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Transport Drivers, Inc. v. Coca-Cola Refreshments USA, Inc.

United States District Court, D. Minnesota

August 2, 2018

Transport Drivers, Inc., Plaintiff,
Coca-Cola Refreshments USA, Inc., Defendant.

          Andrew J. Holly, Esq., Kirsten E. Schubert, Esq., and Tiana Towns, Esq., Dorsey & Whitney LLP; and Lee Thomas Polk, Esq., Epstein Becker Green, P.C., counsel for Plaintiff.

          Deborah A. Ellingboe, Esq., Faegre Baker Daniels LLP; and Charles Herrick Morgan, Esq., and Jonathan Gary Rose, Esq., Alston & Bird LLP, counsel for Defendant.




         This matter is before the Court on a Motion for Partial Summary Judgment filed by Plaintiff Transport Drivers, Inc. (“TDI”). (Doc. No. 82.) Also pending is a Motion for Summary Judgment filed by Defendant Coca-Cola Refreshments USA, Inc. (“CCR”). (Doc. No. 88.) TDI seeks reimbursement from CCR of more than $500, 000 in withdrawal liability assessed pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. (“ERISA”). This liability arose from TDI's withdrawal from a multiemployer pension plan following CCR's termination of the parties' labor services leasing arrangement. CCR denies that it has any obligation to pay and argues that TDI must indemnify CCR for the claims TDI asserts in this lawsuit. For the reasons set forth below, the parties' motions are both granted in part.


         I. The Parties

         TDI provides labor leasing services throughout the United States. (See Doc. No. 99 (“CCR Index”) at 1, Ex. 5 (“R. Formento Dep.”) at 6-7; CCR Index at 2, Ex. 7 (“J. Formento Dep.”) at 49; CCR Index at 3, Ex. 22 (“TDI Website”).) TDI employs laborers who perform work for TDI's customers, and TDI provides services to its customers relating to labor negotiations, payroll, and employee benefits. (R. Formento Dep. at 14-15; TDI Website.) Ronald Formento was TDI's President from 1976 until 2013. (R. Formento Dep. at 6.) Jonathan Formento became President thereafter. (J. Formento Dep. at 32.) During his tenure with the company, Ronald Formento negotiated more than five hundred business agreements. (R. Formento Dep. at 8-9.) Based on his professional experiences, Ronald Formento was familiar with withdrawal liability that may arise from collective bargaining agreements; he testified that he was “more attuned to withdrawal liability than a lot of other people.” (Id. at 18-22, 34, 40-41.)

         CCR is a subsidiary of The Coca-Cola Company, and the corporate successor of Coca-Cola Bottling Midwest, Inc. (“CCBM”) and Coca-Cola Enterprises Inc. (“CCE”). (Doc. No. 97 (“Manning Decl.”) ¶¶ 3-4, 6-9, Exs. A-E.) According to the Associate General Counsel of The Coca-Cola Company, “CCR is the successor in interest to (1) contracts entered into by and property of the former entity [CCBM]; and (2) contracts entered into by and property of the former entity [CCE].”[1] (Manning Decl. ¶¶ 3, 5.)

         II. The 2000 Agreement and the Parties' Ongoing Business Relationship

         On December 28, 2000, TDI reached out to CCBM, proposing that TDI adopt as written an existing labor services contract between CCBM and a company that was going out of business. (Doc. No. 86 (“R. Formento Aff.”) ¶ 11, Ex. A (“2000 Agreement”).) CCBM accepted TDI's proposal. (Id.) The 2000 Agreement consisted of a letter with an attached agreement entered into between a predecessor leasing company and CCBM in 1985. (See id.) TDI did not seek attorney consultation to negotiate the 2000 Agreement based on timing concerns. (R. Formento Dep. at 56-59.)

         The 2000 Agreement contains the following relevant provisions:

1. Lease of Personnel. [CCR] agrees to lease from [TDI] drivers or other personnel (“Workers”) as needed by [CCR] in connection with the transportation or storage of goods, upon the terms and conditions set forth in this Agreement and in the Schedules A. Each Schedule A will become part of and subject to this Agreement upon execution by both parties.
2. Services Provided by [TDI]. [TDI] agrees to provide the following services to [CCR]: . . .
(b) Wages and Benefits. [TDI] will pay all wages, provide all benefits, pay all federal and state wage taxes . . . and maintain payroll records for the Workers.
(c) Collective Bargaining Agreements. [TDI] will negotiate and administer any collective bargaining agreements applicable to the Workers.
3. Payments. [TDI] will invoice [CCR] each week for all charges payable for that week as described in the Schedules A, and for all other charges provided for in this Agreement. . . .
4. Employment Relationship. . . . If any of the Workers are covered by a collective bargaining agreement, [CCR] will not violate or cause [TDI] to violate that collective bargaining agreement, and will defend, indemnify and hold [TDI] harmless against any claim, loss, expense or liability resulting from any such violation.
5. Regulations. [CCR] assumes responsibility for compliance by the Workers with U.S. Department of Transportation Hours of Service and other applicable federal and state governmental regulations (including those related to environmental impairment), and will defend, indemnify and hold [TDI] harmless against any claim, loss, expense, fine or penalty resulting from any violation of these regulations. . . .
6. Insurance and Indemnification. . . .
(e) Indemnification. . . . [CCR] agrees to release, indemnify, defend and hold harmless [TDI], its officers, employees (including the Workers), agents, affiliates and insurers, against all claims, liabilities, losses, legal fees and other expenses . . . for personal injuries or death and for loss or damage . . . to the vehicles, cargo, real estate or other property of any person (including [TDI], [CCR] and their respective officers, employees and agents), except to the extent of recovery under any insurance policy provided by [TDI] or [CCR] under this Agreement, arising out of (i) ownership, maintenance, operation or use, including loading and unloading, of vehicles operated or maintained by the Workers, whether resulting from the sole negligence of [TDI] or a Worker, or otherwise, (ii) services performed by the Workers under this Agreement, (iii) the conduct of [CCR]'s business, and (iv) [CCR]'s failure to comply with the provisions of this Paragraph 6 and of any insurance policy provided under this Paragraph 6.
7. Termination. Either party may terminate this Agreement in its entirety upon at least 30 days prior written notice to the other party.
8. Default. . . . [TDI] may also recover all costs and expenses which it incurs in protecting its interests and enforcing its remedies under this Agreement, including reasonable legal fees.

(2000 Agreement.) The “Schedule A” referred to in the 2000 Agreement is an invoice outlining payments due to TDI by CCR. (See Id. at attached Invoice.) It provides for wages, a service charge, and other employee benefits, including pension benefits. (See id.) The 2000 Agreement is governed by Minnesota law. (See Id. at 1, § 15.)

         Ronald Formento explained that “[t]here was nothing in [the 2000 Agreement] that addressed withdrawal liability at the time, because there was no withdrawal liability.” (R. Formento Dep. at 42.) To explain how the 2000 Agreement obligated CCR to pay for the withdrawal liability, he pointed to Sections 4, 5, and 6(e). (Id. at 35-36, 48-54.) Jonathan Formento, testifying on behalf of TDI, explained that withdrawal liability was “not outlined, but . . . not excluded” in the 2000 Agreement. (See CCR Index at 2, Ex. 6 (“TDI 30(b)(6) Dep.”) at 4, 17-19.) When asked what provision governed CCR's obligation to reimburse TDI for withdrawal liability, he did not specify a particular section, but referenced “the section in the contract that identifies benefits . . . and pension.” (J. Formento Dep. at 98-99.) Dennis Mulvaney, TDI's Regional Vice President responsible for TDI's operations at CCR's Eagan, Minnesota facility, identified the indemnification clause as the source of CCR's obligation to pay for withdrawal liability. (See CCR Index at 2, Ex. 8 (“Mulvaney Dep.”) at 5, 10-11, 18-19, 25-26, 44.)

         During TDI's business relationship with CCR, TDI entered into four collective bargaining agreements (“CBAs”) with the Teamsters Local Union No. 120 (the “Union”) covering TDI's mechanics working at a facility in Eagan, Minnesota. (Doc. No. 87 (“J. Formento Aff.”) ¶ 25, Ex. I.) When the CBAs were being negotiated, CCR provided input to TDI on various terms. (See R. Formento Aff. ¶¶ 32-33, Ex. G; see also Doc. No. 95 (“Second Polk Aff.”) ¶ 2, Ex. 1(“Sypniewski Dep.”) at 41; see also Mulvaney Dep. at 23-24, 46; CCR Index at 2, Ex. 12 (“Wagner Dep.”) at 39-41, 58-62.) Each CBA contained a provision obligating TDI to make ongoing contributions to the Minneapolis Food Distributing Industry Pension Plan (the “Pension Plan”). (See J. Formento Aff. ¶ 25, Ex. I.) On April 1, 2001, TDI executed an Employer Participation Agreement with the Pension Fund's Trustees (“Participation Agreement”) which was incorporated into the CBA between TDI and the Union. (R. Formento Aff. ¶ 20, Ex. H.)

         TDI employed, paid, and provided W-2s for the individuals providing services on behalf of TDI at CCR's Eagan facility. (CCR Index at 2, Ex. 11, Nos. 7-9.) CCR then reimbursed TDI for invoiced labor costs, including wages, overtime, health benefits, and pension payments. (See Wagner Dep. at 32-34.) Ronald Formento claims that TDI and CCR shared an understanding that the 2000 Agreement “contemplated [CCR's] reimbursement of all labor costs including wages and fringe benefits.” (R. Formento Aff. ¶ 10.) In particular, he described it as “a pass-through contract” under which all labor costs were invoiced by TDI and paid by CCR. (Id. ¶¶ 13, 26; see also J. Formento Aff. ¶ 10, Ex. C; R. Formento Dep. at 54-56, 143-46.) Jonathan Formento also described the parties' contract as a “pass-through contract” and explained that costs were passed through to CCR “[i]f agreed upon . . . and understood by both parties.” (J. Formento Aff. ¶ 26; TDI 30(b)(6) Dep. at 20-21.) He testified that TDI kept CCR informed of all costs to be assessed. (TDI 30(b)(6) Dep. at 24-25.) Ronald Formento explained that “TDI always considered its withdrawal liability payments to the Fund as contract labor costs required to be reimbursed by Coca-Cola under the 2000 Agreement.” (R. Formento Aff. ¶ 44.) In particular, TDI considered withdrawal liability to be the same as the ongoing pension costs which CCR was obligated to pay. (Id. ¶¶ 56-57.)

         CCR acknowledged that the 2000 Agreement governed, at least initially. (Doc. No. 85 (“Polk Aff.”) ¶ 2, Ex. 1, Nos. 1-2.) However, Tom Sypniewski, CCR's Midwest Business Unit Fleet Manager from 2006 to 2012, denied that the parties had a “pass-through” contract. (Sypniewski Dep. at 8-9, 35-36.) Janet Wagner, CCR's Fleet Supervisor at the Eagan facility, “reviewed [TDI's] invoices to ensure that what [CCR was] paying were the expressly agreed to amounts for the expressly agreed to items that [CCR] and TDI had agreed to.” (Wagner Dep. at 14, 101-02; see also Id. at 105-06.)

         III. The 2010 Agreement and the Parties' Continued Course of Conduct

         On February 10, 2010, Ronald Formento signed an agreement with CCR titled “Coca-Cola Enterprises Bottling Companies Services Agreement” (the “2010 Agreement”). (R. Formento Aff. ¶ 35, Ex. B (“2010 Agreement”).) Page 1 of the 2010 Agreement includes a recitation of consideration as follows: “For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, Coca-Cola Enterprises Inc., its divisions, subsidiaries and affiliates (“Bottler”) and TRANSPORT DRIVERS (“Supplier or Contractor”) agree . . ., ” (Id. at 1.) With respect to services and compensation, the 2010 Agreement states:

1. Description of Services and related Equipment
Contractor shall provide to the Bottler the following services and related equipment at the following location:
Vehicle maintenance & repairs. . . .
2. Compensation
Contractor shall be compensated by the Bottler for providing the services described above ...

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