UNITED STATES DISTRICT COURT ECF Case

SOUTHERN DISTRICT OF NEW YORK

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ADRIAN HUFF, as Chairman of the Board of Trustees

of TEAMSTERS LOCAL 445 FREIGHT DIVISION

PENSION FUND,

 Plaintiff, 

- against -

MID-HUDSON STEEL CORP., GRAMMAR,

DEMPSEY & HUDSON, INC., BRIDGEPORT STEEL

CO., BUELL SPECIALTY STEEL CO., PABRICO

STEEL FABRICATORS INC., ZINC CONSTRUCTION

CORP., and AIROTRAX, INC.,

Defendants.

Civil Action No. 07 Civ. 5926

(CLB)(MDF)

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_____________________________________________________________________

MEMORANDUM OF LAW IN REPLY TO OPPOSITION TO

PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

_____________________________________________________________________

Sapir & Frumkin LLP

Attorneys for Plaintiff, Adrian Huff, as

Chairman of the Board of Trustees of

Teamsters Local 445 Freight Division

Pension Fund

399 Knollwood Road, Suite 310

White Plains, New York 10603

(914) 328-0366

On the Brief:

William D. Frumkin, Esq.

Scott R. Abraham, Esq.

Case 7:07-cv-05926-CS Document 20 Filed 07/22/2008 Page 1 of 12
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TABLE OF CONTENTS

PRELIMINARY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

POINT I. DEFENDANTS FAILED TO PROPERLY DEMAND ARBITRATION AS

MANDATED BY THE MULTIEMPLOYER PENSION PLAN AMENDMENTS ACT ......1

A. Defendants’ Letter To Plaintiff’s Counsel Was Insufficient As A Demand For

Arbitration Under The Multiemployer Pension Plan Amendments Act ........1

B. Plaintiff Properly Made A Demand For The Acceleration Of The Balance Of

Withdrawal Liability Payments After The Protected Arbitration And Review

Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

POINT II. DEFENDANTS ARE UNDER COMMON CONTROL AND ARE JOINTLY

AND SEVERALLY LIABLE FOR WITHDRAWAL LIABILITY PAYMENTS ...........7

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

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PRELIMINARY STATEMENT

This Memorandum of Law is submitted in Reply to Defendants’ Memorandum of Law in

Opposition to Plaintiff’s Motion for Summary Judgment. 

STATEMENT OF FACTS

For a full recitation of the facts relevant to the instant motion, please refer to Plaintiff’s

Memorandum of Law in Support of Plaintiff’s Motion for Summary Judgment.

POINT I

DEFENDANTS FAILED TO PROPERLY 

DEMAND ARBITRATION AS MANDATED BY THE 

MULTIEMPLOYER PENSION PLAN AMENDMENTS ACT

A. Defendants’ Letter To Plaintiff’s Counsel Was Insufficient As A Demand For

Arbitration Under The Multiemployer Pension Plan Amendments Act 

While Plaintiff does not dispute that it received a letter from Defendants’ counsel, dated

March 15, 2005, requesting “that this matter be arbitrated to determine the actual amount of

liability,” Defendants’ letter was wholly insufficient as a demand for arbitration under the

Multiemployer Pension Plan Amendments Act (1980) (“MPPAA”). Any arbitration concerning the

MPPAA must be conducted in accordance with the Pension Benefit Guaranty Corporation (PBGC)

rules. ERISA § 4221(a)(2), 29 U.S.C. § 1401(a)(2). The PBGC allows the use of the American

Arbitration Association (AAA) as an alternative procedure to the PBGC and most MPPAA

arbitrations done to date have been conducted in accordance with the AAA rules. 50 Fed.Reg.

34,679 (Sept. 19, 1985); 51 Fed.Reg. 22,585 (June 20, 1986). 

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ERISA requires that disputes regarding withdrawal liability be resolved through arbitration.

ERISA § 4221, [29 U.S.C. § 1401]. Section 4221(a)(1) provides as follows:

(1) Any dispute between an employer and the plan sponsor of a multiemployer plan

concerning a determination made under sections 4201 through 4219 [29 USCS §§

1381-1399] shall be resolved through arbitration. Either party may initiate the arbitration

proceeding within a 60-day period after the earlier of--

(A) the date of notification to the employer under section 4219(b)(2)(B) [29 USCS

§ 1399(b)(2)(B)], or

(B) 120 days after the date of the employer's request under section 4219(b)(2)(A) [29

USCS § 1399(b)(2)(A)].

The parties may jointly initiate arbitration within the 180-day period after the date of the

plan sponsor's demand under section 4219(b)(1) [29 USCS § 1399(b)(1)].

ERISA § 4221(a)(1), [29 U.S.C. § 1401(a)(1)].

According to the American Arbitration Association’s Multiemployer Pension Plan

Arbitration Rules for Withdrawal Liability Disputes, arbitration is initiated when “(i) the initiating

party gives notice to the other party of its intention to arbitrate (Demand) . . ., and (ii) files at any

Regional Office of the AAA two (2) copies of said notice, together with the appropriate

administrative fee as provided in the Administrative Fee Schedule.” Pension Plan Arbitration Rules

for Withdrawal Liability Disputes, at § 7(a), available at http://www.adr.org/sp.asp?id=22108.

Failure to demand arbitration timely results in a waiver of arbitration, in which case “the

amounts demanded by the plan sponsor . . . shall be due and owing on the schedule set forth by the

plan sponsor.” Bowers v. Compania Peruanade Vapores, S.A., 689 F. Supp. 215, 219 (S.D.N.Y.

1988)(internal quotation marks omitted); see also Bowers v. Greenpoint Warehousing &

Distribution Servs., Inc., No. 91 Civ. 3784, 1992 U.S. Dist. LEXIS 6599, at *4 (S.D.N.Y.

1992)(“Failure to initiate arbitration within the statutory time period operates as a waiver of

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arbitration, thereby fixing the withdrawal liability and foreclosing any challenge to its

imposition.”)(citing ILGWU Nat'l Ret. Fund Uv. Levy Bros. Frocks, Inc., 846 F.2d 879, 881-82, 887

(2d Cir. 1988)); Rao v. Prest Metals, 149 F. Supp. 2d 1, 11 (E.D.N.Y. 2001) (Employer “waived its

right to challenge the assessment of withdrawal liability” by failing “to request arbitration in a

timely fashion”).

Even conceding that Mid-Hudson’s March 15, 2005 letter constituted “notice” to the Plaintiff

of its intention to arbitrate, Mid-Hudson does not claim nor can it show that it filed at any Regional

Office of the AAA two (2) copies of said notice, together with the appropriate administrative fee as

provided in the Administrative Fee Schedule within the statute of limitations to demand arbitration.

Thus, Mid-Hudson failed to properly demand arbitration within the guidelines of the American

Arbitration Association's Multi-employer Pension Plan Arbitration Rules for Withdrawal Liability

Disputes. Mid-Hudson’s failure to initiate arbitration within the statutory time period operates as

a waiver of arbitration, thereby fixing the withdrawal liability and foreclosing any challenge to its

imposition. See Bowers supra., at *4 (S.D.N.Y. 1992).

Notwithstanding the fact that Defendant Mid-Hudson’s March 15, 2005 letter did not serve

as a proper demand for a review of the Fund’s initial determination of withdrawal liability, Plaintiff

sent Defendant Mid-Hudson a notification of its review under section 4219(b)(2)(B) [29 USCS §

1399(b)(2)(B)], dated August 4, 2005. Affidavit of William D. Frumkin, Esq. In Support of

Plaintiff’s Motion for Summary Judgment, Exh. 2. Defendants were required to demand arbitration,

if at all, within sixty (60) days of this notification. No other demands for arbitration were received

thereafter, nor did Defendants file a demand for arbitration with AAA or PBGC within 60 days of

receiving the notification. Therefore, a demand for arbitration was not timely made within the time

limit prescribed by ERISA § 4221, after Defendants received a notification of the results of the

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review. 

In National Pension Plan of the UNITE HERE Workers Pension Fund v. Westchester Lace

& Textiles, Inc., 2006 U.S. Dist. LEXIS 49845 (S.D.N.Y. July 21, 2006), wherein Mr. McMurdy

represented the defendant employers, The Honorable Robert P. Patterson, Jr., in granting plaintiff’s

motion for summary judgment and denying defendant employers’ motion to vacate an arbitration

decision, held that three (3) letters sent by defendant employers’ counsel, Mr. McMurdy, to the

plaintiff were insufficient as a demand for arbitration. Critically, these three letters included phrases

such as, “[Westchester Lace would] evaluate the appropriateness of any future action, including, but

not limited to, a possible request for arbitration,” Id. at 17; “[p]ursuant to Section 4221(a) of the

Employee Retirement Income Security Act, Westchester Lace requests arbitration with respect to

the alleged withdrawal liability,” Id. at 19; and “[Westchester Lace requests] arbitration of the

determination of the plan that the requested information is reasonable and necessary pursuant to

Section 4221 of ERISA,” Id. at 20. Judge Patterson held that the defendant employer had not

complied with the provisions of ERISA 4219(b)(2)(A), and thus had not tolled the statute of

limitations with respect to the time within which defendant could initiate arbitration. Id. at 24.

Furthermore, Judge Patterson held that “though Defendants seek a determination from this Court

that the Fund Manager's determination to require immediate payment pursuant to ERISA §

4219(c)(5) was unreasonable, ERISA provides that disputes over withdrawal liability be resolved

through arbitration. Section 4221(a)(1) of ERISA, [29 U.S.C. § 1401(a)(1)], requires that “[a]ny

dispute between an employer and the plan sponsor of a multiemployer plan concerning a

determination made under sections 4201 through 4219 [29 USCS §§ 1381-1399] shall be resolved

through arbitration.” By failing to timely initiate arbitration according to ERISA’s provisions,

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Defendants waived their right to arbitrate the withdrawal liability assessment. See Bowers v.

Compania Peruana., supra, 689 F. Supp. at 219; Bowers v. Greenpoint Warehousing, supra, 1992

U.S. Dist. LEXIS 6599, at *4; Rao v. Prest Metals, supra, 149 F. Supp. 2d at 11.” Id. at 30.

Nothing contained in Defendant Mid-Hudson’s March 15, 2005 letter to Plaintiff’s counsel

requested that the plan sponsor review any specific matter relating to the determination of MidHudson’s liability and the schedule of payments, the letter failed to identify any inaccuracy in the

determination of the amount of the unfunded vested benefits allocated to Mid-HudSon, and the letter

did not furnish additional relevant information to Plaintiff. See ERISA § 4219(b)(2)(A), [29 U.S.C.

§ 1399(b)(2)(A)]. Therefore, the March 15, 2005 letter did not toll the statute of limitations with

respect to the time within which Defendants could initiate arbitration. Id. at 24.

B. Plaintiff Properly Made A Demand For The Acceleration Of The Balance Of

Withdrawal Liability Payments After The Protected Arbitration And Review

Period

Defendants argue that the PBGC 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. This argument is misplaced and

entirely without merit. Based upon the foregoing discussion, Defendants failed to take any actions

that would either properly initiate a demand for arbitration or request an employer review, and

therefore, Defendants’ argument that Plaintiff improperly made a demand for the acceleration of

withdrawal liability payments during the protected arbitration or review period is completely

unfounded. However, if the Court were to accept as true that Defendant Mid-Hudson’s March 15,

2005 letter to Plaintiff’s counsel properly served as a request for the plan sponsor to conduct a

review of its determination, the demand for acceleration of withdrawal liability payments was not

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made until well after the review period had concluded. 

Defendants’ counsel’s March 15, 2005 letter to Plaintiff’s counsel states: “...we believe that

the Fund has improperly calculated the claimed liability and request that the calculations be

verified.” Affidavit of Keith McMurdy, at ¶ 4. On or about June 1, 2005, Defendants made a further

request for information regarding the withdrawal liability assessment and calculations. On or about

August 4, 2005, Plaintiff’s counsel sent Defendants’ counsel a letter that stated, in relevant part:

By letters, dated February 1, 3 and March 28, 2005, Local 445 Pension Fund provided

documents in response to Mid-Hudson Steel Corp.’s (“MSC”) January 3, 2005 request for

information regarding the withdrawal liability assessment against MSC. By e-mail of June

1, 2005, you requested additional information regarding the Fund’s withdrawal liability

assessment against MSC. Local 445 Pension Fund responds to MSC’s requests, as

follows...”

Affidavit of William D. Frumkin, Esq. In Reply To Opposition To Motion For Summary Judgment

(hereinafter Frumkin Reply Aff.”), Exh. 1. Thereafter, all documents not previously provided to

Mid-Hudson were produced, along with an explanation and summary of the plan’s review of its

initial determination of the amount of withdrawal liability of Mid-Hudson. Id. Thus, the review

period, under ERISA § 4219(b)(2)(B), [29 U.S.C. § 1399], had concluded.

Defendant Mid-Hudson ceased making withdrawal liability payments on or about January

5, 2007. Frumkin Aff., Exh. 9. On or about March 8, 2007, approximately a year and a half after

the review period had concluded, Plaintiff sent Defendant’s counsel a letter stating, in relevant part:

“MSC’s failure to pay its withdrawal liability remaining due as prescribed herein shall entitle Local

445 Pension Fund to demand from MSC ‘immediate payment of the outstanding amount of the

withdrawal liability, plus accrued interest on the total outstanding liability from the due date of the

first payment which is untimely paid.’ Frumkin Reply Aff., Exh. 2. Plaintiff sent a similar letter to

Defendant’s counsel on or about April 26, 2007 after Defendant Mid-Hudson had failed to remit

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another monthly payment. Frumkin Reply Aff., Exh. 3. The instant action, seeking judgment

requiring Defendant to make immediate payment of the entire amount of the assessed withdrawal

liability to Plaintiff, was not commenced until on or about June 15, 2007, almost two (2) years after

the review period had concluded. 

Therefore, because the review period had been concluded, and because Defendant MidHudson never made a proper demand for arbitration, any argument by Defendants that a demand for

acceleration of payments was made within the protected arbitration or review period is completely

frivolous and without merit. 

POINT II

DEFENDANTS ARE UNDER COMMON CONTROL AND 

ARE JOINTLY AND SEVERALLY LIABLE FOR 

WITHDRAWAL LIABILITY PAYMENTS

Withdrawal liability extends to any trade or business under “common control” with the

withdrawing employer. Section 4001(b)(1) of ERISA, 29 U.S.C. §§ 1301 (b)(1) provides in

pertinent part: “All employees of trades or businesses (whether or not incorporated) which are under

common control shall be treated as employed by a single employer and all such trades and

businesses as a single employer.” Thus, when withdrawal liability is imposed on an employer, all

other commonly controlled trades or businesses are liable as well. See, e.g., I.L.G.W.U. Nat.

Retirement Fund v. Gramercy Mills, Inc., 1994 U.S. Dist. LEXIS 15312, No. 90 Civ. 3552, 1994

WL 592226, at *1 (S.D.N.Y. Oct 26, 1994); Trustees of the Amalgamated Ins. Fund v. Saltz, 760

F. Supp. 55, 57-58 (S.D.N.Y. 1991). Furthermore, under this section, each trade or business under

common control is jointly and severally liable for the withdrawal liability of the others. See Central

States, Southeast & Southwest Areas Pension Fund v. Ditello, 974 F.2d 887, 889 (7th Cir. 1992).

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It is undisputed that Defendants are under common control with the withdrawing employer.

Defendants do not dispute Plaintiff’s Rule 56.1 Statement, and admit that Grammar, Dempsey &

Hudson (“GDH”) was the owner of Mid-Hudson at all relevant times, that James F. Hudson and J.

Morgan Hudson both have 50% ownership interests in GDH, that Defendants Bridgeport Steel Co.

(“Bridgeport”), Buell Specialty Steel Co. (“Buell”), and Pabrico Steel Fabricators, Inc. (“Pabrico”),

are wholly-owned subsidiaries of GDH, and that James F. Hudson and J. Morgan Hudson are

officers and owners of Defendants Mid-Hudson, GDH, Bridgeport, Buell, and Pabrico. See

Defendants’ Responses to Plaintiffs’ Rule 56.1 Statement of Facts and Rule 56.1 Statement of Facts

in Support of Opposition to Plaintiffs’ Motion for Summary Judgment, at ¶¶ 18-21. Therefore,

GDH, Mid-Hudson, Bridgeport, Buell, and Pabrico are jointly and severally liable for Mid-Hudson’s

remaining withdrawal liability payments.

Defendants’ argument that Mid-Hudson’s liabilities exceeded its assets as of the

commencement of the liquidation or dissolution of the company, and therefore Plaintiff did not make

an accurate calculation of Mid-Hudson’s liability, is irrelevant and without merit. Most importantly,

Defendants would have been required to raise this issue during arbitration. See 29 U.S.C. § 1401.

Since Defendants did not properly demand arbitration under the MPPAA, as previously discussed,

they are precluded from raising this issue now, and the previously assessed withdrawal liability is

fixed and Defendants are foreclosed from bringing any challenge to its imposition. See Bowers

supra., at *4 (S.D.N.Y. 1992). Furthermore, Defendants do not dispute that they are all under

common control, and therefore, are jointly and severally responsible for Mid-Hudson’s withdrawal

liability, despite Mid-Hudson’s financial condition. 

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CONCLUSION

For the foregoing reasons, the Fund is entitled to summary judgment against Mid-Hudson,

GDH, Bridgeport, Buell, and Pabrico for all unpaid interim withdrawal liability payments, the

accelerated total withdrawal liability remaining due, interest on the unpaid amount of interim

withdrawal liability payments and the total withdrawal liability remaining due, liquidated damages,

attorney’s fees and costs, as well as such other and further relief as it may deem just and proper.

Dated: White Plains, New York Respectfully submitted,

July 22, 2008

SAPIR & FRUMKIN LLP

 By: /s/ William D. Frumkin 

William D. Frumkin (WF 2173)

Attorneys for Plaintiff

399 Knollwood Road, Suite 310

White Plains, New York 10603

(914) 328-0366 

F:\APPLICAT\WP\TEAMSTER\Mid Hudson Steel Corp\Litigation\Summary Judgment-Mid Hudson - 06-2008\Memorandum-Reply MSJ.wpd\rlh

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CERTIFICATE OF SERVICE

I hereby certify that on July 22, 2008, a copy of Memorandum of Law in Reply to Opposition

to Plaintiff’s Motion for Summary Judgment was filed electronically. Notice of this filing will be

sent by operation of the Court’s electronic filing system to all parties indicated on the electronic

filing receipt including:

Keith R. McMurdy, Esq.

Fox Rothschild, LLP

 100 Park Avenue, Suite 1500

New York, New York 10017

Parties may access this filing through the Court’s electronic filing system

 /s/ Rachel L. Horton 

Rachel L. Horton

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