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Central States v. Allega Concrete Corporation

United States District Court, N.D. Illinois, Eastern Division

June 10, 2014



JOHN J. THARP, Jr., District Judge.

The plaintiffs in this case, Central States, Southeast and Southwest Areas Pension Fund and Arthur Bunte, are a multiemployer pension fund and its Trustee (they are referred to collectively herein as "the Plan"). The complaint seeks a declaratory judgment that defendant Allega Concrete Corporation's attempt to arbitrate the issue of its withdrawal liability was untimely and an injunction barring the arbitration from going forward. This is the third in a series of orders advancing toward a resolution of that issue. The first order (Dkt. 30; "Order I"), entered in response to the Plan's motion for an order enjoining Allega from arbitrating its withdrawal liability claim, addressed the question of whether the timeliness of the employer's arbitration demand was itself subject to arbitration; it held that the question must be resolved by the Court and stayed the arbitration pending a ruling on that issue. The second order (Dkt. 33; "Order II") denied Allega's motion to dismiss the complaint, which was premised on arguments that the arbitration was timely as a matter of law. The Court found, instead, that based on seemingly undisputed facts, [1]it appeared as a matter of law that Allega's attempt to initiate arbitration of its withdrawal liability was in fact untimely. In conjunction with its denial of the motion to dismiss, therefore, the Court provided notice to Allega pursuant to Federal Rule of Civil Procedure 56(f)(3) that it was considering whether summary judgment should be granted to the Plan and provided an opportunity for Allega to submit "a response setting forth any argument, not already addressed by [the Court's two orders] as to why the Court should not grant summary judgment to the plaintiffs based on the undisputed facts set forth in the parties' submissions."

Allega's response to the Court's notice ("Response") raises several issues. First, Allega maintains that "the Federal Rules of Civil Procedure do not permit an Article III Court to unilaterally petition and advocate for Rule 56 summary judgment, without so much as a motion being filed by any of the parties." That contention is simply wrong. Rule 56(f)(3)-which the Court cited as the authority for its notice to Allega-expressly permits district courts to "consider summary judgment on its own after identifying for the parties material facts that may not be genuinely in dispute." The Seventh Circuit has repeatedly affirmed the authority of district court's to grant summary judgment sua sponte as long as notice and an opportunity to respond are provided to the party that would oppose the judgment. See, e.g., Jones v. City of Elkhart, Ind., 737 F.3d 1107, 1117 (7th Cir. 2013) ("The court provided the litigants with notice of the issue and an opportunity to brief it; that is all that the Federal Rules require it to do in granting summary judgment for an issue not raised by the initial summary judgment brief."); Acequia, Inc. v. Prudential Ins. Co. of Am., 226 F.3d 798, 807 (7th Cir. 2000) ("A district court is permitted to enter summary judgment sua sponte if the losing party has proper notice that the court is considering granting summary judgment and the losing party has a fair opportunity to present evidence in opposition."). See also Celotex Corp. v. Catrett, 477 U.S. 317, 326 (1986) ("Our conclusion is bolstered by the fact that district courts are widely acknowledged to possess the power to enter summary judgments sua sponte, so long as the losing party was on notice that she had to come forward with all of her evidence."). Allega's response does not address Rule 56(f)(3) at all, notwithstanding the Court's invocation of that rule; its contention that the Court is not authorized to enter a judgment sua sponte after notice to the affected party is baseless.

Allega maintains that there are a number of material fact disputes as to which discovery is required before summary judgment can properly be considered. None of the issues it raises, however, involves a fact dispute that is material to the question of whether its initiation of withdrawal liability arbitration against the Plan was timely.

Seeking to create a fact issue as to the relevant version of the AAA rules, Allega first questions "[w]hether the American Arbitration Association rules for resolving withdrawal liability disputes that Plaintiffs are requiring through this action to foist upon Defendant were ever promulgated, considered, or approved by the federal Pension Benefit Guaranty Corporation (PBGC')?" This is an issue that the Court considered and addressed in denying Allega's motion to dismiss. As noted in Order II, the PBGC expressly approved the AAA arbitration rules, as revised effective September 1, 1986. See Order II at 5-6; 51 Fed. Reg. 22, 585 (June 20, 1986).[2] The Seventh Circuit, moreover, has expressly held that "Central States has adopted the AAA arbitration rules which, pursuant to 29 C.F.R. ยง 2641.13(c), have been approved by the PBGC." Central States, Se. & Sw. Areas Pension Fund v. Ditello, 974 F.2d 887, 892 (7th Cir. 1992).

Allega's response to this unassailable fact, also previously addressed by the Court in Order II, is that the PBGC has not approved the amended version of the AAA rules that went into effect in February 2013. It takes issue with the Court's conclusion in Order II (at 7-8) that there is no substantive difference between the rules in effect in 2013 and those approved by the PBGC, maintaining that the latter set out the provision relating to filing the arbitration demand with the AAA as an "alternative" means of initiating an arbitration to providing an arbitration demand directly to the adverse party. Allega states in its Response (Dkt. 42, at 3):

Unilaterally, and without any request of, or proposal to the PBGC, and without any promulgation of approval by the PBGC, the American Arbitration Association unilaterally amended its "initiation of arbitration" rules by substituting what was a former "or" to an "and" requirement that two copies of a notice issued to a Multi-Employer Fund, "together with the appropriate administrative fee as provided in the administrative fee schedule" be sent to AAA and be made part and parcel of any recognized "initiation of arbitration" demand under the Multi-Employer Pension Plan Amendment Act.

Allega's assertion that the prior version of the AAA rules set forth the provision relating to filing the demand with the AAA as an "alternative" means of initiating the arbitration, while the 2013 rules make it mandatory, is also wrong, for several reasons.

First, the rules on which Allega bases its argument are the AAA rules effective as of June 1, 1981-not the version approved in 1986. See Attachment A to Allega's Response, Dkt. 42-1. The PBGC approved the 1981 version of the AAA rules in 1985. See 50 Fed. Reg. 38, 046 (Sept. 19, 1985) (finding that the rules "will be substantially fair to all parties involved in the arbitration of a withdrawal liability dispute and that the American Arbitration Association is neutral and able to carry out its role under the procedures"). Shortly thereafter, in 1986, the AAA revised its rules, and on June 20, 1986, the PBGC expressly approved the 1986 AAA rules as revised. See 51 Fed. Reg. 22, 585 (June 20, 1986). The 1986 rules provide, in relevant part:


Arbitrations under these Rules are initiated in the following manner:
(a) (i) The initiating party gives notice to the other party of its intention to arbitrate (Demand) which notice shall set forth a brief description of the dispute and shall include the amount involved, and (ii) files at any Regional Office of the AAA two (2) copies of said notice, together with the appropriate administrative fee as provided in the Administrative Fee Schedule.

This is precisely the way the rule reads in the AAA rules as amended in February 2013. Allega's contention that the PBGC has never approved the mandatory requirement to provide the arbitration demand to the AAA in order to initiate arbitration is not correct; the PBGC approved that requirement, at the latest, in 1986.

In any event, Allega's assertion that the 1981 and 2013 AAA initiation rules are materially different regarding the required arbitration initiation procedure also lacks merit. Contrary to Allega's claim, the original 1981 rules approved by the PBGC do not set out the requirements for initiating an arbitration as alternatives, and do not use "or" to separate ...

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