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
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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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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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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-‐‑
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No. 16-‐‑2037
tem Parking – Illinois, LLC, as the defendant and the entity
responsible for payment.
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