ERISA-District Court Finds That The Company’s Sole Owner Is Not Jointly and Severally Liable With The Company For Its Withdrawal Liability

In Board of Trustees of the Automobile Mechanics’ Local No. 701 Union and Industry Welfare Fund v. Beland & Wiegers Enterprises, Inc., Case No. 13 CV 1611 (N.D. Illinois 2014), one of the claims was for withdrawal liability owed to a multiemployer pension plan (the “Plan”) under ERISA.

In this case, an employer, Beland & Wiegers Enterprises, Inc. (“B&W”), ceased its operations and incurred withdrawal liability to the Plan in the amount of $261,052. Daniel Beland (“Beland”) is the sole owner of B&W. At the time of B&W’s withdrawal from the Plan, Beland owned the property located at 11625 South Ridgeland, Alsip, Illinois. Before cessation of covered operations, B&W operated out of that property. The Plan asked the court to hold B&W and Beland jointly and severally liable for the withdrawal liability, and its associated liquidated damages, interest, and attorney’s fees.

In analyzing the case, the court said that it must determine whether withdrawal liability may properly be imputed to Beland under 29 U.S.C. § 1301(b)(1). Under that section “all employees of trades or business which are under common control shall be treated as employed by a single employer and all such trades and business as a single employer” for purposes of withdrawal liability. Thus, for the court to hold Beland liable for B&W’s withdrawal liability, the Plan must establish that: (1) Beland and B&W are each a “trade or business,” and (2) Beland and B&W are under common control.

As to prong (1), the court must consider whether the organization engaged in an activity: (a) with continuity and regularity and (b) for the primary purpose of income or profit. B& W is clearly a trade or business. But what about Beland? Beland owned the property out of which B&W operated when B&W withdrew from the pension. But ownership of a property does not necessarily rise to the level of a “trade or business.” Here, the Plan has not alleged facts showing that Beland leased his property to B&W with any continuity and regularity. The undisputed facts do not indicate how long Beland leased out his property, whether the lease was continuous or whether the lease was for the purpose of income and profit. Further, the alleged facts do not show that Beland generated revenue from B&W’s operations out of the property or that Beland and B&W had a lease agreement. Thus, court concluded that the alleged facts are insufficient to show that Beland’s ownership of the property constitutes a “trade or business”, and as such the court could not hold him jointly and severally liable for B&W’s withdrawal liability.

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