Cent. States, SE & SW Pention Fund

• Decision Date: 09 June 1999
• Docket Number: Nos. 98-2512,98-2588,s. 98-2512
• Citation: 181 F.3d 799
• Parties: (7th Cir. 1999) CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, a pension trust, and HOWARD MCDOUGALL, trustee, Plaintiffs-Appellees, Cross-Appellants, v. MIDWEST MOTOR EXPRESS, INC., a North Dakota corporation, MME, INC., MIDNITE EXPRESS, INC., and EXPRESS CARTAGE, INC., Defendants-Appellants, Cross-Appellees
• Court: U.S. Court of Appeals — Seventh Circuit

Page 799

181 F.3d 799 (7th Cir. 1999)

CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, a pension trust, and HOWARD MCDOUGALL, trustee, Plaintiffs-Appellees, Cross-Appellants, v. MIDWEST MOTOR EXPRESS, INC., a North Dakota corporation, MME, INC., MIDNITE EXPRESS, INC., and EXPRESS CARTAGE, INC., Defendants-Appellants, Cross-Appellees.

Nos. 98-2512, 98-2588

United States Court of Appeals, Seventh Circuit

Argued February 11, 1999

Decided June 9, 1999¹

Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 94 C 2561--Wayne R. Andersen, Judge. [Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before CUMMINGS, BAUER, and EVANS, Circuit Judges.

TERENCE EVANS, Circuit Judge.

The defendants, primarily attacking with broad constitutional principles, are here contesting a huge bill they received in this ERISA case. The plaintiffs not only defend the big bill but seek to jack it up a tad or two. We start by introducing the parties and explaining the intricacies of their claims and defenses.

Midwest Motor Express, Inc. and its affiliates, MME, Inc., Midnite Express, Inc., and Express Cartage, Inc. (collectively Midwest), withdrew from the Central States, Southeast and Southwest Areas Pension Fund (Central States) in April 1994. Central States then sued Midwest under the Employment Retirement Security Act (ERISA), 29 U.S.C. sec. 1001 et seq., as amended by the Multiemployer Pension Plan Amendments of 1980 (the MPPAA), id. sec. 1381 et seq., for withdrawal liability of about $2.5 million dollars. On cross-motions for summary judgment the district court sided with Central States. Midwest appeals, arguing that the district court lacked subject matter jurisdiction and, more boldly, that imposition of retroactive withdrawal liability (to the tune of about $1.8 million of the total) amounts to an unconstitutional taking and a violation of economic substantive due process. Central States cross-appeals, arguing that the district court had jurisdiction over its ERISA claims but that Midwest had waived its constitutional claims, which Central States urges, should be denied if they are to be heard at all, and that the district court erred in several technical determinations about the damages.

Midwest, a North Dakota trucking corporation, participated in the Central States pension plan from 1958 to 1994. Central States is a multiemployer pension plan that provides pension benefits to employees whose employers have collective bargaining agreements with the International Brotherhood of Teamsters. In a multiemployer pension plan, trustees appointed by the parties to the union contracts, advised by actuarial experts, set the level of contributions that employers must pay. The trustees also set a certain level of benefits to be paid to employees if they remain employed for specified periods. Central States is administered by eight trustees, four from management and four from the Teamsters.

Midwest began contributing to Central States in 1958 and made all required contributions until it withdrew in 1991. Until 1990 Midwest dealt with Central States through Regional Carriers, Inc., an association of trucking employers that Midwest made its agent for collective bargaining with the Teamsters. Midwest never appointed its own trustee to the Central States board of trustees but was represented by the management trustees appointed by Regional Carriers. In 1990 Midwest withdrew from Regional Carriers in order to negotiate a separate, single-employer agreement with the Teamsters. One of the contested issues was whether to continue to participate in the Central States plan from which Midwest wished to withdraw. The contract negotiations were not successful. Unionized Midwest employees struck in August 1991. Negotiations continued, but in October 1991 Midwest legally hired permanent replacements for some of the strikers. In April 1994 Midwest's employees decertified the Teamsters as their representative and the strike ended. The decertification also ended Midwest's obligation to contribute to Central States.

The statutory framework governing relations between the parties is the MPPAA, an amendment to ERISA. ERISA was enacted in 1974 to protect employee pensions from termination because of underfunding among other risks. "Congress wanted to guarantee that if a worker has been promised a defined pension benefit . . . [which had vested] he will actually receive it." Concrete Pipe and Products of Cal., Inc. v. Construction Laborers Pension Trust for Southern Cal., 508 U.S. 602, 607 (1993) (internal citations omitted). Initially, under ERISA, multiemployer plans were only guaranteed at the discretion of the Pension Benefit Guaranty Corp. (PBGC), determinations about payouts being made on a case-by-case basis. 29 U.S.C. sec. 1381(c)(1) (superseded). After 1978 the guarantees were to be mandatory. Id. sec. 1381(c)(2) (superseded). Employers withdrawing from an ongoing multiemployer plan in that period thus incurred a contingent liability. Congress, however, became concerned about the stability of multiemployer plans and the cost of the guarantee. It determined that "the possibility of liability upon termination of a plan created an incentive for employers to withdraw from weak multiemployer plans." Concrete Pipe, 508 U.S. at 608 (1993). Congress enacted the MPPAA to remedy this situation.

The main relevant features of the MPPAA are that (1) it created mandatory withdrawal liability for withdrawing employers, who must immediately begin to pay a fixed debt to the plan in which they had participated, Pieck v. Pension Benefit Guaranty Corp., 724 F.2d 1247, 1255 (7th Cir. 1983); 29 U.S.C. sec. 1381(a); (2) the liability is for a proportionate share of the plan's unfunded vested benefits, id. sec. 1381(b) and sec. 1391 (methods of computing withdrawal liability); Concrete Pipe, 508 U.S. at 609; and (3) the MPPAA has a retroactive aspect, since the withdrawal liability "imposes on the withdrawing employer a share of the unfunded vested liability proportional to the employer's share of contributions to the plan during the years of its participation," Concrete Pipe, 508 U.S. at 610, even if the "years of its participation" in the plan preceded the effective date of the MPPAA² or the enactment of ERISA itself.

On April 26, 1994, Central States issued an assessment of withdrawal liability and a demand for payment in the amount of $2,546,439.39, listing Midwest's "pre-1980 pool liability" as $1,814,856.36 and its "post-1979 pool liability" as $731,582.94. The "pre-1980 pool liability" is the retroactive withdrawal liability imposed by the MPPAA, effective from 1980, the year specified in the amendment. On the same day that Central States issued the assessment and demand for payment (April 29, 1994) Central States sued Midwest on this liability in the United States District Court for the Northern District of Illinois. Midwest received that notice and demand on the following day. In May Midwest sued Central States in federal district court in the District of North Dakota, seeking a declaration that the assessment of retroactive withdrawal liability was unconstitutional and that any collection should be enjoined. The case was transferred to the Northern District of Illinois on Central States' motion. Midwest appealed the transfer to the Eighth Circuit, which affirmed, and to the Supreme Court, which denied certiorari. Midwest agreed in September 1996 to make interim payments of $31,000 a month, which it has done.

Midwest requested arbitration in October 1994, and the parties agreed that the arbitrator would answer stipulated factual questions. Midwest does not contest the actuarial soundness of the assessment or the amount in question, but only whether Midwest can be constitutionally held to any retroactive withdrawal liability. The arbitrator's decision and award of May 20, 1997, made the following findings: (1) Midwest is a pre-ERISA employer, that is, its participation in Central States, beginning in 1958, antedates the enactment of ERISA in 1974; (2) Midwest's withdrawal from Central States was involuntary; (3) Central States is a defined benefit pension plan covered by Title IV of ERISA rather than a defined contribution plan, and while it is not a hybrid Taft-Hartley pension plan within the meaning of ERISA, it is a "hybrid plan" in the sense intended in Justice O'Connor's concurrence in Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 232-236 (1986); and (4) that Midwest had little, but some, control over the benefit and contribution levels and other factors that produced unfunded vested benefits from 1973 to Midwest's withdrawal in 1991.

Against this background, the district court decided cross-motions for summary judgment in favor of Central States. The parties cross-appeal as explained. We review a district court's grant of summary judgment de novo, applying the same standards as the court below and viewing the record and all reasonable inferences to be drawn from it in the light most favorable to the nonmoving party. Fulk v. United Transp. Union,160 F.3d 405, 407 (7th Cir. 1998). Summary judgment is appropriate if there are no genuine issues of material fact in dispute. Mills v. Health Care Serv. Corp., 171 F.3d 450, 453 (7th Cir.1999); Fed. R. Civ. P. 56(c). An arbitrator decides facts by a preponderance and his findings of fact may be set aside only if clearly erroneous. See Jos. Schlitz Brewing Co. v. Milwaukee Brewery Workers' Pension Plan, 3 F.3d 994, 999 (7th Cir. 1993) (interpreting 29 U.S.C. sec. 1401(c)).³ The same standard holds for the arbitrator's application of law to fact. Id.; Chicago Truck Drivers Pension Fund v. Louis Zahn Drug Co., 890 F.2d 1405, 1409-1411 (7th Cir. 1989). The arbitrator's legal conclusions are subject to de novo review. Id.; Trustees of Iron Workers Local 473 Pension Trust v. Allied Products Corp., 872 F.2d 208, 211-212 (7th...