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THOMAS v. SOUTHLAND CORP.

United States District Court, Northern District of Illinois, E.D


March 4, 1985

JOHN THOMAS, JOSEPH MOLEPSKE, ROBERT GIBSON, TERRENCE SMITH, MAXWELL RIFFKIND AND GRANT PETERSEN, TRUSTEES OF THE DAIRY EMPLOYEES'-MILK DEALERS PENSION PLAN, PLAINTIFFS.
v.
THE SOUTHLAND CORPORATION, DEFENDANT.

The opinion of the court was delivered by: Norgle, District Judge.

ORDER

This matter is before the court on the Defendant's, the Southland Corporation ("SOUTHLAND"), Rule 12(b)(6) motion to dismiss. The issue presented by Southland's motion is whether the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. § 1381, et seq. ("MPPAA"), entitles the Plaintiffs, Trustees of the Dairy Employee's-Milk Dealer's Pension Plan ("PLAN"), to payments for Southland's withdrawal liability pending the arbitrator's determination of Southland's withdrawal liability. Southland contends that internal ambiguities and inconsistencies within MPPAA, as well as several constitutional considerations, preclude a construction of the statute which would entitle the Plan to interim payments. Because the court finds the statutory scheme established by MPPAA consistent and without constitutional defect, Southland's motion to dismiss must be denied. A brief outline of the MPPAA precedes a discussion of the issues raised by the motion to dismiss.

The MPPAA provides a comprehensive statutory scheme which regulates employer withdrawals from multiemployer plans. An employer, therefore, is subject to "withdrawal liability" from the date of withdrawal for a plan's "unfunded vested liability." 29 U.S.C. § 1381. Section 1382 directs the plan's trustees to compute the employer's withdrawal liability. After performing the computation and preparing a schedule of payments, the trustees are required by § 1399(b)(1) to notify the withdrawing employer of its liability and demand payment in accord with the established schedule. If a withdrawing employer fails to make payments as demanded by the trustees, then § 1399(c)(3) provides that interest shall accrue on the delinquent payments. After a delinquency period of 60 days the trustees may declare the entire amount of an employer's withdrawal liability due. § 1399(c)(5). A delinquent employer is also subject to interest and penalty on the lump sum payment. Id. Section 1401(a) and (b) provide arbitration procedures in the event of a dispute between the plan and the employer regarding an employer's liability or the plan's calculations. In this case, Southland has made a timely request for arbitration, but the parties have yet to appear before an arbitrator.

During its deliberation of the MPPAA, Congress was preoccupied with shoring up the security of funding for multiemployer plans. House of Representatives Education and Labor Committee Report, H.R.REP. No. 96-869, Part I, 96th Cong., 2d Sess. 54-55, reprinted in 1980 U.S.Code Cong. & Ad.News 2918, 2919, 2925, 2928, 2931, 2952 (hereinafter cited as "House Report"). The MPPAA was generally regarded as a remedy for problems inherent in ERISA as it was enacted in 1974. Id. at 2919, 2925, 2928, 2020. Under ERISA, employers actually received a benefit by withdrawing from existing plans. Id. at 2928. The MPPAA was designed to remove that benefit by imposing liability on withdrawing employers for "vested but unpaid benefits." See Peick v. Pension Benefit Guaranty Corp., 724 F.2d 1247, 1254-55 (7th Cir. 1983). The MPPAA also contains several presumptions which favor determinations and calculations made by plan sponsors. E.g., § 1401(a)(3)(A) and (c). Finally, the MPPAA provides incentives for employers and plans to resolve disputes through arbitration. E.g., § 1401(a)(1). Thus, in keeping with the statutory scheme of MPPAA, as well as the Congressional intent behind the statute, plans are provided with the security of continuous funding upon employer withdrawal and withdrawing employers are provided with explicit administrative procedure for resolution of any disputed calculations.*fn1 On its face the MPPAA appears to greatly favor plan sponsors over employers. However, it must be kept in mind that an employer's liability to a plan is rooted in the employer's contractual obligations. The House Committee Report on the MPPAA specifically noted the close relationship between the MPPAA and an employer's contractual obligations under a collective bargaining agreement.

  Multiemployer plans are creatures of collective bargaining. The
  committee believes that the integrity of the collective
  bargaining process must be preserved to the utmost extent
  consistent with assuring the financial soundness of
  multiemployer plans to meet benefit commitments. The bill as
  reported out by the committee represents an effort to strike an
  appropriate balance among conflicting interest and needs. The
  legislation is designed to improve the financial condition of
  multiemployer plans and eliminate existing incentives to plan
  termination, while maintaining an adequate level of protection
  for plan participants through financial assistance to insolvent
  plans.

House Report, supra, at 2931.

With this background in mind, we turn to the task of construing §§ 1399 and 1401. Section 1399(c)(2) provides:

  (2) Withdrawal liability shall be payable in accordance with
  the schedule set forth by the plan sponsor under subsection
  (b)(1) of this section being no later than 60 days after the
  date of the demand notwithstanding any request for review or
  appeal of determinations of the amount of such liability or of
  the schedule.

Section 1401(d) provides:

  (d) Payments by employer prior and subsequent to determination
  by arbitrator; adjustment; failure of employer to make
  payments

  Payments shall be made by an employer in accordance with the
  determinations made under this part until the arbitrator issues
  a final decision with respect to the determination submitted
  for arbitration, with any necessary adjustments in subsequent
  payments for overpayments or underpayments arising out of the
  decision of the arbitrator with respect to the determination.
  If the employer fails to make timely payment in accordance with
  such final decision, the employer shall be treated as being
  delinquent in the making of a contribution required under the
  plan (within the meaning of section 1145 of this title).
  (emphasis added).

Southland concedes that both sections create a duty on behalf of withdrawing employers to make interim payments to plans pending an arbitrator's decision. See Defendants Brief in Support of Motion to Dismiss at 12, 13. Nevertheless, citing Republic Industries v. Teamster Joint Counsel,
718 F.2d 628 (4th Cir. 1983), Southland contends that § 1401(b)(1) implicity contradicts §§ 1399(c)(2) and 1402(d). Southland argues that this conflict prevents liability for interim withdrawal payments to the Plan. This court disagrees.

In Republic, an employer attacked the constitutionality of the MPPAA. One argument raised by the employer was that provisions of the Act requiring payments pending arbitration violated the due process clause. After upholding the MPPAA against the employer's constitutional attack, the Republic court specifically declined to decide whether the MPPAA required an employer to make interim payments. Republic, supra, at 642. In a footnote, however, the court discussed what it perceived to be an ambiguity in the MPPAA regarding interim payments. Id. at 641 & nn 15, 16. Although the court agreed that § 1399(c)(2) and the first sentence of § 1401(d) clearly require employers to make payments pending arbitration, the court thought the second sentence of § 1401(d) and § 1401(b)(1) were to the contrary. Id.

Southland has seized the ambiguity identified in Republic and reads § 1401(a)(1), (b)(1) as treating amounts demanded by a plan under § 1399(b)(1) as ""due and owing . . ." only "[i]f no arbitration proceeding has been initiated pursuant to subsection (a)."" Defendant's Brief in Support of Motion to Dismiss at 12-13. This reading, however, represents a rather myopic view of § 1401(b)(1).

The full text of § 1401(b)(1) provides:

  (b) Alternative collection proceedings; civil action
  subsequent to arbitration award; conduct of arbitration
  proceedings

  (1) If no arbitration proceeding has been initiated pursuant to
  subsection (a) of this section, the amounts demanded by the
  plan sponsor under section 1399(b)(1) of this title shall be
  due and owing on the schedule set forth by the plan sponsor.
  The plan sponsor may bring an action in a State or Federal
  court of competent jurisdiction for collection.

The subsection, therefore, plainly requires that "amounts demanded by the plan sponsor under section 1399(b)(1)" become "due and owing" under section 1401(b)(1) in the absence of a request for arbitration under § 1401(a). In other words, § 1401(b)(1) has no application to cases in which an employer has requested arbitration.
*fn2 Section 1401(d), on the other hand, does have application in cases where an employer requests arbitration. Subsection (d) contemplates payments "by an employer in accordance with the determinations made under this part until the arbitrator issues a final decision." (emphasis added).

  The application of either subsection clearly depends on whether
arbitration has been requested: If arbitration has not been
requested, then § 1401(b)(1) applies: If arbitration has been
requested, then § 1401(d) applies. Thus, as we read them, the
subsections are not inconsistent because each applies under
different circumstances.*fn3 Moreover, it would be anomalous
for a Congress so concerned with the continued vitality of
multiemployer plans to intend the result suggested by Southland
(viz. the suspension of payments by withdrawing employers who
have initiated arbitration). This court's reading of § 1401 is
consistent with the congressional policy behind MPPAA and the
interim regulations promulgated by the PBGC. See
29 C.F.R. § 2644.2(c)(2). As previously mentioned, the MPPAA provides an
employer with significant incentives to honor its contractual
obligations to a pension fund. This Court declines to disturb
the rational decisions made by Congress to protect the security
of pension plans. Board of Trustees v. Ceazan, 559 F. Supp. 1210
 (N.D.Cal. 1983); Retirement Fund v. Lazar-Wisotzky,
550 F. Supp. 35, 36 (S.D.N.Y. 1982) aff'd 738 F.2d 419 (2d Cir.
1984).

Southland further argues that the Plan is required to exhaust its administrative or arbital remedies under MPAA before proceeding under §§ 1401 and 1451 for payments pending arbitration. This argument is without merit. If the application of the exhaustion doctrine suggested by Southland is accepted, then the requirements for payment pending arbitration contained in § 1401(d) are rendered inoperative. Congress is unlikely to have intended such a result.

Further, in seeking to compel Southland to make interim payments, the Plan is not attempting to make an end run around the arbitration procedures provided by § 1401(a). The Plan seeks construction and enforcement of a separate statutory right provided by §§ 1399(c)(2) and 1401(d). Therefore, because we read these sections as clearly requiring interim payments by a withdrawing employer pending an arbitrator's decision, there can be no exhaustion issue in this case. See I.A.M. National Pension Fund v. Stockton Tri Industries, 727 F.2d 1204, 1209-11 (D.C.Cir. 1984).

The constitutional arguments raised by Southland are not persuasive. The MPPAA has survived attack under the due process clause and the seventh amendment. E.g., Republic supra, at 642; Peick, supra, at 1277. See also Ceazan, supra, at 1216-18; Lazar-Witsotzky, supra. at 37. The motion to dismiss is therefore denied.

IT IS SO ORDERED.


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