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McCleskey v. CWG Plastering, LLC

United States Court of Appeals, Seventh Circuit

July 31, 2018

Mark McCleskey, et al., Plaintiffs-Appellants,
CWG Plastering, LLC, Defendant-Appellee.

          Argued December 6, 2017

          Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 1:15-cv-01284 - Larry J. McKinney, Judge.

          Before Wood, Chief Judge, and Easterbrook and Hamilton, Circuit Judges.

          Wood, Chief Judge.

         Walter "Wally" Gianino owned and operated a plastering company in St. Louis, Missouri, for over thirty years. That business-Gianino Plastering-abruptly closed in 2012. Around the same time, Wally's son, Curt Gianino, who had worked at Gianino Plastering for over a decade, founded his own company, CWG Plastering, LLC. CWG took on at least some of Gianino Plastering's customers, hired its employees, and without missing a beat completed jobs that Gianino Plastering had begun. What might be a story of a son following in his father's footsteps is complicated by an inconvenient fact: Curt went into business on the same day that a $196, 940.73 judgment was entered against his father's company.

         That judgment arose out of Gianino Plastering's 2009 collective bargaining agreement with the Operative Plasterers and Cement Masons International Association Local 3 ("the Union"). The agreement obligated the company to make regular contributions to the Indiana State Council of Plasterers and Cement Masons Health and Welfare and Pension Funds ("the Funds"). Gianino Plastering soon fell short of meeting that obligation, prompting the Funds to sue in the Southern District of Indiana in 2011 to recover the delinquent payments. After a bench trial, the district court entered judgment against Gianino Plastering and in favor of the Funds. But the Funds were blocked from collecting on their judgment because Gianino Plastering filed for bankruptcy.

         The Funds now have sued CWG, asserting that CWG is Gianino Plastering's successor and alter ego and thus liable for both the judgment and for other ongoing violations of the collective bargaining agreement. After discovery, the parties filed cross-motions for summary judgment. The district court ruled that the Funds had not produced enough evidence to proceed to trial. Our de novo review of the record convinces us to the contrary: the Funds proffered considerable evidence that a trier of fact could use to support its case against CWG, and so we reverse and remand.


         The Funds rely on two legal theories to impose liability on CWG for Gianino Plastering's debts and continuing obligations. First, they contend that CWG is a successor to Gianino Plastering, making it liable for Gianino Plastering's failure to pay into the Funds. See, e.g., Teed v. Thomas & Betts Power Sols., L.L.C., 711 F.3d 763, 764 (7th Cir. 2013). Second, they argue that CWG must continue to abide by Gianino Plastering's collective bargaining obligations as an alter ego of the defunct company. See, e.g., Int'l Union of Operating Eng'rs, Local 150, AFLCIO v. Centor Contractors, Inc., 831 F.2d 1309, 1312-13 (7th Cir. 1987).

         Because CWG's liability arises under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1132, 1145, and the National Labor Relations Act (NLRA), 29 U.S.C. § 185(a), everyone assumed in the district court that federal law governs both claims. (On appeal, CWG cited a few cases that rested on state law, but it never actually argued that state law applies.) At oral argument, CWG belatedly took the position that state law should apply. Choice of law is not a subject of jurisdictional status, and so a party can forfeit that issue by overlooking it. McCoy v. Iberdrola Renewables, Inc., 760 F.3d 674, 684 (7th Cir. 2014). That is what CWG did here: it failed to challenge the governing law either in its briefs before this court or in its summary judgment materials in the district court. We thus consider the subject forfeited, see Puffer v. Allstate Ins. Co., 675 F.3d 709, 718 (7th Cir. 2012).


         Even with the forfeiture, the question remains whether we should, on our own initiative, reject the use of federal law in favor of one or more state laws. We see no reason to do so here. If the choice of federal law appeared to be flatly inconsistent with the Supreme Court's decisions, we would have a different problem. But it is not. To the contrary, the NLRA and ERISA are both statutes in which the Supreme Court has often opted for a federal standard, in light of the broad preemptive force of both ERISA and section 301 of the Labor Management Relations Act. See Smith v. Evening News Ass'n, 371 U.S. 195, 200 (1962); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 55-56 (1987).

         For example, the Supreme Court announced a federal standard for successor liability in a number of cases beginning with John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964), where it addressed the question whether a corporate successor had a duty to arbitrate under the labor laws. Id. at 548-49. There the Court found that federal law controlled and imposed a duty to arbitrate on the successor employer, even though only the predecessor had actually agreed to arbitrate. Id. at 550-51. Over the next decade, the Court periodically returned to successor liability under the NLRA and in each instance, it used a federal standard. See Golden State Bottling Co. v. NLRB, 414 U.S. 168, 174-85 (1973) (finding that federal labor policy favored holding a successor liable for the unlawful discharge of an employee from its predecessor); NLRB v. Burns Int'l Sec. Servs., Inc., 406 U.S. 272, 287-88 (1972) (holding that a successor is not bound to substantive terms of previous collective bargaining agreement). See also Howard Johnson Co. v. Detroit Local Joint Exec. Bd., Hotel & Rest. Emps. & Bartenders Int'l Union, AFL-CIO, 417 U.S. 249, 264-65 (1974) (no successor liability).

         A federal standard for alter-ego liability also has deep roots in labor law. In Howard Johnson, the Supreme Court held, without even a nod to state law, that federal common law governed the question before it. It then went on to state that under federal law, an "alter ego" (unlike a successor corporation) "is in reality the same employer and is subject ...

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