Flying Tiger Line v. Cent. States Pension Fund

• Decision Date: 06 February 1989
• Docket Number: Civ. A. No. 86-304-CMW.
• Citation: 704 F. Supp. 1277
• Parties: The FLYING TIGER LINE, INC., et al., Plaintiffs, v. CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, et al., Defendants.
• Court: U.S. District Court — District of Delaware

704 F. Supp. 1277

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

Civ. A. No. 86-304-CMW.

United States District Court, D. Delaware.

February 6, 1989.

COPYRIGHT MATERIAL OMITTED

R. Franklin Balotti, Jesse A. Finkelstein and William W. Bowser of Richards, Layton & Finger, Wilmington, Del. (Peter A. Gold and Robert G. Haas of Blank, Rome, Comisky & McCauley, Philadelphia, Pa., of counsel), and Douglas D. Broadwater and Richard Liebeskind, Jr. of Cravath, Swaine & Moore, New York City, for plaintiffs.

David McBride and Barry Willoughby of Young, Conaway, Stargatt & Taylor, Wilmington, Del. (Thomas W. Jennings and Kent Cprek of Sagot & Jennings, Philadelphia, Pa., of counsel), for defendants.

OPINION

CALEB M. WRIGHT, Senior District Judge.

This action involves issues of withdrawal liability, arbitrability and interim payments under the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. §§ 1381-1461. The plaintiffs, The Flying Tiger Line, Inc., Tiger International, Inc. and Warren Transport, Inc. (collectively "Tiger"), filed suit in this Court in July 1986 seeking declaratory and injunctive relief. The filing of the action was triggered by the March 1986 bankruptcy of Hall's Motor Transit Co. ("Hall's"), a company which at one time was a subsidiary of Tiger International, Inc. Upon its bankruptcy, Hall's stopped making contributions to a number of multiemployer pension plans to which it had previously contributed. Anticipating that several of these pension plans would assert that Tiger was jointly and severally liable for Hall's withdrawal liability,¹ Tiger filed this declaratory judgment action against a number of pension funds. In Count I of its complaint, Tiger sought a declaration that it was not liable for any withdrawal liability that might be owed to the plans by Hall's, and also sought an order enjoining the plans from asserting claims for such liability against Tiger.²

One of the funds to which Hall's contributed was the Teamsters Pension Trust Fund of Philadelphia and Vicinity ("Philadelphia Fund" or "Fund"), an original defendant in this action. By the end of 1987, Hall's ceased all operations covered by the Philadelphia Fund, thus causing a "withdrawal" from the Fund. On January 20, 1988, the Philadelphia Fund issued a notice and demand for payment of withdrawal liability to Tiger pursuant to 29 U.S.C. §§ 1382 and 1399, asserting that Tiger and Hall's collectively were liable for more than $2 million in withdrawal liability. The Philadelphia Fund based its demand on, inter alia, the fact that Hall's and Tiger were previously under common control. The specific grounds of liability asserted is a matter of dispute, as explained more fully infra.

All of the other defendant pension funds have been dismissed by reason of either settlement or lack of a withdrawal liability claim. The Philadelphia Fund is the only remaining defendant in this action, and it continues to assert a MPPAA withdrawal liability claim against Hall's and Tiger.

On March 23, 1988, Tiger moved for partial summary judgment, alleging that it was not liable to the Philadelphia Fund for withdrawal liability. Specifically, Tiger argues that the only basis of liability asserted against it is the Philadelphia Fund's "accrual" theory,³ a theory that Tiger alleges is invalid as a matter of law. On May 9, 1988, the Philadelphia Fund also moved for partial summary judgment. The Philadelphia Fund seeks an order compelling interim payments by Tiger under 29 U.S.C. § 1399(c)(2) pending completion of review and arbitration under 29 U.S.C. §§ 1399 and 1401. Additionally, the Fund seeks an order staying or dismissing this action by reason of arbitrability.

The case is thus before this Court on cross motions for summary judgment. Jurisdiction is proper pursuant to 29 U.S.C. § 1451 and 28 U.S.C. § 1331. For the reasons stated herein, the Court will deny Tiger's motion — the Court declines to rule on the Philadelphia Fund's "accrual" theory as a matter of law, and directs that arbitration proceed on both the Fund's "evade or avoid" claim under 29 U.S.C. § 1392(c) and the accrual theory. As to the Philadelphia Fund's motion, that motion is granted, and Tiger is ordered to commence making interim payments to the Fund pending completion of arbitration.

I. OVERVIEW OF MPPAA⁴

In enacting the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq., Congress established funding and vesting standards for private pension plans. Congress enacted the statute because it was concerned that employees covered by pension plans were being deprived of anticipated benefits because of employer underfunding of those plans. H.C. Elliott, Inc. v. Carpenters Pension Tr. Fund, 859 F.2d 808, 810 (9th Cir.1988) (citing Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 361-62, 100 S.Ct. 1723, 1726-27, 64 L.Ed.2d 354 (1980)). Under the statute, employers may make contributions to one or more pension plans on behalf of all their employees who belong to a participating union. Flying Tiger Line v. Teamsters Pension Tr. Fund, 830 F.2d 1241, 1243 (3d Cir.1987). Many pension funds are thus multiemployer plans that receive contributions from a number of employers.

Under the initial ERISA framework, contributing employers who withdrew from a multiemployer plan often incurred no liability while ridding themselves of a heavy financial burden, at the expense of those employers who stayed with the plan. Teamsters Pension Tr. Fund v. Central Michigan Trucking, 698 F.Supp. 698, 700 (W.D.Mich.1987). MPPAA was enacted to remedy this situation and to reduce the incentive for employers to terminate their affiliation with multiemployer pension plans. Elliot, 859 F.2d at 810. The statute was intended to make it onerous and costly for them to withdraw. H.R. No. 869, 96th Cong., 2d Sess., pt. 1, at 67, reprinted in 1980 U.S.Code Cong. & Admin.News 2918, 2935. To accomplish this purpose, MPPAA requires that employers withdrawing from multiemployer pension plans continue funding a proportionate share of the plan's unfunded benefit obligations upon withdrawal. Central Michigan, 698 F.Supp. at 700. Withdrawal liability is defined in the statute as the employer's adjusted "allocable amount of unfunded vested benefits." 29 U.S.C. § 1381(b)(1).

Several MPPAA provisions are relevant to this litigation. The Act requires that "all ... trades or businesses (whether or not incorporated) that are under common control", as defined in regulations issued by the Pension Benefit Guaranty Corporation ("PBGC"), "shall be treated ... as a single employer." 29 U.S.C. § 1301(b)(1). Because a controlled group is to be treated as a single employer, each member of the group is liable for the withdrawal of any other member of the group. Flying Tiger, 830 F.2d at 1244.

Under § 1383, 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." In determining whether a withdrawal has occurred, MPPAA provides that any transaction designed to "evade or avoid" withdrawal liability should be ignored: "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." 29 U.S.C. § 1392(c). Also, an employer shall not be considered to have withdrawn from a plan solely because "an employer ceases to exist by reason of ... a change in corporate structure described in section 1362(d) of this title ... if the change causes no interruption in employer contributions or obligations to contribute under the plan...." 29 U.S.C. § 1398.⁵ In applying this section, "a successor or parent corporation or other entity resulting from any such change shall be considered the original employer." Id.

MPPAA's statutory scheme intends to provide for the quick and informal resolution of withdrawal liability disputes. See Flying Tiger, 830 F.2d at 1244. The trustees of a pension plan initiate the process for determining and collecting withdrawal liability. The Act initially requires a plan's trustees to determine whether a withdrawal has occurred. 29 U.S.C. §§ 1382(1), 1399(b)(1)(A)(i). The date of a complete withdrawal is "the date of the cessation of the obligation to contribute or the cessation of covered operations." 29 U.S.C. § 1383(e). When the trustees determine a withdrawal has taken place, they must then notify the employer of the amount of liability and demand payment in accordance with an amortization schedule. 29 U.S.C. §§ 1382(2), 1382(3), 1399(b)(1)(B). Within 90 days of receiving notice of asserted withdrawal liability, the employer may ask the trustees to conduct a reasonable "review" of the computed liability. 29 U.S.C. § 1399(b)(2)(A)(i).

If a dispute remains, either party may initiate arbitration proceedings within specified time periods. Specifically, MPPAA provides that: "any dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination made under sections 1381 through 1399 of ... title 29 shall be resolved through arbitration." 29 U.S.C. § 1401(a)(1). Finally, "upon completion of the arbitration proceedings in favor of one of the parties," MPPAA permits "any party thereto" to bring an action "to enforce, vacate or modify the arbitrator's award" in the appropriate federal district court. 29 U.S.C. § 1401(b)(2).

The commencement of payments of withdrawal liability need not await completion of review or an arbitrator's final decision. Regardless of "any request for review or appeal of determinations of the amount of such liability or of the schedule", the employer must begin making interim payments of withdrawal liability in accordance with the plan's schedule...