Central States Areas v. Hunt Truck Lines Inc

In the
United States Court of Appeals
For the Seventh Circuit
____________

No. 01-2558
CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS
PENSION FUND, and HOWARD MCDOUGALL, Trustee,
Plaintiffs-Appellees,
v.

HUNT TRUCK LINES, INC.,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 00 C 1204—Ronald A. Guzman, Judge.
____________
ARGUED JANUARY 25, 2002—DECIDED JULY 23, 2002
____________

Before MANION, KANNE, and WILLIAMS, Circuit Judges.
KANNE, Circuit Judge. In 1994, Hunt Truck Lines, Inc.
withdrew from the Central States, Southeast and South-
west Areas Pension Fund (“Central States”). Usually, this
would give rise to withdrawal liability on Hunt’s part under
the Multiemployer Pension Plan Amendments Act of 1980,
29 U.S.C. §§ 1381-1461 (the “MPPAA”). However, because
Hunt sold its assets to another company, Wintz Parcel
Drivers, Inc., Hunt did not face withdrawal liability pro-
vided that Wintz continued to make payments to the fund.
In 1996, one of Wintz’s subsidiaries went bankrupt, trigger-
ing withdrawal liability on Wintz’s part. Initially, Central
2 No. 01-2558

States sent a notice to Wintz demanding that it begin mak-
ing installment payments on the withdrawal liability, but
Wintz defaulted. That default permitted Central States to
pursue Hunt’s secondary liability for the withdrawal pay-
ments.

A. Proceedings before Judge Nordberg
On May 31, 1996, Central States sent Hunt a notice
demanding that it begin making interim payments on its
withdrawal liability. Hunt refused to pay, and Central
States brought suit seeking interim withdrawal payments,
and the case was assigned to Judge John A. Nordberg.
Although in most cases, a district court routinely grants
an order allowing a pension plan to obtain interim pay-
ments, Hunt I proved to be an exception to that rule. In
Hunt I, Judge Nordberg noted that Central States sent
the original notice to Hunt on May 31, 1996, but that Cen-
tral States conceded in its motion for summary judgment
that Wintz did not withdraw from the plan until “on or
about July 20[, 1996].” Because Hunt could not have in-
curred withdrawal liability until Wintz actually withdrew
from the plan, it was clear that Central States had sent the
original demand at least one and one-half months before
Hunt incurred any liability. Judge Nordberg then held that
although the MPPAA provision regarding interim payments
was broad, it did not allow Central States to seek payments
until after Hunt incurred withdrawal liability. Therefore,
Judge Nordberg granted summary judgment in favor of
Hunt, finding that Central States failed to comply with the
statutory prerequisites of the MPPAA.

B. Arbitration Proceedings
On December 20, 1996, Hunt initiated arbitration of the
withdrawal liability assessment pursuant to 29 U.S.C.
No. 01-2558 3

§ 1401, and the arbitration was assigned to arbitrator Ira
F. Jaffe. On June 23, 1998, the arbitrator also concluded
that Hunt had been billed prematurely and issued an in-
terim arbitration award containing the affirmative order
directing Central States to issue a revised demand, noting
that a revised demand was preferred to “starting the proc-
ess anew.”
On July 1, 1998, pursuant to the arbitrator’s interim
award, Central States issued a revised Notice and Demand
for Withdrawal Liability against Hunt seeking payments
from Hunt from November 1, 1996 until May 1, 1999. On
October 14, 1998, the interim award was converted to a
final award by stipulation of the parties. The final arbitra-
tion award, however, did not specifically require Hunt
to actually make any withdrawal payments. Rather, it
solely ordered Central States to issue the revised demand.

C. Proceedings before Judge Shadur
On October 15, 1998, Central States filed suit seeking to
enforce the arbitration award, and the case was assigned to
Judge Milton Shadur. Central States’ complaint sought to
affirm and enforce the arbitrator’s final award and to enter
judgment against Hunt in accordance therewith. On April
8, 1999, Judge Shadur entered judgment enforcing the final
award. On April 26, 1999, Central States filed a Rule 59(e)
motion to amend judgment, seeking to amend the judgment
to provide for monetary relief because, as noted above, the
arbitration’s award did not provide for withdrawal pay-
ments. Judge Shadur denied the motion, noting that his
power was limited to determining whether the arbitrator’s
decision was correct. At no time, however, did Judge Shadur
rule on the ultimate issue of whether Hunt was liable for
the withdrawal under the MPPAA or on what would happen
if Hunt refused to make payments under the revised de-
mand.
4 No. 01-2558

D. Our Prior Decision
On May 6, 1999, Hunt appealed Judge Shadur’s judgment
enforcing the final award. On June 30, 1999, Central States
moved to consolidate its appeal of Judge Nordberg’s deci-
sion with its appeal of Judge Shadur’s judgment and denial
of Central States’ motion to amend judgment, and we issued
an ordered consolidating the appeals.
On appeal, this court affirmed both lower courts. See
Cent. States, Southeast and Southwest Areas Pension Fund
v. Hunt Truck Lines, Inc., 204 F.3d 736, 743 (7th Cir. 2000)
(“Hunt I”). With regard to the appeal of Judge Nordberg’s
decision, we rejected Central States’ effort to argue that “on
or about July 20” could mean “as early as May 3” and held
that Central States was bound by its admission before the
district court and thus the date of withdrawal was not
legitimately in dispute. See id. at 742. We further concluded
that under the MPPAA, a pension fund was not permitted
to issue a notice and demand for withdrawal liability un-
til after the employer incurred such liability. See id. Be-
cause Wintz had not withdrawn at the time Central States
issued the original demand to Hunt, we held that Central
States’ failure to comply with this procedural requirement
meant that Central States could not collect interim pay-
ments based on the May 31, 1996 notice. See id.
In affirming Judge Shadur’s rulings, we noted that
Arbitrator “Jaffe’s sole affirmative order was that Central
States issue the demand,” and that Judge Shadur was cor-
rect to deny Central States’ Rule 59(e) motion. Writing for
the court, Judge Evans concluded by stating that
[W]e wish to make absolutely clear that, while Central
States cannot recover on this appeal, our decision does
not preclude future recovery. In fact, it appears cer-
tain that Central States will (and should) receive the
full withdrawal fee to which it is entitled. As per
arbitrator Jaffe’s award, the fund has issued Hunt a
No. 01-2558 5

renewed demand. Central States appears to be under
the impression that either Judge Nordberg’s or Judge
Shadur’s opinions preclude it from collecting on this
second demand. This is not the case. Since both judges’
rulings focused solely on the fund’s prior, premature
demand. (Indeed, it should already be complying.) If
Hunt fails to pay on this demand, Central States need
merely file suit under the MPPAA’s enforcement
scheme to ensure that it receives interim payments.
Id. at 743.Œ

E. The Present Suit
Following our dictate, Central States filed suit against
Hunt for collection of withdrawal liability for a complete
withdrawal by Hunt, and the case was assigned Judge
Ronald A. Guzman. Ignoring our statement that the prior
judgments would “not preclude” Central States from col-
lecting under the renewed demand, Hunt argued that res
judicata precluded Central States’ action. Central States
responded that this suit was the first to determine Hunt’s
ultimate liability under the revised demand. Hunt moved
for summary judgment, contending that the present case
was res judicata or, in the alternative, that laches should
bar recovery. Central States moved for summary judgment

Œ
Subsequently, Hunt sought attorney’s fees, which were awarded
by the district court. However, on appeal, we held that the district
court had abused its discretion in awarding attorney’s fees be-
cause there was no dispute that Hunt would ultimately face
withdrawal liability. See Cent. States, Southeast and Southwest
Areas Pension Fund v. Hunt Truck Lines, Inc., 272 F.3d 1000,
1006 (7th Cir. 2001) (“Hunt II”). In so holding, Judge Diane Wood,
writing for the court, again instructed Hunt to pay for the with-
drawal liability and questioned Hunt’s failure to do so. See id.
at 1003.
6 No. 01-2558

arguing, inter alia, that res judicata did not apply because
we had explicitly stated in Hunt I that a subsequent action
would not be precluded and because Hunt’s failure to make
payments under the revised demand constituted a new
wrong.
The district court rejected Hunt’s argument and granted
summary judgment in favor of Central States, while de-
nying Hunt’s cross-motion. The district court initially noted
that the prior judgments involved the various procedural
issues and “not collection under the revised demand should
Hunt choose to disregard payments pursuant to the revised
demand.” The district court then held that the failure to
pay under the revised demand constituted a new wrong and
thus was not res judicata. Hunt appeals, resting solely on
its argument that this claim is res judicata.

I. Analysis
We review a grant of summary judgment de novo, view-
ing all of the facts and drawing all reasonable inferences
therefrom in favor of the nonmoving party. See Cent. States,
Southeast and Southwest Areas Pension Fund v. White, 258
F.3d 636, 639 (7th Cir. 2001). Because the prior litigation
was brought in federal court on a federal claim, the federal
rule of res judicata determines whether res judicata applies
to the present action. See In the Matter of Energy Co-op.,
Inc., 814 F.2d 1226, 1230 (7th Cir. 1987). The three require-
ments for res judicata under federal law are: (1) an identity
of the parties or their privies; (2) an identity of the causes
of actions; and (3) a final judgment on the merits. See id.
There is no dispute that the first element was satisfied.
Rather, the parties dispute whether the remaining two
elements have been satisfied.
The record shows that both the action before Judge
Nordberg and the action before Judge Shadur, as well as
No. 01-2558 7

our decision in Hunt I, concerned the procedural propriety
of Central States’ original demand and Arbitrator Jaffe’s
directive to revise the date of the demand notice. Thus, no
previous action has ever addressed Hunt’s ultimate liability
under the revised demand. Further, neither party disputes
that the subject of the arbitration was the May 31, 1996
original demand only and did not concern a scenario where
Hunt chose to disregard payment pursuant to the revised
demand. Therefore, we conclude that Hunt’s failure to make
payments under the revised demand is a new wrong and
thus the causes of action are not identical.
Moreover, a final judgment on the merits of Hunt’s ulti-
mate liability under the revised demand is also absent. As
Judge Guzman succinctly noted, “[t]he thrust of the prior
decisions in the district court and the Seventh Circuit was
that Central States’ original demand for withdrawal liabil-
ity was premature and whether the appropriate method
to cure this defect could in fact be a revised demand rath-
er than recission. The procedural ramifications of Central
States’ premature notice is separate and distinct from the
substantive merits of the final withdrawal liability assess-
ment.”
Furthermore, Hunt’s contention that the present suit
is res judicata also fails because “[u]nder a generally ac-
cepted exception to the res judicata doctrine, a litigant’s
claims are not precluded if the court in an earlier action
expressly reserves the litigant’s right to bring those claims
in a later action.” D & K Prop. Crystal Lake v. Mutual Life
Ins. Co. of New York, 112 F.3d 257, 260 (7th Cir. 1997)
(quoting Apparel Art Intern, Inc. v. Amertex Enter. Ltd., 48
F.3d 576, 586 (1st Cir. 1995)). The Second Restatement also
specifically addresses the issue at hand and provides that
“the general rule of § 24 does not apply to extinguish the
claim, and part or all of the claim subsists as a possible
basis for a second action by the plaintiff against the defen-
dant [when] [t]he court in the first action has expressly
8 No. 01-2558

reserved the plaintiff’s right to maintain the second ac-
tion . . . .” Restatement (Second) of Judgments § 26(b)(1)
(1982). Indeed, we have previously held that “[i]f a court
reserves for later resolution an issue that might other-
wise have been adjudicated in the initial proceeding, res
judicata will not operate to bar the subsequent suit.” See
Energy Co-op, 814 F.2d at 1233.
In Hunt I, we specifically held that “[w]hile Central
States cannot recover on this appeal our decision does not
preclude future recovery,” and that if Hunt failed to pay on
the revised demand, Central States needed merely to file
suit under the MPPAA’s enforcement scheme to ensure that
it received the appropriate payments. 204 F.3d at 743 (em-
phasis added). Therefore, even if we were to assume that
the claims were identical and that a final judgment on the
merits had been entered, res judicata would not apply due
to our express language in Hunt I. See D & K Prop., 112
F.3d at 260; Energy Co-op, 814 F.2d at 1233.

II. Conclusion
For the foregoing reasons, we AFFIRM the judgment of the
district court.
No. 01-2558 9

MANION, Circuit Judge, concurring. The only reason
res judicata does not apply here is because of this court’s
(albeit a different panel) express language in Hunt I de-
claring that the decision would not preclude future re-
covery. When arbitrator Jaffe eventually issued his final
award that did not include a requirement that Hunt make
the withdrawal payments, Central States could and should
have brought a suit to modify the award rather than to
simply enforce it. Section 1401(b) of ERISA permits both
options. Under other circumstances, Central States’ fail-
ure to sue to modify would preclude its current suit to
collect the withdrawal liability under the doctrine of res
judicata. Hunt I’s declaration that Central States is not
precluded created the law for this case that would not be
applicable otherwise.

A true Copy:
Teste:

________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit

USCA-97-C-006—7-23-02