Santa Fe Pacific Corp. v. Central States, Southeast and Southwest Areas Pension Fund

Citation22 F.3d 725
Decision Date10 June 1994
Docket Number93-2899,Nos. 93-2736,s. 93-2736
Parties-1820, 62 USLW 2703, 18 Employee Benefits Cas. 1010 SANTA FE PACIFIC CORPORATION, Plaintiff-Appellee, v. CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

David C. Gustman (argued), Weston W. Marsh, Harry L. DeLung, Jr. and Kenneth K. Dort, Freeborn & Peters, Chicago, IL, for plaintiff-appellee.

Terence G. Craig, Thomas C. Nyhan, James D. O'Connell, James P. Condon (argued) and Bruce L. Perlin, Central States, Southeast & Southwest Area Pension Fund, Law Dept., Rosemont, IL, for defendant-appellant.

Before POSNER, Chief Judge, and ESCHBACH and KANNE, Circuit Judges.

POSNER, Chief Judge.

Under the Multiemployer Pension Plan Amendments Act of 1980, an employer that withdraws from a multiemployer pension plan can be forced to pay the plan a sum approximating the vested but unfunded benefits of the employer's employees. 29 U.S.C. Secs. 1381 et seq. The purpose of this "withdrawal liability," which is enforceable in a suit by the pension plan with issues of fact resolved by an arbitrator subject to review by the district court for clear error (see 29 U.S.C. Secs. 1401(b)(2), (c), 1451, as glossed in Chicago Truck Drivers, Etc. Pension Fund v. Louis Zahn Drug Co., 890 F.2d 1405, 1411 (7th Cir.1989)), is to protect the other employers in the multi-employer plan from having to pay for those benefits. Central States, Southeast & Southwest Areas Pension Fund v. Lady Baltimore Foods, Inc., 960 F.2d 1339, 1340 (7th Cir.1992). A parent and its subsidiaries are treated as one employer for this purpose, 29 U.S.C. Sec. 1301(b)(1); so if a subsidiary withdraws from the plan, its withdrawal liability can be assessed against the parent. Sec. 1381(a). If, however, rather than causing the subsidiary to withdraw the parent sells the subsidiary, the parent is not liable for withdrawal liability of the subsidiary unless "a principal purpose" of the transaction was to "evade or avoid" parental liability. Sec. 1392(c).

In 1984, in a leveraged buyout, Santa Fe Pacific Corporation sold a trucking subsidiary--the Santa Fe Trails Transportation Company (SFTT)--that was a member of the Central States multiemployer pension plan. The purchaser, a rail freight consolidator, went broke a year later, whereupon Central States assessed a withdrawal liability of $7.6 million against Santa Fe to fund the vested pension benefits of SFTT's employees. Santa Fe challenged the assessment and the matter was referred to arbitration. The arbitrator, a nonlawyer selected by the parties from a panel, established by the American Arbitration Association, of specialists in withdrawal-liability arbitrations, thrice found that avoidance of withdrawal liability had not been a principal purpose of the sale. The first two times the district judge remanded the case to the arbitrator, finding the opinions he had written in support of his conclusion utterly unsatisfactory. The third time the judge, with evident reluctance, upheld the arbitrator, precipitating this appeal.

The issue is purpose, a state of mind inferred from testimony and other evidence. The arbitrator heard testimony for fifteen days and reviewed innumerable documents, and even if the statute did not require the district court (and this court) to accord substantial deference to the arbitrator's judgment, such deference would be the counsel of prudence. But despite the impression that may have been conveyed by some colorful language in Parts & Electric Motors, Inc. v. Sterling Electric Inc., 866 F.2d 228, 233 (7th Cir.1988), where we said that a finding to be deemed clearly erroneous must stink like a "five-week-old, unrefrigerated dead fish," the clear-error standard is not a rubberstamp, even when the trier of fact is called an arbitrator rather than a judge. (The review of an arbitrator's findings is normally much more limited than that of a judge's findings, see, e.g., DDI Seamless Cylinder Int'l, Inc. v. General Fire Extinguisher Corp., 14 F.3d 1163, 1166-67 (7th Cir.1994); Brotherhood of Locomotive Engineers v. Atchison, Topeka & Santa Fe Ry., 768 F.2d 914, 921-22 (7th Cir.1985), but Congress departed from the norm in the Multiemployer Pension Plan Amendments Act.) A finding is clearly erroneous if the reviewing court, after duly acknowledging the superior proximity of the factfinder to the witnesses, is firmly convinced that the finding is erroneous. Concrete Pipe & Products of California, Inc. v. Construction Laborers Pension Trust, --- U.S. ----, ---- - ----, 113 S.Ct. 2264, 2279-80, 124 L.Ed.2d 539 (1993); Anderson v. City of Bessemer City, 470 U.S. 564, 573-75, 105 S.Ct. 1504, 1512, 84 L.Ed.2d 518 (1985).

The imposition of withdrawal liability in a sale of business situation requires only that a principal purpose of the sale be to escape withdrawal liability. It needn't be the only purpose; it need only have been one of the factors that weighed heavily in the seller's thinking. We can find no decisions discussing situations in which there is more than one principal (major, weighty, salient, important) purpose, but we would be doing violence to the language and the purpose of the statute if we read "a principal" as "the principal." The clear import of "a principal" is to let the employer off the hook even if one of his purposes was to beat withdrawal liability, provided however that it was a minor, subordinate purpose, as distinct from a major purpose. To let the employer off even if avoiding such liability was a major purpose would ill serve the statute's goal of preventing one employer from unloading his pension obligations onto the other employers in a multiemployer plan.

There can be no serious doubt that withdrawal liability was one of the principal considerations in the decision to sell SFTT. It is true that officials of Santa Fe denied this in their testimony before the arbitrator, yet his three opinions contain only one finding with respect to credibility; he believed the testimony of Santa Fe's president that concern with the effect on morale of firing the rest of SFTT's employees incident to a sale of all its assets and with difficulties in making asset sales weighed heavily in the decision to sell the stock rather than assets of the subsidiary. But the arbitrator's judgment that therefore avoiding withdrawal liability was not "a principal purpose" of the transaction is an inference from the testimony (and other evidence), not the testimony itself. We therefore need not decide whether this is one of those rare cases in which irreconcilable conflict between oral testimony on the one hand and indubitable documentary evidence and admissions on the other entitles the reviewing court to reject the credibility determinations of the trier of fact. Bullard v. Sercon Corp., 846 F.2d 463, 466 (7th Cir.1988); Winchester Packaging, Inc. v. Mobil Chemical Co., 14 F.3d 316, 319 (7th Cir.1994). We can reject the district judge's factual inferences from testimony only if they are clearly erroneous, but they do not have the additional insulation from appellate review that determinations of credibility enjoy.

Proper analysis of the case requires distinguishing between two different desires of Santa Fe. One was to rid itself of SFTT. The other was to sell SFTT. These sound alike but are different. There is no doubt that for reasons unrelated to withdrawal liability Santa Fe wanted to get rid of the subsidiary, which it described as being "among the living dead"...

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