Hotel 71 Mezz Lender LLC v. National Retirement Fund , 778 F.3d 593 ( 2015 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 14-2034
HOTEL 71 MEZZ LENDER LLC,
a Delaware limited liability
company, et al.,
Plaintiffs/Counter-Defendants-Appellees,
v.
THE NATIONAL RETIREMENT FUND,
Defendant/Counter-Claimant-Appellant
and
THE TRUSTEES OF THE
NATIONAL RETIREMENT FUND,
Counter-Claimant-Appellant.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 13 C 3306— Rubén Castillo, Chief Judge.
ARGUED NOVEMBER 5, 2014 — DECIDED FEBRUARY 6, 2015
Before BAUER, ROVNER, and TINDER, Circuit Judges.
2 No. 14-2034
ROVNER, Circuit Judge. The price a litigant pays for filing a
flawed or unconvincing motion for summary judgment
ordinarily is denial of the motion, not loss of the case. But the
district court in this case appears to have treated the lack of
sufficient evidentiary support for the motion as a reason to
enter summary judgment against the movant. See Hotel 71 Mezz
Lender LLC v. Nat’l Retirement Fund, 9 F. Supp. 3d 863, 873-74
(N.D. Ill. 2014). The court did so in the absence of a cross-
motion for summary judgment on the issue that it found to be
dispositive, and without first giving the unsuccessful movant
notice that it was entertaining the possibility of entering
summary judgment against it or the opportunity to respond.
Because we are not convinced that the movant had no plausi-
ble arguments to make in opposition to an adverse grant of
summary judgment, we vacate the judgment and return the
case to the district court for further proceedings.
I.
In this action, the National Retirement Fund (“NRF”) and
its trustees seek to hold Hotel 71 Mezz Lender LLC (“Mezz
Lender”) and Oaktree Capital Management, L.P. (“Oaktree”)
responsible for multiemployer pension fund withdrawal
liability pursuant to section 4201 of the Multiemployer Pension
Plan Amendments Act of 1980 (“MPPAA”), 29 U.S.C. § 1381.
Oaktree, through Mezz Lender, provided financing for the
acquisition of a hotel by Chicago H&S Hotel Property LLC
(“H&S”). When H&S later defaulted on the loan, it was taken
into bankruptcy and the hotel was liquidated. NRF contends
that the sale of the hotel triggered withdrawal liability on the
part of H&S and any other “trade or business” under common
No. 14-2034 3
control with it—including both Oaktree and Mezz Lender. See
29 U.S.C. §1301(b)(1). Oaktree and Mezz Lender, on the other
hand, contend that the claim of withdrawal liability—whatever
its merits—is barred by the bankruptcy reorganization plan
pursuant to which the hotel was sold.
NRF, formerly known as the UNITE HERE National
Retirement Fund and successor-in-interest to the HEREIU
Pension Fund, is a multiemployer pension fund that provides
retirement and related benefits to unionized workers; it is
administered by a board of trustees that includes both union
and employer representatives. Collective bargaining agree-
ments covering certain union workers require employers to
make regular contributions to NRF on behalf of their employ-
ees. During the time period relevant to this case, Hotel 71, a
full-service, 437-room hotel on Chicago’s Wacker Drive, was a
party to one such agreement obligating it to make contribu-
tions to NRF’s predecessor, the HEREIU Pension Fund, on
behalf of the hotel’s housekeepers, bartenders, bellhops,
laundry workers, and various other employees.
H&S purchased Hotel 71 in 2005. The purchase was
financed by a $100 million senior mortgage loan as well as a
$27.3 million mezzanine loan. Oaktree funded the mezzanine
loan to H&S (actually to an LLC that was H&S’s sole manager
and member, but we may omit that detail) through Mezz
Lender. Upon completion of the purchase, H&S succeeded to
the obligations imposed by several collective bargaining
agreements with the hotel’s workforce, including the obliga-
tion to make contributions to the HEREIU Pension Fund. We
shall hereafter refer to the pension fund and its trustees simply
as NRF or the “pension fund.”
4 No. 14-2034
H&S defaulted on both the senior and mezzanine loans in
2007. On October 3, 2007, Mezz Lender acquired H&S in a
Uniform Commercial Code (“UCC”) Article 9 foreclosure sale
with the intent to place H&S in bankruptcy and attempt to
collect the outstanding balance of its loan there. Mezz Lender
immediately brought in Patrick O’Malley, a restructuring
specialist from a management consulting firm, to run the
company. H&S filed for bankruptcy protection pursuant to
Chapter 11 of the Bankruptcy Code within the month, and
thereafter Mezz Lender participated in the negotiation of a
plan of reorganization. The bankruptcy court approved the
finalized reorganization plan on March 21, 2008.
Pursuant to the approved plan, substantially all of H&S’s
assets—principal among them being Hotel 71—were sold in
July 2008 to H&S’s senior lender. NRF and its trustees view the
sale as a “complete withdrawal” by H&S from the pension
fund, which triggered withdrawal liability on the part of H&S
and any trade or business under common control with
it—including, in NRF’s view, Mezz Lender and Oaktree. See 29
U.S.C. §§ 1301(b)(1), 1381.1 Counsel for NRF sent a notice and
demand letter setting forth that position to Mezz Lender on
1
There appears to be no dispute that the new owner of the hotel continued
to make the requisite contributions to the pension fund following the sale.
NRF nonetheless contends that withdrawal liability was triggered by the
failure of the hotel’s purchaser to provide a bond to NRF or to place an
appropriate amount of money in order to secure its obligations to the
pension fund and by the absence of appropriate language in the purchase
agreement acknowledging H&S’s secondary liability to the pension fund in
the event that the purchaser withdrew from the fund in the five-year period
following the sale. See 29 U.S.C. § 1384(a)(1)(B) & (C).
No. 14-2034 5
April 1, 2013. NRF ultimately reached a settlement with H&S
itself pursuant to which NRF was permitted a general unse-
cured claim of $550,000 against the bankruptcy estate; and it
appears that NRF was able to collect less than $70,000 on that
claim. Nearly all of the more than $2.1 million in withdrawal
liability and accrued interest that NRF attributes to H&S and
the other members of its controlled group thus remains
unpaid.
Section 13.1 of the reorganization plan approved by the
bankruptcy court contains a provision stating that any distribu-
tions received by creditors or contemplated by the plan are in
full satisfaction of any and all claims arising in connection with
H&S’s Chapter 11 case that creditors might have against
“Releasees,” whom the plan defines to include the debtor
(H&S), its then-owner (Mezz Lender), and any officers,
members, or managers of the debtor’s owner, and that all such
claims are released. Section 13.4 in turn enjoins any effort to
pursue the claims released by section 13.1. Mezz Lender and
Oaktree read these provisions as releasing them from any
claim by NRF for withdrawal liability and barring any effort by
NRF to pursue them.
Mezz Lender and Oaktree (which we will refer to collec-
tively as the “Oaktree parties”) filed suit in the district court
seeking a declaratory judgment that the reorganization plan
released any claim of withdrawal liability arising from H&S’s
actions in the Chapter 11 proceeding, including the sale of its
assets, and enjoined NRF from pursuing any claim of with-
drawal liability against either Oaktree or Mezz Lender. NRF
answered the complaint and in turn filed counterclaims against
Mezz Lender, Oaktree, and John Does 1-10–the latter repre-
6 No. 14-2034
senting anyone else in H&S’s controlled group–asserting that
each was jointly and severally liable for withdrawal liability.
When the parties appeared before the district court to
address the Oaktree parties’ request for a preliminary injunc-
tion against NRF—which the Oaktree parties ultimately
withdrew—counsel indicated to the court that they believed
that the case could be promptly resolved by way of cross-
motions for summary judgment, and neither side indicated
that discovery was necessary in order to present those motions.
The district court accordingly set a briefing schedule, and the
parties pursued their respective positions in their cross-
motions.
The Oaktree parties contended in their motion that the
release and injunction provisions of the reorganization plan
barred NRF from pursuing any claim of withdrawal liability
against them. NRF, in response, contended that those provi-
sions did not apply to its claims of withdrawal liability; and, in
its own cross-motion for summary judgment against Mezz
Lender,2 NRF affirmatively contended that Mezz Lender was
in fact responsible for withdrawal liability because, inter alia, it
was a trade or business under common control with H&S. Its
2
NRF explains that its motion focused on Mezz Lender because it did not
believe there was any real dispute that Mezz Lender was responsible for
withdrawal liability as a trade or business under common control with
H&S. By contrast, NRF evidently had concluded that Oaktree’s potential
liability likely would require further factual development, if not a trial. The
district court noted, for example, there was a factual dispute between the
parties as to the precise nature of the relationship between Oaktree and
Mezz Lender. See 9 F. Supp. 3d at 867.
No. 14-2034 7
summary judgment memorandum, however, focused on the
common-control question and the procedural requirements for
asserting withdrawal liability and passed over in silence the
legal criteria for identifying a trade or business on which such
liability may be imposed and made no argument as to why
Mezz Lender constituted such a trade or business. See R. 36 at
8-9.3 Mezz Lender itself did not seek summary judgment on
this point; rather, it contended that “the record [was] rife with
factual issues which preclude[d] the Court from entering
summary judgment in favor of NRF” on the withdrawal
liability claim. R. 38 at 9. In particular, Mezz Lender empha-
sized that whether it constituted a trade or business for
purposes of withdrawal liability was a fact-bound question,
that NRF had yet to make a case for the notion that Mezz
Lender qualified as a trade or business, and that, consequently,
it was premature for the court to render a judgment on this
question. R. 38 at 9; see also 9 F. Supp. 3d at 873 (acknowledging
Mezz Lender’s position).
The district court turned to Mezz Lender’s cross-motion for
summary judgment first. The court noted that the motion
discussed only Mezz Lender’s putative withdrawal liability; it
made no argument as to the potential liability of Oaktree and
John Does 1 through 10. As a result, NRF had, in the court’s
view, “waive[d] [any] argument that Oaktree and John Does
1-10 are jointly and severally liable for Chicago H&S’s with-
drawal liability,” 9 F. Supp. 3d at 871 n.3; only the claim
against Mezz Lender had been preserved. The parties agreed
3
NRF’s counsel subsequently remarked to the district court that NRF did
not expect Mezz Lender to deny that it was a trade or business. R. 47 at 4.
8 No. 14-2034
that Mezz Lender was the one and only owner of H&S when
its assets were sold in June 2008; consequently, the court found
that Mezz Lender was in common control with H&S for
purposes of potential withdrawal liability. Id. at 872-73.
The court turned, then, to the question of whether Mezz
Lender was appropriately characterized as a “trade or
business” for that purpose. Commissioner of Internal Revenue v.
Groetzinger, 480 U.S. 23, 35, 107 S. Ct. 980, 987 (1987), instructs
a court to consider whether the entity in question engaged in
activity (1) with continuity and regularity and (2) principally
in order to generate income or profit. See 9 F. Supp. 3d at 873
(noting these criteria).4 A key function of the Groetzinger test, as
we recognized in Cent. States Se. & Sw. Areas Pension Fund v.
Messina Prods., LLC, 706 F.3d 874, 878 (7th Cir. 2013), “is to
distinguish trades or businesses from passive investments,
which cannot form a basis for imputing withdrawal liability
under section 1301(b)(1).” Whether a particular enterprise
constitutes a trade or business that is subject to withdrawal
liability, or a passive investment that is not, amounts to a
question of fact. See Cent. States, Se. & Sw. Areas Pension Fund
v. Neiman, 285 F.3d 587, 593-94 (7th Cir. 2002); Cent. States, Se.
& Sw. Areas Pension Fund v. Slotky, 956 F.2d 1369, 1373 (7th Cir.
1992); see also McDougall v. Pioneer Ranch Ltd. Partnership, 494
4
Groetzinger articulated this test for purposes of determining what
constitutes a trade or business for purposes of the tax code, see 26 U.S.C.
§ 162(a), but we have adopted the test for purposes of assessing an
individual or company’s eligibility for withdrawal liability. See Cent. States
Se. & Sw. Areas Pension Fund v. Messina Prods., LLC, 706 F.3d 874, 878 (7th
Cir. 2013) (collecting cases).
No. 14-2034 9
F.3d 571, 575-76, 578 (7th Cir. 2007) (reviewing summary-
judgment finding that defendant constituted a trade or
business for clear error), and id. at 578 (Cudahy, J., concurring
in the judgment) (agreeing district court’s finding was not
clearly erroneous, but noting that the subsidiary facts would
also support a contrary finding). A variety of factors bear on
this question, among them “the purpose, tax status, and legal
form of the enterprise.” Cent. States, Se. & Sw. Areas Pension
Fund v. CLP Venture LLC, 760 F.3d 745, 749 (7th Cir. 2014), cert.
denied, — S. Ct. —, 2015 WL 133005 (U.S. Jan. 12, 2015). The
proper characterization of the enterprise turns on the specific
(subsidiary) facts of the case, see Neiman, 285 F.3d at 593-94
(quoting Groetzinger, 480 U.S. at 36, 107 S. Ct. at 987), with no
one factor alone being dispositive, Sun Capital Partners III, L.P.
v. New England Teamsters & Trucking Indus. Pension Fund, 724
F.3d 129, 141-42 (1st Cir. 2013), cert. denied, 134 S. Ct. 1492
(2014).
As we have noted, NRF’s motion all but ignored this issue.
Apparently thinking that there was no doubt that Mezz Lender
constituted a trade or business, its motion and supporting
memorandum did not mention the Groetzinger test, let alone
apply that test to the evidence.
Although it acknowledged the factual nature of this issue,
the district court also took note of our observation in Slotky that
where the only dispute between the parties is how the enter-
prise is to be characterized in light of the subsidiary facts, and
where the court itself will function as the factfinder in the case,
there is no need to postpone resolution of the issue for trial
notwithstanding the parties’ disagreement on the appropriate
10 No. 14-2034
characterization of the enterprise. 9 F. Supp. 3d at 873 (citing
Slotky, 956 F.2d at 1374). In the court’s view, this was the very
situation with which it was confronted: The parties’ sole
disagreement was as to whether Mezz Lender constituted a
trade or business, and because the MPPAA does not entitle the
parties to a jury trial, see id. (citing McDougall, 494 F.3d at 576),
the court itself would be serving as the finder of fact. The court
was therefore satisfied that it could resolve the trade-or-
business question on summary judgment. Id.
The court, confronted with a minimal record which
established only that Mezz Lender was a limited liability
corporation which extended financing for the acquisition of a
hotel by H&S and ultimately acquired complete ownership of
H&S in a UCC foreclosure sale, concluded that NRF had not
carried its burden on this issue. The record was “devoid of any
facts indicating that [Mezz Lender] [has] a trade or business
under MPPAA.” 9 F. Supp. 3d at 874. This was reason to deny
NRF’s motion for summary judgment, which the court
indicated it was doing. Id. But the court also made the follow-
ing declaration: “Based on the facts the parties present, the
Court can only conclude that the relationship between [Mezz]
Lender and Chicago H&S is one of a ‘passive investment.’” Id.
Rather than a determination that there was an unresolved
dispute of fact as to whether Mezz Lender was engaged in
trade or business activity when it helped finance H&S’s
acquisition of Hotel 71 and later assumed ownership of H&S
when it defaulted on the loan, that sentence reads like a final
determination that the financing was merely a passive invest-
ment which precluded the imposition of withdrawal liability
on Mezz Lender. All doubt on that score was eliminated by the
No. 14-2034 11
court’s ensuing discussion of the Oaktree parties’ own motion
for summary judgment.
The court found it unnecessary to consider whether, as the
Oaktree parties contended, the bankruptcy reorganization plan
precluded NRF’s withdrawal liability claim:
Having already decided that [Oaktree, Mezz
Lender,] and John Does 1-10 are not jointly and
severally liable for Chicago H&S’s withdrawal
liability, … the Court need not address the parties’
arguments as to [the Oaktree parties’] motion. The
Court has declared the rights of the parties, and
declines to go any further in resolving this declara-
tory judgment. … The Court has resolved the
substantial controversy by deciding the withdrawal
liability issue, and it finds no other live controversy
in this dispute to warrant declaratory relief. Accord-
ingly, the Court grants [the Oaktree parties’] motion
with respect to the issue of withdrawal liability.
Id.
NRF filed a timely motion to alter or amend the judgment
pursuant to Federal Rule of Civil Procedure 59(e), arguing that
the district court had erred by sua sponte entering summary
judgment in favor of the Oaktree parties on the question of
withdrawal liability without first giving NRF notice that it was
considering that course and the opportunity to respond. Its
motion noted that there were a number of facts in the record
suggesting that Mezz Lender was a trade or business, includ-
ing the fact that Mezz Lender was organized as a formal
business entity (LLC), that it not only lent money to H&S but
12 No. 14-2034
later acquired H&S and took it into bankruptcy, and then
actively participated in the negotiation of a reorganization plan
for H&S. NRF argued further that discovery would likely yield
more proof that Mezz Lender was appropriately characterized
as a trade or business rather than a passive investment. NRF’s
motion also contended that it had not waived any claim of
withdrawal liability against Oaktree and John Does 1 through
10. NRF indicated that it had elected not to pursue summary
judgment against those counter-defendants because it believed
there were issues of material fact with respect to their with-
drawal liability that precluded summary judgment. It re-
minded the court that its summary judgment memorandum
had expressly reserved its right to pursue relief against
Oaktree and the John Doe counter-defendants at a later time.
After a brief hearing, the court denied the motion to
reconsider, precipitating this appeal.
II.
We review the district court’s grant of summary judgment
to the Oaktree parties de novo. E.g., Stable Inv. Partnership v.
Vilsack, — F.3d —, 2015 WL 55466, at *5 (7th Cir. Jan. 5, 2015).
For the reasons that follow, we conclude that the district court
erred in granting summary judgment to the Oaktree parties.
However deficient NRF’s motion was with respect to Mezz
Lender’s status as a trade or business, the deficiency did not
warrant the entry of summary judgment against NRF on that
issue, absent NRF first being given notice and a chance to
present evidence showing that there was a material dispute of
fact on that question precluding summary judgment. We could
sustain the entry of summary judgment if it were clear beyond
No. 14-2034 13
dispute that Mezz Lender was not a trade a business, which is
partly what the Oaktree parties argue in defense of the
judgment. But we conclude, to the contrary, that the issue is
not free from doubt.
A motion for summary judgment is a contention that the
material facts are undisputed and the movant is entitled to
judgment as a matter of law. See Fed. R. Civ. P. 56(a). The party
pursuing the motion must make an initial showing that the
agreed-upon facts support a judgment in its favor. See Rule
56(a) & (c)(1); Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106
S. Ct. 2548, 2553 (1986); Outlaw v. Newkirk, 259 F.3d 833, 837
(7th Cir. 2001); Logan v. Commercial Union Ins. Co., 96 F.3d 971,
978-79 (7th Cir. 1996). Where, as here, the movant is seeking
summary judgment on a claim as to which it bears the burden
of proof, it must lay out the elements of the claim, cite the facts
which it believes satisfies these elements, and demonstrate why
the record is so one-sided as to rule out the prospect of a
finding in favor of the non-movant on the claim. See Reserve
Supply Corp. v. Owens-Corning Fiberglas Corp., 971 F.2d 37, 42
(7th Cir. 1992); United States v. Four Parcels of Real Property in
Greene & Tuscaloosa Counties in State of Ala., 941 F.2d 1428, 1438
(11th Cir. 1991). If the movant has failed to make this initial
showing, the court is obligated to deny the motion. See Johnson
v. Hix Wrecker Serv., Inc., 651 F.3d 658, 662 (7th Cir. 2011) (“A
party opposing summary judgment does not have to rebut
factual propositions on which the movant bears the burden of
proof and that the movant has not properly supported in the
first instance.”); Johnson v. Gudmundsson, 35 F.3d 1104, 1112 (7th
Cir. 1994) (even an unanswered motion for summary judgment
14 No. 14-2034
cannot be granted unless the movant has shown that the facts
warrant judgment in its favor).
This is how we read the district court’s assessment of NRF’s
motion for summary judgment. Essentially, the court said that
the few facts disclosed by NRF’s motion were insufficient to
establish that Mezz Lender was a trade or business as opposed
to a passive investment for purposes of withdrawal liability.
For that reason, the court indicated that it was denying NRF’s
motion. 9 F. Supp. 3d at 874. There can be no quarrel with that
aspect of the district court’s ruling. NRF, as we have said, did
not even cite the standard for determining whether Mezz
Lender is a trade or business let alone apply that standard to
the record facts.
But saying that one party is not entitled to summary
judgment is not to say that its opponent necessarily is. The
denial of a motion for summary judgment reflects the court’s
judgment that one or more material facts are disputed or that
the facts relied on by the motion do not entitle the movant to
judgment as a matter of law. An insufficiently supported
request for summary judgment, like NRF’s, may leave room
for a contention that the undisputed facts warrant judgment in
favor of the non-movant, but the merits of such a contention
demand independent analysis.
The Oaktree parties could have, but did not, seek summary
judgment on the merits of NRF’s claim for withdrawal liability
on the ground, inter alia, that Mezz Lender did not constitute
a trade or business. Instead, they pursued summary judgment
on an entirely different ground, namely that sections 13.1 and
13.4 of the bankruptcy reorganization plan barred NRF from
No. 14-2034 15
pursuing the withdrawal liability claim against them, whatever
the merits of that claim might be. All that the Oaktree parties
had to say with respect to whether or not Mezz Lender
constituted a trade or business was that factual disputes
abounded on that issue, rendering it inappropriate for the
court to resolve the question on summary judgment.
Without a complete explanation, however, the district court
treated its decision that NRF had failed to show that Mezz
Lender was a trade or business not as a decision that this issue
would have to be resolved by way of a trial, but rather as a
final, dispositive finding that Mezz Lender was, as a matter of
law, not a trade or business but rather a passive investment
exempt from the imposition of withdrawal liability. 9 F. Supp.
3d at 874. Because, as we have said, the Oaktree Parties did not
ask the court to make that finding on summary judgment, the
district court’s order can be interpreted in one of two ways.
Either the court equated the denial of NRF’s motion for
summary judgment by itself as warranting a grant of summary
judgment to Mezz Lender, or the court implicitly concluded on
its own motion that the undisputed facts entitled Mezz Lender
to summary judgment although Mezz Lender had not asked
for summary judgment on that ground. Whichever under-
standing of the district court’s order is accurate, the court
granted summary judgment to the Oaktree parties in error.
The first possibility misconceives the nature of the sum-
mary judgment process. A motion for summary judgment is
not an invitation to summarily resolve the case for or against
the movant based on the paper record. Put another way, it is
not a waiver of the movant’s right to a trial—or to argue that
factual disputes warrant a trial—in the event the court finds
16 No. 14-2034
the motion wanting. A summary judgment motion represents
a contention that the facts recited therein warrant judgment in
the movant’s favor, nothing more. See Goldstein v. Fidelity &
Guar. Ins. Underwriters, Inc., 86 F.3d 749, 750-51 (7th Cir. 1996);
Market Street Assocs. Ltd. Partnership v. Frey, 941 F.2d 588, 590
(7th Cir. 1991); Zook v. Brown, 748 F.2d 1161, 1166 (7th Cir.
1984); 10A Charles A. Wright, Arthur R. Miller, & Mary K.
Kane, FED. PRACTICE & PROC. § 2720, 332-34 (3d ed. 1998). It is
not a concession that the same facts might warrant judgment
against the movant, or that the movant could marshal no
additional evidence or arguments in opposition to the prospect
of such an adverse judgment. A court may think the motion
insufficiently supported, blind to outstanding disputes of fact,
or off-base on the relevant legal principles. These are grounds
for denying the motion. But denying the motion normally will
leave the movant in essentially the same position, procedur-
ally, that it would have been in had it not requested summary
judgment in the first instance. If the court moves on to enter-
tain the prospect of entering summary judgment against the
unsuccessful movant, whether in response to a cross-motion
for summary judgment or on its own initiative, then the court
must be mindful of its obligation to adopt what Judge Shadur
aptly characterizes as a dual, “Janus-like” perspective. See, e.g.,
Shiner v Turnoy, 29 F. Supp. 3d 1156, 1160 (N.D. Ill. 2014). That
is, the court must now grant the unsuccessful movant all of the
favorable factual inferences that it has just given to the
movant’s opponent. See R.J. Corman Derailment Servs., LLC v.
Int’l Union of Operating Engrs., Local Union 150, AFL-CIO, 335
No. 14-2034 17
F.3d 643, 647-48 (7th Cir. 2003).5 Only if the court can say, on
that sympathetic reading of the record, that no finder of fact
could reasonably rule in the unsuccessful movant’s favor may
the court properly enter summary judgment against that
movant. E.g., O’Leary v. Accretive Health, Inc., 657 F.3d 625, 630
(7th Cir. 2011).
The second possibility is one we alluded to a moment ago:
that, having considered and denied NRF’s motion for sum-
mary judgment, the court was convinced that the material,
undisputed facts and the law warranted entry of summary
judgment against NRF on the merits of its withdrawal liability
claim, notwithstanding the lack of a cross-motion from the
Oaktree parties on that claim. A court does have the authority
to enter summary judgment on its own motion. Rule 56(f). But
whenever it entertains the possibility of summary judgment
against a party sua sponte, the court must afford the party
notice of that possibility and a reasonable opportunity to
respond. Id.; see also Lynch v. Ne. Regional Commuter R.R. Corp.,
700 F.3d 906, 910-11 (7th Cir. 2012); Simpson v. Merchants
Recovery Bureau, Inc., 171 F.3d 546, 549 (7th Cir. 1999). This
includes the chance to marshal evidence and argument in
opposition to summary judgment, even where, as here, the
party has already sought and failed to obtain summary
judgment in its favor.
5
Thus, even when both parties have moved for summary judgment, each
contending that the relevant facts are undisputed and the case may be
resolved without a trial, the proper outcome may be to deny both motions,
on the ground that the material facts are, in fact, disputed. See id.
18 No. 14-2034
As the district court recognized, there are cases in which the
parties are in agreement (or it is otherwise clear) as to what the
relevant facts are, and the only dispute is over how those facts
are to be characterized. When such cases present claims as to
which there is no right to a jury trial (or the party opposing
summary judgment against whom summary judgment is
contemplated has not asked for one), placing the judge in the
role of factfinder, it may be appropriate for the court to resolve
the characterization dispute on summary judgment notwith-
standing the fact-bound nature of that dispute. MPPAA cases
presenting disputes over whether a particular entity or activity
is properly characterized as a trade or business or instead a
passive investment can fall into this category, as there is no
right to a jury trial in litigation over withdrawal liability. CLP
Venture, supra, 760 F.3d at 750 (citing McDougall, supra, 494 F.3d
at 576); see also 9 F. Supp. 3d at 873 (citing, inter alia, McDougall
and Slotky, 956 F.2d at 1374). But this was not a case in which
the universe of facts informing the proper characterization of
Mezz Lender had been identified and agreed upon. NRF’s
motion had almost entirely ignored the trade or business
question, and the Oaktree parties’ reply simply contended that
the question was a factual one that was not amenable to
resolution on summary judgment. The record revealed only a
few rudimentary facts about Mezz Lender and its relationship
with H&S—for example, that Mezz Lender was an LLC, that
it loaned money to H&S for the acquisition of a hotel, that it
purchased H&S at the UCC foreclosure sale and took H&S into
bankruptcy, and that it was the one and only owner of H&S
when H&S’s assets were liquidated. No case cited by the
parties or the district court indicates that such facts by them-
No. 14-2034 19
selves are necessarily dispositive of the trade or business
question, regardless of what other facts might exist. Cf. Slotky,
956 F.2d at 1374 (noting that it was appropriate for the district
court to resolve the question when “[t]here is no more evidence
to put in”); McDougall, 494 F.3d at 575 (noting that district
court may resolve the trade-or-business dispute when the
subsidiary facts are undisputed). And even if one might infer
from the fact of NRF’s motion that it believed these few facts
sufficient to warrant summary judgment in its favor, its motion
was not, as we have discussed, a concession that these same
facts were dispositive for all purposes, including the possibility
of granting summary judgment to the Oaktree parties.
The court failed to give NRF the opportunity to present
evidence beyond that cited in its own unsuccessful motion for
summary judgment to show why a factfinder nonetheless
could find in its favor on the question of whether Mezz Lender
constitutes a trade or business for purposes of withdrawal
liability. It goes without saying that the court did not think that
the facts on which NRF had based its motion were sufficient to
establish that Mezz Lender was something more than a passive
investment. But that does not rule out the possibility that NRF,
given the chance, could have produced additional facts which
might permit a factfinder to conclude that Mezz Lender was a
trade or business. Moreover, given that the parties had filed
their respective summary judgment motions without first
engaging in discovery, NRF might have asked the court for
leave to pursue additional evidence before the court decided
whether Mezz Lender itself was entitled to summary judgment
on this point. Rule 56(d). And consistent with a point we have
made several times now, NRF would have been entitled to
20 No. 14-2034
have the court view whatever expanded evidentiary record it
presented in the light most favorable to it and to assume that
the finder of fact could resolve any disputed factual questions
in its favor. Having been deprived of these opportunities, NRF
was deprived of the basic procedural protections to which the
target of summary judgment is entitled. See, e.g., Lynch, 700
F.3d at 910-11; cf. Jones v. Union Pacific R. Co., 302 F.3d 735, 740
(7th Cir. 2002) (unsuccessful movant on notice of possibility
court might enter summary judgment against it, given
opponent’s request to treat its memorandum opposing
summary judgment for movant as a cross-motion for summary
judgment).
This error could be deemed harmless if we were convinced
that NRF had no reasonable case to make for the notion that
Mezz Lender was a trade or business. See, e.g., Goldstein, 86
F.3d at 751. This is a central theme that the Oaktree parties
pursue in their brief. But we do not think the matter free from
doubt.
As NRF points out, we have said that “formally recognized
business organizations pose ‘no interpretative difficulties’ for
the Groetzinger test.” CLP Venture, 760 F.3d at 749 (quoting
Central States, Se. & Sw. Areas Pension Fund v. Fulkerson, 238
F.3d 891, 895 (7th Cir. 2001)); see also id. at 749-50 (“[B]ecause
formal business organizations ordinarily operate with continu-
ity and regularity and are ordinarily formed for the primary
purpose of income or profit, it seems highly unlikely that a
formal for-profit business organization would not qualify as a
‘trade or business.’”) (citing Central States Se. & Sw. Areas
Pension Fund v. SCOFBP, LLC, 668 F.3d 873, 878 (7th Cir. 2011)).
No. 14-2034 21
As a limited-liability corporation, Mezz Lender was a formally
recognized business organization, and it extended a multi-
million dollar loan to H&S so that H&S might acquire and
operate a hotel. The loan carried with it the obligation to remit
interest payments to Mezz Lender. Extending a substantial
loan at a specified rate of interest to a commercial enterprise
would on its face seem like business activity. The Oaktree
parties nonetheless emphasize that Mezz Lender was not a
repeat lender but a special purpose entity that extended a
single loan to H&S. In essence, they argue that Mezz Lender
was simply the vehicle for the Oaktree parties to make an
investment in H&S.
We may assume without deciding that a factfinder could
deem Mezz Lender to be a passive investment for the reasons
the Oaktree Parties have articulated; but we are not convinced
that a factfinder would necessarily take this view, even if
presented with additional evidence. NRF points out that Mezz
Lender not only extended the loan to H&S, but when H&S
defaulted, purchased H&S in a UCC foreclosure sale with the
aim of collecting the balance of the loan in bankruptcy,
appointed a restructuring specialist (O’Malley) to manage H&S
on its behalf,6 and, once H&S had filed for bankruptcy, actively
participated in the negotiation of a reorganization plan. These
6
The fact that Mezz Lender appointed O’Malley to run H&S rather than
do so itself does not necessarily demonstrate passivity on Mezz Lender’s
part, as the Oaktree parties have suggested. O’Malley could be viewed as
Mezz Lender’s agent. Whether a parent corporation uses its own personnel
to run its subsidiary or engages an outsider, it is running the subsidiary—or
so, at least, NRF could argue. See Sun Capital Partners, supra, 724 F.3d at
146-48 & n.30.
22 No. 14-2034
facts suggest that NRF would have a plausible case to make in
opposition to a summary-judgment determination that Mezz
Lender was not a passive investment. They also distinguish
this case from one like Central States, Se. & Sw. Areas Pension
Fund v. Stroh Brewery Co., 220 Bankr. R. 959, 962 (N.D. Ill. 1997),
which held that a company, although formally incorporated
and in good standing as such, did not qualify as a trade or
business for purposes of withdrawal liability when it had been
nothing but a dormant “shell” corporation since its formation.
NRF adds that, with the benefit of discovery, it might be able
to identify additional facts supporting an inference that Mezz
Lender was functioning as an active business rather than a
passive investment. The merits of whatever case NRF (and, for
that matter, the Oaktree parties) might be able to make are not
for us to predict or evaluate at this juncture. All we need
decide is that it is not pointless to afford NRF the procedural
protections to which it would ordinarily be entitled as the
target of summary judgment. On the limited record before us,
the question of whether Mezz Lender is merely a passive
investment rather than an active business does not strike us as
being free from doubt. It would therefore not be an empty
exercise in formality to permit NRF the opportunity to oppose
the entry of summary judgment against it on this issue. Beyond
this limited observation, we express no opinion on the merits
of the issue.
A final word about Oaktree and the John Doe defendants
is in order. As we have noted, because NRF’s summary
judgment motion was restricted to Mezz Lender and offered
no evidence or argument in support of imposing withdrawal
liability on either Oaktree or the John Doe defendants, the
No. 14-2034 23
district court concluded that NRF had waived any basis for
imposing such liability on those defendants. 9 F. Supp. 3d at
871 n.3. In its oral remarks regarding NRF’s subsequent motion
to reconsider, the court appeared to criticize NRF for pursuing
a piecemeal approach to the litigation and “hold[ing] back” its
case against the other defendants until it first saw how the
court disposed of its request for summary judgment against
Mezz Lender. R. 47 at 6. The court’s finding of waiver was
manifestly incorrect. Nothing in Rule 56 demands an all-or-
nothing approach to summary judgment. Requests for (and
grants of) partial summary judgment, including summary
judgment as to fewer than all parties and claims, are nothing
new. See, e.g., Leonard v. Socony-Vacuum Oil Co., 130 F.2d 535,
536 (7th Cir. 1942). The rule, in fact, expressly anticipates that
a party may seek summary judgment as to a limited portion of
its case when it provides that “[a] party may move for sum-
mary judgment, identifying each claim or defense—or the part
of each claim or defense—on which summary judgment is
sought.” Fed. R. Civ. P. 56(a). There is no doubt that a court
may grant, and a party may seek, summary judgment as to one
party or one claim, leaving other claims and other parties to be
addressed at a later point in the litigation. See 10A FED. PRAC.
& PROC. § 2715, at 254. A request for partial summary judg-
ment can serve a useful brush-clearing function even if it does
not obviate the need for a trial, see Flynn v. Sandahl, 58 F.3d 283,
288 (7th Cir. 1995), and it may also facilitate the resolution of
the remainder of the case through settlement. Certainly we
agree with the district court that a party should not pursue a
needlessly piecemeal litigation strategy. See Tucker v. Williams,
682 F.3d 654, 661-62 (7th Cir. 2012); Whitford v. Boglino, 63 F.3d
24 No. 14-2034
527, 530 (7th Cir. 1995). But the record gives us no reason to
doubt the good faith of NRF’s assessment that it had a reason-
able basis on which to seek an early summary judgment
against Mezz Lender but not the other counter-defendants.
There was nothing improper about NRF’s decision to seek
summary judgment against Mezz Lender alone; and in doing
so, NRF did not waive its counterclaim as to Oaktree and the
John Doe defendants. On the contrary, NRF’s summary
judgment memorandum noted that it was reserving is counter-
claims as to those defendants. R. 36 at 2 n.1.
The Oaktree parties urge us to affirm the judgment in their
favor based on the alternative ground that they pursued in
their own motion for summary judgment and that the district
court did not reach: i.e., the contention that sections 13.1 and
13.4 of the reorganization bar NRF from pursuing the with-
drawal liability claim against them, whatever the merits of that
claim might be. There appears to be no dispute that if the
Oaktree parties’ position on this question is correct, it would be
unnecessary to decide whether or not Mezz Lender constitutes
a trade or business. And certainly the district court, on remand,
will be free to address that question before proceeding any
further on any other issue. But, consistent with our role as a
reviewing court, we choose to leave the merits of that question
to the district court in the first instance.
III.
For all of the reasons we have discussed, the district court
erred in granting summary judgment to the Oaktree parties on
the question of whether Mezz Lender constitutes a trade or
business for purposes of withdrawal liability. We therefore
No. 14-2034 25
VACATE the judgment and REMAND for further proceedings
consistent with this opinion.