125 F.3d 526 (7th Cir. 1997), 96-3663, Chicago Truck Drivers, Helpers and Warehouse Union (Independent) Pension Fund v. Century Motor Freight, Inc.
|Citation:||125 F.3d 526|
|Party Name:||CHICAGO TRUCK DRIVERS, HELPERS AND WAREHOUSE UNION (INDEPENDENT) PENSION FUND, a pension trust, and George Ossey, Jack Stewart, et al., Plaintiffs-Appellees, v. CENTURY MOTOR FREIGHT, INC., Defendant-Appellant.|
|Case Date:||September 09, 1997|
|Court:||United States Courts of Appeals, Court of Appeals for the Seventh Circuit|
Argued April 18, 1997.
[Copyrighted Material Omitted]
David S. Allen, Thomas J. Angell (argued), Jacobs, Burns, Sugarman, Orlove & Stanton, Chicago, IL, for Plaintiffs-Appellees.
John R. Doyle, Cathy H. McNeil, McDermott, Will & Emery, Chicago, IL, Peter M. Lancaster (argued), Timothy Branson, Dorsey & Whitney, Minneapolis, MN, for Defendant-Appellant.
Before CUMMINGS, MANION, and DIANE P. WOOD, Circuit Judges.
MANION, Circuit Judge.
Century Motor Freight sold all of its assets to Wintz Parcel Drivers in February 1992. The sale meant that Century would no longer be making pension contributions on behalf of its former employees to the Chicago Truck Drivers Union Pension Fund, a multiemployer fund. The responsibility to make payments became Wintz's, but Century was by no means off the hook. Multiemployer pension plans are a popular way for employers to pool their risk and resources, and under ERISA 1 an employer withdrawing from the plan pays a penalty. That penalty is called "withdrawal liability," and it means the employer is liable to the plan for unfunded, vested pension benefits as determined by the fund's trustee. See 29 U.S.C. §§ 1381-83. The employer may contest the amount demanded by the trustee, but only through mandatory arbitration procedures. 29 U.S.C. § 1401.
Such was the fate of Century. When it sold to Wintz, it thought it had come to an agreement with the fund relieving it of withdrawal liability, which of course the fund was entitled to do. Under Century's agreement with the fund, Wintz had to enter into a collective bargaining agreement with the union, as well as post a $50,000 bond in favor of the fund, and Century had to pay everything it owed the fund. Century claims all those conditions were satisfied, which is why it says it was surprised when three years later (in 1995) the fund wrote Century reasserting the company's withdrawal liability. The record is unclear as to what prompted the reassessment, though Century suggested in the district court that it was prompted by Wintz's decision to shut down some of the acquired operations in 1995. Undoubtedly, the reason for the reassessment and its appropriateness will be fleshed out in arbitration, which the parties tell us is pending. For now the important point is that the fund instructed Century that it had to discharge its liability in a lump sum payment of $438,624 or by a payment schedule. When Century did not pay on an installment basis, the fund accelerated the balance owed.
Still Century paid nothing, prompting the fund to file suit in federal court to recover the principal sum of $438,624 plus interest, liquidated damages, court costs and reasonable attorneys' fees pursuant to 29 U.S.C. § 1132(g)(2). The fund successfully moved for summary judgment on its complaint. Century had argued that it was not legally required to pay an accelerated amount under 29 C.F.R. § 4219.31(c)(1), 2 a regulation issued by the Pension Benefit Guaranty Corporation (PBGC) delaying acceleration of a fund's withdrawal liability assessment where the employer has timely filed for arbitration over the matter (as Century did here). The district court determined that Century had made the same argument in a previous litigation involving the same issue (though sued by
a different plaintiff), and that the court in that case had invalidated § 4219.31(c)(1) because it found it conflicted with ERISA. See Central States, Southeast & Southwest Area Pension Fund v. Century Motor Freight, Inc., No. 94 C 6615, 1995 WL 699655 (N.D.Ill. Nov.22, 1995) ("Century I"). The district court held that collateral estoppel precluded Century from invoking § 4219.31(c)(1) in this case.
The fund also asked the district court to award liquidated damages and interest on the accelerated amounts, plus costs and fees. The court agreed and awarded the fund $335,560.18. That sum represented the outstanding principal owed the fund, interest, $87,724.80 in liquidated damages, costs and fees.
We reverse the district court's determination that collateral estoppel precluded Century from litigating the validity of § 4219.31(c)(1), and further hold that this regulation prevents acceleration of a fund's withdrawal liability assessment where the employer has timely filed for arbitration.
An employer withdrawing from an ERISA plan typically has to pay withdrawal liability to the fund (in this case, a multiemployer pension fund). The fund sends a notice to the employer and a demand for the amount of liability. The employer may ask the plan sponsor to review the assessment of withdrawal liability, and if still dissatisfied, the employer may initiate arbitration under 29 U.S.C. § 1401(a). If the employer does not timely initiate the arbitration process to resolve a dispute over a plan's determination of withdrawal liability, the employer waives the right to contest the assessment and the amounts demanded by the plan become "due and owing" and the plan can sue to collect it.
The issue in this case is not whether the arbitration process was initiated, but instead whether the entire withdrawal liability is due before the arbitration process is complete. On the one hand ERISA seems to say that it is. Section 1399(c)(5) states that "[i]n the event of a default, a plan sponsor may require immediate payment of the outstanding amount of an employer's withdrawal liability, plus accrued interest on the total outstanding liability ..." (emphasis added). 29 U.S.C. § 1399(c)(5). But another section of ERISA, 29 U.S.C. § 1401(b)(1), appears to suggest that the employer may stay any obligation to pay the principal owed to the fund by timely seeking arbitration: "If no arbitration proceeding has been initiated ... the amounts demanded by the plan sponsor under section 1399(b)(1) of this title shall be due and owing on the schedule set forth by the plan sponsor." (Emphasis added.) Add to this mix a federal regulation, 29 C.F.R. § 4219.31(c)(1), issued by the PBGC. That regulation plainly states that a "default as a result of failure to make any payments shall not occur until the 61st day after the last of--... (iii) If arbitration is timely initiated ..., issuance of the arbitrator's decision." So on the one hand § 1399(c)(5) suggests that the fund may require "immediate payment" of a balance if an employer is in default, but on the other hand § 1401(b)(1) and C.F.R. § 4219.31(c)(1) appear to delay such a default and acceleration if the employer arbitrates.
Century's argument here is the same as it was in the district court--that the sections are not inconsistent at all. Rather, Century argues, the rule that emerges from ERISA and the PBGC's regulation is that a fund may accelerate, but not before the arbitrator makes his decision. In other words, the regulation would be inconsistent with the statute if it denied the right to accelerate in any circumstance, but it merely delays it, and this delay is entirely consistent with 29 U.S.C. § 1401(b)(1).
The district court did not determine whether the regulation conflicted with ERISA; rather, it found Century estopped to make their argument in the first place. In Century I, a different district court judge in the Northern District of Illinois rejected Century's argument, instead determining the regulation to be in direct conflict with ERISA and therefore finding...
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