An updated docket sheet on the U.S. Supreme Court website shows the top court has denied a review petition from defendants in Central States, Southeast and Southwest Areas Pension Fund and Arthur H. Bunte, Jr., Trustee, vs. CLP Venture LLC, et al.
Court documents show the case, relating to the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), arose from questions about whether various co-defendants that are commonly owned but organizationally distinct can be made jointly and severally liable for a multiemployer pension plan withdrawal liability “indisputably incurred” by one of the defendants.
According to the text of a decision in the case from the 7th U.S. Circuit Court of Appeals, the company that indisputably incurred the withdrawal liability is General Warehouse, which was required to make regular contributions to the Central States, Southeast and Southwest Areas Pension Fund on behalf of certain employees.
In 2005, General Warehouse ceased to have an obligation to the multiemployer pension plan, which led to a complete withdrawal and the company’s incurring a withdrawal liability in the amount of $1,262,568. As established by MPPAA, the assessment of a withdrawal liability is a statutory penalty mechanism designed to dissuade employers from withdrawing from participation in multiemployer pension plans.
The multiemployer plan filed suit to collect the withdrawal liability from General Warehouse, as well as another company called GEOBEO. As noted in court documents, the parties to that litigation entered into a consent judgment, acknowledging that the named defendants were jointly and severally liable. The pension fund then successfully initiated a district court action to add more defendants to the group of business entities from which it could collect, leading to the current string of appeals.
Under the regulations defining common control for purposes of assessing withdrawal liabilities, there are three different common control categories relevant to this case. First is a “parent-subsidiary” group, wherein one or more organization is connected through a common parent. Court documents show the parties to the General Warehouse litigation are a parent-subsidiary group, of which GEOBEO is the parent. Second is a “brother-sister” group, where five or fewer individuals own a controlling interest and effectively control two or more organizations. Court documents show all of the appellants in this case are a brother-sister group, with George Cibula owning at least 80% of each company. The final category is a “combined group,” which is defined as a group of three or more organizations where each organization is a member of a parent-subsidiary or brother-sister group and at least one of the organizations is the common parent of the parent-subsidiary group AND a member of the brother-sister group. GEOBEO is both the parent organization (if Cibula owns 80% of the stock) in the parent-subsidiary group and a member of the brother-sister group.
Background materials presented in court documents present a complicated ownership picture for General Warehouse, GEOBEO and the other companies sued for collections—but both the district and appeals courts in the case determined that before the date General Warehouse incurred withdrawal liability, owner George Cibula had a controlling interest in GEOBEO. Cibula owned 73% of GEOBEO’s common shares, but was also assigned the ability to direct the voting shares in escrow. The remaining 27% of GEOBEO shares were in escrow. As a result, the appeals court found the defendants were properly characterized as being part of a “combined group” under common control, making them jointly and severally liable for General Warehouse’s withdrawal liability.
The Supreme Court was asked to determine if the 7th Circuit erred in its finding.