Connors v. Incoal Inc., Civ. A. No. 86-3162.
| Decision Date | 15 January 1992 |
| Docket Number | Civ. A. No. 86-3162. |
| Citation | 781 F. Supp. 50 |
| Parties | Joseph P. CONNORS, Sr., et al., Plaintiffs, v. INCOAL INC. a/k/a Incoal Coal Co., et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
E. Calvin Golumbic, R. Steven Holt, Erin M. Sweeney, Arent Fox Kintner Plotkin & Kahn, Washington, D.C., for plaintiffs.
John R. Woodrum, C. Gregory Ruffennach, Smith, Heenan & Althen, Washington, D.C., for defendants.
Before the Court are cross motions for summary judgment. Because there is no genuine issue of material fact and some of the moving parties are entitled to judgment as a matter of law, summary judgment is appropriate. For the reasons that follow, plaintiffs' motion is granted in part and denied in part, defendant Kite Coal Sales, Inc.'s motion is denied, and defendant Double A Farms' motion is granted.
This is an action to collect withdrawal liability under the Employment Retirement Income Security Act of 1974 ("ERISA"), as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. §§ 1001, et seq. Plaintiffs seek withdrawal liability in the principal amount of $840,929.05, plus interest, liquidated damages, attorneys' fees, and costs against the defendants jointly and severally.
Plaintiffs are the Trustees of the United Mine Workers of America 1950 Pension Plan ("1950 Plan") and the United Mine Workers of America 1974 Pension Plan ("1974 Plan") (collectively, the "Plans"), which are multiemployer pension plans under §§ 3(37) and 4001(a)(3) of ERISA, 29 U.S.C. §§ 1002(37), 1301(a)(3).
Defendant Incoal Inc., a/k/a Incoal Coal Company ("Incoal"), is a Kentucky corporation that was engaged in the business of acquiring, producing, processing, and/or cleaning coal and maintaining mine sites. Incoal was owned 25% each by Orville Adkins, his wife Dixie, their son Adam, and Adam's wife Sally. Incoal was a signatory to the National Bituminous Coal Wage Agreements of 1978 and 1981 (collectively, the "Agreements"). Pursuant to the Agreements, Incoal participated in the Plans and was obligated to and made contributions to the plans on behalf of its employees covered by the Agreements.
Approximately seven years ago,1 Incoal ceased to operate and ceased making contributions to the Plans. Pursuant to § 4202(2) of ERISA, 29 U.S.C. § 1382(2), by letters dated July 5, 1985, the 1950 Plan assessed Incoal $562,006.75 in withdrawal liability, and the 1974 Plan assessed Incoal $248,603.66.2 Affidavit of Diane Duffin, Exhibit ("Duffin Ex.") A; Duffin Ex. B. The letters advised Incoal of the amount of its liability, established a schedule of payments, and offered, in the alternative, the option of paying its withdrawal liability in a lump sum. The letters also explained, in detail, Incoal's right to request review of its withdrawal liability under § 4219(b)(2)(A) of ERISA, 29 U.S.C. § 1399(b)(2)(A), and to initiate arbitration under § 4221 of ERISA, 29 U.S.C. § 1401. The letters highlighted the fact that Incoal's right to arbitrate any determination by the Plans concerning liability would be lost unless timely action was taken by Incoal.
By letter dated July 16, 1985, Incoal informed the Plans that it had depleted its assets and was financially unable to pay the withdrawal liability. Duffin Ex. C. Thereafter, Incoal failed to make any withdrawal liability payments to the 1950 or 1974 Plans. Additionally, it did not request review of any matter relating to the Plans' determination of withdrawal liability, nor did it demand arbitration.
Consequently, by letter dated January 14, 1986, the Plans declared Incoal in default within the meaning of § 4219(c)(5) of ERISA, 29 U.S.C. § 1399(c)(5), and demanded immediate payment of the entire withdrawal liability plus interest. Duffin Ex. D. Furthermore, this letter advised Incoal that the demand was being made against Incoal, any trade or business under common control with it, and any person receiving assets from it in a transaction to evade or avoid withdrawal liability. Again, no payments were made.
Accordingly, on November 17, 1986, the Plans filed suit against Incoal and S & H Manufacturing, Inc. ("S & H"), as a trade or business under common control, to collect the withdrawal liability, liquidated damages, accrued interest, attorney's fees and costs, and for declaratory relief.
S & H is a Kentucky corporation engaged in the business of manufacturing, repairing, and selling mining equipment. At all times relevant to this suit, defendants Orville Adkins, Dixie Adkins, Adam Adkins, and Sally Adkins each owned 25% of the outstanding stock of S & H.
Through the discovery process, plaintiffs learned of the existence of additional entities which they alleged were controlled group members. On July 9, 1987, plaintiffs filed an amended complaint naming Kite Coal Sales, Inc. ("Kite Coal"), Double A Farms, and Adkins Coal Co. ("Adkins Coal") as additional defendants. On September 6, 1989, plaintiffs filed a second amended complaint naming Sly Branch Coal Co. ("Sly Branch") as an additional defendant. Both Adkins Coal and Sly Branch, however, have been previously dismissed from this case, Adkins Coal having been dismissed pursuant to Fed.R.Civ.P. 12(b) on October 27, 1988, Connors v. Incoal Inc., 699 F.Supp. 3 (D.D.C.1988), aff'd, 907 F.2d 1227 (D.C.Cir.1990),3 and Sly Branch having been dismissed pursuant to a stipulated dismissal on September 13, 1991.
Double A Farms is a partnership which acquired real estate in and around Harrison County, Kentucky and used such land for recreation and investment purposes, and also to grow tobacco and raise cattle. Defendants Orville, Dixie, Adam, and Sally Adkins — who also owned Incoal — each owned a 25% partnership interest in Double A Farms.
Kite Coal is a Kentucky corporation which engaged in the business of selling coal. At all times relevant to this suit, defendants Orville and Adam Adkins were the sole shareholders of Kite Coal, each owning 50% of its outstanding voting stock.
Neither Double A Farms nor Kite Coal were parties to the Agreements, nor were they participating employers in the Plans.
Incoal and S & H have not opposed plaintiffs' motion for summary judgment, thereby conceding liability. Judgment will therefore be entered in plaintiffs' favor as to these defendants. Only two defendants, Double A Farms and Kite Coal, remain. The issue, thus, is whether either one or both of them is a trade or business under common control with Incoal under § 4001(b)(1) of ERISA, 29 U.S.C. § 1301(b)(1), and therefore is to be treated as a single employer for purposes of assessing and collecting withdrawal liability.
The statutory language at issue here, § 4001(b)(1) of ERISA, 29 U.S.C. § 1301(b)(1), provides that, for purposes of the withdrawal liability provisions in Title IV:
Under regulations prescribed by the Pension Benefit Guaranty 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. The regulations prescribed under the preceding sentence shall be consistent and coextensive with regulations prescribed for similar purposes by the Secretary of the Treasury under section 414(c) of the Internal Revenue Code of 1954.
Thus, when an employer participating in a multiemployer pension plan incurs withdrawal liability, all trades or businesses under common control with that employer are deemed responsible jointly and severally for paying the withdrawal liability.
Interpretation of this provision should take place within the larger context of the purposes behind ERISA and MPPAA. ERISA was established to ensure that employees promised certain benefits upon retirement would, in fact, receive those benefits. The original legislation, however, neglected to include liability provisions for a single employer's withdrawal from a multiemployer pension plan. MPPAA was intended, in part, to discourage employers from withdrawing from such plans and leaving them with inadequately funded liabilities. H.R.Rep. No. 869, 96th Cong., 2d Sess. 67, reprinted in 1980 U.S.Code Cong. & Ad.News, 2918, 2935; see also United Retail & Wholesale Employees Teamsters Union Local No. 115 Pension Plan v. Yahn & Mc Donnell, Inc., 787 F.2d 128, 130-31 (3d Cir.1986), aff'd, 481 U.S. 735, 107 S.Ct. 2171, 95 L.Ed.2d 692 (1987). It does so by imposing upon the withdrawing employer a mandatory liability, defined in the statute as the employer's adjusted "allocable amount of unfunded vested benefits." 29 U.S.C. § 1381(b)(1).
Congress enacted the "common control" provision of § 1301(b) in order "to prevent businesses from shirking their ERISA obligations by fractionalizing operations into many separate entities." Teamsters Pension Trust Fund v. H.F. Johnson, Inc., 830 F.2d 1009 (9th Cir.1987). As the report of the Senate Finance Committee stated:
the committee ... intends to make it clear that the coverage and antidiscrimination provisions cannot be avoided by operating through separate corporations instead of separate branches of one corporation.
S.Rep. No. 383, 93d Cong.2d Sess. 43, reprinted in, 1974 U.S.Code Cong. & Ad. News 4639, 4928.
Once liability of the principal employer is established (here, it is conceded), only two elements need be established to spread that liability to other entities: that they are (1) trades or businesses which are (2) under common control. Defendants Double A Farms and Kite Coal do not argue that they are not under common control with Incoal.4 Thus, the only issue as far as the statute is concerned is whether these two entities are trades or businesses. If they are, under the inexorable operation of § 1301(b)(1), they become jointly and severally liable for Incoal's entire withdrawal liability.
ERISA contains no statutory definition of the term "trade or business." Under ...
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Connors v. Incoal, Inc.
...summary judgment against Incoal and S & H, on the ground that they had conceded liability by failing to oppose the Plans' motion. Incoal, 781 F.Supp. at 52. The District Court then granted Double A Farms' cross-motion for summary judgment, holding that it was not a "trade or business." Id. ......