In Central States Southeast and Southwest Areas Pension Fund v. Messina Products, LLC, Nos. 11-3513 & 12-1333 (7th Cir. 2013), the Court faced the question of whether it should pierce corporate veils, and impose on the individual owners and related businesses withdrawal liability to the plaintiff, Central States Southeast and Southwest Areas Pension Fund (the “Fund”), a multiemployer pension plan.
In this case, a defendant, Messina Trucking, Inc. (“Messina Trucking”), was a closely-held corporation owned, along with several other closely held entities, by Stephen and Florence Messina. For several years, Messina Trucking was subject to a collective bargaining agreement that required it to contribute to the Fund for its employees’ retirement benefits. In October 2007, however, Messina Trucking permanently ceased to have an obligation to contribute to the Fund, triggering a “complete withdrawal” from the Fund, and incurring nearly $3.1 million in potential withdrawal liability. The Fund sued Stephen and Florence Messina (the “Messinas”), Messina Trucking, and the other closely held entities seeking a declaratory judgment that the named defendants were jointly and severally liable for the withdrawal liability. One question for the Court was whether the Messinas are responsible for the withdrawal liability.
On this question, the Court noted that all “trades or businesses” under “common control” with a withdrawing employer are treated as a single entity for purposes of assessing and collecting withdrawal liability. The Court determined that the Messinas, who owned and leased several residential properties as well as the property from which MessinaTrucking operated, were engaged in a “trade or business”, and thus could be held responsible for Messina Trucking’s withdrawal liability. To be considered a “trade or business”, an activity must be performed: (1) for the primary purpose of income or profit and (2) with continuity and regularity. The Court determined that the Messina’s activities met prong (1) and (2), and therefore constituted a “trade or business”. The Court said that ERISA does not impose liability for a withdrawing employer on purely passive investment entities, including those that invest in real estate. But where-as here- the real estate is rented to or used by the withdrawing employer and there is common ownership, it is improbable that the rental activity could be deemed a truly passive investment.