Central States, Southeast and Southwest Areas Pension Fund et al v. Vanguard Services, Inc. et al
Filing
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MEMORANDUM Opinion and Order:For the foregoing reasons, the Pension Fund's motion to enforce the indemnification agreement between Vanguard and Wise is granted. The case is set for a status hearing on 3/6/2015 at 09:00 AM. Signed by the Honorable Thomas M. Durkin on 2/24/2015:Mailed notice(srn, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CENTRAL STATES, SOUTHEAST AND
SOUTHWEST AREAS PENSION FUND;
and HOWARD McDOUGALL, Trustee;
Plaintiffs,
v.
VANGUARD SERVICES, INC., an Indiana
corporation; DRIVER’S, INC., an Ohio
corporation; VANGUARD SOUTHEAST, INC.,
a South Carolina corporation; VMT VANGAURD
COMPANIES, INC., an Indiana corporation;
VANGUARD SERVICES (CANADA), INC., a
Canadian corporation; VANGUARD OF
DELAWARE, INC., a Delaware corporation;
CROSSSTONE, LLC, an Indiana limited liability
Corporation; PINERIDGE INSURANCE CO.,
INC., a Barbados corporation; V.O. FREIGHT
SERVICES, INC., a Delaware corporation;
Defendants,
and
WISE ALLOYS, LLC, as assignee and successor
in interest to Reynolds Metals Co.,
Citation Respondent.
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Case No. 09 CV 4721
Judge Thomas M. Durkin
MEMORANDUM OPINION AND ORDER
Plaintiffs, Central States Fund, Southeast and Southwest Areas Pension
Fund and Howard McDougall (“the Pension Fund”) brought this action against
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Vanguard Services, Inc. 1 (“Vanguard”) for collection of contributions and
withdrawal liability under the Employee Retirement Income Security Act
(“ERISA”), 29 U.S.C. § 1001 et seq. R. 1. Specifically, the Pension Fund requested
$4,795,327.60 in contributions and $1,332.48 in interest pursuant to 29 U.S.C. §§
502(g)(2), 515, 1132(g)(2), 1145(b), and 4301(b). R. 1 at 7-8. On August 11, 2009,
Judge Lindberg, who was previously assigned to this case, entered judgment in
favor of the Pension Fund and ordered Vanguard to pay $4,769,353.60 in unfunded
pension withdrawal liability. R. 67. Presently before the Court is Vanguard’s postjudgment motion to enforce an indemnification agreement between Vanguard and
Wise, pursuant to which Vanguard asserts that Wise is liable for a portion of its
withdrawal liability. R. 11; R. 68. Specifically, the Pension Fund claims that Wise is
liable for $300,404.69 of Vanguard’s withdrawal liability from the Pension Fund. R.
44 at 11, 13. Wise disclaims liability arguing that: (1) it is not an “employer” within
the meaning of the Multiemployer Pension Plan Amendments Act of 1980
(“MPPAA”), 29 U.S.C. §§ 1381, 1391; (2) Vanguard’s claim against Wise is untimely;
(3) Wise is not bound by the indemnification clause because it did not assume the
contract that contained the indemnification clause; and (4) Wise was not the
proximate cause of Vanguard’s withdrawal liability. R. 45 at 2; R. 59; R. 62. For the
following reasons, the Pension Fund’s motion to enforce the indemnification
Defendants Driver’s, Inc., Vanguard Southeast, Inc., V.M.T. Vanguard Companies,
Inc., and Vanguard Services (Canada), Inc., are wholly-owned subsidiaries of
Vanguard. R. 1 ¶¶ 11-14. Defendants CrossStone, LLC, Pineridge Insurance Co.,
Inc., and V.O. Freight Services, Inc. are wholly-owned subsidiaries of Vanguard of
Delaware, Inc. Id. ¶¶ 16-18.
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agreement between Vanguard and Wise is granted and Wise is ordered to pay an
amount to be determined after further briefing.
BACKGROUND
Vanguard was in the business of labor leasing. R. 12 at 2. Vanguard leased
its personnel, on a temporary basis, to its client companies to assist in the day-today operations of the client companies’ businesses. Id. As a part of that business,
Vanguard was bound by collective bargaining agreements and participation
agreements executed between itself and local unions. R. 44 at 2. Pursuant to those
collective bargaining agreements, Vanguard was required to make contributions to
the Pension Fund on behalf of its employees that were leased to its clients. Id.
On March 22, 1989, Vanguard and Reynolds Metal Company (“Reynolds”)
entered into an agreement entitled “Employee Lease and Service Agreement” (the
“‘89 Agreement”) for labor leasing services. Id. at 3. The ‘89 Agreement described
how the personnel services would be provided and administered. Id. The agreement
stated, in relevant part, as follows:
Vanguard will pay its employees and provide all fringe
benefits in accordance with the Schedule(s) which are
attached hereto and made a part hereof . . . . This
Agreement and/or attached Schedules may be amended or
changed only by the execution of an endorsement or
amendment hereto duly executed by Vanguard and
CUSTOMER [Reynolds] . . . . This Agreement shall be
binding on the parties hereto, their successors, legal
representatives and assigns, and no assignment of this
Agreement or any interests herein by either party shall be
valid without the prior written consent of the other party.
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R. 43-3 at 2, 5. The ‘89 Agreement was signed by David M. Costantino, Vanguard’s
Corporate Vice President, and John W. VanDyke, Reynolds’s Corporate Director of
Transportation, Id. at 5, and archived in Reynolds’s contract administrations
department. R. 54 at 6.
On May 1, 1994, Vanguard and Reynolds executed an addendum to the ’89
Agreement, titled “Schedule C” (the “May ’94 Schedule”). R. 43-4 at 2. The May ‘94
Schedule applied to Vanguard’s leasing of personnel to Reynolds’s plant in Muscle
Shoals, Alabama, and detailed various terms of the leasing agreement, including
wage rates, fringe benefits, workers’ compensation arrangements, and service
charges. Id. The May ‘94 Schedule contained the following indemnification clause:
Customer [Reynolds] agrees to defend, indemnify and
hold Vanguard harmless from any unfunded pension
liability that might be assessed against Vanguard under
any collective bargaining or participation agreement as a
result of supplying leased employees to any of Customer’s
terminals.
Id. Immediately following this type-written clause was the following handwritten
qualification: “Customer’s obligations under this provision shall be limited to
assessments received by Vanguard prior to May 1, 1997.” Id. The page containing
the indemnification clause and the hand-written qualification were initialed by
Constantino and VanDyke. Id.; R. 43-4 at 5. The May ‘94 Schedule was approved
and archived by Reynolds’s contracts administrations department. R. 45 at 4.
Vanguard did not make any assessments against Reynolds for any unfunded
pension liabilities from May 1, 1994 through May 1, 1997. R. 45 at 4.
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On September 12, 1994, Vanguard and Reynolds amended the May ’94
Schedule with an agreement also titled “Schedule C” (the “September ’94
Schedule”). R. 43-5 at 2; R. 43-1 at 8. The September ’94 Schedule replaced the May
’94 Schedule. Id. The September ’94 Schedule revised the terms regarding wage
rates, layover allowances, paid holidays, and pension, health, and welfare
contribution rates. R. 44 at 4; R. 43-4; R. 43-5. The September ‘94 Schedule included
the same indemnification clause as the May ’94 Schedule. R. 43-5 at 2. However, the
September ‘94 Schedule did not include the handwritten qualification contained in
the May ‘94 Schedule limiting Reynolds’s indemnification liability to assessments
received by Vanguard prior to May 1, 1997 or any other similar limitation. Id. The
September ‘94 Schedule was signed by Vanguard’s Senior Account Manager, Jay
Wiesenberger, and Reynolds’s Fleet Manager, Joe Hutchins. Id. at 6. Unlike the ’89
Agreement and the May ’94 Schedule, the September ‘94 Schedule was not archived
in Reynolds’s contract administration department. R. 59 at 6. Nevertheless, after
the parties executed the September ‘94 Schedule, Reynolds made payments to
Vanguard consistent with the wage and fringe benefit rates set forth in the
September ’94 Schedule. R. 44 at 5.
On December 30, 1998, Wise bought Reynolds’s Muscle Shoals metal-alloy
plant through an asset purchase agreement. R. 46-2 at 90. Disclosure Schedules
4.3(d) and 4.3(h) of the Asset Purchase Agreement memorialized the sale and
contained a list of the liabilities and obligations that Wise assumed from Reynolds.
R. 46-2 at 95-98, 167-68, 170-173. Disclosure Schedule 4.3(d) listed the ‘89
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Agreement with Vanguard, but did not list either the May ’94 Schedule or the
September ’94 Schedule. R. 46-2 at 167-68.
On January 5, 1999, Reynolds sent Vanguard a letter notifying it of the sale
to Wise and requesting Vanguard’s consent to assign the ‘89 Agreement to Wise. R.
43-7 at 2. Specifically, the letter stated that Wise would:
. . . . assume all of Reynolds’ [sic] obligations under the
Agreement(s) arising after the closing date of the sale,
which currently is scheduled for January 29, 1999.
Accordingly, Reynolds requests your consent to the
assignment of the Agreement(s) from Reynolds, Partners
or Southern to Wise Alloys LLC, effective upon the closing
date of the sale.
R. 43-7 at 2. Costantino signed the section of the letter titled “consent granted” on
January 7, 1999. Id. On April 1, 1999, Wise took over the Muscle Shoals plant’s
operations. R. 44 at 5. Vanguard continued to provide its labor leasing services to
Wise. Vanguard billed Wise for these services at the rates set forth in the
September ‘94 Schedule. Wise paid Vanguard accordingly. Id.
On December 28, 1999, Wise sent Vanguard a letter terminating their
contractual relationship effective January 31, 2000. R. 43-8 at 2. On January 14,
2000, Vanguard responded to Wise by letter acknowledging Wise’s termination of
Vanguard’s services and directing Wise’s attention to the indemnification clause
contained in the September ‘94 Schedule. R. 43-9 at 2. Vanguard attached a copy of
the September ‘94 Schedule and the January 5, 1999 assignment letter. Id. The
January 14, 2000 letter estimated Vanguard’s potential withdrawal liability as to
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Wise at $84,747.00 based upon the 1989-1998 fund statement. Id. Wise did not
respond to this letter. R. 43 ¶ 28.
In June 2008, Vanguard withdrew from the Pension Fund. R. 45 at 6. The
Pension Fund estimated Vanguard’s withdrawal liability to be $4.7 million. Id.
During the course of settlement discussions, Vanguard told the Pension Fund which
of Vanguard’s customers had contributed to the Pension Fund in connection with
the services Vanguard provided to their customers. Id. The Pension Fund
determined that Vanguard would be able to recover portions of its withdrawal
liability, which totaled $4,769,353, from the following entities in the following
amounts: (1) Bridgestone ($3,951,090); (2) Bandag, Inc. ($427,850); (3) Wise as
successor to Reynolds ($300,404); (4) Reichold Chemicals, Inc. ($49,759); and (5)
CMM Transportation, Inc. (“CMM”) ($40,238). Id. at 6, 7.
On January 23, 2009, Vanguard sent a letter to Wise informing Wise of
Vanguard’s withdrawal liability from the Pension Fund and of Wise’s responsibility
for its share of that withdrawal liability attributable to Wise’s use of Vanguard
employees. R. 43-10 at 2. The letter informed Wise that its share of the withdrawal
liability was approximately $353,886.06. Id. Wise did not respond to this letter. R.
44 at 6.
On July 28, 2009, the Pension Fund issued Vanguard a Notice and Demand
requesting payment of $4,769,353.60 in unfunded pension withdrawal liability. R.
45 at 7. As previously discussed, the Pension Fund then filed this action against
Vanguard for collection of its unfunded pension withdrawal liability. R. 1 at 7-8. On
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August 11, 2009, Judge Lindberg entered a Consent Judgment in favor of the
Pension Fund requiring Vanguard to pay the above stated contributions plus
interest. R. 6-2 at 6-8; R. 8. On September 1, 2011, the Pension Fund filed a citation
to discover assets against Wise and CMM. R. 10. On September 2, 2011, the Pension
Fund filed a post-judgment motion to enforce the indemnification agreement
contained in the ’94 September Schedule and order payment from CMM and Wise.
R. 11; R. 12. On September 19, 2012, Judge Lindberg granted the Pension Fund’s
motion as to CMM but did not issue a ruling as to Wise. R. 67. Approximately a year
later, the Pension Fund filed this motion requesting a ruling on its post-judgment
motion to enforce the indemnification agreement and order payment against Wise.
R. 68. Wise opposes the motion.
STANDARD OF REVIEW
Fed. R. Civ. P. 69(a) states that the “execution [of a money judgment]—and in
proceedings supplementary to and in aid of judgment or execution—must accord
with the procedure of the state where the court is located.” In Illinois, a judgment
creditor can enforce a judgment against assets held by a third party by causing a
citation to discover assets to be issued once the trial court enters judgment in the
underlying proceeding. 735 ILCS § 5/2-1402(a); Stonecrafters, Inc. v. Wholesale Life
Ins. Brokerage, Inc., 393 Ill. App. 3d 951, 958 (2009); Bloink v. Olson, 265 Ill. App.
3d 711, 714 (1994). This is so even if the third party was not a party to the
underlying litigation. Travelers Prop. Cas. Co. of Am. v. Rogan Shoes, Inc., 2011 WL
2637257, at *2 (N.D. Ill. July 6, 2011). A court then has the authority to enter
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judgment against the third party in a supplementary proceeding if the record
contains “some evidence” that the third party possesses assets of the judgment
debtor to satisfy the judgment. Schak v. Blom, 334 Ill. App. 3d 129, 133 (2002);
Ericksen v. Rush Presbyterian St. Luke’s Med. Ctr., 289 Ill. App. 3d 159, 166 (1997).
“[T]he burden lies with the [judgment creditor] to show that the citation respondent
possesses assets belonging to the judgment creditor.” Mid–American Elevator Co. v.
Norcon, Inc., 287 Ill. App. 3d 582, 587 (1996).
DISCUSSION
As a preliminary matter, the Court notes that the parties do not dispute
whether Wise has the assets that the Pension Fund seeks. As such, if Wise is found
liable for a portion of Vanguard’s withdrawal liability, the Court has the authority
to order payment against Wise under § 5/2-1402.
I.
Whether Wise is an “Employer” Under the MPPAA
First, Wise argues that it cannot be held liable for Vanguard’s withdrawal
liability because Wise is not an “employer” under the MPPAA. R. 45 at 8. Wise
misunderstands the Pension Fund’s theory of liability. The Pension Fund does not
seek to enforce the indemnification provision in the September ‘94 Schedule
pursuant to the MPPAA. Rather, it seeks to enforce the indemnification clause of
the September ’94 Schedule under contract law. R. 44 at 7-8. Wise’s argument
regarding its status under the MPPAA is irrelevant to whether Wise is liable for
Vanguard’s withdrawal liability as a result of the indemnification clause in the
September ’94 Schedule.
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II.
Timeliness of the Pension Fund’s Claim
Second, Wise argues that the Pension Fund’s claim against Wise is untimely
under 735 ILCS 5/13-206. R. 45 at 13. Section 5/13-206 states that “actions on . . .
written contracts . . . shall be commenced within 10 years after the cause of action
accrued.” 735 ILCS 5/13-206 (emphasis added). A cause of action on an indemnity
agreement “does not arise until the indemnitee either has had a judgment entered
against him for damages, or has made payments or suffered actual loss.” Gerill Corp
v. Jack L. Hargrove Builders, Inc., 128 Ill. 2d 179, 199 (1989); accord Cunningham
Bros. Inc., v. Bail, 407 F.2d 1165, 1169 (7th Cir. 1969) (holding that “no duty to do
anything arises until the alleged indemnitee is adjudged liable”); Kempel v. Martin
Oil Marketing, Ltd., No. 95 C 1348, 1995 WL 733439, at *5 (N.D. Ill. Dec. 8, 1995)
(“It is the happening of the occurrence that a party has agreed to indemnify against
that triggers the indemnity obligation, and the indemnitor's failure to pay which
gives rise to the cause of action.”).
In this case, Vanguard was assessed withdrawal liability on August 11, 2009.
R. 45 at 6, 7. The Pension Fund’s cause of action against Vanguard, and its cause of
action under the indemnification clause against Wise, accrued in 2009. As the
Pension Fund filed this action in 2009, its claim is timely.
III.
Whether Wise is Contractually Liable for Vanguard’s Withdrawal
Liability from the Pension Fund
Wise also argues that it is not liable for Vanguard’s withdrawal liability
because it did not contractually assume either of the ’94 Schedules from Reynolds
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and is therefore not bound by the indemnification clauses contained in them. R. 45
at 9-12. In the alternative, Wise contends that should the Court find that it did
assume Reynolds’s ’94 Schedules, the May ’94 Schedule is the operative agreement,
not the September ’94 Schedule. R. 45 at 12, 13. Wise argues this is so because: (1)
the Reynolds representative who signed the September ‘94 Schedule did not have
authority to sign the agreement; and (2) Reynolds did not archive the September ‘94
Schedule in its contract administration department in accordance with Reynolds’s
internal policy. R. 45 at 45 at 12; R. 59 at 9-10. Thus, Wise contends that the
September ’94 Schedule is invalid and the May ’94 Schedule with its handwritten
qualification controls. R. 59 at 7, 8. Because the May ’94 Schedule limits Reynolds’s
liability to assessments received by Vanguard prior to May 1, 1997, and Vanguard
was assessed liability by the Pension Fund in 2009, Wise argues that it is not liable
for Vanguard’s withdrawal liability. R. 43-4; R. 59 at 8.
A. Assumption of the ’94 Schedules
Wise argues that it did not assume responsibility for the ‘94 Schedules
because the Asset Purchase Agreement’s Disclosure Schedule only lists the ‘89
Agreement. R. 45 at 9, 10; R. 59 at 3. Wise argues that the ‘89 Agreement and the
‘94 Schedules are separate agreements because neither of the ‘94 Schedules were
“attached to [the ’89 Agreement], let alone in existence” at the time the ‘89
Agreement was executed. R. 45 at 10-11; R. 59 at 4-5. Moreover, Wise claims that
the ‘89 Agreement did not contain stipulations regarding future attachments. R. 62
at 6.
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The Pension Fund, on the other hand, argues that the ‘89 Agreement and the
‘94 Schedules are indivisible because the ‘89 Agreement clearly and unambiguously
anticipated the adoption and incorporation of future schedules. R. 44 at 8-9, 11; R.
54 at 7-8, 12. The Pension Fund asserts that Wise assumed both of the ‘94
Schedules when it assumed the ‘89 Agreement. R. 44 at 8-9; R. 54 at 7. Moreover,
the Pension Fund argues that Wise impliedly assumed the September ‘94 Schedule
by making payments according to the terms and conditions in the September ’94
Schedule. R. 44 at 9, 10; R. 54 at 8.
Whether Wise expressly assumed the ‘94 Schedules, and is bound by their
indemnification clauses, is a question of contract interpretation. As a general rule, a
corporation may purchase the assets of another corporation without assuming the
seller corporation’s liabilities. Upholsterers’ Intern. Union Pension Fund v. Artistic
Furniture of Pontiac, 920 F.2d 1323, 1325 (7th Cir. 1990) (citing Travis v. Harris
Corp., 565 F.2d 443, 446 (7th Cir. 1977)). There are exceptions to this rule, such as
when there is an express or implied agreement to assume liability. Id. Contract
interpretation is governed by state law. First Options of Chicago, Inc. v. Kaplan,
514 U.S. 938, 944 (1995). Illinois requires the Court “to give effect to the parties’
intentions when interpreting a contract.” Gallagher v. Lenart, 226 Ill. 2d 208, 232
(2007). Generally, “the best indication of the parties’ intent is the plain meaning of
the contract’s language.” Id. at 233. “[The] primary goal in construing [a] contract is
to give effect to the parties’ intent as expressed in the terms of their written
agreement.” Id. If the terms of the contract are unambiguous, the court must
12
enforce the contract as written. Lewitton v. ITA Software, Inc., 585 F.3d 377, 380
(7th Cir. 2009).
1. The Language of the ’89 Agreement
It is unclear from the plain language of the ‘89 Agreement that it anticipated,
and intended to incorporate future schedules between Vanguard and Reynolds.
Vanguard points to the following portion of the ‘89 Agreement in support of its
argument that the ’94 Schedules were specifically incorporated into the ’89
Agreement: “Vanguard will pay its employees and provide all fringe benefits in
accordance with the Schedule(s) which are attached hereto and made part hereof.”
R. 43-3 (emphasis added); R. 43 ¶ 13. The terms “in accordance with” do not mean
that the ’89 Agreement anticipated that there necessarily would be future schedules
between Vanguard and Reynolds. Rather, this clause merely provides that if
Vanguard and Reynolds agreed to other payment schedules in the future that
payment will be made “in accordance with” those schedules. Absent language
specifically incorporating future schedules, the Court cannot say that Wise assumed
any future schedules by assuming the ’89 Agreement alone.
2. The Parties’ Conduct
Even absent express language, however, an implied agreement to be bound
by the terms of an agreement can arise through a party’s course of conduct. Gariup
v. Birchler Ceiling & Interior Co., 777 F. 2d 370, 373 (7th Cir. 1985). See also
Moriarty v. Larry G. Lewis Funeral Dirs. Ltd., 150 F. 3d 773, 777 (7th Cir. 1998)
(“The general principles of contract law permit a party to adopt an agreement by its
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conduct.”); In re Vic Supply Co., Inc., 227 F. 3d 928, 932 (7th Cir. 2000) (“Acceptance
can be effectuated by performance as well as by signature.”). In this case, Wise’s
conduct after taking over the Muscle Shoals plant establishes that Wise assumed
the September ‘94 Schedule. Subsequent to Wise taking over the plant in April
1999, Vanguard billed Wise in accordance with the rates contained in the
September ‘94 Schedule. Wise paid those bills. R. 44 at 9. Wise never asserted that
it should be paying the rates contained in the ’89 Agreement or the May ’94
Schedule. R. 44 at 10. Wise’s payments to Vanguard continued in accordance with
the September ‘94 Schedule until Wise terminated the contractual relationship with
Vanguard on January 31, 2000. R. 44 at 6. Wise never executed another schedule
with Vanguard. Wise’s conduct is unambiguously consistent with an agreement to
be bound by the terms of the September ’94 Schedule. The Court concludes that
Wise also impliedly agreed to be bound by the terms of the September ’94 Schedule.
B. The September ’94 Schedule is Operative
Wise claims, in the alternative, that should the Court find that it is bound by
the ‘94 Schedules, it is the May ‘94 Schedule that controls. Wise argues that the
September ‘94 Schedule was not properly executed in that it was not signed by an
authorized Reynolds representative and it was not filed with Reynolds’s contracts
administration department. R. 59 at 5. If so, Wise’s liability for Vanguard’s
unfunded pension withdrawal liability terminated on May 1, 1997 because of the
handwritten qualification. R. 59 at 7-8.
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Wise’s assertion that the September ‘94 Schedule is invalid because it was
signed by someone who did not have authority to bind Reynolds is incorrect. R. 62
at 8. A principal is bound by a contract entered into by the principal’s agent on his
behalf if the agent had actual or apparent authority to bind him, or if the principal
subsequently ratifies the agreement. N. Assurance Co. of Am. v. Summers, 17 F.3d
956, 960 (7th Cir.1994). Apparent authority exists where actions of the principal
give the other contracting party the reasonable impression that the agent has
authority to enter into an agreement on behalf of the principal. Id. at 962. Here,
there was no reason for Vanguard to believe that Hutchins, who was Reynolds’s
fleet manager, did not have the appropriate authority to bind Reynolds. Moreover,
even if Hutchins did not have the authority to bind Reynolds, Reynolds
subsequently ratified the September ’94 Schedule by conducting itself in accordance
with the terms and conditions of that document. R. 44 at 5.
The Court also rejects Wise’s assertion that it is not bound by the September
’94 Schedule because that schedule was not filed with Reynolds’s contracts
administration department. Reynolds’s internal filing process is irrelevant to the
September ’94 Schedule’s validity. Even if it was relevant—and Wise has not cited
any authority supporting that counterintuitive premise—the parties’ conduct
indicates that they believed it was valid and binding. Vanguard and Reynolds acted
in accordance with the terms and conditions of the September ‘94 Schedule for ten
years. And Wise continued to abide by the terms of the September ‘94 Schedule
after it acquired the plant. At no time during the remainder of Wise and Vanguard’s
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contractual relationship did Wise contest the terms and conditions of the September
’94 Schedule. Wise’s purported reliance on the schedule’s absence from its files is
belied by its payments to Vanguard according to the September ‘94 Schedule’s
terms. As such, Wise intended to be, or at the very least, consented to be bound by
the terms and conditions of the September ’94 Schedule.
In sum, the Court finds that the parties’ conduct in abiding by the terms and
conditions of the September ’94 Schedule demonstrates their intent to be bound by
it. As such, the Court finds that Wise impliedly assumed the September ’94
Schedule and is bound its indemnification clause.
IV.
Whether Wise Must Be the Proximate Cause of Vanguard’s Withdrawal
Liability
Finally, Wise argues that it is not liable for Vanguard’s withdrawal liability
because it was not the proximate cause of the withdrawal. R. 59 at 13-14.
Specifically, Wise claims that the Pension Fund failed to account for other factors
that could have contributed to Vanguard’s withdrawal from the Pension Fund in the
eight years between Wise’s termination of Vanguard’s services and Vanguard’s
withdrawal from the Pension Fund. For example, that Vanguard’s withdrawal may
have been caused by the loss of other customers Vanguard leased employees to. R.
59 at 13-14.
In support of its causation argument, Wise cites TAS Distributing Co. v.
Cummins Engine Co., which holds that in an Illinois contract claim the plaintiff
must prove “with a reasonable degree of certainty [that damages] can be traced to
[the] defendant’s wrongful conduct.” 491 F.3d 625, 633 (7th Cir. 2007). In TAS,
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however, there was a question of whether the defendant’s conduct caused the
plaintiff’s lost profits. There is no question of lost profits causation here. Rather, the
plain terms of the contract ambiguously provide the circumstances under which
Wise agreed to indemnify Vanguard for a withdrawal liability. The September ’94
Schedule provides, “Customer [now Wise] agrees to defend, indemnify and hold
Vanguard harmless from unfunded pension liability . . . as a result of supplying
leased employees to any of Customer’s [Wise’s] terminals.” R. 32-5 at 2. There is no
dispute that Vanguard incurred a liability. Whether Wise “caused” Vanguard to
incur the liability is irrelevant under the plain language of the contract.
V.
Damages
Because Wise is contractually bound by the indemnification clause in the
September ’94 Schedule, damages must be determined. The Pension Fund
calculated Wise’s withdrawal liability by dividing the amount contributed by
Vanguard in the ten years preceding the withdrawal by the total amount of
contributions made by all participating employers over the same ten years. R. 61 at
7-8. The Pension Fund claims it was able to calculate Wise’s total amount of
liability with specificity because the Pension Fund maintained separate accounts for
each of Vanguard’s previous employee groups. R. 44 at 12. Wise, on the other hand,
argues that the Pension Fund’s calculation of Wise’s total amount of liability is not
established with “a reasonable degree of certainty.” R. 59 at 14. Specifically, Wise
contends that the calculation used by the Pension Fund offers no support that
Wise’s cancellation caused a proportional amount of damage and assumes that
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there were no other intervening causes that also contributed to Vanguard’s
withdrawal. R. 59 at 14-15. Neither party offers relevant case law to support such
contentions, and the Court has already rejected this “intervening cause” theory in
the context of liability.
The briefing on the damage issue has been limited. The Court will request an
updated damage figure from the Pension Fund and further briefing on how the
damages should be calculated. This matter is set for status on March 6, 2015 at 9
a.m. to discuss these issues.
CONCLUSION
For the forgoing reasons, the Pension Fund’s motion to enforce the
indemnification agreement between Vanguard and Wise is granted. The case is set
for status on March 6, 2015 at 9 a.m. to discuss damages.
ENTERED:
______________________________
Honorable Thomas M. Durkin
United States District Judge
Dated: February 24, 2015
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