partial withdrawal liability, then any employer can insulate itself
from such liability by the simple expedient of adopting such a
method of assigning work. I do not believe that this reflects the
intent of Congress or comports with the purpose of the statute.
Because it is also not required by the language of the statute, I
do not accept this reading.

Nestle objects that the arbitrator employed a nonstatutory
presumption in favor of a partial withdrawal because he found no
evidence that “any particular lane assignment” that went to a
nonunion Nestle employee driver after the closures would have gone
to a covered union driver before. Instead he reasoned that since
the method of assigning work was the same before and after, and
since covered union drivers got some of those lanes before, they
would have continued to get some of those lanes afterwards. As
explained above, ex ante identification of particular lanes that
covered union drivers would have been assigned is neither possible
nor necessary.

Nestle then argues that even if it is legally permissible to
use this form of inference, the conclusion that follows is not that
work was transferred but that it merely continued elsewhere. This
is supposedly because a nonunion employee driver could perfectly
well have driven any given route before the closures as well as
after. This argument not only depends on the fallacy that work

cannot be transferred unless it is identified, it also essentially

-13-


Oconomowoc and St. Joseph “effectively ceased upon the terminals’
closings.” Nestle said that some of the long haul work was
“retained,” and although it stated that this work was not the
“same” as the work formerly handled from the closed terminals,
Nestle’s DeKalb manager admitted at the hearing that there was no
difference. Nestle submitted a revised statement stating that “upon
further review of the facts,” the work had not been transferred.
The MPPAA requires that a company that withdraws from a
multiemployer pension plan covered by ERISA must pay "withdrawal
liability," which is intended to cover that company’s share of the
unfunded vested benefits that exists when it withdraws. 29 U.S.C.
§§ 1381, 1385, 1391. Withdrawal liability is “intended to assure
that departing employers bear their fair share of pension payments,
and do not leave others holding the bag,” Central States, Southeast
and Southwest Areas Pension Fund v. Nitehawk Exp., Inc., 223 F.3d
483, 487 (7th Cir. 2000), and in particular to avoid “a domino
effect that, ‘much like a bank run,’ could leave the [Fund] unable
to pay its vested obligations,” Central States, Southeast and
Southwest Areas Pension Fund v. Hunt Truck Lines, Inc., 204 F.3d
736, 739 (7th Cir. 2000). Withdrawal liability may be assessed if
the employer makes a complete withdrawal from an ERISA plan, 29
U.S.C. § 1383, or if there is a partial withdrawal, § 1385. This
is a partial withdrawal case. The relevant provision at issue here

is § 1385(b) (2) (A) (i), which states that withdrawal liability


The principal issue is the meaning of “transfer” in § 1385
(b) (2) (A) (i). The parties say that this is a matter of first
impression, and I cannot find any federal case law interpreting the
ERISA provision at issue, although there are several Opinion
Letters by the Pension Benefit Guaranty Corporation (“PBGC”), the
agency delegated the authority to administer the MPPAA, to which
the arbitrator and the parties refer. I must therefore proceed
first from general principles of statutory interpretation. Here the
basic rule is that plain statutory language governs, see Olander v.
Bucyrus-Erie Co., 187 F.3d 599, 604 (7th Cir. 1999),* a principle
rightly insisted upon by Nestle and the Fund.

Nestle’s central argument is as follows. First, a PBCG
Opinion Letter 87-17 (Aug. 13, 1986), Def. Ex. 3, says that work
formerly done by pension fund covered employees but taken up by
third parties is not “transfer[red] . . . to another location
within the meaning of [§ 1385(b) (2) (A) (i)],” because the law covers
situations where “work of the same type is continued by the

employer but for which contributions to a plan . .. are no longer

2? See Lexington Ins. Co. v. Rugg & Knopp, 165 F.3d 1087, 1091
(7th Cir. 1999) (plain meaning governs in statutory
interpretation). The extremely unusual “exception to the plain
meaning rule [is] the ‘rare case[] {in which] the literal
application of a statute will produce a result demonstrably at odds
with the intentions of its drafters.’” Pittway Corp. v. United
States, 102 F.3d 932, 936 (7th Cir. 1996) (citation omitted).
Neither party argues that that a literal reading would “‘lead to an
absurd result or thwart the purpose of the overall statutory
scheme.’” Castellon-Contreras v. INS, 45 F.3d 149, 153 (7th Cir.
1995) (citation omitted).

-9-


by the arbitrator were correct.” 29 U.S.C. § 1401(c); Chicago Truck
Drivers, Helpers and Warehouse Workers Union (Indep.) Pension Fund
v. Louis Zahn Drug Co., 890 F.2d 1405, 1409 7th Cir. 1989). Mixed
questions of law and fact I review for clear error. Nitehawk Exp.,
223 F.3d at 488. The Seventh Circuit has acknowledged the
“practical truth that the decision to label an issue a ‘question of
law,’ a ‘question of fact,’ or a ‘mixed question of law and fact’
. . [may] turn[] on a determination that, as a matter of the
sound administration of justice, one judicial actor is better
positioned than another to decide the issue in question.” Louis
Zahn Drug Co., 890 F.2d at 1410. It holds that “when the issue is
one that requires either fact-finding expertise or where the
arbitrator's special expertise in the area of pension law can
contribute significantly to the decision, substantial deference
ought to be given to the decision of the arbitrator.” Id. at 1411.
Here, Nestle does not dispute that if “transfer” means what

the Fund says it does, then the arbitrator would have correctly
applied the law to the facts. Nestle argues instead that the
arbitrator erred in understanding the meaning of the term
“transfer” in the statute, while the Fund argues that he got it
right. We do not, therefore, have a mixed question of fact and law,
concerning the application of undisputed law to a set of facts, id.
at 1409 (quoting Pullman~Standard v. Swint, 456 U.S. 273, 289 n.19

(1982) (“[M]ixed questions of law and fact [are] questions in which

-6-


arises when the employer “transfers . . . to another location” work
that was performed under a collective bargaining agreement that has
been, so far as the transferred work goes, terminated.! The
question in this case is whether the covered unionized work that
Teamster drivers formerly did for Nestle out of St. Joseph and
Oconomowoc has been “transferred” within the meaning of § 1385.
The parties debate, among other things, the standard of
review. Under ERISA, my review of an arbitrator’s conclusions of
law is de novo. Central States, Southeast and Southwest Areas
Pension Fund v. Midwest Motor Exp., Inc., 181 F.3d 799, 804 (7th
Cir. 1999); Trustees of Iron Workers Local 473 Pension Trust v.
Allied Products Corp., 872 F.2d 208, 212 (7th Cir. 1989) (Courts
may “fully review an arbitrator's legal determinations.”). By
statute, my review of an arbitrator’s factual findings is highly
deferential: “there shall be a presumption, rebuttable only by a

clear preponderance of the evidence, that the findings of fact made

+ fhe provision reads in full:

There is a partial cessation of the employer's contribution
obligation for the plan year if, during such year--(i) the
employer permanently ceases to have an obligation to
contribute under one or more but fewer than all collective
bargaining agreements under which the employer has been
obligated to contribute under the plan but continues to
perform work in the jurisdiction of the collective bargaining
agreement of the type for which contributions were previously
required or transfers such work to another location . . .

29 U.S.C. § 1385 (b) (2) (A) (i).


common carriers, independent operators, and other company drivers.”
Whether that constitutes a transfer within the meaning of the law
is a further question.

The Fund also contends that it was an admission that the work
was transferred when Nestle’s in-house counsel checked the “yes”
box in answer to the question whether the work had been transferred
in its Statements of Business Affairs in 1996, Def. Bx. B at 6. The
arbitrator did not in fact treat this statement as an admission,
although he did imply, without expressly so finding, that the facts
suggested that Nestle changed its tune on whether the changes in
work involved a transfer when it learned that this would mean
almost a million dollars more in withdrawal liability than it had
originally anticipated. The Fund argues that there is law
suggesting that contemporaneous statements may be more reliable
than post hoc explanations when there is a motive to misrepresent,
see Mutual Life Ins. Co. v. Hillmon, 145 U.S. 285, 295 (1892), but
this case is not apposite, even though Nestle points to no relevant
factual discoveries that induced it to change its mind. Nestle is
right that this is a legal question. One can admit a legal fact,
but if the law plainly indicated that no liability existed, it
would be unjust to hold Nestle to its initial word. Besides, the
Fund would not want employers to routinely deny that they ever
transfer work. Therefore I decline to find that Nestle has admitted

that there was a transfer.


~

Minute Order Form (06/97)

_/A

a

nited States District Court, Northern District of Illinois

ND

Namp/f Assigitnbukdge Elaine E. Bucklo Sitting Judge if Other
‘ov(Magistrate Ju ” than Assigned Judge
ASE nuyebtr 01 C 5081 DATE 5/22/2002
SE Nestle Holdings, et al. vs. Central States, et al.
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
() Oo Filed motion of [ use listing in “Motion” box above.]
(2) oO Brief in support of motion due
(3) 0 Answer brief to motion due. . Reply to answer brief due
(4) oO Ruling/Hearing on set for at
(5) Oo Status hearing[held/continued to] [set for/re-set for] on set for at :
(6) qo Pretrial conference[held/continued to] [set for/re-set for] on set for at :
(7) a] Trial[set for/re-set for] on at
(8) a [Bench/Jury trial] [Hearing] held/continued to at
(9) Oo This case is dismissed [with/without] prejudice and without costs{by/agreement/pursuant to]
CLFRCP4(m) General Rule21 CFRCP41(a)(1) OO FRCP41(a)(2).
ao) of [Other docket entry] Plaintiffs’ motion to modify and vacate in part arbitration award is denied.
The arbitrator was correct to find partial withdrawal liability. Because Nestle does not contest the amount,
the award is affirmed. Enter Memorandum Opinion and Order. Any pending motion in this case is
terminated as moot.
a1) {For further detail see order attached to the original minute order.]
No notices required, advised in open court.
No notices required,
ov | Notices mailed by judge’s staff.
Notified counsel by telephone.
Docketing to mail notices.
v¥ | Mail AO 450 form.
Copy to judge/magistrate judge.
courtroom
MP) deputy’s
initials : , ——
Date/time received in”, | -J
central Clerk’s Office naling deputy inithls



reasoning. This is the assumption that a transfer must involve a
previously identifiable thing transferred. The statute says no such
thing. The arbitrator noted that the work was assigned in the same
way before and after the closures, that is, on the basis of
efficiency, driver availability, location, and remaining regulated
hours of the drivers. Therefore, the arbitrator correctly found,
“whether the work was identified at all seems of little relevance.

Identification is possible only by use of hindsight to see
which class of drivers received the assignment to haul freight in
a particular lane.”

Nestle suggests that this violates the grammar of the word
“transfer,” but English syntax does not involve the ontological
commitment to a pre-existing entity that must already somehow be if
it is to be transferred. “Work” is an abstract relation
identifiable only functionally (who has done what) and not a
material substance that has an independent existence or that can be
moved from place to place like a ball. The arbitrator was certainly
correct that nothing in the law or in the logic or grammar of the
word “transfer” compels Nestle’s preferred reading in this context.

In addition, the Fund is right to point out that there is a
tension between Nestle’s argument that before the closing it was
not possible to identify what work fell under the union contract,
but it was possible to say that after the closures that the

remaining work was all identifiably outside the jurisdiction of the

-11-


required.” The PBGC understood “work of the same type” to mean in
part work done “at another of its own locations.” Therefore I am to
consider only the Nestle employee drivers and not the independent
owner operators. I agree with the PBGC’s construction.

Second, “transfer” is a transitive verb that takes an object:
someone transfers something. It means “to convey [something] from
one person, place, or situation to another.” Webster’s Ninth New
Collegiate Dictionary 1253 (1990). Here, Nestle says, there was no
identifiable object. This is because the work “in the jurisdiction
of. the collective bargaining agreement of the type for which
contributions were previously required,” in the language of the
statute, was defined by the domicile of the drivers doing the work.
With regard to the long distance lanes, there was no way to
identify any work in those jurisdictions once the St. Joseph and
Oconomowoc terminals were closed. Moreover, Nestle says, nothing
was conveyed. After the closures, the local lanes were no longer
driven by any Nestle employees, and that work was being done by
third party outsiders, and so, under the PBGC Opinion Letter, it
did not involve a transfer. And the long distance lanes driven by
Nestle employees did not increase in the number of runs after the
closures; therefore, Nestle contends, there was no transfer here
either.

This is a nice piece of statutory interpretation. However, the

arbitrator correctly located the main problem with Nestle’s

-10-


the historical facts are admitted or established, the rule of law
is undisputed, and the issue is whether the facts satisfy the
statutory standard, or to put it another way, whether the rule of
law as applied to the established facts is or is not violated.”).
We have a pure question of law to be reviewed de novo. I bear in
mind that the arbitrator has special expertise in the area of
pension law, but I am as well able to interpret statutory language
as he, and I do so using plenary review.

I address two preliminary matters. First, Nestle asks that I
find the arbitrator erred in refusing to strike certain evidence as
ixrelevant. To the extent that certain testimony might have been
irrelevant but was not relied upon, the arbitrator did not err in
admitting. it to the record. Insofar as the arbitrator relied (or I
rely) on any of this evidence, notably that concerning whom Nestle
assigned to which lanes after the closures, this was because it was
thought to be relevant, as explained in the appropriate place.

Second, the Fund argues that I should treat certain of
Nestle’s earlier statements as admissions that the work was
transferred within the meaning of the statute. In particular the
Fund argues that the arbitrator treated the notes of John Holloway,
Vice President for Labor Relations, made in May 1995, as
“conclusive” on this question. But the arbitrator wrote that the
notes in question “conclusively show that [Nestle] knew that the

over-the-road work of the [affected union] drivers would go to


In June and September of 1995, these two terminals were closed
and the union contracts terminated pursuant to an agreement with
the Teamsters. The drivers affected were let go. Afterwards, the
local runs were performed by common carriers, owner operators, or
Nestle employee drivers, all nonunion. The assignments to these
lanes were made on the same randomly selected basis that the
assignments to the over the road lanes had been before the union
contracts were terminated and the terminals closed. The only
difference was that there were no union drivers in the pool.
Nestle’s records showed that covered union drivers drove the
Oconomowoc to Waverly, Towa, lane in the second quarter of 1995,
but noncovered nonunion drivers drove this lane during the first
quarter of 1996, and that covered union drivers drove the St.
Joseph-DeKalb, Illinois route in the second quarter of 1995; 55% of
the drivers on that route in that period required Fund
contributions; in the preceding quarter, it was 69%. The figures
for Oconomowoc-DeKalb were similar. After September 1995, of
course, no union drivers made these runs.

Nestle filled out a form sent to it by the Fund answering
“yes” to the question whether “bargaining unit work was
transferred.” Apparently Nestle expected withdrawal liability, but
in the amount of perhaps $300,000. When the Fund assessed
$1,257,598.41 in March 1997, Nestle submitted a “request for

review,” asserting that “the short haul operations” out of


abolishes partial withdrawal liability on transfer grounds. In
fact, the arbitrator was correct to find that there had been a
transfer because, as he said, first, there were lanes driven by
covered union drivers before the closures and none afterwards, and
second, the method of assigning them was one that would have
assigned some of those jobs to covered union drivers, although it
was not possible to say which ones in advance.

Finally, Nestle argues that § 1385(b) (2) (A) (i) requires “at a
minimum” evidence that Nestle assigned nonunion Nestle employee
drivers more lanes after the closures than they were assigned
before to support a finding of transfer. However, this requirement
is not found in the text of the statute. The PBGC has indicated
that there is “no quantitative test with regard to the statutory
requirement of a transfer,” Op. Letter 83-20 (Sept. 2, 1983, Def.
Ex. 5; on the contrary, if “any of the work is shifted to a
location where contributions are not required to the plan, then a
partial cessation of the employer’s obligations will occur.” Id.
(emphasis added). Nestle attempts to distinguish this opinion
letter by suggesting that it “assumes the work performed at the
closed facilities was shifted to other facilities and assumes no
difficulty in identifying the work previously performed at the
closed location.” The first claim is wrong: the PBGC is setting

criteria for what counts as a transfer. The second claim is

-14-


Act (“MPPAA”), 29 U.S.C. § 1385(b) (2) (A) (i). Nestle paid but
demanded arbitration, arguing that as a matter of law the work was
not “transferred,” and so the imposition of withdrawal liability
was unjustified. The arbitrator disagreed, and Nestle appeals. I
affirm.

The arbitrator made the following determinations of fact,
which I must accept unless clearly erroneous. Nestle moves its
products in part by truck, about 80% by common carrier and 20%
through the Nestle Transportation Company, which in mid-1995 had
roughly 275 owner operator drivers and slightly over 200 employee
drivers, some of whom were represented by the Teamsters. Local
Union 460 represented eight drivers at the Nestle Terminal in St.
Joseph, Missouri, and Local Union 695 represented three drivers at
the Nestle terminal in Oconomowoc, Wisconsin. Both contracts
required that Nestle make pension contributions to the Fund. Three
of these St. Joseph and two of the Oconomowoc union drivers drove
“local lanes,” and the other union drivers drove “over-the-road”
lanes. In practice, the local lanes were operated exclusively by
covered union drivers, and the over-the-road lanes were shared with
nonunion drivers who were not covered. All classes of drivers drove
over the road lanes on a randomly selected basis depending on
factors such as the availability or location of the driver or his

hours driven under government regulations


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

NESTLE HOLDINGS, INC. and
NESTLE TRANSPORTATION COMPANY,

Plaintiffs,

y. No. 01 C 5081

CENTRAL STATES, SOUTHEAST AND
SOUTHWEST AREAS PENSION FUND,

Defendant.

MEMORANDUM OPINION AND ORDER

More than a million dollars at issue in this case depends on
the meaning of the word “transfer.” Nestle Transportation Company
ships the products of Nestle Holding Companies (collectively
“Nestle”) by truck. In 1995, it partially withdrew from two
collective bargaining agreements with the Union Locals of the
International Brotherhood of Teamsters (the “Teamsters”), closing
two shipping terminals and letting go the Fund-covered union
drivers who had worked under the CBAs. The local runs over the same
road lanes that had been driven by covered unionized drivers were
then performed by nonunion common carriers, owner operators, or
Nestle employees, but Nestle made no contributions to the Central
States, States, Southeast and Southwest Areas Pension Fund (the
“Fund”) for these nonunion drivers, who were not covered by the
Fund. The Fund assessed almost $1.3 million in ERISA partial

withdrawal liability under the Multiemployer Pension Plan Amendment


former contract, and so had not been transferred from covered union
work. Nestle is trying to have it both ways. The work was assigned
in the same manner and was not essentially different in character,
so it was either identifiable (post hoc or ex ante) both before and
after the closures or neither before nor after.

Finally, Nestle’s argument that the work was not identifiable
because it was defined by the jurisdictions of the former contracts
would seem to prove too much. If Nestle means that because the
statutory language “such work” refers to “work in the jurisdiction
of the collective bargaining agreement,” as defined by the domicile
of the affected drivers, but there was no such work after the
collective bargaining agreement was affected, then the statute
would be directly self-defeating: there could never be partial
withdrawal liability under this section because the termination of
the contractual obligation which is the precondition of such
liability would destroy the ability to identify the work
purportedly transferred.

If, somewhat more plausibly, Nestle’s point is that work
assigned by this method is not identifiable ex ante, that is
correct, in the sense that because the assignment is random, or in
any case depends on contingent factors not otherwise than merely
statistically predictable, one could not say before the assignments
were actually made which work would go to a covered union driver.

However this also proves too much: if that is a reason to deny

-12-


irrelevant. However the work is identified, the shifting of any
quantity of it is enough to trigger partial withdrawal liability.

Here the Fund contends that historical patterns show that over
seven quarters from 1994-95, covered union drivers averaged 8.75%
of the Oconomowoc-DeKalb lane, and the arbitrator found similar
results on the other lanes. It is reasonable to infer that there
would have been about as much work assigned to covered union
drivers in the period afterwards had the CBAs not been terminated.
That work was taken up in part by noncovered nonunion Nestle
employees. There was a transfer.

That being the case, the arbitrator was correct to find
partial withdrawal liability. Because Nestle does not contest the
amount, the award is AFFIRMED.

ENTER ORDER:

Elaine E. Bucklo
United States District Judge

Dated: May, 2002

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