I.A.M. Nat. Pension Fund, Plan A, A Benefits v. Clinton Engines Corp.

• Decision Date: 28 July 1987
• Citation: 825 F.2d 415
• Parties: , 56 USLW 2093, 8 Employee Benefits Ca 2089 I.A.M. NATIONAL PENSION FUND, PLAN A, A BENEFITS, et al. v. CLINTON ENGINES CORPORATION, Appellant (Two Cases). I.A.M. NATIONAL PENSION FUND, BENEFIT PLAN A, et al., Appellants v. COOPER INDUSTRIES, INC. 86-5304, 86-7015.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 415

825 F.2d 415

263 U.S.App.D.C. 278, 56 USLW 2093,

8 Employee Benefits Ca 2089

I.A.M. NATIONAL PENSION FUND, PLAN A, A BENEFITS, et al. v. CLINTON ENGINES CORPORATION, Appellant (Two Cases).

I.A.M. NATIONAL PENSION FUND, BENEFIT PLAN A, et al., Appellants v. COOPER INDUSTRIES, INC.

86-5304, 86-7015.

United States Court of Appeals, District of Columbia Circuit.

Argued March 31, 1987.

Decided July 28, 1987.

Appeals from the United States District Court for the District of Columbia (Civil Action No. 85-02877).

Appeal from the United States District Court for the District of Columbia (Civil Action No. 84-03346).

Jane Golden Belford, Washington, D.C., with whom Sheila McDonald Gill and F. Roberts Hanning, Jr. were on the brief for appellant in Nos. 86-5304 and 86-5387.

Denis F. Gordon, Washington, D.C., with whom David M. Ermer and Robert T. Osgood were on the brief for appellants in No. 86-7015 and appellee in Nos. 86-5304 and 86-5387. Laura Steinberg, Boston Mass., also entered an appearance for appellee in Nos. 86-5304 and 86-5387.

Peter H. Gould, Washington, D.C., for amicus curiae, Pension Benefit Guar. Corp., urging a remand to the Dist. Court in No. 86-7015.

Before EDWARDS and STARR, Circuit Judges, and SWYGERT, ^* Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge STARR.

STARR, Circuit Judge:

These two cases involve contests over employers' financial obligations to multiemployer pension funds. The cases arise under the Multiemployer Pension Plan Act Amendments of 1980 ("the MPPAA"), 29 U.S.C. Secs. 1381-1461 (1982 & Supp. III 1985). Both cases pose a single issue: whether an employer that has been assessed "withdrawal liability" within the meaning of the MPPAA must arbitrate its asserted defenses to liability in order to preserve those defenses for ultimate judicial consideration. On the basis of Congress' clearly expressed intent, we conclude that the employers in these cases were bound initially to resort to arbitration. Having failed to do so, the employers have thereby waived these defenses and cannot raise them in actions brought by the pension plan sponsor to collect amounts owed by virtue of withdrawal liability.

I

Before examining the facts of these cases, we first pause to review the governing statutory framework. ¹ In the MPPAA, Congress prescribed a mechanism obligating employers who withdraw from a multiemployer pension plan to contribute to the plan a reasonable share of unfunded, vested employee benefits. Congress crafted this intricate scheme in response to evidence that the preexisting pension plan termination insurance program, enacted as title IV of the Employee Retirement Income Security Act of 1974 ("ERISA"), Pub.L. No. 93-406, tit. IV, 88 Stat. 1020 (codified in various titles of U.S.C.), perversely operated to provide employers with an incentive to withdraw from financially weak plans. The tendency of employers to abandon financially fragile plans posed a threat, in turn, to the solvency of the Pension Benefit Guaranty Corporation, the ERISA-created entity charged with administering the program and insuring payment of vested benefits when a plan terminates with insufficient assets. See 29 U.S.C. Secs. 1301-1309 (1982 & Supp. III 1985); Washington Star Co. v. International Typographical Union Negotiated Pension Plan, 729 F.2d 1502, 1504-05 (D.C.Cir.1984). The MPPAA was designed to shore up these weak points.

At the heart of the MPPAA's regime are provisions for informal, expeditious resolution of withdrawal liability disputes. See Washington Star, 729 F.2d at 1505. See generally 29 U.S.C. Secs. 1381-1399. Initially, upon an employer's withdrawal, the plan sponsor must promptly determine the amount of liability, formulate a payment schedule, and notify the employer of the resulting assessment and schedule. See 29 U.S.C. Secs. 1382, 1399(b)(1). Within 90 days of notification, the employer may request that the sponsor review its determination. Id. Sec. 1399(b)(2)(A). If either party is dissatisfied with the outcome of this review, Congress mandates arbitration. The operative statutory language is as follows:

Any dispute between an employer and the plan sponsor of a multiemployer pension plan concerning a determination made under sections 1381 through 1399 of this title shall be resolved through arbitration.

Id. Sec. 1401(a)(1). ² Thus, Congress' directive is clear. Any dispute over withdrawal liability as determined under the enumerated statutory provisions shall be arbitrated. ³ Judicial consideration of disputes is then contemplated in the context of an action by any of the parties to arbitration "to enforce, vacate, or modify the arbitrator's award." Id. Sec. 1401(b)(2); see also id. Sec. 1451.

Recently, this court had occasion to interpret the mandate of section 1401(a). In Grand Union Co. v. Food Employers Labor Relations Association, 808 F.2d 66 (D.C.Cir.1987), the court emphatically rejected an employer's effort to secure a judicial declaration of its rights and liabilities under the pertinent MPPAA provisions without first resorting to arbitration:

"Arbitrate first" is indeed a rule Congress stated unequivocally.... [I]nitial recourse to arbitration is a statutory direction, one generally to be followed unless neither party timely presses the plea in abatement, and the court finds that deferring a court contest while the parties repair to arbitration "will neither lead to the application of superior expertise nor promote judicial economy."

Id. at 70 (quoting I.A.M. National Pension Fund Benefit Plan C v. Stockton TRI Industries, 727 F.2d 1204, 1210 (D.C.Cir.1984)) (emphasis in original).

In adumbrating a "narrowly cabined" set of exceptions to the general rule "arbitrate first," id. at 68, Grand Union discussed our court's earlier decision in I.A.M. National Pension Fund Benefit Plan C v. Stockton TRI Industries, 727 F.2d 1204 (D.C.Cir.1984). In Stockton, we held, as have all other circuit courts that have considered the issue, that section 1401(a) of the MPPAA was not an "absolute jurisdictional bar," but instead constituted an "exhaustion of administrative remedies" requirement. See id. at 1207. ⁴ We concluded "under the particular circumstances" of that case, id. at 1205, that the employer's failure to arbitrate did not prevent it from raising its defenses in the context of a collection action. For one thing, the Stockton court reasoned, requiring arbitration would serve none of the policies underlying the exhaustion doctrine. Id. at 1210. Equally important, the employer in that case had sought arbitration but had been rebuffed by the plan sponsor. Indeed, the issue of arbitration arose only when the plan sponsor, having lost in the district court, raised it on appeal. Id. at 1206. As the court noted in Grand Union, in Stockton "[t]he situation was a classic one for the application of a waiver or preclusion analysis." Grand Union, 808 F.2d at 69. The Grand Union court emphasized that "Stockton was indeed an exceptional case," id., and that except for the narrow circumstances found in Stockton, "[w]hen private ordering solely between the parties is unavailing, Congress instructed arbitration," id. at 70.

From the unambiguous language by which Congress established the primacy of arbitration in withdrawal liability disputes and in light of our decisions interpreting those terms, it should be beyond cavil that the existence of an issue of statutory interpretation, standing alone, does not justify bypassing arbitration. See id. Likewise, we do not read Grand Union to limit the need for arbitration to cases the records of which "bristle[ ]" with factual issues. Id. at 70 n. 5. On the contrary, it teaches that the general rule laid down by Congress, which the courts are bound to honor, is arbitrate first.

II

With this statutory command in mind, we turn to the facts of the two cases. Without rehearsing those facts at length, we are satisfied that neither case falls within Stockton's exception.

Nos. 86-5304, 86-5387. On March 22, 1985, the I.A.M. National Pension Fund Plan A, A Benefits ("the Fund") notified Clinton Engines Corporation of the Fund's determination that Clinton had "partially withdrawn" from the Fund and thereby incurred withdrawal liability. ⁵ The Fund based its assessment of liability upon a decline in Clinton's work force and a corresponding decline in Clinton's contributions to the Fund, events which took place in 1980. See Appellant's Record Excerpts ("A.R.E."), Nos. 86-5304, 86-5387, at 39. The Fund's notice set forth, in addition to the demand for payment, a schedule under which Clinton's first payment was due May 21, 1985. See id. at 40; see also 29 U.S.C. Sec. 1399(c)(2).

In a letter dated April 9, 1985, Clinton disputed the Fund's determination. A.R.E. Nos. 86-5304, 86-5387, at 41. Unmoved, the Fund, in response, reiterated its demand for payment. Id. at 42; see also 29 U.S.C. Sec. 1399(b)(2)(B). Clinton thereafter neither made payments nor sought arbitration, which it was entitled to do within 60 days after the Fund notified it of the Fund's continued demand for payment. See id. Sec. 1401(a)(1)(A) (quoted supra note 2).

On September 10, 1985, the Fund brought this action for collection under 29 U.S.C. Sec. 1401(b)(1). ⁶ The Fund claimed that by virtue of Clinton's failure to honor its payment schedule, the entire amount of its partial withdrawal liability, $288,871.00, was immediately due and owing. ⁷ Clinton resisted, contending that it had incurred no liability on account of the decline in its fund contributions, because the decline had occurred prior to September 26, 1980, the effective date of the MPPAA. See 29 U.S.C. Sec. 1381 Note (Supp. III 1985) (reproducing Deficit Reduction Act of 1984, Pub.L. No. 98-369, Sec. 558(a), (c), (d), 98 Stat. 979).

The District Court granted summary judgment in favor of the Fund. I.A.M. National Pension Fund Plan A, A Benefits v. Clinton Engines Corp., No. 85-2877 (D.D...