Central States, Southeast and Southwest Areas Pension Fund v. Slotky

• Decision Date: 24 February 1992
• Docket Number: No. 90-3546,90-3546
• Citation: 956 F.2d 1369
• Parties: 14 Employee Benefits Cas. 2753 CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, et al., Plaintiffs-Appellees, v. Burton SLOTKY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1369

956 F.2d 1369

14 Employee Benefits Cas. 2753

CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND et al., Plaintiffs-Appellees, v. Burton SLOTKY, Defendant-Appellant.

No. 90-3546.

United States Court of Appeals Seventh Circuit.

Argued Sept. 24, 1991.

Decided Feb. 24, 1992.

Terence G. Craig (argued), Margaret M. Fahrenbach, Catherine R. Fuller, Neal S. Deodhar, Central States, Southeast & Southwest Area Pension Fund, Law Dept., Rosemont, Ill., for plaintiffs-appellees.

John H. Ward (argued), Anthony C. Valiulis, Deborah Schmitt Bussert, Norman B. Newman, Karen K. Litscher, Much, Shelist, Freed, Denenberg, Ament & Eiger, Chicago, Ill., for defendant-appellant.

Carol Connor Flowe, John H. Falsey, Nancy Heermans, Raymond M. Forster, Israel Goldwitz (argued), Pension Benefit Guar. Corp., Legal Dept., Washington, D.C., amicus curiae.

Before POSNER and KANNE, Circuit Judges, and ENGEL, Senior Circuit Judge. ^*

POSNER, Circuit Judge.

A multiemployer pension plan (and its trustees, but we can ignore them) sues in this case to enforce withdrawal liability against an individual. The Multiemployer Pension Plan Amendments to the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq., require that when an employer withdraws from a multiemployer pension plan governed by ERISA, the plan assess a withdrawal liability against him, 29 U.S.C. § 1396, so that the financial burden of his employees' vested pension benefits will not be shifted to the other employers in the plan and, ultimately, to the Pension Benefit Guaranty Corporation, which insures such benefits. To trigger application of the statute, the pension plan must issue a notice, and a demand for payment, of withdrawal liability to the employer. § 1399(b). If the employer wants to contest the assessment he must first complain informally to the plan within 90 days. § 1399(b)(2)(A). If he obtains no satisfaction from this mandatory conciliation procedure he must initiate arbitration--the method prescribed by the statute for resolving disputes concerning assessments of withdrawal liability--within 60 days after the earlier of either the plan's response to the employer's initial complaint, or 120 days after the employer, as part of the conciliation procedure, requests additional information from the plan regarding the assessment. § 1401(a)(1). Should the employer fail to request arbitration within the deadline the amount of withdrawal liability assessed by the plan becomes due and owing and the plan can (as here) sue to collect it. § 1401(b)(1).

Stevens Bedding Warehouse, Inc., of which Burton Slotky, the defendant in this case, had become the sole shareholder, withdrew from its ERISA pension plan on August 22, 1987, five days after filing for bankruptcy under Chapter 11. On September 30, the plan filed a claim against Stevens Bedding in the bankruptcy proceeding for withdrawal liability of (in round numbers) $164,000. On April 15 of the following year the plan mailed Stevens a notice and demand for the same amount. Three days later it filed a new claim in the bankruptcy proceeding, which in the interim had been converted from Chapter 11 to Chapter 7. Stevens received the April 15 mailing on May 3. Stevens did not contest the assessment. Nor did Slotky, although the statute provides that "trades or businesses" under "common control" are a single employer for purposes of withdrawal liability, § 1301(b)(1), and the buildings in which Stevens carried on its business had been leased to it by Slotky. The plan never mailed or otherwise delivered a notice and demand (or a copy of one of the notice and demands it had sent Stevens) to Slotky. But it argues that notice to one trade or business under common control is notice to all and that since Slotky did not initiate arbitration by the statutory deadline the amount that the plan had assessed became due and owing from him. The district court, agreeing, granted summary judgment for the plan and entered judgment for the assessed withdrawal liability, plus interest and other costs allowed by the statute, for a total of more than $224,000. The excess over the withdrawal liability of $164,000 is accounted for by interest, liquidated damages, attorneys' fees, and the usual court costs.

Slotky may never have heard of withdrawal liability or the concept of a commonly controlled group, may never have dreamed that he might be deemed the employer of Stevens' employees and might therefore become personally liable for the corporation's obligations to the multiemployer pension fund, was not told (at least by the pension plan directly)--till too late--that he might have this liability, was denied a trial on whether his leasing of buildings that he owned made him a trade or business, and has lost all opportunity to show that the amount of the assessment is in error. Nevertheless we agree with the district judge that the pension plan was entitled to judgment in the amount of the assessment plus the statutory add-ons such as attorneys' fees. The plan followed the correct procedures, the controlled group provision applies (and this issue was properly resolved on summary judgment), and Slotky has failed to establish a basis for equitable tolling of the deadlines for conciliation and arbitration.

We do not understand either the pension plan or the Pension Benefit Guaranty Corporation (which has filed an amicus brief in support of the judgment) to be arguing that the question whether someone is a member of a controlled group is reserved for arbitration, even though the statute requires that all disputes between the employer and the plan be resolved by arbitration, 29 U.S.C. § 1401(a)(1), including some that might be thought jurisdictional. Republic Industries, Inc. v. Teamsters Joint Council No. 83 of Virginia Pension Fund, 718 F.2d 628, 634-35 (4th Cir.1983); cf. Flying Tiger Line v. Teamsters Pension Trust Fund, 830 F.2d 1241, 1251-52 (3d Cir.1987). The requirement presupposes a determination that the dispute is with an "employer." On the theory (urged by no one, we have noted) that only the arbitrator can determine who is an employer, and given the plan's position (which happens to be correct, as we shall see) that notice to one member of a controlled group is notice to all, the plan could have sued the Easter Bunny and when the Bunny complained that he was not a trade or business under common control with Stevens Bedding Warehouse could have replied that the Bunny had waived the argument by failing to demand arbitration within the statutory deadline. For of course Stevens, never suspecting that the Easter Bunny might be a trade or business under common control with it, would not have forwarded the notice to the Bunny.

Anyone who suspects that he might be adjudged a member of a controlled group and therefore subjected to withdrawal liability would be well advised to commence arbitration, so that if a court holds that he is a member of such a group and hence is subject to such liability he won't have waived the issues that are reserved for arbitration, as Slotky (we shall see) did here. IUE AFL-CIO Pension Fund v. Barker & Williamson, Inc., 788 F.2d 118, 129 (3d Cir.1986). And we may assume that if such an arbitration is commenced, the arbitrator can decide the issue of controlled group membership. Israel Goldowitz & Thomas S. Gigot, "The Controlled Group Rule for Purposes of the Withdrawal Liability Provisions of the Employee Retirement Income Security Act," 90 W.Va.L.Rev. 773, 793-96 (1988). But the example of the Easter Bunny confirms, what the cases imply, cf. IUE AFL-CIO Pension Fund v. Barker & Williamson, Inc., supra, 788 F.2d at 129; Banner Industries, Inc. v. Central States, Southeast & Southwest Areas Pension Fund, 875 F.2d 1285, 1291, 1293 (7th Cir.1989); Flying Tiger Line v. Teamsters Pension Trust Fund, supra, 830 F.2d at 1251-52, that the issue of membership in a controlled group cannot be within exclusive arbitral jurisdiction. For then people who had absolutely no reason to believe that they might be deemed members of a controlled group would be foreclosed from litigating the issue in any forum because they had never received notice of their potential liability.

It does not follow that a person can always sit back and wait to be sued for withdrawal liability and take his chances on the court's deciding the issue in his favor. What if the pension plan explicitly notifies the person of his potential liability, rather than notifying another member of the (alleged) controlled group? What if, like Slotky but unlike the Easter Bunny, he knows or should know that he might very well be deemed a member of a controlled group? In both cases it can be argued that the statutory policy of encouraging the prompt, nonjudicial resolution of disputes over withdrawal liability requires the alleged member of a controlled group to institute arbitration on penalty of losing all opportunity to contest his membership.

But this we need not decide. The courts can resolve some disputes over membership in controlled groups (our Easter Bunny case, for example); the plan appears to concede, whether improvidently or not, that this is one of them; and we do not think that the question whether the district court should stay its hand when the alleged member of a controlled group had notice of the allegation of membership is jurisdictional, so that we must disregard the concession. For purposes of our appellate review, therefore, the question whether Slotky was a member of a controlled group was properly before the district court. The next issue is what kind of question it is, fact or law. It is a question of fact, even though all the "facts" as a layman would perceive them are agreed upon and the only dispute is over characterization, here over whether Slotky's act in leasing buildings to Stevens Bedding made him a "trade or business" (there is no doubt that he and Stevens were under common control within the meaning of ...