ERISA-Seventh Circuit Upholds Decision Of District Court To Impose Withdrawal Liability On Controlled Group Members

In Trustees of the Suburban Teamsters of Northern Illinois Pension Fund v. E Co., No. 18-2273 (7th Cir. 2019), under the terms of a collective bargaining agreement, T&W Edmier Corporation (“T&W”) regularly contributed on behalf of its employees to the Suburban Teamsters of Northern Illinois Pension Fund (the “Pension Fund”). But in 2014, T&W ceased operations and cut off its pension contributions, prompting the Pension Fund to assess withdrawal liability of $640,900. The Pension Fund sought to collect payment by mailing a notice of the withdrawal liability to T&W and several affiliated entities, only to see their collection efforts ignored. The Trustees of the Pension Fund eventually sued to collect payment, and that action culminated in the district court ordering T&W, along with several other individuals and entities under common control, to pay the withdrawal liability. Now seeking to vacate the district court’s judgment, T&W and the other defendants argue that their due process rights were violated when the Pension Fund initiated collection of the withdrawal liability by mailing notice to some but not all of them.

Upon reviewing the case, the Seventh Circuit Court of Appeals (the “Court”) affirmed the district court’s judgment. The Court found that certain defendants forfeited all defenses to liability, including the defense that they were not members of a controlled group, by failing to arbitrate after receiving the Fund’s notice of withdrawal liability. The Court further found that other defendants had likewise forfeited all defenses, as they were not  unsuspecting defendants;  rather the Court found that none of these defendants had a credible claim of surprise (at being a member of a controlled group) that would allow it to sidestep ERISA’s arbitration requirement. Each defendant was a trade or business under common control with another party who received the notice. As such, each defendant was liable for the withdrawal liability under ERISA’s controlled group provision, and therefore became jointly and severally liable for payment.

 

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