Central States Southeast and Southwest Areas Pension Fund v. Chatham Properties

• Citation: 929 F.2d 260
• Decision Date: 03 April 1991
• Docket Number: No. 89-1451,89-1451
• Parties: Bankr. L. Rep. P 73,877, 13 Employee Benefits Ca 1940 CENTRAL STATES SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, Howard McDougall, Representative Trustee, Plaintiffs-Appellees, Board of Trustees, Michigan United Food and Commercial Workers Union and Food Employers Joint Pension Fund, Intervenor Plaintiff-Appellee, v. CHATHAM PROPERTIES, a Michigan Corporation, Royal Distributing Company, a Michigan Corporation, Leeds Properties, a Michigan Corporation, Blue and White Express of Michigan, Inc., a Michigan Corporation, Market Properties, Inc., a Michigan Corporation, Markets Unlimited, Inc., a Michigan Corporation, Defendants-Appellants. Regal Insurance Company, Defendant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 260

929 F.2d 260

Bankr. L. Rep. P 73,877, 13 Employee Benefits Ca 1940

CENTRAL STATES SOUTHEAST AND SOUTHWEST AREAS PENSION FUND Howard McDougall, Representative Trustee Plaintiffs-Appellees Board of Trustees, Michigan United Food and Commercial Workers Union and Food Employers Joint Pension Fund, Intervenor Plaintiff-Appellee, v. CHATHAM PROPERTIES, a Michigan Corporation, Royal Distributing Company, a Michigan Corporation, Leeds Properties, a Michigan Corporation, Blue and White Express of Michigan, Inc., a Michigan Corporation, Market Properties, Inc., a Michigan Corporation, Markets Unlimited Inc., a Michigan Corporation, Defendants-Appellants. Regal Insurance Company, Defendant.

No. 89-1451.

United States Court of Appeals, Sixth Circuit.

Argued March 15, 1991.

Decided April 3, 1991.

Russell N. Luplow, Elizabeth Roberto, Bloomfield Hills, Mich., Thomas J. Angell, Central States, Southeast & Southwest Areas Health & Welfare & Pension Funds, Terence G. Craig (argued), Central States Law Dept., Rosemont, Ill., for plaintiffs-appellees.

Theodore Sachs, Irvin Mark Steckloff, Sachs, Nunn, Kates, Kadushin, O'Hare, Helveston & Waldman, Detroit, Mich., Thomas J. Angell, Rosemont, Ill., for intervenor-plaintiff-appellee.

Dennis S. Kayes, Kay A. Standridge, Pepper, Hamilton & Scheetz, Detroit, Mich., John J. Bobrowski (argued), Dykema, Gossett, Spencer, Goodnow & Trigg, Bloomfield Hills, Mich., for defendants-appellants.

Before KEITH and NELSON, Circuit Judges, and BAILEY BROWN, Senior Circuit Judge.

BAILEY BROWN, Senior Circuit Judge.

The defendants-appellants, Chatham Properties, Royal Distributing Co., Leeds Properties, Blue and White Express of Michigan, Inc., Market Properties, Inc., and Markets Unlimited, Inc., all subsidiaries of the bankrupt Nu-Trax, Inc., appeal the district court's grant of summary judgment in favor of the plaintiffs-appellees, two multiemployer pension funds. Because of the bankruptcy of their parent corporation, the appellants claim that they should not be held jointly and severally liable for interim withdrawal payments as a result of their and the parent's withdrawal from the multiemployer pension funds governed by Title IV of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Secs. 1001 et seq. as amended by the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), 29 U.S.C. Secs. 1381-1461. For the reasons that follow, we AFFIRM the district court's grant of summary judgment in favor of the appellees, the pension funds.

I

Central States Pension Fund is a multiemployer benefit plan under section 4001(a)(3) of ERISA, 29 U.S.C. Sec. 1301(a)(3). Central States provides retirement benefits to plan participants who are mostly members of the Teamsters Union in the South and Mid-West. Likewise, the Michigan United Food and Commercial Workers Union and Food Employers Joint Pension Fund (Michigan Pension Fund), a multiemployer benefit plan, provides benefits for union members employed in the retail supermarket industry in Michigan. The appellants, as stated, are all subsidiaries of Nu-Trax, Inc. (formerly Chatham Supermarkets, Inc.).

Nu-Trax and its predecessor, Chatham Supermarkets, as well as some of the appellants, were parties to collective bargaining agreements with various Teamster locals and Nu-Trax was party to an agreement with the Food Commercial Workers Union Local 876. Pursuant to these respective agreements, Nu-Trax and some of the appellants were obligated to contribute funds on behalf of their employees to the Central States Pension Fund and the Michigan Pension Fund. The parties do not dispute that under ERISA, Nu-Trax and the appellants are under "common control" and thus are an employer control group for purposes of withdrawal liability.

The parties also do not dispute that on May 30, 1987, Nu-Trax and the appellants ceased their operations that employed the Teamsters. Withdrawal from the Central States Pension Fund occurred at this time. On September 9, 1987, creditors filed an Involuntary Petition under Chapter 11 of the Bankruptcy Code against Nu-Trax. The Bankruptcy court entered an Order of Relief against Nu-Trax under Chapter 11 on October 1, 1987, and a trustee in bankruptcy was appointed. ¹ The parties also do not dispute that in early 1988, withdrawal from the Michigan Pension Fund occurred when all covered operations under the plan ceased. Each of the appellants now has ceased doing business. Both of the appellees sent appellants a notice and demand for interim withdrawal payments and requested arbitration, but no payments have been made.

Central States Pension Fund and its representative trustee, Howard McDougall, filed a complaint on October 3, 1988, to compel Nu-Trax's subsidiaries to make interim withdrawal liability payments. On January 13, 1989, the trustees of the Michigan Pension Fund moved to intervene. Like Central States, the Michigan Pension Fund trustees sought to compel the appellants to make interim withdrawal liability payments under ERISA. The district judge granted the Michigan Pension Fund trustees the right to intervene on February 14, 1989.

Central States and the Michigan Pension Fund trustees moved for summary judgment, respectively, on January 9, 1989, and March 13, 1989. The United States District Court for the Eastern District of Michigan, Honorable Horace Gilmore, granted the appellees summary judgment in a final order on March 23, 1989. In granting summary judgment, the district judge ordered the appellants to pay installments constituting interim payments, interest on those payments that are overdue and attorney fees. The appellants filed a timely notice of appeal on April 10, 1989. ²

The Pension Benefit Guaranty Corporation (PBGC), a government corporation that administers and enforces Title IV of ERISA, has submitted a brief amicus curiae.

II

Before addressing the appellants' argument, it is essential to explain briefly the pertinent statutory scheme of Title IV of ERISA. Under ERISA an employer withdrawing from a multiemployer pension plan is subject to withdrawal liability equal to its allocable share of the plan's unfunded vested benefits at the time of its withdrawal. 29 U.S.C. Sec. 1381. All businesses under common control are treated as a single employer and are jointly and severally liable for such payment in the event of withdrawal. Sec. 1301(b). Withdrawal occurs when an employer permanently ceases all covered operations under the plan. Sec. 1383(a).

After an employer withdraws from a plan under ERISA, the plan sponsor ³ must notify the employer of the amount of liability and demand payment for such amount. Secs. 1381, 1382, 1399(b)(1). Either party may subsequently request arbitration to resolve differences. Sec. 1401(a)(1). The arbitration under regulations issued by PBGC, is conducted and a record is made. 29 C.F.R. Sec. 2641.4(a)(2), (4).

The employer is required to make interim payments on withdrawal liability until the arbitrator has made a final decision. 29 U.S.C. Secs. 1399(b)(2), 1401(d). If the arbitrator subsequently determines, however, that the interim payments have resulted in an overpayment, the plan sponsor must refund the overpayment plus interest. Sec. 1401(d): 29 C.F.R. 2641.7(a)(2), 2644.2(d). Any party may bring an action in a United States district court to enforce, vacate or modify the arbitrator's award. 29 U.S.C. Sec. 1401(b)(2). Arbitration is not, however, a jurisdictional prerequisite for district court review. Mason and Dixon Tank Lines v. Central States, Southeast and Southwest Pension Funds, 852 F.2d 156, 163 (6th Cir.1988).

III

The appellants argue that the district court erred in granting summary judgment for the appellees. The appellants contend that ERISA, specifically 29 U.S.C. Sec. 1301(b), does not necessarily require the imposition of joint and several liability upon the component members of an employer group where the employers consist of several businesses under common control. Section 1301(b) provides, however, in pertinent part:

For purposes of this subchapter, under regulations prescribed by the corporation, all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer and all such trades and businesses as a single employer.

Id. Despite the fact that courts consistently have construed this language to impose joint and several withdrawal liability upon employers under common control, the appellants argue that exceptions to the joint and several liability interpretation should be made for them.

The appellants note that Congress expressly imposed by statute joint and several liability on all members of an employer control group when it enacted the Single Employer Pension Plan Amendment Act of 1986 (SEPPA), 29 U.S.C. Sec. 1362-64. The appellants point out that Congress did not expressly impose joint liability, however, for multiemployer plans in enacting the MPPA but concede that courts have consistently imposed such liability in enforcing section 1301(b). Because Congress did not expressly impose joint and several liability on all members of the employer control group for withdrawal from the multiemployer plans, the appellants argue that this court is free to carve out an exception to the judge-made rule of joint and several liability for withdrawal from multiemployer plans.

The appellants argue that such an exception should be made for them because of the bankruptcy of their parent corporation, Nu-Trax. The appellants note that Nu-Trax is in Chapter 11 and that its assets eventually will be liquidated for the benefit of Nu-Trax's creditors under the orders of the bankruptcy court. The appellants further note that Nu-Trax owns all or substantially all of the appellants' stock as an asset. The appellants argue that the policy of ERISA will be best served by allowing the liquidation of the appellants with Nu-Trax and the distribution of the...