Bowers v. Andrew Weir Shipping, Ltd.

• Decision Date: 07 December 1992
• Docket Number: 92 Civ. 3781 (PKL).,No. 92 Civ. 3728 (PKL),92 Civ. 3728 (PKL)
• Citation: 810 F. Supp. 522
• Parties: JOHN BOWERS, et al., Plaintiffs, v. ANDREW WEIR SHIPPING, LTD., et al., Defendants. ANDREW WEIR SHIPPING, LTD., et al., Plaintiffs, v. NEW YORK SHIPPING ASSOCIATION — INTERNATIONAL LONGSHOREMAN'S ASSOCIATION PENSION TRUST FUND, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

810 F. Supp. 522

JOHN BOWERS, et al., Plaintiffs, v. ANDREW WEIR SHIPPING, LTD., et al., Defendants.

ANDREW WEIR SHIPPING, LTD., et al., Plaintiffs, v. NEW YORK SHIPPING ASSOCIATION — INTERNATIONAL LONGSHOREMAN'S ASSOCIATION PENSION TRUST FUND, et al., Defendants.

Nos. 92 Civ. 3728 (PKL), 92 Civ. 3781 (PKL).

United States District Court, S.D. New York.

December 7, 1992.

COPYRIGHT MATERIAL OMITTED

Thomas A. Gleason, New York City (Maura R. Cahill, Ernest L. Mathews, Jr., of counsel), for the NYSA-ILA Pension Trust Fund and the Bd. of Trustees.

Maddy, Dalton & Lion, New York City (Walter H. Lion, of counsel), for Andrew Weir Shipping, Ltd., et al.

OPINION AND ORDER

LEISURE, District Judge.

This action arises under the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"). 29 U.S.C. §§ 1001-1461. The New York Shipping Association-International Longshoreman's Association Pension Trust Fund (the "Fund"), plaintiff in the action numbered 92 Civ. 3728 (PKL), seeks to confirm and enforce an arbitrator's award holding Andrew Weir Shipping, Ltd. ("Weir Shipping") and South African Marine Corp., Ltd. ("Safmarine") liable for withdrawal obligations pursuant to 29 U.S.C. § 1381(a).¹ Weir Shipping and Safmarine, plaintiffs in the action numbered 92 Civ. 3781 (PKL),² seek to vacate the arbitrator's award, and further move for summary judgment on the liability issue. For the following reasons, the arbitrator's award is confirmed, and the motions of Weir Shipping and Safmarine to vacate the award and for summary judgment hereby are denied.

BACKGROUND

The Fund is a multiemployer pension fund established by collective bargaining between the New York Shipping Association and the International Longshoreman's Association to provide retirement benefits to longshore workers in the Port of New York. Bank Line and Safmarine are separately owned and controlled companies that were engaged in steamship carrier operations serving the Port of New York until 1988, when they formed a joint venture that, the Fund contends, resulted in a withdrawal from the Fund. Both companies were contributors to the Fund.

Bank Line was a wholly-owned subsidiary of Andrew Weir & Co., Ltd. ("Andrew Weir Group").³ In 1980, a separate, unincorporated division within Bank Line began operating a cargo service between the East Coast of the United States, including the Port of New York, and points in South and East Africa. Safmarine, a wholly-owned subsidiary of Safmarine and Rennies Holdings Limited ("Safren Group"), similarly had a separate, unincorporated division that engaged in cargo trade between the United States and South Africa. Rather than maintaining their own marine terminal facilities in New York, Bank Line and Safmarine contracted with other companies to provide these services. During the period they operated in New York, Bank Line and Safmarine both were members of the New York Shipping Association ("NYSA"), which acts as a multiemployer bargaining association on behalf of its members. NYSA negotiates and administers collective bargaining agreements with the International Longshoreman's Association ("ILA"), the collective bargaining representative for longshore workers employed in the Port of New York.

As NYSA members, Bank Line and Safmarine were covered by NYSA's bargaining agreement with ILA. The contract requires steamship carriers to pay NYSA assessments for employee benefits, based on total tonnage loaded and unloaded from the carrier's vessels by longshoremen in the Port of New York. NYSA passed along portions of these assessments to the Fund. Bank Line and Safmarine continued to pay assessments to the Fund until 1988.

On November 30, 1987, Safmarine and Bank Line entered into a joint venture agreement establishing Safbank as a company operating ships between South Africa and the United States. As part of the agreement, both Bank Line and Safmarine agreed to withdraw from the trade served by Safbank. Safmarine owns a 45% interest in Safbank. The remaining 55% is owned by Comeric Limited, a corporation that is 63% owned by Bank Line and 37% owned, albeit indirectly, by Safmarine. As a result of this structure, the Andrew Weir Group has voting control of Safbank, while profits are distributed 65% to the Safren Group and 35% to the Andrew Weir Group. Safbank assumed the goodwill, reputations, and customer relationships of Bank Line and Safmarine. Safbank became bound by the collective bargaining agreement between NYSA and ILA by retaining a NYSA agent member as its general agent.

By letters dated November 8, 1989, the Fund advised Bank Line and Safmarine that it had received notice of their cessation of operations in the Port of New York and calculated the withdrawal liability incurred to be $1,404,752 for Safmarine and $252,181 for Bank Line. Upon reconsideration pursuant to the joint request of Bank Line and Safmarine, the Fund reaffirmed its determination. Safbank, Weir Shipping, and Safmarine timely commenced an arbitration, as required by 29 U.S.C. § 1401(b). In the arbitration, Bank Line and Safmarine contended only that no withdrawals from the Fund occurred on their part due to the application of 29 U.S.C. § 1398(1) of the MPPAA.⁴ They presented four sub-issues to the arbitrator for resolution:

(1) who are the relevant pre-1988 employers; (2) did they cease to exist as employers for purposes of MPPAA upon the transfer of operations to Safbank in 1988; (3) was the resulting entity a change in corporate structure as envisioned by Section 4218(1) 29 U.S.C. § 1398(1); and (4) was there an interruption in contributions or the obligations to contribute to the Fund?

See Complaint, 92 Civ. 3728 (PKL), Ex. 1, Arbitrator's Findings, Opinion and Award (the "Award"), at 13. The arbitrator rendered the Award on April 27, 1992. He determined that the controlled groups of Bank Line and Safmarine, rather than the individual companies, were the statutory "employers" and the formation of Safbank was not a corporate change of the type contemplated by 29 U.S.C. §§ 1398(1) and 1369(b). Thus, the arbitrator determined that Bank Line and Safmarine were liable to the Fund for withdrawal obligations.

The Fund, by its Trustees, filed the action in 92 Civ. 3728 (PKL) to confirm and enforce the Award. The plaintiffs in 92 Civ. 3781 (PKL) timely commenced an action to vacate the arbitration award, pursuant to 29 U.S.C. § 1401(b), asserting that the arbitrator's conclusions of law were incorrect because:

(1) transfer of the covered operations to Safbank was not a withdrawal due to the § 1398 exemption, since Safbank was formed by a reorganization of its parent groups, has an ongoing obligation to contribute, and continued contributions for the covered operations; (2) the award is inequitable because the withdrawal penalties from Weir Shipping and Safmarine are a double payment, with the Fund still collecting substantially the same assessments from the same operations carried on by the Joint Venture; and (3) Korea Shipping is no longer good law in view of Darden; Bank Line and Safmarine were not "employers" subject to statutory withdrawal liability.

See Weir Shipping Memorandum of Law at 8. Bank Line and Safmarine also argue that they should be exempted from withdrawal liability for this transaction pursuant to section 1384 of the MPPAA, which provides an exemption for certain sales of assets.

DISCUSSION

A. Standard of Review

An arbitrator's decisions on matters of law in an MPPAA withdrawal dispute are subject to full review by the district court. See, e.g., Trustees of Colorado Pipe Indus. Pension Trust v. Howard Elec. & Mechanical, Inc., 909 F.2d 1379, 1386 (10th Cir.1990); Trustees of Iron Workers Local 473 Pension Trust v. Allied Products Corp., 872 F.2d 208, 211 (7th Cir.1989), cert. denied, 493 U.S. 847, 110 S.Ct. 143, 107 L.Ed.2d 102 (1989); Union Asphalts and Roadoils, Inc. v. Mo-Kan Teamsters Pension Fund, 857 F.2d 1230, 1233-34 (8th Cir.1988), cert. denied, 490 U.S. 1022, 109 S.Ct. 1748, 104 L.Ed.2d 185 (1989); Trustees of Amalgamated Ins. Fund v. Geltman Indus., Inc., 784 F.2d 926, 928-29 (9th Cir.1986), cert. denied, 479 U.S. 822, 107 S.Ct. 90, 93 L.Ed.2d 42 (1986); I.A.M. Nat'l Pension Fund Benefit Plan C v. Stockton Tri Indus., 727 F.2d 1204, 1207 n. 7 (D.C.Cir.1984). The parties agree that there are no disputed issues of fact.

B. Applicability of the Corporate Reorganization Provision

Section 1398 of the MPPAA provides an exemption from withdrawal liability under certain circumstances:

Notwithstanding any other provision of this part, an employer shall not be considered to have withdrawn from a plan solely because —

(1) an employer ceases to exist by reason of —

(A) a change in corporate structure described in section 4069(b) 29 U.S.C. § 1369(b).

29 U.S.C. § 1398. Section 1369(b) describes certain particular changes in corporate structure that are exempted from withdrawal liability:

(1) Change of identity form, etc. If a person ceases to exist by reason of a reorganization which involves a mere change in identity, form, or place of organization, however effected, a successor corporation resulting from such reorganization shall be treated as the person to whom this subtitle applies.

(2) Liquidation into parent corporation. If a person ceases to exist by reason of liquidation into a parent corporation, the parent corporation shall be treated as the person to whom this subtitle applies.

(3) Merger, consolidation, or division. If a person ceases to exist by reason of a merger, consolidation, or division, the successor corporation or corporations shall be treated as the person to whom this subtitle applies.

29 U.S.C. § 1369(b). Bank Line and Safmarine challenge the arbitrator's determination that the section 1398 exemption for certain corporate changes did not apply to the formation of the Safbank joint venture.

The arbitrator found that the...