and other contributing employers as well as the government through the b b c to protect all of those constituent groups from paid withdrawal liability situations the transaction that we're talking about here was designed to support those congressional purposes cns argues if liability is imposed on them in this transaction where they say well we just purchased assets from another company in our industry that if you impose liability on us you won't need the free flow of capital because this was simply ordinary commerce well this transaction was anything but normal the senior advisor for the seller and he worked in our view as a double agent he was providing information to the buyer unbeknown transaction on the on the buyers we have a revolving door of senior officers we have an individual dan mahoney who was the general counsel at cns at the same time he was the general counsel at penn drastic for an overlapping period before he eventually went to traffic the c e o at the cellar and traffic who signed off on the transaction that brings us here today about is a transaction that should be reviewed in context which is what the cases teach us that we look at the overall circumstances the totality of the circumstances and what we see is that the transaction here which we believe the district court looked at him very narrow isolation was focused instead as a multi state acquisition of certain lines of business by cns from an traffic are references to what is described as a play and now that this is in september of two thousand and eight the cns was already doing the part you're in peace and they intended to go over the distribution piece as soon as warehousing distribution and retail sales is that right yes yes yes that is yeah and i understand from the description of penn traffics operation that they were involved in each of those do so by buying warehousing distribution or buying a retail sales operation or shifting there's no legal or other requirement business requirement to be have the vertical integration of all those three functions is that correct that's a great i guess you could have just a read write so if that's so i'm having a difficult time understanding what the source of any obligation would be for c m s to purchase  the warehousing and distribution operation traffic we had not just the assets and it was in it and to continue to serve the independent retail sales customers was what was the source of that had the liability they weren't hiring assets from a company that had the liability and were crashing there have been operation and what we're saying is that under the way the successorship doctrine works in the policies associated with that if you look through the form of what they did with the warehouse and go to the substance they affect of we were taking it over and trying to avoid the liability and the reason we say that is if you look at what we refer to as the three i had never done a transaction where they hired someone else to do what they prided themselves on doing and if you look at that document the term of that document indicates that in traffic was not permitted to withdraw from it until after the collective bargaining agreement that mr cowen referred to their c e o as being the timing for them taking over distribution for when that would and so that creepy l would see as it never done before was designed to remain in place until the c b expired by which time there would be a situation that they would not would not be taking over unionized labor under a c b a that would have successorship provisions so what we're inquiry into whether or not c n n s can fairly be held to be an employer responsible for this withdrawal liability there's no doubt that they didn't want to assume that they wanted  structure a transaction so that they did not assume this this withdrawal liability and to the extent that the salar penned traffic remained oppa gated to cases interpret in that transaction here does not limit liability to an importer or ace or any party to a transaction and so we think it's much broader than the concept that you have to be an importer but of course under the successorship was a kid the extent that that you've done it in order to evade or avoid liability that wouldn't be their liability because they didn't have it but to the extent they were looking to help can the vater employ its responsibility i mean i'm not sure that that in the circumstances see an ass avoiding the liability it never had transaction is structured in a way to avoid the buyer picking up the liability that would otherwise flow because the buyer in those because in those circumstances the seller gives up the obligation when he this circumstance we're left with a seller who is left with the responsibility and in those circumstances i would think that you would need to point to evidence that cns was aiding and abetting penn triassic in not meeting its obligation or mine missing something it's broader than that you're on the st we think there is evidence here that there was actually evasion which which indicates a basis area congress says as indicated that the focus is to avoid withdrawn liability going on paid so it is perfectly appropriate to in a sense pierce through these transactions to look at what is the the substance that is the heart of the successorship dr which also gives us a basis for saying that the way they structured the transaction the benefits received the assets purchased and the fact that the syracuse warehouse where the unionized adds up we think to a record that is very clear that the liability should flow to the buyer and the concern here is that when the district court of evaluating the successorship doctrine for example at the motion to dismiss stated it it except  entrance should be drawn in our favor the district court inexplicably having identified and important part of analysis to drill down to what is the special relationship of the workers unionized workers to the work that was performed and this transaction by the time it got to the summary judgment stage for some reason without explanation it broke with that portion out never examined the three p l point is the structure here of the three p l a v m c n s the functional benefit of employing the workers at the warehouse and it was designed as a temporary work around until the c the wholesale business that were serviced out of that warehouse represent only thirty percent of the wholesale line of business at that point and in the c s makes the argument that quote i definition and quote thirty percent is not substantial there is no such definition in that regard except when we look at the supreme court in fall river the supreme court has already defined for us that it's thirty to forty percent your what's your best case then for the proposition that this kind of sub contract we need to look behind it to something else i'm not quite sure what i mean they had a  they paid for this services they did not acquire the equipment they didn't acquire employment relationships with the people who were providing those functions it was a you know for a limited period of time and it was a sexual portion of business i don't think entitled to do that without opening up this huge liability that you're trying to place on them we're not trying to place it on what we're saying is that under the case of the totality of the circumstances should have been acquired by c n n and the plant relationships where it entered into by cns they hired a you know with a turnkey operation please provide for this limited set of customers wear how think distribution operation for a limited period of time it's broader than that we're simply saying that they should be deemed to be the employer we are saying they should be deemed to be the successor because that factor that your honour's mentioning is one of the factors that course are looked at but there are very long list of factors all of the factors in the alter ego test other than the bad intent or also considered to be sources of information in the context of successorship here we had the district court that identified several factors at the motion to dismiss stage did not consider one of them then focused narrowly on just a few of the factors that the cases to consider there was really no analysis of the price that was paid for the business the profit stream that was that was obtained by hiring a former senior executives the lack of arm's length here but what we think is the interconnections history of an anti union the patrol and ownership of all of the inventory in the warehouse by c n n asked the continuity of customers where the district court seems to have accepted without analysis that a thirty percent continuation cannot be substantial when of course the supreme court identified in fall river that it certainly can be as one of these factors even want to see it as managers thought that the syracuse warehouse was formally actually part of the cns network we have said which excuse is there any case in which the concept of being a successor in part for example has been adopted this the thirty percent may be substantial but it still referred to as the master plan to coordinate with another company in the in the grocery industry concerning a merger between them and profit and tops and how the british airman for that combined entity would all someday be part of cns and that was part of this but the narrow focus if i may run into to your answer your question is we are not saying that all lines of business depend traffic fail to see a nest but there were distinct lines of line the business represented thirty to forty percent and that stock was deemed to be sufficient to show substantial continuity among other factors and a case for that line of business and that's all we're saying is the lines of business at issue here there was there was sufficient continuity so that for list liability and we're not arguing about any airline delivery for this liability  given all of those public policy concepts and the prior cases that the liability for this withdrawal liability that has not been paid should fall to c n n s and it and is another example from the district courts analysis to the district court it point out that well the pension fund here did receive roughly a five million dollars payment on it sixty three recalling what the district court seemed to suggest was that warehouse there was a sixteen month gap and the district court seemed to drop on the herman case where there happened to be a one month gap between that acquisition d and the cause of operations in that case to establish their seeming rule that you need and penn traffic made pension contributions for the teamsters who worked there during the great recession then traffic went bankrupt and left an unfunded pension liability to the teamsters fund the fund is now trying to collect that  with deeper pockets at c n n but your honor c n n s never owned a warehouse never operated the warehouse that were controlled the warehouse never employed the teamsters never contributed to the fund on behalf of the teamsters never  entered a collective bargaining agreement with the local teamsters union the only thing that has a tragedy destroyed tragedy but what the record does show is that originally wanted to run the warehouse you wanted to buy the whole operation it was specifically to avoid the withdrawal liability op legation that you came up with another way of doing this and certainly you were entitled to do it but after you get it as i understand it you reimbursed cns for their pension a question here yes sure your honor so what happened with the warehouse and you're right initially there were discussions about c n n s buying warehouse that would that would have required one of two things to happen either penn traffic could have withdrawn at that point from the pension fund and incurred the withdrawal liability paid cns could've taken over the operation fresh and traffic didn't want to do that but didn't have the cash that point free cash to incur that liability at that point the other option would have been for cns to take over the collective bargaining agreement to step into the shoes of penn traffic become the employer of record operate the warehouse and in doing that would have exposed cns to the contingent liability associated with the pension fund which he just didn't want to do because it would have made the whole transaction financially irrational and so then traffic had to keep operating the warehouse and traffic didn't want to sell the wholesale business and so what the parties negotiated was that then traffic would keep the warehouse and traffic would keep running it and cns would pay pentridge affix for the services provided warehouse services provided to the wholesale customers who became customers that was that part of the negotiations the terms for that independent contractor relationship was that c n n paid for a pay for the services based on the actual costs of operating that was the way the formula worked one specific to the pension it was just the overall costs of the warehouse see it has paid sort of its share which was a minority share that's not any different from really any other cost plus a reimbursement   the company that's paying for the services into an employer that's exposed to withdraw liability under risk for its contractor and so this is that's really the only nexus here in the warehouse is that type of independent contractor relationship that again division eleven a one said is not enough to turn to expose the party to withdraw liability so the fund has a couple of theories to try to get around that to try to shift the liability that the statute puts on penn traffic try to shift it to c n n s and we need theory at least in the opening brief was this evader avoid argument that cns if they did light avoided liability by not taking over the warehouse and you know that is just legally wrong because the statute is not concerned with employers who don't assume obligations under risk it's concerned with employers were trying to get out of their obligations that they would otherwise get i could interrupt for just a nd or so so part of the narrative that your adversary writes for us is that this is a close knit community operation and for the customer list and so on that that maybe helped contribute to the bankruptcy of penn traffic not long after the asset acquisition by which is a cock less contract fill the gap until those c d s had expired and the liabilities maybe could be hoped to be safely extinguished and then avoiding and evading the obligations that was helping penn traffic maybe to avoid those and while taking on all that was good about penn traffic and seeing it go into bankruptcy soon after so what is inaccurate about that story that narratives up the fact that we have before us i'm sure you're on a roll i will start with what's legally inaccurate because a whole bunch of fact in there that i think are not supported by the record but i'll start with the legal point you know i think there are there are two ways in which a company an employer can try to evade or avoid its withdrawal ability one which is a more common ways to try to shift the liability you know that didn't happen here but traffic kept the other way which i think the fun is trying to sort of analogized to some of these allegations is what came up in that herman case from this court which is basically a fraudulent transfer of assets approach so you're not getting rid of the liability that you owe but you're giving away all the assets so that they're beyond the reach of the pension fund and  centrally defrauding the fund and preventing front from looking for those assets to recover and i think some of the allegations are trying to suggest that that that sort of pent traffic was trying to evade its liability by bankrupting itself and giving away its assets cns and therefore you can go and kind of claw those assets back just that's really not the theory that was advanced in the complaint or below or even in the opening brief in this court i mean the fund theory is really always been focused on cns is intent in structuring the transaction the way it's structured it and the funding really make any allegations about ten traffic being in on it ten traffic being sort of conspiring to to give away its asset that never really explains why penn traffic would have had any incentive to do that certainly the record that came out in discovery didn't support that would have showed was that and traffic was trying to get through a very difficult financial time by turning some of its assets into cash so that it could have more liquidity and then hopefully try to shore yeah well that's an excellent question because as we sort of explain the brief a fraudulent conveyance type of theory is a type of claim that would have to have been brought in the penn traffic bankruptcy because it's not limited to the pension fund it's about you know if you take this theory seriously it means that penn traffic was giving away one thousand and and depriving all creditors of access to those assets and that that's the type of thing that this court in st paul said would have to be brought by the bankruptcy trustee and that binds creditors  what i can tell you is in the record is a report that was done by the by law firm hired by the unsecured creditors committee to analyze you know is there innovate is there a fraudulent transfer theory that we should be pursuing why the fund didn't expressly frame its claim that way in this case and instead tried to focus the attention on the n s a s intent structured the transaction and again you know that that just doesn't work for the same reasons explained by the st circuit for example the sun capital case you know the transaction was structured in a way that did not result in the assumption of liability by c n n s but  claim that is an allegation but i really don't think that's that's their claim the claim is really that cns structured this deal in a way that did not result in taking over the warehouse right bought the wholesale business did not buy the warehouse and soap and traffic kept the warehouse and that meant you know he has never had to step into the shoes of the liabilities associated with the warehouse they do making out there is an allegation about the price that was paid but i'm not really sure how it fits into the theory and how do you respond to that claim well i think we respond in two ways one it's not factually supported by the record so what we have is and you know the court interested in this in the the competing statements of material fact that are in the appendix there was a report on several you know while before the transaction that said something like business might be worth between fifty dollars and seventy million dollars then there was the analysis done by the unsecured creditors commit committee after the fact and said no fair market price is thirty dollars to fifty million dollars and the price was forty three right in the middle so i don't think there's really you know there was no funding to hire an expert to do an analysis of this you know in this case that was never the focus of  focus was about what was the n s a trying to do by not buying the warehouse and the fun was trying to prove you know didn't want to take on warehouse which we admit you know didn't want to take over the warehouse on those terms would not have made any sense i mean if you think about it the liability they're seeking years over sixty million dollars the purchase price that was paid was you know forty three so there's no question that if buying this business meant taking over that liability the sa that happens it's sad when that happens you know penn traffic wouldn't even have had the opportunity to use this infusion of cash to get it back on its feet and continue as a more stable financial any allegations about that correct there were no there were no allegations about that and it was again it was done on a cost basis so you know things that serve an open book of your accosts your share is this not just from my point is there's no suggestion that you were getting the warehouse services that you claim bring main didn't the hands of can add anything other than fair market value that's correct and the payment for that work was about fourteen million dollars over the course of the slightly over a year so you know in a sense you know they heard the fund counsel arguing that well you know cns took over the customer's warehouse that's not really true because then traffic was customer we be iraqi we briefly exactly that's exactly right or are we really replace the customer but we continue to pay for the services which continue to support the pension fund the spent raft was still making the contributions so this is not a case like you know the  th circuit's decision in resilience floor for example where the problem the court had was with him pairing the funds contribution based by you know taking the work moving it to a nonunion shop where there's no pension contributions being made in the fund is left with nothing you know here the work continued the contributions continued just the pen traffic ended up failing which of course is you know unfortunate but it meant that all the creditors you know didn't get fully paid on what they were owed  thank you just about as i'd be happy to address that and only the court necessarily needs to reach it although i would be happy if the court did you know the historical and common law well established rule for success reliability in the context of an asset sale was  d by this court and national services case which is generally speaking the liabilities do not transfer with the assets subject to four well established exceptions that are not applicable here and the general rule when you have a federal statute that does not specifically speak to a question like this background question of corporate law is that we look to the well established common law rule the whole substantial continuity theory of successorship has been pulled out of a completely different context the supreme court developed that answer a different question under a different statute and the question was when you have a change in ownership in a business but the employees are still there doing the same work as the new employer have to recognize the union that existed before the sale and the court said yes if it based it's substantially the same you know if it's the same people doing the same work you know you can assume that they still want the same union to represent them and you've got to bargain with them you don't have to take the terms that were previously negotiated you've got to sit down with that union and that makes perfect sense but it really has nothing to do with statutory liabilities like withdrawal liability and there just is not any legal basis for taking that doctrine and then export ing it to a whole bunch of other statutes that don't that don't speak to it and i would just prefer the court not only to judge lavalas concurrence national services where he explains this in a lot of detail also judge easterbrook concurrence in the recent mclusky case judge didn't tell has a good concurrence in the holland case where the judges explain the they're just mistaken about this is out of step with the more modern approach to federal common law and this court's decision a national services i think is a takes a different approach to that question you know i was going to say was that i think is also is partly an answer to your honor's question about you know partial continuity and how that how that might play out so that doesn't really exist in the cases i think that's because you know the good ole invision it is an on off switch i think that's because of the historical origins of it right you know you're asking do i have to sit down with the union or not you can't sit down with them thirty percent you know if yes or no and so it makes sense to have bright you know going to line where you say yes you know there's enough continuity that you need to recognize the union or no you don't but once you start trying to apply it continuity to other statutes you know that they go back to the eighty's because that's really when the supreme court decisions are from the seventy's and then it kind of spread the there is a cases are more lethal withdrawal i believe cases are much more recent and this  course has not spoken to the issue other than the national services which i think cast a lot of doubt on it you know i don't want to i want to miss mislead anybody though the that you know the district court adopted the theory  t motion dismissed eight allow the case to go to summary judgment to develop the facts on this theory and then rejected the theory on its own terms so i don't want to suggest that you know we need to win that legal framework question in order to  sounds like we have a lot of disagreement over what the record is what the record shows what the record means the solution for that of course would be to remand for trial we also would point out just very briefly that one of the one of the  legal analysis errors that the district court may hear touched on and obviously the now has been reinforced is cns is arguing that if you look at absolutely nothing whatsoever except the warehouse that is too narrow of  slightest if you're going to look at a transaction need to look at it in its complete and here was the obtain procurement they then were focusing upon distribution and they had a broader plan to d also expand the footprint then traffic to do combined with another company and when interest began to experience problems it's a temper of two thousand and eight they rewrote the supply agreement to put in three pages of bankruptcy