Central States, Southeast and Southwest Areas Pension Fund et al v. Vanguard Services, Inc. et al

Filing 83

MEMORANDUM Opinion and Order:The Court will enter judgment in favor of the plaintiffs, and against Wise, in the amount of $300,404.69, plus statutory interest of 5% per annum from September 2, 2011 to the present. Without any party waiving its right to appeal any portion of the Court's ruling, the parties shall jointly file a revised interest calculation consistent with the Court's opinion by June 15, 2015. Signed by the Honorable Thomas M. Durkin on 6/8/2015:Mailed notice(srn, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CENTRAL STATES, SOUTHEAST AND
SOUTHWEST AREAS PENSION FUND AND
ARTHUR H. BUNTE, JR.
PLAINTIFFS,
v.
VANGUARD SERVICES, INC., DRIVERS, INC.,
VANGUARD SOUTHEAST, INC., VMT
VANGUARD COMPANIES, INC., VANGUARD
SERVICES (CANADA), INC., VANGUARD OF
DELAWARE, INC., CROSSTONE, LLC,
PINERIDGE INSURANCE CO., INC., V.O.
FREIGHT SERVICES, INC.,
DEFENDANTS,
AND

WISE ALLOYS, LLC, AS ASSIGNEE AND
SUCCESSOR IN INTEREST TO REYNOLDS
METALS CO.,
CITATION RESPONDENT.

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No. 09 C 4721
Judge Thomas M. Durkin

MEMORANDUM OPINION AND ORDER
On February 24, 2015, the Court granted the plaintiffs’ motion to enforce an
indemnification agreement between Vanguard Services, Inc. (“Vanguard”) and
citation respondent Wise Alloys, LLC (“Wise”). R. 73 (Centr. States, S.E. and S.W.
Areas Pension Fund v. Vanguard Serv., Inc., No. 09 C 4721, 2015 WL 791497, at *1
(N.D. Ill. Feb. 24, 2015)). The Court deferred ruling on damages pending further
briefing from the parties, id. at *7, which is now complete. For the following

reasons, the Court concludes that the plaintiffs are entitled to $300,404.69, plus
statutory prejudgment interest.
BACKGROUND
Plaintiffs, Central States Fund, Southeast and Southwest Areas Pension
Fund and Arthur H. Bunte, Jr. (“the Pension Fund”) brought this action against
Vanguard 1 to collect contributions and withdrawal liability under the Employee
Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. R. 1. Vanguard
is in the business of leasing personnel to other companies to assist in their day-today operations. Vanguard, 2015 WL 791497, at *1. In connection with that service,
Vanguard executes collective bargaining agreements with local unions. Id. Pursuant
to the collective bargaining agreements, Vanguard must make contributions to the
Pension Fund on behalf of the leased employees. Id. In 1989, Vanguard entered into
a labor-leasing agreement with Reynolds Metal Company (“Reynolds”). Id. The
parties’ agreement included a provision (“Schedule C”) requiring Reynolds to
indemnify Vanguard for “unfunded pension liability”:
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.

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.
1

Id. at *2. On December 30, 1998, Wise purchased Reynolds’s Muscle Shoals metalalloy plant, and assumed Reynolds’s agreement with Vanguard. Id. at *2-3.
Vanguard triggered a complete withdrawal from the Pension Fund in 2008,
requiring it to pay withdrawal liability to the Pension Fund. See 29 U.S.C. §§ 1383,
1399. On August 4, 2009, the Pension Fund filed this lawsuit to collect Vanguard’s
withdrawal liability and certain unpaid contributions. R. 1. On August 11, 2009,
Judge Lindberg, the presiding judge at that time, entered a consent judgment
against Vanguard requiring it to pay withdrawal liability of $4,769,353.60, plus
post-judgment interest. R. 9 at 7. On September 2, 2011, the Pension Fund filed
citations to discover assets against Wise and CMM Transportation, Inc. (another
Vanguard client) to enforce the indemnification provisions of their labor-leasing
contracts with Vanguard. R. 10. On September 19, 2012, Judge Lindberg granted
the Pension Fund’s motion to enforce CMM’s duty to indemnify and ordered the
company to pay the Fund $40,238.68 “plus interest at the rate set forth in the
[Pension Fund’s] Trust Agreement.” R. 67 at 2. The Pension Fund’s motion to
enforce the indemnification agreement against Wise was pending when the case
was reassigned to the undersigned judge. See R. 11, 68-69. On February 24, 2015,
the Court granted the Pension Fund’s motion. See Vanguard, 2015 WL 791497, *7.
The Pension Fund states that it maintained separate contribution accounts
for each of Vanguard’s leasing arrangements. R. 77 at 2; see also R. 72 ¶ 19 (Aff. of
Andrew Sprau in Supp. of Post-J. Mot. to Enforce Indem. Agmt.). Using that
information, the Pension Fund has calculated Wise’s share of Vanguard’s

withdrawal liability based upon the percentage of Vanguard’s total contributions to
the Pension Fund over a ten-year period attributable to Vanguard employees
working for Reynolds/Wise. R. 72 ¶¶ 18-19. Over that time period, Vanguard
contributed $2,506,126.00 to the Pension Fund, of which $157,852.00 (or 6.3%) was
attributable to contributions made on behalf of covered employees performing work
for Reynolds/Wise. Id. The Pension Fund seeks $300,404.69 (6.3% of the
$4,769,353.60 judgment against Vanguard) from Wise, “plus interest at the rate
provided by the [Pension Fund’s] Trust Agreement.” R. 77 at 1. Applying that rate,
the Pension Fund calculates that Wise owes the Fund $98,207.06 in interest for the
period January 23, 2009 (the date on which the Fund alleges that Vanguard
demanded indemnification from Wise) through April 13, 2015. See R. 77-1 ¶ 4 (Aff.
of Andrew Sprau, dated April 10, 2015); R. 77 at 2.
ANALYSIS
I.

Wise’s Share of Vanguard’s Withdrawal Liability
Wise argues that the Pension Fund has not satisfied its burden to calculate

its damages “to a reasonable degree of certainty.” TAS Dist. Co., Inc. v. Cummins
Engine Co., Inc., 491 F.3d 625, 632 (7th Cir. 2007); see also R. 80-1 at 2. Specifically,
Wise argues that the Pension Fund has not: (1) pinpointed the particular date on
which Vanguard withdrew from the Fund; and (2) explained the basis for the 10year damages period underlying its calculation. R. 80-1 at 3. On that basis, Wise
asks to the Court to award no more than nominal damages. Id. at 2; see also TAS
Dist., 491 F.3d at 632 (“[W]hen a party establishes that it is entitled to damages but

fails to prove the amount of those damages to a reasonable degree of certainty, only
nominal damages are recoverable at the discretion of the trial judge.”).
Contrary to Wise’s argument, the Fund’s damages are fixed and certain.
Pursuant to Schedule C, Wise is liable for “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 [Wise].”
Vanguard, 2015 WL 791497, at *2. Pursuant to the consent judgment, Vanguard’s
“unfunded pension liability” is $4,769,353.60. R. 9 at 7. Wise may not relitigate
Vanguard’s unfunded pension liability after it has been assessed. The method the
Pension Fund used to calculate Wise’s share of Vanguard’s “unfunded pension
liability” is reasonable, and Wise has not challenged the calculation itself. Thus,
Wise must pay the Pension Fund $300,404.69.
II.

Contractual Interest
The Pension Fund argues that it is entitled to interest at the rate for

withdrawal liability imposed by its Trust Agreement 2 from January 23, 2009—the
date it contends Vanguard “demanded” indemnification from Wise—to the present.
See R. 77 at 2-3. In support of its argument, the Pension Fund cites cases imposing
interest as a mandatory component of withdrawal liability under ERISA. See, e.g.,
Centr. States, S.E. and S.W. Areas Pension Fund v. Slotky, 956 F.2d 1369, 1377 (7th
Cir. 1992) (interest is “mandatory” in successful suits to enforce ERISA’s

According to the Pension Fund, the applicable rate is “2% plus the prime interest
rate established by JPMorgan Chase Bank, NA for the 15th day of the month for
which interest is charged, compounded annually.” R. 77 at 3.

2

withdrawal liability provisions (citing 29 U.S.C. §§ 1381, 1399, 1451)); see also R. 79
at 4. But Wise’s liability in this case arises from the indemnification agreement, not
ERISA. See Vanguard, 2015 WL 791497, at *4 (rejecting as irrelevant Wise’s
argument that it is not an “employer” under ERISA because its liability arises from
contract law). Under Illinois law, indemnification agreements are “strictly
construed.” See Kmart Corp. v. Footstar, Inc., 777 F.3d 923, 928 (7th Cir. 2015)
(Under Illinois law, “indemnity contracts are to be strictly construed, and any
ambiguity in the agreement is to be construed most strongly against the
indemnitee.”). The indemnification agreement refers to “unfunded pension liability,”
which the parties tacitly agree encompasses the judgment that the Court entered
against Vanguard. But it does not clearly encompass interest on that amount. 3 The
parties could have made Reynolds/Wise expressly liable for interest, or else used
catch-all language encompassing that obligation (as it did in a separate section of
Schedule C). See R. 72-4 at 6 (requiring Reynolds/Wise to indemnify Vanguard
“from any expense, loss, damage, claim or liability whatsoever arising out of or
relating to any violation by Vanguard of such collective bargaining agreement and
the commission of any unfair labor practice by Vanguard, its employees or agents”).
But they did not do so. The Court is not persuaded by the Pension Fund’s argument
that Vanguard must have intended for Wise to indemnify it for any and all liability

As far as the Court can tell, CMM did not challenge the Pension Fund’s demand
for interest calculated at the rate provided in the Trust Agreement. See R. 47, 57.
So, understandably, Judge Lindberg did not explain why he applied that rate to
CMM’s share of Vanguard’s withdrawal liability. See R. 67 at 2. Wise is not bound
by CMM’s apparent waiver of its right to challenge the Fund’s interest calculation.

3

“arising out of or relating to” unfunded pension liability. See R. 79 at 5. “Contract
law depends not on private and unexpressed intentions but on objective expressions
of intent and agreement.” Lagen v. United Cont’l Holdings, Inc., 774 F.3d 1124,
1130 (7th Cir. 2014). The Court concludes that the Pension Fund is not entitled to
interest at the rate provided in its Trust Agreement.
III.

Statutory Interest
The Pension Fund has also asserted a claim for prejudgment interest under

the Illinois Interest Act. See R. 79 at 4-5. The Interest Act permits prejudgment
interest “for all moneys after they become due on any bond, bill, promissory note, or
other instrument of writing . . . .” 815 ILCS 205/2. “To demonstrate debt on an
‘instrument of writing,’ a creditor must establish three elements: (1) a written
instrument that establishes indebtedness; (2) a specific or inherent due date; and
(3) that the indebtedness is subject to easy calculation.” PPM Finance, Inc. v.
Norandal USA, Inc., 392 F.3d 889, 895 (7th Cir. 2004). Wise argues that the
indemnification agreement is not an “instrument of writing” because it is not a
“bond, bill, [or] promissory note,” and argues that the catchall provision (“other
instrument of writing”) should be construed to encompass only agreements similar
to those specifically identified in the statute. See R. 81. at 2. The Seventh Circuit
has interpreted the phrase “other instrument of writing” broadly. See, e.g., Santa’s
Best Craft, LLC v. St. Paul Fire and Marine Ins. Co., 611 F.3d 339, 355 (7th Cir.
2010) (an insurance policy is an “instrument of writing” under the Interest Act);
PPM Finance, 392 F.3d at 985 (a subordination agreement is an “instrument of

writing” under the Interest Act); Ameritech Info. Sys., Inc. v. Bar Code Res., Inc.,
331 F.3d 571, 575 (7th Cir. 2003) (construction contracts are “instruments of
writing” under the Interest Act). Schedule C of the labor-leasing agreement between
Vanguard and Reynolds/Wise clearly “establishes indebtedness.” PPM Finance, 392
F.3d at 895. The fact that other portions of the agreement deal with labor-leasing is
irrelevant. Cf. R. 81 at 2. Schedule C also contains an “inherent” due date: when
“unpaid pension liability” is “assessed against Vanguard under any collective
bargaining or participation agreement as a result of supplying leased employees to
any of Customer’s terminals.” See PPM Finance, 392 F.3d at 895 (concluding that
the inherent due date of the subordinated creditor’s obligation to the senior creditor
was the debtor’s default). Finally, the indebtedness is subject to “easy calculation.”
Id. Vanguard’s “unfunded pension liability” is $4,769,353.60. R. 9 at 7. Wise’s share
of that judgment is simply the percentage of Vanguard’s total withdrawal liability
attributable to Vanguard employees working for Wise. Id.
The Court concludes that prejudgment interest, calculated at the statutory
rate of 5% per annum, is appropriate. See 815 ILCS 205/2. Prejudgment interest
begins to accrue when the judgment-debtor’s obligation becomes “liquidated, i.e.,
due and capable of exact computation.” Santa’s Best, 611 F.3d at 355 (citation and
internal quotation marks omitted). The Pension Fund argues that interest should
be calculated from January 23, 2009, when Vanguard sent Wise a letter
“demanding” indemnification. R. 77 at 2. Vanguard did not “demand” contribution
from Wise at that time. Its letter recited Wise’s “estimated” liability, and stated that

Vanguard expected Wise to pay its share of Vanguard’s liability after Vanguard
received a “final demand letter from the Fund.” See R. 43-10 at 2. On September 2,
2011, the Pension Fund demanded payment from Wise in the amount it currently
seeks. See R. 13, Aff. of Andrew Sprau, dated Sept. 2, 2011, ¶¶ 18-19 (explaining the
Fund’s methodology for calculating Wise’s share of Vanguard’s unfunded pension
liability); see also id. at ¶ 20 (“I have calculated Wise’s pro rata share of the
Withdrawal Liability as $300,404.69 (6.3% of $4,769,353.60 equals $300,404.69.”).
The Court concludes that Wise’s liability under the indemnification agreement
became liquidated on that date.
CONCLUSION
The Court will enter judgment in favor of the plaintiffs, and against Wise, in
the amount of $300,404.69, plus statutory interest of 5% per annum from
September 2, 2011 to the present. Without any party waiving its right to appeal any
portion of the Court’s ruling, the parties shall jointly file a revised interest
calculation consistent with the Court’s opinion by June 15, 2015.

ENTERED:

Dated: June 8, 2015

Honorable Thomas M. Durkin
United States District Judge