Seventh Circuit Reverses Summary Judgment Against Company Principal in ERISA Contribution Case Due to Factual Dispute Over Personal Liability

In R.R. Maint. & Indus. Health and Welfare Fund v. Mahoney, No. 24-2704, —F.4th—-, 2025 WL 1982122 (7th Cir. July 17, 2025) and R.R. Maint. & Indus. Health & Welfare Fund v. Mahoney, No. 24-2704, 2025 WL 1982123 (7th Cir. July 17, 2025), the Seventh Circuit reversed a district court’s grant of summary judgment against Clinton Mahoney, holding that a genuine factual dispute existed as to whether Mahoney intended to be personally bound by a trust agreement governing ERISA plan contributions.

The Railroad Maintenance and Industrial Health and Welfare Fund is an ERISA-governed employee benefit plan. Clinton Mahoney was the sole member and manager of Mahoney & Associates, LLC. The company signed a memorandum of agreement adopting a union collective bargaining agreement and the terms of the Fund’s trust agreement. That trust agreement included a personal liability clause providing that “officers and directors” of signatory employers would be personally liable for underpayments caused by willful violations of the agreement.

After two unsuccessful attempts to recover delinquent contributions from the now-dissolved Mahoney & Associates, the Fund sued Mahoney personally. Mahoney, who had signed the memorandum of agreement solely in his representative capacity, moved for summary judgment, asserting he never intended to be personally bound. The Fund cross-moved, citing the trust agreement’s personal liability clause. The district court granted summary judgment to the Fund and awarded attorneys’ fees. Mahoney appealed.

The Fund argued that Mahoney’s initial notice of appeal was untimely. Although Mahoney filed it more than 30 days after the initial judgment, the Seventh Circuit held the original judgment was defective under Rule 58, as it did not specify the relief awarded. The court deemed Mahoney’s subsequent notice of appeal—filed on the day the amended judgment was entered—timely and valid, clearing the way for review on the merits.

Although the Fund pled state-law claims, the Seventh Circuit held that Mahoney’s liability arose under federal law due to complete preemption by ERISA and the Labor Management Relations Act (LMRA). Nonetheless, because ERISA does not provide a substantive body of contract law, courts must apply federal common law, often borrowing from state contract principles.

Following its earlier decision in Sullivan v. Cox, the court applied Illinois law to determine whether Mahoney intended to be personally bound by the trust agreement. The analysis would yield the same result, the court added, even under general contract principles from the Restatement (Third) of Agency.

Under Illinois law, a signatory to a contract signed in a representative capacity is not personally bound absent clear evidence of contrary intent. Here, Mahoney signed the memorandum of agreement on behalf of the LLC, not in his personal capacity. The Fund argued that the trust agreement’s personal liability clause constituted such contrary intent. The court agreed that the clause was strong evidence—but not conclusive—of such intent.

The court emphasized that this presented a textbook factual dispute: the signature in a representative capacity suggested no personal liability, while the clause implied the opposite. Illinois precedent—including Wottowa, Knightsbridge, and Pitman—counselled that such conflicting indications preclude summary judgment and must be resolved by a factfinder.

The district court had relied on a district court opinion, Railway Express Agency, Inc. v. Greenberg, which distinguished between documents with one versus two sets of obligations. The Seventh Circuit rejected this distinction as unsupported by Illinois appellate authority and contrary to the reasoning endorsed by the Illinois Supreme Court. Moreover, the same conclusion followed under the Restatement (Third) of Agency § 6.01, which similarly recognizes a presumption against personal liability when an agent signs only on behalf of a principal—unless a contrary manifestation appears, as the personal liability clause arguably did here.

Mahoney also raised a laches defense, arguing the Fund delayed in suing him and caused him prejudice. The court noted that laches is typically inapplicable to legal claims brought within the statute of limitations, and Illinois law (which bars laches in breach-of-contract suits) would likely govern. However, the court held Mahoney waived the defense on appeal by failing to engage with these legal nuances, offering only superficial arguments.

Because the court reversed summary judgment, it also vacated the attorneys’ fee award granted under the trust agreement’s fee-shifting provision.