Court Opinion

ID: 4110894
Source: CourtListenerOpinion
Date Created: 2016-12-23 21:01:29.62648+00
Date Added: 2024-06-11T07:45:44.106066
License: Public Domain

FILED
                           NOT FOR PUBLICATION
                                                                           DEC 23 2016
                    UNITED STATES COURT OF APPEALS                     MOLLY C. DWYER, CLERK
                                                                        U.S. COURT OF APPEALS

                           FOR THE NINTH CIRCUIT

AUTOMOTIVE INDUSTRIES PENSION                   No.    14-17371
TRUST FUND; et al.,
                                                D.C. No. 3:13-cv-03703-WHO
             Plaintiffs-Appellants,

 v.                                             MEMORANDUM*

TRACTOR EQUIPMENT SALES, INC.,
a California corporation,

             Defendant,

 and

STEVEN E. VAN TUYL, individually and
as trustee of the The Van Tuyl 2003 Living
Trust, as amended; RENA E. VAN TUYL,
individually and as trustee of the The Van
Tuyl 2003 Living Trust, as amended,

             Defendants-Appellees.

                  Appeal from the United States District Court
                      for the Northern District of California
               William Horsley Orrick III, District Judge, Presiding

                    Argued and Submitted December 12, 2016
                            San Francisco, California

       *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Before: HAWKINS, BERZON, and MURGUIA, Circuit Judges.

      Automotive Industries Pension Trust Fund (the “Trust”) appeals the grant of

summary judgment to Steven and Rena Van Tuyl (the “Van Tuyls”). The Van Tuyls,

husband and wife, owned a controlling interest in Tractor Equipment Sales (“TES”),

which had been a participant in the multi-employer Trust prior to TES’s withdrawal

in 2011. The district court concluded the Trust could not enforce withdrawal liability

under ERISA1 against three rental properties owned by the Van Tuyls because they

did not constitute a commonly-controlled “trade or business” under 29 U.S.C. §

1301(b)(1).

      “Withdrawal liability” is assessed against the withdrawing employer, which

includes not only the entity obligated to contribute to the pension plan, but also all

“trades or businesses” that are under “common control” with that entity. See 29

U.S.C. § 1301(b)(1). Congress enacted section 1301(b)(1) “to prevent businesses

from shirking their ERISA obligations by fractionalizing operations into many

separate entities.” Teamsters Pension Tr. Fund–Bd. of Trs. of W. Conference v. Allyn

Transp. Co., 832 F.2d 502, 507 (9th Cir. 1987) (citation omitted); see also Bd. of Trs.

of W. Conference of Teamsters Pension Tr. Fund v. Lafrenz, 837 F.2d 892, 894 (9th

Cir. 1988) (“The point of section 1301(b)(1) is simply to prevent the controlling group

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          The Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq.

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of a company from avoiding withdrawal liability by shifting corporate assets into

other business ventures under its control.”).

      ERISA does not define the term “trade or business,” and we have noted that

what constitutes a “trade or business” is an “essentially factual inquiry.” Id. at 894

n.6. The American Heritage Dictionary defines “trade” as “an occupation, especially

one requiring skilled labor” and “business” as “the occupation, work or trade in which

a person is engaged.” American Heritage Dictionary College Edition 220, 1284 (2nd

Ed. 1991). Although § 1301(b)(1) may apply regardless of whether there is a formal

corporate structure, employees, or some sort of economic relationship with the

withdrawing employer (such as leasing property or equipment to the withdrawing

entity), courts have been much more likely to find a “trade or business” under §

1301(b)(1) if these factors are present. See, e.g, Lafrenz, 837 F.2d at 894-95;

McDougall v. Pioneer Ranch Ltd. P’ship, 494 F.3d 571, 577-78 (7th Cir. 2007); Cent.

States, Se. & Sw. Areas Pension Fund v. Fulkerson, 238 F.3d 891, 895 (7th Cir. 2001).

      None of these factors are present here. Additionally, the Van Tuyls have

devoted little time to the real estate beyond depositing the income and performing

minimal maintenance as required. As the district court noted, throughout the period

of TES’s participation in the Trust, “both the San Jose property and the Merced

property were leased to a single, continuous tenant, while the Tahoe property was

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either used as the Van Tuyls’ own vacation home or was leased to friends and family.”

Indeed, it appears the San Jose property was purchased solely for the purpose of

renting to a particular church group. And all of the properties in question were

purchased many years (indeed, most by decades) before TES’s withdrawal from the

Trust.

         The nature of the real estate activity in this case is thus more akin to holding a

long-term income-producing investment. See Fulkerson, 238 F.3d at 896 (noting that

§ 1301(b)(1) does not impose automatic personal liability on owners of withdrawing

entities, and that construing § 1301(b)(1) to reach all income-producing investments

would eviscerate this limitation); see also Bailey v. United States, 360 F.2d 113, 116

(9th Cir. 1966) (where a statute does not define a term or it appears to have varying

meanings depending on context, it should be construed in light of the purpose of the

statute); cf. Lafrenz, 837 F.2d at 894 n.7 (not every passive investment is necessarily

a trade or business).

         On the particular facts of this case, we affirm the district court’s grant of

summary judgment to the Van Tuyls.

         AFFIRMED.

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