Central States, Southeast and Southwest Areas Pension Fund v. Bellmont Trucking Co., Inc.

• Decision Date: 04 April 1986
• Docket Number: No. 85-2158,85-2158
• Citation: 788 F.2d 428
• Parties: CENTRAL STATES SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, Plaintiff- Appellee, v. BELLMONT TRUCKING CO., INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 428

788 F.2d 428

CENTRAL STATES SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, Plaintiff- Appellee, v. BELLMONT TRUCKING CO., INC., Defendant-Appellant.

No. 85-2158.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 26, 1986.

Decided April 4, 1986.

Steven L. Jackson, Parrish, Knight, Jackson & Beal, Ft. Wayne, Ind., for defendant-appellant.

Terrence G. Craig, John E. Bardgett, Gen. Counsel, Karen I. Ward, Assoc. Gen. Counsel, Thomas J. Angell and Bruce Perlin Central States Law Dept., Chicago, Ill., for plaintiff-appellee.

Before CUMMINGS, Chief Judge, CUDAHY, Circuit Judge, and BARKER, District Judge. ^*

CUDAHY, Circuit Judge.

Defendant, Bellmont Trucking Co. ("Bellmont") appeals the district court's determination that it owes withdrawal liability to plaintiff, Central States Southeast and Southwest Areas Pension Fund (the "Fund"), as a result of Bellmont's bankruptcy, 610 F.Supp. 1505. We affirm.

I.

Bellmont operated a trucking business. Its drivers were members of Teamsters Local No. 414. Bellmont, by virtue of its membership in the Indiana Motor Carriers Labor Relations Association, was a signatory to the National Master Freight Agreement, which requires that employers make contributions to the Fund to fund the pension benefits of their employees.

In July 1983 Bellmont filed a petition in bankruptcy under Chapter 11 of the Bankruptcy Code. At this time Bellmont's obligation to make payments to the Fund ceased. The Fund determined, however, that under the Multi-Employer Pension Plan Amendments Act of 1980 (the "MPPAA"), 29 U.S.C. Sec. 1381 et seq., Bellmont had withdrawn from the Fund and thus incurred withdrawal liability. Bellmont admitted that if liability existed, the amount would be $110,122.80. The district court removed the withdrawal liability claim from the bankruptcy court. The parties filed cross-motions for summary judgment and the district court granted the Fund's motion. This appeal followed.

Bellmont argues that it should not be subject to withdrawal liability because the relationship between its former employees and the Fund remains unchanged. Of the eight employees who worked for Bellmont during its last year of operation, five retired. Employers are not obligated to make contributions to the Fund on behalf of retired employees. The other three presently work for other employers in the industry and are still represented by Teamsters Local 414. Their current employers are obligated to make contributions to the Fund on their behalf. Defendant argues:

Thus, all of Bellmont's former employees who still work have contributions made on their behalf to the Fund in the same amount and at the same rate as while they were working for Bellmont. The net effect of Bellmont's bankruptcy is that the Fund receives the contributions it would have (assuming the retirees had retired)--the only difference is the change in the payor. The payee and the beneficiaries remain precisely the same.

Appellant's Brief at 8-9.

Defendant argues that the MPPAA carves out certain exceptions to the generally applicable rule for imposition of liability on an employer upon its withdrawal from the pension plan. Although Bellmont admittedly cannot take advantage of any of these statutory exceptions, defendant argues that two district court cases stand for the proposition that so long as the relationship between the fund and its workers/beneficiaries remains unchanged, no withdrawal liability should be imposed. See Dorn's Transportation, Inc. v. Teamsters Pension Trust Fund, 596 F.Supp. 350 (D.N.J.1984); Dyck v. Southern Pacific Milling Co., 4 E.B.C. 1346 (C.D.Cal.1983). Further, defendant argues that the purpose of the MPPAA is to create a disincentive for employers who deliberately withdraw from pension plans to gain an economic advantage. Because Bellmont did not "voluntarily" withdraw to gain an economic advantage, but rather withdrew because it filed in bankruptcy, defendant argues that no withdrawal liability was intended by Congress. Defendant also argues that the district court's decision unjustly enriches the Fund.

II.

The MPPAA provides that "[i]f an employer withdraws from a multiemployer plan in a complete withdrawal or a partial withdrawal, then the employer is liable to the plan in the amount determined under this part to be the withdrawal liability." 29 U.S.C. Sec. 1381(a). A complete withdrawal occurs "when an employer--(1) permanently ceases to have an obligation to contribute under the plan, or (2) permanently ceases all covered operations under the plan." 29 U.S.C. Sec. 1383(a). It is not disputed that Bellmont permanently ceased to have an obligation to contribute under the plan when it filed its bankruptcy petition. Subsections (b) and (c) of 29 U.S.C. Sec. 1383 carve out certain exceptions for the construction industry and the entertainment industry. Subsection (d) carves out an exception for employers who contribute to a plan primarily for work in the long and short haul trucking industry, the household goods industry or the public warehousing industry if substantially all of the contributions required under the plan are made by employers primarily engaged in such industries. If subsection (d) applies, a complete withdrawal occurs only if

(A) an employer permanently ceases to have an obligation to contribute under the plan or permanently ceases all covered operations under the plan, and

(B) either--

(i) the corporation determines that the plan has suffered substantial damage to its contribution base as a result of such cessation, or

(ii) the employer fails to furnish 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 50 percent of the withdrawal liability of the employer.

29 U.S.C. Sec. 1383(d)(3). The district court, however, determined that subsection (d) does not apply in this case because "substantially all of the contributions" to the Fund were not made by employers in one of the excepted industries. Bellmont does not appeal this determination.

Other exceptions to the general rule of withdrawal liability articulated in section 1381(a) are found in sections 1384 and 1398. Section 1398 provides:

Notwithstanding any other provision of this part, an employer shall not be considered to have withdrawn from a plan solely because--

(1) an employer ceases to exist by reason of--

(A) a change in corporate structure described in section 1362(d) of this title, or

(B) a change to an unincorporated form of business enterprise,

if the change causes no interruption in employer contributions or obligations to contribute under the plan, or

(2) an employer suspends contributions under the plan during a labor dispute involving its employees.

For purposes of this part, a successor or parent corporation or other entity resulting from any such change shall be considered the original employer.

29 U.S.C. Sec. 1398. Section 1384 provides that a complete or partial withdrawal does not occur solely because of an arm's length sale of assets to an unrelated party if certain conditions are met. Bellmont does not argue that it meets the requirements of either section 1398 or section 1384.

Because Bellmont does not argue that it falls within any of the statutory exemptions for withdrawal liability, its reliance on Dorn's and Dyck is misplaced. In Dorn's Oneida Motor Freight purchased all of the outstanding stock of Dorn's. The court found that Dorn's was exempted from withdrawal liability because the requirements of section 1398 were met. The case before us does not involve a similar change in corporate structure that is exempted under section 1398. The court in Dorn's alternatively held that there was no withdrawal liability because Dorn's and Oneida were a single employer within the meaning of section 1301(b). Section 1301(b) defines a single employer as "trades or businesses" whose employees "are under common control." It was in this context that the court made the comments relied upon by Bellmont. ¹ Defendant does not argue that it and its former employees' subsequent employers should be treated as a single employer under section 1301(b)(1). Hence Dorn's is inapplicable to the case before us.

In Dyck the court held that a transfer of facilities from one subsidiary to another of the same corporate parent was not a partial withdrawal because the companies constituted a single employer under section 1301(b)(1). The court commented on the fact that the employment status of the employees at the transferred facilities was the same as before the transfer in the context of deciding whether the successor employer should be bound by the terms of a collective bargaining agreement entered into by its predecessor. Neither Dyck nor Dorn's held that there is no withdrawal liability merely because the relationship between the employees and the Fund remains unchanged. Both cases relied upon statutory exceptions to the imposition of withdrawal liability.

Defendant also argues that none of the policies of the MPPAA are furthered by imposing withdrawal liability in this case. First, we think that the policies of the MPPAA are furthered by imposing liability. As we noted in Peick v. Pension Benefit Guaranty Corporation, 724 F.2d 1247, 1267 (7th Cir.1983), cert. denied, 467 U.S. 1259, 104 S.Ct. 3554, 82 L.Ed.2d 855 (1984), Congress was concerned not only with reducing incentives to withdraw from multiemployer plans, but also with offsetting "the burden otherwise shifted to the remaining employers when a withdrawal nevertheless occurs." Withdrawal liability tends to compensate for the shrinkage of the contribution base that occurs when the number of employees on whose behalf contributions are made decreases. See Pension Benefit Guaranty Corp. v. Gray & Co., 467 U.S. 717, 104 S.Ct. 2709, 2714 n. 2, 81 L.Ed.2d 601 (1984). ²

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