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June 24 — A shipping company's dispute with a mechanics union pension fund is headed for trial after the U.S. Court of Appeals for the Seventh Circuit undid a ruling absolving the company of nearly $500,000 in withdrawal liability ( Bd. of. Trs. of Auto. Mechs. Local No. 701 Union & Indus. Pension Fund v. Full Circle Grp., Inc. , 2016 BL 202989, 7th Cir., No. 15-2497, 6/24/16 ).
This ruling builds on the court's 2015 decision in a case that made easier for multiemployer pension funds to collect withdrawal liability from unaffiliated companies that acquire employers with pension obligations.
Both cases ask whether a company without pension fund obligations can become liable for these obligations as the successor of a company it acquires. Last year, the Seventh Circuit held that a company could be on the hook even if it only had knowledge of the possibility that such liability would arise.
The court's June 24 decision built on this principle by undoing a federal judge's ruling absolving Full Circle Group Inc. of liability for the pension fund obligations of a company it acquired from the father of Full Circle's owner.
The court said that Full Circle's owner, Mark Hannah, was aware of the fact that his father's company had obligations to a union pension fund. This put Hannah “on notice that there was a possibility of such liability,” the court said.
Interestingly, the court cited current trends in the union pension fund universe as evidence of Hannah's knowledge.
“Further evidence of notice is the fact known if not to him then (again) to his advisers that most union pension funds are underfunded,” the Seventh Circuit said.
Given this, the Seventh Circuit partly reversed the district court's decision in favor of Full Circle so that the case could proceed to trial.
Judge Richard A. Posner wrote the decision, which was joined by Judges William J. Bauer and Ann Claire Williams.
Johnson & Krol represents the pension fund. Laner Muchin represents Full Circle.
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Text of the decision is at http://www.bloomberglaw.com/public/document/Board_of_Trustees_of_the_Autom_v_Full_Circle_Group_Inc_et_al_Dock.
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