Teamsters Local Union No. 727, et al v. L&R Group of Companie

Filing

Filed opinion of the court by Judge Easterbrook. The judgment is AFFIRMED, and the case is REMANDED with instructions to amend the judgment to specify LR System Parking Illinois, LLC, as the defendant and the entity responsible for payment. Diane P. Wood, Chief Judge; Frank H. Easterbrook, Circuit Judge and Ann Claire Williams, Circuit Judge. [6806033-1] [6806033] [16-2037]

Case: 16-2037

Document: 46

Filed: 12/21/2016

Pages: 6

In the

United States Court of Appeals
For the Seventh Circuit
____________________  
No.  16-­‐‑2037  
TEAMSTERS   LOCAL   UNION   NO.   727   HEALTH   AND   WELFARE  
FUND,   TEAMSTERS   LOCAL   UNION   NO.   727   PENSION   FUND,  and  
TEAMSTERS   LOCAL   UNION   NO.   727   LEGAL   AND   EDUCATIONAL  
ASSISTANCE  FUND,  
Plaintiffs-­‐‑Appellees,  
v.  
L&R  GROUP  OF  COMPANIES,  

Defendant-­‐‑Appellant.  

____________________  
Appeal  from  the  United  States  District  Court  for  the  
Northern  District  of  Illinois,  Eastern  Division.  
No.  11  C  1747  —  Jorge  L.  Alonso,  Judge.  

____________________  

ARGUED  DECEMBER  2,  2016  —  DECIDED  DECEMBER  21,  2016  
____________________  
Before   WOOD,   Chief   Judge,   and   EASTERBROOK   and  
WILLIAMS,  Circuit  Judges.  
EASTERBROOK,   Circuit   Judge.   Three   pension   and   welfare  
funds   regulated   by   the   Multiemployer   Pension   Plan  
Amendments  Act  (MPPAA),  which  is  codified  as  part  of  the  
Employee   Retirement   Income   Security   Act   (ERISA),   filed  

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No.  16-­‐‑2037  

this  suit  to  collect  what  they  described  as  shortfalls  in  contri-­‐‑
butions  due  during  2003  through  2008  from  System  Parking,  
Inc.,   which   had   entered   into   four   collective   bargaining  
agreements  with  Teamsters  Local  727.  But  the  funds  did  not  
sue   System   Parking.   Instead   they   sued   “L&R   Group   of  
Companies.”   The   answer   to   the   complaint   also   used   that  
name,  as  did  the  district  court’s  judgment.  The  mismatch  be-­‐‑
tween  the  litigant  and  the  name  of  the  business  obligated  to  
make   contributions   led   us   to   call   for   supplemental   briefs,  
which   reveal   that   there   is   no   such   thing   as   “L&R   Group   of  
Companies.”  This  poses  two  problems  under  Fed.  R.  Civ.  P.  
17.  Rule  17(a)  says  that  suits  must  be  conducted  in  the  name  
of   the   real   parties   in   interest,   and   Rule   17(b)   says   that   only  
persons   or   entities   with   the   capacity   to   sue   or   be   sued   may  
be  litigants.  
The   odd   name   “L&R   Group   of   Companies”,   which   the  
opening   brief   on   appeal   described   as   “not   a   corporation”  
with  no  further  detail,  led  us  to  wonder  whether  it  might  be  
a   partnership,   a   holding   company   organized   as   a   trust,   or  
perhaps   a   membership   organization.   But   the   supplemental  
briefs   reveal   that   it   is   none   of   these.   Counsel   for   appellant,  
while   styling   their   client   as   “L&R   Group   of   Companies”,  
state  variously  that  it  is  “a  description  that  refers  to  a  series  
of  business  entities”  or  a  “rubric”  that  several  companies  use  
in   their   business.   But   a   “description”   or   a   “rubric”   is   not   a  
juridical   entity.   See,   e.g.,   Schiavone   v.   Fortune,   477   U.S.   21  
(1986)  (the  name  of  a  magazine  is  not  suable).  Rule  17(a)  says  
that  litigation  must  proceed  in  the  name  of  the  real  party  in  
interest,   and   a   “rubric”   is   not   any   kind   of   entity.   You   can’t  
sue   a   “rubric”   any   more   than   you   could   sue   the   Chicago  
River  or  the  Magnificent  Mile  as  a  proxy  for  the  City  of  Chi-­‐‑
cago.   The   judgment   in   this   case   directs   “L&R   Group   of  

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Companies”  to  pay  almost  $2  million,  but  a  rubric  does  not  
have  a  bank  account.  
The  supplemental  briefs  reveal  the  identity  of  the  proper  
defendant.  System  Parking,  Inc.,  changed  its  name  to  LR  Sys,  
Inc.,  in  November  2010.  The  next  month  all  of  its  assets  and  
liabilities   were   acquired   by   LR   System   Parking   –   Illinois,  
LLC   (LR   System   Parking   for   short).   Because   this   entity   was  
not  named  in  the  complaint  or  served  with  process,  a  motion  
to   dismiss   the   complaint   would   have   been   granted   under  
Schiavone,   though   the   funds   might   have   had   time   to   sue   it  
before  the  statute  of  limitations  expired.  But  no  one  paid  any  
attention   to   this   subject   in   the   district   court,   and   even   now  
LR  System  Parking  has  not  asked  us  to  remand  with  instruc-­‐‑
tions  to  dismiss.  Nor  has  it  suggested  that  the  funds  should  
be   stuck   with   an   uncollectable   judgment.   Still,   we   cannot  
continue   the   litigation   against   a   rubric,   so   the   question   be-­‐‑
comes  whether  this  problem  can  be  fixed  in  the  court  of  ap-­‐‑
peals.  
We  think  that  the  answer  is  yes,  using  the  power  granted  
by   Fed.   R.   Civ.   P.   21   to   add   or   drop   a   party   in   lieu   of   dis-­‐‑
missing  the  suit.  Cf.  28  U.S.C.  §1653.  Rule  21  nominally  ap-­‐‑
plies   only   to   district   courts,   but   Newman-­‐‑Green   v.   Alfonzo-­‐‑
Larrain,   490   U.S.   826,   832–37   (1989),   holds   that   appellate  
courts  may  exercise  the  same  power—as  the  Supreme  Court  
itself   did   in   Mullaney   v.   Anderson,   342   U.S.   415   (1952).   In  
Newman-­‐‑Green  the  Justices  held  that  a  court  of  appeals  may  
dismiss  a  surplus  litigant  whose  presence  prevented  the  ex-­‐‑
istence  of  complete  diversity  of  citizenship.  Here  we  need  a  
substitution—a   real   party   in   lieu   of   a   rubric—but   Mullaney  
shows   that   a   court   of   appeals   has   that   authority   too,   when  
the   real   party   in   interest   does   not   object.   Mullaney   allowed  

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No.  16-­‐‑2037  

the   addition   of   two   litigants   in   the   Supreme   Court   in   order  
to   avoid   a   problem   with   the   original   litigant’s   standing   to  
sue.   Here   all   we   need   do   is   replace   a   name   (L&R   Group   of  
Companies)   with   the   real   entity   (LR   System   Parking)   that  
everyone   has   taken   the   name   to   be   a   stand-­‐‑in   for.   That’s  
within   the   bounds   of   the   authority   recognized   by   Newman-­‐‑
Green,  so  we  need  not  send  the  case  back  to  the  district  court  
for   formalities   that   quickly   would   propel   the   dispute   back  
here.  
Thus   we   arrive   at   the   merits,   and   the   district   court’s  
thorough  opinion,  2016  U.S.  Dist.  LEXIS  16359  (N.D.  Ill.  Feb.  
10,  2016),  enables  us  to  be  brief.  The  judge  held  a  bench  trial,  
resolved   ambiguities   in   the   collective   bargaining   agree-­‐‑
ments,   and   considered   two   opposing   audit   reports—one  
conducted   by   a   firm   of   auditors   on   behalf   of   the   funds   and  
showing   that   LR   System   Parking   owed   some   $1.8   million  
(including  late-­‐‑payment  penalties  and  interest)  and  the  other  
conducted   internally   by   LR   System   Parking   and   showing  
that   the   funds   had   been   overpaid   about   $1.2   million.   The  
judge   concluded   that:   (1)   the   agreements   require   contribu-­‐‑
tions  for  every  hour  workers  are  paid  and  not  just  for  hours  
they  work  (so  the  employer  owed  contributions  for  paid  va-­‐‑
cation   and   sick-­‐‑leave   hours);   (2)   the   auditor   hired   by   the  
funds  did  not  have  a  duty  to  offset  overpayments  when  cal-­‐‑
culating   underpayments   (this   was   the   only   seriously   con-­‐‑
tested  issue  about  the  quality  of  that  audit);  and  (3)  LR  Sys-­‐‑
tem   Parking’s   audit   was   unreliable.   LR   System   Parking   has  
abandoned  its  arguments  on  the  choice  between  hours  paid  
and  hours  worked,  leaving  only  issues  (2)  and  (3)  for  appel-­‐‑
late  resolution.  

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The  funds’  auditor  counted  underpayments  and  ignored  
overpayments.   LR   System   Parking   says   that   this   spoils   the  
audit.  The  district  judge  found  otherwise,  ruling  that  requir-­‐‑
ing  the  funds’  auditor  to  determine  overpayments  and  offset  
them   against   underpayments   would   shift   to   the   funds   the  
burden   of   calculating   and   proving   the   amount   of   any   over-­‐‑
payment.   The   trust   documents   assign   that   burden   to   em-­‐‑
ployers.  As  the  district  judge  saw  things,  the  funds’  auditor  
was   entitled   to   tally   up   the   underpayments,   while   the   em-­‐‑
ployer’s   auditor   could   tally   overpayments   and   the   court  
would  do  the  offset.  That  makes  sense  and  is  certainly  not  an  
abuse  of  discretion.  
This  brings  us  to  the  district  court’s  decision  that  the  em-­‐‑
ployer’s  audit  was  unreliable,  so  there  was  nothing  to  offset  
against  the  funds’  calculation.  The  judge  gave  three  principal  
reasons  (2016  U.S.  Dist.  LEXIS  16359  at  *63–66):  first,  that  the  
employer’s  audit  was  done  in-­‐‑house  rather  than  by  an  inde-­‐‑
pendent   accounting   firm;   second,   that   the   person   who   pre-­‐‑
pared   it   lacked   any   relevant   experience;   third,   that   LR   Sys-­‐‑
tem  Parking  relied  on  “murky”  assumptions  and  did  not  try  
to   explain   why   this   audit   differed   from   the   funds’   profes-­‐‑
sionally   prepared   audit.   The   judge   summed   up:   “L&R   liti-­‐‑
gated  this  issue  by  obfuscation.”  The  judge’s  conclusion  that  
the  employer’s  audit  was  unreliable  is  a  finding  of  fact  and  
thus   must   stand   unless   clearly   erroneous.   Fed.   R.   Civ.   P.  
52(a)(6).  We  see  no  clear  error  in  this  finding.  On  this  record  
the   judge   might   well   have   accepted   the   employer’s   calcula-­‐‑
tion,  but  the  evidence  did  not  compel  him  to  do  so.  
The   judgment   is   affirmed,   and   the   case   is   remanded  
with  instructions  to  amend  the  judgment  to  specify  LR  Sys-­‐‑

Case: 16-2037

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Document: 46

Filed: 12/21/2016

Pages: 6

No.  16-­‐‑2037  

tem  Parking  –  Illinois,  LLC,  as  the  defendant  and  the  entity  
responsible  for  payment.