Central States Areas v. Wintz Properties ( 1999 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 98-1008
CENTRAL STATES, SOUTHEAST AND SOUTHWEST
AREAS PENSION FUND, and HOWARD MCDOUGAL, trustee,
Plaintiffs-Appellees,
v.
WINTZ PROPERTIES, INC., a Minnesota corporation,
Defendant-Appellant,
and
GEORGE L. WINTZ, individually and as president
of Wintz Properties, Incorporated,
Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 97 C 873--George W. Lindberg, Judge.
Argued June 2, 1998--Decided September 8, 1998
Before FLAUM, MANION, and DIANE P. WOOD, Circuit
Judges.
MANION, Circuit Judge. Wintz Properties, a
business belonging to a multiemployer pension fund
under ERISA, withdrew from the Central States,
Southeast and Southwest Areas Pension Fund, but
failed to pay the accompanying withdrawal liability
required by the statute. That prompted the Fund to
sue Wintz in federal court over the nonpayment; the
district court ordered Wintz to pay. Still Wintz
failed to make payment, choosing instead to pay
other creditors. The continued non-payment prompted
the district court to issue a contempt judgment of
close to $1 million against Wintz (the company) and
George Wintz (its president) personally, an order
that both have appealed. We ordered the parties to
brief the issue of this court’s jurisdiction over
what at first glance appears to be a nonfinal order
to make interim payments to the Fund. After
reviewing the parties’ arguments and the full
record, we have determined that we have
jurisdiction over Wintz’s appeal and affirm the
district court’s contempt order.
I.
Wintz Properties became a defendant in this case
after one of George Wintz’s other companies (Wintz
Freightways, Inc.) went out of business and stopped
contributing to Central States’ multiemployer
pension trust fund. The Fund determined that the
defunct company had effected a complete withdrawal
from the trust, a determination that imposes
"withdrawal liability" on the withdrawing company.
Because Wintz Freightways obviously couldn’t pay
the Fund, the Fund followed the money over to Wintz
Properties (and still other companies owned by
Wintz that the parties and the district court refer
to as the "Wintz Controlled Group")./1
The Fund’s determination that Wintz Freightways
withdrew from the Fund was significant under
ERISA/2 because while an employer may withdraw
from a fund, it pays a penalty if it does. The
penalty is called "withdrawal liability"; it means
the employer is liable to the plan for unfunded,
vested pension benefits as determined by the Fund’s
trustee. See 29 U.S.C. sec.sec. 1381-83. The
employer may contest the amount demanded by the
trustee, but only through mandatory arbitration
procedures. 29 U.S.C. sec. 1401. In the meantime,
while arbitration is pending, the employer has no
choice under the law but to keep to its schedule of
installment payments. See Chicago Truck Drivers,
Helpers & Warehouse Union Pension Fund v. Century
Motor Freight, Inc., 125 F.3d 526, 534 (7th Cir.
1997). If the arbitrator ultimately sides with the
employer that it owes no withdrawal liability, then
whatever has been paid is refunded.
In this case the Fund’s trustee determined that
under ERISA (which sets out formulas for these
things), Wintz’s withdrawal liability amounted to
$2,958,136.71, payable to the Fund. Wintz did not
pay that amount, nor make any installment payments
toward the figure, prompting the Fund to file suit
in district court; shortly afterward, the Fund
filed a motion for a preliminary injunction
ordering Wintz to pay. Wintz’s initial theory
seemed to be that it did not owe withdrawal
liability because it had not withdrawn from the
Fund in the first place. But instead of simply
defending the Fund’s suit on that basis at
arbitration, Wintz filed counterclaims against the
Fund, charging it with making an unlawful
assessment under ERISA, violating a duty of good
faith and fair dealing under the statute, as well
as a duty to investigate whether a withdrawal
actually had occurred. (Some of these may not be
counterclaims so much as "defense[s] masquerading
as . . . positive claim[s] for relief." Automatic
Liquid Packaging, Inc. v. Dominik, 852 F.2d 1036,
1038 (7th Cir. 1988).)
After holding hearings on the Fund’s motion for
a preliminary injunction, the court granted the
motion under the heading "Order to Compel
Payments." While on appeal Wintz argues that the
order was too ambiguous to be enforceable, it is
hard to imagine how it could be any more clear:
The Defendants . . . are jointly and severally
ordered to (a) pay all past due payments as set
forth in the schedule of payments attached to the
Pension Fund’s June 17, 1996 Notice and Demand for
payment of withdrawal liability on or before June
30, 1997, and (b) pay all future interim withdrawal
liability payments on a timely basis or post a bond
(as set forth in ERISA and the regulations
promulgated thereunder) to guarantee such payments.
Still Wintz did not pay--not after the Fund’s
notice and demand for payment, not after receiving
service of the Fund’s suit, not after being ordered
to pay by the district court. Only now the reason
for Wintz’s nonpayment shifted. In more hearings
before the district court on the Fund’s motion to
show cause why Wintz should not be held in contempt
for failing to pay, Wintz argued that it did not
pay because financially the company was crippled.
That strategy might have worked except for two
circumstances: Wintz himself invoked the Fifth
Amendment rather than testifying about the
company’s condition and why it did not comply with
the court’s order (invoking the Fifth Amendment in
a civil context invites an inference that the
witness’ testimony would be adverse to his
interests, see Baxter v. Palmigiano, 425 U.S. 308,
318 (1976)), and discovery in the case revealed
that Wintz was still somewhat liquid. In fact, the
company was paying other creditors instead of the
Fund, and George Wintz himself seemed able to pay
some of his personal creditors (such as credit card
companies).
After discovering that Wintz was paying other
creditors but not the Fund, the court held Wintz
(the company) and George Wintz (personally) in
contempt for disobeying its previous order
compelling payment, and entered a contempt judgment
against both Wintz and its president (jointly and
severally) in the amount of $978,041.42. The bulk
of this sanction ($959,698.31) reflected the amount
Wintz had paid other creditors instead of the Fund
since the court issued its order compelling
payments. The remainder consisted of attorneys’
fees and costs incurred in preparing and
prosecuting the contempt petition. Wintz appeals
the entire contempt sanction; it claims the
sanction was an improper means of enforcing the
district court’s previous order compelling Wintz to
pay the Fund.
II.
Wintz’s principal argument is that it should not
have been sanctioned and held in contempt for
failing to pay the interim withdrawal liability
installment payments that ERISA requires and that
the district court’s order commands. Wintz
challenges only the court’s enforcement of the
order to pay the withdrawal liability through a
contempt sanction; it does not challenge the order
itself (as we have noted, ERISA unequivocally
establishes a "pay now, arbitrate later" scheme).
Before we consider Wintz’s arguments attacking the
contempt sanction, we must determine whether we
have jurisdiction over it. "Whether a judgment of
civil contempt is appealable at the time entered,
rather than later, at the windup of the entire case
in the court of first instance, depends on the
appealability of the underlying order, the order
the judgment of civil contempt is intended to
coerce the contemnor to obey." In re Rimsat, Ltd.,
98 F.3d 956, 963 (7th Cir. 1996); see also
Cleveland Hair Clinic, Inc. v. Puig, 106 F.3d 165,
167 (7th Cir. 1997) ("An adjudication of civil
contempt used to enforce a judicial order is not
appealable if the underlying order is itself not
appealable."). We asked the parties to discuss our
jurisdiction in their briefs, and each side has
responded that we have jurisdiction over the
contempt finding, but for different reasons. Wintz
argues that we have jurisdiction because the
underlying order was appealable as a final decision
under 28 U.S.C. sec. 1291. The Fund tells us that
we have jurisdiction because the underlying order
is a preliminary injunction appealable under sec.
1292(a)(1). We consider each possibility because a
third exists which would divest us of jurisdiction
and require dismissal of Wintz’s appeal-- namely,
that the underlying district court order is neither
a "final decision" nor an injunction, but rather is
an order partly but not wholly adjudicating the
Fund’s complaint (much like an order awarding
partial summary judgment).
We first tackle Wintz’s theory that the contempt
finding is appealable because the order it
disobeyed (the order compelling payments) is a
final decision that disposed of the underlying
litigation initiated by the Fund. This is a rather
surprising position given Wintz’s concession that
at the time it filed this appeal its own
counterclaims against the Fund remained. Only
"final decisions" are appealable under sec. 1291,
and the presence of the counterclaims made the
court’s order compelling payment decidedly
nonfinal. See Alonzi v. Budget Construction Co., 55
F.3d 331, 333 (7th Cir. 1995). Nor were the
counterclaims dismissed by implication when the
court ordered Wintz to pay, because it is possible
for the Fund to violate the technical provisions of
ERISA even though it is correct that an employer
owes it money. The only way the court’s order could
have achieved finality under sec. 1291 was through
Rule 54(b), id., which allows courts to issue final
and appealable orders dismissing fewer than all
claims, but Wintz did not seek nor did the court
apply a designation of finality under this rule.
While acknowledging that at the time of this
appeal its claims (since dismissed) were pending in
the district court, Wintz tells us that some of our
cases compel us to treat the order as final and
appealable despite its seeming incompleteness here.
For example, in Trustees of Chicago Truck Drivers
v. Central Transport, Inc., 935 F.2d 114 (7th Cir.
1991), we were faced with a similar case in which
an employer stopped making payments to a union
pension fund. After the Fund filed suit seeking
interim payments pending arbitration, the district
court ordered the company to pay but over the
Fund’s protests the court refused to hold the
company in contempt for the nonpayment. The Fund
appealed that decision, prompting us to consider
our jurisdiction over the court’s order compelling
payment. We ultimately concluded that we had
jurisdiction because the court’s order essentially
wrapped up the case before it:
The Fund obtained a judgment compelling [the
company] to pay its accrued liability and to make
future payments as they become due. The order was
entered on the form appropriate to civil judgments.
Such an order is final and appealable under 28
U.S.C. sec. 1291. It is the end of the case. . . .
[T]he complaint asked for one thing, money, and the
entire litigation has been concluded. The
definition of a final decision is one wrapping up
the case and leaving "nothing for the court to do
but execute the judgment," which is exactly what
this decision does. Jurisdictional rules should be
clear, and we think it best to simplify the subject
by holding that the terminating order of any suit
seeking "interim payments" under sec. 1399(c)(2) is
a final decision, appealable under 28 U.S.C. sec.
1291.
Id. at 116-17 (internal citation omitted).
If this case simply involved a fund’s pursuit for
interim payments and a district court’s order
compelling those payments, we would have no trouble
relying on Central Transport, as well as Trustees
of the Chicago Truck Drivers, Helpers & Warehouse
Workers Union Pension Fund v. Rentar Industries,
Inc., 951 F.2d 152 (7th Cir. 1991), a later case
applying the Central Transport holding. We would
agree with Wintz that an order compelling payment
to the Fund is a "terminating order" under sec.
1399(c)(2) because there is nothing left for the
court to do but execute the judgment. But at the
time of this appeal the district court had Wintz’s
counterclaims (three of them) to deal with, and
while it was likely at that point that the court’s
award in favor of the Fund spelled doom for those
claims, it was not necessarily so. (One of the
counterclaims alleged a breach of good faith and
fair dealing, and it is at least theoretically
possible for the Fund to have been entitled to the
monies it sought but to have gone about collecting
that money in an unlawful way under ERISA.) The
district court’s order also neglected to address
the Fund’s claim for liquidated damages and
interest; both the Supreme Court and this court
have held that a decision is not final where pre-
judgment interest has yet to be determined. See
Osterneck v. Ernst & Whinney, 489 U.S. 169 (1989);
Mercer v. Magnant, 40 F.3d 893, 896 (7th Cir.
1994). Nor (unlike in Central Transport) was the
district court’s order entered on a form
appropriate to civil judgments. In short, while it
is accurate to interpret Central Transport as
holding that orders compelling ERISA withdrawal
liability payments sought by the Fund can be final
and appealable under sec. 1291, they are not
automatically appealable such that we utterly
ignore the rules disrupting finality that we apply
in every other case. The district court’s order was
not a final decision under sec. 1291, meaning we
have jurisdiction over Wintz’s appeal only if the
Fund is correct that the order was an injunction
enforceable through contempt and appealable as an
interlocutory decision "without regard to finality"
under 28 U.S.C. sec. 1292(a)(1). Ford v. Neese, 119
F.3d 560, 562 (7th Cir. 1997).
On its face the underlying order compelling
interim payments to the Fund looks like an
injunction. The order instructs Wintz to do
something--pay the Fund what the statute requires--
which after all is the point of an injunction;
"[i]n effect, the injunction wrote statutory
prohibitions into a decree enforceable by
contempt." Szabo v. U.S. Marine Corp., 819 F.2d
714, 718 (7th Cir. 1987). Wintz’s principal
argument on appeal is that the order could not have
been an injunction because it did not comply with
Rule 65(d) of the Federal Rules of Civil Procedure,
which requires that an injunction "shall describe
in reasonable detail, and not by reference to the
complaint or other document, the act or acts sought
to be restrained." Fed. R. Civ. P. 65(d). We think
the order was crystal clear and self-contained, but
at this point Wintz’s failure to appeal the grant
of the injunction makes elaboration unnecessary.
"Not having appealed from the grant of the
injunction," Wintz "cannot argue that it is too
vague to be enforced . . . or that it violates Rule
65(d) of the Federal Rules of Civil Procedure,"
Szabo, id., both of which occupy a considerable
portion of Wintz’s briefs on appeal. Put another
way, Rule 65 is not jurisdictional in the way Wintz
wants it to be-- "in the sense that its
requirements are nonwaivable, so that any
[technical] failure to comply with those
requirements would make the injunction a nullity
even if no party had ever objected." Chicago &
Northwestern Trans. Co. v. Railway Labor
Executives’ Assoc., 908 F.2d 144, 149 (7th Cir.
1990). Wintz’s further problem is that even if we
sided with the company and decided that the
injunction in this case was unenforceably vague or
violated Rule 65(d), it would not necessarily
follow that we have jurisdiction under Wintz’s
preferred "final decision" route. As we discussed
earlier, the likely result in that case would be
that we have no jurisdiction at all. See Bates v.
Johnson, 901 F.2d 1424, 1428 (7th Cir. 1990)
("Until the judge enters an injunction . . . there
is nothing before us on appeal.").
We need not follow this detour any longer. The
parties treated the underlying order as an
injunction at the time it was entered, and that is
how we will treat it here. We acknowledge that
during one of the hearings the district court went
to some lengths not to call its order to compel
payments an injunction, instead labeling it an
order requiring "interim interim payments." From
the record, it appears the court was careful in how
it referred to its order so that it could avoid
wading through the balancing test courts must apply
before issuing injunctions. See, e.g., Gateway
Eastern Railway Co. v. Terminal Railroad Assoc. of
St. Louis, 35 F.3d 1134, 1137 (7th Cir. 1994); see
also Fed. R. Civ. P. 65. But "[n]omenclature does
not determine whether an order is a preliminary
injunction" and thus appealable under sec.
1292(a)(1). Doe v. Village of Crestwood, Il., 917
F.2d 1476, 1477 (7th Cir. 1990). If nomenclature
were important, in this case the name attached to
the order ("Order to Compel Payments") could not
have been more facially insistent, and therefore,
injunctive. Accordingly, we have jurisdiction over
the company’s appeal from the district court’s
contempt sanction and proceed to Wintz’s arguments
against it.
In truth we are somewhat hesitant to call the
district court’s contempt judgment anything but a
second injunction to pay the Fund. It is true that
the judgment contains a dollar amount, but it looks
to be less than the accrued installment payments
(approximately $200,000 a month) owed but not paid
to the Fund. At oral argument the Fund’s attorney
informed us that the contempt sanction in this case
would be refunded to Wintz if the arbitrator rules
in the company’s favor (if Wintz loses in
arbitration, then the amount it pays under the
contempt order would be credited toward its
withdrawal liability). Contempt sanctions typically
are not credits toward liability or refunded, nor
for that matter are they paid to an opponent rather
than the court. But the parties and the district
court refer to the judgment as a contempt sanction,
probably because the judgment is entered against
George Wintz (personally, along with the Fund) even
though he was not a named party in the underlying
litigation. At least as to Mr. Wintz, we agree that
the judgment is indeed a sanction, so for that
reason and ease of reference we will treat it that
way.
Wintz’s primary argument against the contempt
judgment (which we review to determine if the court
abused its discretion, United States v. Torres, 142
F.3d 962, 969 (7th Cir. 1998)) appears to be that
the district court’s underlying injunctive order
was so ambiguous as to be unenforceable through
contempt. This sounds similar to Wintz’s argument
that the injunction was vague and violated Rule
65(d), both discussed above and dismissed at this
point as tardy. But perhaps Wintz is arguing that
the order compelling payments was so absurdly non-
directive that it gave Wintz no notice of what was
expected, and thus no notice even that it should be
clarified or appealed, until of course the district
court sanctioned Wintz for disobeying it. We have
nearly opened up a can of worms, because if that
were the case the underlying order would be a
nullity (thus divesting an appellate court of
jurisdiction to review it in the first instance).
Chicago & Northwestern Trans. Co., 908 F.2d at 149;
see also Die Seamless Cylinder Int’l, Inc. v.
General Fire Extinguisher Corp., 14 F.3d 1163, 1166
(7th Cir. 1994) ("It may seem a considerable
paradox that if the judge’s error is so flagrant as
to make his order void, the appellate court loses
jurisdiction. But a void order has no bite, and
Article III precludes an appeal from a harmless
order."). There is no obligation to obey an
injunctive nullity, Bates, supra, so we concede it
would be strange to make a party obey a contempt
citation enforcing the nullity.
We need not open the can of worms because the
district court’s order compelling payments was not
hopelessly defective or ambiguous in any of the
ways forwarded by Wintz. It is true that the
district court’s order makes reference to a
schedule of delinquent payments attached to the
Fund’s notice and demand mailed to Wintz, and in
that sense is not completely self-contained. At
most this amounts to a violation of Rule 65(d)
(since waived, see above); it does not transform an
otherwise valid injunction into a nullity. Setting
this point aside, Wintz makes it sound as if the
parties had been quibbling over the amount the
company owed. In fact, Wintz refused to pay
anything at all, a wholesale disregard of ERISA’s
"pay now, arbitrate later" scheme, Chicago Truck
Drivers Pension Fund, 125 F.3d at 534, and a
decision that forced the Fund to seek payment in
court. The court ordered Wintz to pay, and Wintz
even returned to court to clarify the order. Based
on our review of the parties’ exchanges before the
district court judge, we find it unreasonable for
Wintz to argue at this point that it had no idea
what the order demanded.
Wintz also contends that the district court
improperly sanctioned the company for paying other
creditors. From Wintz’s perspective, at most the
district court’s underlying order compelling
payments was a judgment that had to get in line
behind other judgments outstanding against the
company. Wintz is correct that the district court
based the amount of the sanction on what Wintz had
paid to other creditors instead of the Fund. But
nothing in the order itself deprives Wintz of the
right to pay other creditors, even before the
company paid the Fund, so long as the Fund is paid.
This is not a case wherein Wintz violated an
injunction because it had no money whatsoever; it
obviously was paying several creditors except the
one entity entitled to Wintz’s money under the
terms of the court order. Nor is this a case
wherein the evidence before the district court
highlighted extenuating circumstances preventing
the Fund from doing what ERISA requires. When it
came time for Wintz to present those circumstances,
Wintz’s president, George Wintz, appeared before
the district court but refused to answer questions
under the Fifth Amendment of the United States
Constitution. That was his right, but the court was
entitled to draw a negative inference from his
refusal to speak, and in turn his refusal to pay.
The remainder of Wintz’s arguments do not excuse
its failure to comply with the court’s injunction
and pay the Fund. Contrary to Wintz’s invitation,
we will not wade through the record to determine
whether paying the Fund would force the company
into bankruptcy. We have already observed that
Wintz has managed to pay other creditors instead of
the Fund, but in all events federal judges "have no
equitable power to excuse interim payments."
Central Transport, Inc., 935 F.2d at 119. In
enacting ERISA, Congress decided that interim
payments were mandatory--no excuses--because the
"stakes" are safer in the interim if they are held
by the Fund. Funds don’t go out of business the way
thinly capitalized employers do, id., meaning they
can readily refund the payments to a company like
Wintz if an arbitrator rules against them. All that
remains is Wintz’s argument that the district court
should not have held its president, George Wintz,
personally in contempt in addition to his company.
The order compelling payments was not simply
directed at Wintz Properties, but at the
corporations’ "officers" as well. George Wintz is
the sole officer and shareholder of Wintz
Properties, making the underlying injunction
applicable to him, and his company’s failure to
comply with it his problem, too.
III.
ERISA makes it clear that an employer withdrawing
from a multiemployer pension fund must pay
withdrawal liability to the Fund, and our cases
make it equally clear that interim payments must be
made pending arbitration. See Chicago Truck
Drivers, supra. Wintz refused to make those
payments, prompting the district court to issue an
injunction followed by a finding of contempt. We
affirm the contempt judgment. The Fund asks us to
award it attorneys’ fees and costs incurred in
defending against Wintz’s appeal, and in this case
we will do so. Section 1132(g)(2) of ERISA requires
a court to award reasonable attorneys’ fees and
costs to a fund that must obtain a judgment in
order to collect delinquent contributions to a
multiemployer fund, which is exactly what the Fund
had to do in the district court. See also Chicago
Truck Drivers, 125 F.3d at 535 (affirming an award
of attorneys’ fees and costs "because [the
employer] precipitated the plan’s suit in the
district court by unlawfully failing to make any
installment payments pending arbitration."). The
law should be clear enough by now to avoid the
necessity of a suit like the Fund’s, and an appeal
like Wintz’s, which is part of the reason the
Fund’s fees and costs are properly attributed to
Wintz. Finally, we take note that since filing this
appeal Wintz has added two more to our docket
relating to successive district court orders to pay
the Fund. Not (unfortunately) on their own motion
to consolidate, but instead on our own suggestion,
the parties wisely agreed to suspend briefing on
those cases until the opinion in this case was
decided. We are confident that Wintz will carefully
review those appeals (and subsequent ones like
them) to determine whether they remain viable in
light of our decision today.
AFFIRMED.
FOOTNOTES
/1 As gleaned from the record, it appears that one of
the companies principally owned by George Wintz,
Wintz Freightways, contributed to the union pension
fund before it merged with Central States Xpress,
Inc., an Indiana corporation. Following the merger,
Xpress failed to continue making payments to the
Fund, and soon afterward was placed into
involuntary bankruptcy by its creditors and went
out of business. The Fund determined that for the
purposes of ERISA, Wintz’s other companies (called
the Wintz Controlled Group) constituted a single
employer and were financially responsible for
Xpress’ withdrawal from the pension fund.
/2 As amended by the Multiemployer Pension Plan
Amendments Act of 1980, 29 U.S.C. sec. 1381 et seq.