Hotel 71 Mezz Lender LLC v. National Retirement Fund

In the

United States Court of Appeals

For the Seventh Circuit

No. 14-2034

HOTEL 71 MEZZ LENDER LLC,

a Delaware limited liability

company, et al.,

Plaintiffs/Counter-Defendants-Appellees,

v.

THE NATIONAL RETIREMENT FUND,

Defendant/Counter-Claimant-Appellant

and

THE TRUSTEES OF THE

NATIONAL RETIREMENT FUND,

Counter-Claimant-Appellant.

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 13 C 3306— Rubén Castillo, Chief Judge.

ARGUED NOVEMBER 5, 2014 — DECIDED FEBRUARY 6, 2015

Before BAUER, ROVNER, and TINDER, Circuit Judges.

2 No. 14-2034

ROVNER, Circuit Judge. The price a litigant pays for filing a

flawed or unconvincing motion for summary judgment

ordinarily is denial of the motion, not loss of the case. But the

district court in this case appears to have treated the lack of

sufficient evidentiary support for the motion as a reason to

enter summary judgment against the movant. See Hotel 71 Mezz

Lender LLC v. Nat’l Retirement Fund, 9 F. Supp. 3d 863, 873-74

(N.D. Ill. 2014). The court did so in the absence of a cross-

motion for summary judgment on the issue that it found to be

dispositive, and without first giving the unsuccessful movant

notice that it was entertaining the possibility of entering

summary judgment against it or the opportunity to respond.

Because we are not convinced that the movant had no plausi-

ble arguments to make in opposition to an adverse grant of

summary judgment, we vacate the judgment and return the

case to the district court for further proceedings.

I.

In this action, the National Retirement Fund (“NRF”) and

its trustees seek to hold Hotel 71 Mezz Lender LLC (“Mezz

Lender”) and Oaktree Capital Management, L.P. (“Oaktree”)

responsible for multiemployer pension fund withdrawal

liability pursuant to section 4201 of the Multiemployer Pension

Plan Amendments Act of 1980 (“MPPAA”), 29 U.S.C. § 1381.

Oaktree, through Mezz Lender, provided financing for the

acquisition of a hotel by Chicago H&S Hotel Property LLC

(“H&S”). When H&S later defaulted on the loan, it was taken

into bankruptcy and the hotel was liquidated. NRF contends

that the sale of the hotel triggered withdrawal liability on the

part of H&S and any other “trade or business” under common

No. 14-2034 3

control with it—including both Oaktree and Mezz Lender. See

29 U.S.C. §1301(b)(1). Oaktree and Mezz Lender, on the other

hand, contend that the claim of withdrawal liability—whatever

its merits—is barred by the bankruptcy reorganization plan

pursuant to which the hotel was sold.

NRF, formerly known as the UNITE HERE National

Retirement Fund and successor-in-interest to the HEREIU

Pension Fund, is a multiemployer pension fund that provides

retirement and related benefits to unionized workers; it is

administered by a board of trustees that includes both union

and employer representatives. Collective bargaining agree-

ments covering certain union workers require employers to

make regular contributions to NRF on behalf of their employ-

ees. During the time period relevant to this case, Hotel 71, a

full-service, 437-room hotel on Chicago’s Wacker Drive, was a

party to one such agreement obligating it to make contribu-

tions to NRF’s predecessor, the HEREIU Pension Fund, on

behalf of the hotel’s housekeepers, bartenders, bellhops,

laundry workers, and various other employees.

H&S purchased Hotel 71 in 2005. The purchase was

financed by a $100 million senior mortgage loan as well as a

$27.3 million mezzanine loan. Oaktree funded the mezzanine

loan to H&S (actually to an LLC that was H&S’s sole manager

and member, but we may omit that detail) through Mezz

Lender. Upon completion of the purchase, H&S succeeded to

the obligations imposed by several collective bargaining

agreements with the hotel’s workforce, including the obliga-

tion to make contributions to the HEREIU Pension Fund. We

shall hereafter refer to the pension fund and its trustees simply

as NRF or the “pension fund.”

4 No. 14-2034

H&S defaulted on both the senior and mezzanine loans in

2007. On October 3, 2007, Mezz Lender acquired H&S in a

Uniform Commercial Code (“UCC”) Article 9 foreclosure sale

with the intent to place H&S in bankruptcy and attempt to

collect the outstanding balance of its loan there. Mezz Lender

immediately brought in Patrick O’Malley, a restructuring

specialist from a management consulting firm, to run the

company. H&S filed for bankruptcy protection pursuant to

Chapter 11 of the Bankruptcy Code within the month, and

thereafter Mezz Lender participated in the negotiation of a

plan of reorganization. The bankruptcy court approved the

finalized reorganization plan on March 21, 2008.

Pursuant to the approved plan, substantially all of H&S’s

assets—principal among them being Hotel 71—were sold in

July 2008 to H&S’s senior lender. NRF and its trustees view the

sale as a “complete withdrawal” by H&S from the pension

fund, which triggered withdrawal liability on the part of H&S

and any trade or business under common control with

it—including, in NRF’s view, Mezz Lender and Oaktree. See 29

U.S.C. §§ 1301(b)(1), 1381.1 Counsel for NRF sent a notice and

demand letter setting forth that position to Mezz Lender on

1

There appears to be no dispute that the new owner of the hotel continued

to make the requisite contributions to the pension fund following the sale.

NRF nonetheless contends that withdrawal liability was triggered by the

failure of the hotel’s purchaser to provide a bond to NRF or to place an

appropriate amount of money in order to secure its obligations to the

pension fund and by the absence of appropriate language in the purchase

agreement acknowledging H&S’s secondary liability to the pension fund in

the event that the purchaser withdrew from the fund in the five-year period

following the sale. See 29 U.S.C. § 1384(a)(1)(B) & (C).

No. 14-2034 5

April 1, 2013. NRF ultimately reached a settlement with H&S

itself pursuant to which NRF was permitted a general unse-

cured claim of $550,000 against the bankruptcy estate; and it

appears that NRF was able to collect less than $70,000 on that

claim. Nearly all of the more than $2.1 million in withdrawal

liability and accrued interest that NRF attributes to H&S and

the other members of its controlled group thus remains

unpaid.

Section 13.1 of the reorganization plan approved by the

bankruptcy court contains a provision stating that any distribu-

tions received by creditors or contemplated by the plan are in

full satisfaction of any and all claims arising in connection with

H&S’s Chapter 11 case that creditors might have against

“Releasees,” whom the plan defines to include the debtor

(H&S), its then-owner (Mezz Lender), and any officers,

members, or managers of the debtor’s owner, and that all such

claims are released. Section 13.4 in turn enjoins any effort to

pursue the claims released by section 13.1. Mezz Lender and

Oaktree read these provisions as releasing them from any

claim by NRF for withdrawal liability and barring any effort by

NRF to pursue them.

Mezz Lender and Oaktree (which we will refer to collec-

tively as the “Oaktree parties”) filed suit in the district court

seeking a declaratory judgment that the reorganization plan

released any claim of withdrawal liability arising from H&S’s

actions in the Chapter 11 proceeding, including the sale of its

assets, and enjoined NRF from pursuing any claim of with-

drawal liability against either Oaktree or Mezz Lender. NRF

answered the complaint and in turn filed counterclaims against

Mezz Lender, Oaktree, and John Does 1-10–the latter repre-

6 No. 14-2034

senting anyone else in H&S’s controlled group–asserting that

each was jointly and severally liable for withdrawal liability.

When the parties appeared before the district court to

address the Oaktree parties’ request for a preliminary injunc-

tion against NRF—which the Oaktree parties ultimately

withdrew—counsel indicated to the court that they believed

that the case could be promptly resolved by way of cross-

motions for summary judgment, and neither side indicated

that discovery was necessary in order to present those motions.

The district court accordingly set a briefing schedule, and the

parties pursued their respective positions in their cross-

motions.

The Oaktree parties contended in their motion that the

release and injunction provisions of the reorganization plan

barred NRF from pursuing any claim of withdrawal liability

against them. NRF, in response, contended that those provi-

sions did not apply to its claims of withdrawal liability; and, in

its own cross-motion for summary judgment against Mezz

Lender,2 NRF affirmatively contended that Mezz Lender was

in fact responsible for withdrawal liability because, inter alia, it

was a trade or business under common control with H&S. Its

2

NRF explains that its motion focused on Mezz Lender because it did not

believe there was any real dispute that Mezz Lender was responsible for

withdrawal liability as a trade or business under common control with

H&S. By contrast, NRF evidently had concluded that Oaktree’s potential

liability likely would require further factual development, if not a trial. The

district court noted, for example, there was a factual dispute between the

parties as to the precise nature of the relationship between Oaktree and

Mezz Lender. See 9 F. Supp. 3d at 867.

No. 14-2034 7

summary judgment memorandum, however, focused on the

common-control question and the procedural requirements for

asserting withdrawal liability and passed over in silence the

legal criteria for identifying a trade or business on which such

liability may be imposed and made no argument as to why

Mezz Lender constituted such a trade or business. See R. 36 at

8-9.3 Mezz Lender itself did not seek summary judgment on

this point; rather, it contended that “the record [was] rife with

factual issues which preclude[d] the Court from entering

summary judgment in favor of NRF” on the withdrawal

liability claim. R. 38 at 9. In particular, Mezz Lender empha-

sized that whether it constituted a trade or business for

purposes of withdrawal liability was a fact-bound question,

that NRF had yet to make a case for the notion that Mezz

Lender qualified as a trade or business, and that, consequently,

it was premature for the court to render a judgment on this

question. R. 38 at 9; see also 9 F. Supp. 3d at 873 (acknowledging

Mezz Lender’s position).

The district court turned to Mezz Lender’s cross-motion for

summary judgment first. The court noted that the motion

discussed only Mezz Lender’s putative withdrawal liability; it

made no argument as to the potential liability of Oaktree and

John Does 1 through 10. As a result, NRF had, in the court’s

view, “waive[d] [any] argument that Oaktree and John Does

1-10 are jointly and severally liable for Chicago H&S’s with-

drawal liability,” 9 F. Supp. 3d at 871 n.3; only the claim

against Mezz Lender had been preserved. The parties agreed

3

NRF’s counsel subsequently remarked to the district court that NRF did

not expect Mezz Lender to deny that it was a trade or business. R. 47 at 4.

8 No. 14-2034

that Mezz Lender was the one and only owner of H&S when

its assets were sold in June 2008; consequently, the court found

that Mezz Lender was in common control with H&S for

purposes of potential withdrawal liability. Id. at 872-73.

The court turned, then, to the question of whether Mezz

Lender was appropriately characterized as a “trade or

business” for that purpose. Commissioner of Internal Revenue v.

Groetzinger, 480 U.S. 23, 35, 107 S. Ct. 980, 987 (1987), instructs

a court to consider whether the entity in question engaged in

activity (1) with continuity and regularity and (2) principally

in order to generate income or profit. See 9 F. Supp. 3d at 873

(noting these criteria).4 A key function of the Groetzinger test, as

we recognized in Cent. States Se. & Sw. Areas Pension Fund v.

Messina Prods., LLC, 706 F.3d 874, 878 (7th Cir. 2013), “is to

distinguish trades or businesses from passive investments,

which cannot form a basis for imputing withdrawal liability

under section 1301(b)(1).” Whether a particular enterprise

constitutes a trade or business that is subject to withdrawal

liability, or a passive investment that is not, amounts to a

question of fact. See Cent. States, Se. & Sw. Areas Pension Fund

v. Neiman, 285 F.3d 587, 593-94 (7th Cir. 2002); Cent. States, Se.

& Sw. Areas Pension Fund v. Slotky, 956 F.2d 1369, 1373 (7th Cir.

1992); see also McDougall v. Pioneer Ranch Ltd. Partnership, 494

4

Groetzinger articulated this test for purposes of determining what

constitutes a trade or business for purposes of the tax code, see 26 U.S.C.

§ 162(a), but we have adopted the test for purposes of assessing an

individual or company’s eligibility for withdrawal liability. See Cent. States

Se. & Sw. Areas Pension Fund v. Messina Prods., LLC, 706 F.3d 874, 878 (7th

Cir. 2013) (collecting cases).

No. 14-2034 9

F.3d 571, 575-76, 578 (7th Cir. 2007) (reviewing summary-

judgment finding that defendant constituted a trade or

business for clear error), and id. at 578 (Cudahy, J., concurring

in the judgment) (agreeing district court’s finding was not

clearly erroneous, but noting that the subsidiary facts would

also support a contrary finding). A variety of factors bear on

this question, among them “the purpose, tax status, and legal

form of the enterprise.” Cent. States, Se. & Sw. Areas Pension

Fund v. CLP Venture LLC, 760 F.3d 745, 749 (7th Cir. 2014), cert.

denied, — S. Ct. —, 2015 WL 133005 (U.S. Jan. 12, 2015). The

proper characterization of the enterprise turns on the specific

(subsidiary) facts of the case, see Neiman, 285 F.3d at 593-94

(quoting Groetzinger, 480 U.S. at 36, 107 S. Ct. at 987), with no

one factor alone being dispositive, Sun Capital Partners III, L.P.

v. New England Teamsters & Trucking Indus. Pension Fund, 724

F.3d 129, 141-42 (1st Cir. 2013), cert. denied, 134 S. Ct. 1492

(2014).

As we have noted, NRF’s motion all but ignored this issue.

Apparently thinking that there was no doubt that Mezz Lender

constituted a trade or business, its motion and supporting

memorandum did not mention the Groetzinger test, let alone

apply that test to the evidence.

Although it acknowledged the factual nature of this issue,

the district court also took note of our observation in Slotky that

where the only dispute between the parties is how the enter-

prise is to be characterized in light of the subsidiary facts, and

where the court itself will function as the factfinder in the case,

there is no need to postpone resolution of the issue for trial

notwithstanding the parties’ disagreement on the appropriate

10 No. 14-2034

characterization of the enterprise. 9 F. Supp. 3d at 873 (citing

Slotky, 956 F.2d at 1374). In the court’s view, this was the very

situation with which it was confronted: The parties’ sole

disagreement was as to whether Mezz Lender constituted a

trade or business, and because the MPPAA does not entitle the

parties to a jury trial, see id. (citing McDougall, 494 F.3d at 576),

the court itself would be serving as the finder of fact. The court

was therefore satisfied that it could resolve the trade-or-

business question on summary judgment. Id.

The court, confronted with a minimal record which

established only that Mezz Lender was a limited liability

corporation which extended financing for the acquisition of a

hotel by H&S and ultimately acquired complete ownership of

H&S in a UCC foreclosure sale, concluded that NRF had not

carried its burden on this issue. The record was “devoid of any

facts indicating that [Mezz Lender] [has] a trade or business

under MPPAA.” 9 F. Supp. 3d at 874. This was reason to deny

NRF’s motion for summary judgment, which the court

indicated it was doing. Id. But the court also made the follow-

ing declaration: “Based on the facts the parties present, the

Court can only conclude that the relationship between [Mezz]

Lender and Chicago H&S is one of a ‘passive investment.’” Id.

Rather than a determination that there was an unresolved

dispute of fact as to whether Mezz Lender was engaged in

trade or business activity when it helped finance H&S’s

acquisition of Hotel 71 and later assumed ownership of H&S

when it defaulted on the loan, that sentence reads like a final

determination that the financing was merely a passive invest-

ment which precluded the imposition of withdrawal liability

on Mezz Lender. All doubt on that score was eliminated by the

No. 14-2034 11

court’s ensuing discussion of the Oaktree parties’ own motion

for summary judgment.

The court found it unnecessary to consider whether, as the

Oaktree parties contended, the bankruptcy reorganization plan

precluded NRF’s withdrawal liability claim:

Having already decided that [Oaktree, Mezz

Lender,] and John Does 1-10 are not jointly and

severally liable for Chicago H&S’s withdrawal

liability, … the Court need not address the parties’

arguments as to [the Oaktree parties’] motion. The

Court has declared the rights of the parties, and

declines to go any further in resolving this declara-

tory judgment. … The Court has resolved the

substantial controversy by deciding the withdrawal

liability issue, and it finds no other live controversy

in this dispute to warrant declaratory relief. Accord-

ingly, the Court grants [the Oaktree parties’] motion

with respect to the issue of withdrawal liability.

Id.

NRF filed a timely motion to alter or amend the judgment

pursuant to Federal Rule of Civil Procedure 59(e), arguing that

the district court had erred by sua sponte entering summary

judgment in favor of the Oaktree parties on the question of

withdrawal liability without first giving NRF notice that it was

considering that course and the opportunity to respond. Its

motion noted that there were a number of facts in the record

suggesting that Mezz Lender was a trade or business, includ-

ing the fact that Mezz Lender was organized as a formal

business entity (LLC), that it not only lent money to H&S but

12 No. 14-2034

later acquired H&S and took it into bankruptcy, and then

actively participated in the negotiation of a reorganization plan

for H&S. NRF argued further that discovery would likely yield

more proof that Mezz Lender was appropriately characterized

as a trade or business rather than a passive investment. NRF’s

motion also contended that it had not waived any claim of

withdrawal liability against Oaktree and John Does 1 through

10. NRF indicated that it had elected not to pursue summary

judgment against those counter-defendants because it believed

there were issues of material fact with respect to their with-

drawal liability that precluded summary judgment. It re-

minded the court that its summary judgment memorandum

had expressly reserved its right to pursue relief against

Oaktree and the John Doe counter-defendants at a later time.

After a brief hearing, the court denied the motion to

reconsider, precipitating this appeal.

II.

We review the district court’s grant of summary judgment

to the Oaktree parties de novo. E.g., Stable Inv. Partnership v.

Vilsack, — F.3d —, 2015 WL 55466, at *5 (7th Cir. Jan. 5, 2015).

For the reasons that follow, we conclude that the district court

erred in granting summary judgment to the Oaktree parties.

However deficient NRF’s motion was with respect to Mezz

Lender’s status as a trade or business, the deficiency did not

warrant the entry of summary judgment against NRF on that

issue, absent NRF first being given notice and a chance to

present evidence showing that there was a material dispute of

fact on that question precluding summary judgment. We could

sustain the entry of summary judgment if it were clear beyond

No. 14-2034 13

dispute that Mezz Lender was not a trade a business, which is

partly what the Oaktree parties argue in defense of the

judgment. But we conclude, to the contrary, that the issue is

not free from doubt.

A motion for summary judgment is a contention that the

material facts are undisputed and the movant is entitled to

judgment as a matter of law. See Fed. R. Civ. P. 56(a). The party

pursuing the motion must make an initial showing that the

agreed-upon facts support a judgment in its favor. See Rule

56(a) & (c)(1); Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106

S. Ct. 2548, 2553 (1986); Outlaw v. Newkirk, 259 F.3d 833, 837

(7th Cir. 2001); Logan v. Commercial Union Ins. Co., 96 F.3d 971,

978-79 (7th Cir. 1996). Where, as here, the movant is seeking

summary judgment on a claim as to which it bears the burden

of proof, it must lay out the elements of the claim, cite the facts

which it believes satisfies these elements, and demonstrate why

the record is so one-sided as to rule out the prospect of a

finding in favor of the non-movant on the claim. See Reserve

Supply Corp. v. Owens-Corning Fiberglas Corp., 971 F.2d 37, 42

(7th Cir. 1992); United States v. Four Parcels of Real Property in

Greene & Tuscaloosa Counties in State of Ala., 941 F.2d 1428, 1438

(11th Cir. 1991). If the movant has failed to make this initial

showing, the court is obligated to deny the motion. See Johnson

v. Hix Wrecker Serv., Inc., 651 F.3d 658, 662 (7th Cir. 2011) (“A

party opposing summary judgment does not have to rebut

factual propositions on which the movant bears the burden of

proof and that the movant has not properly supported in the

first instance.”); Johnson v. Gudmundsson, 35 F.3d 1104, 1112 (7th

Cir. 1994) (even an unanswered motion for summary judgment

14 No. 14-2034

cannot be granted unless the movant has shown that the facts

warrant judgment in its favor).

This is how we read the district court’s assessment of NRF’s

motion for summary judgment. Essentially, the court said that

the few facts disclosed by NRF’s motion were insufficient to

establish that Mezz Lender was a trade or business as opposed

to a passive investment for purposes of withdrawal liability.

For that reason, the court indicated that it was denying NRF’s

motion. 9 F. Supp. 3d at 874. There can be no quarrel with that

aspect of the district court’s ruling. NRF, as we have said, did

not even cite the standard for determining whether Mezz

Lender is a trade or business let alone apply that standard to

the record facts.

But saying that one party is not entitled to summary

judgment is not to say that its opponent necessarily is. The

denial of a motion for summary judgment reflects the court’s

judgment that one or more material facts are disputed or that

the facts relied on by the motion do not entitle the movant to

judgment as a matter of law. An insufficiently supported

request for summary judgment, like NRF’s, may leave room

for a contention that the undisputed facts warrant judgment in

favor of the non-movant, but the merits of such a contention

demand independent analysis.

The Oaktree parties could have, but did not, seek summary

judgment on the merits of NRF’s claim for withdrawal liability

on the ground, inter alia, that Mezz Lender did not constitute

a trade or business. Instead, they pursued summary judgment

on an entirely different ground, namely that sections 13.1 and

13.4 of the bankruptcy reorganization plan barred NRF from

No. 14-2034 15

pursuing the withdrawal liability claim against them, whatever

the merits of that claim might be. All that the Oaktree parties

had to say with respect to whether or not Mezz Lender

constituted a trade or business was that factual disputes

abounded on that issue, rendering it inappropriate for the

court to resolve the question on summary judgment.

Without a complete explanation, however, the district court

treated its decision that NRF had failed to show that Mezz

Lender was a trade or business not as a decision that this issue

would have to be resolved by way of a trial, but rather as a

final, dispositive finding that Mezz Lender was, as a matter of

law, not a trade or business but rather a passive investment

exempt from the imposition of withdrawal liability. 9 F. Supp.

3d at 874. Because, as we have said, the Oaktree Parties did not

ask the court to make that finding on summary judgment, the

district court’s order can be interpreted in one of two ways.

Either the court equated the denial of NRF’s motion for

summary judgment by itself as warranting a grant of summary

judgment to Mezz Lender, or the court implicitly concluded on

its own motion that the undisputed facts entitled Mezz Lender

to summary judgment although Mezz Lender had not asked

for summary judgment on that ground. Whichever under-

standing of the district court’s order is accurate, the court

granted summary judgment to the Oaktree parties in error.

The first possibility misconceives the nature of the sum-

mary judgment process. A motion for summary judgment is

not an invitation to summarily resolve the case for or against

the movant based on the paper record. Put another way, it is

not a waiver of the movant’s right to a trial—or to argue that

factual disputes warrant a trial—in the event the court finds

16 No. 14-2034

the motion wanting. A summary judgment motion represents

a contention that the facts recited therein warrant judgment in

the movant’s favor, nothing more. See Goldstein v. Fidelity &

Guar. Ins. Underwriters, Inc., 86 F.3d 749, 750-51 (7th Cir. 1996);

Market Street Assocs. Ltd. Partnership v. Frey, 941 F.2d 588, 590

(7th Cir. 1991); Zook v. Brown, 748 F.2d 1161, 1166 (7th Cir.

1984); 10A Charles A. Wright, Arthur R. Miller, & Mary K.

Kane, FED. PRACTICE & PROC. § 2720, 332-34 (3d ed. 1998). It is

not a concession that the same facts might warrant judgment

against the movant, or that the movant could marshal no

additional evidence or arguments in opposition to the prospect

of such an adverse judgment. A court may think the motion

insufficiently supported, blind to outstanding disputes of fact,

or off-base on the relevant legal principles. These are grounds

for denying the motion. But denying the motion normally will

leave the movant in essentially the same position, procedur-

ally, that it would have been in had it not requested summary

judgment in the first instance. If the court moves on to enter-

tain the prospect of entering summary judgment against the

unsuccessful movant, whether in response to a cross-motion

for summary judgment or on its own initiative, then the court

must be mindful of its obligation to adopt what Judge Shadur

aptly characterizes as a dual, “Janus-like” perspective. See, e.g.,

Shiner v Turnoy, 29 F. Supp. 3d 1156, 1160 (N.D. Ill. 2014). That

is, the court must now grant the unsuccessful movant all of the

favorable factual inferences that it has just given to the

movant’s opponent. See R.J. Corman Derailment Servs., LLC v.

Int’l Union of Operating Engrs., Local Union 150, AFL-CIO, 335

No. 14-2034 17

F.3d 643, 647-48 (7th Cir. 2003).5 Only if the court can say, on

that sympathetic reading of the record, that no finder of fact

could reasonably rule in the unsuccessful movant’s favor may

the court properly enter summary judgment against that

movant. E.g., O’Leary v. Accretive Health, Inc., 657 F.3d 625, 630

(7th Cir. 2011).

The second possibility is one we alluded to a moment ago:

that, having considered and denied NRF’s motion for sum-

mary judgment, the court was convinced that the material,

undisputed facts and the law warranted entry of summary

judgment against NRF on the merits of its withdrawal liability

claim, notwithstanding the lack of a cross-motion from the

Oaktree parties on that claim. A court does have the authority

to enter summary judgment on its own motion. Rule 56(f). But

whenever it entertains the possibility of summary judgment

against a party sua sponte, the court must afford the party

notice of that possibility and a reasonable opportunity to

respond. Id.; see also Lynch v. Ne. Regional Commuter R.R. Corp.,

700 F.3d 906, 910-11 (7th Cir. 2012); Simpson v. Merchants

Recovery Bureau, Inc., 171 F.3d 546, 549 (7th Cir. 1999). This

includes the chance to marshal evidence and argument in

opposition to summary judgment, even where, as here, the

party has already sought and failed to obtain summary

judgment in its favor.

5

Thus, even when both parties have moved for summary judgment, each

contending that the relevant facts are undisputed and the case may be

resolved without a trial, the proper outcome may be to deny both motions,

on the ground that the material facts are, in fact, disputed. See id.

18 No. 14-2034

As the district court recognized, there are cases in which the

parties are in agreement (or it is otherwise clear) as to what the

relevant facts are, and the only dispute is over how those facts

are to be characterized. When such cases present claims as to

which there is no right to a jury trial (or the party opposing

summary judgment against whom summary judgment is

contemplated has not asked for one), placing the judge in the

role of factfinder, it may be appropriate for the court to resolve

the characterization dispute on summary judgment notwith-

standing the fact-bound nature of that dispute. MPPAA cases

presenting disputes over whether a particular entity or activity

is properly characterized as a trade or business or instead a

passive investment can fall into this category, as there is no

right to a jury trial in litigation over withdrawal liability. CLP

Venture, supra, 760 F.3d at 750 (citing McDougall, supra, 494 F.3d

at 576); see also 9 F. Supp. 3d at 873 (citing, inter alia, McDougall

and Slotky, 956 F.2d at 1374). But this was not a case in which

the universe of facts informing the proper characterization of

Mezz Lender had been identified and agreed upon. NRF’s

motion had almost entirely ignored the trade or business

question, and the Oaktree parties’ reply simply contended that

the question was a factual one that was not amenable to

resolution on summary judgment. The record revealed only a

few rudimentary facts about Mezz Lender and its relationship

with H&S—for example, that Mezz Lender was an LLC, that

it loaned money to H&S for the acquisition of a hotel, that it

purchased H&S at the UCC foreclosure sale and took H&S into

bankruptcy, and that it was the one and only owner of H&S

when H&S’s assets were liquidated. No case cited by the

parties or the district court indicates that such facts by them-

No. 14-2034 19

selves are necessarily dispositive of the trade or business

question, regardless of what other facts might exist. Cf. Slotky,

956 F.2d at 1374 (noting that it was appropriate for the district

court to resolve the question when “[t]here is no more evidence

to put in”); McDougall, 494 F.3d at 575 (noting that district

court may resolve the trade-or-business dispute when the

subsidiary facts are undisputed). And even if one might infer

from the fact of NRF’s motion that it believed these few facts

sufficient to warrant summary judgment in its favor, its motion

was not, as we have discussed, a concession that these same

facts were dispositive for all purposes, including the possibility

of granting summary judgment to the Oaktree parties.

The court failed to give NRF the opportunity to present

evidence beyond that cited in its own unsuccessful motion for

summary judgment to show why a factfinder nonetheless

could find in its favor on the question of whether Mezz Lender

constitutes a trade or business for purposes of withdrawal

liability. It goes without saying that the court did not think that

the facts on which NRF had based its motion were sufficient to

establish that Mezz Lender was something more than a passive

investment. But that does not rule out the possibility that NRF,

given the chance, could have produced additional facts which

might permit a factfinder to conclude that Mezz Lender was a

trade or business. Moreover, given that the parties had filed

their respective summary judgment motions without first

engaging in discovery, NRF might have asked the court for

leave to pursue additional evidence before the court decided

whether Mezz Lender itself was entitled to summary judgment

on this point. Rule 56(d). And consistent with a point we have

made several times now, NRF would have been entitled to

20 No. 14-2034

have the court view whatever expanded evidentiary record it

presented in the light most favorable to it and to assume that

the finder of fact could resolve any disputed factual questions

in its favor. Having been deprived of these opportunities, NRF

was deprived of the basic procedural protections to which the

target of summary judgment is entitled. See, e.g., Lynch, 700

F.3d at 910-11; cf. Jones v. Union Pacific R. Co., 302 F.3d 735, 740

(7th Cir. 2002) (unsuccessful movant on notice of possibility

court might enter summary judgment against it, given

opponent’s request to treat its memorandum opposing

summary judgment for movant as a cross-motion for summary

judgment).

This error could be deemed harmless if we were convinced

that NRF had no reasonable case to make for the notion that

Mezz Lender was a trade or business. See, e.g., Goldstein, 86

F.3d at 751. This is a central theme that the Oaktree parties

pursue in their brief. But we do not think the matter free from

doubt.

As NRF points out, we have said that “formally recognized

business organizations pose ‘no interpretative difficulties’ for

the Groetzinger test.” CLP Venture, 760 F.3d at 749 (quoting

Central States, Se. & Sw. Areas Pension Fund v. Fulkerson, 238

F.3d 891, 895 (7th Cir. 2001)); see also id. at 749-50 (“[B]ecause

formal business organizations ordinarily operate with continu-

ity and regularity and are ordinarily formed for the primary

purpose of income or profit, it seems highly unlikely that a

formal for-profit business organization would not qualify as a

‘trade or business.’”) (citing Central States Se. & Sw. Areas

Pension Fund v. SCOFBP, LLC, 668 F.3d 873, 878 (7th Cir. 2011)).

No. 14-2034 21

As a limited-liability corporation, Mezz Lender was a formally

recognized business organization, and it extended a multi-

million dollar loan to H&S so that H&S might acquire and

operate a hotel. The loan carried with it the obligation to remit

interest payments to Mezz Lender. Extending a substantial

loan at a specified rate of interest to a commercial enterprise

would on its face seem like business activity. The Oaktree

parties nonetheless emphasize that Mezz Lender was not a

repeat lender but a special purpose entity that extended a

single loan to H&S. In essence, they argue that Mezz Lender

was simply the vehicle for the Oaktree parties to make an

investment in H&S.

We may assume without deciding that a factfinder could

deem Mezz Lender to be a passive investment for the reasons

the Oaktree Parties have articulated; but we are not convinced

that a factfinder would necessarily take this view, even if

presented with additional evidence. NRF points out that Mezz

Lender not only extended the loan to H&S, but when H&S

defaulted, purchased H&S in a UCC foreclosure sale with the

aim of collecting the balance of the loan in bankruptcy,

appointed a restructuring specialist (O’Malley) to manage H&S

on its behalf,6 and, once H&S had filed for bankruptcy, actively

participated in the negotiation of a reorganization plan. These

6

The fact that Mezz Lender appointed O’Malley to run H&S rather than

do so itself does not necessarily demonstrate passivity on Mezz Lender’s

part, as the Oaktree parties have suggested. O’Malley could be viewed as

Mezz Lender’s agent. Whether a parent corporation uses its own personnel

to run its subsidiary or engages an outsider, it is running the subsidiary—or

so, at least, NRF could argue. See Sun Capital Partners, supra, 724 F.3d at

146-48 & n.30.

22 No. 14-2034

facts suggest that NRF would have a plausible case to make in

opposition to a summary-judgment determination that Mezz

Lender was not a passive investment. They also distinguish

this case from one like Central States, Se. & Sw. Areas Pension

Fund v. Stroh Brewery Co., 220 Bankr. R. 959, 962 (N.D. Ill. 1997),

which held that a company, although formally incorporated

and in good standing as such, did not qualify as a trade or

business for purposes of withdrawal liability when it had been

nothing but a dormant “shell” corporation since its formation.

NRF adds that, with the benefit of discovery, it might be able

to identify additional facts supporting an inference that Mezz

Lender was functioning as an active business rather than a

passive investment. The merits of whatever case NRF (and, for

that matter, the Oaktree parties) might be able to make are not

for us to predict or evaluate at this juncture. All we need

decide is that it is not pointless to afford NRF the procedural

protections to which it would ordinarily be entitled as the

target of summary judgment. On the limited record before us,

the question of whether Mezz Lender is merely a passive

investment rather than an active business does not strike us as

being free from doubt. It would therefore not be an empty

exercise in formality to permit NRF the opportunity to oppose

the entry of summary judgment against it on this issue. Beyond

this limited observation, we express no opinion on the merits

of the issue.

A final word about Oaktree and the John Doe defendants

is in order. As we have noted, because NRF’s summary

judgment motion was restricted to Mezz Lender and offered

no evidence or argument in support of imposing withdrawal

liability on either Oaktree or the John Doe defendants, the

No. 14-2034 23

district court concluded that NRF had waived any basis for

imposing such liability on those defendants. 9 F. Supp. 3d at

871 n.3. In its oral remarks regarding NRF’s subsequent motion

to reconsider, the court appeared to criticize NRF for pursuing

a piecemeal approach to the litigation and “hold[ing] back” its

case against the other defendants until it first saw how the

court disposed of its request for summary judgment against

Mezz Lender. R. 47 at 6. The court’s finding of waiver was

manifestly incorrect. Nothing in Rule 56 demands an all-or-

nothing approach to summary judgment. Requests for (and

grants of) partial summary judgment, including summary

judgment as to fewer than all parties and claims, are nothing

new. See, e.g., Leonard v. Socony-Vacuum Oil Co., 130 F.2d 535,

536 (7th Cir. 1942). The rule, in fact, expressly anticipates that

a party may seek summary judgment as to a limited portion of

its case when it provides that “[a] party may move for sum-

mary judgment, identifying each claim or defense—or the part

of each claim or defense—on which summary judgment is

sought.” Fed. R. Civ. P. 56(a). There is no doubt that a court

may grant, and a party may seek, summary judgment as to one

party or one claim, leaving other claims and other parties to be

addressed at a later point in the litigation. See 10A FED. PRAC.

& PROC. § 2715, at 254. A request for partial summary judg-

ment can serve a useful brush-clearing function even if it does

not obviate the need for a trial, see Flynn v. Sandahl, 58 F.3d 283,

288 (7th Cir. 1995), and it may also facilitate the resolution of

the remainder of the case through settlement. Certainly we

agree with the district court that a party should not pursue a

needlessly piecemeal litigation strategy. See Tucker v. Williams,

682 F.3d 654, 661-62 (7th Cir. 2012); Whitford v. Boglino, 63 F.3d

24 No. 14-2034

527, 530 (7th Cir. 1995). But the record gives us no reason to

doubt the good faith of NRF’s assessment that it had a reason-

able basis on which to seek an early summary judgment

against Mezz Lender but not the other counter-defendants.

There was nothing improper about NRF’s decision to seek

summary judgment against Mezz Lender alone; and in doing

so, NRF did not waive its counterclaim as to Oaktree and the

John Doe defendants. On the contrary, NRF’s summary

judgment memorandum noted that it was reserving is counter-

claims as to those defendants. R. 36 at 2 n.1.

The Oaktree parties urge us to affirm the judgment in their

favor based on the alternative ground that they pursued in

their own motion for summary judgment and that the district

court did not reach: i.e., the contention that sections 13.1 and

13.4 of the reorganization bar NRF from pursuing the with-

drawal liability claim against them, whatever the merits of that

claim might be. There appears to be no dispute that if the

Oaktree parties’ position on this question is correct, it would be

unnecessary to decide whether or not Mezz Lender constitutes

a trade or business. And certainly the district court, on remand,

will be free to address that question before proceeding any

further on any other issue. But, consistent with our role as a

reviewing court, we choose to leave the merits of that question

to the district court in the first instance.

III.

For all of the reasons we have discussed, the district court

erred in granting summary judgment to the Oaktree parties on

the question of whether Mezz Lender constitutes a trade or

business for purposes of withdrawal liability. We therefore

No. 14-2034 25

VACATE the judgment and REMAND for further proceedings

consistent with this opinion.