1994 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

12-30-1994

Machinists Pension Fund, Dist. 15 v. Khale

Engineering Corp.

Precedential or Non-Precedential:

Docket 94-5160

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Recommended Citation

"Machinists Pension Fund, Dist. 15 v. Khale Engineering Corp." (1994). 1994 Decisions. Paper 232.

http://digitalcommons.law.villanova.edu/thirdcircuit_1994/232
 UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT 

 

No. 94-5160 

 

BOARD OF TRUSTEES OF THE DISTRICT NO. 15 

MACHINISTS' PENSION FUND, 

 Appellant

v. 

KAHLE ENGINEERING CORPORATION, a New Jersey corporation 

 

On Appeal from the United States District Court 

for the District of New Jersey 

(D.C. Civil No. 93-cv-04285) 

Argued: September 13, 1994 

Before: SLOVITER, Chief Judge, MANSMANN 

 and ALARCON*, Circuit Judges

(Filed December 30, 1994) 

Elizabeth Roberto (Argued) 

Eames, Wilcox, Mastej, Bryant, 

 Swift & Riddell 

Detroit, MI 48226 

 Attorney for Appellant 

 

*. Hon. Arthur L. Alarcon, United States Circuit Judge for the 

Ninth Circuit, sitting by designation. 
Joseph J. Malcolm (Argued) 

Grotta, Glassman & Hoffman 

Roseland, NJ 07508 

On the Brief: 

 James M. Beach 

 Attorneys for Appellee 

David S. Allen 

Jacobs, Burns, Sugarman, 

 Orlove & Stanton 

Chicago, IL 60606 

 Attorney for Amicus-Appellant 

 Chicago Truck Drivers, Helpers 

 and Warehouse Workers Union 

 (Independent) Pension Fund 

Diana L.S. Peters 

Feder & Associates 

Washington, DC 20036 

 Attorney for Amicus-Appellant 

 National Coordinating 

 Committee for Multiemployer Plans 

 OPINION OF THE COURT

SLOVITER, Chief Judge. 

 The Board of Trustees of the District No. 15 

Machinists' Pension Fund (Fund or Pension Fund) appeals the 

dismissal of their action to collect an assessment of withdrawal 

liability filed against Kahle Engineering Corp. under the 

Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), Pub. 

L. No. 96-364, 94 Stat. 1208 (1980) (codified as amended at 29 

U.S.C. §§ 1001a, 1381-1453 (1988 & Supp. V 1993)), which amended 

the Employee Retirement Income Security Act of 1974 (ERISA), Pub. 

L. No. 93-406, 88 Stat. 832 (codified as amended at 29 U.S.C. §§ 
1001-1461 (1988 & Supp. V 1993)). The district court entered 

summary judgment against the Fund on the basis of the statute of 

limitations. 

 This appeal requires us to determine whether the 

district court correctly held that the six-year statute of 

limitations in the MPPAA began to run for the entire liability 

when the employer first missed an installment payment, even 

though the payout period was more than nine years. Apparently, 

no federal appellate court has addressed this precise issue of 

statutory interpretation under the MPPAA although two other 

courts of appeals have decided cases which suggest possible, and 

conflicting, interpretations. 

I. 
 The Statutory Scheme

 The MPPAA was enacted by Congress in 1980 as an 

amendment to ERISA to insure the financial stability of 

multiemployer pension plans by imposing mandatory liability on 

employers withdrawing from a pension plan. See Laborers Health 

and Welfare Trust Fund v. Advanced Lightweight Concrete Co., 484 

U.S. 539, 545 (1987). In IUE AFL-CIO Pension Fund v. Barker & 

Williamson, 788 F.2d 118 (3d Cir. 1986), we identified two goals 

for the MPPAA: "'to protect the interests of participants and 

beneficiaries in financially distressed multiemployer plans, and 

. . . to ensure benefit security to plan participants.'" Id. at 

127 (quoting H.R. Rep. No. 869, 96th Cong., 2d Sess. 71, 

reprinted in 1980 U.S.C.C.A.N. 2918, 2939). The principal manner 

in which these goals are effectuated by the act is by the 

imposition of withdrawal liability on an employer who withdraws 

from a multiemployer pension plan in the proportionate share of 

the plan's unfunded vested benefits. Crown Cork & Seal v. 

Central States Pension Fund, 982 F.2d 857, 861 (3d Cir. 1992), 

cert. denied, 113 S. Ct. 2961 (1993); see also Concrete Pipe and 

Prods. v. Construction Laborers Pension Trust for S. Cal., 113 S. 

Ct. 2264, 2272 (1993). 

 The statute sets forth an intricate scheme for the 

calculation and collection of the withdrawal liability and 

resolution of disputes with respect thereto.1 When an employer 

 

1. The statutory scheme is supplemented by regulations 

promulgated by the Pension Benefit Guaranty Corporation (PBGC). 

As enacted in 1974, ERISA created the PBGC within the Department 

of Labor "to administer and enforce a pension plan termination 
withdraws from a multiemployer plan, the plan sponsor must 

determine the amount of withdrawal liability, and "as soon as 

practicable" notify the employer of the amount of liability and 

the schedule for repayments and demand payment in accordance with 

that schedule. See 29 U.S.C. §§ 1382, 1399(b)(1). The plan 

sponsor must set up a schedule for withdrawal payments which may 

impose liability to a maximum of twenty years. Id. §§ 

1399(b)(1)(A)(ii), 1399(c)(1). The first installment payment on 

the schedule is due within sixty days of the plan sponsor's 

demand. Id. § 1399(c)(2). Under an exception for labordisputes, the employer shall not be considered to have withdrawn 

from a plan solely because an employer suspends contributions 

during a labor dispute involving its employees. Id. § 1398. 

 No later than ninety days after the employer receives 

notice from the plan sponsor of the determination of withdrawal 

liability, the employer may ask the plan sponsor to review any 

specific matter and to reassess the schedule of payments; "may 

identify any inaccuracy in the determination of the amount of the 

unfunded vested benefits allocable to the employer;" and may 

furnish any additional relevant information to the plan sponsor. 

Id. § 1399(b)(2)(A). The plan sponsor must conduct a reasonable 

review of any matter raised by the employer, and notify the 

(..continued) 

insurance program" and granted it the statutory authority to 

promulgate regulations in carrying out the purposes of ERISA. 

See Concrete Pipe, 113 S. Ct. at 2271 (citing 29 U.S.C. § 

1302(a)-(b)). 
employer of its decision, the basis for its decision, and any 

changes made as a result of the review. Id. § 1399(b)(2)(B). 

 An employer who wishes to contest the fact of its 

liability or the amount must initiate arbitration. If it does 

not, it waives the right to contest the assessment and the 

amounts demanded by the plan sponsor become "due and owing" as 

set forth on the payment schedule, and the employer may be sued 

for collection in state or federal court. Id. § 1401(b)(1). 

 Under the acceleration provision of the statute 

available in the event of a default, the "plan sponsor may 

require immediate payment of the outstanding amount of the 

employer's withdrawal liability, plus accrued interest on the 

total outstanding liability from the due date of the first 

payment which was not timely made." Id. § 1399(c)(5); see also

29 C.F.R. § 2644.2(b)(2). For purposes of this section, default 

is defined as "the failure of an employer to make, when due, any 

payment if not cured within sixty days after the employer 

receives written notification from the plan sponsor of such 

failure." 29 U.S.C. § 1399(c)(5)(A). A default can also be "any 

other event defined by the plan rules which indicates a 

substantial likelihood that an employer will be unable to pay its 

withdrawal liability." Id. § 1399(c)(5)(B). 

 A PBGC regulation prohibits a declaration of default 

for failure to make timely payments during the period, and for 

sixty days thereafter, that an arbitration is pending or that the 

plan sponsor is conducting the employer's requested review. See

29 C.F.R. § 2644.2(c)(1). However, the statute provides that 
payments in accordance with the schedule set forth by the plan 

sponsor must be made "notwithstanding any request for review or 

appeal of determinations of the amount of such liability or of 

the schedule." 29 U.S.C. § 1399(c)(2). If an employer misses a 

scheduled payment, the fund may seek to collect by filing a 

collection action but it may not accelerate the balance during 

that protected arbitration period. See United Retail and 

Wholesale Employees Pension Plan v. Yahn & McDonald, 787 F.2d 

128, 131 (3d Cir. 1986), aff'd per curiam by an equally divided 

court sub nom., PBGC v. Yahn & McDonald, 481 U.S. 735 (1987) 

(hereinafter Yahn). 

 An action for liability under the MPPAA may be brought 

by a plan fiduciary, employer, plan participant, beneficiary or 

an employee organization which represents such a plan participant 

or beneficiary "adversely affected by the act or omission of any 

party" under the statute or by an employee organization. 29 

U.S.C. § 1451(a)(1). That action must be filed within six years 

after the date on which "the cause of action" arose. Id. § 

1451(f)(1).2

 

2. Under another prong of the statute of limitations provision, 

not at issue here, the action may also be brought within three 

years after the plaintiff knew or should have known of the 

existence of such a cause of action except that in the case of 

fraud or concealment, this "discovery prong" is extended to six 

years. The full text of the provision is: 

 An action under this section may not be brought after 

the later of - 

 (1) 6 years after the date on which the cause of 

action arose, or 
 With the statutory scheme in mind, we turn to the facts 

of this case. Our task is to determine when the Pension Fund's 

"cause of action" that is the subject of this suit arose. 

II. 

 Facts and Procedural History

 Kahle was a contributing employer to the Pension Fund 

pursuant to the collective bargaining agreements it entered into 

with its union. Following a labor dispute in 1981, Kahle 

suspended contributions to the Pension Fund. On April 23, 1984, 

in accordance with 29 U.S.C. §§ 1382, 1399(b)(1), the Fund 

notified Kahle in writing that it had determined that Kahle had 

withdrawn from the Fund and requested payment of withdrawal 

liability in the amount of $271,746, payable in thirty-eight 

quarterly installment payments of $9,467 each, beginning on July 

1, 1984, with a final thirty-ninth payment of $6,459, payable in 

January, 1994.3 The April 23 letter also notified Kahle of its 

(..continued) 

 (2) 3 years after the earliest date on which the 

plaintiff acquired or should have acquired actual knowledge of 

the existence of such cause of action; except that in the case of 

fraud or concealment, such action may be brought not later than 6 

years after the date of discovery of the existence of such cause 

of action. 

See 29 U.S.C. § 1451(f). 

3. We note that the payment figures total $366,205, which the 

Pension Fund explained in the district court was attributable to 

interest on the principal amount of $271,746. Kahle objected to 

the interest, but it is unclear whether it objected to the fact 

of interest or its computation. We will leave that issue to the 

district court on remand. 
statutory right to request review from the Fund, to identify any 

inaccuracies, and to furnish any additional relevant information. 

 In response, on July 2, l984 Kahle wrote that it "has 

not withdrawn from the Fund," that the cessation of contributions 

was caused solely by a strike which commenced on June 22, 1981 

and continued in 1982, and that the company remains ready and 

willing to negotiate with the Union. The letter stated it 

constituted an official request under section 4219(b)(2) of ERISA 

[29 U.S.C. § 1399(b)(2)] for review of the Fund's determination 

that the company had withdrawn, that withdrawal occurred on June 

22, 1981 and of the figures used to calculate the withdrawal 

liability. Kahle enclosed a first installment payment of $9,467 

with the letter. App. at 26-27. 

 On August 2, 1984, the Fund's counsel advised Kahle by 

letter that he would raise the request for review of the 

withdrawal liability determination at the next meeting of the 

Fund Trustees and would speak to the union about Kahle's claims 

of continued negotiation and representation. Counsel also posed 

questions to Kahle about its claim of continuing negotiation with 

the union. App. at 59-60. 

 Kahle's response dated September 13, 1984 made clear 

there were no negotiations to end the strike and that picketing 

continued until April 1982, but that "[b]oth parties remained at 

the call of the Federal Mediator." In the last sentence of that 

letter, Kahle stated that "pursuant to 29 C.F.R. § 2644.2(c) the 
Company will discontinue quarterly payments."4 App. at 28-29. In 

fact, the referenced PBGC regulation did not authorize Kahle to 

withhold the scheduled payments but merely prohibited the Fund 

from declaring default during the pendency of arbitration. See

29 C.F.R. § 2644.2. 

 Kahle sent the Fund's counsel a letter on December 20, 

1984, demanding arbitration.5 Before the Fund's counsel had 

received the December 20, 1984, letter, he wrote to Kahle's 

counsel on December 21, 1984, stating that the Trustees saw no 

reason to change their determination that Kahle had withdrawn 

from the Plan. App. at 30. The December 21 letter also stated, 

"Please be . . . advised that your client is now in default in 

its payments. Unless it cures this default by the 1st of January 

1985, our client will have no alternative but to declare your 

client 'in default' and seek all remedies available to it . . . 

under appropriate federal legislation." App. at 30. 

 

4. The September 13 letter was never received by Fund counsel 

although the Fund does not contest its contents, and there are 

later letters that referred to it. The Fund appears to have 

suggested in the district court that the September 13 letter 

constituted a demand for arbitration that tolled the accrual of 

its cause of action and the consequent statute of limitations, 

but the district court gave that argument short shrift because it 

is undisputed that neither party took any steps to invoke the 

arbitration procedure. In the view we take of the statute of 

limitations issue, we need not decide whether the allusion to 

arbitration by the employer would have stopped the accrual of the 

cause of action for any length of time. 

5. The contents of this letter, and particularly the demand for 

arbitration, are referred to in the Fund counsel's subsequent 

letter of December 28, 1984. App. at 61-62. 
 On December 28, 1984, the Fund noted receipt of Kahle's 

letter of December 20, 1984, enclosed another copy of the Fund's 

actuarial calculations, and stated again that the Fund saw no 

reason to alter its determination of the fact of or date of 

withdrawal, but indicated a willingness to review its 

calculations if Kahle provided more specifics. The Fund 

acknowledged Kahle's demand for arbitration and suggested that 

the parties "proceed in accordance with the rules of the American 

Arbitration Association for all purposes," reserving any 

objections including timeliness for the arbitrators. The Fund 

also offered to discuss "these matters on a less formal basis." 

App. at 61-62. 

 There is no evidence of further communications, 

negotiations, or arbitration proceedings after December 1984. 

Kahle did not make any further payments. Almost four years 

later, on August 9, 1988, the Fund notified Kahle "that the 

company is in default in its withdrawal liability payments," 

demanded all past due payments plus interest, and stated that if 

Kahle did not make such payments within sixty days the Fund would 

require "immediate payment of the total withdrawal liability, 

plus interest accruing from the date the first payment was due." 

The Fund also demanded that Kahle post a bond for $271,746, the 

full amount of withdrawal liability. App. at 63-64. The record 

contains no evidence of further communications until the filing 

of this suit. 

 The Pension Fund filed the complaint in the United 

States District Court for the District of New Jersey on September 
28, 1993. The parties filed cross-motions for summary judgment. 

Following a hearing on February 28, 1994, the district court 

granted Kahle's Motion for Summary Judgment and dismissed the 

case as time-barred under the MPPAA's six-year statute of 

limitations. See 29 U.S.C. § 1451(f)(1). 

 The district court had jurisdiction under 29 U.S.C. §§ 

1132(e)(1) and 1451(c) and we have appellate jurisdiction 

pursuant to 28 U.S.C. § 1291. A district court's grant of 

summary judgment is subject to our plenary review. Mitchell v. 

Commission on Adult Entertainment Est., 10 F.3d 123, 129 (3d Cir. 

1993). Our review of the statute of limitations under the MPPAA 

is similarly plenary. Doherty v. Teamsters Pension Trust Fund, 

16 F.3d 1386, 1389 (3d Cir. 1994). 

III. 

 Discussion

 On the date this lawsuit was filed, September 28, l993, 

Kahle was still within the payout period established by the 

Pension Fund pursuant to the MPPAA for Kahle to complete payment 

of its withdrawal liability. That period was not scheduled to 

expire until January 1994. Although the six-year statute of 

limitations precludes the Fund's recovery of any payments due 

more than six years before the filing of its complaint, and the 

Pension Fund apparently so concedes, we fail to see any 

persuasive reason why the Fund should not be entitled to recover 

the payments due during the six years preceding the filing of its 

lawsuit. 
 The district court reasoned that the Fund's cause of 

action arose when Kahle missed its first payment in October 1984 

and, at the latest, December 21, 1984.6 Under the district 

court's theory, and that accepted by the dissent in this case, 

the failure of the Fund to file its suit within six years from 

that date meant that the Fund's action was untimely, even though 

it was filed while there were still payments to be made. 

 We believe that the district court erred when it failed 

to recognize that the employer's obligation to make the scheduled 

payments is akin to the obligation to make installment payments. 

In an installment contract, a new cause of action arises from the 

date each payment is missed. See 4 A. Corbin, Corbin on 

Contracts § 951 (1951). 

 The principles applying the statute of limitations to 

installment payments are well established: 

 In the case of an obligation payable by instalments, 

the statute of limitations runs against each instalment 

from the time it becomes due, that is, from the time 

when an action might be brought to recover it. 

 .... 

 The rule that the statute of limitations begins to 

run against each instalment of an obligation payable by 

instalments only from the time the instalment becomes 

due applies although the debtor has the option to pay 

the entire indebtedness at any time. On the other 

hand, where there is an acceleration clause giving the 

creditor the right upon certain contingencies to 

declare the whole sum due, the statute begins to run, 

only with respect to each instalment, at the time the 

instalment becomes due, unless the creditor exercises 

 

6. It is not clear from the record on what basis the district 

court concluded that the latest date for accrual of the cause of 

action was December 21, 1984. 
his option to declare the whole indebtedness due, in 

which case the statute begins to run from the date of 

the exercise of his option. 

51 Am. Jur. 2d: Limitation of Actions § 133. 

 As Corbin explains, unless there is a repudiation 

(analogous to a default and acceleration under the MPPAA), the 

plaintiff may only sue for each breach as it occurs, and the 

statute of limitations begins to run from that time. See Corbin 

supra, § 989; see also United States v. La France, 728 F. Supp. 

1116, 1119-20 (D. Del. 1990) (holding that the cause of action 

for collection of installment payments under a Small Business 

Administration loan accrues on each installment from the date it 

falls due in the absence of acceleration). 

 The analogy of scheduled payments under the MPPAA to 

installment payments was adopted by the Eleventh Circuit when it 

held that interest accrues on overdue withdrawal liability from 

the due date of each missed payment rather than from the due date 

of the first installment. See Carriers Container Council v. 

Mobile S.S. Ass'n, 948 F.2d 1219, 1222-24 (11th Cir. 1991). The 

court reasoned that accruing interest from the date of the first 

installment would amount to an improper retroactive acceleration 

of interest. Id. at 1223. But cf. New York Teamsters Conference 

Pension & Retirement Fund v. McNicholas Transp. Co., 658 F. Supp. 

1469, 1476 (N.D.N.Y. 1987) (ordering interest from first date of 

missed payment under schedule), aff'd, 848 F.2d 20 (2d Cir. 

1988). Although the context of Carriers Container was different 

than the case before us, that court's treatment of each 
installment as a separate amount due is in line with the theory 

proffered by the Pension Fund. 

 The Fund also refers us to Ludington News Co. and 

Michigan UFCW/Drug Employers Pension Fund Workers Union and Drug 

and Mercantile Employers Joint Pension Fund, 9 Employee Benefits 

Cas. (BNA) 1913 (1988), an arbitrator's decision viewing the 

withdrawal liability as an installment contract obligation under 

which "the statute does not begin to run with respect to a 

particular installment until that installment falls due." Id. at 

1916. Although we recognize that Ludington is without 

precedential effect, it was cited as relevant by another circuit. 

See Joyce v. Clyde Sandoz Masonry, 871 F.2d 1119, 1124 (D.C. 

Cir.), cert. denied, 493 U.S. 918 (1989). We also note that 

Ludington relied on Jackson v. American Can Co., 485 F. Supp. 370 

(W.D. Mich. 1980), a case that does provide a meaningful analogy. 

In Jackson, the court declined to apply the statute of 

limitations as a basis to summarily dismiss an action by a 

retiree who had been told in l963 of the decision to give him 

reduced pension benefits when they became due in l973. Id. at 

374-75. The court noted that the pension plan may qualify as an 

installment contract, under which claims do not accrue until each 

payment comes due. Id. at 374. 

 The strongest authority in support of the holding of 

the district court and the arguments of Kahle is the decision of 

the Seventh Circuit in Central States, Southeast and Southwest 

Areas Pension Fund v. Navco, 3 F.3d 167 (7th Cir. 1993), cert.

denied, 114 S. Ct. 1062 (1994), which, although it arose in 
another context, rejected the position of the pension funds in 

that case that a new cause of action arose when the employer 

failed to make each scheduled payment when due. 

 In Navco, the pension funds sought to recover the 

unpaid withdrawal liability from Navco, a partnership which was 

part of a corporate group with two firms which withdrew from a 

pension plan. The pension funds relied on the MPPAA provision 

that all members of a group under "common control" are liable for 

each other's withdrawal liability. Id. at 169 (citing 29 U.S.C. 

§ 1301(b)(1)). Suit against Navco was filed more than six years 

after the first payment by its affiliated corporations was due. 

Id. at 170. The district court dismissed the suit as untimely, 

rejecting the claim of the pension funds that they had six years 

from their discovery of the existence of Navco to file suit. The 

court of appeals affirmed, agreeing that the statute of 

limitations ran from the accrual of the cause of action rather 

than from the discovery of the identity of additional responsible 

persons, id. at 172, an issue not before us. 

 Because suit was filed more than six years after the 

first scheduled payment was due (but within six years of the last 

scheduled payment), the court also had to consider when the cause 

of action accrued. It agreed with the district court that the 

whole claim comes due when the first payment is missed, phrasing 

its analysis as follows: 

 The pension fund has only one claim against the 

employer (and, derivatively, against the controlling 

persons): the amount of withdrawal liability. Although 

a fund may permit an employer to amortize this sum over 

20 years, 29 U.S.C. § 1399(c)(1)(B), the whole amount 
is presumptively due at the outset. Section 1391 calls 

on the pension plan to determine an amount that is 

owed; the financing options under § 1399(c) do not 

break this single debt into little pieces with their 

own statutes of limitations. 

Id. at 172. 

 Even before turning to the policy behind the MPPAA, we 

find the Navco decision unpersuasive. Consider, for example, a 

mortgage with a twenty-year payout in a jurisdiction with a sixyear statute of limitations. If, for some reason, the mortgage 

company fails to sue the mortgagor for more than six years after 

the mortgagor fails to pay the first and succeeding payments, 

would it be seriously argued that the mortgage company is 

precluded thereafter from suing for those payments due within the 

six years preceding the lawsuit or from exercising the 

acceleration clause as to the remaining fourteen years? 

 Moreover, we believe that the reasoning of the Seventh 

Circuit is not supported by the statutory language nor the 

purposes behind the statutory scheme of the MPPAA. The position 

of Kahle and Navco that the whole sum becomes due and the whole 

claim accrues when the first payment is missed in effect imposes 

a compulsory acceleration clause. This reads out of the statute 

the relevant statutory provision with respect to acceleration 

codified in 29 U.S.C. § 1399(c)(5), which makes acceleration 

discretionary. That provision states: 

 (5) In the event of a default, a plan sponsormay

require immediate payment of the outstanding amount of an 

employer's withdrawal liability, plus accrued interest on the 

total outstanding liability from the due date of the first 

payment which was not timely made. 
29 U.S.C. § 1399(c)(5) (emphasis added). 

 One must assume that when Congress provided that in the 

event of a default "a plan sponsor may require immediate payment 

of the outstanding amount of an employer's withdrawal liability," 

Congress also intended that the plan sponsor could decide not to 

accelerate the outstanding balance. That option is nugatory if 

Kahle is correct, because the claim would accrue automatically 

upon default. 

 We cannot overlook that the statute endorses setting a 

schedule of periodic payments lasting up to twenty years. See 29 

U.S.C. § 1399(c)(1)(B). If, after making timely payments for the 

first year, the employer ran into financial difficulty and missed 

two quarterly payments, under the literal language of the Navco

opinion the claim for the remainder of the unpaid liability would 

have accrued at that time. Suppose, however, that the employer 

regains some financial stability, pays the past due claims, and 

resumes making timely payments for six years. Thereafter, it 

ceases all payments. Is the pension fund's claim for the 

remaining thirteen years of payments now barred because it failed 

to file suit within six years of the first missed payment? We 

see nothing in the statutory language that requires the patently 

inequitable result of permitting an employer to escape much of 

the twenty years of scheduled withdrawal payments because an 

action to collect the entire balance is not brought within six 

years after any one missed payment. 

 Indeed, such a result would, if accepted, set up 

perverse incentives. Automatic default on the entire balance 
from the date of the first missed payment discourages amicable 

resolution of disputes and discourages reentry into the fund as a 

contributing employer. If an employer is late on one payment or 

misses a payment, must the plan sponsor refuse to accept a late 

payment and press for the entire balance, even if this pushes the 

company into insolvency? Forcing the plan sponsor into a 

position where it must pursue zealous collection efforts at the 

expense of facilitating negotiations over reentry or waiting for 

a collective bargaining agreement between the employer and the 

union undercuts the need for flexibility to ensure solvency.7 

 Although there is no evidence in the record as to 

industry practice in these circumstances, there appears to be 

some merit to the argument made in the brief of the Amicus Curiae 

National Coordinating Committee for Multiemployer Plans in 

support of the Pension Fund that presumptive default, as adopted 

by the Seventh Circuit in Navco, will force trustees to 

accelerate and sue, even though this action may not be in the 

 

7. There is support in the legislative history that Congress 

intended to grant some discretion to plan sponsors. 

Specifically, the House Education and Labor Report notes that the 

MPPAA purposefully gave plan fiduciaries "a great deal of 

flexibility to strike a balance among the competing 

considerations of encouraging new entrants, discouraging 

withdrawals, easing administrative burdens, and protecting the 

financial soundness of a fund." H.R. Rep. No. 96-869, 96th 

Cong., 2nd Sess. 67 reprinted in 1980 U.S.C.C.A.N. 2918, 2935. 

Furthermore, even if the plan sponsor chooses rules that "would 

eliminate or reduce liability, the choice of such a rule is not 

per se a violation of a fiduciary standards [sic]; the 

determination must be made as to whether the fiduciary has acted 

reasonably . . . and in accordance with the fiduciary standards." 

Id.
best interests of plan participants and beneficiaries. See

Amicus NCCMP Brief at 6. 

 The Pension Fund's position receives support from the 

decision of the D.C. Circuit in Clyde Sandoz. 871 F.2d at 1120. 

The court reversed the dismissal of an action brought by the 

pension fund to recover the assessed withdrawal liability from 

the employer because the district court had erroneously measured 

the six-year period from the employer's withdrawal from the fund. 

In its opinion, the D.C. Circuit held that the cause of action 

arose from the date upon which the employer failed to make a 

payment on its withdrawal liability demanded by the plan sponsor. 

The court reasoned that the action that "adversely affected" the 

plan was the failure to make the scheduled payment, and that 

therefore the cause of action accrued at that time. The court's 

discussion of the effect of an employer's failure to make a 

payment that is "due and owing," 29 U.S.C § 1401(b)(1), according 

to an amortized schedule lends some support to the Pension Fund's 

argument that the cause of action for individual payments does 

not accrue until the payment date has passed, because only then 

is the payment "due and owing" within the statute. Id. at 1123-

24. 

 The Clyde Sandoz court also referred to the purpose of 

the MPPAA in its interpretation of the statute, noting that that 

purpose was to ensure fund solvency by continuing payments under 

an amortized withdrawal liability schedule of payments. The 

court observed that Congress's overriding purpose of ensuring 

plan solvency was followed by a more general goal of facilitating 
collection and a narrower goal of ensuring prompt collection. 

Id. at 1126. 

 We are not unaware of the argument that Congress 

signalled its interest in prompt resolution of withdrawal 

liability by requiring the plan sponsor to send the withdrawing 

employer a notice and demand for payment "as soon as practicable" 

after the withdrawal, see 29 U.S.C. § 1399(b)(1), and that 

spreading the time to file a complaint for missed payments under 

the "installment contract" theory of liability would run counter 

to this intent. But as the Clyde Sandoz court noted and the 

Congressional history demonstrates, Congress was interested in 

establishing a balance between different goals. When Congress 

deems time of the essence, it establishes a statute of 

limitations considerably shorter than the six-year statute in the 

MPPAA, see 29 U.S.C. § 1451(f)(1), among the longest in federal 

statutes. Congress's express authorization to the plan sponsor 

to establish a lengthy twenty-year period for the schedule of 

payments, see 29 U.S.C. § 1399(c)(1)(B), provides strong evidence 

that Congress wanted to give the employer an extended period of 

time to be able to accrue the funds to pay the withdrawal 

liability. It is unlikely Congress would have done so had it 

believed that the beneficiaries of multi-employer funds would 

suffer drastically if the plan sponsors select payout periods 

that give the employer up to a twenty-year period to pay out the 

entire amount due. 
 We find apt the language used in Clyde Sandoz in 

rejecting a similar argument that focused on the need for prompt 

collection of withdrawal liability. The court stated: 

 Sandoz's reading of the purposes and 

policies animating the MPPAA is curiously 

one-dimensional. To be sure, Congress has 

indicated that promptly collecting 

outstanding sums is desirable. . . . The 

employer's reading of the statute would 

elevate one narrow statutory policy (favoring 

prompt collection) over the more general goal 

(collection) and overriding purpose 

(solvency) which animate and generate that 

narrow preference. There is no indication 

that the Act requires, as Sandoz would have 

it, either prompt collection or no collection 

at all. 

871 F.2d at 1126. 

 Kahle overstates its case when it argues that the 

installment analysis would give the Fund "limitless time to file 

a complaint," Appellee's Brief at 15, an argument echoed by the 

dissent. The Fund is still subject to the six-year statute of 

limitations. Thus, a plan sponsor which had established a twenty 

year payout and chose to wait twenty years to pursue its cause of 

action would only be able to collect the last six years of 

installments and would necessarily forego the remainder, a result 

which should provide adequate disincentive to unnecessary delay. 

The plan sponsor remains subject to the fiduciary duties placed 

on it by ERISA and the MPPAA, and it is therefore unlikely that 

the running of the statute of limitations will be at the plan 

sponsor's "whim," as the dissent suggests.8 

 

8. We find curious the dissent's concern that under this opinion 

Kahle will escape payment of over $150,000 (presumably the amount 
 In light of the statutory language, we reject the 

district court's holding that the cause of action for all of the 

unpaid withdrawal liability accrues when the first installment 

payment is missed. 9

IV. 

 CONCLUSION 

(..continued) 

the dissent calculates was due under the twelve payments from 

October 1984 through July 1987), dissent typescript op. at 18, 

when under the dissent's view Kahle would escape payment for the 

remaining 26 payments, which a rough calculation shows would be 

more than $250,000, assuming interest as computed by the Fund. 

9. The dissent appears to suggest that the notice of default 

sent by the Pension Fund to Kahle on April 23, l984 could be 

viewed as the acceleration notice authorized under 29 U.S.C. § 

1399(c)(5). Kahle has not so argued nor did the district court 

so view it. Nothing in the language of the April 23, l984 letter 

suggested acceleration. The Pension Fund argues that there is a 

distinction between the mandatory notice that sets the amount of 

withdrawal liability and the schedule for repayments, required 

under 29 U.S.C. §§ 1382, 1399(b)(1), and the discretionary notice 

of acceleration authorized under 29 U.S.C. § 1399(c)(5), which it 

contends it sent on August 9, l988. There is some statutory 

support for the distinction, as the two notices are in separate 

provisions, and the acceleration provision would have no 

significance if the mandatory notice of the amount of withdrawal 

liability were also to be viewed as a notice of acceleration. 

 In this case, we need not decide whether the plan 

sponsor would retain the right to accelerate and sue for the 

total amount due had it previously brought an action to recover a 

delinquent payment, because that is not what happened here. The 

Fund did not bring any earlier suit. Furthermore, because all of 

the payments accelerated as of the August 9, l988 notice (from 

August 9, l988 to the final payment due January, l994) are 

covered by the six-year period before the filing of the complaint 

(which would sweep back to September 28, l987), we need not 

consider the effect of the August 9, l988 notice. Presumably, 

the one or two quarterly payments due after the filing of the 

complaint will be covered by supplement or amendment to the 

complaint. 
 We conclude that under the statutory scheme established 

by the MPPAA, a plan sponsor has six years from the date a 

payment is due to sue for its recovery. Absent a decision by the 

Fund to accelerate, the cause of action for payments not yet due 

does not begin to run when the first such payment is missed. In 

this case, it is undisputed that the great bulk of the unpaid 

installments were due by Kahle within six years of the filing of 

the complaint by the Pension Fund. It follows that the Fund was 

not time-barred from bringing suit for the total of the quarterly 

payments which fell due within the six years prior to the filing 

of this suit.10 

 For the reasons set forth above, we will reverse the 

grant of summary judgment dismissing the complaint and remand for 

further proceedings. 

 

10. Because of the view we take of the dispositive facts, any 

disputes between the parties as to the effect of the letters sent 

in l984 are irrelevant to our disposition. For the same reason, 

we need not consider equitable arguments raised by the Pension 

Fund. 
Board of Trustees of the District No. 15 Machinists' Pension Fund 

v. Kahle Engineering Corporation, No. 94-5160 

ALARCÓN, Circuit Judge, dissenting: 

 In this matter, we must decide when a cause of action arises 

under the MPPAA for the unpaid balance of an employer's liability 

after the employer has withdrawn from a pension fund. The 

district court concluded that the clock begins to run from the 

date an employer first fails to make a scheduled payment. 

Because the current action for the unpaid balance was filed nine 

years after the first missed payment, the district court 

dismissed this matter as barred by the six-year statute of 

limitations. 

 The Board of Trustees of District No. 15 Machinists Pension 

Fund ("Fund") contends that its time for filing an action for the 

unpaid balance runs six years from the date of the last scheduled 

payment set forth in the Fund's formal demand letter. 

Unfortunately, the majority has been persuaded by this argument. 

The majority holds today that a cause of action for the unpaid 

balance of an employer's liability to a pension fund is not 

barred by the statute of limitations if it is filed within six 

years of the last scheduled payment even if the employer failed 

to make any quarterly payments for twenty years. Majority 

opinion at 22. Because it is my view that the majority's 

decision finds no support in the text of the MPPAA, and is 

contrary to the law of the Third Circuit regarding the 
application of statutes of limitations, I must respectfully 

dissent. 

 In the MPPAA, Congress provided two straightforward options 

to a pension fund when an employer fails to make a scheduled 

payment on the liability flowing from a withdrawal. The pension 

fund may bring an action for the missed payment within six years. 

The pension fund may choose, instead, to bring an action for the 

entire unpaid balance within six years of the first missed 

payment. 

 The majority has created a third option for the pension 

fund. Under this option, the Fund may elect not to bring an 

action either for the first missed payment, or for the unpaid 

balance, within six years of the default. Instead, the pension 

fund may "cho[o]se to wait twenty years to pursue its cause of 

action" for the unpaid balance, and would be able "to collect the 

last six years of installments." Majority opinion at 22. 

 Contrary to the majority's view, the MPPAA does not place 

the fixing of the date that the cause of action accrues for the 

unpaid balance in the exclusive and unreviewable control of the 

pension fund, regardless of the prejudice to the defendant caused 

by delay in prosecuting the claim. The MPPAA provides that an 

action must be filed within six years after the employer 

defaults. Because this action was filed more than six years 

after the employer missed its first scheduled payment, I would 

affirm the district court's order dismissing this action. 
I. 

 Before explaining the rationale that motivates my dissent, I 

will set forth the facts pertinent to this appeal. Kahle was a 

member of a multiemployer pension plan sponsored by the Fund. In 

1981, Kahle was involved in a labor dispute with its employees. 

As a result, the company suspended its contributions to the Fund. 

On April 23, 1984, the Fund determined that the labor dispute had 

terminated Kahle's obligation to continue making payments. The 

Fund concluded that Kahle had effected a complete withdrawal from 

the pension plan. Accordingly, the Fund sent Kahle a notice of 

its assessment obligation of $271,746 along with a schedule of 

quarterly payments and a demand for payment of the initial 

quarterly obligation of $9,467. The payment schedule required 

that Kahle make thirty-eight additional payments of $9,467, and a 

final payment of $6,459. The Fund also notified Kahle that the 

failure to begin payment as required would entitle the Fund to 

seek immediate payment of the full amount of withdrawal 

liability.11 

 

11. The relevant portion of the demand letter is as follows: 

 We have determined that your company has effected a 

 withdrawal from the Fund. In accordance with the Multi- 

 Employer Pension Plan Amendments Act of 1980 (the Act), 

 we hereby make request for payment of withdrawal liability 

 in accordance with the schedule described below. 

 According to our records, complete withdrawal occurred 

 on June 22, 1981. Based on the method chosen by the 

 Trustees in accordance with the Act, we have computed your 

 company's liability to the Fund to be $271,746. 
 Kahle made its initial quarterly payment on July 2, 1984. 

That same day, Kahle informed the Fund that it had not withdrawn. 

Kahle also requested a review of the Fund's determination that it 

had completely withdrawn. 

 On August 2, 1984, the Fund requested that Kahle provide 

additional information concerning the labor dispute in order that 

the Fund could investigate Kahle's claim that it did not 

withdraw. On September 13, 1984, Kahle responded to the Fund's 

request for additional information and also informed the Fund 

that it would discontinue making quarterly payments. 

 On December 20, 1984, Kahle sent the Fund a letter which 

included a demand to arbitrate the pension dispute. The next 

day, the Fund sent a letter to Kahle in which it explained that 

it had found no basis for altering its prior decision that Kahle 

had completely withdrawn. The Fund also warned Kahle that it had 

defaulted on its payments and that, if not cured by January 1, 

(..continued) 

 You are required to pay this amount in quarterly payments, 

 each in the amount of $9,467 (except for the last payment 

 which will be in the amount of $6,459). 

 Payments must begin no later than 60 days after receipt 

 of this notice, notwithstanding any request for review 

 or appeal. Accordingly, your company's first quarterly 

 installment is due on July 1, 1984. 

 Failure to begin payment of withdrawal liability as 

 required may constitute a default, which will entitle 

 the Fund to require immediate payment of the full 

 amount of the withdrawal liability owed. 
1985, the Fund would declare a default and "seek all remedies 

available to it" against Kahle.12 

 On December 28, 1984, the Fund's attorney notified Kahle 

that Kahle's "letter of December 20, 1984, . . . must have 

crossed in the mails with mine of December 21, 1984." The Fund's 

December 28 letter reiterated its position that there was no 

basis for reversing its conclusion that Kahle had withdrawn from 

the plan. The Fund again advised Kahle that it was in default in 

its payment and stated further that unless the missed payment was 

made, the Fund would "seek all remedies available to it." 

 Kahle did not make any further payments nor did it initiate 

arbitration proceedings. As the Fund candidly admitted in 

 

12. The Fund's letter dated December 21, 1984, states: 

 Since our . . . letter to you of August 2, 1984, the 

Trustees 

 of the District No. 15 Machinists' Pension Fund have met and 

 considered your letter of July 2, 1984. 

 Please be advised that at this time and in part as a result 

 of your failure to respond to our earlier letter, the 

 Trustees can see no reason for changing their determination 

 that your client has withdrawn from the Plan. Thus, your 

 client continues to be obligated to pay its withdrawal 

 liability. 

 Please be further advised that your client is now in 

 default in its payments. Unless it cures this default 

 by the 1st of January 1985, our client will have no 

 alternative but to declare your client "in default" 

 and seek all remedies available to it [sic] client under 

 appropriate federal legislation. 
argument before the district court, it took no further action 

against Kahle until 1988.13 

 On August 9, 1988, the Fund sent Kahle a letter which 

stated: 

This letter is to inform you that the company 

is in default in its withdrawal liability 

payments. We hereby demand, on behalf of the 

Fund, that the company immediately make all 

the past due payments, plus interest. The 

interest shall be equal to the current prime 

rate, accruing from the date each such 

payment was due. If you do not make such 

payments, including interest, within sixty 

(60) days from the date you received this 

letter, the Fund will require, in accordance 

with the Multiemployer Pension Plan 

Amendments Act of 1980, immediate payment of 

the total withdrawal liability, plus interest 

accruing from the date the first payment was 

due. If necessary, the Fund will file an 

action in the United States District Court to 

enforce the company's obligation to pay. 

Kahle did not make any payments in response to this second

notification of its default. Over five years later, and nearly 

 

13. The following colloquy occurred between the district court 

and the Fund's counsel, Ms. Roberto: 

 THE COURT: What happened in 1985, '86, '87? Zero. 

 MS. ROBERTO: Well, the Fund was waiting for--to see 

 what was going to happen with the arbitration 

 with the labor dispute. 

 THE COURT: Waiting for what? In '85, in '86, in '87? 

 Have you got any papers you want to show 

 me that arbitration was commencing, people 

 were looking for arbitrators and reviewing? 

 Nothing happened. I think candor on the 

 part of your client is, Nothing happened in 

 '85, '86, '87, so we sent the default in '88. 

 MS. ROBERTO: I don't dispute that. I have nothing to 

 show you otherwise. 
nine years after Kahle missed its first payment, on September 28, 

1993, the Fund filed this action seeking payment of the unpaid 

balance of Kahle's withdrawal liability. The district court 

granted Kahle's motion for summary judgment on the basis that the 

Fund's action was barred by the six year statute of limitations 

period in 29 U.S.C. § 1451(f)(1). 

II. 

 The Fund contends that this action is not barred by the 

six-year statute of limitations. It argues that its claim for the 

unpaid balance did not accrue until it gave Kahle notice on August 

9, 1988 that if all past-due payments were not made within 60 

days, it would file an action for the total well-drained 

liability. According to the Fund, 

there are two (2) types of accrual dates for 

collection of withdrawal liability 

assessment. One occurs when an installment 

payment is omitted. At that point the 

pension fund has the right to bring suit for 

that one (1) payment. The second is when the 

pension fund exercises its option to 

accelerate the outstanding balance after the 

employers failure to cure a default. If the 

employer does not meet the pension fund's 

demand for the entire outstanding balance, a 

cause of action accrues for the total amount. 

Appellant's Opening Br. at 21. 

 The Fund asserts that the district court erred by 

failing to distinguish between the accrual of 

a cause of action for one installment payment 

and for the total outstanding amount of the 

assessment. Although the district court 

stated that it was following Sandoz when it 

held that the Pension Fund's cause of action 

triggering the commencement of the MPPAA's 
six-year statute of limitations accrued in 

October 1984 or December 1984, it actually 

followed the Court of Appeals for the Seventh 

Circuit's decision in Central States Pension 

Fund v. Navco, 3 F.3d 167 (7th Cir. 1993), 

cert. denied, 114 S. Ct. 1062 (1994). 

Appellant's Opening Br. at 23-24. 

 The Fund's reliance on Joyce v. Clyde Sandoz Masonry, 871 

F.2d 1119 (D.C. Cir.), cert. denied, 493 U.S. 918 (1989), is 

misplaced. There is no intercircuit conflict on the issue 

presented in this case. A careful reading of the Navco and Sandoz

decisions demonstrates that these cases do not support the Fund's 

and the majority's interpretation of the applicable statutes. 

 In Navco, two pension funds, the Central States, Southeast 

and Southwest Areas Pension Fund ("Teamsters Fund") and the 

Chicago Truck Drivers, Helpers and Warehouse Workers Union Pension 

Fund ("Independent Fund"), filed actions against Navco for 

withdrawal liability payments. Navco, 3 F.3d at 169. The 

employers had completely withdrawn from their multiemployer 

pension funds in January 1984. Id. 

 On April 6, 1984, the Teamsters Fund sent a formal notice of 

withdrawal liability and a demand for payment to the employers. 

Id. at 170. The employers were given sixty days to make the 

demanded payment. Id. No payments were made in response to the 

demand. Id. More than seven years after its demand, on May 1, 

1991, the Teamsters Fund filed its cause of action. Id. 

 The district court granted the defendants' motion for 

summary judgment. Id. The court held that the action was barred 
by the six-year statute of limitations, which began to accrue on 

June 5, 1984, when the demanded payment became delinquent. Id. 

On appeal, the Teamsters Fund argued that the district court erred 

when it held that the claim began to accrue when the payment 

became overdue. Id. 

 On June 19, 1984, the Independent Fund sent the employers a 

notice, payment schedule, and demand for payment as a result of 

their withdrawal from the pension fund. Id. Pursuant to the 

schedule, quarterly payments were to begin on July 1, 1984, and 

continue until July 1, 1986. Id. The employers never made any 

payments. Id. Nearly eight years after its demand, on March 13, 

1992, the Independent Fund filed its cause of action. Id. 

 The district court granted the employers' motion for summary 

judgment. Id. The court held that the Independent Fund's action 

was barred by the statute of limitations because the claim began 

to accrue on July 1, 1984. Id. The district court rejected the 

Independent Fund's argument that a claim accrues for the unpaid 

balance each time the employer fails to make a scheduled quarterly 

payment. Id. On appeal, the Independent Fund asserted that the 

cause of action began to accrue when it learned the identity of 

persons within the control group who had the ability to pay the 

withdrawal liability, as opposed to when the payment became 

overdue. Id. The Independent Fund also reiterated its argument 

that a cause of action accrued each time the employer failed to 

make a required quarterly payment. Id. at 172. 
 The Seventh Circuit in Navco consolidated the appeals of the 

Teamsters Fund and the Independent Fund. Id. at 170. The Navco

court affirmed the grant of summary judgment by both of the 

district courts. The Seventh Circuit held that "the claim [for an 

employer's withdrawal liability] accrues as soon as payment 

becomes overdue." Id. at 172. Because the funds filed their 

actions more than six years from the date when the employers 

failed to make their scheduled payments, the Seventh Circuit held 

that the actions were barred by the statute of limitations. Id. 

Additionally, the Navco court rejected the Independent Fund's 

contention that a claim begins to accrue each time an employer 

fails to make a scheduled payment. Id. The court held that the 

"pension fund had only one claim against the employer . . . : the 

amount of withdrawal liability. . . . [T]he whole amount [of 

withdrawal liability] is presumptively due at the outset." Id. 

 In Sandoz, the trustee of the Bricklayers and Trowel Trades 

International Pension Fund filed an action to collect the 

accelerated balance of the employer's pension withdrawal 

liability. Sandoz, 871 F.2d at 1121. Between 1977 and June 30, 

1981, Sandoz made payments to the pension fund. Id. On July 16, 

1981, a new collective bargaining agreement was reached between 

Sandoz and its employees. Id. The agreement did not include an 

obligation by Sandoz to continue making payments to the pension 

fund. Id. Sandoz made a pension fund payment for work performed 
by its employees from July 1 until July 15, 1981. Id. Sandoz 

made no further payments. Id. 

 On July 13, 1987, the fund sent Sandoz a notice of 

withdrawal liability along with a payment schedule. Id. On the 

same day, the fund filed its action. Id. On October 8, 1987, the 

fund notified Sandoz that it failed to make its scheduled payment 

and would be in default unless it paid within sixty days. Id. 

Sandoz did not make any payments in response to the fund's letter. 

Id. 

 The district court dismissed the fund's action because it 

was not filed within the six year statute of limitations period. 

Id. The district court ruled that the cause of action began to 

accrue when the employer completely withdrew from the plan on June 

30, 1981. Id. On appeal, the fund asserted that the cause of 

action began to accrue when the employer failed to make a 

scheduled payment after receiving a demand. Id. at 1122. 

 The D.C. Circuit in Sandoz vacated the judgment of the 

district court. Id. at 1127. The court held that 

the [pension] plan is "adversely affected" 

(and thus that a "cause of action" arises) 

when the plan has not received payments which 

are due and owing. The language of the 

statute points firmly in the direction of the 

conclusion that Sandoz's uncured failure to 

pay the sum demanded adversely affected the 

plan giving rise to a cause of action. 

Id. at 1122. The D.C. Circuit rejected the district court's 

determination that the cause of action begins to accrue on the 
day the employer completely withdraws from the fund. Id. at 

1123. 

 Thus, both the Seventh Circuit in Navco and the D.C. Circuit 

in Sandoz each concluded that a cause of action for withdrawal 

liability payments under the MPPAA begins to accrue when an 

employer fails to make a scheduled payment. Contrary to the 

Fund's position in this matter, there is no conflict between the 

Seventh Circuit and the D.C. Circuit regarding the determination 

as to when a cause of action begins to accrue. The difference 

between Navco and Sandoz is that the Navco court expressly 

rejected an argument which is also raised by the Fund in this 

case, namely, that a cause of action accrues each time an 

employer fails to make a scheduled payment after receiving a 

demand. Navco, 3 F.3d at 172. This issue was not presented to 

the D.C. Circuit in Sandoz. Neither Navco nor Sandoz support the 

Fund's argument in this matter that the statute of limitations 

does not begin to run until six years after the last scheduled 

payment is due. 

 Under the MPPAA, after an employer withdraws from a fund, 

"(1) [a]s soon as practicable after an employer's complete or 

partial withdrawal, the plan sponsor shall--(A) notify the 

employer of--(i) the amount of the liability, and (ii) the 

schedule for liability payments, and (B) demand payment in 

accordance with the schedule." 29 U.S.C. § 1399(b)(1). The 

statute further provides: 
In the event of a default [of a scheduled 

payment], a plan sponsor may require 

immediate payment of the outstanding amount 

of an employer's withdrawal liability, plus 

accrued interest on the total outstanding 

liability from the due date of the first 

payment which was not timely made. For 

purposes of this section, the term "default" 

means-- 

 (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. 

29 U.S.C. § 1399(c)(5). 

 An action under the MPPAA may not be brought more than "6 

years after the date on which the cause of action arose." 29 

U.S.C. § 1451(f)(1). Pursuant to section 1399(c)(5), the cause of 

action for the outstanding amount of an employer's liability 

arises upon the employer's failure to make a scheduled payment. 

See Navco, 3 F.3d at 172 (claim begins to accrue when a scheduled 

payment is overdue); Sandoz, 871 F.2d at 1122 (same). However, a 

pension fund is not permitted to file its action for withdrawal 

liability payment(s) until it has sent an employer the notice 

described in section 1399(c)(5). The notice represents a 

condition precedent which must be satisfied by a fund before it 

may file its cause of action. 

 The MPPAA makes clear that a multiemployer pension fund has 

the option after notifying an employer of a default of (1) filing 
an action for a missed payment in accordance with the schedule 

prepared by the fund after an employer has withdrawn, or (2) 

filing an action for the total amount that is owing in accordance 

with the schedule. A fund has only one claim against an employer. 

It must decide whether to file an action for the missed payment or 

the total withdrawal liability. Navco, 3 F.3d at 172. The fund 

is required to file its action for payment of an employer's 

withdrawal liability within six years of the date when the cause 

of action arose, i.e., the date of the first missed payment. Id. 

This statutory requirement avoids the problem of "improperly 

plac[ing] the running of the limitations period in the control of 

the plaintiff." Board of Trustees of the Constr. Laborers Pension 

Trust v. Thibodo, 34 F.3d 914 (9th Cir. 1994). 

 In Thibodo, the defendant, a construction company, made 

payments to a pension fund until June 15, 1983. Id. at 916. In 

early 1984, the pension fund determined that the company had 

withdrawn from the fund. Id. The fund sent the company an 

assessment along with a payment schedule. Id. However, the 

company believed that the fund had erroneously determined that it 

had withdrawn, and the fund ultimately agreed. Id. 

 By the spring of 1985, the company had rehired numerous 

construction workers. The pension fund subsequently reinstated 

the company's withdrawal liability assessment. Id. The company 

did not make any pension fund payments. Id. In April 1986, the 

fund sent the company a written notification indicating that the 
company had sixty days to begin making payments. Id. The company 

never made any payments in response to the fund's notification. 

Id. On June 20, 1989, the fund filed an action for withdrawal 

liability payments. Id. 

 The district court stayed the proceedings while the parties 

submitted the matter to an arbitrator. Id. The arbitrator 

determined that the company had withdrawn from the pension plan on 

June 15, 1983 and that Thibodo, the company's sole shareholder, 

was personally liable for the company's withdrawal liability. Id. 

Thibodo argued before the district court that the fund had filed 

its action more than six years after the cause of action accrued 

and was therefore barred by the statute of limitations. Id. The 

district court agreed with Thibodo and dismissed the fund's 

action. Id. 

 The Ninth Circuit reversed the judgment of the district 

court. Id. at 918. The court held that the statute of 

limitations under section 1451(f)(1) begins to accrue "from the 

date on which the conditions for complete withdrawal specified in 

§ 1383(b)(2) have been met." Id. at 917. The Ninth Circuit 

recognized that its holding differed from that of the D.C. Circuit 

in Sandoz, which held that the statute of limitations begins to 

accrue when the employer fails to make a scheduled payment after 

receiving a demand from the fund. Id. The Ninth Circuit's 

decision in Thibodo, however, was concerned with discrete 

statutory language used by Congress with reference to withdrawals 
involving the construction industry. Id. Its conclusion that a 

pension fund cannot manipulate the date when a claim begins to 

accrue under the MPPAA, however, is consistent with the holding in 

Navco on this issue. 

III. 

 In this matter, the Fund's cause of action for the balance 

of the withdrawal liability arose on October 1, 1984, when Kahle 

missed a payment after receiving a payment schedule and a 

corresponding demand. See Navco, 3 F.3d at 172 (cause of action 

begins to accrue when a scheduled payment is missed); Sandoz, 871 

F.2d at 1123 ("[T]he failure to pay gives rise to a cause of 

action."). The Fund had six years from October 1, 1984 to 

exercise its option to file an action for the missed payment or 

the total unpaid balance of the employer's withdrawal liability. 

29 U.S.C. § 1451(f)(1). 

 At oral argument, the Fund argued that it was authorized 

under section 1451(f)(1) to file its action six years after the 

employer had failed to make the penultimate payment due on October 

1, 1993. The final payment in this matter was due on January 1, 

1994. The Fund's interpretation of section 1451(f)(1) would 

permit it to wait until the year 2000, approximately sixteen years 

after the first payment was missed, to file its action for the 

unpaid balance. This result would award a pension fund additional 

time to file its action merely because it was dilatory in pursuing 

its claim. See Navco, 3 F.3d at 172 (extending a six year statute 
of limitations under Multiemployer Pension Plan Amendments Act of 

1980 to twenty-six years "is a job best left to magicians"). 

 Such a result is clearly inconsistent with the public policy 

served by statutes of limitations. These statutes are designed 

"to spare the courts from litigation of stale claims, and the 

citizen from being put to his defense after memories have faded, 

witnesses have died or disappeared, and evidence has been lost," 

to put potential defendants "on notice of adverse claims," and "to 

prevent plaintiffs from sleeping on their rights." Sperling v. 

Hoffman-La Roche, Inc., 24 F.3d 463, 471-72 (3d Cir. 1994) 

(internal quotation omitted); see also Navco, 3 F.3d at 172 

("Statutes of limitations serve vital social interests--the usual 

ones of preventing stale claims that may be hard to prove, and 

protecting the interest of potential defendants in knowing their 

liabilities, and in the MPPAA the unusual one of protecting the 

beneficiaries of the fund."). Additionally, permitting a fund to 

choose the triggering date which begins the running of the statute 

of limitations essentially makes the fund's dilatory decision 

unreviewable by a court. 

 The majority has failed to point to any language in the 

MPPAA that supports its conclusion that Congress intended to place 

the running of the statute of limitations in the hands of the 

pension fund. I agree with the majority that the MPPAA gives a 

pension fund the option to file an action for a missed payment or 

an action for the unpaid balance of the employer's liability after 
a default. The fact that Congress gave the pension fund a choice 

as to the remedy it may follow if a payment is missed, however, 

does not affect the six-year statute of limitations. 

 The harm that can flow from delay in filing an action is 

illustrated by the record in this case. The majority states that 

"[t]here is no evidence of further communications, negotiations, 

or arbitration proceedings after December 1984." Majority opinion 

at 11. The explanation for the absence of a record of the actions 

taken by the parties following the Fund's December 21, 1984 notice 

of default is found in the Appellant's Opening Brief. Counsel 

explains throughout his brief that correspondence between the 

parties concerning the employer's withdrawal liability was "not 

available from the Pension Fund's or Fund counsel's files," 

Appellant's Opening Br. at 6 n.2, that "[t]here is no information 

in the Pension Fund's files to indicate course of events before 

default notice," id. at 10 n.3, and further the "Fund's counsel 

did not receive the September 13, 1984 letter." Id. at 5. 

 The Fund's dilatory tactics in this matter have affected its 

own ability to prepare for trial. Moreover, Kahle will now be 

forced to trial more than ten years after the facts that the Fund 

alleges make it liable. Kahle's corporate records, counsel's 

files, and witnesses' memories are subject to the same loss 

already experienced by the Fund. 

IV. 
 This court has explained that the goals of the MPPAA are "to 

protect the interests of participants and beneficiaries in 

financially distressed multiemployer plans and . . . to ensure 

benefit security to plan participants." IUE AFL-CIO Pension Fund 

v. Barker & Williamson, 788 F.2d 118, 127 (3rd Cir. 1986) 

(internal quotation omitted). The majority's interpretation of 

section 1399(c)(5) seriously frustrates Congressional intent. 

 Congress' concern that a pension fund act promptly in 

protecting the integrity of the pension plan is reflected in the 

requirement that the demand for payment of the employer's 

liability after a withdrawal be made "as soon as practicable." 29 

U.S.C. § 1399(b)(1). The majority's conclusion that a fund may 

delay filing an action for the total amount of the outstanding 

liability for up to twenty years is contrary to the expressed 

concern of Congress that a pension fund take timely action to 

resolve a dispute concerning an employer's liability. 

 In construing section 1399(c)(5) to place the running of the 

statute of limitations in the hands of the pension plan, the 

majority would apparently approve of the loss of fourteen years of 

payments owed by the employee to the Fund. The majority's 

construction of the MPPAA is clearly inconsistent with the 

congressional goal of safeguarding the financial integrity of the 

multiemployer plan. The Seventh Circuit's interpretation of 

section 1399(c)(5) in Navco ensures that an employer who misses a 

payment must make up that payment within sixty days of the 
scheduled date, or be subject to an action for the total unpaid 

balance of its withdrawal liability. Had the Fund filed its 

action within six years of the first missed payment in this 

matter, Kahle would have been liable to pay over $270,000. Under 

the majority's view, Kahle will escape payment of over $150,000. 

This will unfairly force the other participants to increase their 

contribution to protect the beneficiaries of the Fund. 

Traditional canons of construction require us to construe a 

statute to avoid a result that defeats congressional intent. 

Adoption of the reasoning in Navco would fully protect the 

interests of the beneficiaries of a pension plan. 

V. 

 The notice requirement in section 1399(c)(5) is solely 

applicable to a cause of action for the total unpaid balance of an 

employer's withdrawal liability. Thus, the Fund's December 21, 

1984 threat to "seek all remedies available to it" could only 

refer to an action for the total unpaid balance. As conceded by 

the Fund, the MPPAA does not require service of a notice of 

default where the pension plan elects to bring an action for a 

misconduct. Appellants Opening Br. at 21. 

 The Fund attempts to escape the consequences of its failure 

to file this action within the six-year limitation period by 

arguing that the notice of default it sent to Kahle dated December 

21, 1984 was "defective," and therefore did not trigger the 

running of the statute of limitations. Appellant's Opening Br. at 
29. This argument is frivolous. To accelerate payment of the 

outstanding withdrawal liability pursuant to section 1399(c)(5), 

the plan sponsor must give the employer written notification of 

its failure to make any payment when due. The Fund's December 21, 

1984 letter informed Kahle's counsel "that your client is now in 

default in its payments." The letter further advised Kahle that 

unless the default was cured, the Fund would "seek all remedies 

available to it." The December 21, 1984 letter substantially 

complied with the notice of default requirements of section 

1399(c)(5). The running of the statute of limitations for the 

total unpaid balance was therefore triggered by the December 21, 

1984 notice of default. 

VI. 

 The majority finds support for its conclusion that the 

statute of limitations for the total unpaid balance begins to run 

anew from the date of each scheduled payment in the common law of 

contracts. The Seventh Circuit rejected a similar argument in 

Navco: 

The schedule under § 1399(c) . . . is not

contractual; the employer did not assent to a 

longer period for payment and suit. We have 

not seen any case extending the contractual 

approach to the MPPAA, and like the district 

court we believe it would be imprudent to 

adopt a rule that relieves pressure on 

trustees of pension funds to act with 

dispatch. Six years is quite sufficient; the 

trustees may not award themselves more. 

Navco, 3 F.3d 167-68. 
 I would not borrow from the law of contracts to negate the 

intent of Congress that pension funds must act promptly to avoid 

compromising the financial integrity of the pension fund and 

requiring other participants to shoulder the responsibility of 

employers who withdraw. The majority's reliance on the 

arbitrator's decision in Ludington News Co. and Michigan UFCW/Drug 

Employers Pension Fund Workers Union and Drug and Mercantile 

Employee Joint Pension Fund, 9 Employee Benefits Cas. (BNA) 1913 

(1988), to support its contractual theory is questionable. The 

majority states "[a]lthough we recognize that Ludington is without 

precedential effect, it was cited as relevant by another circuit. 

See Joyce v. Clyde Sandoz Masonry, 871 F.2d 1119, 1124 (D.C. 

Cir.), cert. denied, 493 U.S. 918 (1989)." Majority opinion at 

14-15. A careful reading of Sandoz, however, reveals that 

Ludington was not "cited as relevant" for the proposition that a 

new cause of action for the unpaid balance accrues when each 

scheduled payment is due. That issue was not discussed by the 

court in Sandoz. Instead, Ludington was cited because it, too, 

concluded that no cause of action arises until the employer 

refuses to meet the demand of the fund. Sandoz, 871 F.2d at 1124. 

As noted above, the analogy to the law of contracts adopted by the 

majority in this matter was expressly rejected by the Seventh 

Circuit. Navco, 3 F.3d at 172-73. 

 CONCLUSION 
 Contrary to the majority's resolution of the issue before 

this court, the MPPAA does not permit a pension fund to file a 

cause of action for the unpaid balance of an employer's withdrawal 

liability six years after the last payment is due, even if no 

payments have been made for up to twenty years. Regrettably, the 

majority has subjected the running of the statute of limitations 

to the whim of the Fund. I find nothing in the law of the Third 

Circuit or any other jurisdiction that supports this extraordinary 

result. Accordingly, I cannot join in the majority's opinion. I 

would affirm the well reasoned judgment of the district court.