United States District Court, N.D. California
PENSION TRUST FUND FOR OPERATING ENGINEERS, et al., Plaintiffs,
TRACTOR EQUIPMENT SALES, et al., Defendants.
ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT Re: Dkt. Nos. 65, 66
WILLIAM H. ORRICK, District Judge.
Defendants Steven and Rena Van Tuyl ("the Van Tuyls") owned three residential properties that they leased to third parties. The Van Tuyls also owned a controlling interest in defendant Tractor Equipment Sales, Inc. ("TES"), which participated in plaintiff Pension Trust Fund for Operating Engineers (collectively with the plaintiff trustees, the "Fund"), a multiemployer pension plan as defined under 29 U.S.C. § 1002(37)(A). The properties and TES were in all respects unrelated except for their common ownership by the Van Tuyls. TES withdrew from the Fund in 2010, triggering withdrawal liability pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., as amended by the Multiemployer Pension Plan Amendments Act ("MPPAA"), 29 U.S.C. § 1381 et. seq., that remains unpaid. The question I must answer is whether the Fund may enforce withdrawal liability against the three rental properties because they constitute a "trade or business" under the controlled group theory as defined by 29 U.S.C. § 1301(b)(1). Because the Van Tuyls' leasing activities do not rise to the level of a trade or business within the meaning of section 1301(b)(1), the Van Tuyls' motion for summary judgment is GRANTED, and the Fund's motion against the Van Tuyls is DENIED. In light of TES's concession that it is liable under 29 U.S.C. § 1381, the Fund's motion for summary judgment against TES is GRANTED.
I. FACTUAL BACKGROUND
The Fund provides retirement benefits for employees on whose behalf employers make contributions to the Fund. Illacqua Decl. ¶ 3 (Dkt. No. 68). Beginning in July 2007, TES was required to participate in the Fund pursuant to a collective bargaining agreement with a union. Id. ¶¶ 4-5. TES regularly made its required contributions until November 2010, when TES withdrew from the Fund. Id. ¶ 5. TES subsequently ceased all operations and, in May 2012, declared bankruptcy. Van Tuyl Decl. ¶ 2 (Dkt. No. 65-1). TES had been in the business of selling and servicing construction equipment. Id. ¶ 3.
By letter dated July 29, 2011, the Fund notified TES and "all members of its controlled group" of the withdrawal liability assessed against them under ERISA's withdrawal liability provisions. Ilacqua Decl., Ex. D. The letter demanded payment and set forth a payment schedule. Id. On August 9, 2011, TES wrote to the Fund requesting review of its withdrawal liability but without specifying any particular issues for review. Id. at Ex. E. The Fund responded on October 21, 2011, informing TES that its withdrawal liability had been reviewed and that no changes would be made. Id. at Ex. F. No part of TES's withdrawal liability has been paid to date. Id. ¶ 14.
Steven and Rena Van Tuyl are husband and wife. Van Tuyl Decl. ¶ 2. At all times relevant to this case, the Van Tuyls owned a controlling interest in TES. Id. The Van Tuyls also own or previously owned controlling interests in three residential properties located in different parts of California. Id. ¶¶ 3-5. A declaration submitted by Rena states the following about the properties:
In 1998, the Van Tuyls purchased a residential property in San Jose, California after a church organization reached out to them and requested that they provide a location for the church's youth center. Van Tuyl Decl. ¶ 3. The property has since been used exclusively by the church as a youth center and as a residential facility for the youth center's staff. Id. The church pays "well-below-market-value" rent to the Van Tuyls for use of the property. Id. Rena states that she and her husband consider their leasing of the property to the church to be a charitable donation. Id. Rena also states that the Van Tuyls "spend virtually no time maintaining or increasing the value of the property; we merely deposit the rent we receive." Id. There is no evidence of any economic relationship between the San Jose property and TES.
In 1980, the Van Tuyls purchased a single-family residence in Merced, California. Van Tuyl Decl. ¶ 4. The Van Tuyls rented the property to another family from 1990 to August 2013. Id. The property is currently vacant. Id. Rena states that the Van Tuyls do not "actively take part in... maintaining [the] property." Id. From 2009 to 2012, the Van Tuyls "spent no time maintaining or improving the value of the property" except to deposit the rent they received and to occasionally pay a handyman to perform minor repairs. Id. Rena states that the Van Tuyls consider the property "a passive property holding for retirement purposes." Id. There is no evidence of any economic relationship between the Merced property and TES.
In 1976, the Van Tuyls purchased a single-family residence in Carnelian Bay, California, in the Lake Tahoe area. Van Tuyl Decl. ¶ 5. The Van Tuyls sold the property in October 2012. Id. While the Van Tuyls owned the property, they used it as a vacation home but also "at times" rented it out to friends and family. Id. Rena states that the Van Tuyls "did not actively take part in... maintaining the property." Id. From 2009 to 2012, the Van Tuyls "spent no time whatsoever maintaining or improving the value of the property" except to deposit the rent they received. Id. Rena also states that she and her husband considered the property "a passive property holding for vacation purposes." Id. There is no evidence of any economic relationship between the Tahoe property and TES.
The Van Tuyls' Schedule E tax returns for 2010 and 2011 show that in both years, the Van Tuyls reported substantial rents received from all three properties and claimed various deductions on account of the properties, including deductions for travel expenses, insurance, repairs, taxes, utilities, gardening, and depreciation. See Bevington Decl. I, Ex. C (Dkt. No. 67-3). On their 2010 Schedule E tax return, the Van Tuyls reported $47, 620 in rents received from the San Jose property, $10, 932 in rents received from the Merced property, and $19, 417 in rents received from the Tahoe property. Id. On their 2011 Schedule E tax return, the Van Tuyls reported $47, 790 in rents received from the San Jose property, $11, 049 in rents received from the Merced property, and $18, 600 in rents received from the Tahoe property. Id. The Van Tuyls did not claim deductions for advertising in connection with any of the three properties in either year. Id.
On their 2010 Schedule E tax return, in response to an item asking whether they had used each property during the tax year "for personal purposes" for more than the greater of fourteen days or ten percent of the total days the property was rented at fair rental value, the Van Tuyls answered, "No, " for all three properties. Id. On their 2011 Schedule E tax return, the Van Tuyls reported 365 "fair rental days" and zero "personal use days" for all three properties. Id. The Van Tuyls admit the Schedule E tax returns are true and correct and state that they are "one hundred percent consistent" with Rena's declaration. Van Tuyls' Reply 9-10 (Dkt. No. 74) ("The tax documents do not undermine [Rena's declaration]; rather, they corroborate and are one hundred percent consistent with it.").
II. PROCEDURAL BACKGROUND
On July 29, 2013, the Fund filed its first amended complaint, naming TES and the Van Tuyls as defendants. Dkt. No. 37. The complaint asserts two causes of action: (1) withdrawal liability under 29 U.S.C. § 1381; and (2) failure to provide required information in violation of 29 U.S.C. § 1399(a). The complaint seeks damages under 29 U.S.C. § 1132(g)(2) for (i) unpaid contributions; (ii) interest on the unpaid contributions as provided for under the plan; (iii) an amount equal to the greater of interest on the unpaid contributions or liquidated damages as provided for under the plan; and (iv) reasonable attorney fees and costs. Id. at 10. The complaint also requests injunctive relief in the form of an order requiring defendants "to provide documentation of all trades or business... within [d]efendants' controlled group as defined in... 29 U.S.C. § 1301(b)(1)." Id. According to the Fund's summary judgment motion, damages currently amount to more than $300, 000. Fund's Mot. 2 (Dkt. No. 66).
On July 30, 2014, TES and the Van Tuyls moved for summary judgment on both causes of action. Van Tuyls' Mot. (Dkt. No. 65). The Fund moved for summary judgment on the same date. Dkt. No. 66. During the hearing on September 3, 2014, both parties conceded that there are no material facts other than those already disclosed in the papers, and that the record is sufficiently developed to decide this case as a matter of law.
Summary judgment is proper where the pleadings, discovery, and affidavits demonstrate that there is "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A dispute is genuine if it could reasonably be resolved in favor of either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is material where it could affect the outcome of the case. Id.
The party moving for summary judgment has the initial burden of demonstrating the absence of a genuine issue of material fact as to an essential element of the nonmoving party's claim. See Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Once the movant has made this showing, the burden shifts to the nonmoving party to identify specific evidence showing there is a genuine issue of material fact for trial. Id. If the nonmoving party cannot do so, the movant "is entitled to... judgment as a matter of law because the nonmoving party has failed to make a sufficient showing on an essential element of her case." Id. (internal quotation marks omitted).
On summary judgment, the court draws all reasonable factual inferences in favor of the nonmoving party. Anderson, 477 U.S. at 255. "Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge." Id. However, conclusory and speculative testimony does not raise genuine issues of fact and is insufficient to ...