Debreceni v. Outlet Co.

• Decision Date: 18 February 1986
• Docket Number: No. 85-1730,85-1730
• Citation: 784 F.2d 13
• Parties: , 7 Employee Benefits Ca 1118 Helen DEBRECENI, Fund Manager of the New England Teamsters and Trucking Industry Pension Fund, Plaintiff, Appellant, v. The OUTLET COMPANY, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 13

784 F.2d 13

54 USLW 2495, 7 Employee Benefits Ca 1118

Helen DEBRECENI, Fund Manager of the New England Teamsters and Trucking Industry Pension Fund, Plaintiff, Appellant, v. The OUTLET COMPANY, Defendant, Appellee.

No. 85-1730.

United States Court of Appeals First Circuit.

Argued Jan. 8, 1986.

Decided Feb. 18, 1986.

James T. Grady with whom Gabriel O. Dumont, Jr. and Grady, Dumont & Dwyer, Boston, Mass., were on brief, for plaintiff, appellant.

H. Daniel Hassenfeld with whom Paul G. Wallach and Herrick & Smith, Boston, Mass., were on brief, for defendant, appellee.

Before COFFIN, Circuit Judge, ROSENN, ^* Senior Circuit Judge, and BOWNES, Circuit Judge.

ROSENN, Senior Circuit Judge.

Helen Debreceni, Fund Manager of the New England Teamsters and Trucking Industry Pension Fund (the Fund), brought suit in the United States District Court for the District of Massachusetts against The Outlet Company (Outlet) to collect $312,890 "withdrawal liability" under the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), 29 U.S.C. Sec. 1381 et seq. (1982). ¹ Pursuant to a 1984 amendment of the MPPAA, an employer who had a binding agreement to withdraw from a pension fund as of September 26, 1980 is exempt from liability under the MPPAA. Outlet had executed a contract in connection with the sale of its business to take effect retroactively on September 25, 1980. This appeal presents a narrow question of first impression: whether a contract dated before but executed after September 26 constitutes a binding agreement on that date for MPPAA purposes. The district court granted summary judgment for Outlet, holding it had a binding agreement as of September 25, 1980, and was exempt. Debrecini appeals. We conclude otherwise and reverse.

I.

For many years, Outlet owned and operated retail department stores, and employed members of Local Union No. 251 of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen, and Helpers of America under various collective bargaining agreements. These agreements provided for contributions by Outlet on behalf of employees covered by the agreements to the Fund, a multiemployer pension plan.

On August 29, 1980, United Department Stores, Inc. (United) made a written offer to purchase Outlet's department store assets, subject to the execution of definitive agreements of sale. The companies commenced negotiations. According to a letter from United's counsel to Outlet's counsel dated September 14, the companies had before that date reached an agreement in principle--subject to the approval of Outlet's board of directors (the Board) at its September 25 meeting--to sell Outlet's store assets to United. At the September 25 meeting, the Board authorized Outlet's officers to complete the sale or terminate negotiations as they saw fit.

Several days later, on September 30, Outlet's president and vice president signed an "Agreement for the Sale and Purchase of Assets and Capital Stock" (the Agreement). The Agreement had been prepared before the Board's meeting and was signed by United's president by September 26. The Agreement provides in its opening words that it is "made the 25th day of September, 1980," and concludes with the statement that the parties "have executed this Agreement the day and year first above written" (emphasis added). It further provides: "The execution hereby by the President or a Vice President of the Seller [Outlet] will make this Agreement a binding obligation of the Seller, enforceable in accordance with its terms" (emphasis added). Outlet's Board ratified the Agreement on October 30, 1980. The Bill of Sale, notices of assignments of eight separate collective bargaining agreements, and two indemnification agreements executed in November 1980 each refer to the Agreement of Sale "dated as of September 25, 1980." There is no claim or suggestion that the parties to the Agreement dated it and intended that it be effective on September 25, 1980, in anticipation of the 1984 amendment.

The Agreement provides that it is to be construed and governed by the laws of New York. The parties have stipulated that as a result of the Agreement, Outlet ceased to have an obligation to contribute to the Fund on or about October 24, 1980. The parties agree that Outlet did not endanger the Fund's financial stability by withdrawing.

On April 30, 1982, Debreceni notified Outlet that the Fund had calculated that the company was liable under the MPPAA for $312,890 withdrawal liability, which she proposed be paid in 83 monthly installments. Outlet did not use the MPPAA arbitration procedures to dispute the amount. Subsequently, Debreceni sent Outlet a notice of default and filed this suit.

During the pendency of the suit, in response to a Supreme Court decision that found constitutional the MPPAA's retroactive application to employers who had withdrawn from multiemployer pension plans before its enactment on September 26, 1980, Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984), Congress amended the MPPAA. The amendment, section 558 of the 1984 tax bill, provides that employers who withdrew from pension plans before the MPPAA's enactment on September 26, 1980, or had binding agreements to withdraw before that date and withdrew by the end of 1980, are exempt from withdrawal liability under the Act. See Deficit Reduction Act of 1984 (DEFRA), 98 Stat. 494, 899, Pub.L. 98-369, Sec. 558. ²

Pursuant to section 558, Outlet moved for summary judgment, arguing that its Agreement with United executed after the MPPAA's enactment on September 26 constituted an agreement to withdraw from the Fund which by its terms bound it before that date. Debreceni moved for summary judgment on other grounds. The district court granted Outlet's motion holding that the defendant "had reached agreement to sell its assets as of Sept. 25, 1980. See Viacom International Inc. v. Tandem Productions Inc., 368 F.Supp. 1264, 1270 (S.D.N.Y.1974), aff'd, 526 F.2d 593 (2d Cir.1975)."

II.

Congress enacted the Employment Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Sec. 1001 et seq. (1982), in a comprehensive attempt to regulate the funding, management, operation, benefit provisions, and insurance of private employer pension plans. A central purpose in enacting ERISA was "to prevent the 'great personal tragedy' suffered by employees whose vested benefits are not paid when pension plans are terminated." Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 374, 100 S.Ct. 1723, 1732-33, 64 L.Ed.2d 354 (1980) (footnote omitted). Under ERISA, an employer who withdrew from a multiemployer pension plan would be liable under some circumstances for its proportionate share of the unfunded portion of vested benefits in the plan. 29 U.S.C. Sec. 1364 (1982). An employer withdrawing from a plan could escape liability if the plan did not terminate within five years of the withdrawal. Id.

Congress enacted the MPPAA because it was concerned that many employers were withdrawing from multiemployer plans, gambling that the plans would survive for five years and they would not be liable for unfunded benefits under ERISA. H.R.Rep. No. 869, 96th Cong., 2d Sess., 54-55, reprinted in 1980 U.S.Code Cong. & Ad.News 2918, 2922-23. The MPPAA, enacted on September 26, 1980, imposed "withdrawal liability" on any employer who withdrew from a plan after April 29, 1980. An employer's withdrawal liability can be defined as its portion of the present value of a plan's unfunded liability for vested benefits at the time it voluntarily leaves the plan. See Textile Workers Pension Fund v. Standard Dye & Finishing Co., Inc., 725 F.2d 843, 849 (2d Cir.), cert. denied sub nom. Sibley, Lindsey & Curr Co. v. Bakery, Confectionary & Tobacco Workers International Union, --- U.S. ----, 104 S.Ct. 3554, 82 L.Ed.2d 856 (1984). Congress' purpose in uniformly imposing withdrawal liability was to "relieve the funding burden on remaining employers and to eliminate the incentive to pull out of a plan which would result if liability were imposed only on a mass withdrawal by all employers." H.R.Rep. No. 869, supra at 67, reprinted in 1980 U.S. Code Cong. & Ad.News at 2935. See generally Standard Dye & Finishing Co., Inc., 725 F.2d at 848-49.

Congress debated the merits of withdrawal liability throughout 1979 and much of 1980. From the beginning, it was agreed that any provision adopted would have retroactive effect, "to prevent employers from avoiding the adverse consequences of withdrawal liability by withdrawing from plans while such liability was being considered by Congress." R.A. Gray & Co., 104 S.Ct. at 2715. Committees in both houses adopted versions of the MPPAA in April 1980, with the retroactively effective date set at February 27, 1979, the day Congress first considered the proposal. Id. Following strong lobbying, Congress eased the retrospective burden of the legislation and moved up the effective retroactive date of the MPPAA as enacted to April 29, 1980. Id.; see 29 U.S.C. Sec. 1461(e)(2)(A) (1982) (amended 1984).

Following its enactment, many employers hotly contested the MPPAA, raising numerous constitutional issues. Two of these cases are now before the Supreme Court. Connolly v. Pension Benefit Guaranty Corp., No. 84-1555, and Woodward and Sand Co., Inc. v. Pension Benefit Guaranty Corp., No. 84-1567, argued, 54 U.S.L.W. 3390 (U.S. Dec. 2, 1985). The Act's retroactive effect particularly came under attack. See, e.g., Republic Industries v. Teamsters Joint Council No. 83 Pension Fund, 718 F.2d 628 (4th Cir.1983) (retroactive provision constitutional), cert. denied, --- U.S. ----, 104 S.Ct. 3553, 82 L.Ed.2d 855 (1984); Shelter Framing Corp. v. Pension Benefit Guaranty Corp., 705 F.2d 1502 (9th Cir.1983) (provision unconstitutional), cert. denied, --- U.S. ----, 104 S.Ct. 3553, 82 L.Ed.2d 855 (1984). The Supreme Court held constitutional the retroactive effect of the MPPAA...