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On April 22, 2013, the Seventh Circuit Court of Appeals issued its opinion in Central States v. Nagy that significantly extends the reach of pension funds to enforce withdrawal liability against the personal assets of business owners.

Normally, not only the employer is liable for its withdrawal liability — all “trades or businesses” within common control with the employer also are liable for the employer’s withdrawal liability.  The Seventh Circuit recently interpreted this mandate much more broadly.

In Nagy, Charles Nagy owned and operated several businesses, including Nagy Ready Mix.  Nagy Ready Mix had Teamster drivers and participated in Central States Pension Fund.  In addition, Nagy also personally owned real estate that he leased to Nagy Ready Mix for its business operations.

Nagy Ready Mix ended its participation in Central States and withdrew in 2007.  Central States assessed Nagy Ready Mix with $3.6 million in withdrawal liability and brought a lawsuit not only against Nagy Ready Mix, but also against Nagy’s other companies and against Nagy individually.

The Court held Nagy was individually liable for the $3.6 million assessment.  The Court found that the activity of the business owner in leasing property that he owned to his business was per se a trade or business under the common control rules. Because the “leasing business” was within common control with Nagy Ready Mix, that unincorporated leasing business – i.e., Nagy leasing his personal property to his company – was jointly and severally liable for Nagy Ready Mix’s withdrawal liability.

It is now clear that (at least in the Seventh Circuit) a business owner who leases property to his business can be individually liable for withdrawal liability.  Prior to the Nagy decision, pension funds not only had to establish common control between the employer and the alleged business targeted with liability, they also had to show that the alleged business actually was a trade or business, not just a passive investment.  After the Nagy case, the pension fund no longer needs to prove that the leasing of property to the employer by the business owner is a separate trade or business.

As always, it is important for any business and business owner facing potential withdrawal liability to objectively analyze all financial interests carefully for possible exposure to the long reach of a pension fund in the event of a withdrawal.

If you would like a copy of the Nagy decision or would like to re-evaluate the impact of the decision on your business, contact Andy ( or Rich (