Grand Union Co. v. Food Employers Labor Relations Ass'n

Decision Date13 January 1987
Docket Number86-5049 and 86-5077,Nos. 85-6160,s. 85-6160
Citation808 F.2d 66
PartiesGRAND UNION COMPANY, Appellant, v. FOOD EMPLOYERS LABOR RELATIONS ASSOCIATION and United Food & Commercial Workers Pension Fund, et al. GRAND UNION COMPANY, Appellant, v. FOOD EMPLOYERS LABOR RELATIONS ASSOCIATION and United Food & Commercial Workers Pension Fund, et al. GRAND UNION COMPANY, Appellant, v. FOOD EMPLOYERS LABOR RELATIONS ASSOCIATION and United Food & Commercial Workers Pension Fund, et al.
CourtU.S. Court of Appeals — District of Columbia Circuit

Appeals from the United States District Court for the District of Columbia (Civil Action No. 85-01551).

Frank C. Razzano, Washington, D.C., for appellant.

Barry S. Slevin, with whom Jeffrey B. Cohen and Donald L. Havermann, Washington, D.C., were on the brief, for appellees.

Before MIKVA, RUTH BADER GINSBURG and SILBERMAN, Circuit Judges.

Opinion for the Court filed by Circuit Judge RUTH BADER GINSBURG.

RUTH BADER GINSBURG, Circuit Judge:

This case dominantly involves the primacy of arbitration as the first recourse dispute resolution mechanism in contests about an employer's withdrawal liability under the Employee Retirement Income Security Act of 1974 (ERISA), codified in relevant part at 29 U.S.C. Secs. 1001-1381, as amended by the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), codified in relevant part at 29 U.S.C. Secs. 1381-1453. The MPPAA 1) imposes withdrawal liability on an employer that ceases participation in a multiemployer pension plan, 2) assigns initial responsibility to the plan for determining the amount of the employer's withdrawal liability, and 3) establishes procedures, centering on arbitration, for resolving disputes over withdrawal liability between employer and plan sponsor.

Appellant Grand Union Company (Grand Union) owns and operates supermarkets and food warehouses. Pursuant to collective bargaining agreements, Grand Union made contributions to appellee Food Employers Labor Relations Association and United Food & Commercial Workers Pension Fund (Fund). In March 1984, Grand Union sold stores to Food-A-Rama, another food sale chain. In November 1984, the Fund notified Grand Union, that, by reason of the sale to Food-A-Rama and Grand Union's cessation of participation in the pension plan, the Fund was calculating Grand Union's withdrawal liability.

Asserting qualification for the "sale of assets" exemption from withdrawal liability, 29 U.S.C. Sec. 1384, Grand Union commenced this action in the district court--without first resorting to arbitration--for a declaration of its rights and liabilities, and attendant affirmative relief. Grand Union sued the Fund and certain individual Fund trustees. In addition to its claim against the Fund for declaratory and injunctive relief to stop assessment of withdrawal liability, Grand Union asserted claims for monetary and other relief against the Fund and individual Fund trustees for breach of fiduciary duty.

The district court dismissed Grand Union's principal declaratory and injunctive relief claim because Grand Union had failed to pursue and exhaust the arbitration remedy Congress ordered as a matter of first resort. That court dismissed Grand Union's breach of fiduciary duty counts for We affirm the district court's orders in all respects. Congress stated as the main rule under MPPAA that withdrawal liability claims shall be arbitrated before they are brought to court. Exceptions to the statute's "arbitrate first" rule are narrowly cabined and, we hold, do not accommodate this case. Furthermore, Congress did not authorize employers to sue pension fund trustees individually for breach of fiduciary duty on account of the fund's efforts to impose and enforce withdrawal liability. Finally, the award of counsel fees underscores the firmness of the "arbitrate first" rule and was fully justified in view of the circumstances this case presents.

failure to state a claim within the federal court's subject matter jurisdiction. Grand Union Co. v. Food Employers Labor Relations Ass'n and United Food & Commercial Workers Pension Fund, 6 Employee Benefits Cas. (BNA) 2531 (D.D.C.1985) In a subsequent order, the district court awarded attorney's fees and costs to the defendants (the Fund and individual Fund trustees). Grand Union Co. v. Food Employers Labor Relations Ass'n and United Food & Commercial Workers Pension Fund, No. 85-1551 (D.D.C. Dec. 11, 1985) (hereafter, D.D.C. Dec. 11, 1985 Order), reprinted in J.A. at 23-27 Grand Union appealed.

I. BACKGROUND
A.

The MPPAA added subtitle E to Title IV of ERISA, Pub.L. 93-406, secs. 4001-4082, 88 Stat. 829, 1003-35 (codified as amended at 29 U.S.C. Secs. 1301-1461 and in scattered sections of 26 U.S.C.) (1974). 1 Subtitle E, 29 U.S.C. Secs. 1381-1453, imposes liability on employers who withdraw from multiemployer pension plans. Under an exemption provision, 29 U.S.C. Sec. 1384, an employer does not incur withdrawal liability when a sale of assets causes it to cease participation in a plan, if the sale satisfies detailed statutory requirements ensuring that the purchaser of the assets will take over the seller's obligations to the plan.

Upon an employer's withdrawal from a plan, MPPAA confides to the plan sponsor responsibility for determining the amount of withdrawal liability, notifying the employer, and collecting the amount due. See 29 U.S.C. Secs. 1382, 1399(b)(1). On timely request, the plan sponsor is obliged to review and explain any aspect of the withdrawal liability determination questioned by the employer. See 29 U.S.C. Sec. 1399(b)(2). If informal review does not resolve the differences between plan sponsor and employer, the statute commands arbitration: "Any dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination made under sections 1381 through 1399 of this title, [i.e., the prescriptions on establishment, calculation, and collection of withdrawal liability] shall be resolved through arbitration." 29 U.S.C. Sec. 1401(a)(1).

At arbitration and in court, the plan sponsor's determination is "presumed correct." 29 U.S.C. Sec. 1401(a)(3)(A). The presumption can be overcome only if the challenger "shows by a preponderance of the evidence that the determination was unreasonable or clearly erroneous." Id. Any party to the arbitration may seek judicial review of the arbitrator's award, 29 U.S.C. Sec. 1401(b)(2), but in court, "there shall be a presumption, rebuttable only by a clear preponderance of the evidence, that the findings of fact made by the arbitrator were correct." 29 U.S.C. Sec. 1401(c).

B.

Grand Union designed its sale of stores to Food-A-Rama with a view to MPPAA, and sought to meet the "sale of assets" exemption from withdrawal liability. The plan sponsor, however, notified Grand Union in November 1984 that the sale had effected Grand Union's withdrawal from the Fund, and that the withdrawal liability calculation was in preparation. In May 1985, before the Fund notified Grand Union of the amount it had calculated, without Count I of Grand Union's complaint sought first, a declaration that Grand Union had satisfied the requirements of the sale of assets exemption from withdrawal liability, and second, an order enjoining the Fund from assessing liability based on the sale. Counts II through V alleged that individual trustees, in refusing to accept Food-A-Rama as a substitute contributing employer, had ignored plan documents and dishonored their fiduciary obligations. These counts sought to hold the trustees personally liable for losses resulting from their alleged wrongful conduct.

asking the Fund to review its liability determination, and without initiating arbitration, Grand Union filed suit in the district court.

Ruling on defendants' motion to dismiss, the district court held Count I inadmissible unless and until Grand Union exhausted the arbitral process. The court further held that Congress did not accord employers any right to sue on alleged breach of fiduciary duty claims of the kind Grand Union stated in Counts II through V. Grand Union, 6 Employee Benefits Cas. (BNA) 2531. In addition, the court granted defendants' motion for attorney's fees and costs. D.D.C. Dec. 11, 1985 Order, J.A. at 23-27. Grand Union appeals each of these three rulings.

II. DISCUSSION
A.

We turn first to Grand Union's claim that the district court erred when it dismissed Count I of the complaint for failure to exhaust the arbitral process. This court recently addressed the arbitration requirement of the MPPAA in I.A.M. Nat'l Pension Fund Benefit Plan C v. Stockton Tri Indus., 727 F.2d 1204 (D.C.Cir.1984) (Stockton ). Both sides feature Stockton as dispositive. The Fund stresses this court's recognition that, in the generality of withdrawal liability cases, "arbitrate first" is the statutory rule. See Stockton, 727 F.2d at 1207-08. Grand Union emphasizes that in Stockton itself, the district court, and then the panel on appeal, adjudicated the case on the merits although arbitration had not occurred.

Stockton was indeed an exceptional case. There, the I.A.M. Fund came to court, skirting the employer's request for arbitration, and demanded payment in full of the withdrawal liability it had assessed against the company. 2 Only on appeal, after losing on the merits in the district court, did the I.A.M. Fund plead the need for initial resort to arbitration. The situation was a classic one for the application of a waiver or preclusion analysis. But before the appellate panel dismissed the I.A.M. Fund's tardy plea for arbitration, 3 it sought to confirm that "resort to arbitration was neither a statutory prerequisite to the district court's jurisdiction, nor in the particular circumstances of [the Stockton case] ... a requirement mandated by jurisprudential considerations." Id. at 1207.

As to the former, the panel aligned itself with sister courts that have...

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