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Pension Plan – Successor in Interest

By: Derek Hawkins//March 27, 2018//

Pension Plan – Successor in Interest

By: Derek Hawkins//March 27, 2018//

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7th Circuit Court of Appeals

Case Name: Indiana Electrical Workers Pension Benefit Fund, et al. v. ManWeb Services, Inc.

Case No.: 16-2840

Officials: MANION, KANNE, and HAMILTON, Circuit Judges

Focus: Pension Plan – Successor in Interest

For a second time in this case, we consider whether defendant‐appellee ManWeb Services, Inc. is a successor in interest to a defunct employer that owes withdrawal charges 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.

The Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), establishes withdrawal liability for employers leaving a multiemployer pension plan. 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 li‐ ability. In the first appeal, we 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. We find ourselves in respectful disagreement with our 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. We vacate the district court’s decision and remand for further consideration of this equitable determination.

Vacated and Remanded
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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.

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