## In the



# United States Court of Appeals

For the Seventh Circuit

No. 08

‐ 4041

C EN T RA

, I NC

. and D ETROIT I NTERNATIONAL B RIDGE C O

.,

Plaintiffs

‐ Counterdefendants

‐ Appellants

,

v.

C ENTRAL S TATES

, S OUTHEAST AND S OUTHWEST

A REAS P ENSION F UND

, Defendant

‐ Counterplaintiff

‐ Appellee.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 07

‐ C

‐ 6312

— William T. Hart

, Judge

.

A RGUED M AY 27, 2009

— D ECIDED A UGUST 20, 2009

Before C UDAHY

, R IPPLE and W OOD

, Circuit Judges

.

C UDAHY

, Circuit Judge. CenTra, Inc. is a holding company

that owns subsidiaries in trucking and real estate, as well as

one that operates the Ambassador bridge between Detroit

and Windsor, Ontario. In 1995, CenTra was reorganized to

shed its unprofitable unionized trucking operations. Two

years later, CenTra’s last unionized subsidiary

— the Detroit2 No. 08

‐ 4041

International Bridge Co. (DIBC)

— withdrew from the

Central States pension fund, and the fund assessed more

than $14 million in withdrawal liability against CenTra

under the Multiemployer Pension Plan Amendments Act

of 1980 (MPPAA), 29 U.S.C. §§ 1381–1461. CenTra chal

‐ lenged the assessment in arbitration, and the arbitrator

reduced the assessment to roughly $960,000. The district

court vacated the arbitrator’s award and reinstated the

fund’s assessment. We affirm.

I

The MPPAA amended Title IV of ERISA to require

employers withdrawing from multiemployer pension

plans to pay their proportionate share of the plans’ un

‐

funded vested benefits

— the so

‐ called “withdrawal liabil

‐ ity.” 29 U.S.C. § 1381(b)(1). The purpose of withdrawal

liability is to protect the other employers in the plan

from having to pay for the benefits vested in the with

‐ drawing employer’s employees. See, e.g.

, Santa Fe Pacific

Corp. v. Central States, Southeast and Southwest Areas

Pension Fund

, 22 F.3d 725, 726–27 (7th Cir. 1994). The

pension plan calculates a withdrawing employer’s with

‐

drawal liability based in large part on the employer’s

history of contributions to the fund. See Central States,

Southeast and Southwest Areas Pension Fund v. Nitehawk

Express, Inc.

, 223 F.3d 483, 486 (7th Cir. 2000). Here, the

“employer” withdrawing from the fund is the group

made up of CenTra and its subsidiaries

— a “controlledNo. 08

‐ 4041 3

1 Under the statute, all trades or businesses under common

control are treated as a single employer or “controlled group.” 29

U.S.C. § 1301(b)(1); see Central States, Southeast and Southwest Areas

Pension Fund v. Nitehawk Express, Inc.

, 223 F.3d 483, 486 (7th Cir.

2000). group” in the argot of the MPPAA. 1 The question is whether

CenTra’s controlled group, which withdrew from the plan

in 1997, was properly assessed withdrawal liability based on

the contribution histories of two CenTra subsidiaries that

disappeared in the 1995 reorganization.

A

Though the parties quibble about the details, the facts

are not materially in dispute. In 1970, T.J. Moroun and

his four children created CenTra as a holding company

for various trucking subsidiaries the family had owned

for decades. T.J. died in 1992; by 1994 his son Manuel

(Matty), CenTra’s first president, was also CenTra’s princi

‐ pal owner and controlling shareholder. Matty’s three sisters

were minority owners.

From 1970 until 1995, two of CenTra’s subsidiaries were

Central Cartage Co. and Central Transport, Inc. (Old

Subsidiaries or Old Subs). Central Cartage performed

local pick

‐ up and delivery services in cities across the

Midwest and employed drivers and dockmen. Central

Transport was an “over

‐ the

‐ road” line haul carrier that

employed drivers who owned their own trucks. The

Old Subsidiaries worked together to provide shippers door

‐

to

‐ door service. The dockmen, local drivers and over

‐ the

‐4 No. 08

‐ 4041

road truckers that the Old Subs employed all belonged to

local unions affiliated with the Teamsters. The Old Subs

each had labor agreements with those unions under which

they contributed to the Central States pension fund on

behalf of their employees. In 1979, Central Cartage pur

‐

chased DIBC, which owns and operates the Ambassador

Bridge. DIBC was also a union employer and contributed to

the Central States pension fund. Also relevant here is Crown

Enterprises, Inc., a real estate firm that, prior to the 1995

reorganization, was owned by Central Transport. Crown

never participated in the pension plan. Rounding out the

relevant employers in the pre

‐ 1995 CenTra controlled group

was U.S. Truck Company, Inc., another fund contributor.

Matty’s sister Agnes Anne (Anne) owned U.S. Truck. It was

affiliated with CenTra by virtue of an agreement between

Matty and Anne giving Matty an option to purchase U.S.

Truck’s stock. U.S. Truck also contributed to the fund.

Pre

‐ 1995, then, the CenTra controlled group looked like

this:

Matty, Anne, Florence and

Victoria Moroun

CenTra U.S. Truck

(fund contributor)

Central Cartage

(fund contributor) Central Transpor t

(fund contributor)

DIB C

(fund contributor) Crown EnterprisesNo. 08

‐ 4041 5

2 Throughout the 1980s and 1990s there was acrimony and

litigation among the Moroun siblings regarding control of the

family business. For the most part, that family dispute is irrele

‐

vant to the matters at issue here. Deregulation of the trucking industry in the 1980s led

to increased competition, and CenTra began looking

for ways to cut costs. In particular, CenTra sought to

alleviate the burdens imposed by the unions’ standard wage

rates, which were higher than non

‐ union rates. According

to CenTra, the unions stood fast, and the Old Subs suffered

financially. Matty wanted to reorganize in a way that would

allow CenTra to get rid of the Old Subs’ trucking operations

while retaining DIBC and Crown, which were profitable. He

also wanted the reorganization to be tax neutral. In 1987,

CenTra obtained a favorable tax ruling from the Internal

Revenue Service for a proposed reorganization, but it would

be another eight years before the Moroun siblings reached

an agreement allowing the reorganization to go forward. 2

In 1995 the reorganization finally did go forward. In

preparation, CenTra created two new subsidiaries, Central

Cartage Co. of Michigan, Inc. and Central Transport of

Michigan, Inc. (New Subsidiaries or New Subs), which were

intended to take on CenTra’s union trucking operations, and

a third subsidiary, Central Transport International, Inc.

(CTII), which was to engage in non

‐ union trucking.6 No. 08

‐ 4041

Then, on December 31, 1995, the Old Subs merged into

CenTra and ceased to exist as such, leaving CenTra as

the surviving corporation. At the same time or shortly

thereafter (as discussed below, the timing is irrelevant to the

analysis), CenTra contributed certain assets and assigned

certain liabilities to the New Subs, and the New Subs were

renamed to take on the names of the Old Subs (i.e., the “of

Michigan, Inc.” was dropped).

CenTra refers to the contribution of capital and assign

‐

ment of liabilities to the New Subs as a “drop down.” In

particular, CenTra “dropped down” Old Transport’s

line haul operations, which constituted a portion of Old

Transport’s motor carrier division, to New Transport.

CenTra also contributed $266,000 in common stock and

paid

‐ in capital to New Transport. CenTra retained the

remainder of Old Transport’s motor carrier division,

which included Crown Enterprises, the real estate

business that had been a subsidiary of Old Transport Matty, Anne,

Florence and

Victoria Moroun

CenTra

Central Cartage

(fund

contributor ) Central Transport

(fund

contri b utor )

DIBC

(fund

contributor ) Crown

Enterprises New Cartage

(fund

contributo r ) New Transport

(fund

contributor ) CTIINo. 08

‐ 4041 7

3 The numbers vary depending on which balance sheet or

journal entry is consulted in the record. Robert Youngert,

CenTra’s chief financial officer, testified that this might be

because some of the financial documents in the record were

audited and some were not. and which had a book value of $44.5 million at the time

of the merger. In addition, CenTra retained Old

Transport’s freight receivables and other receivables, as well

as its other divisions, including a Mexico sales office, several

terminal properties and some Canadian real estate, all of

which appear to have been contributed by CenTra to CTII.

CenTra Chief Financial Officer Robert Youngert testified

that New Transport was to be a line haul carrier for CenTra

only, and that CenTra retained Old Transport’s freight

receivables to avoid saddling New Transport with the risk

that they would not be collectible.

The Old Transport assets and liabilities that CenTra

dropped down to New Transport had a book value of about

$6.8 million; those transferred to CTII or retained by CenTra

were valued at roughly $104.2 million. With respect to

Central Cartage, CenTra “dropped down” Old Cartage’s

freight division to New Cartage, and contributed $306,000

in common stock and paid

‐ in capital. CenTra retained DIBC.

The assets and liabilities dropped down to New Cartage

were valued at roughly $23.5 million and those retained by

CenTra were valued at approximately $29.9 million. 3

All of the Old Subs’ union trucking operations (in

‐ cluding drivers and other employees) were transferred

to the New Subs. The New Subs also assumed the Old Subs’

labor agreements and their obligations to contribute to the8 No. 08

‐ 4041

pension fund. CenTra, however, retained the Old Subs’

freight contracts and transferred those contracts to CTII.

After the merger of the Old Subs into CenTra and the drop

down to the New Subs, the CenTra controlled group looked

like this:

On February 29, 1996, CenTra sold its stock in New

Transport to U.S. Truck. On August 9, 1996, CenTra

sold its stock in New Cartage to U.S. Truck. Then on

August 19, 1996, Matty and Anne entered a settlement

agreement in which Matty gave up his option to

purchase U.S. Truck stock. This agreement ended CenTra’s

affiliation with U.S. Truck. Following the stock sale

and settlement agreement, there were two controlled

groups, one headed by CenTra and one headed by U.S.

Truck: Matty, Anne,

Florence and

Victoria Moroun

CenTra

DIBC

(fund

contributor) Crown

Enterprises New Cartage

(fund

contributor) New Transport

(fund

contributor) CTIINo. 08

‐ 4041 9

U.S. Truck’s controlled group did not fare well. In 1997,

New Transport shut down. In 1999 New Cartage failed, and

U.S. Truck filed for bankruptcy and was ultimately liqui

‐

dated. The fund assessed withdrawal liability against U.S.

Truck for a partial withdrawal in 1998, 29 U.S.C. § 1385, and

again for a complete withdrawal in 1999, 29 U.S.C. § 1383.

Meanwhile, DIBC remained the last fund contributor in

CenTra’s controlled group. DIBC’s labor agreement expired

in November 1997, and Central States terminated DIBC’s

participation in the fund as of that date. DIBC, Crown and

CTII are CenTra subsidiaries to the present day.

B

DIBC’s withdrawal from the fund marked CenTra’s

“complete withdrawal” under 29 U.S.C. § 1383(a), and

Central States assessed withdrawal liability. The fund

calculated CenTra’s withdrawal liability based on the

contribution histories of the Old and New Subs up

through August 1996, and based on DIBC’s entire con

‐

tribution history. The total amount of liability assessed

was $14,761,082.66. CenTra objected that the contribu

‐

tion histories for the Old Subs and the New Subs should not CenTra

DIBC

(fund

contributor) Crown

Enterprises CTII U.S. Truck

New Transport

(fund contributor) New Cartage

(fund contributor)10 No. 08

‐ 4041

4 The fund filed an unsecured claim for withdrawal liability

in U.S. Truck’s bankruptcy proceeding, and noted that the

amount of liability had been calculated on the assumption

that the contribution histories for the Old and New Subs prior to

September 1996 would be attributable to CenTra. The

fund reserved the right to increase its claim against U.S.

Truck, however, if that assumption proved to be incorrect. have been used to calculate its withdrawal liability. CenTra

argued that as a result of the 1995 reorganization,

U.S. Truck, not CenTra, was the employer responsible

for those contribution histories if and when U.S. Truck

withdrew from the plan. 4 Under MPPAA procedure, CenTra

paid the full amount assessed and then

demanded arbitration. The arbitrator ruled for CenTra,

finding that its withdrawal liability should have been

calculated without regard to the Old and New Subs’

contribution histories, and the fund’s award was

reduced to $959,332, representing DIBC’s history of contri

‐

butions to the fund.

The arbitrator found that the merger of the Old Subs

into CenTra, followed by the “drop down” to the New Subs,

the stock sales to U.S. Truck and the ultimate separation of

U.S. Truck from CenTra’s controlled group met

certain statutory safe harbors under the MPPAA, 29

U.S.C. §§ 1398, 1369(b), which prevented CenTra from

incurring withdrawal liability at any point along the

way. The upshot of the arbitrator’s finding was that it

meant the Old Subs’ contribution histories traveled first

to CenTra in the merger, then to the New Subs in theNo. 08

‐ 4041 11

5 The arbitrator also found that the evidence was insufficient

for a conclusion that a principal purpose of the reorganization

was to evade or avoid withdrawal liability under 29 U.S.C.

§ 1392(c). Like the district court, we resolve the case under

§§ 1398 and 1369(b), and therefore we need not reach this

question. “drop down,” and ultimately along with the New Subs

in the stock sales to U.S. Truck. 5

The district court vacated the arbitrator’s award and

reinstated the fund’s assessment, finding that the Old

Subs’ contribution histories were assumed by CenTra in the

merger and stayed with CenTra because none of the later

steps in the reorganization met the MPPAA’s statutory

requirements for avoiding withdrawal liability. We agree

with the district court’s analysis and therefore affirm.

II

A

The MPPAA, the most extensive amendment of ERISA

to date, “overhaul[ed]” ERISA’s Title 4, the plan termination

insurance system. John H. Langbein, Susan J. Stabile

& Bruce A. Wolk, Pension and Employee Benefit Law 92

(4th ed. 2006). In addition to protecting employers who

remain in a plan, the MPPAA protects the Pension

Benefit Guaranty Corporation (PBGC), the agency

charged with implementing and interpreting the statute,

from the enormous burden of insuring pension benefits, all

in the interest of ensuring that employees will be able to

collect their benefits upon retirement. Langbein, Stabile &12 No. 08

‐ 4041

6 Under 29 U.S.C. § 1382, the plan sponsor determines the

amount of withdrawal liability, notifies the employer of that

amount and collects it from the employer. Wolk, Pension and Employee Benefit Law at 69. Prior to the en

‐

actment of ERISA, an employer’s liability to a multiem

‐ ployer plan was governed by the terms of the collective bar

‐ gaining agreement, which typically lacked any provision

for contingent liability. Id. at 69–70. ERISA Title 4 im

‐ posed liability upon withdrawal by a substantial employer

from a multiemployer plan, and the MPPAA imposed

strict technical rules governing such withdrawals. Id. ; see

29 U.S.C. §§ 1381(b)(1), 1391.

With respect to this case, there are at least three steps

to a pension plan’s determination of withdrawal liability. 6

First, the fund determines whether an employer (here,

CenTra’s controlled group) has withdrawn from the plan. A

complete withdrawal occurs when an employer “perma

‐ nently ceases to have an obligation to contribute under the

plan” or “permanently ceases all covered operations under

the plan.” 29 U.S.C. § 1383(a)(1)–(2).

Often key to this determination are three sections of the

MPPAA establishing that certain corporate level transac

‐

tions do not count as a withdrawal. The first is 29 U.S.C.

§ 1398, which provides that a withdrawal does not

occur merely because of a change in business form. In

particular, and “[n]otwithstanding any other provision of

this part,”

an employer shall not be considered to have withdrawn

from a plan solely because

—No. 08

‐ 4041 13

(1) an employer ceases to exist by reason of

—

(A) a change in corporate structure described in

section 1369(b) of this title, or

(B) a change to an unincorporated form of busi

‐

ness enterprise,

if the change causes no interruption in employer

contributions or obligations to contribute under the

plan

. . .

Section 1369(b), in turn, provides that “[i]f a person ceases

to exist by reason of a merger, consolidation, or division, the

successor corporation or corporations shall be treated as the

person to whom this subtitle applies.” 29 U.S.C.

§ 1369(b)(3). Taken together, §§ 1398 and 1369(b) specify

that an employer does not “withdraw” from a plan

solely because it undergoes a merger, consolidation, or

division (terms that are, unfortunately, undefined). Follow

‐ ing such reorganizations, the successor corporation “or

corporations” are deemed the “original employer” for

purposes of determining withdrawal liability, and with

‐

drawal liability is not incurred until such time (if any) as the

successor withdraws from the plan.

The third provision relevant to the question whether

an employer has withdrawn is 29 U.S.C. § 1384, which

provides that asset sales meeting certain stringent require

‐

ments

— the buyer must assume an obligation to make

contributions to the plan at substantially the same level as

the seller’s contribution, the seller must post a bond and

assume secondary liability and the sale must be at arm’s

length to an unrelated entity

— will not result in a with

‐14 No. 08

‐ 4041

7 The amount of withdrawal liability is determined first by

calculating the plan’s unfunded vested benefits at the time of

the withdrawal, defined by subtracting the value of the plan’s



### (continued...) drawal. See 29 U.S.C. § 1384(a); Nitehawk Express

, 223 F.3d

at 488.

Sections 1398, 1369(b) and 1384 are most often given effect

by courts addressing whether and when a withdrawal has

occurred, and they are treated as “safe harbors” exempting

predecessor employers from withdrawal liability. Central

States, Southeast and Southwest Areas Health and Welfare Fund

v. Cullum Cos., Inc.

, 973 F.2d 1333, 1337 (7th Cir. 1992)

(discussing § 1384 and quoting I.A.M. National Pension Fund

v. Clinton Engines, Corp.

, 825 F.2d 415, 420 (D.C. Cir. 1987));

Central States, Southeast and Southwest Areas Pension Fund v.

Sherwin

‐ Williams Co.

, 71 F.3d 1338, 1342 (7th Cir. 1995)

(calling § 1398 a “savings clause”). In the present case, there

is no dispute about when CenTra withdrew from the plan.

The withdrawal occurred in 1997, when DIBC terminated its

obligation to the fund. The parties agree that the 1995

reorganization did not cause a withdrawal. Nevertheless, as

will appear, the safe harbor provisions, and §§ 1398 and

1369(b) in particular, remain crucial to determining the

allocation of the assessed withdrawal liability among the Old

Subs’ successors.

The second step to determining withdrawal liability is the

calculation of the amount owed by the withdrawing

employer. The rules governing this calculation are complex,

29 U.S.C. §§ 1381, 1391, 7 but the calculation is based largelyNo. 08

‐ 4041 15



### (...continued)

assets from the present value of its nonforfeitable benefits.

Jayne E. Zanglein & Susan J. Stabile, ERISA Litigation 1478 (3d ed.

2008). In the absence of regulations governing these valuations,

pension plans may use actuarial assumptions so long as they are

“reasonable.” Id. Second, the withdrawing employer’s share of

the unfunded vested benefits is determined according to one of

the methods listed in 29 U.S.C. § 1391, or by an alternative

method adopted by an amendment to the pension plan, subject

to approval of the Pension Benefit Guaranty Corporation. 29

U.S.C. § 1391; Central States, Southeast and Southwest Areas Pension

Fund v. 888 Corp

., 813 F.2d 760, 762 n.2 (6th Cir. 1987) (citation

omitted); see also Zanglein & Stabile, ERISA Litigation at 1481;

60A Am. Jr. 2d Pensions § 728 (2009).

Unless otherwise provided for in the plan, the amount of

unfunded vested benefits allocable to an employer is calcu

‐

lated by the “presumptive method” described in 29 U.S.C.

§ 1391(b)

. . . Under this method, withdrawal liability is

calculated by multiplying the plan’s aggregate unfunded

benefit liability from all employers by the fraction made up

of the sum of all contributions required to have been made

by the withdrawing employer, divided by the sum of all

contributions by all employers in the plan during the same

time period.

888 Corp.

, 813 F.2d at 762 n.2 (citing Peick v. Pension Benefit

Guaranty Corp.

, 724 F.2d 1247, 1256 (7th Cir. 1983)); see also Borden,

Inc. v. Bakery & Confectionery Union & Industry Int’l Pension

, 974

F.2d 528, 530 n.2 (4th Cir. 1992); Park South Hotel Corp. v. New York

Hotel Trades Council

, 851 F.2d 578, 580 (2d Cir. 1988). on the withdrawing employer’s contribution history over

the five or ten years preceding the withdrawal. See 29 U.S.C.

§ 1391(c)(2), (c)(5)(C); Central States Southeast and Southwest16 No. 08

‐ 4041

Areas Pension Fund v. Safeway, Inc

., 229 F.3d 605, 613 (7th Cir.

2000). The parties here do not dispute the amount of with

‐

drawal liability so much as they dispute whether and how

that amount is to be allocated to CenTra. To understand

the distinction between the amount of the liability and

its allocation, consider how the amount of the liability was

calculated in this case. CenTra’s withdrawal occurred in

November 1997, and the fund calculated CenTra’s with

‐

drawal liability based on that date. To do so, the fund

looked at the contribution histories of CenTra’s controlled

group going back ten years prior to the 1997 withdrawal

date. In eight of those ten years, the Old Subs belonged

to the CenTra controlled group. In fact, the Old Subs’

contributions made up the bulk of the group’s contribu

‐

tions during that period. If we calculated withdrawal

liability merely according to § 1391, then, arguably that

calculation would not take into account or make adjust

‐

ments for the 1995 reorganization: the CenTra controlled

group’s contribution history over the ten years preceding

November 1997 included contributions by the Old Subs,

and therefore those contributions would be included in

the calculation under § 1391. End of story.

The statute does not comment one way or the other

about whether this method of calculation is appropriate.

The PBGC, however, has blessed a third and further

step in the process, the allocation step. The fund looks to the

safe harbor provisions discussed above to determine how to

allocate the withdrawal liability calculated under § 1391

among multiple employers. The PBGC has found that where

an employer avoids withdrawal liability under one of the

safe harbor provisions

— by undergoing a merger, divisionNo. 08

‐ 4041 17

or exempted asset sale, for instance

— the successor em

‐ ployer “inherits” the contribution history of the predecessor

for purposes of calculating liability for any subsequent

withdrawal. PBGC Opinion Letters 82

‐ 40 (Dec. 27, 1982), 92

‐

1 (Mar. 30, 1992); see Nithawk Express

, 223 F.3d at 491; Park

South Hotel Corp. v. New York Hotel Trades Council

, 851 F.2d

578, 583–84 (2d Cir. 1988). If there is more than one succes

‐

sor employer, the PBGC has said that the contribution

history of the predecessor should be apportioned among the

successors on a “reasonable” basis. PBGC Opinion Letter 92

‐

1; see also Nitehawk Express

, 223 F.3d at 491.

We have previously relied on PBGC Opinion Letter 92

‐

1 in determining how to allocate withdrawal liability among

multiple employers, Nitehawk Express

, 223 F.3d at 491, and

we see no reason to depart from this practice here. We note,

however, that the PBGC has not promulgated regulations on

this question but has merely issued the above

‐ cited opinion

letters on the subject. Opinion letters are not entitled to

Chevron deference, or even the deference we accord an

agency’s interpretation of its own ambiguous regulation,

Auer v. Robbins

, 519 U.S. 452, 461 (1997) (An agency’s

interpretation of its regulation is “controlling unless ‘plainly

erroneous or inconsistent with the regulation.’ ”) (quoting

Robertson v. Methow Valley Citizens Council

, 490 U.S. 332, 359

(1989)) (further quotation marks and citation omitted), but

opinion letters are “‘entitled to respect’

. . . to the extent that

[they] have the ‘power to persuade,’ ” Christensen v. Harris

County

, 529 U.S. 576, 587 (2000) (quoting Skidmore v. Swift &

Co.

, 323 U.S. 134, 140 (1944)).

We remain persuaded that the PBGC’s method of appor

‐ tioning withdrawal liability is a reasonable interpretation of18 No. 08

‐ 4041

the statute. It respects the statute’s purpose of ensuring that

the plan’s benefits will be adequately funded without overly

burdening employers that have undergone changes in

corporate structure covered by the MPPAA’s safe harbors

(and, therefore, without deterring such employers from

engaging in beneficial reorganizations). The safe harbor

provisions give structure to the MPPAA that comports with

general corporate law principles. Looking to those provi

‐

sions in allocating withdrawal liability therefore should

respect parties’ expectations regarding the effect of a

corporate transaction on the corporation’s obligations.

To be concrete, §§ 1398 and 1369(b) treat mergers, consoli

‐

dations and divisions one way for purposes of determining

whether a withdrawal has occurred, while asset sales are

generally treated another way. This distinction is common

to corporate law and to Title IV of ERISA. “It is axiomatic

that a stock sale, merger, or consolidation has no effect on a

corporation’s contractual obligations. Similar principles

have always applied under Title IV of ERISA.” Jayne E.

Zanglein & Susan J. Stabile, ERISA Litigation 1474 (3d ed.

2008). A successor corporation in a merger or stock sale

inherits the predecessor’s contribution history just as it

assumes contractual liabilities.

In contrast to a stock sale, an asset sale generally does

not result in assumption of liabilities by operation

of law. Again, the result under MPPAA is congru

‐

ent

— an asset sale generally results in a complete

withdrawal if the seller’s controlled group no longer has

covered operations or an obligation to contribute. By the

same token, the buyer generally does not inherit the

contribution history.No. 08

‐ 4041 19

8 CenTra appears to object to this approach, preferring to

view the reorganization “holistically.” But even were we to



### (continued...) Id. at 1476 (citing PBGC Opinion Letter 82

‐ 40).

However, § 1384, the third MPPAA safe harbor provision,

creates “an elective relief rule” for buyers and sellers of

assets, id.

, so that struggling companies will not be deterred

from financially beneficial asset sales by the “daunting

prospect of withdrawal liability, ” Nitehawk Express

, 223 F.3d

at 487. Section 1384’s limited exemption for asset sales that

meet its stringent requirements does not undercut the

general distinction between mergers and divisions on the

one hand (transactions that transfer contribution histories to

the successor corporation) and asset sales on the other

(transactions that generally do not transfer contribution

histories to the purchaser). Because these provisions track

typical distinctions in the law of corporate transactions, it is

reasonable to apply them in determining the effect such

transactions have on an employer’s withdrawal liability.

B

The district court reviewed the arbitrator’s decision

regarding the fund’s assessment of withdrawal liability

for clear error, and we review the district court’s

decision under the same standard. Nitehawk Express

, 223

F.3d at 488. In assessing whether the fund reasonably

allocated the Old Subs’ contribution histories to CenTra, we

take CenTra’s reorganization one step at a time. 8 The first20 No. 08

‐ 4041



### (...continued)

emphasize the whole over its parts

— a position for which CenTra

offers no authority

— we know of no other way to talk about the

reorganization than to discuss its constituent transactions. step was the merger of the Old Subs into CenTra, which

clearly caused the Old Subs to cease to exist and left CenTra

as the surviving corporation. The record contains several

merger documents to this effect, and the parties do not

meaningfully dispute that this is the case. Under safe harbor

provisions §§ 1398 and 1369(b), CenTra inherited the Old

Subs’ contribution histories as a consequence of the merger.

See Nitehawk Express

, 223 F.3d at 491 (citing PBGC Opinion

Letter 92

‐ 1).

The second step was the “drop down” of assets and

liabilities from CenTra to the New Subs. CenTra argues that

this step was a “division” under § 1369(b)(3), and therefore

that the New Subs inherited the Old Subs’ contribution

histories along with the other assets and liabilities “dropped

down” by CenTra. We cannot agree. Although “division” is

not defined in the MPPAA, see Sherwin

‐ Williams

, 71 F.3d at

1339, the case law has never treated a transaction such as the

“drop down” of assets and liabilities at issue here as a

division under the statute. Rather, “division” generally

means a sale of stock, rather than a transfer of assorted

assets and liabilities. See id. (“[The] sale of a subsidiary’s

stock is a form of corporate ‘division.’ ”) (citing PBGC

Opinion Letters 82

‐ 4 (Feb. 10, 1982) and 84

‐ 7 (Dec. 20,

1984)); Nitehawk Express

, 223 F.3d at 491–92 (“[U]nder the

statute, the contribution history of a subsidiary whose stock

is sold automatically transfers to the buyer.”) (citing PBGC

Opinion Letter 92

‐ 1); Bowers v. Andrew Weir Shipping Ltd.

, 27No. 08

‐ 4041 21

9 Less than half of Old Cartage’s book value transferred to

New Cartage, and only about 7 percent of Old Transport’s

book value made its way to New Transport. F.3d 800, 805 (2d Cir. 1994) (“While ‘division’ is not a term

of art with a widely established meaning, the district

court

— relying on the scant legislative history and an

opinion letter of the [PBGC]

— concluded that the term, ‘as

used in the MPPAA, appears to connote a transaction

whereby the stock of a contributing corporation is “divided”

away from its controlled group and acquired by or distrib

‐

uted to new owners.’

. . . . We agree with this analysis

. . .”)

(citation omitted).

CenTra urges us to follow its holistic approach and to find

that the merger of the Old Subs into CenTra and the simul

‐

taneous “drop down” of the trucking operations to the New

Subs is a division under § 1369(b)(3)

— that the merger and

drop down were not separate transactions but rather were

“an integrated division of the trucking operations from the

Old Subsidiaries into the New Subsidiaries.” In effect,

CenTra wants us to treat its reorganization as though the

Old Subs’ were merged into CenTra and then dropped

down unchanged into the New Subs (or, perhaps, as though

the Old Subs were merged directly into the New Subs). If

that were what happened, we might agree that the merger +

drop down was a “division” under the statute. But that is

not what happened. The Old Subs are not equivalent to the

New Subs. The Old Subs disappeared into CenTra, and

only pieces of the Old Subs were transferred to the New

Subs. 922 No. 08

‐ 4041

CenTra has derided this analysis, calling it a “substantial

asset” requirement “grafted” onto the statute by the district

court below, and argues that nothing in § 1398 suggests that

the “successor to a covered change in corporate form” must

retain “a certain level of its predecessor’s assets.” But this

argument ignores the basic fact that a successor is not a

“successor” unless it succeeds to the predecessor corpora

‐

tion’s obligations in the first place. Here, the successor to the

Old Subs is CenTra, not the New Subs. CenTra has pointed

to nothing in the record, and we have found nothing,

supporting the assertion that CenTra turned around and

transferred the Old Subs to the New Subs, contribution

histories and all. What are in the record are balance sheets

and financial journal entries showing how carefully CenTra

picked out specific assets and liabilities and transferred only

those assets and liabilities to the New Subs. There is no

reason to believe that the Old Subs’ contribution histories

went with those assets and liabilities by fiat.

Moreover, CenTra ignores § 1398’s requirement that

the predecessor employer must “cease to exist” if the

transaction is to be exempt from withdrawal liability.

No corporate entity ceased to exist in the “drop down,”

as the Old Subs did in the merger with CenTra (as evi

‐

denced by the merger documents noting that the Old

Subs’ stock was dissolved and CenTra was the sur

‐ viving corporation). It may be more in line with CenTra’s

framing of the argument to say that, rather than “ignoring”

the § 1398 requirement, CenTra urges that we shoehorn

the merger and the “drop down” into a single transaction by

which the Old Subs ceased to exist and their

trucking operations and contribution histories (but notNo. 08

‐ 4041 23

much else) were “divided” into the New Subs. But as stated

above, this ignores the merger into CenTra and CenTra’s

retention of DIBC, Crown, and the various other valuable

assets that CenTra failed to transfer to the New Subs.

A construction analogous to CenTra’s was rejected in Penn

Central Corp. v. Western Conference of Teamsters Pension Fund

,

75 F.3d 529 (9th Cir. 1996). In that case, the Ninth Circuit

held that a successor corporation that purchased one of the

companies in a controlled group became the “original

employer” under §§ 1398 and 1369(b) of that company only,

and did not inherit the contribution histories of other

subsidiaries in the controlled group that had previously

ceased operations. Id. at 534. “It would be unreasonable to

interpret the last sentence in 29 U.S.C. § 1398 as requiring

the successor corporation to assume additional withdrawal

liability for each of the parent’s subsidiaries, where, as here,

only one of the subsidiaries is purchased by the successor

and the other subsidiaries ceased operations long before the

successor’s purchase.” Id. Here, U.S. Truck purchased the

New Subs, not the Old Subs, which ceased operations prior

to U.S. Truck’s purchase. We can see no reason why U.S.

Truck would have incurred withdrawal liability based on

the Old Subs’ contribution histories, even if the merger was

simultaneous with the “drop down” and the New Subs

continued making contributions to the fund on behalf of

employees who formerly worked for the Old Subs. The drop

down was not a division, nor did it meet the stringent

requirements governing asset sales under § 1384. Therefore

the Old Subs’ contribution histories were not inherited

by the New Subs but remained with CenTra after the

merger.24 No. 08

‐ 4041

Because the Old Subs’ contribution histories remained

with CenTra, we need not consider whether the sale of the

New Subs’ stock to U.S. Truck constituted a “division.”

Even if it did, the Old Subs’ contribution histories were

not a part of the stock sale because they never made it into

the New Subs in the first place. Likewise, we need not

consider whether the settlement agreement ending the

affiliation between CenTra and U.S. Truck constituted

a statutory division.

That leaves one final matter to put to rest: CenTra’s

argument that this conclusion rests on a theory that with

‐

drawal liability “accrues over time,” a theory that CenTra

correctly points out has been rejected by various courts. Our

holding is not based on this theory, which takes as its

premise the idea that a parent cannot shed a subsidiary’s

contribution histories by engaging in a transaction covered

by one of the safe harbor provisions discussed above. As

should be clear from what we have said thus far, we agree

entirely with CenTra and the courts that have considered

this argument that it lacks merit. See Teamsters Pension Trust

Fund of Philadelphia v. Central Michigan Trucking, Inc.

, 857

F.2d 1107, 1109 (6th Cir. 1988) (rejecting the fund’s argu

‐

ment that a change in corporate structure under § 1398 did

not relieve the predecessor parent company from with

‐

drawal liability that had “accrued” during its ownership of

the former subsidiary); Godchaux v. Conveying Techniques,

Inc.

, 846 F.2d 306, 310–11 & n.12 (5th Cir. 1988). A parent can

shed its subs’ contribution histories (or, more correctly, a

parent can avoid having those contributions used in

the calculation of the parent’s withdrawal liability) byNo. 08

‐ 4041 25

10 As discussed, the PBGC reasonably allows the fund to look to

the statute’s safe harbor provisions to determine whether a

successor employer or purchaser of assets has “inherited”

contribution histories. This inheritance is similar to the

means whereby an employer would assume other contractual

liabilities, but we do not address whether the similarity

extends further. engaging in such a transaction. CenTra simply failed

to engage in the necessary transaction here.

CenTra ignores this thrust of the argument, as did the

arbitrator below, both focusing instead on the notion of

liability growing in a contributing employer with the

passage of time. The arbitrator found that “Central States’

case is premised on the theory that, at all times prior to

the reorganization, the Old Subs were accruing with

‐

drawal liabilities, and that these accruals never left the

CenTra controlled group.

. . . The evidence and argu

‐

ments in this case, however, fail to persuade one that

contribution histories are, or should be, treated as lia

‐

bilities.”

Setting aside the question whether contribution

histories are appropriately treated as liabilities, 10 it is

not quite right to characterize contribution histories as

“accruing” until the occurrence of a reorganization covered

by a safe harbor. They do not “accrue” so much as they

form the basis for any eventual calculation of the employer’s

withdrawal liability. That means that if the employer never

withdraws (i.e., if the employer engages in a transaction

covered by one of the safe harbor provisions, or if the

employer simply continues in operation indefinitely and26 No. 08

‐ 4041

continues contributing to the fund), that employer will

never be assessed withdrawal liability. Therefore, no

contribution histories have “accrued”; any liability is

contingent on withdrawal.

Again, where an employer engages in a transaction

covered by one of the statute’s safe harbors, the

successor employer is treated as the original employer

for purposes of calculating the successor’s subsequent

withdrawal liability, and no liability is assessed against

the predecessor. In the present case, the Old Subs are

the predecessor and CenTra is the successor. When the fund

calculated CenTra’s withdrawal liability, it was therefore

appropriate to consider the Old Subs’ contribution histories;

the fund did not assess any liability against the Old Subs.

Likewise, when the fund initially calculated U.S. Truck’s

withdrawal liability, it excluded the Old Subs’ contribution

histories on grounds elaborated here: CenTra’s drop down

of assets to the New Subs did not transfer the Old Subs’

contribution histories to the New Subs, so those contribution

histories stayed with CenTra instead of transferring to U.S.

Truck in the sale of the New Subs’ stock.

The district court’s decision vacating the arbitration award

and reinstating the fund’s assessment of with

‐

drawal liability is therefore

A FFIRMED

.

8

‐ 20

‐ 09