Connors v. Mulvehill
| Decision Date | 05 February 1988 |
| Docket Number | Civ. A. No. 87-AR-0039-S. |
| Citation | 679 F. Supp. 1071 |
| Parties | Joseph P. CONNORS, Sr., et al., Plaintiffs, v. Van MULVEHILL, Defendant. |
| Court | U.S. District Court — Northern District of Alabama |
Patrick K. Nakamura, Robert H. Stropp, Jr., Stropp & Nakamura, Birmingham, Ala., David C. Bernabucci, Asst. General Counsel, United Mine Workers of America, Health and Retirement Funds, Peter H. Gould, Deputy Asst. General Counsel, Pension Benefit Guar. Corp., Washington, D.C., for plaintiffs.
Charles L. Howard, Jr., Howard & Howard, Birmingham, Ala., for defendant.
The court has for consideration the motion of defendant, Van Mulvehill, for summary judgment. The court also has for consideration the motion of plaintiffs, Joseph P. Connors, Sr., et al., as Trustees, for partial summary judgment, and the motion of plaintiffs, in the alternative, to require arbitration of the present controversy. The material and controlling facts are not in dispute. The primary reason the court has allowed motions for summary judgment to be filed after the pretrial conference was the court's growing belief that the case could be disposed of under Rule 56, F.R.Civ.P. That belief is no longer tentative.
On and prior to October 27, 1981, Van Mulvehill Coal Co., Inc., was a corporation organized and existing under the laws of the State of Alabama. All of its capital stock was then owned by Van Mulvehill, defendant herein. The corporation was engaged in the mining of coal and was a signatory to the National Bituminous Coal Wage Agreement of 1978, under the terms of which it was a "participating employer" and was thus obligated to make contributions to certain "Plans" or "Funds," commonly referred to as The United Mineworkers of America Health and Retirement Funds, which are presently managed by plaintiffs herein, Joseph P. Connors, Sr., et al, as Trustees.
On October 27, 1981, Mulvehill sold and transferred to John Calvert all of the capital stock of Van Mulvehill Coal Co., Inc. Mulvehill retained no interest whatsoever in the corporation.
The collective bargaining agreement between the corporation and the United Mine Workers had expired on March 27, 1981, removing any contractual obligation thereafter to contribute to the Funds, except, perhaps, for so-called "withdrawal liability." No contributions to the Funds were made by the corporation after March 27, 1981. If any contributions were made to the Funds prior to the expiration of the collective bargaining agreement, the actual date of the last contribution is not shown.
Inter alia, the written agreement by which this stock sale was effectuated on October 27, 1981, contained the following obligation undertaken by Mulvehill:
Mulvehill shall assume all outstanding indebtedness owed by or obligated by the corporation, and shall save and hold harmless Calvert, his heirs, administrators and assigns forever, against all lawful claims against said corporation.
(emphasis supplied).
The contract also contained the following promise by Calvert:
Calvert shall upon the execution of this agreement, assume all control, operation and management of the corporation, and shall save and hold harmless Mulvehill for any and all liability, arising out of any and all future operation and management of said corporation, and the conducting of the business of said corporation shall from the date of execution of this agreement become the sole and singular responsibility of Calvert.
The contract also contained the following language respecting the future ownership of the corporation's accounts receivable:
Calvert does not receive hereby any accounts receivable owed or accruing to the corporation, said accounts to become the sole and complete property of Mulvehill.
The agreement contained no reference whatever to the Funds, or to any present or prospective corporate obligation to the Funds. For aught appearing, as of October 27, 1981, Mulvehill was blissfully unaware of any theoretically possible present or future obligation by his corporation of the kind and character here claimed by plaintiffs, and until this complaint was filed Mulvehill had no notice whatever of an alleged "withdrawal liability" or other "employer" obligation to plaintiffs or to their predecessor Trustees of the Funds.
There is no evidence whatever offered by plaintiffs to indicate any purpose by Mulvehill in selling his corporation to evade or to avoid any obligation, corporate or personal, to contribute to the Funds.
After October 27, 1981, the corporation continued its mining operations under the exclusive ownership and management of Calvert. At some undesignated time, the corporation was called upon to make contributions to the Funds which may have became due upon the corporation's "withdrawal" as provided by the Multi-Employer Pension Plan Amendments Act of 1980 (MPPAA), 29 U.S.C. § 1381, et seq., which is an addendum to the Employment Retirement Income Security Act of 1974 (ERISA). 29 U.S.C. § 1001, et seq.
On July 28, 1984, Calvert died. Letters of administration were issued on Calvert's estate by the Probate Court of Blount County, Alabama on September 25, 1984, and Calvert's estate was finally settled on June 18, 1986, without any claim having been filed against it by these plaintiffs or by anyone on their behalf.
On some date after the October 27, 1981, sale, but long before Calvert's death, plaintiffs notified the corporation of an alleged withdrawal liability to the Funds in the amount of $70,075.44 and demanded payment as required by 29 U.S.C. §§ 1382 and 1399. This sum was arrived at by an ex parte computation by plaintiffs pursuant to 29 U.S.C. § 1391(d). The corporation thereafter failed to pay this alleged withdrawal liability, failed to furnish any additional relevant information which would be required by 29 U.S.C. § 1399(b)(2)(A) in the event the employer disputed the obligation, and failed to request the statutorily permitted review of the Trustees' determination by an impartial arbitrator under 29 U.S.C. § 1401. Under the circumstances, the corporation was in irretrievable default under 29 U.S.C. § 1399(c)(5), and was subject to an automatic judgment.
Neither plaintiffs, nor Calvert, nor any employee or representative of the corporation, ever notified Mulvehill, or called upon Mulvehill, for the purpose of giving him any opportunity to express himself or to defend either the corporation or himself during the procedures by which the final determination of corporate withdrawal liability under MPPAA was made. As could be expected under this state of facts, plaintiffs, on September 28, 1983, obtained a default judgment against the corporation in the United States District Court for the District of Columbia. This judgment was in the amount of $85,275.83. As already stated, Mulvehill received no notice whatsoever of this collection action against the corporation until the instant action against him was filed.
Initially, plaintiffs here sought to enforce against Mulvehill personally the $85,275.83 judgment which they had obtained against his former corporation. Plaintiffs now concede (1) that "due process" would require notice to Mulvehill prior to any adjudication of any sum owed by him as an alleged indemnitor of the corporation, and (2) that if this court has jurisdiction, that jurisdiction is based not on ERISA, as originally claimed, but on the diversity of citizenship of the parties.
Plaintiffs conspicuously rely only upon one theory of liability against Mulvehill, namely, a right under the Alabama law of contract. Plaintiffs do not claim any direct withdrawal liability against Mulvehill as a statutory "employer" under 29 U.S.C. § 1383, or a secondarily liable alleged "seller of assets," under 29 U.S.C. § 1384. Plaintiffs had good reasons not to invoke 29 U.S.C. §§ 1383 and 1384 as will hereinafter appear.
Plaintiffs are correct in changing their minds and conceding that this court lacks jurisdiction under ERISA. An excellent argument can be made that this court totally lacks jurisdiction. Mulvehill has not made that argument, not only because he believes that he has an absolute defense on the merits but probably because he may not want to throw himself and plaintiffs together into the arbitration "briar patch." Following that route, an arbitrator would be called upon to rule on the MPPAA statute of limitations question, as well as on Mulvehill's liability and on the "withdrawal liability" computation itself, and Mulvehill would also suffer the uncertainty and expense of the arbitration process.
Plaintiffs invoked the jurisdiction of this court, and not Mulvehill. Now they retreat ambiguously by asking, in the alternative, that the court order the arbitration of the dispute which they themselves brought here. This change of mind is, in effect, a confession that plaintiffs may have erroneously invoked this court's jurisdiction in the first place. Plaintiffs' "fall back" position, if it can be tolerated, must be construed as a motion to dismiss the action without prejudice, because if this court lacks jurisdiction to enter a judgment on the merits, it lacks jurisdiction to order arbitration. Mulvehill cannot be ordered to arbitrate a dispute that he was never called upon to arbitrate. Plaintiffs have not attempted to perform the MPPAA prerequisites under 29 U.S.C. § 1399 which might lead to arbitration vis-a-vis Mulvehill. There is no persuasive precedent for the Funds to come into federal court under MPPAA before making formal demand on an alleged "withdrawal liability" obligor. This court is not persuaded by Tri-State Rubber & Equipment, Inc. v. Central State Southeast & Southwest Areas Pension Fund, CA No. 866-70091, an unreported case decided by the District Court for the Eastern District of Michigan on November 6, 1986 Available on WESTLAW, 1986 WL 15680, in which that court decided that "it is more...
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In re UMWA Employee Ben. Plans Litigation
...4 (July 1984). The Trusts took a similar position in Connors v. B & W Coal Co., 646 F.Supp. 164 (D.D.C.1986) and in Connors v. Van Mulvehill, 679 F.Supp. 1071 (N.D.Ala. 1988). Additionally, in Garland Coal Co., 7 Employee Benefits Cas. (BNA) 1771, 1772-73 (1986), the Trusts argued in an arb......
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