Corbett v. MacDonald Moving Services, Inc.
| Decision Date | 08 August 1997 |
| Docket Number | No. 1459,D,1459 |
| Citation | 124 F.3d 82 |
| Parties | Robert CORBETT; Alexander Roca; Peter Furtado; Dennis Farrell, as Trustees and Fiduciaries of the Teamsters Local 814 Pension Fund, Plaintiffs-Appellants, v. MacDONALD MOVING SERVICES, INC., Defendant-Appellee. ocket 96-9413. |
| Court | U.S. Court of Appeals — Second Circuit |
Eugene S. Friedman, Friedman & Levine (William K. Wolf, William Anspach, on the brief), New York City, for Plaintiffs-Appellants.
Mark A. Stull (Douglas J. Pick, Pick & Halperin, LLP, New York City, on the brief), Boston, MA, for Defendant-Appellee.
Before: MESKILL, JACOBS, and LEVAL, Circuit Judges.
A Chapter 11 debtor in bankruptcy, Santini Brothers, Inc. ("Santini"), ceased doing business in 1991 and laid off its employees, thereby incurring statutory "withdrawal liability" to the Teamster Local 814 Pension Fund, an ERISA multi-employer pension plan. See 29 U.S.C. §§ 1381-1405. Santini and the parent company that owns 100% of its stock--MacDonald Moving Services, Inc. ("MacDonald")--undertook in Santini's confirmed Plan of Reorganization to pay to the Fund, on specified terms, the amount of withdrawal liability that was estimated in the Fund's Proof of Claim; and the Plan of Reorganization discharged the parent as well as Santini in respect of the withdrawal obligation. Prior to the June 1992 confirmation of the Plan of Reorganization, the amount of the withdrawal liability was recalculated and found to be substantially greater, but no amended Proof of Claim was filed. Nothing has been paid to the Fund by Santini or MacDonald.
In this lawsuit, the trustees and fiduciaries of the Fund sued MacDonald to collect the full, recalculated amount of the withdrawal liability. In October 1996, the United States District Court for the Eastern District of New York (Amon, J.) denied the Trustees' motion for summary judgment, and granted MacDonald's summary judgment motion on the ground of res judicata, thereby limiting MacDonald's withdrawal obligation to the undertakings in the Plan of Reorganization. The Trustees appeal, raising much the same issues they raised before the district court.
We affirm.
The facts are undisputed. Santini and Teamsters Local 814 ("Local 814") were parties to collective bargaining agreements under which Santini made periodic contributions to the ERISA Fund, a multi-employer plan within the meaning of 29 U.S.C. §§ 1002(37) and 1301(a)(3). The Fund was formed pursuant to an Agreement and Declaration of Trust between Local 814 and several employers of the participants; its purpose is to collect and invest employer contributions in order to provide employee benefits. Appellants Robert Corbett, Alexander Roca, Peter Furtado, and Dennis Farrell are the trustees and fiduciaries of the Fund (collectively, the "Trustees"), as well as the sponsors of the pension plan established and maintained by the Fund.
Appellee MacDonald is a corporation that has at all relevant times owned 100% of Santini's stock. MacDonald and Santini are therefore under common control within the meaning of I.R.C. §§ 414 and 1563, 26 U.S.C. §§ 414 and 1563, and constitute a single employer pursuant to 29 U.S.C. § 1301(b)(1).
On April 15, 1991, Santini filed a voluntary petition in bankruptcy under Chapter 11, 11 U.S.C. § 1101 et seq., in the United States Bankruptcy Court for the District of New Jersey (the "Bankruptcy Court") (Chapter 11 Case No. 91-22419). On September 1, 1991, Santini began laying off employees who were represented by Local 814, and the Trustees soon thereafter determined that Santini had permanently ceased all covered operations under the Fund. In accordance with the procedures in the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 In February 1992, the Trustees sent letters to MacDonald and Santini, advising of their determination that Santini had permanently ceased all covered operations under the Fund on or about December 27, 1991, stating that MacDonald and Santini were under common control, and demanding that the withdrawal liability be paid in full by April 1, 1992. The letters computed the withdrawal liability at $138,985, but added that the amount was subject to recalculation:
U.S.C. §§ 1101-1461 ( ERISA), the Trustees calculated Santini's withdrawal liability, and on October 22, 1991 (nine days before the specified bar date) filed a general unsecured claim with the bankruptcy court in the amount of $138,985, representing Santini's as-then-calculated withdrawal liability.
[t]he withdrawal liability was calculated based upon the latest actuarial valuation available at the time of Santini's withdrawal. The Trustees reserve the right to redetermine the company's liability upon completion of the July 1, 1991 actuarial valuation, and adjust the company's liability accordingly.
MacDonald timely received that letter.
On March 5, 1992, Santini's bankruptcy counsel responded to both letters, acknowledged that Santini and MacDonald were under common control and were therefore jointly responsible for each other's withdrawal liability, and stated that the joint liability would be taken care of in the Plan of Reorganization:
Santini is sensitive to the fact that it will be responsible for payment of withdrawal liability to the Fund. Accordingly, it would like to provide for same within its Plan of Reorganization rather than burden MacDonald with payment of the entire amount. Santini's Plan of Reorganization concentrates on both the Santini and MacDonald operations and is relying on the excess cash flow produced by both businesses to fund the Plan.
With regard to the Fund, the Plan would provide for payment of the amount due in equal monthly installments, with interest, termed out over sixty (60) months. With the exception of providing for the Fund, Santini's Plan of Reorganization is ready to file. Therefore, we would like to resolve this matter as quickly and as efficiently as possible so that we can make provisions for the Fund and file the Plan with the Bankruptcy Court.
On March 25, 1992, the Trustees sent Santini and MacDonald written demand for payment of recalculated withdrawal liability in the amount of $308,815, to be paid in five quarterly installments beginning on May 1, but no amended Proof of Claim was submitted to the Bankruptcy Court. It appears that neither Santini nor MacDonald ever responded to the Trustees' demands, or initiated ERISA arbitration pursuant to 29 U.S.C. § 1401(a)(1). On June 19, 1992, the Trustees sent out another pair of letters, noting that the May 1 payment had not been received.
On June 25, 1992, the Bankruptcy Court entered its Order confirming the Plan of Reorganization filed by Santini (the "Reorganization Plan" or the "Santini Plan"). The Santini Plan includes a provision that the withdrawal liability claim will be paid out of the "combined excess cash flow" of both Santini and MacDonald. Reorg. Plan § 4.8. Section 13.2 indicates that the Plan discharges all debts and claims against Santini and its affiliates; § 14.16 effects the release of all claims against Santini and its affiliates.
The Trustees took no appeal from the Bankruptcy Court's confirmation order.
About eight months after confirmation of the Reorganization Plan, in March 1993, the Trustees sent for filing in the Bankruptcy Court a "First Amended Proof of Claim" reflecting a withdrawal liability in the amount of $308,815. To date, neither Santini nor MacDonald has made any withdrawal liability payments.
The complaint in this action seeks to recover Santini's withdrawal liability from MacDonald, its now-dissolved parent company, MacDonald Moving & Storage, Inc., and Pasquale On June 1, 1993, the Trustees moved for summary judgment against MacDonald in the amount of $308,315, plus interest, liquidated damages, and attorney's fees and costs. The Trustees argued that because neither MacDonald nor Santini initiated arbitration after the Trustees assessed the amount owed for withdrawal liability, MacDonald had waived its right to challenge the revised withdrawal liability.
Santini. 1 The action was filed on October 28, 1992--three months after the Santini plan was confirmed and over four months before the Trustees filed their amended Proof of Claim
MacDonald cross-moved for summary judgment limiting its liability to the terms set forth in the Reorganization Plan. MacDonald argued that the Trustees' claim was barred because the Plan discharged MacDonald's liability as well as Santini's, and because the Trustees did not challenge the bankruptcy court's power to foreclose their claim against MacDonald. In opposition, the Trustees argued, inter alia, that the Santini Plan did not purport to discharge creditors' claims against MacDonald, and that even if and to the extent that the Plan did purport to do so, the Order of Confirmation lacks res judicata effect, because: 1) bankruptcy courts lack jurisdiction to discharge third-party nondebtors; 2) ERISA claims are outside Bankruptcy Court jurisdiction because they are not "core" proceedings under 28 U.S.C. § 157(b); 3) the amount of the claim was unascertainable, and therefore the claim was not ripe for adjudication until after the confirmation; and 4) the public policy interests served by ERISA and the Bankruptcy Code outweigh the finality interest served by the doctrine of res judicata.
On October 23, 1996, Judge Amon entered a judgment granting MacDonald's motion for summary judgment and denying the Trustees' motion.
It is uncontested that under the common control doctrine, MacDonald is jointly and severally liable for Santini's withdrawal liability. By virtue of 29 U.S.C. § 1301(b)(1) of ERISA and applicable regulations at 26 C.F.R. §§ 1.414(c)-1 through 1.414(c)-5, all businesses under common control are treated as a single employer for purposes of...
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