Mason and Dixon Tank Lines, Inc. v. Central States, Southeast and Southwest Areas Pension Fund

• Decision Date: 15 July 1988
• Docket Number: Nos. 86-5221,86-6249 and 86-6289,s. 86-5221
• Citation: 852 F.2d 156
• Parties: , 9 Employee Benefits Ca 2491 The MASON AND DIXON TANK LINES, INC., Plaintiff and Counter-Defendant-Appellee, Cross-Appellant, v. CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, et al., Defendants and Counter-Plaintiffs-Appellants, Cross-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 156

852 F.2d 156

57 USLW 2084, 9 Employee Benefits Ca 2491

The MASON AND DIXON TANK LINES, INC., Plaintiff and

Counter-Defendant-Appellee, Cross-Appellant,

v.

CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND,

et al., Defendants and

Counter-Plaintiffs-Appellants, Cross-Appellees.

Nos. 86-5221, 86-6249 and 86-6289.

United States Court of Appeals, Sixth Circuit.

Argued Dec. 14, 1987.

Decided July 15, 1988.

Russell N. Luplow (argued), Diana L.S. Peters, Bloomfield Hills, Mich., for defendants and counter-plaintiffs-appellants, cross-appellees.

Don C. Stansberry, Jr., Huntsville, Tenn., Patrick Moran (argued), Fredric A. Smith, Birmingham, Mich., for plaintiff and counter-defendant-appellee, cross-appellant.

Before WELLFORD, NELSON and BOGGS, Circuit Judges.

BOGGS, Circuit Judge.

Central States, Southeast and Southwest Areas Pension Fund appeals the district court's decision reducing the amount of withdrawal liability assessed against Mason and Dixon Tank Lines, Inc. under the Employee Retirement Income Security Act of 1974, 29 U.S.C. Secs. 1001-1371, as amended by the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. Sec. 1381-1461. Because the issues addressed by the district court should have initially been submitted to arbitration, we reverse.

I

We begin with a brief overview of the statutory scheme governing employee pension benefits. In 1974, Congress enacted the Employee Retirement Income Security Act of 1974, 29 U.S.C. Secs. 1001-1371 (ERISA), to reassure employees who had been promised a pension benefit upon retirement that they would receive it. Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 213-14, 106 S.Ct. 1018, 1020, 89 L.Ed.2d 166 (1986); Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 375, 100 S.Ct. 1723, 1733, 64 L.Ed.2d 354 (1980). Unfortunately, ERISA did not completely live up to its drafters' expectations. In particular, the statute did not adequately address the adverse consequences that would occur when an employer withdrew from a multiemployer pension plan. As the Supreme Court explained in Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984):

A key problem of ongoing multiemployer plans, especially in declining industries, is the problem of employer withdrawal. Employer withdrawals reduce a plan's contribution base. This pushes the contribution rate for remaining employers to higher and higher levels in order to fund past service liabilities, including liabilities generated by employers no longer participating in the plan, so-called inherited liabilities. The rising costs may encourage--or force--further withdrawals, thereby increasing the inherited liabilities to be funded by an ever-decreasing contribution base. This vicious downward spiral may continue until it is no longer reasonable or possible for the pension plan to continue.

Id. at 723 n. 2, 104 S.Ct. at 2714 n. 2 (quoting Pension Plan Termination Insurance Issues: Hearings before the Subcommittee on Oversight of the House Committee on Ways and Means, 95th Cong., 2d Sess. 22 (1978) (statement of Matthew M. Lind, Executive Director of the Pension Benefit Guaranty Corporation)).

Indeed, congressional study revealed that "the preexisting pension plan termination program, enacted as title IV of [ERISA], perversely operated to provide employers with an incentive to withdraw from financially weak plans." I.A.M. National Pension Fund v. Clinton Engines Corp., 825 F.2d 415, 416 (D.C.Cir.1987). The threat of significant employer withdrawals also jeopardized the solvency of the Pension Benefit Guaranty Corporation, which was created to provide benefits to plan participants in the unfortunate event that a pension plan was terminated without sufficient assets to cover guaranteed benefits. R.A. Gray, 467 U.S. at 721, 104 S.Ct. at 2713.

In response to these problems, Congress amended ERISA by enacting the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), 29 U.S.C. Secs. 1381-1461. The MPPAA requires employers who withdraw, completely or partially, from a multiemployer pension plan to contribute to the plan a proportionate share of the unfunded, vested benefits. R.A. Gray, 467 U.S. at 725, 104 S.Ct. at 2715. See Central States, Southeast and Southwest Areas Pension Fund v. 888 Corp., 813 F.2d 760, 762 n. 2 (6th Cir.1987). An employer completely withdraws from a multiemployer pension plan when it (1) permanently ceases to have an obligation to contribute under the plan, or (2) permanently ceases all covered operations under the plan. 29 U.S.C. Sec. 1383(a). A partial withdrawal occurs if (1) there is a seventy-percent contribution decline for a given plan year, or (2) there is a partial cessation of the employer's contribution obligation. Id. at Sec. 1385(a). ¹

There is a partial cessation of the employer's contribution obligation for a plan year if, during such year:

(i) the employer permanently ceases to have an obligation to contribute under one or more but fewer than all collective bargaining agreements under which the employer has been obligated to contribute under the plan but continues to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required or transfers such work to another location.

29 U.S.C. Sec. 1385(b)(2)(A)(i).

In the MPPAA, Congress has established a statutory scheme that is both "lengthy and complex." Marvin Hayes Lines, Inc. v. Central States, Southeast and Southwest Areas Pension Fund, 814 F.2d 297, 299 (6th Cir.1987). For present purposes, we need focus only on several provisions that are pertinent to the issues raised here. One key provision, which the MPPAA retained from ERISA, is the common control (or "controlled group") provision. 29 U.S.C. Sec. 1301(b)(1) reads in part as follows:

For purposes of this subchapter, under regulations prescribed by the [Pension Benefit Guaranty Corporation], all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer and all such trades and businesses as a single employer.

As the House and Senate Reports indicate, the primary purpose of the common control provision is to ensure that employers will not circumvent their ERISA and MPPAA obligations by operating through separate entities. See S.Rep. No. 383, 93d Cong., 2d Sess. 43, reprinted in 1974 U.S.Code Cong. & Admin.News 4639, 4890, 4928; H.R.Rep. No. 807, 93d Cong., 2d Sess. 50, reprinted in 1974 U.S.Code Cong. & Admin.News 4670, 4716. Accord, Board of Trustees v. H.F. Johnson, Inc., 830 F.2d 1009, 1013 (9th Cir.1987). ²

The MPPAA also contains detailed dispute resolution provisions, in recognition "that the employer and the Plan may not always be in agreement as to the computation of withdrawal liability." Marvin Hayes, 814 F.2d at 299. Once the plan sponsors determine that an employer has completely or partially withdrawn from a pension plan, they must notify the employer of the amount of the liability, prepare a schedule for liability payments, and demand payment in accordance with the schedule. 29 U.S.C. Secs. 1382, 1399(b)(1). Within 90 days after receiving notice, the employer may ask the plan sponsors to review any specific matter relating to the determination of liability and the schedule of payments, may identify any inaccuracy in the determination of the amount of the unfunded vested benefits allocable to the employer, and may furnish any additional relevant information to the plan sponsor. Id. at Sec. 1399(b)(2)(A). After reasonable review of any matter raised, the plan sponsors must then notify the employer of its decision, including the reasons for any change in the determination of the employer's liability or schedule of liability. Id. at Sec. 1399(b)(2)(B).

If either party disputes the outcome, 29 U.S.C. Sec. 1401(a)(1) comes into play: ³

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. ⁴

When arbitration proceedings are completed in favor of one party, any party thereto may bring an action, no later than 30 days after the issuance of the arbitrator's award, in federal court to "enforce, vacate, or modify the arbitrator's award." Id. at Sec. 1401(b)(2). As we noted in Marvin Hayes, 814 F.2d at 299, interim payments of withdrawal liability normally must be made to the plan during the pendency of any dispute. 29 U.S.C. Sec. 1399(c)(2), 1401(d). Accord, Flying Tiger Line v. Teamsters Pension Trust Fund, 830 F.2d 1241, 1244 (3d Cir.1987).

II

We trace the history of this case is some detail in view of the issues raised on appeal. Central States, Southeast and Southwest Areas Pension Fund (Central States) is a multiemployer pension plan as defined by ERISA and the MPPAA, 29 U.S.C. Secs. 1002(37), 1301(a)(3). Mason and Dixon Tank Lines, Inc. (Tank Lines) is a Tennessee corporation engaged in interstate and intrastate hauling of liquid commodities. At all times relevant to this appeal, Tank Lines was the wholly-owned subsidiary of Mason and Dixon, Inc. (Mason and Dixon), a Tennessee trucking company engaged in interstate transport of freight.

Tank Lines has a number of terminals, each covered by a separate collective bargaining agreement with a local union affiliated with the International Brotherhood of Teamsters. These collective bargaining agreements require Tank Lines to contribute to the pension fund of Central States. On November 29, 1983, five employees who comprised a discrete bargaining unit at one of Tank Lines's terminals voted to decertify their union. On December 31, as a result of the decertification election, the collective bargaining agreement covering these five employees expired and Tank Lines's obligation with respect to these employees to contribute to the pension fund...