Robbins v. Lady Baltimore Foods, Inc.

• Decision Date: 14 February 1989
• Docket Number: Nos. 87-2753,88-1280 and 88-1652,s. 87-2753
• Citation: 868 F.2d 258
• Parties: 10 Employee Benefits Ca 2032 Loran W. ROBBINS, et al., Plaintiffs-Appellees, v. LADY BALTIMORE FOODS, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 258

868 F.2d 258

10 Employee Benefits Ca 2032

Loran W. ROBBINS, et al., Plaintiffs-Appellees, v. LADY BALTIMORE FOODS, INC., Defendant-Appellant.

Nos. 87-2753, 88-1280 and 88-1652.

United States Court of Appeals Seventh Circuit.

Argued April 21, 1988.

Decided Feb. 14, 1989.

James G. Baker, Spencer, Fane, Britt & Browne, Kansas City, Mo., for defendant-appellant.

Terence G. Craig, Central States Law Dept., Chicago, Ill., for plaintiffs-appellees.

Before WOOD, Jr. and KANNE, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

KANNE, Circuit Judge.

The defendant, Lady Baltimore Foods, Inc. ("Lady Baltimore"), appeals the district court's grant of summary judgment in favor of the plaintiffs, the trustees of the Central States, Southeast and Southwest Areas Pension Fund ("Pension Fund"). Specifically, Lady Baltimore challenges the district court's decision that 29 U.S.C. Sec. 1461(h)(1) was unconstitutional. This statute purported to exempt Lady Baltimore from withdrawal liability under the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. Secs. 1381-1461. ¹ Lady Baltimore also challenges the district court's award of interim withdrawal liability payments to the Pension Fund. For the reasons set out below, we affirm the district court's award of interim withdrawal liability payments, but we reverse the grant of summary judgment against Lady Baltimore as to the constitutionality of 29 U.S.C. Sec. 1461(h)(1), vacate the district court's decision that this statute was unconstitutional, and remand the entire matter for arbitration.

I. Background

A. Lady Baltimore's Withdrawal from the Pension Fund

Lady Baltimore Foods, Inc. was a contributing employer to the Pension Fund under the terms of a collective bargaining agreement with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America ("the Union"). On January 12, 1979, Lady Baltimore and the Union executed a new collective bargaining agreement which remained in effect through May 15, 1982. This agreement included the following pension provision:

ARTICLE XVIII--PENSION

Section 7. Effective January 12, 1982 all contributions to the Central States Southeast and Southwest Areas Pension Fund shall cease, Sections 1, 2, 3, 4, 5 and 6 of this Article shall be null and void and of no further force and effect and all obligations of the Company to said Fund or under any trust agreement shall be terminated. From that date forward regular employees shall be eligible to enter into the Company's pension plan pursuant to the terms and provisions of that plan.

The Pension Fund initially refused to approve Lady Baltimore's continued participation in the plan on these terms. By letter of December 24, 1980, however, it reversed its position and agreed to permit Lady Baltimore to continue to participate in the Pension Fund. In April of 1982, after a dispute over the amount of the last payment, Lady Baltimore made its final contribution to the fund. ²

In December, 1983, the Pension Fund advised Lady Baltimore that it determined that Lady Baltimore owed it withdrawal liability under the MPPAA in the amount of $216,488.80. It also notified Lady Baltimore that it was required to discharge this liability in monthly payments of somewhat less than $5,000.00. The Pension Fund subsequently reduced the assessment of Lady Baltimore's withdrawal liability to $212,797.92 and increased the monthly payment to $5,001.06. Lady Baltimore thereafter requested arbitration of its withdrawal liability. ³

B. Procedural Posture

On November 1, 1985, the Pension Fund filed suit in the Northern District of Illinois to compel Lady Baltimore to make interim liability payments pursuant to 29 U.S.C. Secs. 1399(c)(2), 1401(d). On December 11, 1985, Lady Baltimore filed its answer denying liability. On June 5, 1986, the Pension Fund filed a motion for summary judgment, requesting continuing and past due interim withdrawal liability payments. On August 26, 1986, the district court entered orders directing Lady Baltimore to pay interim withdrawal liability payments as they became due in the future. It said nothing, however, about past due payments of withdrawal liability.

On October 22, 1986, the Tax Reform Act of 1986 became law. Included in this Act was a statutory provision referred to by appellees as the "Lady Baltimore Amendment." The so-called Lady Baltimore Amendment, Pub.L. No. 99-514, Sec. 1852(i), 100 Stat. 2869 (1986) [codified at 29 U.S.C. Sec. 1461(h)(1) ], states as follows:

In the case of an employer who entered into a collective bargaining agreement--

(A) which was effective on January 12, 1979, and which remained in effect through May 15, 1982, and

(B) under which contributions to a multiemployer plan were to cease on January 12, 1982,

any withdrawal liability incurred by the employer pursuant to Part I of Subtitle E [of this Subchapter] [29 U.S.C. Secs. 1381-1405] as a result of the complete or partial withdrawal of the employer from the multiemployer plan before January 12, 1982, shall be void.

The Pension Fund claims that Lady Baltimore notified the district court of the pendency of the Lady Baltimore Amendment before it was enacted into law. The Pension Fund, moreover, cites to numerous instances in the record where Lady Baltimore told the district court that this amendment was passed by Congress, supposedly at the urging of Senator Dole of Kansas, specifically to exempt it (Lady Baltimore) from withdrawal liability under MPPAA.

On or about October 27, 1986, Lady Baltimore filed a cross motion for summary judgment with the district court. In this motion for summary judgment, Lady Baltimore asked for relief from the district court's order of August 26, 1986, requiring it to make payments of interim withdrawal liability to the Pension Fund. It did so on two grounds. First, it raised a number of equitable defenses to withdrawal liability in general. ⁴ Second, Lady Baltimore argued that it was not subject to withdrawal liability because 29 U.S.C. Sec. 1461(h)(1) exempted it from such liability. On October 30, 1986, the district court denied Lady Baltimore's motion for immediate relief from interim withdrawal liability payments, but deferred consideration on the impact of Sec. 1461(h)(1) until its ruling on the motion for summary judgment.

On October 14, 1987, 678 F.Supp. 1323, the district court granted summary judgment in favor of the Pension Fund and against Lady Baltimore. The district court's order first held that MPPAA required Lady Baltimore's asserted equitable defenses to withdrawal liability to be arbitrated. Thus, they could not be considered by it as a basis for excusing the company from making interim withdrawal liability payments. The district court concluded, however, that it could consider the effect of 29 U.S.C. Sec. 1461(h)(1). The court reasoned that this was because this statute, if constitutional, would preclude not only withdrawal liability in general, but interim withdrawal liability as well. Earlier in its opinion, the district court determined, over the Pension Fund's objection, that Lady Baltimore had withdrawn from the Pension Fund by January 12, 1985. ⁵ The district court then found that 29 U.S.C. Sec. 1461(h)(1) violated the Pension Fund's right to substantive and procedural due process, and therefore was unconstitutional. It also ordered the continuation of interim withdrawal liability payments, and ordered Lady Baltimore to pay past due payments for February, 1984 through July, 1986 plus interest.

Lady Baltimore appeals the district court's denial of its motion for summary judgment, and its grant of the Pension Fund's motion for summary judgment.

II. Discussion

A. Mechanics of MPPAA

Because this court has discussed the structure and function of MPPAA elsewhere, only a brief discussion of its mechanics is necessary here. See, e.g., Peick v. Pension Benefit Guaranty Corp., 724 F.2d 1247, 1251-56 (7th Cir.1983), cert. denied, 467 U.S. 1259, 104 S.Ct. 3554, 82 L.Ed.2d 855 (1984). MPPAA was enacted by Congress to cure the problems arising when an employer ceased making payments to a pension plan fund. When an employer ceased making such payments, the plan would be left with vested pension obligations which were only partially funded. MPPAA provides that an employer who withdraws from a pension plan covered under it becomes liable for an amount of money designed to cover the employees' share of vested, but unfunded, benefits. 29 U.S.C. Secs. 1381(a), 1382; Robbins v. Admiral Merchants Motor Freight, Inc., 846 F.2d 1054, 1055-56 (7th Cir.1988) and cases cited therein; Robbins v. B & B Lines, 830 F.2d 648, 649 (7th Cir.1987).

Under MPPAA, after the sponsor of a multiemployer plan determines that an employer has "withdrawn" within the meaning of 29 U.S.C. Secs. 1383, 1385, the sponsor must issue a notice and demand for payment of the employer's withdrawal liability. The notice must include a schedule of payments. 29 U.S.C. Sec. 1399(b)(1). Within 90 days after receiving the notice and demand, the employer may ask the plan's sponsor "to review any specific matter relating to the determination of the employer's liability and the schedule of payments," 29 U.S.C. Sec. 1399(b)(2)(A)(i). After a "reasonable review of any matter raised," the sponsor must notify the employer of its decision. 29 U.S.C. Sec. 1399(b)(2)(B).

If the employer disagrees with the plan's sponsor's decision on review, it must initiate arbitration within 60 days after the earlier of the date it is notified of the decision or 120 days after its request for review. 29 U.S.C. Sec. 1401(a)(1). Courts interpreting Sec. 1401(a)(1) have been consistent and unequivocal in concluding that this provision mandates that any dispute over withdrawal liability must be arbitrated. Robbins v. Admiral Merchants, 846 F.2d at 1056 (citations omitted). During the pendency of any review or appeal thereof, withdrawal liability payments are due beginning...