Central Laborers' Pension, Welfare and Annuity Funds et al v. Midwest Underground, Inc. et al
Filing
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OPINION (See Written Opinion): Defendants Midwest's, William Murphy's, and Michael Murphy's Motions to Dismiss Counts II through IV for lack of standing or grounds to enforce the 2007 Judgment (d/e 10 , 16 , 20 ) are GRANTED without prejudice. Plaintiffs are given leave to file an amended complaint that clarifies the relief sought by each named Plaintiff. If Plaintiffs file an amended complaint, Plaintiffs may add the plaintiffs from Case No. 04-3048 not named in the Origina l Complaint. Plaintiffs SHALL file the amended complaint on or before November 15, 2013. Furthermore, the Court DENIES Defendants' Motions to Sever Counts II through IV (d/e 10 , 16 , 20 ) because litigating all claims in this action with all Plaintiffs joined promotes efficiency in light of the relationship between Count I and Counts II through IV. Entered by Judge Sue E. Myerscough on 11/01/2013. (VM, ilcd)
E-FILED
Friday, 01 November, 2013 10:42:46 AM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
CENTRAL LABORERS’ PENSION,
WELFARE, AND ANNUITY FUNDS
ET AL.,
Plaintiffs,
v.
MIDWEST UNDERGROUND, INC.,
an Illinois Corporation, WILLIAM )
MURPHY, Individually, and
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MICHAEL MURPHY, Individually,
Defendants.
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No. 12-3188
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OPINION
SUE E. MYERSCOUGH, U.S. District Judge:
This cause is before the Court on Defendant Midwest Underground,
Inc.’s (“Midwest”) Motion to Dismiss or Sever Counts II and III of
Plaintiffs’ Complaint (d/e 10), Defendant Michael D. Murphy’s Motion to
Dismiss or Sever Count IV of Plaintiffs’ Complaint (d/e 16), and Defendant
William Murphy’s Motion to Dismiss or Sever Count IV of Plaintiff’s
Complaint (d/e 20). Defendants Midwest’s, William Murphy’s, and
Michael Murphy’s Motions to Dismiss Counts II through IV for lack of
standing or grounds to enforce the 2007 Judgment (d/e 10, 16, 20) are
GRANTED without prejudice. Plaintiffs are given leave to file an amended
complaint clarifying the relief sought by each named Plaintiff. Plaintiffs
SHALL file the amended complaint on or before November 15, 2013.
Furthermore, the Court DENIES Defendants’ Motions to Sever Counts II
through IV (d/e 10, 16, 20) because litigating all claims in this action with
all Plaintiffs joined promotes efficiency in light of the relationship between
Count I and Counts II through IV.
I.
BACKGROUND
On July 17, 2012, Plaintiffs filed a four-count Complaint against
Defendants seeking employer contributions or payments allegedly owed to
Plaintiffs pursuant to Section 301 of the Labor Management Relations Act,
as amended, 29 U.S.C. § 185, and Sections 502 and 515 of the Employee
Retirement Income Security Act of 1974 (“ERISA”) (29 U.S.C. §§ 1132 and
1145).
Count I is a claim against Defendant Midwest for delinquent
contributions and liquidated damages for the period October 2011 through
January 2012. Plaintiffs seek delinquent contributions and liquidated
damages from Midwest totaling $83,932.20.
Counts II through IV are based on a judgment Plaintiffs obtained in
this Court on February 22, 2007 against Murphy Bros., Inc., in Case No.
04-3048, in the amount $153,980.61. Plaintiffs have not collected on the
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judgment as Murphy Bros., Inc., ceased operations in March 2004 and was
administratively dissolved on May 1, 2006.
Count II of the Complaint alleges a successor liability claim against
Defendant Midwest for the contributions owed by Murphy Bros., Inc., to
Plaintiffs. Count III alleges an alter ego liability claim against Defendant
Midwest for those same contributions owed by Murphy Bros., Inc., to
Plaintiffs. Count IV alleges a piercing the corporate veil claim and seeks to
hold Defendants William and Michael Murphy liable for the 2007 judgment
against Murphy Bros., Inc.
In support of Counts II through IV, Plaintiffs allege that Defendant
Midwest uses the same business address that Murphy Bros., Inc., used and,
like Murphy Bros., Inc., Midwest is a pipeline contractor. Additionally,
Defendants Michael and William Murphy were the sole shareholders of
Murphy Bros., Inc., and paid for personal expenses with Murphy Bros.,
Inc., funds. Defendant Michael Murphy provided the capital for Midwest’s
startup, and three officers of Murphy Bros., Inc., are now officers of
Midwest.
On September 9, 2012, Defendant Midwest filed a Motion to Dismiss
or Sever Counts II and III of Plaintiffs’ Complaint. Defendant Midwest
argues that Counts II and III of Plaintiffs’ Complaint should be dismissed
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as time barred and because not all of the Plaintiffs in this action have
standing or grounds to enforce the 2007 judgment. In the alternative,
Defendant Midwest seeks severance of Counts II and III from Count I.
On November 19, 2012 and January 31, 2013 respectively, Defendants
Michael and William Murphy filed Motions to Dismiss or Sever Count IV of
Plaintiff’s Complaint. Defendants Michael and William Murphy argue that
Count IV should be dismissed as untimely, for failure to state a claim, and
because not all of the named Plaintiffs have standing or grounds to enforce
the 2007 judgment. Alternatively, Defendants Michael and William
Murphy seek severance of Count IV.
II. JURISDICTION AND VENUE
This Court has exclusive jurisdiction over this civil action brought
under ERISA pursuant to 29 U.S.C. § 1132(e)(1). Venue is proper under 29
U.S.C. § 1132(e)(2) because the pension plan is administered in this judicial
district .
III. LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) challenges a complaint for
failure to state a claim upon which relief may be granted. Fed.R.Civ.P.
12(b)(6). At this stage, the court accepts as true all well-pleaded facts in the
plaintiff’s complaint and draws all reasonable inferences from those facts in
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the plaintiff’s favor. Dixon v. Page, 291 F.3d 485, 486 (7th Cir. 2002). To
survive a Rule 12(b)(6) motion, the complaint must provide the defendant
with fair notice of the claims’ bases and establish a plausible claim for relief.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
IV.
ANALYSIS
Plaintiffs have filed Responses (d/e 12, 17, 22, 23) to Defendants’
Motions to Dismiss or Sever Counts II through IV of Plaintiffs’ Complaint.
Plaintiffs argue that none of these claims are time barred and that filing an
amended complaint will clarify which Plaintiffs seek relief from which
Defendants. Plaintiffs also argue that they have stated claims upon which
relief can be granted against Defendants Michael and William Murphy and
that litigating Counts I through IV in a single action with all Plaintiffs
joined promotes efficiency.
A.
Plaintiffs’ Claims in Counts II through IV Are Not Time
Barred Because Plaintiffs Have Seven Years to File a Claim
to Enforce the February 22, 2007 Judgment Against
Murphy Bros., Inc.
Defendants first argue that the claims in Counts II through IV are
time barred. In response, Plaintiffs assert that in ERISA and LMRA cases
brought by pension funds to recover delinquent contributions, the Seventh
Circuit uses Illinois’s ten-year statute of limitations applicable to cases
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involving written contracts. Plaintiffs further assert that the claims in
Counts II through IV are timely based on the application of this ten-year
statute of limitations. Notably, Plaintiffs do not develop an argument
regarding when the claims in Counts II through IV accrued for purposes of
applying the ten-year statute of limitations.
ERISA does not contain a statute of limitations for suits brought to
recover unpaid contributions. Cent. States v. Jordan, 873 F.2d 149, 152
(7th Cir. 1989). In the absence of a governing federal provision, “the settled
practice has been to adopt a local time limitation as federal law if it is not
inconsistent with federal law or policy to do so.” Wilson v. Garcia, 471 U.S.
261, 266-67, 105 S.Ct. 1938, 1941-42, 85 L.Ed.2d 254 (1985).
Generally, as Plaintiffs assert, Illinois’s ten-year statute of limitations
applies in these pension fund cases because the delinquent contributions
claims arise out of written agreements between the pension funds and
employers. See Central Laborers’ Pension v. Parkland Environmental
Group, Inc., 2013 WL 5658842, at *6 (C.D. Ill. 2013) (citing Jordan, 873
F.2d at 154) (explaining that the Seventh Circuit applies Illinois’s ten-year
statute of limitations for written contracts in actions by fund trustees to
collect delinquent employer contributions owed to a multiemployer benefit
fund)). However, with respect to Counts II through IV, Plaintiffs have
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already sought and obtained a judgment for the delinquent contributions
owed to Plaintiffs by Murphy Bros., Inc. Therefore, Plaintiffs are not
pursuing delinquent contributions pursuant to a written contract. Instead,
in Counts II through IV, Plaintiffs are pursuing delinquent contributions by
enforcing the judgment against Murphy Bros., Inc.
In Illinois, a seven-year statute of limitations applies for the
enforcement of judgments from the date judgment is entered. 735 ILCS
5/12-108(a). But where other applicable Illinois statutes require a different
limitations period, the different period applies. See Peetoom v. Swanson,
778 N.E.2d 291, 295 (Ill. App. 2002) (holding that the five-year statute of
limitations governing collection of obligations of dissolved corporations,
not the two-year statute for personal injury, or seven-year statute for
enforcing judgments, applied to injured pedestrian’s collection action
against shareholders and directors of the dissolved corporation).
Defendants note that Murphy Bros., Inc., was dissolved on May 1,
2006. Defendants also note that the Illinois Business Corporation Act of
1983 requires actions against dissolved corporations to be brought within
five-years after the date of dissolution. 805 ILCS 5/12.80. Defendants
contend that the five-year rather than the seven-year statute of limitations
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applies here and that Plaintiffs have failed to file the claims in Counts II
through IV within five years of Murphy Bros., Inc.’s, dissolution.
Despite Defendants’ argument, the application of a state statute of
limitations to a federal cause of action is ultimately a question of federal
law. International Union, United Automobile, Aerospace & Agricultural
Implement Workers of America (UAW) v. Hoosier Cardinal Corp., 383 U.S.
696, 86 S.Ct. 1107, 16 L.Ed.2d 192 (1966). Furthermore, the decisions of
the Illinois courts regarding the applicability of the statutes of limitations
for dissolution of a corporation and enforcing a judgment are helpful but
not binding, for they do not take into consideration the national interests at
stake. Occidental Life Ins. Co. v. EEOC, 432 U.S. 355, 367, 97 S.Ct. 2447,
2455, 53 L.Ed.2d 402 (1977) (affirming appellate court’s holding that state
statute of limitations that otherwise prevented the EEOC from bringing a
lawsuit for violation of Title VII was inconsistent with the underlying
policies of the federal statute).
Here, as a matter of federal policy, the longer seven-year statute of
limitations applies because Plaintiffs’ claims are for vested pension benefits
that have allegedly become due to them over a period of years. To reduce
the time period for claims by applying the five-year statute of limitations
flies in the face of ERISA’s underlying purpose of “contribut[ing] to the
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stability of pension funds and . . . encourage[ing] employers to meet their
obligations.” Jordan, 873 F.2d at 154.
With this in mind, the judgment against Murphy Bros., Inc., was
entered by this Court on February 22, 2007. On July 17, 2012, Plaintiffs’
filed the instant Complaint that includes claims in Counts II through IV to
enforce that 2007 judgment. Plaintiffs clearly sought enforcement of the
2007 judgment within seven years. Therefore, the claims in Counts II
through IV against Defendants Midwest and William and Michael Murphy
are not time barred.
B.
Plaintiffs May Proceed on Count IV in Their Attempt to
Pierce the Corporate Veil and Hold Defendant Shareholders
Michael and William Murphy Liable for the Judgment Debt
Owed By Murphy Bros., Inc.
Defendants Michael and William Murphy argue that Count IV should
be dismissed. Specifically, Defendants note that the doctrine of piercing the
corporate veil is an equitable remedy that acts as a means of imposing
liability on an underlying cause of action such as a tort or breach of
contract. Defendants contend that Plaintiffs’ Complaint fails to assert an
underlying tort, breach of contract, or other cognizable cause of action
against Defendants Michael and William Murphy. In the absence of such a
cause of action, Defendants assert that Count IV fails to state a claim upon
which relief can be granted.
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Veil-piercing is an equitable remedy governed by state law, here the
law of Illinois because that is where Murphy Bros., Inc., was incorporated.
Laborers’ Pension Fund v. Lay-Com, Inc., 580 F.3d 602, 610 (7th Cir.
2009) (applying Illinois veil-piercing law in ERISA action for unpaid
contributions after initial defendants became judgment proof and plaintiffs
sought to hold other closely related entities and individuals liable). Under
Illinois law, the judgment creditor may file a new action to pierce the
corporate veil to hold individual shareholders and directors personally
liable for the judgment of the corporation. See, e.g., Miner v. Fashion
Enterprises, Inc., 794 N.E.2d 902, 911-12 (Ill. App. 2003) (finding that the
new action is proper because a judgment is a new and distinct obligation of
the corporation which differs in nature and essence from the original
claim).
Here, Plaintiffs obtained a judgment against Murphy Bros., Inc., on
February 22, 2007. Plaintiffs have now filed an action against the sole
shareholders of Murphy Bros., Inc., Defendants William and Michael
Murphy, to hold the shareholders liable for the unpaid judgment. This
action to hold the shareholders personally liable for the judgment of the
corporation is appropriate.
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C.
Plaintiffs Shall File an Amended Complaint Clarifying
Which Plaintiffs Seek What Relief from Defendants
Midwest and William and Michael Murphy
Defendants Midwest and William and Michael Murphy also move for
dismissal of Counts II through IV because not all of the named Plaintiffs in
this action were named plaintiffs in Case No. 04-3048 that resulted in the
2007 judgment. Defendants assert that the current Plaintiffs not named in
Case No. 04-3048 have no standing or grounds to enforce the 2007
judgment in Counts II through IV.
Plaintiffs seek to remedy the issues raised by Defendants by filing an
amended complaint clarifying which Plaintiffs seek enforcement of the
2007 judgment against Murphy Bros., Inc., in Counts II through IV of the
Complaint and which Plaintiffs seek relief from Midwest in Count I.
Plaintiffs also state that Case No. 04-3048 included plaintiffs not named in
this action. Plaintiffs request leave to file an amended complaint that
includes the plaintiffs from the previous lawsuit not named in this action.
Based on Defendants’ arguments and Plaintiffs’ response,
Defendants’ Motion to Dismiss for lack of standing or grounds to enforce
the 2007 judgment is granted without prejudice because the Complaint
does not clearly indicate which Plaintiffs seek relief in Count I and which
Plaintiffs seek to enforce the 2007 judgment in Counts II through IV.
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Plaintiffs are given leave to file an amended complaint naming the
additional plaintiffs from Case No. 04-3048 and clarifying which Plaintiffs
seek enforcement of the 2007 judgment against Defendants in Counts II
through IV of the Complaint and which Plaintiffs seek relief from Midwest
in Count I. See Fed.R.Civ.P. 15(a)(2) (stating that courts should give leave
to amend a pleading when justice so requires). Adding the additional
plaintiffs from the previous lawsuit does not prejudice Defendants because
Defendants already know the plaintiffs who obtained the 2007 judgment
against Murphy Bros., Inc. Additionally, adding these plaintiffs does not
change the nature or number of claims that Defendants must litigate
against.
D.
Litigating the Claims in Counts I through IV in One Action
with All Plaintiffs Joined Promotes Efficiency
Finally, Defendants Midwest and William and Michael Murphy assert
that the claim in Count I against Midwest for delinquent contributions for
the period October 2011 through January 2012 has no relationship to the
claims in Counts II through IV that seek to enforce the 2007 judgment
against Murphy, Bros., Inc. Because no relationship exists, Defendants
assert that joinder of all of the Plaintiffs in one action is inappropriate. As a
result, Defendants move to sever Counts II through IV so that the plaintiffs
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named in Case No. 04-3048 are the only plaintiffs named in an action to
enforce the 2007 judgment.
However, Defendants’ claims that no relationship exists between
Count I and Counts II through IV are contradicted by the well-pleaded
allegations in Plaintiffs’ Complaint. Specifically, the claims in Counts I
through IV involve unpaid contributions owed to Plaintiffs by Defendant
Midwest and Midwest’s corporate predecessor, Murphy Bros., Inc. The
Complaint alleges that Midwest is merely a continuation of Murphy Bros.,
Inc., and that Midwest was created to avoid Murphy Bros., Inc.’s, corporate
liabilities. Clearly, the corporate entities at issue in Counts I through IV
share a relationship that may be borne out through discovery.
Furthermore, because of the alleged relationship between Murphy
Bros., Inc. and Midwest, Defendants William and Michael Murphy, the sole
shareholders of Murphy Bros., Inc., may have knowledge about Count I as
well as Counts II through IV. Consequently, litigating Counts I through IV
in the same action with all Plaintiffs joined furthers efficiency because all of
the named Defendants are allegedly related and the evidence and testimony
relating to each claim may overlap. See Fed.R.Civ.P. 20(a)(1) (stating that
plaintiffs may join in one action if “they assert any right to relief jointly,
severally, or in the alternative with respect to or arising out of the same
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transaction, occurrence, or series of transactions or occurrences; and any
question of law or fact common to all plaintiffs will arise in the action”).
V.
CONCLUSION
Defendants Midwest’s, William Murphy’s, and Michael
Murphy’s Motions to Dismiss Counts II through IV for lack of
standing or grounds to enforce the 2007 Judgment (d/e 10, 16,
20) are GRANTED without prejudice. Plaintiffs are given leave
to file an amended complaint that clarifies the relief sought by
each named Plaintiff. If Plaintiffs file an amended complaint,
Plaintiffs may add the plaintiffs from Case No. 04-3048 not
named in the Original Complaint. Plaintiffs SHALL file the
amended complaint on or before November 15, 2013.
Furthermore, the Court DENIES Defendants’ Motions to Sever
Counts II through IV (d/e 10, 16, 20) because litigating all claims
in this action with all Plaintiffs joined promotes efficiency in
light of the relationship between Count I and Counts II through
IV.
IT IS SO ORDERED.
ENTER: November 1, 2013
FOR THE COURT:
s/ Sue E. Myerscough
SUE E. MYERSCOUGH
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UNITED STATES DISTRICT JUDGE
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