Teamsters and Employers Welfare Trust of Illinois v. Gwillim Trucking, Inc.
Filing
41
OPINION: Plaintiff's Rule 25(c) Combined Motion and Memorandum to Substitute TKNG Transportation, Inc. as a Party Defendant (d/e 35 ) is GRANTED. The Clerk is DIRECTED to enter judgment in favor of Plaintiff and against TKNG Transportation, I nc. in the amount of $24,138.60 on Count II, $219,989 on Count III, $28,144.70 for attorney's fees, and $788.44 in costs. This case remains closed. (SEE WRITTEN OPINION.) Entered by Judge Sue E. Myerscough on 2/27/2019. (GL, ilcd)
E-FILED
Wednesday, 27 February, 2019 10:42:23 AM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
TEAMSTERS AND EMPLOYERS
WELFARE TRUST OF ILLINOIS,
Plaintiff,
v.
GWILLIM TRUCKING, INC.,
Defendant.
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Case No. 14-cv-03386
OPINION
SUE E. MYERSCOUGH, U.S. District Judge:
This cause is before the Court on Plaintiff Teamsters and
Employers Welfare Trust of Illinois’ Rule 25(c) Combined Motion
and Memorandum to Substitute TKNG Transportation, Inc. (TKNG)
as a Party Defendant (d/e 35). Because TKNG had notice of the
judgment before an interest was transferred to TKNG and there was
substantial continuity in the operation of the business, the Motion
is GRANTED.
I. BACKGROUND
On December 11, 2014, Plaintiff filed a three-count Complaint
(d/e 1) alleging that Defendant Gwillim Trucking, Inc. failed to pay
Page 1 of 11
Plaintiff contributions as required by collective bargaining
agreements and the Employee Retirement Income Security Act of
1974 (ERISA), 29 U.S.C. § 1001 et seq. Count I of Plaintiff’s
Complaint alleged that Defendant was liable to Plaintiff for unpaid
contributions that came due between February 2014 and October
2014. Count II alleged that Defendant was liable to Plaintiff for
unpaid contributions that came due between January 2007 and
December 2009. Count III alleged that Defendant was liable to
Plaintiff for unpaid contributions that came due after December
2009.
In February 2017, this Court granted summary judgment in
favor of Plaintiff on Count II of Plaintiff’s Complaint in the amount
of $24,138.60. The Court granted partial summary judgment on
Count III in the amount of $219,989 for the time period of January
1, 2010 to June 30, 2014, leaving pending the period from July 1,
2014 to September 30, 2015. (It appears that the relief sought in
Count I was subsumed in Count III, as the parties have not
addressed Count I). The Court expressly found, pursuant to
Federal Rule of Civil Procedure 54(b), “no just reason for delay.”
Opinion at 22 (d/e 24).
Page 2 of 11
On August 10, 2017, Plaintiff filed a Status Report (d/e 28)
indicating that Plaintiff would no longer pursue the remaining
liability sought in Count III and intended to dedicate its resources
to collecting the judgment the Court entered in February 2017. On
September 5, 3017, a Citation to Discover Assets (d/e 31) was
issued to “Gwillim Trucking, Inc., Attn: Michael Gwillim.”
On September 14, 2017, Mr. Gwillim appeared for the
Citation. Mr. Gwillim testified that, at the time judgment was
entered in this case, he was the sole owner of Defendant and held
the position of secretary. Defendant closed on August 7, 2017 and
is no longer in operation. Also, on August 7, 2017, Mr. Gwillim
started TKNG1, a trucking company. Mr. Gwillim is president of
TKNG and the sole owner.
Mr. Gwillim testified that TKNG employs the same employees
Defendant employed, although TKNG added one extra person in the
shop. TKNG is in the same building Defendant occupied at 1525
North Sumner. TKNG transports refrigerated and dry freight for
Prairie Farms, the customer who was the main source of income for
1
The transcript of the hearing mistakenly refers to “TK&G Transportation.”
Page 3 of 11
Defendant the last year of Defendant’s operation. The monthly
gross income from Prairie Farms is the same for TKNG as it was for
Defendant—approximately $90,000 a month. Like Defendant,
TKNG works on a few trucks for Gully Transportation.
Mr. Gwillim testified that, prior to Defendant closing, the only
assets Defendant had were six trucks. Defendant had loans of
approximately $25,152, $129,000, and $13,000 with Carlinville
National Bank. The bank had a security interest in the assets of
Defendant. When asked if Defendant had anything worked out with
the bank regarding the loans, Mr. Gwillim testified that TKNG was
making the payments and TKNG took “over the debt of the trucks.”
Mr. Gwillim also testified that “we’re running trucks that are, you
know, 20 years old,” which appears to be a reference to TKNG using
Defendant’s six trucks in TKNG’s business. Tr. at 22 (d/e 32).
In January 2018, this Court awarded Plaintiff $28,144.70 for
attorney’s fees and $788.44 for costs pursuant to 29 U.S.C.
§ 1132(g)(2)(D). On March 19, 2018, Plaintiff filed a Notice of
Voluntary Dismissal dismissing without prejudice the remaining
portion of Count III. The Court acknowledged the voluntary
dismissal and closed the case.
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On July 12, 2018, Plaintiff filed the Rule 25(c) Combined
Motion and Memorandum to Substitute TKNG Transportation, Inc.
as a Party Defendant (d/e 35) at issue herein. Plaintiff requests
that the Court enter an order substituting TKNG as a party
defendant liable for the unpaid balance of the judgment against
Defendant. Plaintiff also requests in the alternative that, if the
Court denies the Motion, the Court allow Plaintiff to engage in
limited discovery on the question of successorship.
On August 6, 2018, Defendant filed a Response in Opposition
(d/e 37). On February 26, 2019, TKNG filed a Waiver of Service and
Entry of Appearance (d/e 40) joining in Defendant’s Response.
II. ANALYSIS
Federal Rule of Civil Procedure 25(c) provides that, “[i]f an
interest is transferred, the action may be continued by or against
the original party unless the court, on motion, orders the transferee
to be substituted in the action or joined with the original party.”
Fed.R.Civ.P. 25(c). Substitution of a party under Rule 25(c) is
discretionary with the court. Otis Clapp & Son, Inc. v. Filmore
Vitamin Co., 754 F.2d 738, 743 (7th Cir. 1985).
Page 5 of 11
Whether the Court should grant the motion and substitute
TKNG in this action depends on whether TKNG is a successor-ininterest of Defendant. The general rule is that a corporation that
purchases the assets of another does not assume the seller
corporation’s liabilities. Sullivan v. Running Waters Irrigation, Inc.,
739 F.3d 354, 357 (7th Cir. 2014). Several exceptions to this
general rule exist, including an exception in the context of ERISA
actions to recover delinquent pension fund contributions. Id. In
the ERISA context, a plaintiff may proceed against the subsequent
purchaser of a business if (1) the successor had notice of the claim
before the acquisition and (2) there is a substantial continuity of
operation of the business before and after the sale. Id. Several
courts in the Northern District have held that successor liability
extends beyond situations where assets are sold and extends “any
reorganization that results in a substantial continuation of the
business by the successor and either obliterates the previous
business or leaves it as an empty shell.” Tr. of Chi. Regional
Council of Carpenters Pension Fund v. Conforti Const. Co., Inc., No.
09 C 322, 2013 WL 3771415, at *2 (N.D. Ill. July 17, 2013) (internal
quotation marks) (quoting and citing cases); see also Sullivan, 739
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F.3d at 357 (“However, Artistic Furniture does not require a formal
purchase of assets to establish successor liability in the ERISA
context.”) (citing Upholsterers’ Int’l Union Pension Fund v. Artistic
Furniture of Pontiac, 920 F.2d 1323, 1327-29 (7th Cir. 1990)).
Defendant and TKNG do not dispute that the second
requirement for successor liability is met, agreeing that TKNG “is a
continuity of the business operation of” Defendant. Resp. at 3.
Defendant and TKNG do dispute, however, that TKNG had notice of
liability before an interest was transferred because no specific
interest was transferred by Defendant to TKNG and Defendant
continues as an entity.
A similar argument was made in Sullivan v. Running Waters
Irrigation, Inc., 739 F.3d 354. In Sullivan, two interrelated
companies, Running Waters Irrigation, Inc. (RWI) and JV
Equipment Leasing, LLC (JV) challenged their substitution as
judgment debtors for the predecessor company, Alpine Irrigation
Company (Alpine). Id. at 355 (noting that Alpine was in arrears on
pension fund payments). RWI and JV were established
contemporaneously with Alpine’s closing. Id. at 356. RWI serviced
and occasionally installed law irrigation systems. Id. JV’s sole
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business was to lease to RWI six pieces of equipment that JV
purchased from Alpine. Id.
The district court held that RWI and JV were successors and
substituted RWI and JV for Alpine. Id. On appeal, RWI and JV
argued that only a substantial transfer of assets could trigger
substitution under Rule 25(c) and because JV only acquired six
pieces of equipment and RWI acquired no assets from Alpine, no
interest had been transferred. Id. at 357.
The Seventh Circuit disagreed, noting that a formal purchase
of assets is not required to establish successor liability in the ERISA
context. Id. The Seventh Circuit also rejected RWI and JV’s
argument that the transfer of assets was insufficient to establish
continuity, noting that “it is clear that together JV and RWI took on
every aspect of Alpine’s former business.” Id. at 358.
Similarly, here, TKNG assumed Defendant’s loans and
apparently took possession of the only assets of Defendant—the six
trucks. TKNG has also, as Defendant and TKNG admit, continued
the business operation of Defendant. Consequently, the Court finds
that an interest was transferred from Defendant to TKNG. See also,
e.g., Panther Pumps & Equip. Co., Inc. v. Hydrocraft, Inc., 566 F.2d
Page 8 of 11
8, 22, 25 (7th Cir. 1977) (permitting the substitution of the sole
owner of a newly formed corporation as a successor-defendant
where the individual used his alter ego company to effect a
continuance of the original company—the newly formed corporation
and the original corporation had the same owner and the inventory
of the original corporation was transferred without monetary
consideration to the new corporation so that the new corporation
could make a substantially identical product).
Defendant and TKNG also argue, without citation to any
authority, that there was no transfer of interest “particularly in that
the Judgment liability had already been imposed and there were no
disputed issues of fact or appeal pending related to the prior
Judgment.” Resp. at 3. Defendant and TKNG do not elaborate on
this argument, and the Court finds the argument forfeited.
Finally, the Court finds TKNG had notice of the claim before
the transfer of interest. Notice can be shown by actual knowledge
or evidence from which knowledge can be implied. Sullivan, 739
F.3d at 357. Here, Michael Gwillim was the sole owner of
Defendant when the judgment was entered. Michael Gwillim is also
the sole owner of TKNG. The transfer occurred on or after August
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7, 2017—the date Defendant ceased operation and TKNG was
formed. The Court granted partial summary judgment in February
2017, and the judgment was effective July 17, 2017. See February
8, 2019 Text Order. Because Michael Gwillim was the sole owner of
both companies, knowledge by TKNG of the claim against
Defendant can, at the very least, be implied. See, e.g., Sullivan, 739
F.3d at 356-357 (finding the district court did not clearly err by
concluding that notice existed where the owner of the original
company admitted his son knew more about the company’s assets
and operations than he did; the son held a leadership position in
the original company and the two companies established
contemporaneously with the original company’s closing; and the
son owned the property on which all of the companies were located).
III. CONCLUSION
For the reasons stated, Plaintiff’s Rule 25(c) Combined Motion
and Memorandum to Substitute TKNG Transportation, Inc. as a
Party Defendant (d/e 35) is GRANTED. The Clerk is DIRECTED to
enter judgment in favor of Plaintiff and against TKNG
Transportation, Inc. in the amount of $24,138.60 on Count II,
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$219,989 on Count III, $28,144.70 for attorney’s fees, and $788.44
in costs. This case remains closed.
ENTERED: February 27, 2019
FOR THE COURT:
s/Sue E. Myerscough
SUE E. MYERSCOUGH
UNITED STATES DISTRICT JUDGE
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