Plaintiffs allege that Bruce Felshman and Robert Felshman consummated transactions that
led to the insolvency of nearly all of the business defendants. (Pls.’ Reply at 11.) Plaintiffs have
presented no evidence, however showing that the individual defendants performed any such
transactions or that they performed them in order to perpetrate a fraud. (See Pls.’ Reply at 11-12;
Pls.’ Sur Reply at 15-16.) Plaintiffs also allege that the individual defendants distributed assets for
their own interests, failed 10 maintain corporate formalities, failed to operate at arms length, failed
to adequately capitalize corporations and fractionalized operations, (First Am. Compl. ] 68), but they
fail to provide evidentiary material to support those claims. Bruce Felshman and Robert Felshman
deny the allegations of those counts of the Amended Complaint. (Answer First Am. Compl. ff 56-
100) In their declarations, Bruce Felshman and Robert Felshman deny that they received assets of
dissolved corporations without consideration, deny that there was any disregard of corporate
formalities, and deny that any of corporation was rendered insolvent through distribution ofits assets
without consideration. (Decl. Bruce Felshman, 9 14-16; Decl. Robert Felshman, {J 8-11.)
Plaintiffs argue that the individual defendants have not submitted any evidence supporting their
assertion (Pls.’ Sur Reply at 15-16), but it is Plaintiffs’ responsibility to satisfy the requirements for
imposing personal liability by providing coming forward with evidence to support their thcories of
liability under the applicable state law. See, ¢.g., Minneapolis Van & Warehouse Co., 764 F, Supp
at 1295, applying “the universally recognized doctrine that stockholders cannot receive the
unencumbered benefit of corporate assets until all creditors have been paid or provided for” to
impose a constructive trust over procecds from a transfer of specific corporate real estate to a

shareholder.

13



employees. (First Am, Compl. {{] 5-7.)) The First Amended Complaint also names two individual
defendants, Bruce Felshman and Robert Felshman, whom Plaintiffs allege executed various Master
Collective Bargaining Agreements on behalf of the McAnn’s Control Group. (First Am. Compl. 9]
7-13.) The Amended Complaint further alleges that collective bargaining agreements bound the
McAnn’s Control Group to the Pension Fund Trust Agreements; that in 1999, the McAnn’s Control
Group ceased to be a participating employer under the Pension Plan and withdrew from the Pension
Plan in a complete withdrawal as that term is defined in 29 U.S.C. §1383(a); and that, as a result,
the McAnn’s Control Group incurred withdrawal liability to the Funds in the amount of
$2,923,985.29, plus interest, focs and penalties. (First Am. Compl. ff] 14-15, 18, 36.) The First
Amended Complaint seeks to impose personal liability on Bruce Felshman and Robert Felshman for
that withdrawal liability under a variety of theories.

On March 19, 1999, Plaintiffs had a letter delivered to Bruce Felshman “re: McAnn’s
(Controlled group)” asserting withdrawal liability against “you (i.e., the Employer),” notifying him
of Plaintiffs’ assertion that withdrawal liability had been incurred by a number of businesses
Plaintiffs considered under common control. (Pls.’ Reply, Ex. 2.) [Dkt #35,] The letter stated that
“{a]ttached is a listing of all the facilities included in this determination, as these busincsses and
others under common control constitute a single employer for purposes of withdrawal liability, with
each member of the controlled group being jointly and severally liable for these payments.” (/d.)
Defendants admit that they did not demand arbitration in response to Plaintiffs’ notice and demand,

onginally arguing that the Ictter did not provide sufficient notice to ihe entity defendants in order to

> Plaintiffs subsequently filed a Second Amended Complaint naming additional defendants.
[Dkt # 60.] Those defendants are not the subject of the present motion.

4



Regarding 1407 Restaurant, Inc., Defendants state that “1407 Broadway Restaurant, Inc.”
was 100% owned by Robert Felshman. (Pls.’ Reply, Ex. 1, Defs.’ Resp. to Pls.’ Interrog. No. 3.)’
Both Bruce Felshman and Robert Felshman deny that they have any ownership of 1407 Restaurant,
Inc. or any knowledge of who owns it, and state that they were not authorized to waive or accept
service on behalf of 1407 Restaurant, Inc. (Decl. Bruce Felshman, ff 23, 26; Decl. Robert Felshman,
$415, 18)

Plaintiffs’ Sur Reply does not bring forward any evidence contrary to the declarations of
Bruce Felshman and Robert Felshman. (Pls.’ Sur Reply at 17.) On this state of the record, there is
no evidence to support Plaintiffs’ contention that the Disputed Corporate Defendants are part of the

“McAnn’s Control Group,”

CONCLUSION

For the forgoing reasons, this court respectfully recommends that Plaintiffs’ Motion for an
Order Requiring Past Due and Accruing Interim and Withdrawal Liability Payments be DENIED as
to Bruce Felshman and Robert Felshman and as to 131 East 45th Street Restaurant Corp., 43 Park
Place Restaurant, Inc., and 1407 Restaurant, Inc., without prejudice to a future motion by Plaintiffs
for summary judgment.

Specific written objections to this report and recommendation may be served and filed within
10 business days from the date that this order is served. Fed. R. Civ. P. 72(a). Failure to file

objections with the District Court within the specified time will result in a waiver of the right to

7 1407 Broadway Restaurant, Inc. is one of the entity defendants as to which Defendants did
not object to entry of an order requiring interim withdrawal liability payments.

17



businesses conducted by these corporations continued to operate for the duration of their
participation in the Fund despite dissolution of the corporate entity, Under New York law (the state
of incorporation of the corporations), individuals who conduct business on behalf of a dissolved
corporation may be personally liable for the obligations that arise from that business. Brundes Meat
Corp. v. Cromer, 146 A.D.2d 666 (N.Y. App. Div.1989). In the Brandes Meat case, the plaintiff
provided mcat to the defendant pursuant to acontract. After the defendant failed to pay, the plaintiff
sued. The defendant defended on the ground that he had entered into the contact as an agent for a
corporation. The corporation, however, had been previously dissolved years earlier. The court
recited the rule that, after dissolution, a corporation may conduct business only to the extent
necessary to wind up ils affairs. Jd. at 666. The individual defendant was thus held personally liable
for the contract as he had “purported to act on behalf of a corporation which had neither a de jure
nor a de facto existence.” Id. at 667.

In support of their motion, Plaintiffs submit the interrogatory answers in which Bruce
Felshman and Robert Felshman admit that one or both of them were shareholders in the subject
corporations. (Pls.’ Reply, Ex, 1, Defs.’ Resp. to Pls.’ Interrog. No. 3.) In a summary cxhibit,
Plaintiffs set out the dissolution date of each of the corporations and the date that each allegedly
withdrew from participation in the Funds. (Pls.’ Sur Reply, Ex. 7.) However, this information is
not verified or supported by an affidavit, and there is no factual basis given for the asscrtion of the
date that the corporation withdrew from the Funds. Plaintiffs state that their summary “is supported
by the attached documentation which was submitted by defendants Bruce and Robert Felshman

during discovery.” (Pls.’ Sur Reply at 6.) The documentation consists of exhibits appearing to be

Sur Reply, Ex. 7.)



A. Status as ERISA Employers

Generally, a corporate officer who is not a party to a pension plan or a collective bargaining
agreement entercd into by the corporation is personally liable for contributions only to the extant that
the officer is liable for general corporate debts under state corporate law. Plumbers’ Pension Fund,
Local 130 v, Niedrich, 891 F.2d 1297, 1301 (7" Cir. 1989). However, ERISA treats each owner of
an unincorporated business as an employer and includes the owner as a member of the control group,
resulting in the owner’s personal liability for outstanding withdrawal liability. 29 U.S.C. §
1301(b)(1); Central States v. Neiman, 285 F.3d 587, 594, 596 (7ih Cir. 2002);Central States v.
Slotky, 956 F.2d 1369, 1374 (7th Cir. 1992), Likewise, if under the applicable state law, corporate
officers are liable for corporate debts incurred after the dissolution ofa corporation, the officers can
be held personally liable under ERISA for the corporation’s contributions to the benefit fund.
Boards of Trustees of Bricklayers Local 74 Fringe Benefit Funds v. Michael J. Vorkupic, Inc., No.
01 C 1617, 2002 WL 596357 at *2 (N.D. Ill. April 17, 2002)(Grady, J.) (discussing Illinois law).
In this case, Plaintiffs claim that Bruce Felshman and Robert Felshman conducted the business of
some of the entity defendants alter those defendants were dissolved as corporations, and thus, that
Bruce Felshman and Robert Felshman are individually liable as “employers.” Bruce Felshman and
Robert Felshman deny that claim.

Plaintiffs argue that the individual defendants are obligated to make interim withdrawal
liability payments while their status as employers is determined, subject to the exception set forth
in Rentar. (P1.’s Sur Reply at 2.) [Dkt # 55.] However, in the Rentar case, as in the other cases cited
by Plaintiffs (Central States v. Hunt Truck Lines, 272 F.3d 1000, 1003 (7 Cir. 2001) and Trustecs

of Chicago Truck Drivers y. Central Transport Inc., 935 F.2d 114, 115 (7" Cir, 1991)), an arbitration



trigger ERISA’s deadline for initiating arbitration. (Defs.’ Opp’n. at 5.) [Dkt # 34.] Defendants have
since conceded that the lettcr along with the subsequently-filed Complaint and First Amended
Complaint constitute sufficient statutory notice to defendants “who were at any time employers
within the meaning of the withdrawal liability provisions of ERISA . . . and who were properly
served with the complaint or for whom we properly waived service of either complaint [or amended
complaint].” (Def.’s Letter to Mark A. Spadoro dated Sept. 11, 2002 at 2, Pls.’ Sur Reply, Ex. 8.)
Defendants’ counsel further stated his opposition to the entry of an order requiring interim
withdrawal liability payments by three entities, 43 Park Place Restaurant, Inc., 131 East 45" Street
Restaurant Corp. 1407 Restaurant, Inc., and by Bruce Felshman and Robert Felshman. (/d.) They
took no position with respect to McAnn’s Bar & Restaurant, Inc., which Defendants’ counsel stated

it does not represent. (/d.)*

ANALYSIS
IL INDIVIDUAL DEFENDANTS
Plaintiffs assert (hat Bruce Felshman and Robert Felshman are subject to withdrawal liability
under a number of theories, A threshold issue is whether those individuals can be ordered to make
interim withdrawal liability payments before there is a resolution of the ultimate issue of their

liability.

* Plaintiffs motion for entry of an ordcr of default against McAnn’s Bar & Restaurant, Inc.
was granted on October 1, 2002. [Dkt # 49.]

a


appeal all findings, factual and legal, made by this Court in the report and recommendation,

Lorentzen y. Anderson Pest Control, 64 F.3d 327, 330 (7th Cir. 1995).

GERALDIN. AT BROWN
United States Magistrate Judge

Dated: January 2, 2003

18



an employer or under other theories of liability. Indeed, even when arbitration is anticipated, the
obligation of a former shareholder for interim withdrawal liability payments has been determined
by the procedures and standards applicable to summary judgment. Central States v. Minneapolis
Van & Warehouse Co., 764 F. Supp. 1289, 1298 (N.D. ill. 1991)(Shadur, J.),

Plaintiffs argue that a formal summary judgment motion complying with the requirements
of Local Rule 56.1 is not necessary because that Plaintiffs have met whatever standard is appropriate.
(Pls.’ Sur Reply at 3.) Again, however, Plaintiffs do not point to any precedent in which a standard
other than summary judgment has been applied in circumstances comparable to the prescnt situation.
They do not discuss in what way their assertion that the record “clearly shows” the individuals’
liability differs from arguing that summary judgment is appropriate.

A court may enter summary judgment swa sponte if the parties were on notice of the need to
come forward with evidence and had an opportunity to do so. Dayton Electric Manufacturing Co.,
v, Apcom Inc., 782 F. Supp. 389, 395 (N.D. II]. 1992). However, granting summary judgment sua
sponte warrants special caution and is improper unless the responding party was given adequate
notice and a fair opportunity to present evidence in opposition toit. Simpson v. Merchant's Recovery
Bureau, 171 F.3d 546, 549 (7" Cir. 1999). The present record does not justify summary judgment
on behalf of Plaintiffs on the issuc of the individual liability of Bruce Felshman and Robert
Felshman,

Plaintiffs have identified ten corporations that they assert were dissolved prior to that

corporation’s withdrawal from the Fund. (Pls.’ Sur Reply, Ex. 7.)° Plaintiffs conclude that the

> The entities are: 11 Stone Street Corp.; 50 Trinity Place Rest. Corp.; 163-65 West 48th
Street Corp.; 545 Fifth Rest, Corp.; Cedar 113 Street Café, Inc.; Thames Restaurant, Inc.; 50 E. 43
Rest. Inc.; B. F. Bar Inc.; Booth Five Grand Central Corp.; and Williams Street 23 Rest. Corp. (Pls.”

8



Hine Outer Foruptto7)

United States District Court, Northern District of Illinois

Name of Assigned Judge Marvin Ei, Aspen Sitting Judge if Other Geraldine Soat Brown
or Magistrate Judge than Assigned Judge
CASE NUMBER 01 C7518 DATE 4/2003
CASE Wilhelm vs. Mc Ann’s W 48" St
TITLE

[in the following box (a) indicate the party filing the motion, ¢.z., plaimtiM, defendant, 3rd party plaintiff, and (b) state briefly the nature
of the motion being presented. ]

MOTION:

DOCKET ENTRY:

(i) Oo Filed motion of [ use listing in “Motion” box above.]

(2) Oo Brief in support of motion due

(3) oO Answer brief to motiondug —_. Reply to answer brief due

(4) im Ruling/Hearingon_ set for at.

(5) a Status hearing[held/continued to] [set for/re-set for]on__—sset for at

(6) o Pretrial conferencefheld/continued to] [set for/re-set for]on___set for at.

(7) C] Trialfset for/re-set for] on at

(8) im) [Bench/Jury trial) [Hearing] held/continued to at

(9) QO This case is dismissed [with/without] prejudice and without costs[by/agrcement/pursuant to]
OFRCPa(m) ODO Local Rule 41.1 OFRCP41(ay(1) OO FRCP41(a\(2).

(oy {Other docket entry) — Report and Recommendation to Hon, Marvin E. Aspen submitted herewith. For the ‘ons set

out in the Report and Recommendation, this court respectfully recommends that Plaintiffs’ Motion for an Order Requiring Past Due and
Accruing Interim and Withdrawal Liability Payments be DENIED as to Bruce Felshman and Robert Felshman and as to 131 East 45th
Street Restaurant Corp.. 43 Park Place Restaurant, Inc., and 1407 Restaurant, Inc., without prejudice to a future motion by Plaintiffs
for summary judgment

Specific written objections to this report and recommendation may be served und filed within 10 business days from the date
that this order is served. Fed, R. Civ. P. 72(a). Failure to file objections with the District Court within the specified time will result in
a waiver of the right to appeal all findings, factual and legal, made by this Court in the report and recommendation, Lorenizen v,
Anderson Pest Control, 64 F.3d 327, 330 (7th Cir. 1995)

ql) x [For further detail see order (on reverse side offattached to) the original minute order.]
No notices required, advised in open court Document
No notices required. ste of Number
Y | Notices muited by judge's staft, y AN 03 2 002
Notified counsel by telephone. ing resin a tek
Dockcting to mail notices
Mail AQ 450 form, f r docket dapulshuttat
cy Perey
J | Copy tw judge/magistrate judge. og e '
eva003
Ci us iad tne mile notice
courtroom
MW depuly’s Mw
initials
Dateiti ved in
central (lerk’s Office deputy initials



As Plaintiffs observe, in some cases those agrecments bear datcs after the date Plaintiffs
assert the corporation was dissolved. For example, Bruce Fclshman signed a 1993 Memorandum
of Agreement on bchalf of 545 Fifth Rest. Corp., Cedar 113 Street Café, Inc. and Thames Restaurant,
Inc, (Defs.’ Further Resp., Tab 3, Ex. 10.) Plaintiffs assert that all of those corporations were
dissolved on December 24, 1991. (Pls.’ Sur Reply, Ex. 7.) However, it is not clear from the limited
material provided by the partics that the Memorandum of Agreement reflects the continuing conduct
of business on behalf of any of those entitics. The Memorandum of Agreement appears to be an
amendment to a previous agreement entered into in May 1990, a time when those corporations were
presumably in good standing. Plaintiffs have not discussed whether the corporations undertook
further obligations in the Memorandum of Agreement, or simply modified retroactively obligations
they had previously undertaken, which might or might not constitute winding up the affairs of the
corporation, rather than continuing to conduct business.

It is well-established that a motion for summary judgment must be supported or opposed by
“evidence of evidentiary quality — either admissible documents or attested testimony such as that
found in depositions or in affidavits... .” Winskunas v. Birnbaum, 23 F.3d 1264, 1267 (7" Cir.
1994), Plaintiffs here have not submitted any matcrial of evidentiary quality to demonstrate that the
business of the corporations was carried on after dissolution and before withdrawal of the
corporations from participation in the Funds.

Likewise, Plaintiffs argue that Robert Felshman executed collective bargaining agrecments
for an entity called “McAnn’s Bar and Restaurant, Inc.” at a time when “McAnn’s Bar and
Restaurant, Inc.” was not incorporated. (Pls. Sur Reply at 8.) Robert Felshman responds that the

actual party to the agrecment was “McAnn’s Bar and Restaurant Corp.” which was incorporated

11



printouts from the New York State Department of State website showing that as of the date of the

search, those entities had an “inactive” stalus (bul not showing the date of dissolution), and LEXIS

printouts showing the date of dissolution of each corporation. (/d., Ex. 7.) However, the LEXIS
printouts expressly state, “[t]his data is not an official record of the Department of State or the State
of New York.” (/d.) Cf Brandes Meat Corp., 146 A.D.2d at 667 (plaintiff submitted certificate
issued by Secretary of Statc to show date of dissolution). Even assuming that the documents were
produced by the defendants in discovery, the defendants are not by that fact alone deemed to have
admitted the truth of the information contained therein. Cf Fed. R. Evid. 801(d)(2). Plaintiffs
further state that the date of withdrawal was supplied to Defendants in the letter of March 19, 1999,
and that “to date” Bruce Felshman and Robert Felshman “have not controverted” the date. (Pls.’ Sur
Reply at 6.) However, Plaintiffs do not demonstrate that the date has ever been set forth in amanncr
that would turn “not controverting” the date into an admission, for example, by way of a request to
admit.

Bruce Felshman and Robert Felshman admit that the corporations identified in footnote five,
supra, are now dissolved. (Answer to First Am. Compl. {| 51.) However, they dispute Plaintiffs’
allegation that they carried on the corporations’ businesses after the corporations were dissolved.
They submitted their own declarations stating that they never owned an unincorporated business and
that “each of the corporations . .. was a New York corporation in good standing throughout its active
life.” (Defs.’ Further Resp., Decl. Bruce Felshman ff 12-13; Decl. Robert Felshman ff 6-7.) They

also submit copies of the collective bargaining agreements reflecting that those agreements were

entered into between the union and the corporate entities. (Defs.’ Further Resp., Tab 3, Exs. 1-11.)



had been initiated to determine issues of liability, and the issue before the court was the propriety
of interim withdrawal liability payments for the interim “until the arbitrator issues a final decision
with respect to the determination submitted for arbitration.” 29 U.S.C. §1401(d). Thus, these cases
do not answer the question in this case, which is: Where as here, the opportunity for arbitration has
been waived, can the court impose interim withdrawal liability payments on a party that disputes its
liability? Generally, a defendant’s status as an employer is an issue that must be resolved prior to
determining withdrawal liability, and is to be resolved by the court, al least when no arbitration has
been commenced, Sfotky, 956 F.2d at 1372-73 (stating that “(t]he requirement [that all disputes
between the employer and the pension plan be resolved by arbitration] presupposes a determination

som

that the dispute is with an ‘employer’”’). The alleged employer's failure to initiate arbitration docs
not preclude the defendant from raising the issue of his status as an employer to the court. Central
States v. Personnel Inc., 974 F.2d 789, 792 n.1 (7th Cir. 1992). Accord, Central States v.
Progressive Driver Services, Inc., 940 F. Supp. 1311, 1314 (N.D. IIL 1996).

Defendants argue that the determinations necessary to impose ERISA liability, even interim
liability, must be made pursuant to judgment, either summary judgment or bench tal. (Defs.’
Further Resp. at 6.) In this case, no motion for summary judgment has been filed as to any aspect
of the case. Discovery is procceding and is set to close in April, 2003. [Dkt #59.] Plaintiffs argue
that summary judgment proceedings are not necessary; that the record before the court “clearly
shows” that Bruce Felshman and Robert Felshman are “employers.” (Pls.’ Sur Reply at 3.)
However, Plaintiffs have not cited a case in which the court that was ultimately to determine liability

because arbitration was waived, ordered interim withdrawal payments prior to its own resolution (on

summary judgment or bench trial) of a dispute regarding whether a defendant was liable either as


and Accruing Interim Withdrawal Liability Payments.) [Dkt#24.] Under ERISA, when an employer
withdraws from a multiemployer pension plan, the employer is liable to the pension fund for vested
but unfunded benefits. 29 U.S.C. § 1381(a). The pension fund must determine the amount of the
withdrawing employer’s liability and notify the employer of the amount demanded. § 1382(1)-(2).
If the employer wishes to challenge the withdrawal liability determination, it has ninety days from
receipt of the notice to request a review of the pension fund’s calculation. § 1399(b)(2)(A). If the
employer receives no satisfaction from ils request for review, it must initiate arbitration within the
deadline set by ERISA. § 1401(a)(1). If the employer fails to initiate arbitration, the amount
demanded by the fund is deemed to be due and owing. § 1401(b)(1). Even if the employer
commences arbitration to contest its liability, it still must make payments in the interim according
to the schedule prepared by the pension fund. § 1401(d). In this sense, ERISA establishes “a pay
now, arbitrate later scheme” in order to maintain the solvency of the pension fund. Central States
v. Wintz, 155 F.3d 868, 872 (7th Cir. 1998). Under this scheme, the employer is obligated to make
interim withdrawal payments unless it shows that the pension fund lacks a colorable claim and that
the interim payments would irreparably harm the employer. Trustees of Chicago Truck Drivers v.
Rentar Industries, Inc., 951 F.2d 152, 155 (7th Cir. 1991). ERISA treats trades or businesses that
are under common control as a single employer and holds members of the commonly controlled
group jointly and severally liable for withdrawal liability. § 1301(b)(1).

In this case, Plaintiffs’ First Amended Complaint [dkt 19] names as defendants more than

two dozen entities, which Plaintiffs call the “McAnn’s Control Group” and which Plaintiffs allege

entered into collective bargaining agreements covering restaurant, food and beverage service



The Minneapolis Van case illustrates a further problem with Plaintiffs’ claims against Bruce
Felshman and Robert Felshman for constructive trust and for “cvade and avoid” liability. Title 29,
§ 1392(c) states that “[i]f a principal purpose of any transaction is to evade or avoid liability. . .
liability shall be determined and collected . . . without regard to such transaction.” In other words,
if Plaintiffs are able to prove that the individual defendants completed transactions with the purpose
of evading or avoiding withdrawal liability, those transactions will be disregarded and liability will
be collected as though those transactions never took place. Plaintiffs’ recovery, however, is limited
to the valuc of assets that were allegedly improperly transferred. Board of Trustees, Sheet Metal
Workers Nat'l. Pension Fund v. Illinois Range, Inc., 186 F.R.D. 498, 502 (N.D. Ill. 1999) (Denlow,
M.J.) (evade and avoid liability); Reagan v. Baird, 487 N.E. 2d 1028 (ILL. App. 1986) (fraudulent
conveyance). Count IV of Plaintiff's First Amended Complaint alleges that Bruce Felshman and
Robert Felshman “consummat[ed] transactions... to evade and avoid withdrawal liability, including
without limitation, transactions relaled to the dissolution” of the defendant corporations. (First Am.
Compl. 758.) However, Plaintiffs fail to come forward with proof of specific transactions that were
undertaken for the purpose of evading or avoiding ERISA liability, or the value of the assets so
transferred. Notwithstanding that deficiency, Plaintiffs request that the court order interim liability
payments for the full amount of the assessed liability based on Plaintiffs’ evade and avoid theory.
(First Am. Compl. 65.) Again, the evidence presented by Plaintiffs is insufficient to require Bruce
Felshman and Robert Felshman to make interim withdrawal liability payments.

In summary, in the absence of authority to support imposing individual personal liability for
withdrawal hability arising out of agreements entered into by corporations prior to a judgment

finding such personal liability, this Court respectfully recommends that Plaintiffs’ motion for an

14



Regarding 131 East 45th Street Restaurant Corp., Bruce Felshman states in his declaration
that upon receiving the Complaint he mistakenly believed he may have owned that corporation
because 131 East 45" St. was the address of the restaurant and bar operated by Ecurb Rest., Inc., a
corporation that he previously owned. (Decl. Bruce Felshman, 4 25.)° Bruce Felshman states that
he does not know who owns 131 East 45" Street Restaurant Corp., and that he was not authorized
to accept or waive service on its behalf. (/d.) Robert Felshman states substantially the same in his
declaration. (Decl. Robert Felshman § 17.)

Regarding defendant 43 Park Place Restaurant, Inc., Bruce Felshman and Robert Felshman
state that that corporation was owned by Bruce Felshman’s sister and her husband (Robert
Felshman’s aunt and uncle) who are now deceased. (Decl. Bruce Felshman, 4| 24; Decl. Robert
Felshman, | 16.) They both state that they did not receive any interest in the corporation. (/d.) As
in the case of 131 East 45th Street Restaurant Corp., this defendant’s name resembles the address
of Mo Go Rest. Inc., a corporation on whose behalf Bruce Felshman signed several agreements.
(See, e.g., Defs.’ Further Resp., Tab 3, Exs. 6,7.) In the Amended Complaint, Plaintiffs identify the
defendant as “43 Park Place Restaurant, Inc., a New York Corporation, d/b/a Mo Go Restaurant.”
(First Am. Compl. ] 5.) Several of the agreements list a corporation named “Mo Go Rest. Inc., d/b/a
McAnn’s” at the address 43 Park Place. (Defs.’ Further Resp., Tab 3, Exs. 6, 7.) Mo Go Rest., Inc.
is not named as a defendant in either the Complaint or the Amended Complaint, although it is listed

in the March 19, 1999 letter to Bruce Felshman. (Pls.’ Reply, Ex. 2.)

® Beurb Rest., Inc is onc of the entity defendants as to which Defendants did not object to
entry of an order requiring interim withdrawal liability payments.

16



liability payments to the Fund pursuant to ERISA, 29 U.S.C. § 1399, et seg. [Dkt #24.) That
motion was included in the relerral to this court. [Dkt # 46.] Following a stipulation by Defendants’
counsel that Defendants would not oppose the entry of such an order against twenty-nine of the entity
defendants, a report and recommendation was submitted by this Court recommending that those
entities be ordered to pay interim withdrawal liability payments, [Dkt #53.] Defendants oppose the
entry of such an order against three remaining entity defendants and the individual defendants Bruce
Felshman and Robert Felshman. The parties filed additional submissions on that subject. (Defs.’
Further Resp. Pls.” Mot. Order Requiring Intenm Payments (“Defs.’ Further Resp.”’); (Pls.’ Sur
Reply Supp. Mot. Entry Ordering Defs. Pay Past Due and Accruing Interim Withdrawal Liability
Payments (“Pls.’ Sur Reply”).) [Dkt # # 47, 55.]

For the following reasons, this court respectfully recommends that the Plaintiffs’ motion be
DENIED with regard to the three remaining entity defendants and the two individual defendants
without prejudice to Plaintiffs’ seeking summary judgment on the contested issues relating to the

liability of those parties.

BACKGROUND
Plaintiffs claim that Defendants incurred withdrawal liability pursuant to ERISA upon
withdrawal from a multicmployer pension plan and that Defendants are obligated to make interim

withdrawal liability payments. (Pls.’ Mot. for Entry of an Order Requiring Defs. to Pay Past Due

> The entity defendants and the individual defendants are collectively referred to as the
“Defendants.” They are represented by the same counsel with the exception of defendant Mc Ann’s
Bar & Restaurant, Inc., which is a different entity from McAnn’s Bar & Restaurant Corp.
Defendants’ counsel does not represent Mc Ann’s Bar & Restaurant, Inc.

2



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS DOCKETED

EASTERN DIVISION JAN 0 3 2003
JOHN W. WILHELM, et al., )
Plaintiffs, ) Cause No. 01 C 7518
)
Vv. )
) Judge Marvin E. Aspen
MC ANN’S W, 48TH STREET REST. ) Magistrate Judge Geraldine Soat Brown
CORP., A NEW YORK CORPORATION, _)
etal, y
Defendants. y
)

To: The Honorable Marvin E. Aspen
United States District Court Judge

REPORT AND RECOMMENDATION

Geraldine Soat Brown, United States Magistrate Judge

The Hotel Employees and Restaurant Employees International Union Pension Fund (the
“Fund”) and the Trustees of that Fund (collectively the “Plaintiffs”) filed this action against more
than two dozen entities and two individuals to collect withdrawal liability payments allegedly duc
and unpaid under The Employee Retirement Income Security Act (“ERISA”) as amended by the
Multicmployer Pension Plan Amendments of 1980, 29 U.S.C. §§ 1001-1461.' Plaintiffs moved for

an order requiring the defendants to make allegedly past due and accruing inter withdrawal

' Plaintiffs allege that some of the defendant entities who are called corporations are not
registered corporations. (First Am. Compl. ff] 40-41.)

1

L



during the relevant period and made contributions to the Funds. (Decl. Robert Felshman, ff] 12-14.)
He states that identifying the signatory in the agreement as “McAnn’s Bar and Rest., Inc.” was a
misnomer, (/d.,9 13.) He further states that he has never owned any portion of “McAnn’s Bar and
Restaurant, Inc,” (/d., | 14.) Plaintiffs do not deny that “McAnn’s Bar and Restaurant Corp.” made
the payments to the Funds (which the Funds presumably accepted) pursuant to the agreement that
had been signed in the name “McAnn’s Bar and Rest., Inc.” They argue only that this apparently
mutual scrivener’s error in the agreement does not release Robert Felshman of personal lability.
(Pls.’ Sur Reply at 8.) However, as the movants, Plaintiffs have the burden of demonstrating that
there is no genuine issue of material fact, and that Plaintifls are entitled to summary judgment as a
matter of law. Fed. R. Civ. P. 56(c). Plaintiffs have not cited authority demonstrating that the Funds
may hold Robert Felshman personally liable under these circumstances.

In short, the current record does not establish that there are no genuine issues of fact or that
Plaintiffs are entitled to judgment as a matter of law as to the individual liability of Bruce Felshman
and Robert Felshman. On the other hand, Defendants have not established that Plaintiffs would not
be able to establish individual liability. Thus, the denial of Plaintiffs’ current motion should be
without prejudice to their filing a motion for summary judgment on this issue.

B. Plaintiffs’ Other Theories of Individual Liability

Plaintiffs’ alternative theories have even less evidentiary support in the record. Plaintiffs
claim that Bruce Felshman and Robert Felshman are also personally under the following theories:
evade and avoid liability under 29 U.S.C. §§ 1381, 1392 and 1451 (Count TV), “alter ego”(Count
V); “piercing the corporate veil”(Count V1); “fraudulent conveyance/constructive trust”’(Count VI);

and “single employer/ alter ego liability” (Count VII),

12


order requiring Bruce Fclshman and Robert Felshman to make interim withdrawal liability payments

be denied, without prejudice to a future motion by Plaintiffs for summary judgment.

IL. THE DISPUTED CORPORATE DEFENDANTS: 43 Park Place Restaurant, Inc.; 131
East 45" Street Restaurant Corp. and 1407 Restaurant, Inc.

Plaintiffs seck an order compelling interim withdrawal liability payments from three
additional entity defendants named in the First Amended Complaint: 43 Park Place Restaurant, Inc.;
131 East 45" Street Restaurant Corp.; and 1407 Restaurant, Inc. (hereinafter referred to as the
“Disputed Corporate Defendants”). Plaintiffs assert that these Disputed Corporate Defendants are
subject to withdrawal liability as trades or businesses that are part of a single cmployer or control
group. 29 U.S.C. § 1301(b)(1). Defendants deny that there has been proper service upon the
Disputed Corporate Defendants, and Bruce Felshman and Robert Felshman state that they have never
owned an interest in any of them. (Defs.’ Further Resp. at 12-13; Decl. Bruce Felshman, {{[ 23; Decl.
Robert Felshman, §] 15.)

The Disputed Corporate Defendants were not listed in the March 19, 1999 letter to Bruce
Felshman, (Pls.’ Reply, Ex. 2.) However, they were named as defendants in the Complaint and 43
Park Place Restaurant, Inc. and 131 East 45" Street Restaurant Corp. are named as defendants in the
First Amended Complaint. Apparently, Defendants’ counsel waived service upon the Disputed
Corporate Defendants and filed an appearance on behalf of those defendants. [Dkt # 10.] Now
Defendants’ counsel asserts that its waiver was improper and unauthorized, and therefore, the service
of the Complaint failed to constitute notice upon the Disputed Corporate Defendants. (Dets.’ Further

Resp. at 13.)