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CONNORS v. MIDDLE FORK CORP.

March 24, 1992

JOSEPH P. CONNORS, SR., et al. Plaintiffs,
v.
MIDDLE FORK CORPORATION, et al., Defendants.


REVERCOMB


The opinion of the court was delivered by: GEORGE H. REVERCOMB

I.

 This is an ERISA *fn1" case involving an employer's liability for withdrawing from a multiemployer pension plan. It arises out of the withdrawal of Middle Fork Corporation ("Middle Fork"), in April 1987, from the United Mine Workers of America 1950 and 1974 Pension Plans ("the Plans"), which are multiemployer pension plans under ERISA, 29 U.S.C. §§ 1002(37), 1301(a)(3). Middle Fork is a Virginia corporation engaged in the business of producing and processing coal, and was a signatory employer to the National Bituminous Coal Wage Agreements of 1981 and 1984. Pursuant to these Wage Agreements, Middle Fork was obligated to and did make contributions to the Plans on behalf of its covered employees.

 Plaintiffs in this action are the Trustees of the Plans. Defendants now before the Court are Arthur O. Rogers, II, individually, Arthur O. Rogers, II, trustee for Shannon Rogers, and James B. Rogers ("the Rogers defendants"). Plaintiffs have alleged that, as a result of its withdrawal from the Plans, Middle Fork and all trades or businesses under "common control" incurred withdrawal liability to the Plans under ERISA, 29 U.S.C. §§ 1301-1461. It is undisputed that, since January 1, 1984, Middle Fork has been wholly owned by MFC Partnership, a general partnership formed under Kentucky law, and thus a trade or business under common control with Middle Fork at the time the latter completely withdrew from the Plans.

 On April 18, 1990, this Court entered a Default Judgment against Middle Fork, and John W. Lockhart and Caleb B. Cooley, two of the partners in the MFC Partnership. The Court determined that Middle Fork's withdrawal liability was $ 82,146.02 plus interest, liquidated damages, attorneys fees, and costs. Plaintiffs allege that none of these amounts have been paid, that Middle Fork is without assets to satisfy the judgment, that James Lockhart is likewise without assets, and that Caleb Cooley has filed for bankruptcy protection. See Pls.' Mot. for Summ. J. at 5-6.

 The parties have now cross-moved for summary judgment. The Court initially heard oral argument on the motions on November 19, 1991. A subsequent hearing was held on January 30, 1992, pursuant to Fed. R. Civ. P. 43(e), at which the parties supplemented the record through oral testimony of witnesses and submission of additional exhibits. On the record now before the Court, and for the following reasons, the Court will deny plaintiffs', and grant defendants', motions for summary judgment.

 II.

 The undisputed facts as they pertain to MFC partnership are these. MFC Partnership was organized pursuant to a written partnership agreement dated April 8, 1983 ("the Partnership Agreement"). See Defs.' Ex. B. The partnership was formed to provide equipment to Middle Fork. See Lockhart Dep. at 19. It is undisputed that A. Odell Rogers ("Odell") entered into the MFC Partnership on April 8, 1983, with John Lockhart and Caleb Cooley. See Defs.' Ex. B; Aff. of A. Odell Rogers. From April 8, 1983 until July, 1984, Odell, Lockhart and Cooley were the only partners in MFC Partnership, although Cooley was also the trustee for four trusts that owned a partnership interest. See Defs.' Ex. B, at 361; Aff. of A. Odell Rogers. According to the Partnership Agreement, Odell held a 41% interest in the profits and losses of MFC Partnership. Defs.' Ex. B, at 361.

 Odell Rogers is the father of the three Rogers defendants. The parties do not dispute that, in July, 1984, he made a gift of his interest in MFC Partnership to his three sons. See Aff. of A. Odell Rogers P2. At the time of the transfer, defendants Arthur O. Rogers, II, and James B. Rogers were, respectively, 20 and 19 years of age, and were attending college outside of Virginia. Shannon Rogers was a four-year-old. Id. Odell testified that he informed his lawyer, Doug Wood, of his wish to transfer his interest in MFC Partnership to his sons, and left his lawyer to work out the details. When Arthur Rogers, II, received an Amended Partnership Agreement (the "Amended Agreement") from Mr. Wood with instructions on a post-it note to sign and return it, he instead placed the Amended Agreement in a filing cabinet without signing it. Aff. of Arthur O. Rogers, II P5. James Rogers did sign and return the Amended Agreement, but did so merely upon the instruction of the lawyer, without having read it. Aff. of James B. Rogers P5.

 It is also undisputed that the Rogers defendants received income from MFC Partnership, which was reported to the Internal Revenue Service on the partnership's Schedule K-1 forms, and on the defendants' individual federal tax returns. The Schedule K-1s identify the Rogers defendants as general partners. See, e.g., Pls.' Ex. 4 (federal income tax return of MFC Partnership for 1987). The defendants are also identified as "partners" on the partnership's unaudited balance sheet for December 31, 1985, and in one transaction reported on its General Ledger Activity for 1985. Finally, each of the Rogers defendants is reported as having received $ 1000 in "Management Fees" on Middle Fork's unaudited income statement for the year ending September 30, 1986.

 III.

 The dispositive issue for the Court's determination is whether the Rogers defendants were general partners of MFC Partnership. *fn3" This issue is one of federal law, although the Court may also look to state law for guidance. See Connors v. Ryan's Coal Co., Inc., 923 F.2d 1461, 1466 (11th Cir. 1991); Teamsters Pension Trust Fund v. H.F. Johnson, 830 F.2d 1009, 1014 (9th Cir. 1987). It is, of course, "well settled that the MPPAA contemplates recovery of withdrawal liability from partners and partnerships under common control with defaulting signatory employers." Ryan's Coal, 923 F.2d at 1466; Connors v. Calvert Dev. Co., 622 F. Supp. 877, 880-881 (D.D.C. 1985). There is, however, nothing to indicate that Title IV of ERISA abrogates general principles of partnership law in determining whether particular individuals are partners, and in making that determination courts have freely resorted to those principles. See 29 U.S.C. §§ 1381, 1405(c); Ryan's Coal, 923 F.2d at 1467-68; H.F. Johnson, 830 F.2d at 1014-15; cf. Connors v. P & M Coal Co., 255 App. D.C. 334, 801 F.2d 1373, 1376-78 (D.C. Cir. 1986) (holding that the definition of "employer" in Title I of ERISA should not be read into Title IV so as to compromise the principle of limited liability in corporate law).

 In applying partnership law to the case at hand, plaintiff, as the proponent of liability, bears the burden of proof on the dispositive issue. Because the issue of defendants' partnership status is before the Court on the parties' motions for summary judgment, defendants will be entitled to summary judgment as a matter of law if plaintiffs fail to make a sufficient showing on an essential element of their case on which they have the burden of proof. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986) (further explaining that the summary judgment standard is similar to that of a ...


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