Central States Southeast & Southwest Areas Pension Fund v. Messina Products, LLC

In the

United States Court of Appeals

For the Seventh Circuit

Nos. 11-3513 & 12-1333

C ENTRAL S TATES S OUTHEAST AND

S OUTHWEST A REAS P ENSION F UND, et al.,,

Plaintiffs-Appellees and

Cross-Appellants,

v.

M ESSINA P RODUCTS, LLC,

a Michigan limited liability company,

Defendant-Appellant,

and

S TEPHEN M ESSINA and F LORENCE

M ESSINA,

Defendants and

Cross-Appellees.

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 1:10-cv-00355—Robert M. Dow, Jr., Judge.

A RGUED S EPTEMBER 12, 2012—D ECIDED F EBRUARY 8, 2013

2 Nos. 11-3513 & 12-1333

Before F LAUM, W OOD , and H AMILTON, Circuit Judges.

H AMILTON, Circuit Judge. When an employer par-

ticipates in a multiemployer pension plan and then with-

draws from the plan with unpaid liabilities, federal

law can pierce corporate veils and impose liability on

owners and related businesses. These appeals present

issues on the scope of such liabilities. Plaintiff Central

States, Southeast and Southwest Areas Pension Fund is a

multiemployer pension plan within the meaning of the

Employee Retirement Income Security Act of 1974

(“ERISA”), as amended by the Multiemployer Pension

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

§§ 1381-1461. Messina Trucking, Inc. was a closely-held

corporation owned, along with several other closely-

held entities, by Stephen and Florence Messina. For

several years, Messina Trucking was subject to a collec-

tive bargaining agreement that required it to contribute

to the Fund for its employees’ retirement benefits. In

October 2007, however, Messina Trucking permanently

ceased to have an obligation to contribute to the Fund,

triggering a “complete withdrawal” from the Fund, and

incurring nearly $3.1 million in potential withdrawal

liability. 29 U.S.C. § 1383.1

The Fund sued Stephen and Florence Messina, Messina

Trucking, Messina Products, Messina Product Operations

LLC, Utica Equipment Co., Washington Lakes, LLC, and

1

Messina Trucking initiated arbitration to challenge the

merits of its withdrawal liability. See 29 U.S.C. § 1401(a)(1).

That arbitration is pending.

Nos. 11-3513 & 12-1333 3

Auburn Supply Co. seeking a declaratory judgment

that the named defendants were jointly and severally

liable for the withdrawal liability obligation incurred

by Messina Trucking under 29 U.S.C. § 1301(b)(1) of the

MPPAA as “trades or businesses” under “common con-

trol” with Messina Trucking. All parties aside from

Stephen and Florence Messina and Messina Products

either conceded liability or for various reasons were

dismissed from the proceedings.

The Messinas and Messina Products argued that they

were not “trades or businesses” under section 1301(b)(1)

and thus that they could not be held liable for Messina

Trucking’s withdrawal. On cross-motions for summary

judgment, the district court held that Mr. and Mrs.

Messina, who owned and leased several residential

properties as well as the property from which Messina

Trucking operated, were not engaged in a “trade or

business” and thus could not be held liable for Messina

Trucking’s withdrawal liability. See Central States,

Southeast and Southwest Areas Pension Fund v. Messina

Trucking, Inc., 821 F. Supp. 2d 1000, 1009 (N.D. Ill. 2011).

The district court found that Messina Products, as a

formal business organization whose documents showed

that its purpose was to generate profit, was a “trade or

business” that could be held liable for Messina

Trucking’s withdrawal liability. Id. at 1007. The Fund

appeals the portion of the judgment in favor of the

Messinas, and Messina Products appeals the portion of

the judgment in favor of the Fund. We resolve both

appeals in favor of the Fund, affirming in part and revers-

4 Nos. 11-3513 & 12-1333

ing in part the district court’s judgment, and remanding

for further proceedings.2

I. Commonly Controlled “Trades or Businesses” under the

MPPAA

Under ERISA, the Pension Benefit Guaranty Corpora-

tion, a government corporation, protects covered em-

ployees by insuring their benefits against insolvency

or termination of their pension funds. Before the 1980s,

ERISA’s contingent liability provisions gave employers a

perverse incentive to withdraw from financially weak

multiemployer plans to avoid liability in the event the

plan terminated in the future. The MPPAA amended

ERISA to discourage such voluntary withdrawals from

multiemployer plans by imposing mandatory liability

on all withdrawing employers for their proportionate

shares of “unfunded vested benefits.” 29 U.S.C. § 1381.

2

Mr. and Mrs. Messina have argued that, in the event of a

reversal of the judgment in their favor, the arbitrator must

decide whether they were in the control group at the time of

the withdrawal. See Doherty v. Teamsters Pension Trust Fund

of Philadelphia, 16 F.3d 1386, 1390 (3d Cir. 1994); Central States,

Southeast and Southwest Areas Pension Fund v. Slotky, 956 F.2d

1369, 1373 (7th Cir. 1992). Because the district court found

that the Messinas were not operating a “trade or business”

and thus were not employers within the control group and

subject to liability, it did not address this question. On

remand, the district court should address this issue of

arbitrability in the first instance.

Nos. 11-3513 & 12-1333 5

Not only the withdrawing employer can be held liable.

Congress also provided that all “trades or businesses”

under “common control” with the withdrawing em-

ployer are treated as a single entity for purposes of as-

sessing and collecting withdrawal liability. 29 U.S.C.

§ 1301(b)(1); Central States, Southeast and Southwest

Areas Pension Fund v. Neiman, 285 F.3d 587, 594 (7th Cir.

2002). Each trade or business found to be under

common control is jointly and severally liable for any

withdrawal liability of any other. See Central States, South-

east and Southwest Areas Pension Fund v. SCOFBP, LLC,

668 F.3d 873, 876 (7th Cir. 2011), citing McDougall v.

Pioneer Ranch Ltd. Partnership, 494 F.3d 571, 574 (7th Cir.

2007). The provision’s purpose is “to prevent businesses

from shirking their ERISA obligations by fractionalizing

operations into many separate entities . . . .” Central

States, Southeast and Southwest Areas Pension Fund v. White,

258 F.3d 636, 644 (7th Cir. 2001), quoting Board of Trustees

of the Western Conference of Teamsters Pension Trust Fund

v. H.F. Johnson, Inc., 830 F.2d 1009, 1013 (9th Cir. 1987).

Because Mr. and Mrs. Messina and Messina Products

conceded that they were under “common control” with

Messina Trucking, the only issues here are whether

the Messinas and Messina Products were involved in

a “trade or business” and accordingly can be held

jointly and severally liable for Messina Trucking’s

pension liability.

The phrase “trade or business” is not defined by sec-

tion 1301(b)(1). To apply the term under the MPPAA,

we have adopted the test adopted by the Supreme

Court for other tax purposes in Commissioner of Internal

6 Nos. 11-3513 & 12-1333

Revenue v. Groetzinger, 480 U.S. 23, 35 (1987). See Neiman,

285 F.3d at 594; White, 258 F.3d at 642; Central States,

Southeast and Southwest Areas Pension Fund v. Fulkerson,

238 F.3d 891, 895 (7th Cir. 2001). The “Groetzinger test”

requires that for economic activity to be considered the

operation of a trade or business the activity must be

performed (1) for the primary purpose of income or

profit; and (2) with continuity and regularity.

One purpose of the Groetzinger test is to distinguish

trades or businesses from passive investments, which

cannot form a basis for imputing withdrawal liability

under section 1301(b)(1). See Central States, Southeast

and Southwest Areas Pension Fund v. Personnel, Inc.,

974 F.2d 789, 794 (7th Cir. 1992). The question is whether

Mr. and Mrs. Messina and Messina Products should

be considered “trades or businesses” under this test, or

whether their activities are more akin to passive invest-

ments. We conclude that the record shows that they

are all “trades or businesses” and can be held liable

under section 1301(b)(1) for Messina Trucking’s with-

drawal liability.

II. Stephen and Florence Messina

A. Standard of Review

Ordinarily, we review de novo a district court’s grant

of summary judgment in an ERISA case because the

issues involved require statutory interpretation and are

issues of law. See White, 258 F.3d at 639-40; Fulkerson,

238 F.3d at 894. Yet when the only issue before the

Nos. 11-3513 & 12-1333 7

district court is the characterization of undisputed sub-

sidiary facts, and where a party does not have the right

to a jury trial, we have applied the clearly-erroneous

standard of review. See Pioneer Ranch, 494 F.3d at 575-77;

Personnel, 974 F.2d at 792; Central States, Southeast and

Southwest Areas Pension Fund v. Slotky, 956 F.2d 1369, 1373

(7th Cir. 1992).

The Fund argues that its appeal against the Messinas

presents pure questions of law and that we should re-

solve these questions de novo. The Messinas contend

that the more forgiving clear error standard should

govern because there are no disputed facts, only

disputed characterizations of those facts. As we explain

below, resolution of the issues in this appeal is not a

matter of properly characterizing undisputed facts. It is

instead a matter of proper interpretation of the statute

and our precedents as applied to undisputed facts. Be-

cause these are issues of law, de novo review is appro-

priate. Fulkerson, 238 F.3d at 894.

B. The Relevant Facts

When Messina Trucking withdrew from the Fund in

October 2007, the Messinas owned at least 80 percent of

the stock and ownership interest in each of the Messina

entities, including Messina Trucking. Stephen Messina

had served as the president of Messina Trucking since

its inception in 1955. Florence Messina had served as

vice president and secretary since 1964.

Because the ownership, rental, and use of real estate

are critical to our decision, we must trace them in some

8 Nos. 11-3513 & 12-1333

detail. In 1963, Stephen Messina purchased a parcel of

real property located at 6386 Auburn Road in Shelby

Township, Michigan (“the Auburn Road Property”).

Stephen and Florence Messina have been joint owners of

the Auburn Road Property since at least 1971. After he

purchased the Auburn Road Property, Stephen Messina

demolished the existing building and replaced it with a

new one. He then constructed a second building and, over

time, several additions to the two buildings. Messina

Trucking and a couple of other Messina entities op-

erated out of the Auburn Road Property.

Messina Trucking paid rent to the Messinas for its use

of the Auburn Road Property for many years, but it

stopped paying rent at some point prior to 2005 due to

financial difficulties. There was never any written lease

agreement between the Messinas and Messina Trucking,

but the practice was that the Messinas paid the

property taxes on the property, while Messina Trucking

paid for property insurance and utilities. All repairs and

maintenance on the Auburn Road Property were per-

formed by employees of Messina Trucking. The other

Messina entities that operated from the Auburn Road

Property never paid any rent to the Messinas to use

the property.

Stephen Messina also owned two properties located

at 45245 Merrill Road and 45041 Merrill Road in Utica,

Michigan (the “Merrill Road Properties”). 45245 Merrill

Road adjoins the Auburn Road Property. Mr. Messina

testified that he purchased the properties in part because

they were adjacent to the Auburn Road Property, and

Nos. 11-3513 & 12-1333 9

that the additional land allowed him to expand a garage

on the Auburn Road Property that was used by Messina

Trucking, and to permit Messina Trucking to have addi-

tional means of ingress to and egress from its operations.

Stephen Messina also stated that he purchased the

Merrill Road Properties to generate rental income. At

one time Messina Trucking paid rent for its use of the

Merrill Road Properties, but again, it stopped paying

rent sometime prior to 2005. Two homes were located on

the 45245 Merrill Road property. One of the homes was

leased to a Messina Trucking employee and his wife

pursuant to a written agreement with Stephen Messina.

That employee was able to provide additional security

for the Messina Trucking facilities on nights on week-

ends and to care for the guard dog. The second home on

the 45245 Merrill Road property also was leased to a

residential tenant. A third home located on the 45041

Merrill Road property was leased pursuant to a writ-

ten agreement.

Either Stephen Messina or his daughter negotiated

the terms of the residential leases for the Merrill Road

Properties. The rent for the properties was paid on

a monthly basis, and either Florence Messina or the

Messinas’ daughter deposited the rent checks into

the Messinas’ personal joint bank account. A Messina

Trucking employee monitored the rent payments to

ensure that they were paid on time. The Messinas paid

the property taxes and insurance on the Merrill Road

Properties. The tenants paid all other utilities aside

from water, which was paid by Messina Trucking. Em-

10 Nos. 11-3513 & 12-1333

ployees of Messina Trucking took care of the lawns

and removed snow at the Merrill Road Properties. The

Messina Trucking shop foreman was responsible for

maintenance. These Messina Trucking employees were

not paid any additional money for their maintenance

work on these residential properties owned by Mr. and

Mrs. Messina. During the tax years 2005 to 2008, the

Messinas reported the rental income from the prop-

erties on Schedule E of their federal tax returns, and

they deducted expenses for insurance, professional fees,

repairs, taxes, and utilities from the rental income.

C. Analysis

The Fund does not seek to hold Mr. and Mrs. Messina

liable merely because of their ownership of or positions

within Messina Trucking, nor could it. See White, 258 F.3d

at 640 n.3; see also Fulkerson, 238 F.3d at 896 (“Given

the prevalence of investing, permitting the holding of

investments . . . without more to be considered regular

and continuous activity would eviscerate the limitations

placed in the text of § 1301(b)(1).”); Slotky, 956 F.2d at

1374 (“[T]he purpose of limiting controlled group mem-

bership to persons engaged in trades or businesses is

to protect the owners of corporations from having to

dig into their pockets to make good the withdrawal

liability of their corporations.”). Instead, the Fund seeks

to hold the Messinas liable for operating as a “trade

or business” as commercial and residential landlords.

The district court found that the Messinas’ rental activi-

ties did not amount to a “trade or business” under the two-

Nos. 11-3513 & 12-1333 11

part Groetzinger test. Considering only the sporadic

rental activity undertaken by the Messinas themselves,

the district court concluded that their rental activity

was not sufficiently continuous and regular to be a

trade or business rather than an investment. In ren-

dering its decision, however, the district court did not

have the benefit of Central States, Southeast and Southwest

Areas Pension Fund v. SCOFBP, LLC, 668 F.3d 873 (7th

Cir. 2011), issued after the district court’s decision.

Without SCOFBP, and particularly its teaching that

renting property to a withdrawing employer is “cate-

gorically” a trade or business, the district court did not

consider properly the legal implications of the facts that

the Messinas permitted Messina Trucking, their closely-

held corporation and the withdrawing employer, to

operate on the property they owned without a formal

written lease and without paying rent for several years.

See SCOFBP, 668 F.3d at 879. The district court also

did not account properly for the property maintenance

activities of the Messina Trucking employees, which,

without a formal agreement, must be imputed to the

Messinas. We therefore reverse the judgment in favor

of Mr. and Mrs. Messina.

The district court relied primarily on our decision

in Fulkerson. See Messina Trucking, 821 F. Supp. 2d at 1007-

09, citing Fulkerson, 238 F.3d 891.3 The Fulkersons were

3

The district court also relied heavily on Central States,

Southeast and Southwest Areas Pension Fund v. Nagy Ready Mix,

(continued...)

12 Nos. 11-3513 & 12-1333

the only shareholders of Holmes Freight Lines, Inc., a

trucking company. They also owned three parcels of

land that they leased to Action Express, Inc., a different

trucking company that was owned by their sons.

Holmes Freight and Action Express were maintained as

separate corporations; the Fulkersons owned no interest

in and were not involved in the management of

Action Express. The written leases under which Action

Express leased the Fulkersons’ property were so-called

“triple net leases” under which the tenant, Action

Express, was responsible for most obligations, including

maintenance, operating expenses, real estate taxes, and

insurance. All the Fulkersons did was collect rent pay-

ments and make mortgage payments. When Holmes

Freight ceased operations and withdrew from the Fund,

the Fund argued that the Fulkersons’ leasing activities

constituted a “trade or business” and that the Fulkersons

could be held liable for Holmes Freight’s withdrawal

3

(...continued)

Inc., 2011 WL 3021524 (N.D. Ill. July 22, 2011). Nagy leased his

property to Nagy Ready Mix, a closely-held corporation,

through a formal triple-net lease under which Nagy Ready

Mix was responsible for upkeep of the property. The district

court held that Nagy’s rental activity more closely resembled

investment activity than “trade or business” activity, and

found that he could not be held liable for Nagy Ready Mix’s

withdrawal liability under section 1301(b)(1). See 2011 WL

3021524, at *4-6. The Fund’s appeal from the district court’s

decision in Nagy is pending before this court in No. 11-3055.

In the meantime, unlike the district court, we do not give

Nagy persuasive weight.

Nos. 11-3513 & 12-1333 13

liability. See Fulkerson, 238 F.3d at 893-94. We held

otherwise, finding that the Fulkersons’ leasing activity

did not automatically constitute a “trade or business”

under the Groetzinger test, and remanded for further

development of the record. We explained that, “posses-

sion of a property, be it stocks, commodities, leases,

or something else, without more is the hallmark of an

investment. Thus, mere ownership of a property (as

opposed to activities taken with regard to the prop-

erty) cannot be considered in determining whether

conduct is regular or continuous.” Fulkerson, 238 F.3d

at 895-96. Once we removed from consideration the

fact that the Fulkersons owned the leased property, all

that remained was the fact that Tom Fulkerson spent

approximately five hours a year dealing with the leases

or the leased properties. This, we found, was insuf-

ficient activity to satisfy the requirement in Groetzinger

that the activity be regular or continuous to be a trade

or business. Id. at 896.

Likewise, we held in White, 258 F.3d 636, that by

renting out two residential apartments above their

garage, the Whites had not engaged in a “trade or busi-

ness” sufficient to impose withdrawal liability on them

personally when the trucking company owned by Gary

White went bankrupt and withdrew from the Fund.

Importantly, we found that there was no possibility

that the Whites’ rental activity was being used to

dissipate or fractionalize the withdrawing employer’s

assets to avoid withdrawal liability. Id. at 644. Although

the Whites realized some income and tax benefits from

the rentals, an important purpose of their ownership of

14 Nos. 11-3513 & 12-1333

the rental apartments was the additional security the

tenants provided for the Whites’ own home. The

existence of the apartments had not been a deciding

factor in the Whites’ decision to purchase their home,

and though they performed some maintenance and

upkeep on the property, the apartments were ap-

pendages of their primary residence and such normal

upkeep benefitted them personally. We found that their

actions were routine for any homeowner and were

not legally significant. White, 258 F.3d at 643.

The rental activities we considered in Fulkerson and

White are easily distinguishable from the rental activities

conducted by the Messinas. Simply put, neither the

Fulkersons nor the Whites rented property to the with-

drawing employer itself. The Fulkersons rented property

to their sons’ separately owned and managed trucking

company; the Whites rented their garage apartments

to residential tenants.

The Messinas, though, rented their property to their

own, closely-held company — Messina Trucking, the

withdrawing employer. They also leased residences to

individual tenants, but that activity was incidental to

the rental activity in favor of Messina Trucking. In

SCOFBP, we stated explicitly that “leasing property to

a withdrawing employer is a ‘trade or business’ within

the meaning of the MPPAA.” 668 F.3d at 878, 879 (“Fur-

thermore, we have held that leasing property to a with-

drawing employer itself is categorically a trade or busi-

ness.”), citing Central States, Southeast and Southwest

Areas Pension Fund v. Ditello, 974 F.2d 887, 890 (7th Cir.

Nos. 11-3513 & 12-1333 15

1992); see also Slotky, 956 F.2d at 1374 (rejecting argu-

ment that property owner, who was majority share-

holder of withdrawing employer that was operating on

the property and sporadically paying rent, was not en-

gaged in a “trade or business” but was merely holding

property for withdrawing employer as a trustee). The

MPPAA does not impose liability for a withdrawing

employer on purely passive investment entities, in-

cluding those that invest in real estate. But where the

real estate is rented to or used by the withdrawing em-

ployer and there is common ownership, it is improbable

that the rental activity could be deemed a truly passive

investment. In such situations, the likelihood that a true

purpose and effect of the “lease” is to split up the with-

drawing employer’s assets is self-evident. We see no

reason why that principle should not apply here.

The Messinas make no effort to distinguish SCOFBP

or its implications. They also fail to cite any appellate

authority, and we are aware of none, holding that an

individual under common control with a withdrawing

employer and who leases property to the withdrawing

employer is not operating a trade or business. Without

authority in support of their position, the Messinas

instead attack SCOFBP, arguing that it is “inapplicable”

and “fails to account for the state of the law in this

circuit on such issue.” In holding that leasing property

to a withdrawing employer is “categorically” a trade

or business, SCOFBP relied on Ditello. The Messinas

contend that Ditello, and SCOFBP by extension, are not

good law because instead of relying on Groetzinger and

its two-part test, they relied instead on the underlying

16 Nos. 11-3513 & 12-1333

purpose of the statute — to prevent the fractionalization

of assets.

The argument is not persuasive. When Ditello was

decided, it was not yet settled in our circuit that

the Groetzinger test is the test for determining

whether entities are “trades or businesses” under

section 1301(b)(1). There is no more uncertainty; that

issue is settled. See White, 258 F.3d at 642 (affirming that

the Groetzinger test is “appropriate” for determining

whether an activity is a trade or business for purposes

of section 1301(b)(1)); Fulkerson, 238 F.3d at 895 (finding

that the Groetzinger test applies to questions under

section 1301(b)(1); test “comports with the common

meaning of trade or business” and thus has broad ap-

plicability).

Although Ditello did not rely on Groetzinger, its

reasoning remains sound on this point.4 Its analysis,

4

Another portion of Ditello has been abrogated. Ditello and

Personnel were decided within two weeks of each other, and

diverged on the question of whether withdrawal liability

could be imposed where there was no economic relationship

between the withdrawing company and unrelated leasing

activities. In Personnel, we held that for businesses to be con-

sidered under “common control,” the businesses did not have

to be economically related. Instead, to establish withdrawal

liability, the Fund needed to prove only that the defendants

engaged in a trade or business. See 974 F.2d at 793. In

Ditello, however, we stated, “this circuit has never squarely

faced the issue of whether businesses must be economically

(continued...)

Nos. 11-3513 & 12-1333 17

which was based on the purpose underlying section

1301(b)(1), is congruent with the Groetzinger test.

SCOFBP, in turn, remains sound. Its conclusion that

an owner’s or related entity’s leasing of property to a

withdrawing employer was a trade or business is con-

sistent with both the Groetzinger test and with the under-

lying purpose of section 1301(b)(1).

In White, we said that there was no possibility that

the Whites’ rental activity was being used to dissipate

or fractionalize the withdrawing employer’s assets to

avoid withdrawal liability. See 258 F.3d at 644. Here, we

must draw the opposite conclusion. Stephen Messina

purchased the Auburn Road Property and then the

Merrill Road Properties for the benefit of Messina Truck-

ing’s operations. There was no formal lease (triple-net

or otherwise). Without formal documentation, the ines-

capable conclusion is that the Messinas’ leasing activity

was simply an extension of the business operations of

Messina Trucking, the withdrawing employer, and was

a means to fractionalize Messina Trucking’s assets. One

way or the other, the Messinas profited from the leasing

arrangement. While Messina Trucking was paying rent,

they profited directly from the rent payments. When

Messina Trucking ceased paying rent, rather than evict

4

(...continued)

related to be considered members of a controlled group of

trades or business under section 1301(b)(1), and it remains

an open question.” 974 F.2d at 890. This discrepancy in our

law has been resolved, and is no longer an open question in

our circuit. See Fulkerson, 238 F.3d at 895 n. 1 (confirming

that no economic nexus is required to impose liability).

18 Nos. 11-3513 & 12-1333

their tenant, the Messinas continued to receive the tax

benefits of their arrangement. They deducted expenses

such as insurance, professional fees, repairs, taxes, and

utilities from the rental income. And as owners of

Messina Trucking, they profited from their decision as

landlords to permit Messina Trucking to operate rent-

free. In other words, they engaged in their leasing

activity “for the primary purpose of income or profit,”

satisfying the second part of the Groetzinger test.

Real estate activity unrelated to business of the with-

drawing employer also can be “for the primary purpose

of income or profit” where that activity “increases

equity, appreciates value, and generates tax deductions

that reduce the overall tax burden,” even if the activity

does not produce a net gain. SCOFBP, 668 F.3d at 878,

citing Personnel, 974 F.2d at 795-96. Accordingly, the fact

that the Messinas did not rent exclusively to Messina

Trucking, the withdrawing employer, but also in-

cidentally rented a few residences located on the

Merrill Road Properties, does not change our analysis.

The first part of the Groetzinger test, “continuity and

regularity,” is also satisfied. We reject the Messinas’

contention that the acts undertaken by the Messina

Trucking employees to maintain the Messinas’ property

cannot be imputed to the Messinas. There was no

formal lease in place that would have imposed a duty or

any other legal obligation on the Messina Trucking em-

ployees to take on those responsibilities. Without one,

the Messina Trucking employees who maintained the

property could not have been doing so for the benefit

Nos. 11-3513 & 12-1333 19

of Messina Trucking. They could have been acting only

at the behest of and for the benefit of the Messinas,

who owned the business and the property. The employ-

ees’ activities as agents of the Messinas should be

imputed to the Messinas. When considering the

actions of the Messinas and their agents in total, there

is no question that their leasing activities were con-

tinuous and regular.

In sum, it is clear that the Messinas’ rental activities

satisfied the Groetzinger test and were a “trade or busi-

ness.” We therefore reverse the district court’s judgment

in favor of Stephen and Florence Messina.

III. Messina Products

A. Standard of Review

We turn now to Messina Products’ appeal from the

district court’s determination that it was operating as a

“trade or business.” Messina Products asserts that our

review of its appeal should be de novo.5 However, because

5

Specifically, Messina Products contends that the district

court based its determination on a mistaken finding of fact

that Messina Products had employees when it actually did not.

Though the district court mentioned Messina Products’ sup-

posed employees in its denial of Messina Products’ motion

to alter or amend, the district court did not rely on this point

in reaching its original decision. Even if it had, the only

dispute is over the characterization of undisputed facts.

(continued...)

20 Nos. 11-3513 & 12-1333

the only issue before the district court was the charac-

terization of undisputed subsidiary facts and no party

has the right to a jury trial, we apply the clearly

erroneous standard of review. See Pioneer Ranch, 494

F.3d at 575; Personnel, 974 F.2d at 792; Slotky, 956 F.2d

at 1373. Our resolution of Messina Products’ appeal

would remain the same, though, even if we reviewed

these issues de novo.

B. The Relevant Facts

Messina Products was a Michigan limited liability

company formed on August 7, 1998, and commonly

owned with Messina Trucking. Stephen Messina was the

president of Messina Products, while Florence was the

vice-president and secretary. The company was gov-

erned by an operating agreement stating that the “Mem-

bers have adopted a business plan for the development

of properties and for the production, sale and marketing

of gravel for road, subdivision, City and community

development, both wholesale and retail.”

5

(...continued)

(There is no dispute that the Messinas were corporate officers

for Messina Products and that an employee of Messina

Trucking handled the bookkeeping and administrative work

for Messina Products.) Messina Products also contends that

the district court made a legal error in considering its state-

ment of business intent, which predates Messina Trucking’s

withdrawal from the Fund by several years. As explained in

the text, we find no error on that point, legal or otherwise,

and clear error review is appropriate.

Nos. 11-3513 & 12-1333 21

Vito Palazzolo was the controller for Messina Trucking.

He had access to and kept records not only for Messina

Trucking but also for the other Messina Entities,

including Messina Products. He testified that Messina

Products had no employees and owned no real estate.

It never sold any goods or performed any services. Its

sole asset was a 50% partnership interest in Messina

Lombardo, LLC, a company that owned and rented

properties. In turn, Messina Lombardo had no em-

ployees and was run by Lombardo Management Co.

Neither the Messinas nor Messina Products had any

ownership interest in Lombardo Management. Every

year, Messina Products received a K-1 tax form for LLC

income from Messina Lombardo. Palazzolo reviewed

the K-1 and forwarded it to the outside tax preparer.

Messina Products did not require any additional book-

keeping. In its federal tax returns, Messina Products

reported “trade or business” income and stated that

its principal business activity was “real estate rental.”

C. Analysis

Messina Products argued before the district court that

it was a passive investment vehicle and thus was not a

“trade or business” under the Groetzinger test. Again, to

be a “trade or business” under Groetzinger, the economic

activity in question must be performed (1) for the

primary purpose of income or profit and (2) with con-

tinuity and regularity. Groetzinger, 480 U.S. at 35. In

deciding MPPAA cases involving withdrawal liability,

we have determined certain factors to be particularly

relevant to this analysis, including the defendant’s

22 Nos. 11-3513 & 12-1333

intent in creating the enterprise, how the enterprise is

treated for tax purposes, and its legal form. See, e.g., Pioneer

Ranch, 494 F.3d at 577-78; Fulkerson, 238 F.3d at 895;

Personnel, 974 F.2d at 795. The district court considered

these factors and found that Messina Products had con-

tinually maintained and operated a real estate rental

company. It relied on the fact that Messina Products

was formally organized as a business enterprise and

had expressed its business purpose in its operating state-

ment and in its tax filings. The district court concluded

that Messina Products operated as a “trade or business”

under the Groetzinger test and thus could be held liable

for Messina Trucking’s withdrawal liability.

Messina Products disagrees, arguing that it had no

employees, owned no real estate or assets aside from

its interest in Messina Lombardo, and did not engage

in regular business activity. It attempts to characterize

itself as a passive investment vehicle, akin to the

passive, triple-net lease rental activity we considered in

Fulkerson, 238 F.3d at 893, 896, and the residential rental

activity we considered in White, 258 F.3d at 643-44.

We disagree.

We have written that it is “highly unlikely” that a

formal for-profit business organization would not

qualify as a trade or business under the Groetzinger test,

but our circuit has not adopted a per se rule that formal,

for-profit entities should always be considered “trades

or businesses.” SCOFBP, 668 F.3d at 878. Nevertheless,

we explained in Pioneer Ranch that “a defendant’s

stated intention of forming a business is highly relevant,

because it constitutes a declaration against interest.”

Nos. 11-3513 & 12-1333 23

Pioneer Ranch, 494 F.3d at 577-78. Accordingly, the

district court appropriately took note of the Messina

Products operating agreement stating that the “Members

have adopted a business plan for the development of

properties and for the production, sale and marketing

of gravel for road, subdivision, City and community

development, both wholesale and retail.” As we did in

Pioneer Ranch, and as the district court did here, we

find this evidence “highly relevant.” Messina Trucking,

821 F. Supp. 2d at 1006, citing Pioneer Ranch, 494 F.3d at

577-78. The fact that Messina Products filed a Form 1065

tax return for “trade or business income” and listed on

that return that its principal business activity was “real

estate rental” is also “strong evidence” that Messina

Products was a trade or business. See Personnel, 974 F.2d

at 795. And the activities, although minimal, were con-

ducted with sufficient continuity and regularity to

satisfy the Groetzinger test, particularly where they were

done under the auspices of a formal, for-profit organiza-

tion.

We reject Messina Products’ argument that we should

not consider the operating agreement because it was

written several years before Messina Trucking’s with-

drawal. Messina Products cites for support IUE AFL-

CIO Pension Fund v. Barker & Williamson, Inc., 788 F.2d 118,

125-126 (3d Cir. 1986), but that case decided a different

issue, holding that whether organizations are under

“common control” is determined as of the date of the

withdrawal. Also, Messina Products’ argument ignores

the fact that when conducting the Groetzinger analysis,

we routinely consult an entity’s documentary evidence

and other activities that necessarily predate the with-

24 Nos. 11-3513 & 12-1333

drawal. See, e.g., Pioneer Ranch, 494 F.3d at 577-78

(relying on decade-old partnership agreement and defen-

dant’s tax returns over years preceding withdrawal);

White, 258 F.3d at 643-44 (considering 32 years of defen-

dants’ rental history and tax returns); Fulkerson, 238 F.3d

at 895-97 (considering defendant’s leasing activities

over ten years).

If the evidence were otherwise — if, for example,

Messina Products had amended its operating agreement

to reflect an intent to discontinue business operations

and to operate as a passive investment vehicle, or had

filed tax documents suggesting that it had only an invest-

ment purpose or that it had earned only investment

income — we could not ignore such evidence simply

because it preceded the withdrawal. In this case, how-

ever, Messina Products’ operating agreement was never

amended in a manner that could suggest that Messina

Products had ceased its business operations and was

instead an investment vehicle, and it consistently filed

its tax returns asserting a business purpose and

listing business income. It was entirely appropriate for

the district court to take these documents at face value.

With regard to Messina Products, therefore, we find

no error and affirm the district court.

The judgment of the district court is affirmed with

regard to Messina Products and reversed with regard

to Stephen and Florence Messina, and the case is

remanded for further proceedings consistent with

this opinion.

2-8-13