McDonald v. Centra
| Decision Date | 28 August 1990 |
| Docket Number | Civ. No. S 89-1734. |
| Citation | 118 BR 903 |
| Parties | Clifton McDONALD, Hermann V. Myers, Sr., William G. McIntyre and Daniel L. Sandy, in their capacities as trustees of and on Behalf of Freight Drivers and Helpers Local Union No. 557 Pension Fund v. CENTRA, a Delaware Corporation, General Highway Express, an Ohio Corporation, Central Transport, a Michigan Corporation, GLS Leasco, a Michigan Corporation, Central Cartage, a Michigan Corporation, and Mason and Dixon Tank Lines, a Tennessee Corporation. |
| Court | U.S. District Court — District of Maine |
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Anthony A. Abato, Jr., H. Victoria Hedian, Christine Williams, Abato, Rubenstein & Abato, P.A., Lutherville, Md., for plaintiffs.
Michael A. Nedelman, Patrick A. Moran, Frederic A. Smith, Simpson & Moran, Birmingham, Mich., Frances Kanterman, Frank, Bernstein, Conaway & Goldman, Baltimore, Md., for defendants.
This is a collection action brought by the Trustees of the Freight Drivers and Helpers Local Union No. 557 Pension Fund ("Fund") against defendants Centra, Inc., General Highway Express, Central Transport, Inc., GLS Leasco, Inc., Central Cartage, Inc. and Mason and Dixon Tank Lines pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq., as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA" or "Act"), 29 U.S.C. §§ 1381 et seq.
The Fund seeks payment of a withdrawal liability assessment plus interest, liquidated damages, attorneys fees and costs it claims are due and owing based on the withdrawal of Mason and Dixon Lines, Inc. ("M & D"), from the Freight Drivers and Helpers Local Union No. 557 Pension Fund, a multiemployer pension plan of which it was a member.
The defendants filed a motion to dismiss arguing that this collection action is premature because the Fund failed to afford them notice of their withdrawal liability as required by the MPPAA. Furthermore, they argue, even if the Fund gave them the requisite notice, this action is still premature because they have not been given the 90 day period required by the MPPAA in which to invoke review and arbitration of the withdrawal liability assessment. Defendants claim that the filing of a proof of claim by the Fund and the objection to it by the defendants in the bankruptcy proceedings of M & D equitably tolled the running of this 90 day period. Therefore, they argue, because this suit was filed prior to the bankruptcy court's grant of the Fund's motion to withdraw the claim, this Court must dismiss this action in order to allow them the 90 days in which to request arbitration. The defendants simultaneously contend that if this Court finds that the 90 day grace period was not tolled and that they have, therefore, waived their right to arbitrate the merits of the withdrawal liability assessment, that arbitration would have been inappropriate due to the presence of a question involving a purely legal issue, that is, whether the confirmation of M & D's reorganization plan discharged them from any obligation to pay the assessment.
The Fund has filed a motion for summary judgment, contending that the defendants are jointly and severally liable for the withdrawal liability by virtue of their status as corporations under common control with M & D, that therefore notice to M & D was notice to all and the fact that M & D was a debtor in bankruptcy was irrelevant with regard to the liability of the rest of the defendants. The Fund argues that, in any event, the filing of a proof of claim in bankruptcy court does not toll the statutory period in which to request arbitration, and that because none of the defendants requested review or arbitration this Court must award the withdrawal liability assessment, plus attorneys fees and costs to the Fund.
The Fund also argues that even if this Court dismisses this action and allows the defendants to invoke arbitration, as a separate matter, the full amount of the assessment is due and owing immediately because the defendants failed to make any interim payments as required by §§ 1399 and 1401 of the MPPAA, as requested by the Fund. This award would then be subject to review and modification in arbitration.1
Defendants reply that the Fund failed to mention interim payments in their complaint, or to send them a schedule of payments as statutorily required, and that, even if this issue were properly raised, any liability for the payments was discharged in the bankruptcy proceedings of M & D. No oral hearing is deemed necessary on these motions under Local Rule 105(6), D. Md.
For reasons set forth herein, the defendants' motion to dismiss will be denied, and the Fund's motion for summary judgment will be granted.
M & D, a common carrier engaged in interstate trucking, was a member of the Freight Drivers and Helpers Local No. 557 Pension Fund. Pursuant to a collective bargaining agreement entered into with Local Union No. 557, M & D agreed to pay a specified amount of money to the fund for every hour worked by an employee covered by the agreement.
Based on information provided to him by the Fund's actuary, the Contract Administrator of the Fund, Mr. Theodore E. DeMasse, sent a letter to the offices of M & D on August 28, 1984 notifying it of deficiencies in its payments for the periods covering January 1, 1983 through December 31, 1983 and January 1, 1984 through March 31, 1984. On October 2, 1984 M & D responded by letter, requesting from Mr. DeMasse a more particularized account of the precise weeks in which M & D had been found delinquent. One week later, on October 8, 1984, Mr. DeMasse's office responded with a letter explaining that the auditing firm provided to the Fund analyses calculated on a monthly basis, but that if the weekly information was pertinent to M & D's records, M & D should contact the auditing firm directly. There is no indication in the record that M & D did so.
Over a month and a half later, on November 26, 1984, M & D responded by letter through its treasurer, Mr. Hal M. Briand, informing the Fund that M & D had filed for bankruptcy under Chapter 11 nine months earlier, on March 29, 1984, and that, therefore, the assessed deficiencies would be classified as prepetition claims and should be filed with the bankruptcy court. Future correspondence from the Fund was directed to the attorney for "the Debtor." Mr. Briand failed to tell the Fund, however, that the bar date for filing proofs of claim in the bankruptcy proceeding had been set at August 14, 1984, some three months prior to his letter. In fact, M & D had filed a petition for reorganization in the Middle District of North Carolina six months before M & D's initial request to have the deficiencies "clarified." This was the first notification of M & D's bankruptcy received by the Fund.
Upon notification of M & D's bankruptcy proceedings, and the subsequent closing of M & D's Commodity Division, the Fund calculated the assessment for a complete withdrawal from the Fund and sent a letter of notice and demand to M & D on January 11, 1985, claiming $619,101 in withdrawal liability. The Fund explained the procedure to follow in order to qualify for the trucking industry exemption under the MPPAA and the 90 day grace period in which M & D had the right to initiate review and arbitration of the assessment. The Fund also included a schedule of payments to begin 60 days after the date of the letter if M & D failed to institute procedures to qualify for the trucking industry exemption. Finally, the Fund notified M & D that it was filing a proof of claim in the bankruptcy proceeding for the entire amount of the assessment together with an explanation to the bankruptcy court that immediate liability may be avoided if M & D qualified for the trucking exemption. To date, the defendants have neither applied for the trucking industry exemption, sought review of the assessment, nor made any of the scheduled monthly payments.
Because the letter of November 26, 1984, was its first notification that M & D was in bankruptcy proceedings, the Fund had no knowledge when it filed its proof of claim that the bar date for such claim had been set at August 14 of that year. It was also unaware of the relationship among M & D and the defendants. After filing the claim, the Fund received no correspondence from the bankruptcy court or the defendants until March of 1986, some one and a half years later, when Central Transport and GLS Leasco filed objections to the Fund's proof of claim. At approximately the same time, the bankruptcy court conducted a hearing on M & D's Plan of Reorganization and entered its Order Confirming Restated Joint Plan of Reorganization, on March 29, 1986. Under this Plan, the withdrawal liability claim was to be satisfied by the issuance of a non-voting preferred stock of M & D, of a par value equal to the face value of the Fund's claim, unredeemable for 20 years, with no interest or security. The Fund was never advised of the terms of the Proposed Plan and consequently was not given the opportunity to vote on or object to the Plan. About a month later, M & D filed objections to the Fund's claim.
Pursuant to the bankruptcy procedures for contested claims, Central Transport and GLS Leasco filed discovery requests which totalled 60 pages and amounted to 450 questions. In order to respond to this voluminous request, the Fund asked for two enlargements of time, extending the proceedings into February of 1987. During settlement negotiations, the Fund learned that M & D still was operating in some small degree in its Special Commodities Division, and determined, therefore, that M & D's liability was contingent and could not be calculated until after the three year testing period required by § 4205(b)(1)(A) of the MPPAA.
No determination with respect to the claims had been made by the bankruptcy court by May of 1989, at which time the...
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