Textile Workers Pension Fund v. Standard Dye & Finishing Co., Inc.

Decision Date09 January 1984
Docket Number70 and 428,D,AFL-CIO and B,Nos. 35,s. 35
Citation725 F.2d 843
CourtU.S. Court of Appeals — Second Circuit
Parties5 Employee Benefits Ca 1001 TEXTILE WORKERS PENSION FUND, Plaintiff-Appellee, v. STANDARD DYE & FINISHING CO., INC., Rocco Barone, Bill Carafello, Adolph Nazarro, Sr., Adolph Nazarro, Jr., Joseph Nazarro, Dick Knight, David Lavorgna and Morris Wax, Defendants, Standard Dye & Finishing Co., Inc., Defendant-Appellant. SIBLEY, LINDSAY & CURR CO., A DIVISION OF ASSOCIATED DRY GOODS CORP., Plaintiff-Appellee, v. BAKERY, CONFECTIONERY & TOBACCO WORKERS INTERNATIONAL UNION OF AMERICA,akery & Confectionery Union & Industry International Pension Fund, Defendants- Appellants. ockets 83-7004, 83-7328 and 83-7650.

Richard R. Bonamo, Woodbridge, N.J. (Frederick J. Dennehy, Wilentz, Goldman & Spitzer, P.A., Woodbridge, N.J., of counsel), for defendant-appellant Standard Dye.

Noel Arnold Levin, New York City (Ronald E. Richman, Morgan, Lewis & Bockius, New York City, of counsel), for plaintiff-appellee Textile Workers.

Kenneth F. Hickey, Washington, D.C. (Harry W. Burton, Stephen R. Lohman, Morgan, Lewis & Bockius, Washington, D.C., of counsel), for defendant-appellant Bakery & Confectionery Union & Industry International Pension Fund.

Henry Kaiser, Washington, D.C. (Julia Penny Clark, Jeffrey L. Gibbs, Bredhoff & Kaiser, Washington, D.C., submitted, of counsel), for defendant-appellant Bakery, Confectionery & Tobacco Workers International Union of America, AFL-CIO.

William L. Dorr, Rochester, N.Y. (Harris, Beach, Wilcox, Rubin & Levey, Rochester, N.Y., of counsel), for plaintiff-appellee Sibley, Lindsay & Curr Co., A Division of Associated Dry Goods, Corp.

Philip B. Kurland, Chicago, Ill. (John B. Coffey, III, Christopher G. Walsh, Jr., Rothschild, Barry & Myers, Chicago, Ill., Lester M. Bridgeman, Louis T. Urbanczyk, Washington, D.C.), for Arrow Transportation Co., Inc. and Republic Industries, Inc., amici curiae.

Baruch A. Fellner, Associate General Counsel, Washington, D.C. (Henry Rose, General Counsel, J. Stephen Caflisch, Special Counsel, Peter H. Gould, Terence G. Craig, David F. Power, Office of the General Counsel, Washington, D.C.), for Pension Benefit Guaranty Corp., amicus curiae.

Harris Weinstein, Washington, D.C. (Arvid E. Roach II, Covington & Burling, Washington, D.C.), for Transport Motor Express, Inc., E.W. Bohren Transport, Inc., and Essex Group, Inc., amici curiae.

Before CARDAMONE, PIERCE and PRATT, Circuit Judges.

CARDAMONE, Circuit Judge:

On these two appeals we are called upon to analyze the withdrawal liability provisions in the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA or Act), Pub.L. No. 96-364, 94 Stat. 1208 (codified in scattered sections of 29 U.S.C.). Although the two employers before us withdrew from the multiemployer plans, of which they had been members prior to the enactment of the MPPAA, the Act provides for withdrawal liability to be retroactively imposed. Thus, the common question in both appeals is whether the imposition of financial liability violates these employers' constitutional rights. This question has been the subject of extensive litigation, spawning scores of district court decisions and, as of this writing, dividing two of our sister circuits. Compare Republic Indus. v. Teamsters Joint Council, 718 F.2d 628 (4th Cir.1983) (Act upheld) with Shelter Framing Corp. v. PBGC, 705 F.2d 1502 (9th Cir.) (Act struck down), cert. granted, --- U.S. ----, 104 S.Ct. 271, 76 L.Ed.2d 253 (1983). We hold that the retroactive application of the MPPAA withdrawal provisions is constitutional in all respects.

Although this field of law has been plowed a number of times, we work it once again in the hope that our analysis, like Ariadne's slender filament of thread, will lead us surely through its labyrinths, making its complexities more easily understood. We turn first to the facts.

I Facts

Standard Dye & Finishing Co., Inc. (Standard) was engaged for many years in the processing and distribution of dye and textiles. As an employer it contributed to a pension fund (Fund) on behalf of its employees beginning in 1961 when it signed a collective bargaining agreement with the Textile Union Workers of America (Union). The Fund is a self-insured multiemployer pension trust within the meaning of the Employee Retirement Income Security Act, 29 U.S.C. Sec. 1001 et seq. (ERISA) as amended by the MPPAA, and is jointly administered by an equal number of employer and union trustees pursuant to 29 U.S.C. Sec. 186(c)(5)(B)(1976).

In 1980 Standard decided to liquidate its business because it was unable to pass on increasing costs to its customers. It advised the Union of this decision in May 1980 and its board of directors and stockholders formally voted in favor of liquidation in June. The liquidation plan called for the sale of Standard's assets for $1 million. Standard was paid all but $256,500 of this sum from the sale proceeds and $522,611.62 was distributed to Standard's stockholders. All these events occurred before the enactment of MPPAA on September 26, 1980. After its enactment, Standard paid an additional liquidating dividend of $210,470.42 to its stockholders.

Employment of all production workers terminated June 20, 1980, save for a handful retained to perform tasks incident to closing down operations. The last of those employees were terminated on October 31, 1980. Standard continued to make pension fund contributions on behalf of this smaller group until their termination.

In March 1981 Standard notified the Fund that it planned to liquidate and distribute the balance of its remaining assets of approximately $267,000. In June the Fund calculated Standard's withdrawal liability to be $817,398, payable in 69 equal quarterly installments of $18,544 with a final payment of $12,053. Standard did not contest the actuary's calculation of the debt. When the Fund did not receive the first payment due in August, it advised the company that unless it received the initial installment by October 1981 it would exercise its right under MPPAA to accelerate the debt and declare the full amount of the liability due and payable. When Standard still failed to make the required payment, the Fund commenced this action in the United States District Court for the Southern District of New York against Standard and eight of its stockholders who received liquidating dividends. The defendants moved for summary judgment, contending that the retroactive application of the withdrawal liability provision of the MPPAA unconstitutionally violated their rights to due process. On October 21, 1982 Judge Sprizzo denied that motion and upheld the constitutionality of the statute, ruling that the retroactive provision constituted a "rational means to a legitimate end." Textile Workers Pension Fund v. Standard Dye & Finishing Co., 549 F.Supp. 404, 410 (S.D.N.Y.1982). Defendants filed a petition seeking permission to file an interlocutory appeal which the district court granted and we granted defendants leave to appeal under 28 U.S.C. Sec. 1292(b).


Sibley, Lindsay & Curr Co. (Sibley), a division of the Associated Dry Goods Corporation, operates department stores in Rochester and elsewhere in the western part of New York State. For many years prior to 1980 Sibley operated a bakery at its Main Street store in Rochester. In 1955 the Bakery, Confectionery and Tobacco Workers International Union (Bakery Union) and various employers agreed to establish a pension fund. One year later Sibley negotiated and entered into a formal collective bargaining agreement with the Bakery Union, which required it to make contributions to the pension fund.

The 1980 actuarial valuation report for the pension fund indicated that it was seriously overextended, listing assets of over $609 million and liabilities of over $1.4 billion resulting in an unfunded past service liability of $871 million. The total liability showed an increase of over $108 million from 1979.

On May 31, 1980 Sibley closed the bakery in its Main Street Rochester store and terminated the employment of 43 bakery workers. Earlier that month Sibley and the Bakery Union had executed an agreement with respect to the closing. Under its terms Sibley provided vacation and severance benefits to its terminated employees. The pension fund was not a party to the agreement, and the agreement did not purport to fix Sibley's withdrawal liability under ERISA.

In May 1981 the pension fund notified Sibley that its withdrawal liability amounted to $315,927 and Sibley began making monthly payments of $6,245 in July. The payments were made under protest to avoid the default provisions of the MPPAA. Sibley then filed this action in the United States District Court for the Western District of New York in June 1982 challenging the constitutionality of the retroactive imposition of withdrawal liability under the MPPAA. In August 1982, Judge Telesca denied the pension fund's and Union's motions to dismiss. Subsequently, Sibley's initial motion for a preliminary injunction and for a declaratory judgment was converted into a motion for summary judgment. On March 15, 1983 Judge Telesca granted Sibley's motion for summary judgment and ruled that the retroactive application of the MPPAA withdrawal liability provisions violated Sibley's right to due process of law. See Sibley, Lindsay & Curr Co. v. Bakery, Confectionary and Tobacco Workers Int'l Union, et al., 566 F.Supp. 32 (W.D.N.Y.1983). From this judgment, the Union and pension fund appeal.

II Background and Legislative History

In order to understand the problem that Congress sought to remedy by imposing retroactive liability on employers withdrawing from multiemployer pension plans, it is necessary to review the reasons for the existence of these plans and the legislative history of the Act.

Multiemployer plans were originally developed in industries where...

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