Labor & Employment Law Daily Wrap Up, PENSION AND BENEFIT PLANS—7th Cir.: Company owner found personally liable under ERISA for delinquent benefit contributions wins reversal on appeal, (Jul 21, 2025)

By Marjorie Johnson, J.D.

The issue should not have been decided on summary judgment since there was a genuine dispute concerning his intent to be personally bound by the terms of the agreement he signed with the multiemployer union fund.

A district court erred in granting summary judgment in favor of a union-sponsored employee benefit fund that sought to hold a participating employer’s owner personally liable under ERISA for delinquent contributions to the funds based on the personal liability clause contained in the agreement he signed. Reversing the order and vacating the award of attorneys’ fees, the Seventh Circuit found that because it was undisputed that he signed the agreement in a representative capacity, a triable issue existed as to his intent under both Illinois contract law and general principles of contract law (Railroad Maintenance and Industrial Health and Welfare Fund v. Mahoney, Nos. 24-2704 & 24-2817 (7th Cir. July 17, 2025)).

Multi-employer fund. The lawsuit was brought by Railroad Maintenance and Industrial Health and Welfare Fund. The employee benefit fund is governed by ERISA and administered pursuant to a trust agreement, and participating employers make contributions to the fund in accordance with the terms of their collective bargaining agreement (CBA). In a one-page memorandum of agreement with the respective union, the employer agreed to be bound by the terms of the union’s CBA and the fund’s trust agreement.

Delinquent funds. In two prior suits, the fund attempted unsuccessfully to collect unpaid contributions from the employer, which had since been dissolved. The fund then brought this suit against the owner personally.

Personal liability clause. The owner, who was the sole member and manager of the company, signed the agreement in a representative capacity obligating the company to contribute to the fund. However, although he did not sign the memorandum in his personal capacity, the trust agreement provided that officers and directors of the company “shall be personally liable for any underpayment or other pecuniary loss to the Fund” resulting from a willful violation of any requirement in the trust agreement.

Summary judgment. Both parties moved for summary judgment, contending that there was not a genuine dispute concerning the owner’s intent—or lack thereof—to be personally bound by the terms of the trust agreement. Relying on the personal liability clause in the agreement, the district court granted summary judgment to the fund and also awarded the fund attorneys’ fees based on another provision of the agreement.

ERISA claim. The Seventh Circuit began by noting that the fund’s claim against the owner arose under federal law. Even though the fund brought it as a state law claim, ERISA and the LMRA completely preempt state law on matters related to employee benefit plans and CBAs. “The Fund is an employee benefit plan governed by ERISA and is seeking to recover delinquent contributions, along with ancillary fees and penalties, that it says [the owner] owes under the terms of the collective bargaining and trust agreements,” explained the appeals court. “Such a claim arises under federal law.”

Contract interpretation. Because ERISA does not contain a body of law governing contract interpretation, the Seventh Circuit must “fashion federal common law,” and consult state law “when consistent with the policies underlying ERISA.” And while it was not clear whether it should look to Illinois law or general principles of contract law, the appeals court left that issue for another day since either approach led to the same result.

Illinois contract law. Under Illinois law, an agent is not personally bound by an agreement he signs in a representative capacity “absent evidence of contrary intent in the document.” If there is such evidence, then “an issue of fact as to the agent’s intent arises, an issue for the jury to determine.”

Here, it was undisputed that the owner signed the agreement in his representative capacity, which indicated that he did not intend to be personally bound by its terms. However, the personal liability clause created a triable issue that should not have been resolved on summary judgment since it “evinces a contrary intent,” the Seventh Circuit explained.

General principles of contract law. Drawing on general principles of contract law, the appeals court reached the same conclusion. Illinois law is consistent with the Restatement (Third) of Agency, which provides: “When an agent acting with actual or apparent authority makes a contract on behalf of a disclosed principal [the company], the agent is not a party to the contract unless the agent and third party [the Fund] agree otherwise.” Comment (d) to the Restatement explains that “[a]n agent is not a party to a contract if any portion of the parties’ writing makes clear that the agent acts solely in a representative capacity on behalf of a disclosed principal.” Significantly here, the fund conceded that the owner signed the memorandum in his representative capacity.

But the Restatement also provides that, “[i]f a contract names both the principal and the agent, in the absence of a manifestation to the contrary the agent is not a party to the contract if the contract indicates that the agent is named only as agent.” Here, the personal liability clause was “a manifestation to the contrary,” or as Illinois Supreme Court has described, “evidence of contrary intent.” Further, a Restatement note emphasizes the ambiguity that the personal liability clause creates: “A contract may be ambiguous when an officer is designated in an individual capacity but the officer signs the contract in an expressly representative capacity.”

The cases are Nos. 24-2704 & 24-2817.

Judge: Kirsch, T.

Attorneys: John A. Wolters (Cavanagh & O'Hara) for Railroad Maintenance and Industrial Health and Welfare Fund. Michael F. Hughes (Amundsen Davis) for Clinton Mahoney.

Companies: Railroad Maintenance and Industrial Health and Welfare Fund

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