On October 20, 2003, plaintiffs filed their second amended complaint against defendants
Quanstrom, individually and d/b/a Monee Nursery, and Monee Nursery, LLC, seeking delinquent
fringe benefit contributions and an audit pursuant to ERISA.

DISCUSSION
(1) Res Judicata

Defendants have moved to dismiss plaintiffs’ second amended complaint, invoking the
doctrine of res judicata. “Under res judicata, a ‘final judgment on the merits bars further claims
by parties or their privies based on the same cause of action.”” Brown v. Felsen, 442 U.S. 127,
131 (1979)(quoting Montana v. United States, 440 U.S. 147, 153 (1979)). A successful res
judicata defense must meet three elements: “1) an identity of the parties or their privies, 2) an
identity of the causes of action, and 3) a final judgment on the merits.” People Who Care v.
Rockford Bd. of Educ., 68 F.3d 172, 177 (7th Cir. 1995).

In their motion,” defendants argue that the prior arbitration award to Local 150 bars the
present ERISA action by the Trustees. Specifically, defendants assert that: 1) Local 150 and the
plaintiffs are in privity because plaintiffs, not Local 150, are the true beneficiaries of the
arbitration award for fringe benefits and the Trustees were represented by Local 150 in the
arbitration; 2) the causes of action are identical because the present ERISA action seeks the same
fringe benefits awarded in the arbitration; and 3) the arbitration award, affirmed by both the

district court and court of appeals, is a final judgment.

2The court notes that defendants failed to file their reply brief in support of the instant
motion.


and/or alter egos are parties to that one transaction. Requiring plaintiffs to raise separate claims
against Quanstrom and Monee Nursery, LLC would not serve the purpose of Rule 10(b) because
separation would not facilitate a “clear presentation of the matters set forth.” Separation would
likely confuse the matter further.
CONCLUSION

For the reasons stated herein, defendants’ motion to dismiss is denied. Defendants are
directed to file their answers to the second amended complaint on or before February 20, 2004.
This matter is set for a report on status on February 24, 2004, at 9:00 a.m., at which time the
parties are to have conferred and shall present a definitive proposed discovery plan.

ENTER: January 28, 2004

VR toon

Robert W. Gettleman
United States District Judge



the Trustees were not named plaintiffs in the arbitration. Only Local 150 was a named plaintiff
in arbitration. Defendants assert that Local 150 and the Trustees are in privity because Local 150
represented the interests of the Trustees in the arbitration, winning an award for wage
contributions and fringe benefit funds.

At first blush, defendant’s contention that Local 150 and the Trustees are in privity is
somewhat persuasive due to both actions seeking payment of delinquent contributions to the
fringe benefit funds. Defendants contend that because Local 150 sought compensation for
delinquent contributions, the Trustees’ interest in such compensation was already represented by
Local 150, thus placing Local 150 and the Trustees in privity. However, caselaw subsequent to
Pientka makes clear that a union does not represent the same interests as a trust fund. Moreover,

the Seventh Circuit frowns on the concept of what it calls “virtual representation.” Central

States, Southeast and Southwest Areas Pension Fund v. D Investments, Inc., 2002 WL 1759938,

at *5 (N.D. Ill. July 30, 2002)(citing DeBraska v. City of Milwaukee, 189 F.3d 650, 653 (7th Cir.

1999)).

In Central States, Southeast and Southwest Areas Pension Fund v. Central Transport, Inc..

472 U.S. 559, 575-576 (U.S. 1985), the Supreme Court noted that:

{C]ompelling benefit plans to rely on unions would erode the protections ERISA
assures to beneficiaries... ERISA places strict duties on trustees with respect to the
interests of beneficiaries, and unions’ duties toward beneficiaries are of a quite
different scope...A trustee’s duty extends to all participants and beneficiaries of a
multiemployer plan, while a local union’s duty is confined to current employees
employed in the bargaining unit in which is has representational rights.”

The Court explained that requiring benefit plans to rely on union enforcement runs

contrary to the core principles of ERISA and federal labor policy. ERISA exists in large part to


With respect to his privity argument, defendants direct the court’s attention to Chicago

Dist. Council of Carpenters Pension Fund y. Pientka, 1985 WL 2320 (N.D. Ill. 1985). In

Pientka, the plaintiffs were multiple union trust funds, trustees of the trust funds and the union

that established the trust. Id. The defendants were a corporation and its president, who were
obligated to make contributions to the trust funds pursuant to a collective bargaining agreement.
Id, When the defendants failed to make the contributions, the plaintiffs sued pursuant to ERISA
and Section 301 of the Taft-Hartley Act (29 U.S.C. §§ 185 and 1132) to collect delinquent
benefit payments (“Suit 2"). Id, However, prior to Suit 2, a default judgment had already been
entered against the corporation in a separate action brought by the trust funds to recover the
missing contributions (“Suit 1"). Id. The defendants successfully argued that res judicata barred
Suit 2. Id.

The Pientka court stated that privity of parties is often determined by the interest that is
litigated and not merely by the names of the parties as they appear in the pleadings. Pientka,
1985 WL 2320. The rule is that “a person whose interest is put in litigation by one entitled to
represent him is bound by the judgment as though he was named as a party.” Id. In finding
privity between the parties, the court noted that the trust funds were nominally and effectively
parties to both actions. Id. Merely joining additional plaintiffs in Suit 2 did not change the fact
that a judgment was already entered against the defendants in favor of thie trust funds in Suit 1.
Id. The court specifically stated that “the legal effect of any judgment will be that the defendants
will have to pay monies to the Trust Funds.” Id,

The instant action differs from Pientka in several important aspects. In Pientka, the court

readily found privity because the trust funds were named plaintiffs in both suits. Here, however,


that defendant has yet to pay any of the arbitration award, the risk of a double reward is
eliminated by the fact that the arbitrator did not award any monetary damages for the violations
of Article 12 of the collective bargaining agreement entitled Fringe Benefit Contributions
(“Therefore, despite the Article 12 violation 1 cannot order a monetary remedy”). Since
monetary damages were not actually awarded for Monee Nursery’s failure to pay fringe benefits,
this court runs no risk of awarding monetary damages twice for the same conduct.

Because defendants have failed to demonstrate privity, the court need not discuss the
other two elements of res judicata, namely identity of causes of action or final judgment on the
merits. Defendants’ motion to dismiss on grounds of res judicata is therefore denied.

(2) FED. R. Civ. P. 10(b) - Form of Pleadings. Paragraphs; Separate Statements.

Defendants have also moved to dismiss pursuant to FED. R. Civ. P. 10(b), arguing that
plaintiffs should draft their complaint to make separate claims against Monee Nursery, LLC and
Quanstrom. Defendants argue that the claims against Monee Nursery, LLC and Quanstrom are
founded on separate transactions or occurrences. Defendants overlook the complete language of
the portion of Rule 10(b) that they invoke. Rule 10(b) states, “Each claim founded upon a
separate transaction or occurrence and each defense other than denials shall be stated in a
separate count or defense whenever a separation facilitates the clear presentation of the matters
set forth.” Defendants misconstrue the meaning of “separate transaction or occurrence” by
focusing on the parties named as defendants. In fact, one transaction, Monee Nursery’s alleged
participation in a collective bargaining agreement and subsequent non-payment under that
contract, creates this ERISA claim. Plaintiffs need not bring separate claims against Monee

Nursery, LLC and Quanstrom, since plaintiffs allege that Monee Nursery and all its successors


2

“Minute Ordét Form (96/97)

United States District Court, Northern District of Illinois

Name of Assigned Judge Sitting Judge if Oth
MorMagisirte ludge | Obert W. Gettleman | “iastamigned Judge
CASE NUMBER 03 C 254 DATE January 28, 2004
CASE William E, Dugan, et al v Carl M. Quanstrom, et al
TITLE
{In the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

MOTION: of the motion being presented.]
DOCKET ENTRY:
(1) Q Filed motion of { use listing in “Motion” box above.}
(2) Qa Brief in support of motion due ise
(3) Oo Answer brief to motion due. . Reply to answer brief due |
(4) a Hearing
(6) a Status hearing reset to 2/24/04, at 9:00 a.m.
(6) a Pretrial conference[held/continued to] [set for/re-set for] on set for at . |
(o) Q Trial[set for/re-set for] on at |
(8) Qa [Bench/Jury trial] [Hearing] held/continued t to at |
(9) Qo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OFRCP4(m) (General Rule21 [FRCP41(a)(1) OO FRCP41(a)(2).

a0) [Other docket entry]

Memorandum opinion and order entered.
Defendants’ motion to dismiss is denied. Defendants answers to the second amended |
complaint are due by 2/20/04.

al @ {For further detail see order attached to the original minute order.}

No notices required, advised in open court. Document
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Copy to judge/magistrate judge. Lunod 19 iy is a°s" nl
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courtroom . date mailed notice
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ensure that a worker will actually receive a promised pension benefit. Id. at 569, 577. See also
Schneider Moving & Storage Co. v. Robbins, 466 U.S. 364 (1984) (benefit plans can bring
independent actions and need not rely on union grievance and arbitration procedures). In Pipe

Fitters’ Welfare Fund, Local Union 597 v. Mosbeck Industrial Equipment, Inc., 856 F.2d 837,

854 (7th Cir. 1988), the Seventh Circuit, citing to Central States, noted that “[W]e cannot say
that the Trust Funds are the representative of the Union for purpose of enforcing employer
contributions.” Conversely, it follows that a union is not the representative of a trust fund.

These authorities compel the conclusion that Local 150 did not represent the interest of
the Trustees in arbitration. Local 150 represented its own interest, primarily concerned with
Monee Nursery’s assignment of workers. According to the Labor Arbitration Opinion and
Award attached as an exhibit to plaintiffs’ response to the instant motion, the issues Local 150
presented for resolution were:

1. Whether the Employer violated Article 1, Article 6, and Article 13 of the

Illinois and Indiana Landscape Contractors Labor Agreement when it assigned

non-bargaining unit members to bargaining unit work on Noveniber 16, 1993 and

continuing to date?

2. If so, what is the appropriate remedy?

After concluding that from November 1993 through September 2000 Monee Nursery
“violated Articles 6, 12, and 13 of the Agreement when it utilized non-union members to perform
bargaining unit work,” the arbitrator ordered Monee Nursery “to pay damages to the Union in the
amount of $133,168 for non payment to fringe benefit plans and under payment of wages from
November 17, 1993 to [September 19, 2000].” In their res judicata argument, defendants

essentially contend that a present judgment for failure to pay fringe benefits would render Monee

Nursery doubly liable for its failure to make payments to the Funds. Notwithstanding the fact


On September 19, 2000, an arbitrator found that Monee Nursery violated the underlying
Master Agreement and failed to properly terminate the Agreement pursuant to its terms. On
December 14, 2000, Monee Nursery filed a Complaint against Local 150 and the American
Arbitration Association in the Circuit Court of Cook Country to vacate the arbitration award. On
January 26, 2001, Local 150 filed a Notice of Removal, and the case was subsequently removed
to this court. On September 12, 2002, Judge Norgle denied Monee Nursery’s motion for
summary judgment seeking to vacate the arbitration award and granted Local 150’s cross-motion.
for summary judgment seeking enforcement of the arbitration award. Monee Nursery &
Landscape Co. v. Int’| Union of Engineers, Local 150 AFL-CIO, 2002 WL 31085091 (N.D. Ill.
2002), On November 7, 2003, the United States Court of Appeals for the Seventh Circuit
affirmed Judge Norgle’s decision. Monee Nursery & Landscape Co. v. Int’! Union of Operating
Engineers, Local 150, AFL-CIO, 348 F.3d 671 (7th Cir. 2003).

On June 10, 2002, Monee Nursery organized under the Illinois Limited Liability
Company Act. Plaintiffs allege that Monee Nursery, LLC maintains its offices at the same
address and engages in the same business as Monee Nursery, and that Monee Nursery, LLC
never contributed to the Midwest Operating Engineers Fringe Benefit Funds. Plaintiffs allege
that defendant undertook to continue the business of Monee Nursery through Monee Nursery,
LLC to avoid the obligations of Monee Nursery, cognizant of Monee Nursery’s continuing
liability to the funds. Plaintiffs’ second amended complaint alleges that Monee Nursery, LLC is
a successor and/or alter ego of Monee Nursery, which renders the LLC bound to the same

contract with Local 150.


2000; and (2) plaintiffs failed to plead in accordance with FED. R. Civ. P. 10(b). For the reasons
stated below, the court denies the defendants’ motion to dismiss in its entirety.
FACTS

According to plaintiffs’ second amended complaint, Monee Nursery was initially owned
by defendant Quanstrom’s parents as co-owners and then by Quanstrom as sole proprietor. On
July 12, 1984, Quanstrom’s mother, Myrene Quanstrom, executed a Landscaping Memorandum
of Agreement (the “Agreement”) with Local 150 as “co-owner” of Monee Nursery. The
Agreement, attached as Exhibit A to the second amended complaint, was entered into by Monee
Nursery, its successors and assigns. The Agreement incorporated the Master Agreement with
Local 150, which set the wages, benefits and grievance procedures between Local 150 anda
member contractor. According to the second amended complaint, the Master Agreement
provides that the employer agrees to be bound by the terms of the Trust Agreement of the Fringe
Benefit Funds and to make prompt payment of the per-hour contributions with respect to each
Trust Fund, Plaintiffs allege that Monee Nursery never contributed to the Midwest Operating
Engineers Fringe Benefit Funds.

Concerned that Monee Nursery was performing bargaining unit work without using Local
150 unit operating engineers, Local 150 requested arbitration of a collective bargaining
agreement with Monee Nursery in December 1993. Monee Nursery subsequently filed suit in the
Circuit Court of Cook County, Illinois, to stay the arbitration proceedings, arguing that the
Agreement was invalid and, alternatively, had been abandoned by the parties. The circuit court
ruled that the Agreement bound Monee Nursery. In October 1998, the Illinois Appellate Court

affirmed the circuit court’s decision.


DOCKETED
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS JAN 2 9 2004
EASTERN DIVISION

WILLIAM E. DUGAN, et al.,

Plaintiffs,
No. 03 C 0254
v.
Judge Robert W. Gettleman
CARL M. QUANSTROM, individually and d/b/a
Monee Nursery Co., a/k/a Monee Nursery &
Landscape Company, and MONEE NURSERY,
LLC, an Illinois limited liability company,

weerervererrervyrreryrwv wv

Defendants.
MEMORANDUM OPINION AND ORDER
In their second amended complaint," plaintiffs, the Trustees of the Midwest Operating

Engineers Welfare Fund, the Midwest Operating Engineers Pension Trust Fund, the Operating
Engineers Local 150 Apprenticeship Fund and the Local 150, 1.U.0.E., Vacation Savings Plan
(“Trustees”) allege that defendants Carl M. Quanstrom, individually and doing business as
(“d/b/a”) Monee Nursery Co. (“Monee Nursery”), also known as Monee Nursery and Landscape
Company, and Monee Nursery, LLC, are liable under the Employee Retirement Income Security
Act of 1974 (“ERISA”), 29 U.S.C. §§ 1132, 1145, for neglecting obligations to an executed
Landscaping Memorandum of Agreement with International Union of Operating Engineers Local
150, AFL-CIO (“Local 150”), Defendants have moved to dismiss the second amended

complaint, arguing that (1) res judicata bars the claims for fringe benefits prior to September 20,

‘Defendant Quanstrom’s earlier motion to dismiss plaintiffs’ first amended complaint for
lack of subject matter jurisdiction pursuant to FED. R. Civ. P. 12(b)(1) was denied on October 9,

2003. a a