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Central States Southeast and Southwest Areas Pension Fund v. O'Neill Bros. Transfer & Storage Co.

August 31, 2010


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:07-cv-05220-Samuel Der-Yeghiayan, Judge.

The opinion of the court was delivered by: Ripple, Circuit Judge.


Before BAUER, RIPPLE and KANNE, Circuit Judges.

Central States Southeast and Southwest Areas Pension Fund ("Central States") brought this action against O'Neill Bros. Transfer & Storage Company ("O'Neill"), seeking interim payment of withdrawal liability under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq. The district court granted summary judgment for Central States, and O'Neill appeals. For the reasons set forth in this opinion, we affirm the judgment of the district court.



A multiemployer pension plan is created when various employers agree to make contributions to a common pension fund on behalf of their respective employees. Congress has recognized that the reliability of multi-employer pension funds is of extreme importance to the workers who rely upon them and of vital importance to the economic and social well-being of the Nation. To achieve and maintain the requisite level of financial security, multiemployer pension plans must maintain adequate funding levels to ensure their capacity to fund the benefits of workers who have a legitimate expectation that those funds will be available to meet their needs. The Multiemployer Pension Plan Amendments Act ("MPPAA" or "the Act"), an amendment to ERISA, therefore requires that an employer pay "withdrawal liability" if it withdraws from a multiemployer pension fund. The Act provides a mechanism for calculating the amount of withdrawal liability and the schedule according to which it should be paid. See 29 U.S.C. §§ 1391, 1399(c)(1), (3). The mechanism calculates the amount of liability to equal the employer's proportionate share of*fn1 the plan's unfunded vested benefits; the amount of each annual payment is roughly equal to the withdrawing employer's typical past contributions. Milwaukee Brewery Workers' Pension Plan v. Jos. Schlitz Brewing Co., 513 U.S. 414, 418 (1995). Congress conceived of withdrawal liability as a substitute for the annual payments that an employer would have made had it not withdrawn. Cent. States, Se. & Sw. Areas Pension Fund v. Basic Am. Indus., 252 F.3d 911, 918 (7th Cir. 2001) (citing Milwaukee Brewery, 513 U.S. at 418-19). The statutory mechanism seeks to maintain level funding for the plan, despite the employer's withdrawal. Milwaukee Brewery, 513 U.S. at 419.

The Act provides that, in addition to calculating withdrawal liability, the pension plan also must calculate an installment schedule in accordance with 29 U.S.C. § 1399(c). The employer may seek review of these calculations and then challenge the plan's determination in arbitration, but it must pay even while the review and arbitration are pending. 29 U.S.C. §§ 1399(c)(2), 1401(d). Thus, payment is placed ahead of decision. Trustees of the Chicago Truck Drivers, Helpers & Warehouse Workers Union (Indep.) Pension Fund v. Cent. Transp., Inc., 935 F.2d 114, 118 (7th Cir. 1991). Of course, if the employer eventually prevails in its challenge, overpayments are returned to it. See 29 U.S.C. § 1401(d).

To further ensure the financial stability of the plan, the statute specifically provides that, in the event of a default, the pension plan may demand immediate payment of the outstanding amount of withdrawal liability. Id. § 1399(c)(5). The statute provides two definitions of default:

(A) the failure of an employer to make, when due, any payment under this section, if the failure is not cured within 60 days after the employer receives written notification from the plan sponsor of such failure, and

(B) any other event defined in rules adopted by the plan which indicates a substantial likelihood that an employer will be unable to pay its withdrawal liability.

Id. The Pension Benefit Guaranty Corporation ("PBGC") has promulgated a regulation that provides, among other things, that "[a] default as a result of failure to make any payments shall not occur until the 61st day after" the issuance of the arbitrator's decision. 29 C.F.R. § 4219.31(c)(1).

With this description of the underlying statutory scheme in mind, we now shall turn to the facts of the case.


Central States administers a multiemployer pension fund. O'Neill was, until early 2007, one of the employers who contributed to the fund. At that time, however, O'Neill ceased operations and informed Central States that the company was " 'preparing for its termination and liquidation.' " R.35, Attach. 1 at 3. Central States deemed this notification a withdrawal; furthermore, because O'Neill was liquidating, Central States, acting under the terms of the plan, deemed O'Neill to be in default and required immediate payment of the entire amount of the withdrawal liability. See 29 U.S.C. § 1399(c)(5)(B).

On May 16, 2007, Central States sent O'Neill a letter demanding "immediate payment of the entire amount due." R.35, Attach. 1 at 19. On August 16, 2007, Central*fn2 States sent O'Neill a second letter that revised upward the amount of withdrawal liability to $1,689,191.36; this increase was due to a revision in the total amount of unfunded vested benefits.

On September 14, 2007, Central States filed its original complaint in the district court. It sought an interim payment of the entire amount of the withdrawal liability owed by O'Neill. O'Neill then moved for a dismissal or a stay of proceedings pending the outcome of mandatory arbitration.

Pretrial proceedings before the district court took several twists and turns. The district court first ordered the complaint amended in order to clarify that Central States was, in fact, seeking only interim payment. Consequently, O'Neill did not file an answer until April 2008. One month later, Central States moved for summary judgment.

In October 2008, the district court denied summary judgment without prejudice; the court stated that "the record does not reflect whether O'Neill Company is able to make payments in the form of a payment schedule as opposed to a lump sum payment." R.40 at 1. It ordered Central States to offer O'Neill a "feasible payment schedule" if Central States had not already done so. Id. at 1-2. In response to this order, on December 12, 2008, Central States calculated and submitted a payment schedule, as required by 29 U.S.C. § 1399(c)(1). Under that schedule, the first payment was due on September 1, 2007.

In February 2009, the district court ordered Central States to submit another schedule comprised of future due dates. Central States complied and submitted what*fn3 was essentially the same schedule, except that payments did not begin until April 5, 2009, one month after the filing was submitted. O'Neill then filed a response in which it contended that this schedule violated the statute because it called for ...

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