CENTRAL STATES, ET AL. PEN. F. v. HOUSTON PIPE LINE

• Decision Date: 02 March 1989
• Docket Number: No. 88 C 6955.,88 C 6955.
• Citation: 713 F. Supp. 1527
• Parties: CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, a pension trust, and Loran W. Robbins, Marion M. Winstead, Robert C. Sansone, Robert J. Baker, Howard McDougall, Arthur H. Bunte, Jr., R. Jerry Cook and R.V. Pulliam, Sr., the present Trustees, Plaintiffs, v. HOUSTON PIPE LINE COMPANY, a Texas corporation; Pott Industries, Inc., a Missouri corporation; and Federal Barge Lines, Inc., a Delaware corporation, Defendants.
• Court: U.S. District Court — Northern District of Illinois

713 F. Supp. 1527

CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, a pension trust, and Loran W. Robbins, Marion M. Winstead, Robert C. Sansone, Robert J. Baker, Howard McDougall, Arthur H. Bunte, Jr., R. Jerry Cook and R.V. Pulliam, Sr., the present Trustees, Plaintiffs, v. HOUSTON PIPE LINE COMPANY, a Texas corporation; Pott Industries, Inc., a Missouri corporation; and Federal Barge Lines, Inc., a Delaware corporation, Defendants.

No. 88 C 6955.

United States District Court, N.D. Illinois, E.D.

March 2, 1989.

Lance D. Taylor, Terence G. Craig, Thomas C. Nyhan, Cent. States Pension Fund, Chicago, Ill., for plaintiffs.

Lawrence J. Zabinski, McDermott Will & Emery, Chicago, Ill., Juan D. Keller, Brenda L. Talent, Douglas W. King, Bryan Cave

McPhee & Roberts, St. Louis, Mo., for defendants.

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Plaintiffs Central States, Southeast and Southwest Areas Pension Fund and its trustees (collectively "Central States") bring this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq., as amended by the Multiemployer Pension Plan Amendment Act of 1980 ("MPPAA"), 29 U.S.C. § 1381, et seq., against defendants Houston Pipe Line Company and various corporate offspring (collectively the "Houston Group") seeking payment of a withdrawal assessment. In addition to denying liability, the Houston Group raises five affirmative defenses and a counterclaim. Plaintiffs move for summary judgment, to strike the affirmative defenses and to dismiss the counterclaim. For the reasons that follow, the motion for summary judgment is granted, the motion to strike is granted in part and denied in part, and the motion to dismiss is denied.

I. Factual Background and Procedural History

For at least fifteen years, defendant Federal Barge Lines, Inc. ("Federal Barge") and Valley Line Co., a company not a party to this litigation, negotiated and executed a series of collective bargaining agreements with Local No. 54 of the Marine Officers Association ("Local 54") on behalf of certain employees, including masters, mates and pilots. The last agreements expired on August 15, 1983, at which time Federal Barge and Valley Line refused to bargain with Local 54, taking the position that the employees covered by the agreements were supervisors under the National Labor Relations Act ("NLRA") and the companies accordingly had no duty to negotiate on their behalf. 29 U.S.C. § 164(a).¹ Local 54 filed a unit clarification petition and an unfair labor charge with the National Labor Relations Board ("NLRB") against Valley Line, both of which Local 54 voluntarily withdrew on advice of counsel. Local 54 then filed an action against both companies in a Missouri district court which dismissed the action. Morello v. Federal Barge Lines, Inc., 575 F.Supp. 87 (E.D.Mo.1983). The Eighth Circuit affirmed, holding that the question whether Federal Barge has a legal duty to bargain with Local 54 on behalf of the masters, mates and pilots is within the primary jurisdiction of the NLRB. Morello v. Federal Barge Lines, Inc., 746 F.2d 1347 (8th Cir.1984).

The final judgment in that action did not resolve Federal Barge's dispute with Central States arising from the termination of the union contract. Under the terms of the collective bargaining agreements, Federal Barge was required to make contributions to the Central States Pension Fund ("Fund") on behalf of covered employees. While Federal Barge now disputes the enforceability of these terms, it nevertheless contributed a total of approximately $3,539,000 to the Fund through the years up to and including 1984. On an unspecified date after expiration of the collective bargaining agreement, Federal Barge ceased making payments to the Fund. On June 26, 1985, Central States sent a notice to Federal Barge demanding payments totalling $630,995.09 for withdrawal liability within the meaning of § 4201(a) of ERISA, 29 U.S.C. § 1381(a).² Federal Barge rejected Central States' demand and on April 30, 1986, initiated arbitration proceedings before the American Arbitration Association.³ In the arbitration petition, Federal Barge expressly reserved its right to assert its defenses to withdrawal liability in federal court.

On August 11, 1988, Central States filed this action seeking past due and interim withdrawal liability payments pending judgment in the arbitration proceedings. In its answer, the Houston Group denies the court's jurisdiction over this action and alleges that the provisions of the collective bargaining agreement upon which Central States hinges its claim for withdrawal liability are illegal and unenforceable. In a counterclaim, the Houston Group seeks a refund of all past contributions.

II. Motion for Summary Judgment

Congress passed the MPPAA in order to funnel disputes over withdrawal liability between an employer and a pension plan into the presumably quicker and less formal mechanism of arbitration. Teamsters Pension Trust Fund v. Allyn Transp. Co., 832 F.2d 502, 504 (9th Cir. 1987). The central provision in the MPPAA statutory scheme states that "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 shall be resolved through arbitration." 29 U.S.C. § 1401(a)(1). "Congress' directive is clear. Any dispute over withdrawal liability as determined under the enumerated statutory provisions shall be arbitrated." I.A.M. National Pension Fund v. Clinton Engines Corp., 825 F.2d 415, 417 (D.C.Cir. 1987). Arbitration is the appropriate forum regardless of whether the dispute centers on an interpretation of provisions of the MPPAA, id. at 418, or involves only issues of law. Banner Industries, Inc. v. Central States, Southeast & Southwest Areas Pension Fund, 657 F.Supp. 875, 883 (N.D.Ill.1987) ("The scope of an arbitrator's jurisdiction cannot turn on the presence or absence of factual disputes").

Congress also established a "pay now, dispute later" arrangement in order to assure that a pension fund is able to meet its benefits obligations to employees pending arbitral review. Robbins v. Pepsi-Cola Metropolitan Bottling Co., 800 F.2d 641, 642 (7th Cir.1986). Section 4221(d) of the MPPAA provides that:

Payments shall be made by the employer in accordance with the determinations made under this part until the arbitrator issues a final decision with respect to the determination submitted for arbitration, with any necessary adjustments in subsequent payments for overpayments or underpayments arising out of the decision of the arbitrator with respect to the determination. 29 U.S.C. § 1401(d).

Thus, during the time in which a dispute is properly before an arbitrator, the employer must make withdrawal payments and a pension fund may sue in federal court to seek such payments. 29 U.S.C. § 1451(a)(1).

The Houston Group's challenge to withdrawal liability is summarized as follows: Under § 302(c)(5) of the Labor Management Relations Act of 1947 ("LMRA"), 29 U.S.C. § 186(c)(5),⁴ an employer may not contribute and a pension fund may not accept funds that will not be used for the benefit of employees of the contributing employer. United Mine Workers v. Robinson, 455 U.S. 562, 570, 102 S.Ct. 1226, 1231, 71 L.Ed.2d 419 (1982). Since all of Federal Barge's employees are supervisors and the Central States Pension Plan provides that no funds will be used for the benefit of employees properly categorized as supervisors,⁵ the Fund may not accept contributions or demand withdrawal liability.

The Houston Group characterizes this dispute as one over Federal Barge's status as an "employer" under the MPPAA and thereby seeks to invoke a long-recognized exception to the MPPAA's arbitration mandate. Most courts faced with the issue have concluded that an employer's challenge to its status as an "employer" under the MPPAA creates a dispute properly resolved in federal court rather than arbitration. Determining the disputing parties' status is a prerequisite to application of the arbitration provision. Included among the more common nonarbitrable challenges to employer status are whether corporate officers and shareholders are "employers," see, e.g., United Paperworkers International Union, Local No. 35 Pension Plan v. Arlington Sample Book Co., 5 Employee Benefits Cases (BNA) 1948, 1984 WL 6625 (E.D.Pa.1984); whether a company is the "employer" of an independent contractor, see, e.g., Refined Sugars, Inc. v. Local 807 Labor-Management Pension Fund, 632 F.Supp. 630 (S.D.N.Y.1986); and whether the entity from which a plan seeks withdrawal liability is an "employer" by virtue of its membership in a control group under 29 U.S.C. § 1301(b)(1),⁶ see, e.g., Mason and Dixon Tank Lines, Inc. v. Central States, Southeast & Southwest Areas Pension Fund, 852 F.2d 156 (6th Cir.1988); Tri-State Rubber v. Central States, 661 F.Supp. 46 (E.D.Mich.1987). See also Flying Tiger Line v. Teamsters Pension Trust Fund, 830 F.2d 1241, 1247, 1251 (3d Cir.1987) (mandating arbitration of disputes as to whether an entity which at one time was properly deemed an "employer" under the MPPAA lost such status).

We reject the Houston Group's characterization of this dispute. The uncontroverted evidence establishes that the Group is an employer within the meaning of the MPPAA. An "employer" is "any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan." 29 U.S.C. § 1002(5). "The term `employee' means any individual employed by an employer." 29 U.S.C. § 1002(6). While these definitions appear tautological at first glance, we view them as establishing three prerequisites to "employer" status under the MPPAA — that the person "employ" individuals under the ordinary meaning of the verb, that it do so "directly" rather than through other legal entities, such as subsidiaries, and that it "act" in...