The opinion of the court was delivered by: Shadur, District Judge.
Richland Industries, Ltd. ("Richland II") sues the Trustees
("Trustees") of the Central States, Southeast and Southwest Areas
Pension Fund (the "Fund") to recover withdrawal liability
payments made under Section 4062 of the Employee Retirement
Income Security Act of 1974 ("ERISA"), as amended by the
Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"
or simply the "Act"), 29 U.S.C. § 1362.*fn1 Richland II argues
Trustees erroneously calculated the amount of withdrawal
liability Richland II owed to the Fund by including the
contribution history of Richland Industries, Inc. ("Richland I"),
the corporation whose assets Richland II purchased.
Richland II and Trustees have filed cross-motions for summary
judgment under Fed.R.Civ.P. ("Rule") 56. For the reasons stated
in this memorandum opinion and order, Richland II's motion is
granted and Trustees' is denied.
From February 1, 1975 through July 11, 1979 Richland I
submitted contributions to the Fund pursuant to a series of
collective bargaining agreements ("CBAs") with Teamsters Local
695 ("Local 695"). Richland I was a wholly-owned subsidiary of
TSC Industries, Inc. ("TSC"), which was in turn owned and
controlled by Fuqua Industries, Inc.
On July 12, 1979 — before the Act became effective — Dallman
Investments, Inc. (the same corporation that later, by name
change, became Richland II) purchased the operating assets (both
tangible and intangible, including good will) of Richland I in a
going-concern transaction. Before that time Richland II and
Richland I had been entirely separate, independent corporate
entities (no officers, directors or stockholders of Richland II
had been employees, officers or directors of Richland I). Nor did
either acquire any stock of the other as a result of the asset
transaction. After the sale Richland I ceased its business
activities, stopped contributing to the Fund and changed its name
to R.I. Liquidating, Inc. In 1981 it merged into TSC.
As part of its asset purchase, Richland II acquired the right
to use the trade name "Richland Industries." It changed its
corporate name to Richland Industries, Ltd. and continued
production of the same products as Richland I, in the same
facility and with the same employees. Under the purchase
agreement, Richland II assumed all Richland I's future
obligations under its CBA with Local 695. It immediately began
contributing to the Fund as required by the CBA.
On November 30, 1981 the CBA Richland II had inherited expired.
When the parties failed to negotiate a new agreement, on February
6, 1982 Local 695 went out on strike. On December 10, 1982 the
NLRB decertified Local 695. That decertification permanently
terminated Richland II's obligation to contribute to the Fund, a
cessation that constituted a "complete withdrawal" within the
meaning of Act § 1383.
In late December 1982 Richland II received from Trustees a
request to file a "Statement of Business Affairs." Though the
request was addressed to Richland I rather than Richland II, the
latter timely filed the statement. It did so however on behalf of
Richland I, at the same time advising Trustees Richland II was an
employer different from Richland I.
In December 1983 Trustees sent Richland II a notice and "Demand
For Payment of Withdrawal Liability." Again the notice was
addressed to Richland I not Richland II. Trustees' "Demand"
claimed a withdrawal liability in the amount of $35,378.69, based
on the contribution history of Richland I dating back to 1975.
Trustees later recalculated the liability to $37,717.97.
Richland II objected to the inclusion of Richland I's
contribution history in the calculation of Richland II's
withdrawal liability and filed a Request for Review. Trustees
denied the request on the grounds that (Stip. Ex. G):
Richland II paid the Fund (under protest) over $17,000 on the
disputed liability. Trustees have denied Richland II's demands
for a refund of those payments.
If Richland I's contribution history were not attributed to
Richland II, the latter would face no withdrawal liability at all
(any liability attributable solely to Richland II falls below the
de minimis threshold established by the Act). And Richland II has
not challenged Trustees' calculations except insofar as they
include Richland I's contribution history. Thus the cross-motions
pose a sole — an all-or-nothing — issue: whether Richland II may
be held liable under the Act for unfunded vested liabilities that
accrued during Richland I's regime.
But the NLRA cases and doctrines cited by Trustees really do not
bear on the question here at all. Indeed, one of the cases
Trustees themselves cite (Mem. 5), Howard Johnson Co. v. Detroit
Local Joint Executive Board,
, 262-63 n. 9, 94 S.Ct.
2236, 2243-44 n. 9, 41 L.Ed.2d 46 (1974) (citations omitted and
adapted to this case) emphasizes that Gertrude Stein's "A rose is
a rose is a rose" analysis does not apply here:
Trustees first cite a host of NLRA cases for the
noncontroversial proposition that when a successor employer
voluntarily assumes the predecessor's labor agreement, the
successor is "fully responsible for the whole obligation" or
"fully bound to every aspect of that agreement" (Trustees Mem.
7). That truism leads nowhere, for Richland II has concededly
performed its only relevant obligation under the CBA: paying
contributions into the Fund at a specified rate (Stip. Ex. A,
Art. XXIV). No provision of the CBA even arguably deals with
withdrawal liability payments.
as Debrecini v. Healthco-D.G. Stoughton Co., 579 F. Supp. 296,
297-98 (D.Mass. 1984) and T.I.M.E.-DC, Inc. v. Trucking Employees
of North Jersey Welfare Fund, Inc., 560 F. Supp. 294, 297
(E.D.N.Y. 1983) have recognized, withdrawal liability arises from
the statute, not the CBA.
Trustees attempt to avoid the force of the
Debrecini-T.I.M.E.-DC line of cases by arguing NLRA also renders
a successor liable for its predecessor's statutory obligations,
citing cases in which successors have been required to implement
remedies imposed on their predecessors for the latters' unfair
labor practices. Richland II argues forcefully the NLRA policies
motivating those decisions are inapplicable here. But there is an
even more fundamental problem with Trustees' approach: Richland
I had no statutory liability for withdrawal payments at all. And
because it did not, there was no derivative liability to be
imposed on Richland II.
Thus Trustees miscast the issue when they speak in terms of
forcing Richland II to shoulder Richland I's obligations, for the
latter had neither a statutory nor a contractual obligation to
pay Fund any more than it did. Hence the current question is
solely a matter of Richland II's own obligations under the Act's
formulas, and that question can be decided only by reference to
the Act itself and its legislative history.
Pre-Act Employer Withdrawals
To understand the Act, it is necessary to look first at the
provisions of ERISA that preceded it. Pension Benefit Guaranty
Corp. ["PBGC"] v. R.A. Gray & Co., ___ U.S. ___, 104 S.Ct. 2709,
2713-15, 81 L.Ed.2d 601 (1984) explained both the structure of
ERISA and the transition to the Act as to employers' withdrawal
ERISA was enacted in 1974, largely in response to the
increasing number of terminations of pension plans before
sufficient funds had been accumulated to pay vested benefits. One
aspect of the legislation was the creation of PBGC, an insurer
that collects premiums from covered plans and pays benefits to
participants in those plans if the plans terminate with
insufficient funds to cover guaranteed benefits.
Although PBGC automatically provided benefits to single
employer plans, ERISA deferred its effective date for comparable
automatic coverage of multiemployer plans. In the interim PBGC
had discretion whether to provide benefits to beneficiaries of
underfunded multiemployer plans upon termination of those plans.
Employers participating in such plans were not necessarily
liable, after withdrawal from the plans, for the underfunding of
their employees' vested benefits. For any withdrawing employer,
such liability was contingent on:
1. the plan's termination within five years of the
employer's withdrawal; and
2. PBGC's discretionary decision to make payments
to the employees after termination.
Only if PBGC exercised its discretion to insure employees of
the terminated plan would PBGC assess withdrawal liability
against any employer who had participated in the plan at any time
in the last five years of its existence. That meant an employer
escaped withdrawal liability altogether under ERISA if either (1)
the plan continued in existence for five years after the
employer's withdrawal or (2) PBGC declined to provide benefits on
plan termination. And in any event the employer's liability was
limited to 30% of the employer's net worth.
Congress commissioned PBGC in 1978 to prepare a comprehensive
report on the problems with ERISA's treatment of multiemployer
plans, in the meantime further deferring the mandatory coverage
of such plans. PBGC's July 1978 report, which provided the
impetus for the Act, found ERISA failed adequately to protect
plans from the adverse consequences of employer withdrawal. In
fact ERISA actually encouraged early withdrawal from troubled
plans because of:
1. the chance the contingent liability would never
2. the fact the withdrawing employer could in any
event defer liability until plan termination; and
3. the formulation under which the earlier an
employer withdrew, the smaller its post-plan
termination liability would be.
And of course the 30%-of-net-worth cap on withdrawal liability
also factored into the equation, for it allowed some employers to
avoid paying even their otherwise-calculated share of unfunded
On February 27, 1979 PBGC recommended to Congress a new system,
under which an employer withdrawing from a multiemployer plan
would be automatically liable for whatever share of the plan's
unfunded vested liability was attributable to that employer's
participation in the plan. Because Congress feared the prospect
of such legislation would prompt a massive withdrawal from
existing plans to avoid the proposed withdrawal liability,
Congress early announced that whatever legislation it enacted
would be retroactive to February 27, 1979, the date of PBGC's
proposal. Ultimately that retroactive date was changed to April
Withdrawal Liability Under the Act
One of the Act's provisions creates automatic withdrawal
liability extending back even to an employer's pre-Act
contribution history. That retroactive application was upheld in
Gray, 104 S.Ct. at 2717-20. But even though an employer may be
held liable for its own pre-Act contribution history, it may not
be held liable under most circumstances for the pre-Act
contribution history of other employers. In particular, Act §
1384 clearly establishes that a purchaser of assets may not be
held liable for the seller's contribution history, absent a
special arrangement with the seller by which the purchaser
voluntarily assumes that liability. No such arrangement was made
here. Under the unambiguous provisions of the statute, there is
really no room to argue Richland II is liable for Richland I's
1. Application of the Act's Formula to Richland II
Trustees' basic position is that the Act's silence as to the
treatment of a pre-Act asset sale represents a "gap" that must be
filled in by the courts. Examination of the Act, however,
discloses no gap at all in its prescribing how to compute the
liability of an asset purchaser that withdraws after the
effective date of the Act. Instead the Act provides crystal-clear
(albeit complex) formulas for calculating that liability.
Act § 1391(c) establishes a formula that precludes any
consideration of the unfunded vested liabilities of Richland I,
which concededly withdrew from the Fund upon its sale of assets
in 1979. Under that formulation, Act § 1391(c)(2) calls for
calculation of the total amount of the Fund's unfunded vested
liabilities for its last fiscal year ended before April 29, 1980.
Richland II's liability is then computed by multiplying that
figure by the following fraction (Act § 1391(c)(2)(B)(ii)(I) and
(II)) (emphasis added):
the sum of all contributions required to be made by
the employer under the plan for the last 5
plan years ending before April 28, 1980
the sum of all contributions made for the last 5 plan
years ending before April 29, 1980 by all employers
who had an obligation to contribute under the plan
for the first plan year ending after April
29, 1980 and who had not withdrawn from the plan
before such date.
It is plain "the employer" referred to in the numerator means
the current employer whose liability is being calculated. And the
denominator deals only with employers participating in the plan
after the effective date of the Act. Thus each part of the
fraction by its terms excludes Richland I's contribution history.
Trustees do not dispute that clear reading of the formula's
language. Rather they seem to contend alternatively:
1. Richland I and Richland II should be considered
a single "employer" for purposes of the formula.
2. General policy considerations behind the Act
compel the inclusion of Richland I's liability in the
Those arguments will be dealt with in turn (although neither
requires extended discussion).
2. "Single Employer" Issue
There are explicit statutory provisions defining when
successive employers can be considered a single "employer" for
purposes of calculating withdrawal liability. ERISA § 1362(d)
(left unchanged by the Act, and made applicable to multiemployer
plans by Act § 1398) provides successor corporations will be
liable for the contribution history of their predecessors after
(d) For purposes of this section the following
rules apply in the case of certain corporate
(1) If an employer ceases to exist by reason of
the reorganization which involves a mere change in
identity, form, or place of organization, however
effected, a successor corporation resulting from
such reorganization shall be treated as the
employer to whom this section applies.
(2) If an employer ceases to exist by reason of a
liquidation into a parent corporation, the parent
corporation shall be treated as the employer to
whom this section applies.
(3) If an employer ceases to exist by reason of a
merger, consolidation, or division, the successor
corporation or corporations shall be treated as the
employer to whom this section applies.
It would distort that statute, with its specific enumeration of
the kinds of acquisitions (ERISA § 1362(d)(3)) as well as the
kinds of corporate restructurings (ERISA § 1362(d)(1) and (2)) to
which a "single employer" rule applies, to insert a
sale-of-assets acquisition — conspicuously absent from ERISA §
1362 and hence from Act § 1398.
In fact, the Act explicitly treats asset sellers and purchasers
as separate employers. Section 1384 (in tandem with Section
1383(a)) establishes that an arms' length sale of assets normally
occasions a complete withdrawal from the plan by the seller. That
subjects the seller to full withdrawal liability. And the
purchaser undertakes no liability at all for the seller's
contribution history, unless the purchaser posts a special bond
and the seller agrees contractually to assume secondary liability
for its contribution history.
Although that statutory framework of Act § 1384 was not in
effect at the time of the Richland I-Richland II asset sale, it
is instructive for two reasons:
1. It wholly forecloses the possibility of
considering Richland I and Richland II jointly as
"the employer" under Act § 1391(c)(2)(B)(ii)(I).
2. It underscores just how implausible Trustees'
That last point may need a bit of explication. Trustees must
concede that had the Act never become law, Richland II would not
have been liable for Richland I's unfunded vested liabilities
under ERISA. And had the Act been enacted before the asset sale
here, Act §§ 1383 and 1384 would have protected Richland II from
liability for Richland I's history (unless of course Richland II
voluntarily assumed such liability, as it did not). It is thus
wholly bizarre for Trustees to contend that although neither
statute by its terms would saddle Richland II with Richland I's
liability, the transition from one statute to the other somehow
(sub silentio) rendered Richland II so liable.
3. Policy Considerations
Finding no support at all in the language of the Act, Trustees
attempt to override the statute by resort to its legislative
history. That effort calls into play the reverse principle of
statutory interpretation criticized by Justice Stevens,
dissenting in Kosak v. United States, 465 U.S. 848, 104 S.Ct.
1519, 1531, 79 L.Ed.2d 860 (citation omitted):
Therefore, this is "a case for applying the canon of
construction of the wag who said, when the
legislative history is doubtful, go to the statute."
Trustees urge a primary purpose of the Act was to render each
employer liable for its proportionate share of liability. From
that they reason it would be unfair to saddle the Fund's other
contributing employers with unfunded vested liability left by
Richland II's predecessor. Such fairness considerations, however,
cut both ways. It would be at least equally unfair to saddle
Richland II with Richland I's liability, when it was the latter
that obviously reaped the benefits of underfunding.
In all events, though, such policy considerations are far more
appropriately addressed to Congress in the first instance than to
the courts. And Congress specifically recognized, when it passed
the Act, that plans would carry over unfunded vested liabilities
from the ERISA withdrawal regime. When Congress moved the
effective date of the Act forward from 1979 to 1980, it
acknowledged that plans would necessarily bear the burden of
swallowing the unfunded vested liability of employers (such as
Richland I) who withdrew during that interim period (Gray, 104
S.Ct. at 2715, quoting 126 Cong.Rec. 510101 (July 29, 1980)
(statement of Sen. Javits)):
The committees decided in part to move up the date
from February 27, 1979, the date contained in earlier
versions of the bill, because the original purpose of
a retroactive effective date — namely, to avoid
encouragement of employer withdrawals while the bill
was being considered — has been achieved. It should
also be noted that the April 29 effective date is the
product of strong political pressures by certain
withdrawing employers who were caught by the earlier
date. I realize that permitting these employers to
avoid liability only increases the burdens of those
employers remaining with the plans in question, but
it appears necessary to accept the April 29 date in
order to enact the bill before the August 1 deadline
If any inference is to be drawn from legislative history, it is
precisely the opposite of what Trustees claim. Congress
deliberately chose to remove transactions in the gap period —
February 27, 1979 to April 29, 1980 — from the impact of the Act.
It would be irresponsible, in policy terms as well as in terms of
statutory construction, to subvert the effects of that
legislative choice as Trustees would ask. Effectively Congress
opted to let Richland I off the hook, and Richland II cannot be
forced to pay the price.
Indeed Congress was even willing to release employers
withdrawing after the Act's effective date from liability for
certain of their own employees' unfunded vested benefits that had
accrued before the Act took effect. Thus Act § 1397 excludes from
consideration in determining such an employer's liability:
1. contributions made under a CBA under which the
contribution obligation expired before the Act; and
2. contributions made for work performed at a
facility if before the Act became effective;
(a) the facility had ceased operations or
(b) the contribution obligation with respect to
the facility's employees had ceased.
Plainly, then, Congress did not intend that the Act immediately
eliminate all unfunded vested liabilities then in existence.
Rather, the Act's withdrawal liability provisions reflect a
congressional attempt to