interest shall be considered as owned by such a person.”
The defendants also contend that Pieranunzi retained the right to reclaim the shares in the event of default, and therefore Cibula did not control the shares in escrow. They rely on paragraph six of the Assignment Agreement4, which stаtes that Pieranunzi retains any legal remedies available to him in the event of a default. The defendants contend that his legal remedies include the right to reclaim his shares. Thus, they argue that if Pieranunzi has a right to reclaim, then he never relinquished control of those shares, which would limit Cibula‘s control оf GEOBEO to less than 80%. However, the defendants ignore the fact that in the paragraphs immediately preceding paragraph six Pieranunzi explicitly assigned to Cibula the right to demand the shares in escrow.5 It
In addition to having the right to direct the shares to himself, Cibula had 100% voting control of GEOBEO. Pursuant to the terms of the Stock Redemption Agreement while GEOBEO was in default the еscrowee was required to abstain from voting the stock in escrow. This effectively meant that the stock owned by Cibula (that which remained outside of escrow) was the only stock entitled to vote, giving Cibula 100% of the voting power whether or not he owned the stock in escrow. The defendants would have us believe that because the escrowee voted he had voting control over the stock in escrow, regardless of the fact that he voted to abstain as he was required to. We are concerned with who had voting power, thus the fact that the escrowee technically voted is irrelevant because he was bound by the Stock Redemption Agreement to abstain. See
Accordingly, we agree with the district court that before the date General Warehouse incurred withdrawal liability, Cibula had a controlling interest in GEOBEO. As a result, the defendants were properly characterized as being part of a “combined group” under common control, making them jointly and severally liable for General Warehouse‘s withdrawal liability.
II.
We now turn to consider whether the defendants can be characterized as “trades” or “businesses” under the MPPAA. See
The dеfendants argue that Cibula spent so little time personally involved with these businesses, that they are more correctly characterized as passive investments, rather than trades or businesses. We disagree. There is no real question as to whether these formally registered business entities are аptly construed as such for purposes of withdrawal liability under the MPPAA. However strained the defendants’ contention is in this regard, the district court still properly applied the relevant test from Groetzinger and determined that the defendants were indeed trades or businesses under the MPPAA. Under the test the court considеrs whether the person was engaged in the activity (1) for the primary purpose of income or profit; and (2) with continuity and regularity. Comm‘r of Internal Revenue v. Groetzinger, 480 U.S. 23, 35, 107 S.Ct. 980, 94 L.Ed.2d 25 (1987). More specifically, when applying this test courts look to factors such as the purpose, tax status, and legal form of thе enterprise. See, e.g., Personnel, 974 F.2d at 795; Connors v. Incoal, Inc., 995 F.2d 245, 254 (D.C.Cir.1993). The point of this test is to distinguish trades and businesses from investments, “which are not trades and businesses and thus cannot form a basis for imputing withdrawal liability.” Personnel, 974 F.2d at 794.
We have previously held that formally recognized business organizations pose “no interpretative difficulties” for the Groetzinger test. Central States, Se. & Sw. Areas Pension Fund v. Fulkеrson, 238 F.3d 891, 895 (7th Cir.2001). We have also noted that because formal business organizations ordinarily operate with continuity and regularity and are ordinarily formed for the primary purpose of income or prof-
In mounting their challenge to the district court‘s characterization of them as trades or businesses, the defendants rely heavily on the fact that Cibula spent very little time—less than ten hours per year—personally managing these businesses. Viewed in isolation, Cibula‘s minimal involvement might be persuasive, but defendants ignore other, more persuasive factors, which undercut their argument that these were mere passive investments.
In 2005, the defendants paid a combined total of over $250,000 to companies who managed and operated the various business entities. Thus, the argument that Cibula was not involved in these entities is a red herring, since these significant management fees obviated the need for Cibula‘s personal involvement. In fact, the management fees indicate that the activities undertaken by the defendants were continuous and regular. See, e.g., SCOFBP, 668 F.3d at 879. In addition to the management fees paid, the defendants also claimed business-related income deductions on their federal income tax returns; they applied for and were issued Federal Employer Identification Numbers; and they contractеd with professionals to provide legal, managerial, and accounting services. All factors indicate that the defendants were properly characterized as businesses or trades. Id. at 878.
III.
The defendants also contend the district court improperly struck their jury demand. They are wrong. We hаve previously held that there is no right to a jury trial in an MPPAA withdrawal liability action—no provision in the MPPAA or the Seventh Amendment provides for one. McDougall v. Pioneer Ranch Ltd., 494 F.3d 571, 576 (7th Cir.2007). McDougall presented the same type of claim as is made in this case, thus the Appellants’ attempt to distinguish it is unavailing. In any event, even if the court did commit error in striking the jury demand, it would not be grounds for reversal—the court did not hold a bench trial, but resolved the matter on summary judgment. The defendants cannot avoid summary judgment by challenging this form of disposition when no trial was necessary.
AFFIRMED.
CUDAHY
CIRCUIT JUDGE