In 1999, Michael Cappy filed for bankruptcy protection. Prior to the bankruptcy filing, Mr. Cappy transferred his interest in two real estate leasing companies to two family trusts. Mr. Cappy also owned a lumber milling company that went out of business in October 2001. As a result of the closure of the business, the lumber milling company incurred withdrawal liability from a multiemployer pension plan. Within the bankruptcy proceeding, the bankruptcy court found that the transfers of the two real estate entities were fraudulent and ordered that the interests transferred to the trusts be returned to the bankruptcy estate. As a consequence, 100 percent of the interests in the lumber milling company and the two real estate leasing businesses were effectively owned by Mr. Cappy. The multiemployer plan sought to impose control group liability for the withdrawal on the two real estate leasing businesses. Affirming the decision of a lower court, the Court of Appeals for the Seventh Circuit held that the real estate leasing companies were trades or businesses because they were formed to generate income or profit, and that the ownership interest of Mr. Cappy in the three entities remained in place even though ownership of the entities was in the bankruptcy estate. (Central States Southeast & Southwest Areas Pension Fund v. SCOFBP LLC, 7th Cir., 2011)
Register Now As you are not an existing subscriber please register for your free daily legal newsfeed service.
RegisterIf you have any questions about the service please contact customerservices@lexology.com or call Lexology Customer Services on +44 20 7234 0606.
Bankruptcy estate does not avoid control group status for withdrawal liability
- Hodgson Russ LLP
- Peter K. Bradley, Anita Costello Greer, Michael J. Flanagan, Richard W. Kaiser, Arthur A. Marrapese III and Ryan M. Murphy
- USA
- February 28 2012
-
If you are interested in submitting an article to Lexology, please contact Andrew Teague at ateague@lexology.com.
![]()
Monique Greene
Corporate Counsel
Powershop
