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Central States Southeast & Southwest Areas Pension Fund v. Lakeville Transportation, Inc.

United States District Court, D. Minnesota

March 25, 2019

Central States Southeast and Southwest Areas Pension Fund, Central States Southeast and Southwest Areas Health and Welfare Fund, and Arthur H. Bunte, Jr., Trustee, Plaintiffs,
v.
Lakeville Transportation, Inc., Wren Corporation, Summit Renovation and Design, Inc., LME, Inc., Wren Equipment, LLC, Terminal Properties, LLC, Superior Properties Management, Inc., Wren Enterprises, LLC, R&L Cartage Properties, LLC, Lakeville Logistics, Inc., Iowa Terminal Properties, LLC, Rock Island Properties, LLC, JMW Properties, LLC, Omaha Properties, LLC, Turk Trust, LLC, Roger Wilsey, Shari Taylor Wilsey, and Finish Line Express, LLC, Defendants.

          Brad R. Berliner, Frank T. Blechschmidt, and John Joseph Franczyk, Jr., Central States Funds Legal Department, Lisa L. Beane, Robins Kaplan, LLP Katherine S. Barrett Wiik, Best & Flanagan, for Plaintiffs.

          John R. McDonald, Benjamin E. Gurstelle, Jason R. Asmus, and Justin Peter Weinberg, Briggs and Morgan, P.A., for Defendants Turk Trust, LLC, Roger Wilsey, and Shari Taylor Wilsey.

          Christopher E. Hoyme, Jackson Lewis P.C., Brian T. Benkstein, Fredrikson & Byron, P.A., for Defendants Summit Renovation and Design, Inc., LME, Inc., Wren Equipment LLC, Terminal Properties, LLC, Superior Properties Management, Inc., Wren Enterprises, LLC, Lakeville Logistics, Inc., Iowa Terminal Properties, LLC, Rock Island Properties, LLC, JMW Properties, LLC, and Omaha Properties, LLC.

          Martin D. Kappenman and Thomas R. Revnew, Seaton, Peters & Revnew, for Defendant Finish Line Express, LLC.

          MEMORANDUM OPINION AND ORDER

          SUSAN RICHARD NELSON, UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         This matter is before the Court on the Motion to Refer This Case to the Bankruptcy Court [Doc. No. 80] jointly filed by the following Defendants: Roger Wilsey, Shari Taylor Wilsey, Turk Trust, LLC, Iowa Terminal Properties, LLC, JMW Properties, LLC, LME, Inc., Lakeville Logistics, Inc., Omaha Properties, LLC, R&L Cartage Properties, LLC, Rock Island Properties, LLC, Summit Renovation and Design, Inc., Superior Properties Management, Inc., Terminal Properties, LLC, Wren Enterprises, LLC, Wren Equipment, LLC, and Finish Line Express, LLC (collectively, the "Moving Defendants"). For the reasons set forth below, the Moving Defendants' Motion is denied.

         II. BACKGROUND

         In January 2017, Lakeville Motor Express, Inc. ("Lakeville Motor") commenced Chapter 7 bankruptcy proceedings under Title 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court, District of Minnesota ("Bankruptcy Court"). (See In re Lakeville Motor Express, Inc., No. 17-40145 (Bankr. D. Minn.)) (the "Lakeville Motor Bankruptcy Case"). Plaintiffs in the instant action-employee pension funds, health and welfare funds, and the funds' trustee-participated in the Lakeville Motor Bankruptcy Case, where they filed three proofs of claim against the debtor, Lakeville Motor Express, Inc. ("Lakeville Motor"). (See id., Claim Nos. 14, 15, 16.)

         In March 2018, Plaintiffs filed the instant suit under the Employment Retirement Income Security Act of 1974 ("ERISA") against Defendants, in the U.S. District Court for the Northern District of Illinois. (See Compl., Central States Se. & Sw. Areas Pension Fundv. Lakeville Transp., Inc., No. 18-cv-1878 (N.D. 111. Mar. 15, 2018) [ECF No. 1].) Although Lakeville Motor is not one of the Defendants in this action, the allegations in the Complaint concern its closure in 2016 and its alleged liabilities of over $90 million resulting from unpaid employee wages and withdrawal liability. (Id. ¶¶i2.) Plaintiffs allege that the owners of Lakeville Motor, Roger Wilsey and Shari Taylor Wilsey, "intentionally sabotaged" the company's operations, while moving work to other trucking and truck-related companies that they owned and controlled. (Id. ¶ 2.) Plaintiffs assert that these other entities-Defendants in this action-were alter egos of Lakeville Motor, or were subject to its control. (Id. ¶ 4.) Plaintiffs contend that Defendants were delinquent in making contributions to employee benefit funds and also incurred withdrawal liability. (Id.)

         In May 2018, several of the Defendants in the Northern District of Illinois District Court action moved to transfer this case to the District of Minnesota. (See Mot. to Transfer [Doc. No. 52].) The movants requested transfer to this District, ultimately seeking the referral of this case to Bankruptcy Court in this District. (Mem. Supp. Mot. to Transfer at 6 [Doc. No. 47-1].)

         Also in May 2018, in Bankruptcy Court, John R. Stoebner, Trustee for the Bankruptcy Estate of Lakeville Motor Express, Inc., filed two adversary proceedings, John Stoebner, Trustee v. LME, Inc., 18-4031 (the "LME Adversary Proceeding"), and John Stoebner, Trustee v. Central States, Southeast & Southwest Pension Fund, 18-4058 (the "Central States Adversary Proceeding."). In the LME Adversary Proceeding, Stoebner alleged that Lakeville Motors had made fraudulent and preferential transfers. (See Stoebner v. LME, Inc., Adv. No. 18-04031 (Bankr. D. Minn. Mar. 28, 2018 [ECFNo. 1])). In the Central States Adversary Proceeding, Stoebner alleged that the ERISA claims filed by Plaintiffs in the District Court lawsuit violated an automatic stay in the Lakeville Motor Bankruptcy Case, and that the Court should require the marshaling of assets. (See Stoebner v. Central States Se. & Sw. Areas Pension Fund, Adv. No. 18-04058 (Bankr. D. Minn. May 2, 2019 [ECFNo. 1])).

         In July 2018, the presiding judge in the Northern District of Illinois granted the motion to transfer, noting that this case is "closely related" to the Lakeville Motor Bankruptcy Case. (July 2, 2018 Order at 9 [Doc. No. 71].) He observed that Plaintiffs' claims in Bankruptcy Court "seek to collect on the same contribution and withdrawal liability at issue here." (Id. at 9-10.) Moreover, he stated, "The bankruptcy court in the District of Minnesota likely will have jurisdiction over this case once it is transferred because this case is 'related to' the bankruptcy proceeding." (Id. at 11) (citing 28 U.S.C. § 157(c)(1)). Upon the transfer of this case from the Northern District of Illinois, the Moving Defendants filed the instant motion, seeking the referral of this case to Bankruptcy Court.

         Since the filing of this motion, however, the parties in the LME Adversary proceeding have reached a settlement agreement, which U.S. Bankruptcy Judge Michael Ridgway has recently approved. (See Lakeville Motor Bankruptcy Case, No. 17-40145, Mar. 13, 2019 Order [Doc. No. 64].) Among the terms of the ...


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