In Cent. Illinois Pipe Trades Health & Welfare Fund v. Prather Plumbing & Heating, Inc., No. 20-2525, __F.4th __, 2021 WL 2819035 (7th Cir. July 7, 2021), the Seventh Circuit held that an ERISA fund has no federal cause of action where it seeks to impose successor liability to collect on a judgment where the successor company has itself not violated ERISA. Here, Robert Prather formed Prather Plumbing and hired his three sons. The company had an agreement with the Local 63 Plumbing and Pipefitters Union, which bound the company to the union’s collective bargaining agreement with the Mid-Illini Mechanical Contractors Association. The company became delinquent in its contributions and the funds sued the company. They settled but the company continued to miss its payments. One of the sons formed a new non-union-affiliated company, Prather Plumbing & Heating Inc., or PPHI, purchased about $25k in assets from Prather Plumbing, and hired his two brothers. The father eventually shuttered his company. Weeks after doing so, the funds obtained a default judgement against Prather Plumbing for over $300k.
When the funds learned Prather Plumbing was insolvent, they filed a new lawsuit against PPHI alone, raising a single claim under a theory of successor liability. In other words, the funds argued that the equitable doctrine of successor liability could be used to hold PPHI responsible for Prather Plumbing’s obligations because there are sufficient indicia of continuity between the two entities and PPHI has notice of the predecessor’s liability. The district court determined that it had jurisdiction because the complaint raised a claim “arising under” federal law within the meaning of 28 U.S.C. § 1331. On the merits, however, it concluded that PPHI should not be held liable for Prather Plumbing’s delinquency.
On appeal, the Seventh Circuit reversed the district court’s determination that it had jurisdiction over the dispute. There is no question of Article III standing as the funds’ suit presented a justiciable controversy by alleging that PPHI owes them for Prather Plumbing’s unpaid judgment for delinquent contributions. But there is no statutory basis for jurisdiction, either express or implied. ERISA does not provide an enforcement mechanism for collecting judgments.
Neither 29 U.S.C. § 1132 (ERISA’s civil enforcement provision) nor § 1145 (provision mandating employers contribute to multiemployer benefits plans) authorizes a lawsuit to hold a successor liable for a prior ERISA judgment. The funds do not allege that PPHI is liable for violating § 1145, any collective bargaining agreement, or any provision of ERISA. Simply, there is no ERISA cause of action.
“The funds do not maintain that PPHI has directly violated ERISA, either as an alter ego of Prather Plumbing or in its own right. The only claim the funds raise is for successor liability, with the aim of holding PPHI equitably responsible for the unpaid obligations of Prather Plumbing.” The court explained that there is no implied federal right of action to impose successor liability on a third party. While the court has recognized the successor doctrine as a means of holding one party liable when the lawsuit contains some independent federal cause of action, there is no standalone federal right of action to collect an ERISA judgment against an alleged successor. The court declined to create a private right of action where the statute has not.
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