Board of Trustees of the Automobile Mechanics' Local No. 701 Union and Industry Pension Fund, Plaintiff-Appellant,
Full Circle Group, Inc., et al., Defendants-Appellees.
May 23, 2016
from the United States District Court for the Northern
District of Illinois, Eastern Division. No. 13 C 5868 -
Charles P. Kocoras, Judge.
Bauer, Posner, and Williams, Circuit Judges.
Posner, Circuit Judge.
plaintiff, a board that administers a multiemployer
defined-benefit pension plan sponsored by Mechanics'
Local Union No. 701, filed this suit against a company named
Full Circle Group and its subsidiaries seeking to impose
withdrawal liability on them (we'll treat all the
companies as a single entity, which we'll dub FCG).
Multiemployer Pension Plan Amendments Act of 1980 amended
ERISA by imposing liability on employers who withdraw,
partially or completely, from participation in an underfunded
multiemployer pension fund, thereby reducing the fund's
already diminished resources for paying the pensions to which
employees of the fund's members are contractually
entitled. See 29 U.S.C. §§ 1381 et seq.;
Central States, Southeast & Southwest Areas Pension
Funds v. Bulk Transport Corp., 820 F.3d 884 (7th Cir.
2016). The pension board's appeal is from the district
court's grant of summary judgment in favor of FCG and the
resulting entry of a final judgment in its favor.
purchased the assets of a shipping and shipyard services
company named Hannah Maritime Corporation (HMC, the parties
call it, as will we), whose president was Donald Hannah. HMC
had a collective bargaining agreement with the mechanics
union that required it to make contributions to the
union's pension fund to finance pensions for HMC's
had hired his son Mark to work at HMC in 2007. The following
year Mark formed FCG, and the new company bought two land
leases and shipyard equipment from HMC and also hired
HMC's shipyard service employees. No significant
liabilities of HMC were explicitly transferred to the new
company-notably, HMC's withdrawal liability was not
transferred. FCG tried to negotiate its own collective
bargaining agreement with the union, and though the attempt
failed the company contributed to the union's pension
fund until the company's employees voted to decertify the
union in 2009. With HMC having ceased contributing to the
fund, the fund assessed withdrawal liability against it. But
in the meantime HMC had become insolvent, which prompted this
suit in which the fund seeks to impose HMC's liability to
the fund on FCG as HMC's successor.
district judge did not decide whether FCG could be said
merely to have continued HMC's business, just under a
different name, a question complicated by the fact that not
all of FCG's employees were former employees of HMC and
by uncertainty as to just how similar FCG's business was
to what HMC's business had been. The judge was concerned
that deciding that issue would require a trial. Instead he
focused on a second requirement for successor liability-that
the successor be aware of its predecessor's liability.
Chicago Truck Drivers, Helpers & Warehouse Workers
Union (Independent) Pension Fund v. Tasemkin, Inc., 59
F.3d 48, 49 (7th Cir. 1995); Upholsterers'
International Union Pension Fund v. Artistic Furniture of
Pontiac, 920 F.2d 1323, 1326 (7th Cir. 1990).
would be plausible that having worked for HMC and being the
owner's son, Mark Hannah would have been aware of the
company's obligations to contribute to a union pension
fund, though we can't be certain that he learned of these
obligations before the agreement to transfer assets to the
newly created FCG. It is a virtual certainty however that he
knew before the agreement was made that HMC was unionized, if
only because it was something his father was bound to
mention-indeed to be preoccupied with because unionization
limits a company's control over and dealings with its
employees. Mark testified that he was aware of the union
pension fund, and the obligation to contribute to it, by July
1, 2008, the date the transaction closed.
"general [federal] common law rule of successor
liability holds that … where one company sells its
assets to another company, the latter is not liable for the
debts and liabilities of the seller." Tsareff v.
ManWeb Services, Inc., 794 F.3d 841, 845 (7th Cir.
2015). But as explained in EEOC v. Vucitech, 842
F.2d 936, 944 (7th Cir. 1988) (citations omitted), there need
to be exceptions to that rule:
The entire issue of successor liability … is
dreadfully tangled, reflecting the difficulty of striking the
right balance between the competing interests at stake. In
favor of successor liability is the interest in preventing
tortfeasors from externalizing the costs of their misconduct
by selling their assets free of any liabilities and
distributing the proceeds to their shareholders. Against is
the interest in a fluid market in corporate assets, which is
impeded if purchasers acquire along with the assets legal
liabilities of unknown, sometimes unknowable, dimensions. The
latter consideration dominated common law thinking until
recent years, producing a rule, now eroding, that in a sale
of assets … as distinct from a merger or
consolidation, the purchaser took free of any liabilities not
expressly assumed, including tort liabilities.
A similar but looser approach, in which the focus is on the
continuity between the predecessor's and successor's
businesses and [on] the [successor's] notice of the
[predecessor's] acts, has long been followed in labor
cases in which the issue is the successor's duty to honor
the obligations assumed by [the] predecessor in a collective
parties agree that we should use the "similar but looser
approach" described in Vucitech and reiterated
in other cases-an approach that focuses on the continuity
between the predecessor's and successor's businesses
and on the latter's notice of the former's acts.
Knowing that HMC was unionized Mark would almost certainly
also have known that the company would be required to
contribute to a union pension fund if there was one. That
knowledge should have alerted him to the possibility of
withdrawal liability, which he could have verified by asking
HMC to get an estimate from the union of the union's
liabilities to its members. See 29 U.S.C. § 1021(l).
That would have eliminated the possibility that successor
liability would impose a crushing debt on FCG, for once Mark
learned what FCG's successor liability would or might be
he could, depending on its size, have refused to buy
HMC's assets; for if no assets are bought, no liabilities
district court granted summary judgment in favor of FCG for
two reasons, the first being lack of evidence that Mark knew
about the pension fund and the possibility of withdrawal
liability before signing the asset-acquisition agreement. Yet
he knew about the pension contributions by July,
implying that he had learned about them earlier, and he had
lawyers advising him on the acquisition of HMC's assets
and its unionized employees. It is thus plausible that he
knew about the ...