### In the



# United States Court of Appeals

For the Seventh Circuit

____________________

No. 13

‐ 1308

J AMES T. S ULLIVAN

, ET AL

., Plaintiffs

‐ Appellees

,

v.

R UNNING W ATERS I RRIGATION

, I NC

.,

AND JV E QUIPMENT L EASING

, LLC,

Defendants

‐ Appellants

.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 09

‐ CV

‐ 2329

— Elaine E. Bucklo

, Judge

.

____________________

A RGUED O CTOBER 1, 2013

— D ECIDED J ANUARY 9, 2014

____________________

Before C UDAHY

, R IPPLE

, and H AMILTON

, Circuit Judges

.

C UDAHY

, Circuit Judge

. This case is about two interrelated

companies that challenge the application of successor liabil

‐ ity under ERISA, pursuant to a Rule 25(c) motion that substi

‐

tuted the companies as judgment debtors, without an evi

‐ dentiary hearing. On appeal, RWI and JV challenge (1)

whether the district court properly applied the multifactor

ERISA successorship test to find that an “interest” had been2 No. 13

‐ 1308

transferred within the meaning of Fed. R. Civ. P. 25(c); and

(2) whether the district court’s resolution of the 25(c) substi

‐

tution without an evidentiary hearing was proper. We now

affirm.

I.

The predecessor business entity, Alpine Irrigation Com

‐

pany (Alpine), was a residential irrigation business owned

by Robert Zeh (Robert) from 1961 until it closed in 2009. In

the years preceding its closing, Alpine was in arrears on pen

‐

sion fund payments to the Chicago Journeyman Plumbers

Union (the Union). After a Joint Arbitration Board awarded

it $56,269.97, the Union filed suit to compel the award under

both the Labor Management Relations Act of 1947 (LMRA),

29 U.S.C. § 185, and the Employee Retirement Security Act of

1974 (ERISA), 29 U.S.C. §§ 1132(e)(1). In order to enforce the

judgment against Alpine, the Union’s trustee James Sullivan

sought citations to discover Alpine’s assets.

The discovery citations proved fruitful. During his depo

‐

sition, Robert admitted that his son, Jeffery Zeh (Jeffery),

knew more about Alpine’s assets and operations than Rob

‐

ert. Jeffery was then deposed and revealed his sole owner

‐ ship of two companies that were established contemporane

‐ ously with Alpine’s closing, Running Waters Irrigation, Inc.

(RWI) and JV Equipment Leasing, LLC (JV) (collectively the

Appellants). RWI primarily services, but occasionally in

‐

stalls, lawn irrigation systems. JV’s sole business is leasing to

RWI six pieces of equipment, which it purchased from Al

‐ pine. The remainder of Alpine’s unsold equipment remains

on RWI’s property.No. 13

‐ 1308 3

Alpine and RWI share a number of undisputed similari

‐

ties: RWI operates out of Jeffery’s home, Alpine’s prior busi

‐

ness address; RWI utilizes Alpine’s office and storage space;

all but one of RWI’s employees worked for Alpine; and final

‐ ly, with very few exceptions, RWI relies on Alpine’s custom

‐

er list to service Alpine’s past customers. Almost all of RWI’s

customers are former Alpine customers.

For these reasons, Sullivan moved to impose judgment

against RWI and JV as successors. When the magistrate

judge denied the motion for lack of a procedural mechanism

through which to substitute the parties, Sullivan filed a mo

‐

tion under Federal Rule of Civil Procedure 25(c). In his Sec

‐

ond Report and Recommendation (Second R&R), the magis

‐

trate judge determined that the Appellants were successors

under ERISA and that Rule 25(c) provided an appropriate

procedure to enable the substitution of the Appellants for

Alpine. The district court adopted the Second R&R and

granted Sullivan’s motion to substitute. The court deter

‐

mined that the Appellants’ objections to the Second R&R

failed to successfully rebut the magistrate judge’s key find

‐ ings that: Jeffery exercised control over all entities; RWI

hired five out of six former Alpine employees; all entities

operated out of Jeffery’s house; there was substantial over

‐ lap in customer lists; and, the timing of Alpine’s closure and

RWI’s incorporation suggested its intention to take over Al

‐ pine’s operations.

On appeal, the Appellants assert that the district court’s

factual findings fell short of satisfying ERISA’s successorship

test. The Appellants specifically refute that Jeffery ever had

notice of Alpine’s liability and reject factual findings con

‐ tributing to the substantial continuity determination. The4 No. 13

‐ 1308

Appellants also assert that they were denied Due Process

because the Rule 25(c) motion was granted without a full ev

‐ identiary hearing.

The district court had jurisdiction pursuant to 28 U.S.C §

1331. This court has jurisdiction under 28 U.S.C. § 1291. We

review the district court’s adoption of the magistrate judge’s

findings of fact for clear error and the substitution of a trans

‐

feree under Federal Rule of Civil Procedure 25(c) for abuse

of discretion. However, because this discretion is only trig

‐ gered upon the determination that an entity has transferred

an interest within the meaning of Rule 25(c), which requires

applying law to the facts, we review the district court’s find

‐ ing of substantial continuity de novo

. See Luxliner P.L. Export

Co. V. RDI/Luxliner, Inc.

, 13 F.3d 69, 72 (3d Cir. 1993)(“A Rule

25(c) decision is generally within the district court’s discre

‐

tion. To determine whether an entity is a transferee of inter

‐

est so as to trigger this discretion, however, a district court’s

mission is one of applying law to facts.”)(citations omitted).

II.

Rule 25(c) allows the substitution of parties if an “inter

‐

est” is transferred, but relies on other substantive law to de

‐

fine “interest.” Normally, a corporation purchasing the as

‐

sets of another corporation does not assume the obligations

of the transferor. Panther Pumps & Equipment Co., Inc. v. Hy

‐ drocraft Inc.

, 566 F.2d 8, 24 (7th Cir. 1977). However, there are

several important exceptions. One such exception has devel

‐ oped in the context of ERISA actions, like this one, to recover

delinquent pension fund contributions. See Upholsterers’ Int’l

Union Pension Fund v. Artistic Furniture of Pontiac

, 920 F.2d

1323, 1327–29 (7th Cir. 1990).No. 13

‐ 1308 5

The Appellants assert that only a substantial transfer of

assets can trigger substitution under Rule 25(c), and because

JV acquired only six pieces of equipment from Alpine and

RWI acquired no assets directly from Alpine, no interest has

been transferred. However, Artistic Furniture does not re

‐ quire a formal purchase of assets to establish successor liabil

‐ ity in the ERISA context. See id.

The ERISA test specifically allows the plaintiff to proceed

against the subsequent purchaser of the violator’s business,

even if it is a true sale, provided that two conditions are sat

‐

isfied: (1) the successor had notice of the claim before the ac

‐ quisition; and (2) there is substantial continuity of operation

of the business before and after the sale. See Artistic Furni

‐

ture

, 920 F.2d at 1329. It was through this test that the district

court determined an “interest” was transferred from Alpine

to RWI and JV, justifying this Rule 25(c) substitution.

Notice

Notice can be proven by showing actual knowledge, as

well as evidence that allows the fact finder to imply

knowledge from the circumstances. See Golden State Bottling

Co. v. NLRB

, 414 U.S. 168, 173 (1973). Notice can be implied

from variety of circumstances, such as common control or

proximity. See Artistic Furniture

, 920 F.2d at 1329. Plenty of

such evidence exists here. The district court found that Jef

‐ fery—as the holder of a leadership position in each compa

‐

ny, the son of Alpine’s owner and the owner of the property

on which all these companies were located—had enough

knowledge to satisfy this notice requirement. In fact, during

Richard’s deposition, he indicated that Jeffery would have

more information concerning the assets and status of Alpine

than he would—a clear indication that Jeffery was intimately6 No. 13

‐ 1308

familiar with Alpine’s operations. The facts adopted by the

district court provide ample circumstances from which to

imply Jeffery was aware of Alpine’s delinquency. The dis

‐

trict court did not clearly err by adopting these factual find

‐ ings and concluding that notice existed.

Substantial Continuity

Substantial continuity requires a fact

‐ centered analysis.

The facts in this case point clearly toward continuity of busi

‐

ness. The Appellants’ primary contention regarding the dis

‐

trict court’s substantial continuity finding relies on viewing

the alleged successors as isolated entities. RWI contends that

it never purchased any of Alpine’s assets, while JV contends

that its purchase of Alpine’s assets was merely part of a

piecemeal sale, insufficient to establish continuity. JV further

rejects the continuity finding on the basis that it is a leasing

company rather than an irrigation company. The purported

independence of these three entities is contradicted by the

facts adopted by the district court, which taken as a whole,

show that RWI, JV and Alpine had similar leadership, em

‐ ployees, customers, office space, equipment and services.

As to RWI, the Appellants concede that it operates out of

the same location as Alpine, is in the same or similar busi

‐

ness, uses Alpine’s employees and office equipment and has

almost all of the same clients. Moreover, the district court

found that Jeffery held a leadership position in each compa

‐

ny. The Appellants dispute this finding, claiming that Jeffery

was never an officer of Alpine. However, the court based its

decision on tax returns, company credit cards in Jeffery’s

name and Robert’s depositions concerning Jeffery’s in

‐

volvement. This evidence does not support a conclusion thatNo. 13

‐ 1308 7

the court clearly erred in finding that Jeffery held leadership

positions at each company.

RWI contends that it does not conduct the same business

as Alpine. It argues that Alpine “serviced and installed” irri

‐ gation systems, while RWI services and consults for irriga

‐

tion systems. This distinction is wholly artificial, highlighted

by the fact that almost every one of RWI’s customers is a

former customer of Alpine and receives similar services. The

district court did not err in finding that both Alpine and RWI

are in the same or a substantially similar business.

JV characterizes the equipment transfer from Alpine to

JV as a piecemeal sale of assets, which under Tweed v. Thom

‐

as & Betts Power Solutions, LLC

, is insufficient to establish

continuity. 711 F.3d 763, 768 (7th Cir. 2013). In a similar vein,

RWI contends that it is not a successor because it acquired

no assets or equipment from Alpine. Viewed in isolation,

these assertions as to the unrelated nature of these entities

might be persuasive. However, these are artificial distinc

‐

tions, which do not mask the substantial interrelatedness of

RWI, JV and Alpine. The factual basis for substantial conti

‐ nuity is quite clear in this case. In fact, the Appellants do not

contest the district court’s finding that “Jeffery Zeh struc

‐

tured his companies such that JV would buy Alpine’s assets

and lease them back to RWI in servicing Alpine’s former cli

‐

ents.”

Despite the Appellants’ assertions that these entities are

wholly distinct, it is clear that together JV and RWI took on

every aspect of Alpine’s former business. On the facts availa

‐

ble, we find nothing which would suggest that the district

court improperly concluded that there was substantial con

‐ tinuity between RWI, JV and Alpine.8 No. 13

‐ 1308

III.

The Appellants assert denial of Due Process because the

Rule 25(c) motion was granted without a hearing. They rely

on Golden State Bottling Company, Inc. v. National Labor Rela

‐

tions Board

, 414 U.S. 168 (1973), and Panther Pumps & Equip

‐

ment Co., Inc. v. Hydrocraft, Inc.

, 566 F.2d 8 (7th Cir. 1977), to

argue that a Rule 25(c) motion entitles a potential successor

to an evidentiary hearing per se

. But, the Appellants fail to

show how such precedent applies in the absence of a request

for a hearing or a showing of what such a hearing would

disclose.

Initially, it is worth noting that the cases relied upon by

the Appellants do not hold that an evidentiary hearing is

mandatory to resolve every Rule 25(c) substitution. In nei

‐

ther Golden State nor Panther Pumps was there an absence of

an evidentiary hearing—neither court was required to re

‐

solve such an issue. The Appellants are asking us to deny a

court’s discretion to require an evidentiary hearing and in

‐

stead make such a hearing mandatory. We decline to impose

such a requirement on the basis of dicta. This is especially

true when the language of Rule 25(c) contemplates resolu

‐

tion solely on motion. Fed. R. Civ. P. 25(c). In any event, for

the following reasons, this case does not meet the generally

accepted conditions for a mandatory rule.

A court has discretion to deny an evidentiary hearing if

the Appellants cannot show that an evidentiary hearing

would have an articulable bearing on the material issues in

dispute. Cf. U.S. v. 8136 S. Dobson St., Chicago Ill.

, 125 F.3d

1076, 1086 (7th Cir. 1997) (denying an evidentiary hearing for

a Rule 60(b) motion); Duncan Foundry & Mach. Works, Inc. v.

N.L.R.B.

, 458 F.2d. 933, 935 (7th Cir. 1972) (same in the con

‐No. 13

‐ 1308 9

text of NLRB review). Here, the district court found that the

Appellants’ objections to the Second R&R did not rebut its

material factual findings, nor did the objections address the

applicable legal test. The Appellants do not identify what

they believe would have been revealed on cross

‐

examination, what questionable evidence there was or what

credibility determinations needed to be made. Thus, it is un

‐

clear why the briefing process was insufficient to present or

rebut material facts such that an evidentiary hearing was

necessary to adequately resolve this motion. Therefore, it

was within the district court’s discretion to resolve the Rule

25(c) motion by reviewing and adopting the Second R&R,

promulgated without an evidentiary hearing. See e.g.

, Pink

‐

ston v. Madry

, 440 F.3d 879, 983–94 (7th Cir. 2006).

Moreover, it was the Appellants’ responsibility to request

an evidentiary hearing. Pursuant to Fed. R. Civ. Pro. Rule

72(b), the Appellants did file objections to the Second R&R.

However, these objections need to be specific enough to alert

the district court as to what issues are actually in dispute.

Johnson v. Zema Systems Corp.

, 170 F.3d 734, 741–42 (7th Cir.

1999).

At no point in the Appellants’ objections do they specifi

‐ cally object to the absence of an evidentiary hearing. The

Appellants’ objections are not based on the procedural suffi

‐ ciency of a fully briefed motion, but on substantive questions

of law and fact.

The Appellants come closest to such an objection in their

conclusion:

RWI and JV are entitled to their day in court and not

via substitution under Rule 25C(c)

... . RWI and JV10 No. 13

‐ 1308

have the right to answer the allegations against them,

conduct discovery and have a trial, all of which will

be washed away if the R&R is adopted. It is not as if

Plaintiffs are without a remedy; they can simply file a

complaint to pursue their claim.

Such a conclusory statement, however, is not a request for an

evidentiary hearing. More importantly, it is insufficient to

show what such a hearing would produce or why the pro

‐ ceedings before the magistrate judge were inadequate.

By this we are not requiring heightened specificity in re

‐ questing an evidentiary hearing. We simply believe that un

‐

der any standard the objections made here do not sufficiently

convey the Appellants’ dissatisfaction with the sufficiency of

the procedures below as opposed to general dissatisfaction

with the outcome. Thus, the Appellants never made clear to

the district court what an evidentiary hearing would have

disclosed.

Finally, at oral argument, the Appellants challenged the

sufficiency of the proceedings below because the magistrate

judge’s Second R&R contained credibility observations with

respect to Jeffery, which were based on transcripts of a depo

‐

sition that was taken before Sullivan brought the 25(c) mo

‐

tion. Thus, the Appellants argue that a decision maker’s

credibility assessment based on the cold record is not appro

‐ priate—an evidentiary hearing is required for such determi

‐

nations. While the credibility conclusions have been inap

‐ propriately included in the Second R&R, two factors per

‐

suade us that this argument is not determinative. First, as

discussed above, there is ample evidence showing substan

‐

tial continuity, it is unlikely that the absence of the credibility

observations would disturb this. Second, the AppellantsNo. 13

‐ 1308 11

never objected to these observations; they have thus waived

appellate review of this issue. See Zema Systems

, 170 F.3d at

739 (“If a party objects in the district court on some issues

and not others, he waives appellate review of the issues to

which he has not objected.”). Unlike the foregoing discus

‐

sion, specificity is not at issue here. The Appellants’ objec

‐

tions to the Second R&R were devoid of any reference to the

magistrate judge’s observations on Jeffery’s credibility.

IV.

Taken as a whole, the facts adopted by the district court

create a clear picture of notice and continuity, satisfying the

ERISA test. The district court did not err in concluding that

an interest had been transferred from Alpine to RWI and JV

within the meaning of Rule 25(c). The district court did not

abuse its discretion when it resolved the 25(c) motion with

‐

out an evidentiary hearing when the Appellants made no

request for such a hearing or showed why such a hearing

was necessary. We AFFIRM.