Trustees of Amalgamated Ins. Fund v. Geltman Industries, Inc.

• Decision Date: 07 March 1986
• Docket Number: Nos. 85-5720,85-5907,s. 85-5720
• Citation: 784 F.2d 926
• Parties: , 7 Employee Benefits Ca 1303 TRUSTEES OF the AMALGAMATED INSURANCE FUND, Plaintiff-Appellee, v. GELTMAN INDUSTRIES, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 926

784 F.2d 926

54 USLW 2488, 7 Employee Benefits Ca 1303 TRUSTEES OF the AMALGAMATED INSURANCE FUND, Plaintiff-Appellee, v. GELTMAN INDUSTRIES, INC., Defendant-Appellant.

Nos. 85-5720, 85-5907.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 6, 1986.

Decided March 7, 1986.

Ellen Greenstone, Los Angeles, Cal., for plaintiff-appellee.

Peter Gould, Washington, D.C., for amicus curiae.

Jennie L. La Prade, Los Angeles, Cal., for defendant-appellant.

Appeal from the United States District Court for the Central District of California.

Before ANDERSON, PREGERSON, and WIGGINS, Circuit Judges.

J. BLAINE ANDERSON, Circuit Judge:

Geltman Industries, Inc., (Geltman) appeals from the district court's order confirming an arbitration award in favor of the Trustees of the Amalgamated Insurance Fund (Fund) and denying Geltman's motion to modify the award. The arbitration involved the determination of Geltman's withdrawal liability and any limitations that may apply under Employee Retirement Income Security Act (ERISA), as amended by the Multiemployer Pension Plan Amendment Act of 1980 (MPPAA). Geltman contends that the provisions of 29 U.S.C. Sec. 1405(a) should have been applied in determining its limitation on withdrawal liability rather than the provisions of 29 U.S.C. Sec. 1405(b).

The Fund cross-appeals from the district court's order denying the Fund's attorney's fees upon confirmation of the arbitration award in its favor. We affirm in part, reverse in part, and remand.

I. FACTS

The facts are undisputed in this case. Geltman was involved in the garment industry. Its business had been in decline for many years. In February, 1982, Geltman ceased its operations because "continued losses had brought it precariously close to a negative net worth." Geltman negotiated a sale of its assets and applied the proceeds to the payment of creditors and shareholders in the liquidation of the business. After the sale and payment of liabilities, Geltman was left with $98,000 in cash and a note providing for payment to Geltman of $2,000 per month for 120 months, given in exchange for Geltman's lease rights. This money and the payments due under the note were distributed to Geltman's shareholders.

After Geltman's dissolution, the Fund notified Geltman that Geltman owed $416,508.12 in withdrawal liability. The parties arbitrated the issue of withdrawal liability pursuant to 29 U.S.C. Sec. 1401. The arbitrator awarded the entire liquidation value of Geltman ($98,000 in cash plus the note) to the pension plan pursuant to 29 U.S.C. Sec. 1405(b) and stated that 29 U.S.C. Sec. 1405(a) was not applicable to this case. The district court affirmed the award. Geltman appeals, asking that the district court's order be reversed and the arbitration award be modified in accordance with the provisions of 29 U.S.C. Sec. 1405(a). The Fund cross-appeals, claiming that the award of attorney fees is mandatory in this case, and that the district court erred in denying attorney fees on discretionary grounds.

II. DISCUSSION

A. Standard of Review-Arbitrator's Conclusions

The clear authorization of 29 U.S.C. Sec. 1401(b)(2) for judicial review "to enforce, vacate, or modify the arbitrator's award" gives this court a right to review an arbitrator's legal rulings. Republic Industries v. Teamsters Joint Council, 718 F.2d 628, 641 (4th Cir.1983), cert. denied --- U.S. ----, 104 S.Ct. 3553, 82 L.Ed.2d 855 (1984). While the factual findings of an arbitrator are presumed correct, 29 U.S.C. Sec. 1401(c), the court may review de novo all conclusions of law. Bd. of Trustees v. Thompson Bldg. Materials, Inc., 749 F.2d 1396, 1405-06 (9th Cir.1984), cert. denied, --- U.S. ----, 105 S.Ct. 2116, 85 L.Ed.2d 481 (1985). Statutory interpretation is a question of law subject to de novo review. United States v. Horowitz, 756 F.2d 1400, 1403 (9th Cir.), cert. denied, --- U.S. ----, 106 S.Ct. 74, 88 L.Ed.2d 60 (1985).

We are asked to review an arbitrator's ruling on the interpretation and application of pertinent sections of 29 U.S.C. Sec. 1405. Therefore, the proper standard of review is de novo.

B. Statutory Interpretation--29 U.S.C. Sec. 1405(a) or 29 U.S.C. Sec. 1405(b)

In this case of first impression for an appellate court, we find ourselves faced with three different interpretations of the provisions of 29 U.S.C. Sec. 1405.

Geltman contends that the arbitrator misinterpreted the scope of Sec. 1405(a) by restrictively interpreting that section to apply only when there is a sale of assets, but no insolvency. Geltman further argues that the arbitrator was erroneous in finding that this was an insolvency liquidation, and, therefore, that Sec. 1405(b) applied. Geltman finds fault with the arbitrator's preclusive interpretation of Sec. 1405(a) because (1) it contradicts the clear language of the statute; (2) it is inconsistent with legislative intent and the underlying policy of ERISA and MPPAA; and (3) it renders Sec. 1405(a)'s limitation virtually meaningless when read in conjunction with Sec. 1405(b).

A slightly different interpretation is advanced in an amicus brief submitted by the Pension Benefit Guaranty Corporation (PBGC). The PBGC argues that Sec. 1405(b) is inapplicable unless an employer is determined to be insolvent under Sec. 1405(d)(1) and that insolvency cannot be determined unless the reduction in withdrawal liability provided for in Sec. 1405(a) is first applied. PBGC argues, in the alternative, that even if the prerequisites of Sec. 1405(b) are met (i.e., Geltman is insolvent under Sec. 1405(d)(1)), Sec. 1405(b) does not preclude the application of Sec. 1405(a). The PBGC's interpretation gives the withdrawing employer the ability to choose that section which produces the lowest withdrawal liability.

The Fund argues that the plain language of Sec. 1405 mandates the application of Sec. 1405(b) and precludes the application of Sec. 1405(a) in insolvency liquidations. Therefore, according to the Fund, there is no choice for insolvent employers between the application of Sec. 1405(a) and Sec. 1405(b). The Fund contends that the application of Sec. 1405(b) to insolvency liquidation is consistent with legislative history and the context and purpose of the statute. The Fund further contends that Sec. 1405(d)(1) refers and applies to Sec. 1405(b) and because Sec. 1405(b) and Sec. 1405(a) are mutually exclusive, there is no need to determine the insolvency of the employer by first applying Sec. 1405(a).

We find the Fund's interpretation to be most consistent with the structure and plain language of the statute. Therefore, the proper analysis to be used in applying the various sections of 29 U.S.C. Sec. 1405 involves the following two-step process. First, it must be decided whether the employer is an insolvent employer. This is done by looking to the provisions of Sec. 1405(d)(1) without regard to Sec. 1405(a). Second, if the employer is insolvent, then it is necessary to go to the provisions of Sec. 1405(b) to determine any limitations on the employer's withdrawal liability. If, and only if, the employer is not insolvent, do the limitations in Sec. 1405(a) apply. Under this analysis, we find that Geltman was insolvent and, as a consequence, Sec. 1405(b) applies. Therefore, the district court was correct in its confirmation of the arbitration award in favor of the Fund.

We find support for our analysis in the plain language and the structure of the statute, as well as the underlying policies of ERISA and MPPAA. The plain language of 29 U.S.C. Sec. 1405, ¹ indicates that both Sec. 1405(a) and Sec. 1405(b) could apply to the liquidation or dissolution of an employer. Section 1405(a)(2) refers to "the liquidation or dissolution value of the employer" after a sale or exchange to determine the unfunded vested benefits allocable to that employer. To qualify for the limitation provisions of Sec. 1405(a), there need only be a bona fide sale of all or substantially all of the employer's assets in an arms-length transaction to an unrelated party. Initially, it would appear that Geltman qualifies for Sec. 1405(a) limitations. However, it is clear that Sec. 1405(b) also applies to liquidations and dissolutions. This is apparent from the opening sentence which states, "[i]n the case of an insolvent employer undergoing liquidation or dissolution...." (Emphasis added). But, this section is more specific. It states that "[i]n the case of an insolvent employer ...," any limitations on withdrawal liability will be determined differently from those determined in Sec. 1405(a). Fundamental maxims of statutory construction require that a specific statutory section qualifies a more general section and will govern, even though the general provisions, standing alone, would encompass the same subject. Monte Vista Lodge v. Guardian Life Ins. Co. of America, 384 F.2d 126, 129 (9th Cir.1967), cert. denied, 390 U.S. 950, 88 S.Ct. 1041, 19 L.Ed.2d 1142 (1968). See also Markair, Inc. v. C.A.B., 744 F.2d 1383, 1385 (9th Cir.1984) (specific terms of statute override general terms). The fact that both Secs. 1405(a) and 1405(b) begin with "in the case of" is further evidence that the sections are to operate exclusive of each other and cover separate and distinct situations. Furthermore, while Sec. 1405(b) specifically mentions insolvency liquidations, Sec. 1405(a) makes no such reference. Therefore, if an employer is insolvent, the provisions of Sec. 1405(b) apply. If the employer is not insolvent, and the other conditions of Sec. 1405(a) are met, the provisions of that section apply.

There is implicit support for this analysis in Granada Wines v. New England Teamsters & Trucking, 748 F.2d 42 (1st Cir.1984). In that case it was held that "Sec. 4225(b) [Sec. 1405(b) ] governs only liquidations, and Sec. 4225(a) [Sec. 1405(a) ] governs sales of assets ..." Id. at 45. Also, in Dorn's Transp., Inc. v. I.A.M. Nat. Pension Fund, 578 F.Supp. 1222 (D.D.C.1984...