O'CONNOR v. DeBolt Transfer, Inc.

• Decision Date: 21 May 1990
• Docket Number: Civ. A. No. 85-1826.
• Citation: 737 F. Supp. 1430
• Parties: John P. O'CONNOR, Raymond H. Baker, James M. Beros, William M. Cherilla, Richard Glass, Nicholas A. Sansotta, Jerry A. Davis, William J. Dillner, Jr., James H. Hutchinson, Jr., and Joseph E. Zaucha, Trustees of the Western Pennsylvania Teamsters and Employers Pension Fund, Plaintiffs, v. DeBOLT TRANSFER, INC., DeBolt-Somerset Bus Co., Inc., Steel Valley Trucking, Inc., Al-O-Mon Terminals, DeBolt Realty Co., Inc., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

737 F. Supp. 1430

John P. O'CONNOR, Raymond H. Baker, James M. Beros, William M. Cherilla, Richard Glass, Nicholas A. Sansotta, Jerry A. Davis, William J. Dillner, Jr., James H. Hutchinson, Jr., and Joseph E. Zaucha, Trustees of the Western Pennsylvania Teamsters and Employers Pension Fund, Plaintiffs, v. DeBOLT TRANSFER, INC., DeBolt-Somerset Bus Co., Inc., Steel Valley Trucking, Inc., Al-O-Mon Terminals, DeBolt Realty Co., Inc., Defendants.

Civ. A. No. 85-1826.

United States District Court, W.D. Pennsylvania.

May 21, 1990.

Vincent P. Szeligo, Wick, Streiff, Myer, Metz & O'Boyle, Pittsburgh, Pa., for plaintiffs.

Thomas D. MacMullan, MacMullan & Associates, P.C., Pittsburgh, Pa., for DeBolt Transfer, Inc., DeBolt Realty, Inc., Steel Valley Trucking, Inc., and Al-O-Mon Terminals.

Templeton Smith, Jr., Rose, Schmidt, Hasley & DiSalle, Pittsburgh, Pa., for DeBolt-Somerset Bus Co.

FINDINGS OF FACT, CONCLUSIONS OF LAW, OPINION AND ORDER

SIMMONS, District Judge.

FINDINGS OF FACT

1. That DeBolt Transfer, Inc. was properly a party to the collective bargaining agreement between it and the Teamster's Locals 249 and 261, (AFL-CIO) and was required by said agreement to make contribution for its employees into the Western Pennsylvania Teamsters and Employers Pension Fund. (Transfer's obligation to contribute to the Fund is well known since this Court previously interpreted the language of Transfer's collective bargaining agreement in a decision upheld by the Third Circuit in Byrnes, et al. v. DeBolt Transfer, 741 F.2d 620 (3d Cir.1984)).

2. "Withdrawal liability" owed to the Plaintiff Pension Fund in the amount of $355,108.00, was assessed against DeBolt Transfer, Inc. ("Transfer") by a demand letter dated March 17, 1984, as later amended.

3. "Transfer" acknowledged receipt of the demand letter and the amended demand and did not respond in any way to the Plaintiff's demand and did not demand arbitration as provided by law. (See 29 U.S.C. Sections 1399, 1401, and 1451).

4. Mrs. Sara DeBolt has common ownership of all five of defendant companies.

5. Mrs. Sara DeBolt, as owner of Defendant DeBolt Transfer, Inc. had constructive knowledge of the amount of "withdrawal liability" assessed against her company, Defendant DeBolt Transfer, Inc.

6. Because Sara DeBolt as a matter of fact is the common owner of the other four defendant corporations, namely, DeBolt-Somerset Bus Co., Inc.; Steel Valley Trucking, Inc.; Al-O-Mon Terminals; and DeBolt Realty Co., Inc., at all relevant times, she had constructive notice of the "withdrawal liability" proceedings involving DeBolt Transfer, Inc.

7. Defendant DeBolt Transfer, Inc. stopped contributing to the Plaintiff Pension Fund on April 1, 1982.

CONCLUSIONS OF LAW

1. Mrs. Sara DeBolt's common ownership of all five of the Defendant companies meets the legal requisite of the "controlled group" test for the assessment of withdrawal liability under the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA") (29 U.S.C. Sec. 1381 et seq.), amending the Employee Retirement Income Security Act of 1974 ("ERISA").

2. All of the defendants are members of a "controlled group" and are jointly and severally liable for the withdrawal liability incurred by DeBolt Transfer, Inc. (The term "controlled group" is defined in ERISA at 29 U.S.C. Sec. 1301(b)(1) and interpreted by the Pension Benefit Guaranty Corporation in regulations at 29 C.F.R. para. 2644.)

OPINION

This action arises out of an assessment of withdrawal liability under the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA") (29 U.S.C. Section 1381 et seq.), amending the Employee Retirement Income Security Act of 1974, ("ERISA"). The Fund filed the instant Complaint for Collection of Withdrawal Liability seeking the recovery of withdrawal liability from DeBolt Transfer, Inc. ("Transfer") due to its complete withdrawal from the Fund. The Fund further seeks to establish joint and several liability against the remaining Defendants, DeBolt-Somerset Bus Co., Inc. ("Bus"), Steel Valley Trucking, Inc. ("Steel"), Al-O-Mon Terminals ("Terminals") and DeBolt Realty Co., Inc. ("Realty") because they are members of a controlled group with Transfer, as that term is defined by ERISA at 29 U.S.C. Sec. 1301(b)(1) and interpreted by the Pension Benefit Guaranty Corporation in regulations at 29 C.F.R. Para. 2644.

Undoubtedly the Fund is entitled to judgment against Transfer because Transfer had an obligation to contribute to the Fund and upon the cessation of that obligation to contribute in April, 1982, it incurred a complete withdrawal within the meaning of MPPAA and was assessed withdrawal liability. See 29 U.S.C. Sections 1382 and 1383. The assessment and the calculation of the amount of liability is now fixed and cannot be challenged by any of the defendants because it is undenied that "Transfer" failed to initiate the arbitration remedy provided under MPPAA. See 29 U.S.C. Sections 1399, and 1401. The statute and the body of case law unequivocally provides that "Transfer" owes the assessed withdrawal liability, all additional statutory damages, and that it is foreclosed from disputing the liability in this civil collection proceeding.

Since the Fund also seeks recovery from the four other Defendants, it must establish that each is a member of the same controlled group as "Transfer". Upon proof of the undisputable facts showing the requisite level of common ownership, the Fund has met its burden and is entitled to judgment.

Although the defendants were initially evasive and refused to acknowledge controlled group status¹, in a lengthy colloquy during the second and third day of trial, counsel for "Bus" conceded that all of the five defendants met the technical definition of being part of a controlled group by virtue of common ownership of all five defendants by Mrs. Sara DeBolt. Tr. 302-306, 319². However, since the remaining defendant, "Bus" "Steel", "Terminals" and "Realty", throughout the trial refused to concede that they legally fell within the technical definition of controlled group, the Fund presented a preponderance of evidence showing that application of the technical stock ownership test established that all five defendants are members of a controlled group because it is an undenied fact that common ownership of the five defendants was held by one individual, Mrs. Sara O. DeBolt.

Some of the defendants have asserted that even if Transfer is liable and has waived its right to challenge the calculation and assessment, the Fund must show more than a mere technical satisfaction of the controlled group stock ownership test before it can enforce joint and several liability against all defendants for the withdrawal liability triggered by Transfer.³ However, this is a novel legal theory that has never been applied by any court in any known withdrawal liability decision issued as of this date. There is no authority supporting this position. In fact, defendants come squarely against an impressive body of uniform precedent firmly supporting the Fund's position that the entire controlled group is jointly and severally liable for the withdrawal liability of one member of the group simply because common ownership existed at the requisite level at the time of the withdrawal.

Notwithstanding the fact that "Transfer" was the only defendant which participated in the Fund and was the only defendant identified on the Fund's demand for payment of withdrawal liability, the other defendants, ("Bus", "Steel", "Terminals" and "Realty") had because of common ownership, constructive notice of the assessment and are legally bound by "Transfer's" failure to preserve the statutory right to challenge the assessment in an arbitration proceeding. Liability is fixed and judgment against all defendants is proper.

However, these other four defendants (other than "Transfer"), contend that joint and several liability must be justified by a showing of more than mere common ownership of all five defendants. Defendants argue that Mrs. DeBolt did not exercise actual control and/or active supervision over all five entities. Testimony was presented that she had delegated the responsibility for operating four of the defendants (Transfer, Steel, Terminals and Realty) to one son, John P.M. DeBolt, and that she delegated the responsibility for operating the remaining defendant ("Bus") to her other son, George S.T. DeBolt. Notwithstanding that defendants were able to establish that Mrs. DeBolt was an absentee owner exercising little or no actual control or active supervision over the day-to-day management over "Bus" and "Transfer", there is no legal precedent which would obligate the Fund to prove actual control and/or active supervision by a common owner as a necessary element in establishing the existence of a MPPAA controlled group.

A. "TRANSFER'S OBLIGATION FOR WITHDRAWAL LIABILITY IS FIXED AND THE RIGHT TO DISPUTE THE WITHDRAWAL LIABILITY HAS BEEN WAIVED.

Richard V. Desiderio, Trust Officer of Pittsburgh National Bank, the Administrative

Manager of the Fund, testified in support of the Fund's complaint. Tr. 27-142. Mr. Desiderio testified that he had been involved in the day-to-day functioning and official record-keeping of the Fund since 1961. He testified that he was personally involved and familiar with the Administrative Manager's responsibilities and procedures in assessing withdrawal liability on behalf of the Fund under MPPAA. Tr. 28 and Ex. 15.

Mr. Desiderio explained that the Fund is a multiemployer pension fund covering 10,000 active employees working for 600-625 different employers. He explained that "Transfer" had been one of the contributing employers until it completely withdrew from the Fund on April 1, 1982. Tr. 28-36. As a result of "Transfer's" complete withdrawal, the Fund assessed complete withdrawal liability of $371,736 against "Transfer" through a demand letter dated May 17, 1984. Ex. 1. The Fund's demand letter included an...