In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 16‐2840
INDIANA ELECTRICAL WORKERS PENSION BENEFIT FUND, et al.,
Plaintiffs‐Appellants,
v.
MANWEB SERVICES, INC.,
Defendant‐Appellee.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 10‐cv‐00980 — Sarah Evans Barker, Judge.
____________________
ARGUED DECEMBER 8, 2016 — DECIDED MARCH 12, 2018
____________________
Before MANION, KANNE, and HAMILTON, Circuit Judges.
HAMILTON, Circuit Judge. For a second time in this case, we
consider whether defendant‐appellee ManWeb Services, Inc.
is a successor in interest to a defunct employer that owes with‐
drawal charges to a multiemployer pension plan. The original
employer was Tiernan & Hoover, but everyone refers to it as
“Freije” after its key founder, William Freije, and his son Rich‐
ard. ManWeb entered into an asset purchase agreement with
2 No. 16‐2840
Freije in 2009. Freije was a small contractor specializing in re‐
frigeration and cold‐storage engineering for commercial and
industrial projects. ManWeb was a larger company offering a
wider range of contracting services, with the notable excep‐
tion, before it acquired Freije’s assets, of refrigeration projects
such as cold‐storage warehouses. Freije’s unionized electri‐
cians were covered by a multiemployer pension plan.
The Employee Retirement Income Security Act of 1974
(ERISA), as amended by the Multiemployer Pension Plan
Amendments Act of 1980 (MPPAA), establishes withdrawal
liability for employers leaving a multiemployer pension plan.
29 U.S.C. § 1381. In this case, Freije withdrew from the Indi‐
ana Electrical Workers Benefit Fund (“the Fund”). The Fund
assessed withdrawal liability of $661,978 against Freije. When
Freije failed to pay, the Fund brought this action against both
Freije and ManWeb as a successor in interest to Freije. Succes‐
sor liability can apply under the MPPAA when the purchaser
had notice of the liability and there is continuity of business
operations. Upholsterers’ Int’l Union Pension Fund v. Artistic
Furniture of Pontiac, 920 F.2d 1323, 1329 (7th Cir. 1990). At this
point, the only issue in the case is the claim against ManWeb
based on successor liability.
The district court granted summary judgment for Man‐
Web in 2013, finding it lacked notice of Freije’s withdrawal li‐
ability. In the first appeal, we remanded, finding that “Man‐
Web had sufficient pre‐acquisition notice of [Freije’s] contin‐
gent withdrawal liability to satisfy the federal successor lia‐
bility notice requirement.” Tsareff v. ManWeb Services, Inc., 794
F.3d 841, 848 (7th Cir. 2015) (“ManWeb I”). On remand, the dis‐
trict court again granted summary judgment for ManWeb,
concluding that the Fund had not shown sufficient continuity
No. 16‐2840 3
of business operations to support successor liability. The Fund
has appealed again. We find ourselves in respectful disagree‐
ment with our colleague on the district court. In the totality of
relevant circumstances, ManWeb’s purchase of and use of
Freije’s intangible assets—its name, goodwill, trademarks,
supplier and customer data, trade secrets, telephone numbers
and websites—and its retention of Freije’s principals to pro‐
mote ManWeb to existing and potential customers as carrying
on the Freije business under ManWeb’s larger umbrella,
weigh more heavily in favor of successor liability than the dis‐
trict court recognized. We vacate the district court’s decision
and remand for further consideration of this equitable deter‐
mination.
I. Undisputed Facts and Procedural Background
ManWeb is an Indianapolis company that now performs a
range of industrial construction services. In August 2009,
ManWeb paid $259,360 for the assets of Tiernan & Hoover,
another, much smaller Indianapolis construction company
specializing in cold‐storage facilities. ManWeb I, 794 F.3d at
843. Tiernan & Hoover did business under the name The
Freije Company, and like everyone else in this case, we refer
to it as Freije. Freije was a party to a collective bargaining
agreement with International Brotherhood of Electrical Work‐
ers Local 481; ManWeb was non‐union. As a union employer,
Freije contributed to the Fund and under the MPPAA was re‐
quired to pay withdrawal liability of $661,978 when it ceased
operations. See ManWeb I, 794 F.3d at 843–44. ManWeb did
not make any contributions to the Fund after its purchase of
Freije. Id. at 844.
4 No. 16‐2840
A. The Fund’s First Appeal
Neither Freije nor ManWeb made payments to satisfy the
withdrawal liability, and Freije never took advantage of its
right to seek review of the assessment amount or to challenge
the assessment in arbitration. See 29 U.S.C. §§ 1399(b)(2)(A) &
1401(a)(1). The assessment therefore became due when the
statutory deadline for contesting the liability passed. See 29
U.S.C. § 1401(b). The Fund then filed this suit against Freije
and added ManWeb as a defendant based on successor liabil‐
ity. See 29 U.S.C. §§ 1132(e)–(f) & 1451(c) (authorizing juris‐
diction). Both sides filed cross‐motions for summary judg‐
ment.
The district court granted the Fund’s motion against Freije,
finding that Freije owed the withdrawal liability assessment
in full. The district court also held, however, that ManWeb
was not responsible for successor liability, and the court
granted ManWeb’s motion for judgment as a matter of law.
Successor liability is an equitable doctrine and is imposed
when “there exist sufficient indicia of continuity between the
two companies and … the successor firm had notice of its pre‐
decessor’s liability.” Artistic Furniture, 920 F.2d at 1329. Find‐
ing that “it was impossible for ManWeb to have notice of any
existing withdrawal liability,” the court found no successor li‐
ability without evaluating whether there was substantial con‐
tinuity of business operations. See ManWeb I, 794 F.3d at 845.
The Fund appealed the denial of successor liability. Be‐
cause successor liability is an equitable doctrine, our decision
rested on an analysis of MPPAA policy goals that seek to en‐
sure “the responsibility for a withdrawing employer’s share
of unfunded vested pension benefits is not shifted to remain‐
ing employers.” Id. at 846. We concluded that ManWeb had
No. 16‐2840 5
notice of Freije’s contingent withdrawal liability. Id. at 848.
That liability was included in the Asset Purchase Agreement
and financial statements, and ManWeb had included in the
agreement a provision trying expressly to disclaim that liabil‐
ity. We reversed and remanded for analysis of the continuity
requirement. Id. at 850.
B. Remand and the Current Appeal
On remand, the district court again found in favor of Man‐
Web on cross‐motions for summary judgment, this time find‐
ing no substantial continuity of business operations from
Freije to ManWeb. The district court evaluated five clusters of
continuity factors: business processes and services, facilities
and equipment, workforce, management and ownership, and
customers. The court concluded that “ManWeb did not and
has not continued [Freije’s] business without interruption or
substantial change.” The court then addressed the balance of
equities and found that the factors and policies weighed
against successor liability.
II. Analysis
Summary judgment is appropriate only where there is no
genuine issue of material fact and the moving party is entitled
to a judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986). We review de novo the
district court’s grant of summary judgment. McDougall v. Pio‐
neer Ranch Ltd. Partnership, 494 F.3d 571, 575 (7th Cir. 2007).
Here the material facts are not disputed.
A. MPPAA Policy Goals and Successor Liability
Multiemployer pension plans are based on defined contri‐
butions and pay defined benefits. If one employer defaults on
its contributions, whether by delinquency or withdrawal,
6 No. 16‐2840
other employers must make up the difference to cover the de‐
fined benefits owed to participants. Artistic Furniture, 920 F.2d
at 1327–28, citing Central States, Southeast and Southwest Areas
Pension Fund v. Gerber Truck Service Inc., 870 F.2d 1148, 1151
(7th Cir. 1989). Unpaid contributions also result in the loss of
investment income that could have been earned by the plan.
Id. at 1328. Both types of losses put financial pressure on the
remaining employers and discourage new employers from
joining. The financial stability of the plan is put in jeopardy,
and plan beneficiaries risk losing their pension benefits.
The MPPAA amended ERISA to protect multiemployer
plans from these damaging consequences of withdrawal. See
Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717,
723–25 (1984); H.R. Rep. 96‐869, Part 1, at 67–68, 75, 1980
U.S.C.C.A.N. 2918, 2935–36. In enacting the MPPAA, Con‐
gress showed “a desire to (1) relieve the financial burden
placed upon remaining contributors to a multiemployer fund
when one or more of them withdraws from the plan; (2) avoid
creating a severe disincentive to new employers entering the
plan; and (3) prevent the creation of funding deficiencies.”
ManWeb I, 794 F.3d at 845–46 (internal citations and quotation
marks omitted). Withdrawal liability, a company’s share of
unfunded vested benefits, is imposed on an employer that
ends its participation in a multiemployer plan. ManWeb I, 794
F.3d at 845; Artistic Furniture, 920 F.2d at 1328. The House
Committee on Education and Labor explained in enacting the
MPPAA: “Employer withdrawal liability will help to insulate
a plan from the adverse effects of a sustained decline in the
contribution base.” H.R. Rep. 96‐689, Part 1, at 67, 1980
U.S.C.C.A.N. at 2395. Successor liability may be imposed to
prevent other employers from having to make up the differ‐
ence left by employers who have left the fund without paying
No. 16‐2840 7
their liabilities but whose businesses continue. Artistic Furni‐
ture, 920 F.2d at 1328. (In extreme cases of plan failure, the fed‐
eral Pension Benefit Guaranty Corporation may be called
upon to make up shortfalls caused by withdrawing employ‐
ers who default on their obligations. See 29 U.S.C. § 1431.)
Asset purchase agreements typically provide that the
buyer acquires the assets of the selling company but does not
assume the seller’s liabilities. E.g., Chicago Truck Drivers, Help‐
ers & Warehouse Workers Union (Independent) Pension Fund v.
Tasemkin, Inc., 59 F.3d 48, 49 (7th Cir. 1995); Artistic Furniture,
920 F.2d at 1325; Travis v. Harris Corp., 565 F.2d 443, 446 (7th
Cir. 1977). This general rule emerged under the common law
to “maximize the fluidity of corporate assets,” Artistic Furni‐
ture, 920 F.2d at 1325, and ManWeb’s agreement to buy Freije’s
assets tried to fit that mold. The general rule, however, is not
absolute, and successor liability doctrine provides an im‐
portant exception. It applies when “an employer … substan‐
tially assumes a predecessor’s assets, continues the predeces‐
sor’s operations without interruption or substantial change,
and … has notice … at the time of acquisition.” Id. at 1326 (us‐
ing decisions under National Labor Relations Act to guide ap‐
plication of MPPAA); see also Tasemkin, 59 F.3d at 49 (observ‐
ing that this exception “protect[s] federal rights [and] effectu‐
ate[s] federal policies”).
Successor liability extends throughout federal employ‐
ment law to protect federal statutory policies from corporate
artifice. From its origins in enforcing the National Labor Re‐
lations Act, successor liability has served to vindicate policies
articulated in, for example, Title VII of the Civil Rights Act of
1964, the Fair Labor Standards Act, ERISA, and 42 U.S.C.
§ 1981, among others. See Golden State Bottling Co. v. N.L.R.B.,
8 No. 16‐2840
414 U.S. 168 (1973) (NLRA); Teed v. Thomas & Betts Power Solu‐
tions, L.L.C., 711 F.3d 763 (7th Cir. 2013) (FLSA); Artistic Furni‐
ture, 920 F.2d 1323 (MPPAA); Wheeler v. Snyder Buick, Inc., 794
F.2d 1228 (7th Cir. 1986) (Title VII); Musikiwamba v. ESSI Inc.,
760 F.2d 740 (7th Cir. 1985) (§ 1981).
The issue of successor liability depends on the particular
facts and the legal duties at stake, so, as the district court rec‐
ognized, a new employer or buyer of assets “may be a succes‐
sor for some purposes and not for others.” Howard Johnson Co.,
Inc. v. Detroit Local Joint Executive Bd., 417 U.S. 249, 262 n.9
(1974) (holding under NLRA that purchaser of hotel assets
was not required to arbitrate with union about its decision not
to hire all of seller’s employees). Decisions about successor li‐
ability require an equitable balancing of the national policies
at stake and the interests of the affected parties. Resilient Floor
Covering Pension Trust Fund Bd. of Trustees v. Michael’s Floor
Covering, Inc., 801 F.3d 1079, 1091 (9th Cir. 2015); ManWeb I,
794 F.3d at 848; see also Artistic Furniture, 920 F.2d at 1326–27.
Successor liability under the MPPAA requires two distinct
components: notice of the potential liability and substantial
continuity of the business. ManWeb I, 794 F.3d at 845, quoting
Tasemkin, 59 F.3d at 49. In our prior opinion, we determined
that ManWeb had notice, ManWeb I, 794 F.3d at 847, so we fo‐
cus now on continuity. Recognizing the ingenuity often
shown in reorganizing businesses and their assets, courts con‐
sider the totality of the circumstances to determine continuity,
focusing on the particulars of the case and the nature of the
liability at issue. See Fall River Dyeing & Finishing Corp. v.
N.L.R.B., 482 U.S. 27, 43 (1987) (assessing business activities,
workforce, working conditions, supervisors, production pro‐
cesses, products, and customer base to determine successor
No. 16‐2840 9
liability under NLRA); Artistic Furniture, 920 F.2d at 1329 (as‐
sessing workforce, supervisory personnel, plant, machinery,
equipment, products, assumption of work orders and war‐
ranty claims, and management to determine successor liabil‐
ity under MPPAA); Sullivan v. Running Waters Irrigation, Inc.,
739 F.3d 354, 358 (7th Cir. 2014) (assessing leadership, employ‐
ees, customers, office space, equipment, and services to deter‐
mine successor liability under ERISA); N.L.R.B. v. Jarm Enter‐
prises, Inc., 785 F.2d 195, 200 (7th Cir. 1986) (assessing business
operations, plant, workforce, job positions, working condi‐
tions, supervisors, machinery, equipment, methods of pro‐
duction, and manufactured product or service to determine
successor liability under NLRA). The Ninth Circuit’s opinion
in Resilient Floor Covering provides a detailed and helpful re‐
view of the development of successor liability under a range
of federal labor and employment laws. See 801 F.3d at 1088–
96.
B. The “Big Buyer” Loophole?
In arguing for lack of continuity here, ManWeb empha‐
sizes several factors that we view quite differently. First, Man‐
Web argues, and the district court found, a lack of continuity
in the business services offered because ManWeb, before it
bought Freije’s assets, had not offered the industrial refriger‐
ation construction services that it offered after the purchase.
ManWeb also points out, as did the district court, that the 13
Freije employees who joined ManWeb comprised only a small
fraction of ManWeb’s post‐purchase workforce. Third, Man‐
Web and the district court noted that only 1.3 percent of Man‐
Web’s overall electrical projects and less than 1 percent of its
electrical work revenue came from completion of Freije’s cus‐
tomers’ contracts pending at the time of the purchase.
10 No. 16‐2840
The Fund argues that these aspects of the district court’s
analysis undermine the policies of the MPPAA by creating
what amounts to a “big buyer” loophole for successor liabil‐
ity, defeating a finding of continuity even where a large buyer
in essence swallows a smaller seller whole and continues its
business as part of the buyer’s business. We agree. Large buy‐
ers of assets should not escape successor liability just because
of their size, yet the district court’s calculations logically point
toward that result. Those calculations lose sight of the proper
focus, which is the extent to which the predecessor company’s
business continues after the asset purchase.
A hypothetical example with simple arithmetic illustrates
the problem with ManWeb’s argument. Suppose Smith Com‐
pany has 25 employees and Jones, Inc. has 475 employees.
Jones acquires Smith’s assets, and 100 percent of the Smith
employees go to work for Jones. Under ManWeb’s arguments,
however, the relevant number is just 5 percent—the propor‐
tion of Jones employees who are former Smith employees. Or
consider the transfer of customers and revenue. Suppose
Smith has 25 customers and annual revenues of $25 million,
while Jones has 475 customers and annual revenues of $475
million. And suppose that all Smith customers and their rev‐
enue move their business to Jones. In our view, that would
reflect complete continuity of the seller Smith’s business, even
though its customers and revenues would be only 5 percent
of the buyer’s business.
Although the numbers will never be so stark, this example
shows why the totality‐of‐the‐circumstances analysis must fo‐
cus more on the proportion of the seller’s workforce, business,
and customers that move to the buyer, regardless of the extent
to which they might be diluted in a much bigger buyer’s
No. 16‐2840 11
workforce, business, or customer base. The actual facts here
are not as stark as the Smith–Jones hypothetical, but they are
similar enough that we conclude the district court’s method
was inappropriate and that the continuity factors must be re‐
evaluated.1
C. Continuity of Business Operations
In the parties’ first appeal, we observed that “in light of the
difficulty of the successorship question, the myriad factual
circumstances and legal contexts in which it can arise, and the
absence of congressional guidance as to its resolution, empha‐
1 On this point, the district court relied on the analysis in the Ninth
Circuit’s Resilient Floor Covering opinion. See 801 F.3d at 1098. As noted
above, that opinion is helpful on a number of aspects of this case. In focus‐
ing on whether a majority of the new workforce previously worked for
the old employer, however, Resilient Floor Covering drew from successor
liability cases dealing with a new employer’s duty to bargain with the un‐
ion representing the old employer. Id., citing N.L.R.B. v. Jeffries Lithograph
Co., 752 F.2d 459, 464 (9th Cir. 1985), and Fall River Dyeing, 482 U.S. at 46
n.12, among other cases. When the question is whether employees of the
new employer should be represented by the union from the old employer,
that is surely the correct focus because of the majority rule that applies in
choosing representation for collective bargaining. Otherwise successor li‐
ability could be used to impose a union on a large number of employees
who do not support it. When the issue is different, such as whether the
new employer should take on the withdrawal liabilities of the old em‐
ployer, however, different considerations apply, and the risk of creating
an arbitrary loophole for big buyers of assets should be avoided. The Sixth
Circuit made this point persuasively in Grace v. USCAR, 521 F.3d 655, 672
n.16 (6th Cir. 2008) (if continuity is measured by whether majority of new
employer’s employees came from old employer, “then any large entity
that absorbed a much smaller company in any fashion would never be
considered to be a substantial continuation of the small company”), quot‐
ing district court opinion.
12 No. 16‐2840
sis on the facts of each case as it arises is especially appropri‐
ate.” ManWeb I, 794 F.3d at 848, quoting Howard Johnson Co.,
417 U.S. at 256. This remains true in this second appeal. We
find it most helpful to assess the continuity of relevant factors
in six categories: ownership, physical assets, intangible assets,
management and workforce, business services, and custom‐
ers.
1. Continuity of Ownership.
There was no shared ownership between ManWeb and
Freije. We agree with the district court that there was no con‐
tinuity of ownership, and this factor does not support succes‐
sor liability for ManWeb.
2. Continuity of Physical Assets.
ManWeb purchased Freije’s assets for $259,360. Not need‐
ing the physical assets, such as vehicles, tools, and office
equipment, ManWeb sold most of the property at auction and
did not use it in the operation of its business. ManWeb also
did not use Freije’s prior location. The district court found
these facts weigh against successor liability, and we agree.
3. Continuity of Intangible Assets.
One may wonder, then, why ManWeb purchased the as‐
sets of a struggling company when it had no interest in the
location, facilities, or physical assets. The answer is the Freije
name. The Indianapolis construction industry knew the
names of William and Dick Freije. Their reputations and the
reputation of the company that bore their name were worth
the purchase price to ManWeb because it could market its
business as a continuation of Freije’s business.
No. 16‐2840 13
The asset purchase agreement gave ManWeb not just
physical equipment, which it did not need or want, but also
the Freije trademark and tradename, supplier lists, trade
secrets, contracts, customer lists and data, telephone
numbers, and internet domain names. In other words,
ManWeb purchased everything it needed to represent itself,
or at least a part of itself, as the continuation of the Freije
business. Immediately after the purchase, internet traffic from
www.thefreijecompany.com was forwarded to ManWeb’s site.
At the same time, ManWeb had Freije telephone lines and
mail forwarded to ManWeb’s office. Outgoing mail was sent
on letterhead that had both The Freije Company logo and the
ManWeb logo in an attempt “to retain as many customers” as
possible, according to ManWeb’s owner. In short, ManWeb
immediately began using Freije’s goodwill and other
intangible assets to hold and attract business.
ManWeb’s owner, Michael Webster, testified that he ex‐
pected to gain a business advantage using the Freije name,
and ManWeb filed a Certificate of Assumed Business Name
with the Indiana Secretary of State for “The Freije Company.”
According to a former Freije owner, the “niche” market of in‐
dustrial refrigeration was dominated by “word of mouth,”
and new opportunities came about not through advertising
but through customers in the industry “network[ing] with
each other.”
When ManWeb bought Freije’s assets, ManWeb issued a
press release describing the transaction not as an asset pur‐
chase but as an acquisition and merger. That is the language
of continuity. Fourteen months after the asset purchase, Man‐
Web started doing business as Freije Engineered Solutions,
and phones were answered using the Freije name. At the time
14 No. 16‐2840
of the district court’s decision several years after the execution
of the asset purchase agreement, ManWeb was doing business
as Freije‐RSC Engineered Solutions. ManWeb even tried to
appropriate the history of the Freije name and company. Man‐
Web started operations in 2003, but in 2012 (and even today),
the “History” page on ManWeb’s website has described the
company’s origins with the Freije family in 1959, the ManWeb
acquisition in 2009, and ManWeb’s restructuring and rebrand‐
ing of its business as “Freije Engineered Solutions.”
The evidence shows that ManWeb bought Freije’s assets—
especially the assets associated with goodwill and reputa‐
tion—in large part because it wanted to convince customers
that it was, in fact, a continuation of the old Freije company.
This continuity of the tradename and related intangible as‐
sets, together with the intention behind it, weighs strongly in
favor of continuity of business operations.
4. Continuity of Workforce.
Examining separately the categories of management, su‐
pervisors, and rank‐and‐file employees clarifies the extent of
continuity and change to Freije’s business after the purchase
agreement.
a. Continuity of Management.
Three senior managers moved directly from Freije to Man‐
Web. Dick Freije, an original owner and a mechanical/refrig‐
eration engineer, brought with him the Freije name and his
personal reputation. At ManWeb he became Director and Re‐
frigeration Engineer. Michael Hoover, president of Freije, like‐
wise became a Director and Refrigeration Engineer at Man‐
Web. Gregory Taylor, previously vice president at Freije and
a part owner, became the Business Development Manager for
No. 16‐2840 15
ManWeb. Manweb publicized these men’s employment with
it to keep old Freije customers and attract new ones. This pub‐
licity indicates that their continuity was important to Man‐
Web, and like the district court, we find continuity of manage‐
ment.
b. Continuity of Supervisors.
Three former Freije supervisors were hired by ManWeb.
However, there is no evidence as to the supervisory structure
of ManWeb and how those former Freije supervisors fit into
it. On this record, we agree with the district court and find no
substantial continuity of supervisors.
c. Continuity of Employee Workforce.
At the time of the sale, Freije had about 40 employees.
Three were members of the electrical workers union. Thirteen
of the forty (33 percent of Freije’s workforce) were hired by
ManWeb; the remainder left to seek work elsewhere. No for‐
mer Freije employees who were employed at ManWeb had
been members of the union. After acquiring Freije and hiring
thirteen of its employees, ManWeb’s total workforce had 238
employees. In other words, former Freije employees made up
5 percent of ManWeb’s workforce.
The district court interpreted these numbers as showing
minimal continuity of workforce. We disagree. As explained
above, the district court’s approach focuses more on the con‐
tinuity of the pre‐purchase ManWeb business at the expense
of examining the more critical degree of continuity of Freije’s
business. It also overlooks the big buyer problem. Even if
ManWeb had hired Freije’s entire staff of 40, former Freije em‐
ployees would have amounted to just 15 percent of ManWeb’s
16 No. 16‐2840
total workforce. When a large company like ManWeb pur‐
chases a small company like Freije, using the larger com‐
pany’s workforce as the denominator of the relevant fraction
will understate the continuity of the workforce.
The fact that one third of Freije’s workforce continued at
ManWeb is not insignificant. In the big buyer context, a pur‐
chaser in the same general industry as the seller often will re‐
tain lower‐level staff performing substantially the same func‐
tions as those at the smaller company. More important in this
context is the retention of key people such as Dick Freije and
the other managers who went to work for ManWeb. These
workers possessed unique knowledge, skills, and abilities not
present in ManWeb before the purchase. Their presence at
ManWeb signaled continuity to customers and enabled the
Freije team that made the transition to ManWeb to offer that
continuity of service to customers.
The district court emphasized the fact that no union em‐
ployees went to work for ManWeb. On its face, this would
seem to indicate that the contribution base would not be dam‐
aged, since at least some of those employees went to other
companies that were, presumably, contributing to the Fund.
However, the district court’s emphasis does not account for
the fact that ManWeb had chosen to be non‐union. This is
what the MPPAA warns against: an employer who “stays in
the industry but goes non‐union and ceases making payments
to the plan.” Resilient Floor Covering, 801 F.3d at 1094. Thus,
we find that continuity of one third of Freije’s employees, in‐
cluding the continuity of key individuals, tends to indicate
significant continuity of the workforce.
No. 16‐2840 17
5. Continuity of Business Services.
Before it acquired Freije’s assets, ManWeb already offered
a broad array of engineering services. The record also shows,
though, that ManWeb had consistently been unable to launch
industrial refrigeration projects, despite being a national
player in the market to design and build warehouses. Freije
specialized in industrial refrigeration: “engineering, construc‐
tion, and service for cold storage facilities.” Before the pur‐
chase, ManWeb was not doing refrigeration work in its pro‐
jects. After the purchase of Freije assets, ManWeb was able to
include refrigeration services in its broader package of offer‐
ings.
The district court concluded that the narrow overlap be‐
tween the refrigeration services offered by Freije and the
broad range of services offered by ManWeb weighed against
a finding of successor liability. We disagree, and our disagree‐
ment on this point is again related to our reluctance to create
a “big buyer” loophole for successor liability. When the over‐
lap is considered in light of the relative sizes of the businesses,
the continuity of services comes into clearer focus. The over‐
lap in services is slight if we consider the fraction of ManWeb’s
overall post‐purchase services that involved refrigeration
work. In addition to industrial refrigeration, the much larger
ManWeb also provided services in engineering, installation,
HVAC, plumbing, electrical, and security systems. The over‐
lap is complete, however, if we focus on the fraction of ser‐
vices previously offered by Freije (industrial refrigeration)
that were offered by ManWeb after the purchase. The pur‐
poses of the MPPAA fit better with the second perspective.
There was significant continuity of Freije’s refrigeration ser‐
vices before and after the purchase.
18 No. 16‐2840
6. Continuity of Customers.
As part of the asset purchase agreement itself, ManWeb
agreed to assume ongoing Freije contracts. It also agreed to
assume Freije’s existing warranties. As part of its agreement
to assume ongoing contracts, ManWeb agreed to use its work‐
force to complete the work, but Freije’s owners and sellers
would pay the cost of labor, material, rental, subcontracts, and
an hourly burden (overhead) rate. The profits of the work,
however, were to go to Freije and to be applied toward Freije’s
owners’ debts.
The district court concluded that this profits arrangement
weighed against continuity. We disagree. ManWeb describes
this work as “part of [Freije’s] wind down” and as separate
from any “continuation of [Freije’s] work.” Yet whether it is
labeled part of the wind‐down or not, for those customers
with ongoing contracts at the time of sale, a Freije employee
showed up one day, and a ManWeb employee showed up the
next, with no interruption in service or change in the contract.
The result, if not the purpose, of the assumption of work and
warranties was the continuity of business services for those
customers.
ManWeb has also argued that its work on the assumed
contracts was “insignificant.” By its calculation, ManWeb per‐
formed just 730 hours of electrical work related to the as‐
sumed contracts in the twelve months following the purchase
of Freije. This amounted to just 1.3 percent of ManWeb’s total
electrical work in that period, and the revenue for that work
was less than 1 percent of total revenue in that category for
the year. Again, however, this analysis loses sight of Freije’s
continuity of operations and uses the same focus on the size
of the successor that would create the big buyer loophole. A
No. 16‐2840 19
more appropriate inquiry would examine the volume of the
assumed work in comparison with the volume of work per‐
formed by Freije before the asset purchase.
The district court found no evidence that ManWeb re‐
ceived any new work from former Freije customers. The court
recognized that ManWeb had hoped to keep Freije customers
and to draw in new customers with the Freije name. The court
interpreted ManWeb’s inability to accomplish those goals to
mean that the policy concerns behind the MPPAA took on less
significance. If Freije customers took their new work else‐
where, the court reasoned, the contribution base could not
have been compromised. But that approach does not recog‐
nize the harm that a new non‐union competitor in the market‐
place can cause a multiemployer pension plan. For example,
union‐shop contributors may have poached some of Freije’s
customers, but competition from a new non‐union competitor
may cause those unionized pension contributors to cut their
quotes to customers, driving down the contributors’ overall
revenue and eventually reducing their contributions to the
plan. We are skeptical, in any event, that disappointed hopes
should save ManWeb from successor liability.
While success in capturing the seller’s customers is cer‐
tainly one way to show customer continuity, it is not the only
way. Customers choose and abandon service providers for in‐
numerable reasons, and the years surrounding the 2009 ac‐
quisition were fraught with upheaval due to the financial cri‐
sis, especially in construction‐related businesses. In our view,
more important is whether the company made attempts to
treat Freije’s customers as its own. See Resilient Floor Covering,
801 F.3d at 1096 (“Where, however, the objective factors indi‐
cate that the new employer ‘ma[de] a conscious decision,’…
20 No. 16‐2840
to take over the predecessor’s customer base, the equitable or‐
igins of the successor liability doctrine support the conclusion
that the successor must pay withdrawal liability.”), quoting
Fall River Dyeing, 482 U.S. at 41. Again, ManWeb had no inter‐
est in Freije’s tangible assets, but wanted only the intangible
assets that would allow it to carry forward the Freije business
under its larger umbrella of contracting services.
Based on ManWeb’s treatment of Freije’s customers as its
own through assumption of work and warranties as well as
its aggressive attempts to use Freije’s goodwill and senior
management to maintain connections with Freije’s former
customers, we find that ManWeb’s objective actions sought to
maintain continuity of Freije’s customers. That factor weighs
substantially in favor of successor liability.
D. Conclusion on Successor Liability
Successor liability is an equitable doctrine, so the district
court’s balancing of the equities is reviewed for abuse of dis‐
cretion. ManWeb I, 794 F.3d at 848; E.E.O.C. v. Northern Star
Hospitality, Inc., 777 F.3d 898, 901 (7th Cir. 2015). An abuse of
discretion can be established, though, when the district court
based its holding on an erroneous view of the law. Ervin v. OS
Restaurant Services, Inc., 632 F.3d 971, 976 (7th Cir. 2011); Bal v.
Moyer, 883 F.2d 45, 46–47 (7th Cir. 1989).
We have explained factor by factor where our analysis
agrees with and differs from the district court’s on the conti‐
nuity of business before and after the asset purchase agree‐
ment. With respect, we find that the district court’s approach
was mistaken as a matter of law in ways that essentially invite
the creation of an arbitrary exception for successor liability for
No. 16‐2840 21
big buyers and lose sight of the use of intangible assets to pre‐
sent the new business as continuing the old. The policy goals
of the MPPAA—preventing increased financial burden on the
remaining employers, disincentives to new employers, and
fund insolvency—must guide courts in balancing the equities.
ManWeb I, 794 F.3d at 845–46. Isolated individual factors must
be balanced as a whole to determine if successor liability is
appropriate. The presence or absence of any one factor “does
not compel a particular conclusion.” Resilient Floor Covering,
801 F.3d at 1091.
We have observed before that when “the successor com‐
pany knows about its predecessor’s liability, knows the pre‐
cise extent of that liability, and knows that the predecessor it‐
self would not be able to pay a judgment obtained against it,
the presumption should be in favor of successor liability.”
Worth v. Tyer, 276 F.3d 249, 260 (7th Cir. 2001), quoting
E.E.O.C. v. Vucitech, 842 F.2d 936, 945 (7th Cir. 1988). As the
Fund points out, ManWeb “was not an innocent purchaser”
because it had notice of both the withdrawal liability and the
fact that Freije’s other debts would prevent it from paying a
judgment against it. In our prior decision in this case, we
noted that Freije’s “contingent withdrawal liability was ex‐
plicitly included” in the asset purchase agreement. ManWeb I,
794 F.3d at 848. The asset purchase agreement also included
an indemnification clause to protect ManWeb from claims
against Freije, including withdrawal liability. That Freije is
likely unable to satisfy that indemnification only serves to un‐
derscore the point that without a finding of successor liability
the Fund will be injured by unpaid contributions.
The district court considered that competing with the pol‐
icy goals of the MPPAA was “the social interest in facilitating
22 No. 16‐2840
the transfer of ‘corporate and other productive assets.’” The
owners of Freije had debts for which they were personally li‐
able. Those debts were satisfied by the exact purchase price
agreed to by ManWeb, while the deal was structured to leave
the Fund on the outside looking in. We recognize that those
specific debts were able to be satisfied by the unimpeded
transfer of assets, and that successor liability may pose an im‐
pediment to the transfer of corporate and other productive as‐
sets. In Artistic Furniture, however, we recognized that “the
fact that the imposition of liability will have significant fiscal
impact on a successor is not prohibitive.” 920 F.2d at 1327.
Ultimately, equitable balancing remains an issue within
the sound discretion of the district court. Our disagreement
with the district court’s legal analysis does not mandate that
we substitute our own judgment on the weighing of these fac‐
tors for the district court’s revised judgment. See Lindquist
Ford, Inc. v. Middleton Motors, Inc., 557 F.3d 469, 482–83 (re‐
manding for the district court to rebalance the equities where
the court “oversimplified [an] aspect of the claim” and relied
on a “too‐narrow view of the equitable element”). On re‐
mand, the district court should reweigh the successor liability
factors in light of the considerations we have identified.
* * *
The judgment of the district court is VACATED and the
case is REMANDED to the district court for further proceed‐
ings consistent with this opinion.
No. 16‐2840 23
MANION, Circuit Judge, concurring in the judgment. In
order to apply successor liability on a buyer of assets, there
must be “substantial continuity in the operation of the busi‐
ness before and after the sale.” Tsareff v. ManWeb Servs., Inc.,
794 F.3d 841, 845 (7th Cir. 2015) (quoting Chicago Truck Driv‐
ers, Helpers and Warehouse Workers Union (Indep.) Pension
Fund v. Tasemkin, Inc., 59 F.3d 48, 49 (7th Cir. 1995)). In de‐
termining whether such continuity exists, we consider the
totality of the circumstances. See Fall River Dyeing & Finishing
Corp. v. N.L.R.B., 482 U.S. 27, 43 (1987). I agree with the court
that the district court’s treatment of some of those circum‐
stances got the relevant analysis backwards. Rather than
consider how much of Freije’s business ManWeb carried on,
the district court measured what percentage of ManWeb’s
ongoing operations were formerly Freije’s operations. Ac‐
cordingly, I concur in the court’s decision to send the case
back to the district court so it can review the evidence and
re‐weigh the factors under the appropriate framework.
I write separately, however, to note my disagreement
with the court’s own analysis, namely its conclusion that the
mere fact ManWeb “made attempts to treat Freije’s custom‐
ers as its own,” Maj. Op. at 19, regardless of whether those
efforts resulted in any actual continuity of customers, weighs
in favor of imposing $661,978 in withdrawal liability on
ManWeb. I believe that we should judge based on results,
not the parties’ ambitions.
I.
The entire reason we have successor liability in the multi‐
employer‐pension context is to prevent a company from
avoiding its obligations to a pension plan while carrying on
business and taking up market share that formerly support‐
No. 16‐2840 24
ed the plan. See Resilient Floor Covering Pension Trust Fund Bd.
of Trustees v. Michael’s Floor Covering, Inc., 801 F.3d 1079, 1090
(9th Cir. 2015) (noting how an employer who “stays in the
industry but … ceases making payments to the plan” reduc‐
es the funds going into the plan by taking work that would
otherwise go to plan‐supporting employers). That is not the
situation we presently have before us. The Fund has pre‐
sented no evidence to show that ManWeb, for all its efforts,
actually carried on Freije’s business with Freije’s customers
in any meaningful way. Nevertheless, the court dismisses
ManWeb’s “disappointed hopes,” and says what matters “is
whether [ManWeb] made attempts to treat Freije’s customers
as its own,” not whether ManWeb succeeded in doing so.
Maj. Op. at 19.
The court supports this assertion with the following quo‐
tation from a Ninth Circuit opinion: “Where, however, the
objective factors indicate that the new employer ‘ma[de] a
conscious decision,’ … to take over the predecessor’s cus‐
tomer base, the equitable origins of the successor liability
doctrine support the conclusion that the successor must pay
withdrawal liability.” Id. at 23 (alterations in original) (quot‐
ing Resilient, 801 F.3d at 1096 (9th Cir. 2015)). That quote can’t
support the weight the court puts on it. Indeed, the Ninth
Circuit’s reasoning in that opinion directly contradicts the
court’s failed‐attempt reasoning here. The Ninth Circuit held
that whether a company is subject to successor liability is
“determined in large part by whether the new employer has
taken over the economically critical bulk of the prior em‐
ployer’s customer base.” Id. at 1084. It is implausible that the
Ninth Circuit would emphasize the importance of acquiring
the predecessor’s customer base but nevertheless indicate
No. 16‐2840 25
that a company could be held liable just because it tried, un‐
successfully, to do so.
The court’s reasoning to the contrary in this case negates
and discards the equitable bases of successor liability. While
no one factor in the successor‐liability analysis is dispositive,
there is no fairness in imposing liability on a non‐plan em‐
ployer simply because that employer tried, but failed, to con‐
tinue the business. Applying such a standard would inevita‐
bly punish asset purchasers for making business decisions
that fail. If a company buys another company’s assets, tries
to carry on the business, and succeeds, then equity may de‐
mand the imposition of successor liability. But it is difficult
to imagine a scenario where imposing liability on a company
that has not created or sold a product or service under the
continued business in the market previously serviced by the
plan participants could be equitable.1 In such a situation, the
alleged successor has taken nothing from the plan, so it
should owe nothing to the plan.
II.
The court’s opinion rightly avoids what it refers to as the
“big buyer loophole,” but it ends up advocating for a “deep
pocket shakedown.” Essentially, the court suggests that
1 The court attempts to devise such a scenario by suggesting that
even if a non‐plan employer does not capture any of a plan‐employer’s
customer base, it could still affect the plan by causing plan employers to
lower their rates to compete, thus reducing their revenues and ultimately
their plan contributions. Maj. Op. at 19. However, even plan employers
could engage in similar “price wars” among themselves, which would
have the same revenue‐reducing effects. And even if we should take
such attenuated effects into account in the equitable analysis, the Fund
presents no evidence that anything like that happened in this case.
No. 16‐2840 26
ManWeb should pay $661,978 in withdrawal liability for
something there is no evidence it took—the bulk of Freije’s
customer base. The court makes this suggestion despite its
own acknowledgment that it should not “substitute [its]
own judgment on the weighing of [the] factors for the dis‐
trict court’s revised judgment.” Maj. Op. at 22. As the district
court considers the successor‐liability factors anew in light of
today’s decision, it should keep in mind that there are differ‐
ing opinions on how to weigh those factors, and that its de‐
cision need only rest within the bounds of discretion.