ERISA-Seventh Circuit Rules That Asset Purchaser May Have Had Sufficient Continuity Of Business Operations To Be Subject To Successor Withdrawal Liability

In Indiana Electrical Workers Pension Benefit Fund v. ManWeb Servs., No. 16-2840 (7th Cir. 2018), for a second time in this case, the Seventh Circuit Court of Appeals (the “Court”) considered whether defendant-appellee ManWeb Services, Inc. is a successor in interest to a defunct employer that owes withdrawal liability to a multiemployer pension plan.  The original employer was Tiernan & Hoover, but everyone refers to it as “Freije” after its key founder, William Freije, and his son Richard.  ManWeb entered into an asset purchase agreement with Freije in 2009.  Freije was a small contractor specializing in refrigeration and cold-storage engineering for commercial and industrial projects.  ManWeb was a larger company offering a wider range of contracting services, with the notable exception, before it acquired Freije’s assets, of refrigeration projects such as cold-storage warehouses.  Freije’s unionized electricians were covered by a multiemployer pension plan.

ERISA establishes withdrawal liability for employers leaving a multiemployer pension plan. See 29 U.S.C. § 1381.  In this case, Freije withdrew from the Indiana Electrical Workers Benefit Fund (“the Fund”).  The Fund assessed withdrawal liability of $661,978 against Freije.  When Freije failed to pay, the Fund brought this action against both Freije and ManWeb as a successor in interest to Freije.  Successor liability can apply under the MPPAA when the purchaser had notice of the liability and there is continuity of business operations. Upholsterers’ Int’l Union Pension Fund v. Artistic Furniture of Pontiac, 920 F.2d 1323, 1329 (7th Cir. 1990). At this point, the only issue in the case is the claim against ManWeb based on successor liability.

The district court granted summary judgment for Man-Web in 2013, finding it lacked notice of Freije’s withdrawal liability.  In the first appeal, the Court remanded, finding that “Man-Web had sufficient pre-acquisition notice of [Freije’s] contingent withdrawal liability to satisfy the federal successor liability notice requirement.” Tsareff v. ManWeb Services, Inc., 794 F.3d 841, 848 (7th Cir. 2015) (“ManWeb I“).  On remand, the district court again granted summary judgment for ManWeb, concluding that the Fund had not shown sufficient continuity of business operations to support successor liability.  The Fund has appealed again.  This time, the Court found itself in respectful disagreement with it’s colleague on the district court.  In the totality of relevant circumstances, ManWeb’s purchase of and use of Freije’s intangible assets—its name, goodwill, trademarks, supplier and customer data, trade secrets, telephone numbers and websites—and its retention of Freije’s principals to promote ManWeb to existing and potential customers as carrying on the Freije business under ManWeb’s larger umbrella, weigh more heavily in favor of successor liability than the district court recognized. Therefore, the Court vacated the district court’s decision and remanded the case for further consideration of this equitable determination.

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