Court Opinion

ID: 2994247
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:13:37.301594+00
Date Added: 2024-06-11T12:46:23.962374
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 99-3410

Board of Trustees, Sheet Metal Workers’
National Pension Fund, et al.,

Plaintiffs-Appellants,

v.

Elite Erectors, Inc., Skylight Consultants
of America, Inc., and Mary Lowry,

Defendants-Appellees.

Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. IP 98-298-C H/G--David F. Hamilton, Judge.

Argued March 30, 2000--Decided May 16, 2000

  Before Harlington Wood, Jr., Easterbrook, and Kanne,
Circuit Judges.

  Easterbrook, Circuit Judge. Elite Erectors, which
installed skylights, was obliged under collective
bargaining agreements to contribute to the Sheet
Metal Workers’ National Pension Fund and other
trusts covered by ERISA. When Elite went out of
business it owed plaintiffs (collectively "the
Funds") about $18,000. ERISA allows litigation "in
the district where the plan is administered,
where the breach took place, or where a defendant
resides or may be found". 29 U.S.C.
sec.1132(e)(2). Plaintiffs, which are
administered in Alexandria, Virginia, filed their
suit in the United States District Court for the
Eastern District of Virginia. Elite Erectors
defaulted. Before the district court entered
judgment, the Funds amended their complaint to
name Skylight Consultants of America, Inc., and
Mary Lowry as Elite’s alter egos. Skylight and
Lowry also defaulted, and the district court
eventually entered judgment holding all three
jointly and severally liable to the Funds.
  Just as they had ignored the suit, Elite,
Skylight, and Lowry ignored the judgment: they
neither appealed nor paid. After registering the
judgment in the United States District Court for
the Southern District of Indiana, where Lowry
lives and Skylight carries on a business, see 28
U.S.C. sec.1963, the Funds initiated collection
proceedings. At last stirred to action, Skylight
and Lowry (who, unlike Elite, are solvent) filed
a motion under Fed. R. Civ. P. 60(b)(4), asking
the district judge in Indiana to declare the
Virginia judgment void because, they asserted,
the Eastern District of Virginia lacked personal
jurisdiction over them. Skylight and Lowry did
not deny that they had been served with process
but observed that neither carried on any business
in Virginia. This much the Funds concede; they
rely, however, on another portion of
sec.1132(e)(2), which says that in a collection
action by a pension or welfare plan "process may
be served in any other district where a defendant
resides or may be found." That nationwide-service
clause enabled the Eastern District of Virginia
to acquire personal jurisdiction, the Funds
contended, and required Skylight and Lowry to
litigate in Virginia whether they were Elite’s
alter egos. But the district judge in Indiana
concluded that Skylight and Lowry could be
defendants in Virginia only if they actually were
Elite’s alter egos. Just as Skylight and Lowry
had declined to join issue on that subject in
Virginia, the Funds declined to join issue in
Indiana, deeming the subject foreclosed by the
Virginia judgment. Considering only the arguments
and evidence presented by Skylight and Lowry, the
district judge in Indiana concluded that they
were not Elite’s alter egos and therefore had not
been subject to suit in Virginia. 46 F. Supp. 2d
852, reconsideration denied, 64 F. Supp. 2d 839
(1999). Because the Virginia court lacked
personal jurisdiction over Skylight and Lowry,
the Indiana judge held, its judgment is void with
respect to them.

  Logically the first question is whether a
district court in which a judgment is registered
under sec.1963 may modify or annul that judgment
under Rule 60(b). Some courts have held that the
final sentence of sec.1963 para.1--"A judgment so
registered shall have the same effect as a
judgment of the district court of the district
where registered and may be enforced in like
manner."--means that the original judgment
becomes a judgment of the court in which it has
been registered, and therefore may be modified or
set aside by the court of registration. See
Rector v. Peterson, 759 F.2d 809 (10th Cir.
1985); Covington Industries, Inc. v. Resintex
A.G., 629 F.2d 730 (2d Cir. 1980). But sec.1963
does not say that the original judgment becomes
a local one; it says that the original judgment
has the effect of a local judgment. This is a
substantial difference, because the registered
judgment does not lose its existence in the court
that rendered the decree. Could the Southern
District of Indiana tell the Eastern District of
Virginia that it may not enforce its own judgment
if, for example, Skylight or Lowry should have
assets in Virginia? A judgment may be registered
in many districts, see Charles Alan Wright,
Arthur R. Miller & Mary Kay Kane, 11 Federal
Practice and Procedure sec.2787 (2d ed. 1995),
and it would not make much sense to allow each of
these districts to modify the judgment under Rule
60(b), potentially in different ways. Rector and
Covington state a minority view. Other circuits
conclude (with the support of Wright & Miller,
Federal Practice at sec.2865) that requests for
modification under Rule 60(b) must be presented
to the rendering court. E.g., Indian Head
National Bank of Nashua v. Brunelle, 689 F.2d 245
(1st Cir. 1982); First Beverages, Inc. v. Royal
Crown Cola Co., 612 F.2d 1164, 1172 (9th Cir.
1980). This circuit is among the majority that
require Rule 60(b) motions to be presented to the
rendering court. Fuhrman v. Livaditis, 611 F.2d
203, 204-05 (7th Cir. 1979). Cf. Harris Trust &
Savings Bank v. Ellis, 810 F.2d 700, 705-06 (7th
Cir. 1987).

  None of the parties alerted the district judge
to Fuhrman and similar cases; the Funds did not
question the employment of Rule 60(b)(4), only
the district court’s conclusion that the Eastern
District of Virginia lacked jurisdiction over
Skylight and Lowry. Still, the Southern District
of Indiana was free to disregard the judgment,
without formally annulling it under Rule
60(b)(4), if the rendering court lacked
jurisdiction. Adam v. Saenger, 303 U.S. 59, 62
(1938); Hanes Supply Co. v. Valley Evaporating
Co., 261 F.2d 29 (5th Cir. 1958). A motion in the
registration court under Rule 60(b)(4) is
functionally identical to a motion to preclude
enforcement under Adam; perhaps this is why In re
Joint Eastern & Southern District Asbestos
Litigation, 22 F.3d 755, 762 n.15 (7th Cir.
1994), approved the practice. Whether or not the
district court enters an order under Rule
60(b)(4), principles of issue preclusion would
prevent relitigation of the jurisdictional
question in other courts of registration.
  "A party that simply refuses to appear may
contend in a later case that the first tribunal
lacked jurisdiction--though jurisdiction is the
only issue thus preserved, and if the first court
had jurisdiction then the judgment must be
enforced. See Earle v. McVeigh, 91 U.S. 503, 507
(1875); Williams v. General Electric Capital Auto
Lease, Inc., 159 F.2d 266 (7th Cir. 1998);
Metropolitan Life Insurance Co. v. Cammon, 929
F.2d 1220, 1222-23 (7th Cir. 1991). . . .
[O]therwise a court that lacked jurisdiction
could strong-arm a party to litigate the subject,
decide in favor of its own power, and thus block
any review of its adjudicatory competence."
United States v. Cook County, 167 F.3d 381, 388
(7th Cir. 1999) (emphasis in original). Skylight
and Lowry, who did not appear in the Virginia
action, therefore are entitled to resist
enforcement in Indiana if, but only if, the
United States District Court for the Eastern
District of Virginia lacked personal or subject-
matter jurisdiction.

  The district judge in Indiana concluded that
personal jurisdiction could be established in
Virginia only if Skylight and Lowry were Elite’s
alter egos, as the Funds’ complaint asserted.
This interprets sec.1132(e)(2) as if it allowed
nationwide service (and thus personal
jurisdiction) only with respect to "employers"
or, more generally, "persons liable under ERISA"--a
step that would conflate jurisdiction with the
merits. Section 1132(e)(2) does not say this; it
provides nationwide service to bring "a
defendant" into the action. Whether the defendant
is liable under ERISA is the subject to be
litigated following service; it is not a
condition precedent to personal jurisdiction. The
Indiana judge gave an unnatural reading to
sec.1132(e)(2) in order to avoid what he
perceived to be a constitutional problem.
Ambiguous language that is constitutional when
read one way and unconstitutional when read
another properly may be understood the first way;
judges assume that Congress did not set out to
transgress constitutional limits. But the
constitutional penumbra is large; almost any
statute can be thought to raise "constitutional
issues," and treating these as license to rewrite
the law would divest Congress of effective
lawmaking power. Judges therefore must not
manufacture ambiguity or disregard
straightforward language. United States v.
Marshall, 908 F.2d 1312, 1318 (7th Cir. 1990) (en
banc), affirmed under the name Chapman v. United
States, 500 U.S. 453, 464 (1991). "[A]voidance of
a difficulty will not be pressed to the point of
disingenuous evasion." Rust v. Sullivan, 500 U.S.
173, 191 (1991). Section 1132(e)(2) does not
require or tolerate creative interpretation.
"Defendant" means defendant; Skylight and Lowry
were defendants in the Virginia action and were
served with process under sec.1132(e)(2); the
district court therefore had personal
jurisdiction unless sec.1132(e)(2) violates the
Constitution.

  Three other circuits have held that
sec.1132(e)(2) and its counterpart 29 U.S.C.
sec.1451(d) (which applies exclusively to multi-
employer plans such as the Funds) comport with
all constitutional requirements. United
Electrical Workers v. 163 Pleasant Street Corp.,
960 F.2d 1080, 1085 (1st Cir. 1991); IUE AFL-CIO
Pension Fund v. Herrmann, 9 F.3d 1049, 1056-57
(2d Cir. 1993); Bellaire General Hospital v. Blue
Cross Blue Shield of Michigan, 97 F.3d 822, 825-
26 (5th Cir. 1996). Cf. Republic of Panama v.
BCCI Holdings (Luxembourg) S.A., 119 F.3d 935,
942-48 (11th Cir. 1997) (holding sec.1132(e)(2)
valid unless it causes a "severe disadvantage" to
defendant). Although we have not previously
addressed this question under ERISA, we have
concluded that nationwide service under other
statutes is proper, as long as the defendants
have adequate contacts with the United States as
a whole. E.g., United Rope Distributors, Inc. v.
Seatriumph Marine Corp., 930 F.2d 532, 534 (7th
Cir. 1991) (admiralty); Lisak v. Mercantile
Bancorp, Inc., 834 F.2d 668, 671-72 (7th Cir.
1987) (RICO); Fitzsimmons v. Barton, 589 F.2d 330,
332-34 (7th Cir. 1979) (securities laws). United
States v. Union Pacific R.R., 98 U.S. 569, 603-04
(1878), holds that Congress may make a court in
Washington, D.C., the exclusive forum for certain
claims arising under federal law, which makes it
hard to see how litigation across the Potomac in
Alexandria--part of the District until its
retrocession to Virginia in 1847--could be
unconstitutional.

  One court of appeals recently disagreed. Relying
principally on a passage in Omni Capital
International v. Rudolf Wolff & Co., 484 U.S. 97,
104 (1987), the tenth circuit has concluded that
the defendant must have adequate contacts with
the federal district in which the litigation will
occur, and not just with the United States as a
whole. Peay v. Bellsouth Medical Assistance Plan,
205 F.3d 1206 (10th Cir. 2000). Recognizing that
there were many contrary decisions, Peay
disagreed particularly with In re Federal
Fountain, Inc., 165 F.3d 600 (8th Cir. 1999) (en
banc) (bankruptcy law), and Bellaire. Although we
have given its analysis respectful attention,
Peay does not persuade us to abandon Fitzsimmons
and its successors in and out of this circuit.

  Linking personal jurisdiction to a defendant’s
"contacts" with the forum developed in state
litigation. Due process limitations on
adjudication in state courts reflect not so much
questions of convenience as of jurisdictional
power. Barrow, Alaska, is farther from Juneau
than Indianapolis is from Alexandria, and travel
from Barrow to Juneau is much harder than is
travel from Indianapolis to Alexandria (there are
no highways and no scheduled air service from
Barrow to anywhere), yet no one doubts that the
Constitution permits Alaska to require any of its
citizens to answer a complaint filed in Juneau,
the state capital, just as the United States
confines some kinds of federal cases to
Washington, D.C., on the eastern seaboard.
Conversely Kentucky’s proximity to southern
Indiana (Louisville would be more convenient for
residents of New Albany than tribunals in
Indianapolis) does not permit Kentucky to
adjudicate the rights of people who have never
visited that state or done business there; its
sovereignty stops at the border. Limitations on
sovereignty, and not the convenience of
defendants, lie at the core of cases such as
Burger King Corp. v. Rudzewicz, 471 U.S. 462
(1985), and World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286 (1980), and their many
predecessors.

  No limitations on sovereignty come into play in
federal courts when all litigants are citizens.
It is one sovereign, the same "judicial Power,"
whether the court sits in Indianapolis or
Alexandria. Peay did not deny this. Instead it
relied on the observation in Omni Capital, 484
U.S. at 104, that restrictions on state
adjudication enable litigants to preserve their
liberty and property from arbitrary confiscation.
No one doubts this; Congress could violate the
due process clause by requiring all federal cases
to be tried in Adak (the westernmost settlement
in the Aleutian Islands), because transportation
costs easily could exceed the stakes and make the
offer of adjudication a mirage. But this
principle is unrelated to any requirement that a
defendant have "contacts" with a particular
federal judicial district and does not block
litigation in easy-to-reach forums. A defendant
who lives in Springfield, in the territory of the
United States District Court for the Central
District of Illinois, may be required to defend
in Chicago (part of the Northern District)
without any constitutional objection on the
ground of undue inconvenience--even if the
defendant has never been to Chicago and has no
"contacts" with the Northern District--just as
Illinois could allocate the bulk of litigation
among its citizens to Chicago (or require
residents of Chicago to visit Springfield, where
the Supreme Court of Illinois sits).

  Congress has not sought to throw litigants’
convenience to the winds or use transportation
costs to resolve small-stakes cases by default.
Venue under 28 U.S.C. sec.1391 usually respects
defendants’ interests. See Stafford v. Briggs,
444 U.S. 527 (1980). Even when Congress departs
from sec.1391 by allowing venue in the district
of the plaintiff’s business or residence,
defendants’ legitimate interests are protected by
28 U.S.C. sec.1404(a): "For the convenience of
parties and witnesses, in the interest of
justice, a district court may transfer any civil
action to any other district or division where it
might have been brought." Easy air
transportation, the rapid transmission of
documents, and the abundance of law firms with
nationwide practices, make it easy these days for
cases to be litigated with little extra burden in
any of the major metropolitan areas. If
Alexandria was particularly inconvenient for
Skylight and Lowry--and if it was "in the
interest of justice" for the Funds to bear the
incremental burden of litigating in Indiana,
rather than for Skylight and Lowry to bear the
incremental burden of litigating in Virginia--
then a motion under sec.1404(a) would have been
in order. Counsel for Skylight and Lowry could
have filed the motion by mail, without stepping
outside the Southern District of Indiana.
Moreover, if defending in Alexandria imposed
extra costs on Skylight and Lowry, and if, as
they say, the Funds hadn’t a leg to stand on
substantively, then Skylight and Lowry could have
litigated on the Funds’ dime--for prevailing
parties in ERISA collection actions recover the
attorneys’ fees necessary to fend off weak
claims. 29 U.S.C. sec.1132(g). Because 28 U.S.C.
sec.1404 and 29 U.S.C. sec.1132(g) protect
defendants’ interests, sec.1132(e)(2) comports
with the Constitution and provided the Eastern
District of Virginia with personal jurisdiction
over Skylight and Lowry even on the assumption
that neither has any "contacts" with Virginia.

  Although Skylight and Lowry persuaded the
Indiana court that the Virginia court lacked
personal jurisdiction over them, their arguments
on appeal center on subject-matter jurisdiction.
Invoking Peacock v. Thomas, 516 U.S. 349 (1996),
and Levit v. Ingersoll Rand Financial Corp., 874
F.2d 1186, 1192-94 (7th Cir. 1989), they contend
that state rather than federal law governs
vicarious liability for debts under ERISA. Cf.
Kokkonen v. Guardian Life Insurance Co., 511 U.S.
375 (1994). If their liability turns on state
law, then the Virginia court may have lacked
subject-matter jurisdiction over them--for,
although the parties may be of diverse
citizenship, the amount in controversy does not
exceed $75,000. See 28 U.S.C. sec.1332. We say
"may have" because the Funds’ claim against Elite
unquestionably arose under federal law, and 28
U.S.C. sec.1367(a) creates supplemental
jurisdiction over claims against other defendants
to the extent that they "are so related to claims
in the action within such original jurisdiction
that they form part of the same case or
controversy under Article III of the United
States Constitution." See Stromberg Metal Works,
Inc. v. Press Mechanical, Inc., 77 F.3d 928 (7th
Cir. 1996). We need not decide, however, whether
the claim against Elite, Skylight, and Lowry was
a single controversy, because the Funds’
entitlements vis a vis Skylight and Lowry
independently arise under ERISA.

  Peacock concludes that efforts to hold corporate
officers vicariously liable for their firms’
pension debts arise under state rather than
federal law, and that an effort to "pierce the
corporate veil" to collect a judgment under ERISA
therefore belongs in state court. Several of our
decisions remark that this conclusion does not
affect supplemental jurisdiction under sec.1367.
Thus federal courts may entertain vicarious-
liability theories in a single suit. Peacock is
limited, we have held, to successive litigation.
Wilson v. Chicago, 120 F.3d 681, 683-85 (7th Cir.
1997); see also Citizens Electric Corp. v.
Bituminous Fire & Marine Insurance Co., 68 F.3d
1016 (7th Cir. 1995). But there is a deeper
problem with defendants’ position--they do not
appreciate the difference between vicarious and
direct liability.

  Efforts to pierce the corporate veil ask a
court to hold A vicariously liable for B’s debt.
If federal law does not establish vicarious
liability, then the request must rest on state
law; what other source could it have? But a
contention that A is B’s "alter ego" asserts that
A and B are the same entity; liability then is
not vicarious but direct. Varity Corp. v. Howe,
516 U.S. 489, 492 (1996) (applying this
principle, initially developed in federal labor
law, to ERISA litigation); Central States Pension
Fund v. Central Transport, Inc., 85 F.3d 1282,
1286-87 (7th Cir. 1996). See also, e.g., Howard
Johnson Co. v. Hotel Employees, 417 U.S. 249, 259
n.5 (1974); United States v. Vitek Supply Corp.,
151 F.3d 580, 584-85 (1998); Reich v. Sea Sprite
Boat Co., 50 F.3d 413 (7th Cir. 1995). All
liability under ERISA is federal; a claim "arises
under" federal law when federal law creates the
right of action, see Merrell Dow Pharmaceuticals
Inc. v. Thompson, 478 U.S. 804, 808 (1986), and
the Funds contended in Virginia that they were
entitled to collect under ERISA.

  Consider, for example, the situation in United
States v. Bestfoods, 524 U.S. 51 (1998): the
United States claimed that Bestfoods, parent
corporation to the operator of a polluted site,
was obliged to clean up that site. The Court
replied that if the parent corporation just
operated a subsidiary that owned polluting
assets, then it would be liable only if the
corporate veil could be pierced; but if the
parent actively exercised control over the assets
themselves, then it would be directly liable
under federal law. Even veil-piercing likely
would be subject to federal law--though the Court
reserved the possibility that federal law would
be based on state-law principles. 524 U.S. at 63-
64 n. 9. But when the parent and subsidiary are
just alter egos, then everything depends on, and
the claim arises under, federal law. Just so
here. The Funds claimed in Virginia that ERISA
required Skylight and Lowry to pay them about
$18,000. That may be right or wrong under ERISA,
but it was a federal rather than a state-law
claim.

  Skylight and Lowry have one final sally: even
if a contention that defendants are alter egos of
an employer (and thus employers themselves)
arises under ERISA, the Funds’ complaint in
Virginia did not allege all components of alter
ego status. This supposes that complaints must
allege each "element" of a "cause of action," the
norm in code pleading. But we have rejected this
proposition for federal litigation in general,
and ERISA in particular. Bartholet v. Reishauer
A.G. (Zurich), 953 F.2d 1073, 1077-78 (7th Cir.
1992). See also, e.g., Walker v. National
Recovery, Inc., 200 F.3d 500 (7th Cir. 1999);
Bennett v. Schmidt, 153 F.3d 516 (7th Cir. 1998).
A complaint just initiates a case; it need not
set out all of the applicable law or facts,
provided it notifies the defendant of the claim’s
nature. Fed. R. Civ. P. 8. Even if the Funds’
complaint was subject to dismissal under Fed. R.
Civ. P. 12(b)(6), that shortcoming would not have
affected the district court’s subject-matter
jurisdiction. Skylight and Lowry appear to
believe that whenever a claim flops, it also
falls out of federal jurisdiction. That’s not so;
there is a gulf between "deficient" and "too
feeble to invoke federal jurisdiction." Steel Co.
v. Citizens for a Better Environment, 523 U.S.
83, 89-90 (1998); Bell v. Hood, 327 U.S. 678,
682-83 (1946). Perhaps the Funds would not have
been able to prove that Elite, Skylight, and
Lowry are just different manifestations of the
same entity. Cf. Papa v. Katy Industries, Inc.,
166 F.3d 937 (7th Cir. 1999) (defining the extent
of a single employer for purposes of employment-
discrimination law). But defendants did not put
the Funds to their proof, and the complaint is
not so loopy that it failed to establish federal
subject-matter jurisdiction. Because the Virginia
district court had jurisdiction, the Indiana
district court must enforce the judgment.

Reversed and Remanded