Opinion ID: 495432
Heading Depth: 1
Heading Rank: 3

Heading: applying mppaa to this dispute

Text: 18 The district court certified the following question for appeal: 19 May a corporation that legitimately believes its status as a MPPAA employer is doubtful have that issue resolved by a federal court in a timely declaratory action, wherein the federal district court will determine the legal and factual issues necessary for a determination that the corporation is subject to MPPAA liability and procedures, or must the issue of MPPAA applicability and liability instead be determined by a MPPAA arbitrator? 20 The Flying Tiger Line, Inc. v. Central States, Southwest & Southeast Areas Pension Fund, No. 86-304, mem. order p 1 (D.Del. Dec. 4, 1986). We conclude that where the party against which withdrawal liability is being asserted was certainly part of the controlled group of an employer subject to MPPAA at some point in time, and where the issues in dispute fall within the purview of MPPAA provisions that are explicitly designated for arbitration, the Act's dispute resolution procedures must be followed. 21 Tiger contends that because MPPAA section 1401 specifies that employers are required to arbitrate disputes, entities that legitimately question their status as employers are entitled to judicial resolution of this issue before being compelled to arbitrate under MPPAA. Admittedly, section 1401 refers to employers; the more fundamental question, however, concerns what needs to be decided to dispose of Count I of Tiger's complaint. Tiger claims that the issue is whether it was an employer at the time Hall's withdrew from the plans. The multiemployer pension funds argue, and the district court ultimately determined, that Tiger's status can only be defined by deciding whether the January 1985 sale was a sham transaction designed to relieve Tiger of Hall's withdrawal liability. Because we agree that the central dispute between Tiger and the funds concerns whether the sale must be ignored under MPPAA's evade or avoid provision, we are guided by the Act's language that clearly states that [a] dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination made under sections 1381 through 1399 of this title shall be resolved through arbitration. 29 U.S.C. Sec. 1401(a)(1) (1982) (emphasis added). We agree with the district court that characterizing the issue to be decided as whether or not Tiger was an 'employer' is a broad brush description of a specific issue. The case really turns on the determination of the 'evade or avoid' question, a question properly before the arbitrator. The Flying Tiger Line v. Central States, at 17.
22 The legislative history of MPPAA indicates that Congress specifically contemplated that disputes concerning evade or avoid transactions such as Tiger's 1985 sale would be resolved through arbitration. Representative Frank Thompson, Jr., Democrat of New Jersey, the principal House sponsor of the bill, stated that 23 transactions undertaken to evade or avoid withdrawal liability may not be used as a method of escaping withdrawal liability that would otherwise be imposed. It is intended that the plan sponsor, the arbitrator, and the courts follow the substance rather than the form of such transactions in determining, assessing, and collecting withdrawal liability. 24 126 Cong.Rec. H23038 (daily ed. Aug. 25, 1980) (emphasis added). This explicit reference to the plan sponsor, the arbitrator, and the courts demonstrates that Congress intended evade or avoid disputes to be resolved through the MPPAA sequence of procedures, which places arbitration prior to court action. 12
25 The arbitration requirement is an important component of MPPAA's scheme to secure the financial health of multiemployer pension plans. Arbitration of withdrawal liability disputes substantially reduces the expenses incurred by multiemployer plans while it bears a burden that would otherwise fall on the federal courts. [A]rbitration promotes judicial economy and judicial restraint, both because the arbitrator's decision may dispose of the suit, and even if one party appeals the arbitrator's decision, the court will have the benefit of the arbitrator's analysis. Robbins v. Chipman Trucking, Inc., 8 Employee Benefits Cas. (BNA) 1251, 1258 (N.D.Ill.1986) (Chipman Trucking ). 13 Congress clearly designed MPPAA so that court will be the final forum for dispute resolution, and MPPAA's purposes would be undermined by the expense and delay that would be involved if litigation occurred prior to the Act's dispute resolution procedures. Accordingly, we again emphasize the importance of the legislature's decision that arbitration, and not the courts, is the proper forum for the initial resolution of disputes [under MPPAA]. Republic Indus., Inc. v. Central Pa. Teamsters Pension Fund, 693 F.2d 290, 295 (3d Cir.1982) (Republic Industries ); accord Central States, Southeast & Southwest Areas Pension Fund v. MGS Transp., Inc., 661 F.Supp. 54, 56 (N.D.Ill.1987) (This congressional preference for arbitration should be respected.); Terson Co., Inc. v. Pension Benefit Guar. Corp., 565 F.Supp. 203, 208 (N.D.Ill.1982) ([T]he court must consider the fact that Congress, when it created the statutory scheme encompassing ERISA and the MPPAA, deemed arbitration as the proper forum for the adjudication of claims arising out of this scheme. We cannot blithely ignore the express intent of Congress.); cf. Refined Sugars, Inc. v. Local 807 Labor-Management Pension Fund, 580 F.Supp. 1457, 1461 (S.D.N.Y.1984) (MPPAA sections 1381 through 1399 cover the determinations for which Congress has provided an arbitral resolution). 26 We also note that two other circuits have recently emphasized the clarity of MPPAA's arbitration requirement. The D.C. Circuit has held that 27 initial recourse to arbitration is a statutory direction, one generally to be followed unless neither party timely presses the plea in abatement[ ] and the court finds that deferring a court contest while the parties repair to arbitration will neither lead to the application of superior expertise nor promote judicial economy. 28 Grand Union Co. v. Food Employers Labor Relations Ass'n, 808 F.2d 66, 70 (D.C.Cir.1987) (initial emphasis added) (quoting I.A.M. Nat'l Pension Fund Benefit Plan C v. Stockton TRI Indus., 727 F.2d 1204, 1210 (D.C.Cir.1984)) (Grand Union ). In Marvin Hayes Lines, Inc. v. Central States, Southeast & Southwest Areas Pension Fund, 814 F.2d 297 (6th Cir.1987), the Sixth Circuit concluded that, [u]nless an employer is mounting a facial constitutional attack or making a verifiable claim of irreparable injury, the courts have no jurisdiction to entertain the merits of the dispute prior to arbitration. Id. at 300 (emphasis added).
29 Tiger relies primarily on this Court's decision in Barker & Williamson for the proposition that an alleged employer may bring a declaratory judgment action to have its status determined before such a corporate entity must engage in arbitration. We there suggested that, in addition to (1) trustee review and arbitration, or (2) complete inaction, 30 a third course ... available ... [to a] corporation [that] legitimately believes its status as a controlled group member is doubtful[ is to] bring a declaratory judgment action to have that question resolved by a federal court. In such a proceeding, the corporation could request that the court enjoin the running of the statutory period for seeking review and arbitration.... [T]he corporation [could also] ... request[ ] review by the fund and arbitration and mak[e] the interim payments to the fund contingent upon the outcome of the declaratory judgment action. 31 788 F.2d at 129. 32 The language of Barker & Williamson cannot be read so broadly as to change the clear meaning of MPPAA section 1401. In Barker & Williamson, this Court was required to interpret MPPAA section 1301 to determine whether Sentinel Electronics, Inc. (Sentinel), the putative controlled group member, had become such an employer at the time Barker & Williamson, Inc. (B & W), the contributing employer, completely withdrew from its multiemployer pension plan. 788 F.2d at 123. The central legal question in Barker & Williamson asked whether Sentinel's interest in certain B & W stock constituted an option that gave Sentinel constructive ownership over B & W as of that date. Id. When B & W defaulted on its payments, the fund's trustees alleged that Sentinel was a member of B & W's controlled group, that Sentinel and B & W were a single employer under MPPAA section 1301(b), and, therefore, that Sentinel was liable for the full amount of B & W's withdrawal liability. Sentinel did not challenge the trustees' assessment of withdrawal liability in any fashion; it simply d[id] nothing[,] ... gambl[ing] that it w[ould] not later be found to be a member of a controlled group with the withdrawn employer. Id. at 129. We affirmed the district court's legal determination that Sentinel was the constructive owner of B & W's stock on the date in question, id. at 122-26, and, accordingly, we held Sentinel liable for the full amount of B & W's withdrawal liability. Id. at 129-30. By do[ing] nothing, Sentinel los[t] the possibility of review and arbitration under MPPAA. Id. at 129. 33 The factual context of Barker & Williamson defines one relatively clear limit on the declaratory judgment course of action. Our reference there to this third course of action referred to disputes, such as Sentinel's unsuccessful stock option/controlled group argument, that arise under MPPAA provisions that fall outside of the section 1381 through 1399 range. The reference does not undermine section 1401's clear mandate that disputes within that range of sections be arbitrated. 34 We emphasize the legal dissimilarity of the two disputes. In Barker & Williamson, the issue was whether Sentinel had become a MPPAA employer in time to incur liability for B & W's withdrawal. Here, the issue is whether Tiger ceased to be a MPPAA employer in time to avoid liability for Hall's withdrawal. The latter unavoidably raises an evade or avoid issue under section 1392(c) that cannot be a part of the former. This dispute centers, in other words, upon the trustees' determination under section 1392(c) that a principal purpose of Tiger's sale of Hall's stock was to evade or avoid withdrawal liability; it is not simply a matter of whether Tiger was an employer as defined by the statute at the time of Hall's withdrawal. 14 35 While no provision of MPPAA specifically addresses who should resolve questions concerning the status of a one-time employer, the statutory scheme specifically provides that once an entity is an employer, it will be deemed to have withdrawn when it permanently ceases to have an obligation to contribute under the plan. 29 U.S.C. Sec. 1383(a) (1982). Any such employer will, under MPPAA section 1381, be assessed withdrawal liability unless that employer satisfies a statutory provision relieving it of liability. A district court in Banner Indus., Inc. v. Central States, Southeast & Southwest Areas Pension Fund, 657 F.Supp. 875, issues certified for appeal, 663 F.Supp. 1290, subsequent opinion, 663 F.Supp. 1292 (N.D.Ill.1987), recently concluded that 36 [w]hether the requirements of [a statutory] safe-haven have been satisfied necessarily turns on the facts of each case.... [T]he issue of whether one remains an employer on the date of withdrawal is not the same issue as whether one ever became an employer for the purposes of ERISA generally and MPPAA in particular. The latter is an issue for the court since its resolution determines the arbitrator's authority over the dispute. The former is an issue for the arbitrator since its resolution turns on the applicability of MPPAA provisions relating to employer withdrawals--provisions Congress specifically placed within the purview of the arbitrator. 37 657 F.Supp. at 882 (footnote omitted); accord id. at 883 ([W]e disagree with Banner that the factual disputes in this case bear on Banner's 'employer' status. Rather, they bear on Banner's continued employer status, an inherently different question.) (original emphasis); cf. Tri-State Rubber & Equip., Inc. v. Central States Southeast & Southwest Areas Pension Fund, 661 F.Supp. 46, 47 (E.D.Mich.1987) (No court has required interim payments from a company that claims it was never 'an employer.' ) (emphasis added). We find this distinction to be persuasive. 38 Courts that have resolved employer status questions prior to arbitration have been concerned with entities that never have been employers subject to MPPAA and that, therefore, legitimately question application of MPPAA's dispute resolution procedures to them. For example, in Central Transp., Inc. v. Central States, Southeast & Southwest Areas Pension Fund, 639 F.Supp. 788 (E.D.Tenn.1986), aff'd per curiam in an unpublished opinion, 816 F.2d 678 (6th Cir.) (table) (opinion available on LEXIS, Genfed library, USApp file), petition for cert. filed, 56 U.S.L.W. 3185 (U.S. Sept. 22, 1987), a corporation, Central Transport, entered into an agreement to purchase Mason & Dixon Lines, Inc., the parent of a subsidiary corporation called Tank Lines. This purchase agreement, however, was contingent upon Interstate Commerce Commission (ICC) approval. Before such approval was received, Tank Lines ceased contributing to its multiemployer pension plans. While the ICC subsequently did approve Central Transport's purchase agreement, the court held Central Transport was not liable for Tank Line's withdrawal because Central Transport had not exercised control over Tank Lines at the time the withdrawal occurred. The court held as a matter of law that, as of the withdrawal date, Central Transport had never been an employer. See 639 F.Supp. at 791; cf. United Paperworkers Int'l Union, Local No. 35 Pension Plan v. Arlington Sample Book Co., 5 Employee Benefits Cas. (BNA) 1948 (E.D.Pa.1984) (issue whether president and sole shareholder of a MPPAA corporate employer was himself an employer under MPPAA sections 1002(5) and 1002(9)); Refined Sugars, Inc., 580 F.Supp. 1457 (issue whether corporation was an employer); Baldwin v. Shopmen's Ironworkers Pension Trust of S. Calif., 3 Employee Benefits Cas. (BNA) 1713 (C.D.Cal.1982) (issue whether two sole shareholders were employers).
39 Tiger also claims that, because its complaint challenges the applicability of MPPAA's entire administrative scheme to this dispute, it cannot be compelled to arbitrate a question of arbitral jurisdiction. Tiger relies on the Supreme Court's unanimous decision in AT & T Technologies, Inc. v. Communications Workers of Am., 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (AT & T Technologies ). Tiger argues that arbitrators derive their authority from MPPAA; if there is ambiguity concerning the applicability of its arbitration provisions, it [i]s for the court, not the arbitrator, to decide in the first instance whether the dispute [i]s to be resolved through arbitration. Id. at 651, 106 S.Ct. at 1420. 40 Tiger's argument fails for two reasons. First, we note that AT & T Technologies concerned a federal court's duty to interpret the arbitration clause of a collective bargaining agreement, and was not a case of a court addressing the arbitration provisions of a federal statute such as MPPAA. 15 In addition, we note that the district court did not compel Tiger to arbitrate a legal question of the arbitrator's jurisdiction. Rather, the district court considered the statutory issue and decided that the dispute here must be arbitrated under MPPAA section 1401. This decision was consistent with AT & T Technologies, where the Supreme Court emphasized that, in deciding whether a dispute is subject to arbitration, a court is not to rule on the potential merits of the underlying claims. 475 U.S. at 649, 106 S.Ct. at 1419. For this reason, Tiger's argument on the merits--that the plans have not demonstrated that Tiger's conduct fails to satisfy the good faith requirement of MPPAA section 1392(c), see generally Dorn's Transp., Inc. v. Teamsters Pension Trust Fund of Philadelphia & Vicinity, 787 F.2d 897, 902-03 (3d Cir.1986) (Dorn's ), 16 --has no bearing on our decision that the arbitrator must decide the merits initially.