Opinion ID: 540395
Heading Depth: 2
Heading Rank: 2

Heading: dismissal of the trustees' counterclaim

Text: 20
21 Under the MPPAA, [a]ny dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination [of withdrawal liability] shall be resolved through arbitration. 29 U.S.C. Sec. 1401(a)(1) (emphasis added). If no arbitration proceeding has been initiated pursuant to [section 1401(a)(1) ], the amounts demanded by the plan sponsor ... shall be due and owing ... [and the sponsor] may bring an action ... for collection. 29 U.S.C. Sec. 1401(b)(1). Defenses which should be referred to arbitration are waived by a failure to timely initiate arbitration (unless some exception to the exhaustion-of-remedies doctrine applies). Central States Pension Fund v. Skyland Leasing Co., 691 F.Supp. 6, 14 (W.D.Mich.1987); New York State Teamsters Conference Pension & Retirement Fund v. McNicholas Transp. Co., 658 F.Supp. 1469, 1475 (N.D.N.Y.1987), aff'd, 848 F.2d 20 (2d Cir.1988). 22 The Trustees argue that this rule bars Centric from raising any defense to their withdrawal liability claim, but the MPPAA only requires arbitration of disputes concerning an assessment of withdrawal liability. Generally, therefore, the only defenses which are waived by a failure to timely initiate arbitration are those which go to the merits of the liability assessment itself. See, e.g., Carl Colteryahn Dairy v. Western Pa. Teamsters & Employers Pension Fund, 847 F.2d 113, 118 (3d Cir.1988) (how and when withdrawal liability is to be assessed); Teamsters Pension Trust Fund v. Allyn Transp. Co., 832 F.2d 502, 506 (9th Cir.1987) ( 'the establishment or amount of withdrawal liability'  (quoting Shelter Framing Corp. v. Pension Benefit Guaranty Corp., 705 F.2d 1502, 1509 (9th Cir.1983), rev'd on other grounds sub nom. Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984))); T.I.M.E.-DC, Inc. v. Management-Labor Welfare & Pension Funds, 756 F.2d 939, 945 (2d Cir.1985) (issues the resolution of which is necessary to calculate withdrawal liability); Central States Pension Fund v. Skyland Leasing Co., 691 F.Supp. at 14 (the amount of liability assessed and the method of calculating such liability); see also Mason & Dixon Tank Lines, Inc. v. Central States Pension Fund, 852 F.2d 156, 164 (6th Cir.1988). Laches in the prosecution of an action to collect the amount assessed is not such a defense, for it goes to the effect of the delay in bringing suit, not to the merits of the claim. 23 Moreover, a failure to arbitrate does not waive a defense that the employer does not yet have. Crown Cork & Seal Co. v. Central States Pension Fund, 881 F.2d 11, 16-17 (3d Cir.1989); see also, e.g., Central States Pension Fund v. 888 Corp., 813 F.2d 760, 764 (6th Cir.1987); Combs v. Leishman, 691 F.Supp. 424, 429 (D.D.C.1988). At the time the Trustees argue Centric should have initiated arbitration, the delay giving rise to the laches defense had not yet occurred. 24 Therefore, whether or not Centric's civil action tolled the time for initiating arbitration, Centric did not lose its right to claim that the Trustees were guilty of laches.
25 The defense of laches is available in a suit to collect a claim for withdrawal liability. See ILGWU Nat'l Retirement Fund v. Levy Bros. Frocks, Inc., 846 F.2d 879, 887 (2d Cir.1988); Central States Pension Fund v. Lloyd L. Sztanyo Trust, 693 F.Supp. 531, 541 (E.D.Mich.1988); Jaspan v. Certified Indus., Inc., 645 F.Supp. 998, 1007 (E.D.N.Y.1985); cf. Trustees of Wyo. Laborers Health & Welfare Plan v. Morgen & Oswood Constr. Co., 850 F.2d 613, 624 (10th Cir.1988); Trustees of Colo. Statewide Iron Workers Fund v. A & P Steel, Inc., 812 F.2d 1518, 1528 (10th Cir.1987) (both considering a laches defense to a claim under ERISA for delinquent contributions to pension funds). But see Robbins v. Pepsi-Cola Metro. Bottling Co., 636 F.Supp. 641, 681 n. 6 (N.D.Ill.1986); Combs v. Western Coal Corp., 611 F.Supp. 917, 920 (D.D.C.1985). 4 The defense is available whether or not the amount assessed has become due and owing. See Jaspan v. Certified Indus., Inc., 645 F.Supp. at 1005. Laches is just as applicable to a delay in re initiating litigation as it is to a delay in initiating litigation. See Restatement (Second) of Judgments Sec. 20 comment n (1982); cf. In re Whitney-Forbes, Inc., 770 F.2d 692, 698 (7th Cir.1985); Coleman v. Block, 663 F.Supp. 1315, 1329 (D.N.D.1987), vacated as moot, 864 F.2d 604 (8th Cir.1988). 26 After the district court terminated without prejudice the Trustees' counterclaim for withdrawal liability, the Trustees got the bankruptcy court to lift the automatic stay on May 13, 1986. However, it was not until January 29, 1988--over twenty months later--that the Trustees moved to reopen the district court litigation. The district court held that the claim had become barred by laches: 27 [D]espite the issuance of the order granting relief from stay, thereby permitting the [T]rustees to prosecute their counterclaim in this civil action, the [T]rustees' former legal counsel decided to proceed through the proof of claim filed in the bankruptcy proceedings and then neglected to prosecute that claim in a timely manner. Current counsel for the [T]rustees then discovered that ... a bond had been posted in this civil action to secure payment of withdrawal liability.... Accordingly, the [T]rustees seek to recover on that bond.... [T]he failure of the [T]rustees to prosecute the counterclaim here for more than 20 months after receiving the order granting relief from stay is inexcusable and would cause substantial detriment to the plaintiff by proceeding with the litigation of the counterclaim. 28 R. Vol. I, Tab 20 at 3. 29 Laches consists of two elements: (1) inexcusable delay in instituting a suit; and (2) resulting prejudice to defendant from such delay. Brunswick Corp. v. Spinit Reel Co., 832 F.2d 513, 523 (10th Cir.1987). We will not disturb a finding of laches unless the district court abused its discretion. Id. 30 The Trustees claim that, rather than sleeping on their rights, their counsel spent the twenty-month interval trying to work out an amicable settlement. Generally, a delay caused by settlement negotiations is not unreasonable. See, e.g., Stone v. Williams, 873 F.2d 620, 625 (2d Cir.1989); Mogavero v. McLucas, 543 F.2d 1081, 1083 (4th Cir.1976). Unfortunately for the Trustees, this argument appears to be an afterthought. No evidence in the record supports it. 5 We agree with the district court's conclusion that the Trustees have not justified their failure to act. 31 When the plaintiff's conduct is unjustified, the defendant's need to show prejudice eases. Stone v. Williams, 873 F.2d at 625; see Gull Airborne Instruments, Inc. v. Weinberger, 694 F.2d 838, 893 (D.C.Cir.1982). Centric need not show that the delay hindered its defense of the Trustees' claim; prejudice also can flow from outside conditions (in this case, arrangements to liquidate) arising during the hiatus. See, e.g., Lingenfelter v. Keystone Consol. Indus., Inc., 691 F.2d 339, 342 (7th Cir.1982); Independent Bankers Ass'n v. Heimann, 627 F.2d 486, 488 (D.C.Cir.1980). The same prejudice to Centric that the bankruptcy court found under the first Magouirk factor also accrued to Centric from the Trustee's languor in the district court. Further litigation of the Trustees' claim would force Centric to revise its plan of liquidation, and would both delay and reduce the ultimate payments to the secured creditors. We cannot say that the district court's conclusion that Centric was prejudiced was an abuse of its discretion.