7th Circuit Again Rules Successor is Responsible for Multiemployer Plan Withdrawal Liability

The appellate court disagreed with a district court conclusion that the multiemployer plan had not shown sufficient continuity of business operations to support successor liability.

For the second time, the 7th U.S. Circuit Court of Appeals has ruled in a case about whether ManWeb Services, Inc. is a successor in interest to a defunct employer that owes withdrawal liability to a multiemployer plan. The original employer was Tiernan & Hoover, which withdrew from the Indiana Electrical Workers Benefit Fund.

Tiernan & Hoover did not get notice that it was deemed to have withdrawn from the plan and owed $661,978.00 in withdrawal liability until after it sold its assets to non-union employer ManWeb Services. In a previous ruling, the 7th Circuit disagreed with a district court’s finding that the successor liability notice requirement excludes notice of contingent liabilities. It said if this were true, and an employer withdrew from a plan after it sold its assets, “a liability loophole would exist,” and the plan would be left “holding the bag.”

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. In the new appeal, the 7th Circuit again disagreed with the district court.

According to the appellate court’s opinion, ManWeb’s purchase of Tiernan & Hoover’s intangible assets—its name, goodwill, trademarks, supplier and customer data, trade secrets, telephone numbers and websites—and its retention of Tiernan & Hoover’s principals to promote ManWeb to existing customers as carrying on the Tiernan & Hoover business “weigh more heavily in favor of successor liability than the district court recognized.” The 7th Circuit vacated the district court’s decision and remanded the case for further consideration.