Messina Trucking was a contributing employer to the Central States, Southeast and Southwest Areas Pension Fund. In October 2007, Messina Trucking withdrew from the fund. The fund determined that the withdrawal liability was slightly under $3.1 million and that all commonly controlled trades and businesses were jointly and severally liable. In January 2010, Messina Trucking defaulted on its withdrawal liability obligation. The fund filed a lawsuit against Messina Trucking, several entities that were under common control, Stephen Messina and Florence Messina personally, and a limited liability company owned by the Messinas formed to hold an investment. The basis on which to access liability against the Messinas personally was that the Messinas owned and leased the property from which Messina Trucking operated. The Messinas argued that they were not engaged in a trade or business and thus not liable for the withdrawal liability. The dispute in the case was not whether common control existed, but rather were the Messinas engaged in a trade or business. The Seventh Circuit Court of Appeals reversed the district court and held that the Messinas were engaged in a trade or business because of their ownership of the property used by Messina Trucking. The Seventh Circuit relied on a more recent decision also issued by the Seventh Circuit, which held that renting property to a withdrawing employer is “categorically” a trade or business. The Seventh Circuit determined that allowing Messina Trucking to operate on the property without paying rent for several years and the provision of property maintenance activities performed by Messina Trucking employees must be imputed to the Messinas. The court also held that the LLC owned by the Messinas was also a trade or business. The LLC’s sole asset was a 50 percent partnership interest in another limited liability company that owned rental properties. The Messinas argued that the LLC was a passive investment vehicle and was not a trade or business. The Seventh Circuit found it was a trade or business because the intention of forming a business entity is highly relevant to the existence of a trade or business, and the LLC filed a Form 1065 tax return, which showed trade or business income, and declared on that tax return that its principal business trade or activity was real estate rental.
This case, along with several other recent cases, shows that multiemployer funds are undertaking aggressive action in order to collect withdrawal liability from every possible party and that possible claims against related entities and persons should be reviewed whenever an employer considers withdrawing from a multiemployer plan. (Central States Southeast and Southwest Areas Pension Fund v. Messina Products LLC, 7th Cir., 2013).