Trustees of Iron Workers Local 473 Pension Trust v. Allied Products Corp.

Decision Date13 April 1989
Docket NumberNo. 87-2108,87-2108
Citation872 F.2d 208
Parties, 57 USLW 2659, 10 Employee Benefits Ca 2576 TRUSTEES OF IRON WORKERS LOCAL 473 PENSION TRUST, Plaintiff-Appellee, v. ALLIED PRODUCTS CORPORATION, Defendant-Appellant.
CourtU.S. Court of Appeals — Seventh Circuit

Stephen P. Bedell, Gardner Carton & Douglas, Chicago, Ill., for defendant-appellant.

Charles B. Wolf, Vedder Price Kaufman & Kammholz, Chicago, Ill., James J. Armbruster, Pension Benefit Guar. Corp., Washington, D.C., for plaintiff-appellee.

Before FLAUM, MANION, and KANNE, Circuit Judges.

MANION, Circuit Judge.

Allied Products Corporation ("Allied") appeals the district court's decision granting summary judgment in favor of the Trustees ("Trustees") of Iron Workers Local 473 Pension Trust ("the Plan"). The Trustees sought to vacate or modify a withdrawal liability arbitration award and to collect withdrawal liability payments under the Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendments Act of 1980. The arbitrator had held that Allied completely withdrew from the Plan in the plan year ending June 30, 1984, while the Trustees claimed that Allied completely withdrew from the Plan in the plan year ending June 30, 1983. (Depending on the date of Allied's withdrawal, there is a swing of nearly $200,000 in the amount owed in withdrawal liability.) The district court vacated the arbitrator's award. For the reasons stated below, we reverse the district court's judgment, but hold that it properly reviewed the arbitrator's legal determinations de novo.

I.

The facts are straightforward and undisputed. 1 Since May 1, 1959, Allied and Shopmen's Local Union No. 473 of the International Association of Bridge, Structural and Ornamental Iron Workers, AFL-CIO ("Union") were parties to collective bargaining agreements covering production and maintenance employees at Allied's plant in Bedford Park, Illinois. These agreements required, among other things, contributions by Allied to the Plan based on each hour worked by covered employees. The Plan was most recently amended and restated as of May 1, 1979.

The pension plan year ("plan year") runs from July 1 through June 30. On June 16, 1982, Allied informed the Union that it would permanently shut down its Bedford Park plant operations. On July 2, 1982, Allied and the Union executed a Shutdown and Severance Pay Agreement which stated in part: "[t]he terms and conditions as set forth in the collective bargaining agreement ... as amended, shall continue in full force and effect, except as hereinafter modified by this Severance Agreement, as long as any bargaining unit member remains employed."

In the plan year ending June 30, 1982, Allied contributed $79,669.91 for 111,573 participant hours. For the plan year ending June 30, 1983, Allied's contributions declined to $10,338.56 for 13,854.75 participant hours. From July 1, 1983, through December 1983, Allied's contributions fell to $1,432.50 for 1,910 participant hours.

There were 48 employees working for Allied for the payroll week ending July 4, 1982. Five employees remained at the plant by the end of August 1982. Of these five, two were terminated in September and two more in December 1983. One employee, Donald Steele, a maintenance man, worked continuously at the Bedford Park plant and was still on the payroll at the end of December 1983. Two of the five remaining employees, Charles Hearod, a forklift operator, and Lester Banks, a fitter/welder, were recalled by Allied in February 1983. Banks subsequently was terminated in April 1983, while Hearod worked at the plant continuously from the date of his recall through December 1983.

Banks was called back to work for the purpose of welding and finishing certain heat exchangers which were preassembled but not finished. Hearod and Steele assisted in the finishing work as well, and also worked the shear press and brake press to machine certain seal retainers in August and/or September 1983 for approximately ten hours each. In June 1983, these employees also performed 16 hours of welding on exhaust duct assembly units. All other work performed by these employees included cleaning and maintenance work and the identification, weighing and shipment of parts, scrap, raw materials and fixtures in inventory. These activities, it was stipulated, all constituted bargaining unit work.

Although Allied informed the Union in June 1982 of its intent to permanently shut down its Bedford Park plant operations, Allied still received, processed and filled seven purchase orders during 1983, the last one in September 1983. In addition, after July 1, 1982, Allied identified, loaded and shipped numerous items of scrap, parts, and fixtures to its other divisions.

On November 15, 1982, the Trustees sent Allied a notice of multiemployer plan withdrawal liability, a demand for payment of $559,108.57, and stated that the entire amount was due by January 1, 1983. Alternatively, the Trustees permitted Allied to make 27 monthly installment payments of $23,791.33 with a 28th payment of $7,495.81, beginning January 1, 1983. The amount of withdrawal liability was determined by the Trustees as of June 30, 1982, based on the Trustees' conclusion that a complete withdrawal had occurred during the plan year ending June 30, 1983.

On February 14, 1983, Allied submitted to the Trustees a request for review. On June 17, 1983, the Trustees responded to Allied's request, refusing to alter its November 15, 1982 notice and demand. Allied then initiated arbitration proceedings on August 10, 1983, seeking review of the Trustees' determination under 29 U.S.C. Sec. 1401(a).

The arbitrator concluded that "the Plan's determination that [Allied] withdrew from the Plan during the plan year ending June 30, 1983 and that [Allied's] withdrawal liability should therefore be determined based on the Fund's unfunded vested benefits as of June 30, 1982 is clearly erroneous and must be set aside." The arbitrator further concluded that a complete withdrawal had occurred during the plan year ending June 30, 1984, and that the Plan should immediately determine Allied's withdrawal liability based on the Fund's unfunded vested benefits as of June 30, 1983.

The district court referred the Trustees' suit to vacate the arbitration award to a magistrate. Reviewing the arbitrator's decision de novo, the magistrate held that the arbitrator misinterpreted 29 U.S.C. Sec. 1383(a)(2) (withdrawal occurs when an employer permanently ceases all covered operations), and thus vacated the award. The arbitrator read Sec. 1383(a)(2) literally (all means all), while the magistrate, relying on a single passage of legislative history, held that all meant "virtually all." Under the latter interpretation, the magistrate held that Allied completely withdrew from the Plan in the plan year ending June 30, 1983, as the Trustees claimed. The district court adopted the magistrate's report and recommendation, writing separately to emphasize the court's authority to review de novo the arbitrator's decision.

II.

We confront two issues on appeal: 2 the proper standard of review of an arbitrator's award, and the interpretation to be given 29 U.S.C. Sec. 1383(a)(2).

A. Statutory Background

ERISA subjects employers who withdraw from multiemployer pension plans to so-called withdrawal liability in an amount equal to their statutory share of the plan's unfunded vested liabilities. 29 U.S.C. Sec. 1381. A "complete withdrawal" occurs when an employer "(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). 3 "[T]he date of a complete withdrawal is the date of the cessation of the obligation to contribute or the cessation of covered operations." 29 U.S.C. Sec. 1383(e).

Following an employer's withdrawal from a multiemployer pension plan, the plan sponsor is required to determine the amount of withdrawal liability owed, notify the employer of this amount, and demand payment. 29 U.S.C. Secs. 1382, 1399(b)(1). The amount of an employer's withdrawal liability is determined as of the last day of the plan year preceding the plan year in which the withdrawal occurs. 4 29 U.S.C. Sec. 1391(b)(2)(A). Within 90 days after notice and demand have been made, the withdrawing employer may request that the Plan review its determination. 29 U.S.C. Sec. 1399(b)(2)(A). The Plan must notify the employer of its decision after its review. 29 U.S.C. Sec. 1399(b)(2)(B). An employer may then initiate arbitration within the 60-day period after the earlier of (1) the date of notification to the employer of the Plan's decision on review, or (2) 120 days after the date of the employer's request for review. 29 U.S.C. Sec. 1401.

Any party to the arbitration may appeal to an appropriate federal district court to "enforce, vacate, or modify the arbitrator's award." 29 U.S.C. Sec. 1401(b)(2). "[T]o the extent consistent with [Title IV of ERISA]," arbitration proceedings "shall ... be conducted in the same manner, subject to the same limitations, carried out with the same powers (including subpoena power), and enforced in United States courts as an arbitration proceeding carried out under Title 9 [ (Federal Arbitration Act) ]." 29 U.S.C. Sec. 1401(b)(3). On review "there shall be a presumption, rebuttable only by a clear preponderance of the evidence, that the findings of fact made by the arbitrator were correct." 29 U.S.C. Sec. 1401(c).

B. Arbitrator's Award; Standard of Review

Like every other federal appellate court which has addressed this question, we hold that district courts may fully review the arbitrator's legal determinations. Union Asphalts and Roadoils, Inc. v. Mo-Kan Teamsters Pension Fund, 857 F.2d 1230, 1233-34 (8th Cir.1988); Trustees of Amalgamated Ins. Fund v. Geltman Industries, Inc., 784 F.2d 926, 928-29 (9th...

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