Central States Pension Fund v. Bell Transit Co.

• Decision Date: 07 May 1993
• Docket Number: No. 92 C 6508.,92 C 6508.
• Citation: 821 F. Supp. 1266
• Parties: CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, et al., Plaintiffs, v. BELL TRANSIT COMPANY, etc., Defendants.
• Court: U.S. District Court — Northern District of Illinois

821 F. Supp. 1266

CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, et al., Plaintiffs, v. BELL TRANSIT COMPANY, etc., Defendants.

No. 92 C 6508.

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

May 7, 1993.

Margaret M. Fahrenbach and Terence G. Craig, Cent. States Law Dept., Rosemont, IL, for plaintiffs.

Leonard R. Kofkin, Donald J. Vogel, Fagel & Haber, Chicago, IL, and Mark T. Vuono, Vuono, Lavelle & Gray, Pittsburgh, PA, for defendants.

MEMORANDUM OPINION AND ORDER

HART, District Judge.

Plaintiffs Central States, Southeast and Southwest Areas Pension Fund (the "Fund") and one of its trustees brought this action against defendant Bell Transit Company ("Bell"), which formerly had employees who are participants in the Fund. Count I is a claim for withdrawal liability under the Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. § 1001 et seq. In Count II, plaintiffs seek to vacate an arbitration award finding that defendant had not incurred withdrawal liability. In a counterclaim against the Fund, Bell seeks a refund of interim payments of withdrawal liability made while the arbitration proceeding was pending. Presently pending are cross-motions for summary judgment. Plaintiffs move for summary judgment on Count II. Defendant moves for summary judgment dismissing plaintiffs' entire complaint and awarding relief on defendant's counterclaim.¹

The material facts of this case are not in dispute. Prior to May 1, 1987, Bell had been a party to certain collective bargaining agreements with the International Brotherhood of Teamsters. Those agreements required that Bell make pension contributions to the Fund on behalf of certain employees. On May 3, 1987, Bell sold its covered operations and ceased to have any obligation for further contributions. Bell sold substantially all its assets to Best Transport, Inc. ("Best") which agreed to be bound to make pension contributions for former Bell employees. By July 31, 1987 at the latest, Bell had converted all of its assets to cash. Although it filed papers indicating that it intended to distribute the cash to its shareholders, it has not done so. Bell continues to hold the cash.

The cessation of Bell's operations ordinarily would constitute a complete withdrawal from the Fund. Bell, however, will not be subject to withdrawal liability if the requirements set forth in 29 U.S.C. § 1384 are satisfied. That statute provides:

(1) A complete or partial withdrawal of an employer (hereinafter in this section referred to as the "seller") under this section does not occur solely because, as a result of a bona fide, arm's-length sale of assets to an unrelated party (hereinafter in this section referred to as the "purchaser"), the seller ceases covered operations or ceases to have an obligation to contribute for such operations, if —

(A) the purchaser has an obligation to contribute to the plan with respect to the operations for substantially the same number of contribution base units for which the seller had an obligation to contribute to the plan;

(B) the purchaser provides to the plan for a period of 5 plan years commencing with the first plan year beginning after the sale of assets, a bond issued by a corporate surety company that is an acceptable surety for purposes of section 1112 of this title, or an amount held in escrow by a bank or similar financial institution satisfactory to the plan, in an amount equal to the greater of —

(i) the average annual contribution required to be made by the seller with respect to the operations under the plan for the 3 plan years preceding the plan year in which the sale of the employer's assets occurs, or

(ii) the annual contribution that the seller was required to make with respect to the operations under the plan for the last plan year before the plan year in which the sale of the assets occurs, which bond or escrow shall be paid to the plan if the purchaser withdraws from the plan, or fails to make a contribution to the plan when due, at any time during the first 5 plan years beginning after the sale; and

(C) the contract for sale provides that, if the purchaser withdraws in a complete withdrawal, or a partial withdrawal with respect to operations, during such first 5 plan years, the seller is secondarily liable for any withdrawal liability it would have had to the plan with respect to the operations (but for this section) if the liability of the purchaser with respect to the plan is not paid.

(2) If the purchaser —

(A) withdraws before the last day of the fifth plan year beginning after the sale, and

(B) fails to make any withdrawal liability payment when due, then the seller shall pay to the plan an amount equal to the payment that would have been due from the seller but for this section.

(3)(A) If all, or substantially all, of the seller's assets are distributed, or if the seller is liquidated before the end of the 5 plan year period described in paragraph (1)(C), then the seller shall provide a bond or amount in escrow equal to the present value of the withdrawal liability the seller would have had but for this subsection.

(B) If only a portion of the seller's assets are distributed during such period, then a bond or escrow shall be required, in accordance with regulations prescribed by the corporation, in a manner consistent with subparagraph (A).

(4) The liability of the party furnishing a bond or escrow under this subsection shall be reduced, upon payment of the bond or escrow to the plan, by the amount thereof.

29 U.S.C. § 1384.

The Fund does not contend that the requirements of subsections (A), (B), and (C) of subsection (1) have not been satisfied.² The dispute is whether Bell's action of converting its assets to cash means it has been "liquidated" as that term is used in subsection (3)(A). If Bell's conduct constitutes being liquidated, then the parties also dispute whether failure to provide a bond or escrow in accordance with subsection 3(A) subjects Bell to withdrawal liability.

In 1990, the Fund determined that Bell was subject to withdrawal liability because it had liquidated without providing a bond or escrow as required by subsection 3(A). Bell timely requested arbitration and then made interim payments of withdrawal liability pending resolution of the arbitration. In an award dated January 15, 1993, the arbitrator held that the conversion of assets to cash does not constitute being liquidated under subsection 3(A). He held that Bell would not be "liquidated" until the cash is distributed to shareholders. The arbitrator also held that, even if Bell had been liquidated, subsection 3(A) would only require that a bond be posted or an escrow established; it would not result in withdrawal liability for Bell.

First, the proper standard of review must be determined. The Fund contends that the presumption of 29 U.S.C. § 1401(a)(3)(A) applies. "For purposes of any proceeding under this section, any determination made by a plan sponsor under sections 1381 through 1399 of this title and section 1405 of this title is presumed correct unless a party contesting the determination shows by a preponderance of the evidence that the determination was unreasonable or clearly erroneous." Id. Bell contends that the arbitrator's determination that Bell was not liquidated is a mixed question of law and fact to which this court must defer unless clearly erroneous. See Chicago Truck Drivers, Helpers & Warehouse Workers Union (Independent) Pension Fund v. Louis Zahn Drug Co., 890 F.2d 1405, 1411 (7th Cir.1989).

Under 29 U.S.C. § 1401(c), findings of fact of the arbitrator are presumed true unless rebutted by a clear preponderance of the evidence. Legal determinations, however, are fully reviewable by the courts. Zahn Drug, 890 F.2d at 1409 (citing Trustees of Iron Workers Local 473 Pension Trust v. Allied Products Corp., 872 F.2d 208, 212 (7th Cir.), cert. denied, 493 U.S. 847, 110 S.Ct. 143, 107 L.Ed.2d 102 (1989)). In Zahn Drug, the Seventh Circuit held that the clearly erroneous standard applied to mixed questions of law and fact involving "fact-specific, non-recurring determinations," but that "the parties have a right to expect that the reviewing court will scrutinize fully the arbitrator's understanding of the underlying legal principles." 890 F.2d at 1411. The question of whether being liquidated under the statute requires that cash be actually distributed is a legal question not limited by the fact review standard for arbitration proceedings. It is a question of statutory construction for which there is de novo review in the courts. Cf. Central States, Southeast & Southwest Areas Health & Welfare Fund v. Cullum Cos., 973 F.2d 1333, 1337 (7th Cir.1992) (arbitrator's interpretation of 29 U.S.C. § 1384(a)(1)(A) is reviewable de novo). Whether a liquidation without providing a bond subjects a seller to withdrawal liability is also a legal question of statutory construction that is subject to de novo review.³ Cf. id.

Although the arbitrator's legal determinations are not subject to deferential review, it still must be considered whether the Fund's determinations, factual and legal, are subject to deferential review pursuant to § 1401(a)(3)(A). The presumption of § 1401(a)(3)(A) applies to both the arbitrator and court review. Grand Union Co. v. Food Employers Labor Relations Association, 808 F.2d 66, 70 (D.C.Cir.1987). No case has been cited or found which discusses whether the presumption under § 1401(a)(3)(A) applies to legal determinations. The statute refers to deference to "determinations" without limiting such deference to factual determinations. Cf. United Retail & Wholesale Employees Teamsters Union Local No. 115 Pension Plan v. Yahn & McDonnell, Inc., 787 F.2d 128, 135 n. 9 (3d Cir.1986), aff'd by equally divided court, 481 U.S. 735, 107 S.Ct. 2171, 95 L.Ed.2d 692 (1987) (per curiam) (statute provides for deference to "trustees'...