Appeals from the United States District Court for the Northern District of Illinois, Eastern Division No. 04 C 7872-David H. Coar, Judge.
The opinion of the court was delivered by: Cudahy, Circuit Judge.
ARGUED SEPTEMBER 20, 2007
Before CUDAHY, POSNER, and WILLIAMS, Circuit Judges.
The Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent) Pension Fund (the Fund) and its trustee, Jack Stewart, brought this suit against Defendants El Paso CGP Company, El Paso Midwest Company, El Paso CNG Company, L.L.C., American Natural Resources Company and ANR Advance Holdings, Inc. to collect withdrawal liability under the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA). See 29 U.S.C § 1401(b)(1). The Defendants deny that they owe any withdrawal liability. The Fund, however, argues that the Defendants are not only liable but have forfeited their right to contest liability by failing to make a timely demand for arbitration back in 1999, when a proof of claim for withdrawal liability payment was filed in the Chapter 7 bankruptcy of one of the Defendants' affiliates. The Defendants believe that their duty to arbitrate was not triggered in 1999 because the proof of claim was not the valid notice and demand for payment prescribed by the statute. The district court agreed with the Fund and granted its motion for summary judgment on liability but denied the Fund's motion for judgment on damages, choosing instead to calculate damages under another theory. Both parties appealed.
The question before us immediately is not whether the Defendants are liable for the withdrawal assessment; it is whether the Fund's filing of the proof of claim in a Chapter 7 bankruptcy constituted a statutory notice and demand and thus cut off the Defendant's right to contest liability. We hold that the proof of claim was sufficient but only because the Defendants had actual notice of it no later than January 1, 2002. We therefore AFFIRM the judgment of the district court on liability. We disagree, however, with the district court's resolution of the damages issues, so we VACATE the judgment on damages and REMAND the case for further proceedings.
The MPPAA is, of course, actually a series of amendments to the Employee Retirement Income Security Act of 1974 (ERISA). See 29 U.S.C. § 1001 et seq. ERISA is famously complicated and often tedious. As is customary, we begin with a brief review of the relevant law. Hopefully, this will make the exposition of the facts a bit more digestible.
The MPPAA protects employees in multiemployer pension plans by requiring employers who withdraw from such plans to pay their share of "unfunded vested benefits." 29 U.S.C. § 1381(b)(1). This is known as "withdrawal liability." When an employer withdraws, the plan sponsor calculates the amount of liability and, "[a]s soon as practicable," notifies the employer of the liability and demands payment. 29 U.S.C. § 1399(b)(1). This "notice and demand" must include the amount of liability and a schedule of installment payments. When the employer receives the notice, it must begin paying according to the schedule. See Robbins v. Pepsi-Cola Metro. Bottling Co., 800 F.2d 641, 642-43 (7th Cir. 1986) (per curiam). The statute places a premium on prompt payment; it is a "pay now, dispute later" scheme. Id. at 642. But the withdrawing employer "owes nothing" until the plan notifies it of its liability and demands payment. Milwaukee Brewery Workers' Pension Plan v. Joseph Schlitz Brewing Co., 513 U.S. 414, 423, 115 S.Ct. 981, 130 L.Ed.2d 932 (1985).
If the employer wishes to dispute a plan sponsor's assessment of withdrawal liability, it must arbitrate the issue. See 29 U.S.C. § 1401(a)(1). Exceptions to the arbitration requirement are made only in the rarest cases. See Central States, Se. & Sw. Areas Pension Fund v. Slotky, 956 F.2d 1369, 1373 (7th Cir. 1992). Upon receipt of the notice and demand, the employer has 90 days to request an informal review by the plan of the assessment. See 29 U.S.C. § 1399(b)(2)(A). The employer then has roughly 120 additional days to demand arbitration. See 29 U.S.C. § 1401(a)(1). If an employer fails to demand arbitration, the assessment becomes "due and owing on the schedule set forth by the plan sponsor." 29 U.S.C § 1401(b)(1).
When a plan sponsor sues to collect withdrawal liability, it may sue the withdrawing employer or any trade or business under "common control" with the employer because members of a "controlled group" are jointly and severally liable for the withdrawal. 29 U.S.C. § 1301(b)(1). The definition of a "controlled group" under the MPPAA tracks the definition under the Internal Revenue Code and includes parent-subsidiary relationships. See 26 U.S.C. § 1563(a). The controlled group provision allows a plan "to deal exclusively with the defaulting employer known to the fund, while at the same time assuring [itself] that legal remedies can be maintained against all related entities in the control group." Bd. of Trs. of Trucking Employees of North Jersey Welfare Fund, INC-Pension Fund v. Kero Leasing Corp., 377 F.3d 288, 306 (3d Cir. 2004) (Rosenn, J., dissenting). Thus, any notice sent to one member of a controlled group is considered constructive notice to all other members of such a group. See Slotky, 956 F.2d at 1375.
Of course, the purpose of the MPPAA is to ensure that employers live up to the obligations they owe to the pension fund and to the employees who participate in it. But Congress also recognized that employers that have substantial pension liabilities may attempt to shirk their obligations through deceptive transactions. See Teamsters Pension Trust Fund-Bd. of Trs. of the Western Conference v. Allyn Transp. Co., 832 F.2d 502, 507 (9th Cir. 1987). Congress thus provided that "[i]f a principal purpose of any transaction is to evade or avoid liability under this part, [Sections 1381 to 1405] shall be applied (and liability shall be determined and collected) without regard to such transaction." 29 U.S.C. § 1392(c). This discourages companies from using corporate forms and manipulations to shield themselves from withdrawal liability.
With all this in mind, we turn to the facts of the case. The Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent) (the Union) entered into a collective bargaining agreement with a trucking company called ANR Freight System, Inc. (ANR Freight) on April 3, 1994. The agreement required ANR Freight to contribute to the Fund.
ANR Freight was the wholly owned subsidiary of the Coastal Corporation (Coastal), a large oil and gas company. Coastal controlled ANR Freight through a series of intermediaries: Coastal was the sole stockholder of Coastal Natural Gas Company (Coastal Natural); Coastal Natural was the sole stockholder of ANRC; ANRC was the sole stockholder of ANRFS Holdings; and ANRFS Holdings was the sole stockholder of ANR Freight. Most of these companies subsequently changed names or were succeeded by other companies: Coastal became El Paso CGP Company; Coastal Natural became EL Paso CNG Company, L.L.C.; and ANRFS Holdings merged with El Paso Midwest Company. It is undisputed that, until November 3, 1995, these companies constituted a "controlled group," which we will call the Coastal Group.
In 1995, the Coastal Group arranged to have ANR Freight merge with Advance Transportation Company (ATC), a wholly unrelated trucking company owned by its employees and by individual shareholders. The merger was accomplished in two steps. First, on August 14, 1995, ANR Freight exchanged stock with ATC, with the result that the Coastal Group and the shareholders of ATC each became 50% owners of each other's companies. Second, on November 3, 1995, ATC merged with ANR Freight and the resulting company was immediately renamed ANR Advance Transportation Company (ANR Advance). As a result of the exchange of stock and the subsequent merger, ANR Advance was no longer part of the Coastal Group because the Coastal Group no longer owned 80% or more of ANR Advance's stock. See United States v. Vogel Fertilizer Co., 455 U.S. 16, 29, 102 S.Ct. 821, 70 L.Ed.2d 792 (1982).
Over the next three years, ANR Advance operated its trucking business and made regular contributions to the Fund. On February 2, 1999, an involuntary Chapter 11 petition was filed against ANR Advance and, on March 3, 1999, a court converted the case into a Chapter 7 proceeding. The Fund decided that ANR Advance had withdrawn from the Fund and filed a proof of claim for withdrawal liability in the ANR Advance bankruptcy on June 3, 1999. The proof of claim referred to "withdrawal liability," stated the total amount of the assessment and carried a liability payment schedule, which broke the assessment down into ten installments.
When the proof of claim was filed, the bankruptcy proceeding was under Chapter 7 and was being administered by a trustee, who apparently never informed the Defendants of the filing of the claim. The claim languished amidst sundry paperwork for over two years. In late 2001, Steven McKemy, a lawyer for the Defendants, finally discovered it while doing due diligence in the settlement of another ...