Local 705 International Brotherhood of Teamsters Pension Fund v. Pitello, No. 20-2142 (7th Cir. 2021)
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Gradei’s withdrew from a multi-employer pension plan, asserting that it had ceased all operations covered by the governing multi-employer collective bargaining agreement and was no longer required to contribute to the Fund, which sought to collect $221,932.55 in withdrawal liability. Gradei’s did not respond to payment demands and filed for bankruptcy. The Fund sued the Pitellos (Gradei’s owners) and another corporation owned by the Pitellos (GX), on the theory that they were businesses under common control. The district court found that Gradei’s and GX were conducting business rent-free on property owned by the Pitellos, which was enough to establish common control.
The Seventh Circuit affirmed. Under the Employee Retirement Income Security Act, 29 U.S.C. 1381(a), 1404(a) withdrawal liability applies to the withdrawing employer and to “all trades or businesses ... under common control” with that employer. The court rejected Pitello’s argument that the property was only a passive investment. It is possible to rebut the presumption that leasing property to a withdrawing employer is a business but the Pitellos failed to do that. The court noted the economic equivalence between a return on investment in the form of rent collection and return on investment in the form of dividends or salaries made possible by the absence of any rent obligation. The land is part of the business.
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