FH Cobb Co. v. NYS Teamsters Conference

• Decision Date: 17 April 1984
• Docket Number: No. 82-CV-765.,82-CV-765.
• Parties: F.H. COBB COMPANY and Super Food Services, Inc., Plaintiffs, v. NEW YORK STATE TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND; Paul E. Bush, Rocco F. Deperno, Victor Mousseau, Jack Canzoneri, Irving Wisch, Kepler Vincent and T. Howard Nolan as Trustees of the New York State Teamsters Conference Pension and Retirement Fund, Defendants.
• Court: U.S. District Court — Northern District of New York

584 F. Supp. 1181

F.H. COBB COMPANY and Super Food Services, Inc., Plaintiffs, v. NEW YORK STATE TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND; Paul E. Bush, Rocco F. Deperno, Victor Mousseau, Jack Canzoneri, Irving Wisch, Kepler Vincent and T. Howard Nolan as Trustees of the New York State Teamsters Conference Pension and Retirement Fund, Defendants.

No. 82-CV-765.

United States District Court, N.D. New York.

April 17, 1984.

Bond, Schoeneck & King, Syracuse, N.Y., for plaintiffs; L. Lawrence Tully, Syracuse, N.Y., of counsel.

Maloney, Viviani, Higgins & Kelly, New York City, for defendants; Arthur J. Viviani, New York City, of counsel.

MEMORANDUM-DECISION AND ORDER

McCURN, District Judge.

Under the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), a participating employer that withdraws from a multiemployer pension plan is required to continue funding its proportionate share of the plan's unfunded benefit obligations. 29 U.S.C. § 1381. Congress imposed withdrawal liability upon employers in order 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, 96th Cong., 2d Sess., see generally, Textile Workers Pension Fund v. Standard Dye & Finishing Co., 725 F.2d 843 (2d Cir.1984), reprinted in 1980 U.S.Code Cong. & Ad.News 2918, 2935. Although the MPPAA was enacted on September 26, 1980, withdrawal liability was imposed retrospectively upon any employer withdrawing on or after April 29, 1980. On this motion by plaintiffs for summary judgment the court must determine whether any genuine issue exists as to plaintiffs' claim that F.H. Cobb Co. "permanently ceased all covered operations" within the meaning of the MPPAA, 29 U.S.C. § 1383, prior to April 29, 1980, and is therefore not subject to withdrawal liability.

BACKGROUND

The background of this action, as established by affidavits and documentary evidence, and by uncontroverted statements pursuant to Local Rule 10(c), is as follows. F.H. Cobb Co., a subsidiary of Super Food Services Inc., was engaged in the business of distributing food and non-food items on a wholesale basis to retail customers. In January, 1980, Super Food Services, Inc. decided to discontinue the entire F.H. Cobb operations for business reasons unrelated to F.H. Cobb's pension operations. The Chairman of the Board of Super Food explained to the shareholders that the New York operations were being discontinued because of F.H. Cobb's "inability to achieve a satisfactory return of assets," and because of "inflationary pressures on the balance sheet." Plaintiffs' Exhibit 2. Accordingly Super Food signed an agreement with S.M. Flickinger, Inc. on January 16, 1980, providing for the sale or assignment by Super Food to Flickinger of all F.H. Cobb store and warehouse leases and related assets. The closing took place on February 15, 1980, and F.H. Cobb "transferred all of its retail customers to Flickinger by March 9, 1980." Plaintiffs' 10(c) Statement ¶ 15. Since March 8, 1980, F.H. Cobb has not engaged in the wholesale distribution of food and non-food items to retail customers.

However, in February of 1980, F.H. Cobb advised Teamsters Local Union No. 317 that it would need approximately 10 employees for a period of time, after all other employees had been laid off, to perform work incidental to the closure of operations; i.e., moving inventory and equipment out of the F.H. Cobb warehouse. F.H. Cobb stated in its request that such employees would be considered to "have completed their obligation to us regarding paragraph 26.5 of our agreement," Plaintiffs' Exhibit 5, a reference to the employees' termination for the purpose of qualifying for severance pay. Plaintiffs state in their 10(c) Statement:

8. Between March 8 and May 16, 1980, F.H. Cobb employed a small group of employees — ranging in number from nine to sixteen, or between 5% and 9% of the pre-closure workforce — for the sole and limited purpose of performing tasks that were necessary and incidental to the permanent closure of the business operation. Specifically, these employees transferred the remaining merchandise from the F.H. Cobb warehouse to the Flickinger warehouse and maintained F.H. Cobb's warehouse during the transfer process.

9. None of these employees performed driving or warehousing services related to F.H. Cobb's normal business operation of distributing food and non-food items to retail customers. None of these employees worked for F.H. Cobb after May 16, 1980.

10. In May of 1980, F.H. Cobb made its final contribution to the New York State Teamsters Conference Pension and Retirement Fund in the amount of $846.30 for the hours worked by these employees between May 1 and May 16. F.H. Cobb also contributed $865.30 in May of 1980 as deferred compensation on behalf of certain employees who were entitled to accrued vacation pay and severance pay for services rendered over prior months and years, and $49.00 on behalf of an employee who was out of work because of a Workers' Compensation Injury.

As discussed previously, on September 26, 1980, Congress enacted the MPPAA and provided that the withdrawal liability provisions contained therein were effective retroactively to April 29, 1980. On May 4, 1982 and June 10, 1982, the Teamsters Pension Fund sent letters to the attorneys for Super Food and F.H. Cobb asserting that because the plaintiffs had not ceased contributing to the Pension Fund until May, 1980, that plaintiffs were required to pay withdrawal liability of $846,385.00 to the Pension Fund within 60 days. Plaintiffs therefore commenced this action, in July of 1982, for a declaration of their non-liability.

Discussion

Although plaintiffs' complaint, which contains 12 causes of action, raises a variety of challenges to the MPPAA and its application to plaintiffs, the only issue on this summary judgment motion is whether F.H. Cobb completely withdrew from the multiemployer pension plan prior to April 29, 1980.

Before reaching that issue, it is necessary to address defendants' preliminary contention that this matter must be submitted to arbitration. Although the MPPAA does provide that disputes concerning determinations of employer obligations to a plan "shall be resolved through arbitration," 29 U.S.C. § 1401, the particular issue presented here — the determination of whether there are genuine issues of fact as to plaintiffs' withdrawal from the plan, or whether plaintiffs are entitled to judgment as a matter of law — may be adjudicated in federal district court without exhausting arbitral remedies. I.A.M. National Pension Plan, Benefit Plan C v. Stockton TRI, 727 F.2d 1204 at 1208-1210 (D.C. Cir.1984).

Turning then to the merits, a "complete withdrawal" from a multiemployer pension plan must satisfy the requirements of 29 U.S.C. § 1383:

(a) Determinative factors. For the purposes of this part, a complete withdrawal from a multiemployer plan occurs when an employer —

(1) permanently ceases to have an obligation to contribute under the plan, or

(2) permanently ceases all covered operations under the plan.

As a number of courts have noted, the legislative history of the MPPAA reveals that Congress intended the cessation of "virtually all operations" to constitute "complete withdrawal" for MPPAA purposes. Plaintiffs direct the court's attention to the following excerpts:

It is intended, however, that a complete withdrawal occurs, as under current law, where an employer has ceased virtually all operations at the facility for which the employer makes contributions to the plan. H.R.Rep. No. 869, 96th Cong., 2d Sess., reprinted in 1980 U.S.Code Cong., Ad.News 2918, 2936 emphasis added. The bill would treat an employer as withdrawing from a multiemployer plan when the employer (1) permanently ceases to have an obligation to contribute under the plan, or (2) permanently ceases all covered operations under the plan. Current law does not define a withdrawal. As under current law, a virtually complete cessation of contributions, e.g., a 98 percent reduction, that has the same effect on the plan as a complete cessation of contributions, is a complete withdrawal. H.R.Rep. No. 869, 96th Cong., 2d Sess. reprinted in 1980 U.S.Code Cong., Ad.News 2918, 2941 emphasis added.

The caselaw uniformly follows this ...