Titan Tire Corporation v. Pirelli Tire ( 2008 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 07-1092
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Kenneth Eckert, *
*
Plaintiff, *
*
v. *
*
Titan Tire Corporation; Titan Tire *
Corporation, Employee’s Pension Plan; *
Pirelli Tire, LLC, *
* Appeal from the United States
Defendants, * District Court for the
* Southern District of Iowa.
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*
Titan Tire Corporation; Titan Tire *
Corporation, Employee’s Pension Plan, *
*
Third Party Plaintiffs - *
Appellants, *
*
v. *
*
Pirelli Tire, LLC, *
*
Third Party Defendant - *
Appellee. *
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Submitted: October 15, 2007
Filed: January 29, 2008
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Before LOKEN, Chief Judge, GRUENDER and BENTON, Circuit Judges.
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GRUENDER, Circuit Judge.
Kenneth Eckert brought this lawsuit against Titan Tire Corporation and Titan
Tire Corporation Pension Plan (collectively “Titan”), claiming that Titan
miscalculated the amount of pension benefits he was entitled to receive. Titan brought
a third-party claim against Pirelli Tire, L.L.C. (“Pirelli”), claiming that Pirelli was
responsible for the miscalculation and that Pirelli should indemnify Titan. Titan and
Eckert settled Eckert’s claim. On Titan’s third-party claim against Pirelli, the district
court1 held that Pirelli was not required to indemnify Titan for the miscalculation of
Eckert’s pension benefits. For the reasons discussed below, we affirm.
I. BACKGROUND
Pursuant to an Asset Purchase Agreement (“APA”) dated July 16, 1994, Titan
Tire Corporation purchased Pirelli’s Des Moines, Iowa tire manufacturing and
production plant from Pirelli. Under section 2.04(2) of the APA, Titan assumed the
liability to cover Pirelli’s obligations for retirement benefits to former Pirelli
employees who were continuing in employment with Titan, but Pirelli remained liable
for retirement benefits accrued by the employees before Titan’s purchase of the plant.
To cover Pirelli’s liabilities to the employees, section 13.01(3)(a)(iii) of the APA
required Pirelli to transfer assets to Titan sufficient to cover Pirelli’s pension liability,
the “pension amount.” Section 13.01(3)(a)(iv) defined the “pension amount” as an
amount equal to the actuarial present value of the vested accrued benefits.
1
The Honorable Harold D. Vietor, United States District Judge for the Southern
District of Iowa.
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In section 5 of the APA, labeled “Representations and Warranties,” the parties
acknowledged that the representations made under section 5 were “correct and
complete in all material respects” and would be “correct and complete in all material
respects as of” July 16, 1994, the effective date of the APA. In section 5.18(1)(B),
Pirelli represented and warranted that, “[w]ith respect to each Employee Pension
Benefit Plan listed in Section 5.18 of the Disclosure Schedule, [Pirelli] has delivered
or made available to [Titan] correct and complete copies of . . . actuarial valuations
and audited financial statements for the most recent plan year.”
According to the testimony of William Hogan, an actuary engaged by Titan,
Pirelli’s actuaries provided him with “a data file in electronic format which held
individual participant information, names, date of birth, date of hires, pay, [and]
accrued benefits.” The file contained the individual participant records “determining
for each individual person what the likely cost of the pension is going to be and the
present value of that cost today,” which was then “summed up to get a total cost for
all participants.” Using the data provided by Pirelli’s actuaries, Hogan prepared his
own calculations using his firm’s systems to determine if his actuarial valuations
“would come reasonably close to the calculations” provided by Pirelli’s actuaries.
Hogan did not check the correctness of the underlying data as to each individual
participant but instead checked the actuarial calculations to ensure that Pirelli’s
actuarial calculations were correct. However, Pirelli’s actuarial valuations relied on
the incorrect starting date for Eckert of March 9, 1987, instead of his correct starting
date of February 12, 1970. As a result, the actuarial valuations provided by Pirelli’s
actuaries were incorrect. Only after Eckert filed his complaint did Titan examine the
actuarial valuations Pirelli had provided and realize that it relied on an incorrect hire
date for Eckert. The parties determined that the amount Pirelli transferred to Titan
was $37,520 less than its true pension liability.
Section 9 of the APA limited the time during which either party could bring a
claim for breach of a representation or warranty under section 5 and stated that “[t]he
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representations and warranties of the parties under Section[] 5 . . . hereof and the right
to make a claim for indemnification hereunder for breaches of representations and
warranties or otherwise with respect thereto shall survive only for a period of one (1)
year after the Closing Date.” Therefore, under section 9, the parties had one year from
the closing date to file a claim for breach of any section 5 representations and
warranties. Titan does not dispute that it filed its claim against Pirelli more than one
year after the closing date.
The transaction closed on August 11, 1994, and in August 1996, Pirelli
transferred approximately $55,000,000 of assets to Titan pursuant to Pirelli’s
obligation to transfer the pension amount under section 13 of the APA. Pirelli made
a second transfer of approximately $828,000 on December 31, 1998. In 2003, Eckert
filed suit against Titan seeking the full amount of the pension benefits he had earned.
Titan filed a third-party complaint against Pirelli, claiming that Pirelli was responsible
for the miscalculation and seeking indemnification based on the APA. Titan also
argues that it is entitled to relief under the Employee Retirement Income Security Act
(“ERISA”), 29 U.S.C. §§ 1001 et seq., but Pirelli argues that Titan failed to plead an
ERISA claim. Titan settled Eckert’s claims before trial but continued to pursue its
third-party claims against Pirelli. After a bench trial, the district court entered
judgment in favor of Pirelli, finding that Titan had not adequately pled its ERISA
claim and had failed to bring its breach of contract claim within one year as required
by the APA’s limitations provision. Titan appeals both rulings. We affirm.
II. DISCUSSION
When the district court conducts a bench trial as it did here, we review the
district court’s fact finding for clear error, and we review legal conclusions and mixed
questions of law and fact de novo. See Fed. R. Civ. P. 52(a); Koons v. Aventis
Pharms., Inc., 367 F.3d 768, 774 (8th Cir. 2004).
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All claims under the APA are “governed by and construed in accordance with
the domestic laws of the State of Illinois.” Section 15.07. Therefore, we must apply
Illinois law in interpreting the APA, including whether section 9’s one-year
limitations period bars Titan’s breach of contract claim. See, e.g., Inacom Corp. v.
Sears, Roebuck & Co., 254 F.3d 683, 687-89 (8th Cir. 2001). Under Illinois law,
“[t]he primary objective in construing a contract is to determine and give effect to the
intention of the parties at the time they entered into the contract.” K’s Merch. Mart,
Inc. v. Northgate Ltd. P’ship, 835 N.E.2d 965, 970 (Ill. App. Ct. 2005); see also
Outboard Marine Corp. v. Liberty Mut. Ins. Co., 607 N.E.2d 1204, 1212 (Ill. 1992).
In reaching that objective, “[t]he language used in the contract generally is the best
indication of the parties’ intent.” K’s Merch. Mart, 835 N.E.2d at 971. Here, the plain
language of section 9 makes it clear that the parties sought to require that claims for
breaches of representations and warranties under section 5 be brought within one year
of the close of the transaction. See Vill. of Lake In The Hills v. Ill. Emcasco Ins. Co.,
506 N.E.2d 681, 683 (Ill. App. Ct. 1987) (“Parties to a contract may validly agree to
set a reasonable time limit within which a suit on the contract must be filed.”).
While a contract’s plain language is the best indication of the parties’ intent,
“[t]he contract must be construed as a whole, taking into account the overall purpose
of the contract, and the context in which the language is used.” K’s Merch. Mart, 835
N.E.2d at 971. Section 9 of the APA states that the representations and warranties
under section 5 and the right to make a claim for a breach of the representations and
warranties survive only one year after the closing date. Pirelli argues that Titan’s
claim rests on a breach of Pirelli’s section 5 representation and warranty that it would
provide correct actuarial valuations for the pension plans. If so, Titan cannot succeed
on its claim for indemnification because it filed its claim more than a year after the
closing date, and section 9 bars the claim. Titan, however, argues that Pirelli actually
violated section 13, to which section 9’s one-year limitation does not apply. Section
13 of the APA required Pirelli to transfer to Titan the pension amount as defined in
section 13.01(3)(a)(iv), and Titan argues that Pirelli failed to transfer the correct
pension amount.
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Underlying Titan’s argument that Pirelli failed to transfer the correct pension
amount is the claim that Pirelli provided Titan with inaccurate actuarial valuations of
the pension plans. In section 5.18(1)(B), Pirelli warranted that it was providing Titan
with correct actuarial valuations, which it failed to do. Titan’s argument that Pirelli
failed to transfer the pension amount under section 13.01 rests on the fact that Pirelli
provided inaccurate actuarial valuations as required in section 5.
As Titan’s actuary Hogan testified, Pirelli’s actuaries transferred a data file to
him containing the names, dates of birth, dates of hire, pay and the present value of
the accrued benefits for each employee covered by the pension plan. The present
value of the accrued benefits for each employee was then summed up for all
employees resulting in the actuarial valuations of the pension plans, an accurate
version of which Pirelli was required to provide under section 5.18(1)(B) of the APA.
Under section 5.18(1)(B), Pirelli warranted that it would provide the “correct . . .
actuarial valuations.” Because Eckert’s date of hire was incorrect, the actuarial
valuations Pirelli provided were incorrect. By providing incorrect actuarial
valuations, Pirelli breached its representation and warranty under section 5 of the
APA.
Using the data Pirelli provided, Pirelli and Titan both calculated the pension
amount and Pirelli transferred to Titan assets equal to the calculated pension amount,
meeting its duty under section 13.01(3)(a)(iii). Had Pirelli not transferred any assets
to cover the pension amount or had it transferred an amount less than the calculated
pension amount, it would have breached section 13.01, which required Pirelli to
transfer the calculated pension amount to Titan. Titan does not argue either that Pirelli
failed to transfer any assets to cover the pension amount or that Pirelli transferred less
than the calculated pension amount. In fact, Pirelli did transfer funds equal to the
pension amount under section 13.01 as determined by its actuaries; it simply
transferred the incorrect amount based on its incorrect actuarial valuations. Under
section 5, Pirelli had warranted those actuarial valuations were correct. Therefore,
construing the contract as a whole, taking into account the overall purpose of the
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contract and the context in which the language is used, we conclude that the incorrect
actuarial valuations provided by Pirelli to Titan that resulted in the transfer of the
incorrect pension amount constituted a breach of Pirelli’s section 5 representation and
warranty. Thus, section 9’s one-year limitation bars Titan’s breach of contract claim.2
Titan next argues that Pirelli violated ERISA by failing to transfer sufficient
assets to fund the pension plan of a successor employer as required by ERISA. See
29 U.S.C. § 1058. The district court found that Titan had not properly pled this claim
in its third-party complaint against Pirelli and declined to address Titan’s arguments
under ERISA.
In its third-party complaint, Titan invoked ERISA twice, both times within the
section entitled “Parties, Jurisdiction, and Venue.” The complaint stated that the
pension plan was governed by ERISA and that the district court had jurisdiction over
the case pursuant to 28 U.S.C. § 1331 (federal question jurisdiction), 28 U.S.C. § 1332(diversity jurisdiction) and 29 U.S.C. § 1132(e) (giving federal courts jurisdiction to
hear claims arising under ERISA). In its complaint, Titan failed to include an ERISA
claim as a separate count, failed to invoke ERISA as part of its claim for relief and
2
At oral argument, Titan argued for the first time that it would be illogical for
section 9’s one-year limitation to apply because the pension amount was not
transferred until 1996, more than one year after the closing date of the APA, and that
therefore it could not possibly have brought its claim within one year. However,
because Titan did not make this argument in its brief, it is waived. See Gebrasadik
v. Gonzalez, 491 F.3d 846, 851 n.6 (8th Cir. 2007). In any event, we do not see any
inconsistency. Put simply, the APA allowed Titan one year to verify the accuracy of
the actuarial valuations which determined the pension amount to be transferred under
section 13. Indeed, had Titan or its actuaries simply compared the correct start date
for Eckert contained in a list of employees attached to the APA pursuant to section
5.17 with the incorrect start date in the electronic data file Pirelli’s actuaries provided
to Titan’s actuaries, Titan could have easily discovered the error that caused the
actuarial valuations to be inaccurate.
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failed to do anything indicating its intent to pursue a claim based on ERISA beyond
merely citing the jurisdictional provision of the statute.
The federal rule that governs pleadings requires only that a complaint be “a
short and plain statement of the claim showing that the pleader is entitled to relief.”
Fed. R. Civ. P. 8(a)(2). This short and plain statement must provide “fair notice of the
plaintiff’s claim and grounds for relief.” Smith v. St. Bernards Reg’l Med. Ctr., 19
F.3d 1254, 1255 (8th Cir. 1994); see also Bramlet v. Wilson, 495 F.2d 714, 716 (8th
Cir. 1974). Furthermore, a court should construe the complaint liberally in the light
most favorable to the plaintiff. See Luney v. SGS Auto. Servs., Inc., 432 F.3d 866, 867
(8th Cir. 2005). Nonetheless, the complaint must still provide the defendant with “fair
notice of what the plaintiff’s claim is and the grounds upon which it rests.” Conley
v. Gibson, 355 U.S. 41, 47 (1957). “While a complaint attacked by a Rule 12(b)(6)
motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation
to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and
conclusions . . . .” Bell Atl. Corp. v. Twombly, 550 U.S. ---, 127 S. Ct. 1955, 1964-65
(2007) (internal citation omitted) (alteration in original).
The district court found that Titan’s claim failed to “provide specificity
sufficient to give Pirelli notice that Titan [sought] relief pursuant to ERISA. Even in
a notice pleading system, a plaintiff, whether third-party or otherwise, must give the
defendant fair notice of the basis for the relief it seeks. Titan did not properly plead
an ERISA claim.” Eckert v. Titan Tire Corp., No. 03-30689, slip. op. at 7 (S.D. Iowa
Dec. 12, 2006). The district court concluded that because Titan did not mention an
ERISA violation in its third-party complaint that sought relief only on the basis that
Pirelli violated the APA by failing to transfer the correct pension amount, the
complaint failed to give Pirelli notice of Titan’s ERISA claim.
We agree with the district court. Simply invoking ERISA in the jurisdictional
section of the complaint was insufficient to give Pirelli notice of Titan’s claim and the
grounds upon which it rested. While a party is not necessarily required to identify a
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specific statute in its complaint, see, e.g., Sagana v. Tenorio, 384 F.3d 731, 736-37
(9th Cir. 2004); Northrup v. Hoffman of Simsbury, Inc., 134 F.3d 41, 45-46 (2d Cir.
1997), a complaint must still provide fair notice of the claim, see Conley, 355 U.S. at
47. To provide fair notice to Pirelli, Titan was required to provide sufficient notice
that it was seeking relief or making a claim based on ERISA. Just as “the standing
component of jurisdiction is not satisfied merely by citing the federal statute defendant
has allegedly violated,” Gardner v. First American Title Insurance Co., 294 F.3d 991,
994 (8th Cir. 2002), the fair notice component of a complaint is not satisfied merely
by citing the statute’s jurisdictional provision within the complaint’s jurisdictional
section. While Rule 8(a) requires very little, it does require fair notice of the claim
and the grounds upon which the claim rest. In its complaint, Titan failed to give such
notice.
III. CONCLUSION
Accordingly, we affirm the district court.
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