The Seventh Circuit Court of Appeals recently affirmed a district court decision holding that two limited liability companies were jointly and severally liable for the pension obligations of a third, insolvent affiliate that had ceased making contributions to a multiemployer pension fund. Central States, Southeast and Southwest Areas Pension Fund v. SCOFBP, No. 10-3633 (7th Cir. Dec. 27, 2011).
The Multiemployer Pension Plan Amendments Act of 1980 (the “MPPAA”) requires employers who withdraw from a multiemployer pension fund to pay their share of liability resulting from their withdrawal. Under the MPAA, “all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer and all such trades and businesses as a single employer.” 29 U.S.C. § 1301(b)(1). Thus, an affiliate and a withdrawing employer will together be treated as a single employer, and the non-withdrawing affiliate will be jointly and severally liable for the pension obligations of the withdrawing employer if the affiliate is a “trade or business” that is “under common control” with the employer.
In SCOFBP, the three defendant affiliates were all part of one larger set of business entities and off-shore trusts controlled by one individual. In 2001, one of those affiliates, SCOFBP, LLC, was rendered insolvent and discontinued its contributions to the plaintiff pension fund. As a result, SCOFBP incurred withdrawal liability under the MPPAA for unfunded pension benefits. The pension fund asserted that SCOFBP’s two solvent affiliates, for-profit LLCs that owned real property leased to SCOFBP and an unaffiliated third party, were liable for the withdrawing entity’s pension obligations because the affiliates were “trades or businesses under common control” with SCOFBP.
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