Flying Tiger Line v. CENT. STATES, ETC., PEN. FUND

• Decision Date: 17 October 1986
• Docket Number: Civ. A. No. 86-304 CMW.
• Parties: The FLYING TIGER LINE, INC., et al., Plaintiffs, v. CENTRAL STATES, SOUTHWEST and SOUTHEAST AREAS PENSION FUND, et al., Defendants.
• Court: U.S. District Court — District of Delaware

659 F. Supp. 13

The FLYING TIGER LINE, INC., et al., Plaintiffs, v. CENTRAL STATES, SOUTHWEST and SOUTHEAST AREAS PENSION FUND, et al., Defendants.

Civ. A. No. 86-304 CMW.

United States District Court, D. Delaware.

October 17, 1986.

R. Franklin Balotti and Jesse Finkelstein of Richards, Layton & Finger, Wilmington, Del., for plaintiffs; Cravath, Swaine & Moore, New York City, of counsel.

Irving Morris of Morris & Rosenthal, Wilmington, Del., for defendant Central States, Southeast and Southwest Areas Pension Fund; Rodney F. Page, Michael Evan Jaffe, David T. Dekker and James J. Armbruster of Arent, Fox, Kintner, Plotkin & Kahn, Washington, D.C., of counsel.

David C. McBride and Barry M. Willoughby of Young, Conaway, Stargatt & Taylor, Wilmington, Del., for defendant Teamsters Pension Trust Fund of Philadelphia and Vincinity; Thomas W. Jennings, Sanford G. Rosenthal and Kent Cprek of Sagot & Jennings, Philadelphia, Pa., of counsel.

David C. McBride and Barry M. Willoughby of Young, Conaway, Stargatt & Taylor, Wilmington, Del., for defendant Western Pennsylvania Teamsters and Employers Pension Fund; Henry M. Wick, Jr., Charles J. Streiff and Vincent P. Szeligo of Wick, Rich, Fluke & Streiff, Pittsburgh, Pa., of counsel.

James L. Patton, Jr. of Young, Conaway, Stargatt & Taylor, Wilmington, Del., for defendant, Teamsters Local 641 Pension Fund; D. Gayle Loftis, Jersey City, N.J., of counsel.

Barry M. Willoughby of Young, Conaway, Stargatt & Taylor, Wilmington, Del., for defendant Trucking Employees of North Jersey Welfare Fund, Inc.; Sidney Reitman and Bennett D. Zurofsky of Reitman, Parsonnet, Maisel & Duggan, Newark, N.J., of counsel.

Barry M. Willoughby of Young, Conaway, Stargatt & Taylor, Wilmington, Del., for defendant Central Pennsylvania Teamsters Pension Fund; Charles R. Osinski, Allentown, Pa., of counsel.

CALEB M. WRIGHT, Senior District Judge.

In July of 1986, plaintiffs Flying Tiger Line, Inc., Tiger International, Inc. and Warren Transport (collectively "Tiger"), brought this action seeking declaratory and injunctive relief against the defendant pension funds ("Funds").¹ The action contained three counts. The first count sought a declaration that Tiger was not an "employer" for the purpose of the Multiemployer Pension Plan Amendments Act ("MPPAA") and was therefore not subject to the MPPAA's procedures. The second and third counts were facial and as-applied challenges to MPAA's constitutionality.

This Court issued an Opinion and Order on September 12th denying defendants' motion to dismiss. The Court held that because the Tiger companies faced irreparable injury if forced to make interim payments, the normal requirement of exhaustion of administrative remedies would not be required. Accordingly, this Court determined that it would decide the Count I issue of "employer" status before requiring Tiger to go through the arbitration procedures.² The Court stayed resolution of the facial constitutional challenge until the Supreme Court rules on the pending appeal of United Retail & Wholesale Employees Teamsters Union Local 115 Pension Plan v. Yahn & McDonnell, 787 F.2d 128 (3d Cir.1986). 55 U.S.L.W. 3127 (U.S. August 14, 1986) (No. 86-231). The Court also stayed the as-applied challenge because no one has applied MPPAA to Tiger yet. Now before the Court are the Funds' various reconsideration motions.³

FACTS

The factual setting is the same as for the prior opinion. For a description of the facts, see Op. at 1-5.

IRREPARABLE INJURY

This Court decided on September 12th that it had the power to hear Count I because Tiger's claim fit into the irreparable injury exception to the exhaustion doctrine. When a plaintiff is confronted with irreparable injury if forced to go through administrative proceedings before coming to court, the plaintiff may bypass these procedures and go directly to court. Republic Industries, Inc. v. Central Pennsylvania Teamsters Pension Fund, 693 F.2d 290 (3d Cir.1982); Op. at 7.

On reconsideration, the Court must "bite the bullet", West v. Keve, 721 F.2d 91, 94 (3d Cir.1983), and reverse itself. Accepting the allegations of Tiger's financial condition, the Court does not believe that Tiger will be harmed more if forced to go to arbitration than if Tiger goes to court. If there is no distinction in the harm Tiger faces whether in court or in arbitration, then the irreparable injury exception to the exhaustion doctrine should not apply.⁴

The first harm Tiger alleged was that the collection of interim withdrawal liability payments would irreparably harm the company. A determination that interim payments are due, however, is not self-enforcing. If a Fund wishes to collect payments, that Fund must come before a court. United Retail & Wholesale Emp. v. Yahn & McDonnell, 787 F.2d 128, 134 (3d Cir. 1986).

The other harms alleged concerned the perception of Tiger's financial health that would result in even the assertion of withdrawal liability. First, the liability payments that are presently being asserted against Hall's are arguably being asserted against Tiger as well. Any Tiger creditor knows that Tiger is involved in litigation, whether before this Court or before an arbitrator, with the Funds over the issue of Tiger's responsibility for Hall's withdrawal.⁵ In plaintiffs' opposition to the reconsideration motion, much is made of the Override Agreement between plaintiffs and their creditors. Yet, there is nothing to convince this Court that the strict requirements of that agreement yield a different result in arbitration or in court. In either case, a court must rule on actual enforcement and in either case the creditors know that the Funds are attempting to assert Hall's liability against Tiger.⁶

Finally, the Court does not find that the perceptions of customers and competitors create the type of harm created in T.I.M.E.-DC, Inc. v. New York State Teamsters Pension Fund, 580 F.Supp. 621 (N.D.N.Y.), aff'd., 735 F.2d 60 (2d Cir.1984) and Central States, Southeast and Southwest Areas Pension Fund v. T.I.M.E.-DC, Inc., 639 F.Supp. 1468, 1478-79 (N.D.Tx.1986). In those cases, the courts were concerned that T.I.M.E.-DC's customers would perceive that the company had gone out of business if pension funds were permitted to assert withdrawal liability. Moreover, competitors could point to the assertion of withdrawal liability as proof that T.I.M.E.-DC was no longer functioning. As against the company that is primarily liable, then, there is a risk that asserting withdrawal liability will lead to the perception that the company is no longer functioning. By contrast, the instant case involves secondary liability. Hall's, the company against whom primary liability is imposed, has clearly reduced operations significantly. Nothing in the assertion of liability against Tiger because of its relationship to Hall's is an indication of Tiger's current ability to do business.

STATUTORY INTERPRETATION

Because the Court has reversed itself on the irreparable injury issue, the Court must reconsider whether it should decide Count I under the statutory interpretation exception to the exhaustion doctrine. See Op. at 13; Republic Industries, 693 F.2d at 293. In the prior opinion, this Court chose not to decide this issue.⁷

The parties' major dispute concerns what needs to be decided to dispose of Count I. Plaintiffs contend that the issue to be decided is whether or not Tiger was an "employer" when Hall's withdrew. The arbitration provision of the MPPAA states that "Any dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination made under sections 1381 through 1399 of this title should be resolved through arbitration." 29 U.S.C. § 1401(a)(1) emphasis added. Because the arbitration only applies to employers, Tiger argues, a court must first determine whether, as a matter of law, Tiger is an employer before an arbitrator has power to resolve a dispute. See, e.g., Refined Sugars, Inc. v. Local 807 Labor Management Pension Fund, 580 F.Supp. 1457 (S.D.N.Y.1984); Paperworks Pension Plan v. Arlington Sample Book Co., 5 E.B.C. 1948 (E.D.Pa.1984).

The Funds, however, view the issue raised in Count I differently. To them, the real issue that needs to be decided concerns the January 1985 transaction in which Tiger sold 75% of Hall's to Hall's Acquisition Corp. ("HAC"), a corporation wholly owned by Alvin Bodford, then Chief Financial Officer of Hall's. The Funds argue that this was a sham transaction whose purpose was to avoid the withdrawal liability. Under 29 U.S.C. § 1392(c):

If a principal purpose of any transaction is to evade or avoid liability under this part, this part shall be applied (and liability shall be determined and collected) without regard to such transaction.

Significantly, any dispute arising under § 1392 is subject to the arbitration procedures. Therefore, the Funds argue, the issue to be decided belongs before an arbitrator not before the Court.

The Court agrees with the Funds. Prior to the 1985 transaction, Tiger owned 100% of Hall's; therefore, Tiger was indisputably in the "employer" control group of Hall's until the transaction. If that transaction is proven to be one subject to 29 U.S.C. § 1392(c), then the Funds are free to ignore the transaction and assert liability against Tiger. If the transaction is held to be an "evade or avoid" transaction, then Tiger was an "employer" on the date Hall's withdrew. But characterizing the issue to be decided as whether or not Tiger was an "employer" is a broad brush description of a specific issue. The case really turns on the determination of the "evade or avoid" question, a question properly before the arbitrator.

A problem arises because there appears to be an inherent conflict within the arbitration provision. On the one hand, the arbitrator only is to resolve disputes between employers and funds, while on the other, the arbitrator is empowered to resolve the "evade or avoid" issue....