1998 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

8-26-1998

Teamsters Pension v. Littlejohn

Precedential or Non-Precedential:

Docket 97-1856

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Recommended Citation

"Teamsters Pension v. Littlejohn" (1998). 1998 Decisions. Paper 204.

http://digitalcommons.law.villanova.edu/thirdcircuit_1998/204
Filed August 26, 1998 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 97-1856 

TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA 

& VICINITY; WILLIAM J. EINHORN 

v. 

SILAS LITTLEJOHN; TEAMSTERS LOCAL UNION NO. 115 

 Teamsters Local Union No. 115, 

 Appellant 

Appeal from the United States District Court 

For the Eastern District of Pennsylvania 

D.C. No.: 95-cv-07556 

Argued July 20, 1998 

Coram: STAPLETON, ROSENN, Circuit Judges and 

RESTANI, Court of International Trade* 

(Filed August 26, 1998) 

Walter H. DeTreux, III (argued) 

2833 Cottman Avenue 

Philadelphia, PA 19149 

Counsel for Appellant 

_________________________________________________________________ 

*The Honorable Jane A. Restani, Judge, United States Court of 

International Trade, sitting by designation. 
 Frank C. Sabatino (argued) 

 Schnader, Harrison, Segal & Lewis 

 1600 Market Street, Suite 3600 

 Philadelphia, PA 19103 

 Counsel for Appellees 

OPINION OF THE COURT 

ROSENN, Circuit Judge. 

This appeal presents an unusual question pertaining to 

the liability of a surviving unincorporated local union after 

merger with it by another unincorporated local union for a 

debt of the latter. The district court held that pre-merger 

notice of the debt owed by the non-surviving local was not 

required and that the surviving local union was liable for 

the debt. The surviving local timely appealed. We affirm. 

I. 

The facts of this case are undisputed. Teamsters Local 

513 was a labor union which represented certain employees 

in the Philadelphia metropolitan area for purposes of 

collective bargaining. In September 1991, the members of 

Local 513 voted to merge into another local union, 

Teamsters Local Union No. 115. The merger became 

effective in early February 1992. Both of the local unions 

were unincorporated associations. On June 12, 1978, Silas 

Littlejohn began working for Local Union No. 513 as an 

office employee. He left this job in early February 1992. 

As an employee of Local 513, Littlejohn was covered by 

the Teamsters Pension Trust Fund of Philadelphia & 

Vicinity (the "Pension Fund"), the Plaintiff/Appellee. All 

participating local unions were required to make 

contributions to the Pension Fund on behalf of their own 

employees. In spite of this obligation, Local 513 did not 

make any contributions to the Pension Fund on Littlejohn's 

behalf. On December 7, 1992, Littlejohn applied for and 

was denied a pension by the Pension Fund because it had 

not received any contributions in his behalf. Littlejohn 

appealed the Fund's decision. The Fund held a hearing, but 

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did not render a decision on the appeal. Having never 

received contributions on Littlejohn's behalf, the Pension 

Fund requested past contributions from Local 115. Local 

115 denied liability for Local 513's failure to pay the 

pension contributions. Local 115 took the position that it 

had never employed Littlejohn, had no knowledge of Local 

513's failure to make the pension contributions, and, 

therefore, Local 115 should not be liable for the 

contributions that Local 513 was required to make to the 

Pension Fund. 

Instead of rendering a decision on Littlejohn's appeal, in 

December 1995, the Pension Fund and the Fund's 

administrator, William Einhorn, filed a complaint in the 

United States District Court for the Eastern District of 

Pennsylvania against Local 115 and Littlejohn. In its 

complaint, the Pension Fund sought a declaration either 

that Littlejohn did not participate in the pension plan and, 

thus, was not eligible for pension benefits, or that Local 115 

was responsible for delinquent contributions that should 

have been paid to the Pension Fund on Littlejohn's behalf 

by Local 513. The Pension Fund also requested, contingent 

on a finding that Local 115 was responsible for the

delinquent contributions, a determination that Local 115 

was liable for interest, attorneys' fees, liquidated damages, 

and costs. 

The parties filed cross-motions for summary judgment. 

The district court granted the Pension Fund's motion 

finding that Littlejohn was entitled to pension benefits and 

that Local 115 was required to pay the contributions to the 

Pension Fund that were improperly unpaid by Local 513. 

II. 

The Pension Fund is governed by the federal Employee 

Retirement Income Security Act of 1974 ("ERISA"), 29 

U.S.C. SS 1001-1461. ERISA covers the Fund because it is 

a private pension Fund established by both employers 

engaged in commerce and employee organizations 

representing employees engaged in commerce. See 29 

U.S.C. SS 1002(2)(A)(I), 1003(a)(3). Pursuant to ERISA, a 

claim like the one in this case--essentially to recover 

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employer contributions owed to an employee pension plan-- 

must be brought in a federal district court. See 29 U.S.C. 

S 1132(e)(1); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54 

(1987). Hence, the district court had subject-matter 

jurisdiction of the Fund's lawsuit pursuant to 29 U.S.C. 

S 1132(e)(1) and 28 U.S.C. S 1331. In light of this

independent basis for federal jurisdiction, the Pension 

Fund's invocation of the Declaratory Judgment Act, see 28 

U.S.C. S 2201, is proper. See Skelly Oil Co. v. Phillips 

Petroleum Co., 339 U.S. 667, 671 (1950); Terra Nova Ins. 

Co., Ltd. v. 900 Bar, Inc., 857 F.2d 1213, 1217 n.2 (3d Cir. 

1989). 

This court has appellate jurisdiction, pursuant to 28 

U.S.C. S 1291, because the district court entered final 

judgment against Local 115. We exercise plenary review of 

the district court's resolution of the parties' cross-motions 

for summary judgment. See Fornarotto v. American 

Waterworks Co., Inc., 144 F.3d 276, 278 n.3 (3d Cir. 1998). 

III. 

Local 115 argues that it is not liable for the unpaid 

pension contributions because it did not have notice of the 

existence of the delinquency at the time that it merged with 

Local 513. Local 115 relies primarily on Golden State 

Bottling Co., Inc. v. National Labor Rel. Bd., 414 U.S. 68 

(1973), which stands for the proposition that a purchaser of 

a business, which continues the operations of that 

business with notice that the predecessor has committed an 

unfair labor practice, is liable for the damages caused by 

the unfair labor practice. See also Upholster's Union Pension 

Fund v. Artistic Furniture of Pontiac, 920 F.2d 1323, 1329 

(7th Cir. 1990). The Pension Fund counters that, under 

well-settled and long-standing principles of corporate 

liability, the surviving entity of a merger is liable for all of 

the debts of the predecessor entity regardless of whether 

the survivor had pre-merger notice of the debt. See John 

Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 550 n.3 

(1964); 15 William M. Fletcher et al., Fletcher Cyclopedia of 

the Law of Private Corporations S 7121, at 226-27 (rev. ed. 

1990). 

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It is well established that ERISA displaces all state law 

purporting to relate to private pension plans. See McGurl v. 

Trucking Employees Welfare Fund, 124 F.3d 471, 476 (3d 

Cir. 1997). The statute, however, does not address many of 

the issues which arise in the normal course of the 

administration of such plans. Relevant to this case, it does 

not set forth principles governing successor liability. In a 

situation where the statute does not provide explicit 

instructions, it is well settled that Congress intended that 

the federal courts would fill in the gaps by developing, in 

light of reason, experience, and common sense, a federal 

common law of rights and obligations imposed by the

statute. See, e.g., Varity Corp. v. Howe, 516 U.S. 489, 497 

(1996); Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 

110-11 (1989); Franchise Tax Bd. Of California v. 

Construction Laborers Vacation Trust for Southern 

California, 463 U.S. 10, 24 n.26 (1983). 

Of course, the federal common law must be developed

with ERISA's policy goals in mind. One of the reasons 

Congress enacted ERISA was to protect plan participants 

and their beneficiaries. See 29 U.S.C.S 1001(b) (declaration 

of policies); see also Matinchek v. John Alden Life Ins. Co., 

93 F.3d 96, 99 (3d Cir. 1996). In developing the federal 

common law, the federal courts have properly looked to 

state law for guidance. See McGurl, 124 F.3d at 481. 

Nonetheless, it is important that the federal courts, in 

formulating the common-law rules, do not strictly adhere to 

a single state's law at the expense of reason, experience, or 

common sense, or of furthering the policies of ERISA. Cf. 

Ream v. Frey, 107 F.3d 147, 154 (3d Cir. 1997) (while state 

trust law provides source of rules for ERISA, it is no more 

than a guide or starting point for developing common law 

rules for welfare plans). 

The parties spend much time arguing over the 

application of several cases which describe the development 

and construction of corporate successorship in the federal 

labor law context. Specifically, the United States Supreme 

Court has considered whether an employer's purchase of a 

business binds the purchaser to abide by a collective 

bargaining agreement between a union and the 

predecessor. See, e.g., Golden State Bottling Co., 414 U.S. at 

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180, 185. In that case, the Court has held that successor 

liability is broader when the obligation involved is a 

collective bargaining agreement than it would be when an 

ordinary debt is involved. Id. at 182-83 n.5. In other cases, 

the Court has stated that an employer may be bound by 

the collective bargaining agreement of the predecessor as 

long as it had notice of the obligation and continued the 

operations of the predecessor even if the succeeding 

corporation purchased the assets of the old company and 

did not actually merge with it. Id. at 180-85; see also 

Howard Johnson Co., Inc. v. Detroit Local Jt. Exec. Bd., 417 

U.S. 249, 257 (1974); Livingston, 376 U.S. at 349-51 

(surviving company in merger bound to arbitrate grievance 

with union under terms of collective bargaining agreement 

signed by predecessor). Those cases are somewhat 

distinguishable because they dealt with the application of 

labor law concepts and the terms of a collective bargaining 

agreement to a corporation other than the signatory to the 

agreement. Here, the parties agree that only the transfer of 

a valid and ordinary debt is at issue which just happens to 

have its genesis in the terms of a collective bargaining 

agreement. The issue distinctly is not whether the terms of 

the collective bargaining agreement signed by Local 513 will 

be enforced against Local 115. 

We agree with the district court and reject Local 115's 

argument that the surviving entity in a merger must have 

notice of a predecessor's debt in order to be liable for it. 

Reason, common sense, and experience--as well as the 

overwhelming weight of authority--persuade us that we 

should adopt the general rule that the surviving entity in a 

merger is liable for the constituents' debts even when the 

survivor does not have notice of the debt. 

Many courts, including this one, have stated that when 

an obligation imposed by federal labor or environmental law 

is involved, merger or consolidation automatically operates 

to transfer the debts of the predecessor to the surviving 

entity. See, e.g., Aluminum Co. of America v. Beazer East, 

Inc., 124 F.3d 551, 565 (3d Cir. 1997); Southward v. South 

Central Ready Mix Supply Corp., 7 F.3d 487, 495 (6th Cir. 

1993) (dicta); Artistic Furniture, 920 F.2d at 1325; Anspec 

Co., Inc. v. Johnson Controls, Inc., 922 F.2d 1240, 1245 (6th 

 6 
Cir. 1991). In addition, two district courts have considered 

a question quite similar to the one raised here. Both district 

courts held that the merger of two local unions, in most 

circumstances, makes the survivor liable for the 

constituents' debts. See EEOC v. Local 638, 700 F. Supp. 

739 (S.D.N.Y. 1988); Local No. 1, Broadcast Employees v. 

International Bhd. of Teamsters, 461 F. Supp. 961 (E.D. Pa. 

1978), aff 'd in part and rev'd in part on other grounds, 614 

F.2d 846 (3d Cir. 1980). 

These cases confirm the almost universally accepted state 

law principle that when two corporations merge, the

surviving corporation assumes the liabilities of the extinct 

corporation. See, e.g., 15 Pa. C.S.A. S 1929(b) (all debts of 

each corporation "shall be deemed to be transferred to and 

vested in the surviving or new corporation"); N.J.S.A. 

S 14A:10-6(e) ("the surviving or new corporation shall be 

liable for all the obligations and liabilities of each of the 

corporations so merged"); Del. Code Ann. tit. 8, S 259(a) 

("all debts due to any of said constituent corporations ... 

shall be vested in the corporation surviving"); 15 Fletcher et 

al. SS 7117, 7121, at 216-18, 226-230 (collecting cases and 

statutes from numerous states). Local 115 does not 

contend that its merger agreement with Local 513 provided 

that it only assumed the debts of which it had notice. 

Generally, there is no requirement that the surviving entity 

have pre-merger notice of the predecessor's debts. Indeed, 

we have found no authority--either in the labor law context 

or any other for that matter--which stands for the 

proposition that a surviving corporation must have notice of 

the predecessor's debts in order to be liable for them. This 

is especially true when the merger agreement between the 

locals did not require notice. 

The parties do not contend that the local unions, because 

they are unincorporated associations and not corporations, 

should not be subject to this general rule. We agree. There 

is nothing in the record to suggest that the status of the 

local unions prevented Local 115 from having complete 

access to the records of Local 513 and, thus, from having 

an opportunity to ascertain the nature of Local 513's debts. 

As a practical matter, the affiliation of the two locals with 

the International brotherhood of Teamsters Union should 

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have facilitated the access of the locals to the payroll, 

audits and other records of assets and liabilities of each 

other. Further, we see no reason to believe that the 

employees of unincorporated associations are deserving of 

less protection than those of a corporation in this context. 

An examination of this general rule demonstrates not 

only its basis in reason but also that adopting it in this 

context will further ERISA's policy goal of protecting 

employee pension plan participants and their beneficiaries. 

See 29 U.S.C. S 1001(a). First, the two merging entities 

either do have, or can assure that they have, access to all 

the information necessary to determine the precise nature 

and number of liabilities of the predecessor entity. This is 

especially true in a case like this where the existence of the 

debt is so readily discoverable. In contrast, the participants 

and beneficiaries may have no reason to know that the 

contributions have not been made or that the surviving 

entity does not have notice of the debt. Thus, it is 

appropriate to put the burden of ascertaining the liabilities 

of merged entities on the surviving entity rather than on its 

employees. This will further ERISA's goal of protecting 

participants and beneficiaries in pension plans as the 

burden is on the employer to assure itself that it is not 

delinquent. Second, requiring notice to the surviving entity 

before a debt follows a merger would result in perverse 

incentives, encouraging the survivor to not examine records 

and hide its head in the sand for fear of receiving notice of 

an obligation. We are loathe to create such incentives. 

Third, requiring notice as a condition for payment would 

allow a disappearing constituent to unilaterally extinguish 

a debt--which it may have voluntarily assumed--simply by 

hiding it from the surviving entity before the merger. See 

Howard Johnson Co., 417 U.S. at 257. Introducing such 

uncertainty into this area could severely undermine

ERISA's goals. 

Local 115 is in a particularly unsympathetic position in 

this case. There is no dispute that Local 115 actually 

merged with Local 513. The parties agree that this was not 

an asset sale or something short of full fusion of the two 

entities. Moreover, even if Local 115 did not realize that 

Local 513 had not funded Littlejohn's pension, this is not 

 8 
such an unusual liability that it could not have foreseen its 

existence. In short, any reasonable entity would have been 

on notice to examine Local 513's records for this type of 

obligation, especially in light of Local 115's similar 

commitment to make contributions for its employees to the 

Pension Fund. There is no contention that Local 115 had 

anything less than full access to all of Local 513's payroll 

and pension records. Indeed, this was not a consolidation 

of two stranger corporations with little knowledge of each 

others' operations, but a merger of two sister locals, both of 

which operated in a similar manner and which were 

offspring of the International Brotherhood of Teamsters. 

IV. 

In sum, we hold that when two unincorporated local 

unions merge, the survivor assumes the liabilities of the 

extinct constituent even if it does not have pre-merger 

notice of the debt. For the foregoing reasons, the district 

court's January 10, 1997 judgment will be affirmed. Costs 

taxed against Teamsters Local Union 115. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

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