In re BFW Liquidation, LLC

Decision Date28 September 2011
Docket NumberNo. 09–00634–BGC–11.,09–00634–BGC–11.
Citation459 B.R. 757
PartiesIn re BFW LIQUIDATION, LLC, f/k/a Bruno's Supermarkets, LLC, Debtor.
CourtU.S. Bankruptcy Court — Northern District of Alabama


Charles L. Denaburg, Najjar Denaburg PC, Derek F. Meek, John Richard Lehman, II, Marc P. Solomon, Burr & Forman LLP, Rita H. Dixon, Rita H. Dixon, LLC Birmingham, AL, John D. Elrod, Greenberg Traurig, LLP, Atlanta, GA, for Debtor.

Memorandum Opinion and Order Abstaining Pursuant to 28 U.S.C. § 1334(c)(1) and Granting Relief From the Stay to Arbitrate Claim

BENJAMIN COHEN, Bankruptcy Judge.

The matters before the Court are:

1. The Debtor's Objection to Proof of Claim Number 802 Filed by United Food and Commercial Workers Unions and Employers Pension Fund filed on August 7, 2009. Docket No. 1355;

2. The Motion of the United Food and Commercial Workers Unions and Employers Pension Fund to Compel Arbitration or, Alternatively, for Relief From Automatic Stay to Pursue Arbitration of Claim filed on August 26, 2009. Docket No. 1440;

3. The Official Committee of Unsecured Creditors' Objection to (I) the Motion of the United Food and Commercial Workers Unions and Employers Pension Fund to Compel Arbitration or, Alternatively, for Relief from Automatic Stay to Pursue Arbitration of Claim and (II) the Motion to Expedite Hearing on Same filed on September 1, 2009. Docket No. 1486;

4. The Supplemental Objection of the Debtor to the Claims of the United Food and Commercial Workers Unions and Employers Pension Fund (Claim Nos. 802 & 947) filed on September 15, 2009. Docket No. 1576;

5. The Liquidating Trustee's Memorandum of Law in Support of the Objection to the Motion of the United Food and Commercial Workers Unions and Employers Pension Fund To Compel Arbitration or, Alternatively, for Relief From Automatic Stay to Pursue Arbitration of Claim filed on August 20, 2010. Docket No. 2589; and

6. The Reply Brief in Support of Motion of the United Food and Commercial Workers Unions and Employers Pension Fund to Compel Arbitration or, Alternatively, for Relief from Automatic Stay to Pursue Arbitration of Claim filed on August 30, 2010. Docket No. 2598.

A hearing was held on September 2, 2010. Appearing were: Mr. John D. Elrod and Mr. James Sacca, attorneys for Mr. William Kaye, the Liquidating Trustee; and Mr. Rufus T. Dorsey, IV, the attorney for the United Food and Commercial Workers Unions and Employers Pension Fund (“Fund”).

The matters were submitted on the briefs and pleadings, the record in this case, and arguments of counsel. For the reasons expressed below, the Court finds that the Fund's motion should be granted. Discretionary abstention in favor of arbitration of the Fund's claim and of the Debtor's objection is warranted. As such, the Fund should be granted relief from the stay to initiate arbitration.

I. Facts, Procedural Posture, and Basic Contentions

During the course of this Chapter 11 case, the debtor ceased operations, sold substantially all of its property, and filed a plan providing for the disposition of the money realized. Its cessation of operations resulted in its withdrawal from the United Food and Commercial Workers Unions and Employers Pension Fund and concomitant incurrence of “withdrawal liability” for unfunded vested pension benefits.

The Fund filed a proof of claim for the liability incurred by the Debtor as a result of the Debtor's withdrawal. The Debtor objected to the claim on the grounds that the amount claimed was computed incorrectly. The Fund insists that the resulting dispute between it and the Debtor with respect to the proper amount of the claim must be resolved through arbitration. Indeed, the statutes which establish and impose liability on employers for withdrawal liability mandate that course of action. 29 U.S.C. § 1401(a)(1). The Debtor, however, contends that the intervention of bankruptcy abrogates the statutory mandate of 29 U.S.C. § 1401(a)(1) and that the bankruptcy claims process must instead be employed to resolve the dispute. The Official Committee of Unsecured Creditors (“OCUC”) and Liquidating Trustee likewise oppose arbitration of the contest of claims.

II. Law
A. It Is Not Necessary to Decide if Arbitration Is Required by the MPPAA for Withdrawal Liability Claims in Bankruptcy
1. Introduction to the MPPAA

The purpose and general structure of the Multiemployer Pension Plan Amendments to the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq., of which section 1401, is a part, were succinctly described in Chicago Truck Drivers v. El Paso Co., 525 F.3d 591 (7th Cir.2008). The opinion here included:

The MPPAA protects employees in multiemployer pension plans by requiring employers who withdraw from such plans to pay their share of “unfunded vested benefits.” 29 U.S.C. § 1381(b)(1). This is known as “withdrawal liability.” When an employer withdraws, the plan sponsor calculates the amount of liability and, [a]s soon as practicable,” notifies the employer of the liability and demands payment. 29 U.S.C. § 1399(b)(1). This “notice and demand” must include the amount of liability and a schedule of installment payments. When the employer receives the notice, it must begin paying according to the schedule. See Robbins v. Pepsi–Cola Metro. Bottling Co., 800 F.2d 641, 642–43 (7th Cir.1986) (per curiam). The statute places a premium on prompt payment; it is a “pay now, dispute later” scheme. Id. at 642. But the withdrawing employer “owes nothing” until the plan notifies it of its liability and demands payment. Milwaukee Brewery Workers' Pension Plan v. Joseph Schlitz Brewing Co., 513 U.S. 414, 423, 115 S.Ct. 981, 130 L.Ed.2d 932 (1995).

If the employer wishes to dispute a plan sponsor's assessment of withdrawal liability, it must arbitrate the issue. See 29 U.S.C. § 1401(a)(1). Exceptions to the arbitration requirement are made only in the rarest cases. See Central States, Se. & Sw. Areas Pension Fund v. Slotky, 956 F.2d 1369, 1373 (7th Cir.1992). Upon receipt of the notice and demand, the employer has 90 days to request an informal review by the plan of the assessment. See 29 U.S.C. § 1399(b)(2)(A). The employer then has roughly 120 additional days to demand arbitration. See 29 U.S.C. § 1401(a)(1). If an employer fails to demand arbitration, the assessment becomes “due and owing on the schedule set forth by the plan sponsor.” 29 U.S.C. § 1401(b)(1).

Id. at 595.

2. The Arbitration Requirement

Section 1401(a)(1) of Title 29 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 this title shall be resolved through arbitration.” Id. That provision would include the dispute in this case over the amount of the Fund's claim and the manner in which it was calculated, the basis of the Debtor's objection to the claim. See 29 U.S.C. § 1391(a) (“Determination of amount of unfunded vested benefits allocable to employer withdrawn from plan”).

In addition to mandating arbitration of disputes with respect to withdrawal liability, however, in 29 U.S.C. § 1451(a), the MPPAA paradoxically authorizes a plan fiduciary or employer, as well as other designated parties in interest, “adversely affected by the act or omission of any party under this subtitle with respect to a multiemployer plan ... [to] bring an action for appropriate legal or equitable relief, or both.” Id. (parenthetical added). Moreover, subsection (c) of that statute squarely imbues district courts of the United States with exclusive jurisdiction to entertain any such actions. It reads, “The district courts of the United States shall have exclusive jurisdiction of an action under this section without regard to the amount in controversy, except that State courts of competent jurisdiction shall have concurrent jurisdiction over an action brought by a plan fiduciary to collect withdrawal liability.” Id.

The above raises the question: What happens if an action is brought to ascertain and enforce withdrawal liability in a court without arbitration first having been instituted and completed, as is the present situation? In that circumstance, courts have universally concluded that the arbitration requirement of section 1401(a)(1) is not jurisdictional, but rather constitutes an exhaustion of administrative remedies requirement.1 “In general, this ‘long settled rule of judicial administration [mandates] that no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted.’ Central States Southeast and Southwest Areas Pension Fund v. T.I.M.E.–DC, Inc., 826 F.2d 320, 328 (5th Cir.1987)(quoting Myers v. Bethlehem Corp., 303 U.S. 41, 50–51, 58 S.Ct. 459, 82 L.Ed. 638 (1938)). “Thus, if a party commences an action in federal court without having first exhausted the mandatory arbitration process, it will be subject to a failure-to-exhaust defense.” Board of Trustees, Sheet Metal Workers' Nat. Pension Fund v. BES Services, Inc., 469 F.3d 369, 375 (4th Cir.2006). In short, within the context of an action to litigate withdrawal liability, it means that the dispute must be referred by the court to arbitration if the time for initiating arbitration has not expired or been tolled unless the issues sought to be resolved fall within a severely limited number of exceptions.2

3. The Goals Sought to be Achieved by MPPAA Section 1401(a)(1)

The goals sought to be achieved by Congress in mandating arbitration for MPPAA disputes are: (1) to have technical issues decided by persons expert in deciding those issues; (2) to conservation of judicial resources; and (3) to have those issues decided in a forum and by a procedure which it intended to be more efficient and economical for the parties involved than the courts. 3

a. Technical withdrawal liability issues should be resolved by experts who specialize in those issues

One goal sought to be achieved by Congress in mandating...

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