Court Opinion

ID: 4173098
Source: CourtListenerOpinion
Date Created: 2017-05-31 17:04:03.427329+00
Date Added: 2024-06-11T07:47:07.485521
License: Public Domain

NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                               ______________

                                     No. 16-3751
                                   ______________

                        STEELWORKERS PENSION TRUST
                        by DANIEL A. BOSH, CHAIRMAN,

                                                Appellant

                                           v.

  THE RENCO GROUP, INC.; ILSHAR CAPITAL LLC; BLUE TURTLES, INC.;
UNARCO MATERIAL HANDLING, INC.; ITEVA PRODUCTS LLC; THE DOE RUN
          RESOURCES CORPORATION; US MAGNESIUM LLC

                                   ______________

                     Appeal from the United States District Court
                       for the Western District of Pennsylvania
                             (D.C. Civil No. 2-16-cv-00190)
                    District Judge: Honorable Terrence F. McVerry
                                    ______________

                     Submitted Under Third Circuit L.A.R. 34.1(a)
                                  March 14, 2017
                                 ______________

   Before: GREENAWAY, JR., SHWARTZ, Circuit Judges, and SIMANDLE, Chief
                             District Judge.*

                                 (Filed: May 31, 2017)

      *
        Honorable Jerome B. Simandle, Chief District Judge of the United States District
Court for the District of New Jersey, sitting by designation.
                                      ______________

                                        OPINION**
                                      ______________

SIMANDLE, Chief District Judge.

       The Steelworkers Pension Trust by Daniel A. Bosh, Chairman, (collectively the

“Trust”) appeals the District Court’s dismissal of its Amended Complaint and denial of

its motion to stay arbitration. Because both counts of the Amended Complaint seek

withdrawal liability under provisions of the Employee Retirement Income Security Act of

1974 (“ERISA”) and the Multiemployer Pension Plan Amendments Act of 1980

(“MPPAA”) which 29 U.S.C. § 1401(a)(1) mandates must be resolved through arbitration

in the first instance, the District Court properly ordered this case to arbitration, and we

will affirm.

                                               I

       This case involves a claim for withdrawal liability arising from the bankruptcy of

RG Steel, one of the largest steel producing companies in the United States. The Trust is

a multiemployer, defined benefit pension plan. RG Steel was one of over 500

contributing employers to the Trust and made monthly pension contributions on behalf of

some of its workers until the company went into bankruptcy and ceased operations in or

about August 2012. This triggered RG Steel’s withdrawal liability to the Trust under

ERISA and the MPPAA, by which it owes its “pro-rata share of a multiemployer, defined

       **
         This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7
does not constitute binding precedent.
                                              2
benefit pension plan’s unfunded vested benefits” so that the Trust can continue to provide

monthly pension checks to its vested members. App. 610a.

       In March 2011, Defendant The Renco Group, Inc. (“Renco”) purchased RG Steel.

Because Renco owned 100% of RG Steel through this transaction, RG Steel became part

of the “Renco Controlled Group,” along with Defendants Ilshar Capital LLC, Blue

Turtles, Inc., Unarco Material Handling, Inc., Iteva Products LLC, the Doe Run

Resources Corporation, and US Magnesium LLC, which are all subsidiaries of Renco.

An entity is a member of a controlled group when its parent company possesses at least

80% of the combined voting power of shares of all classes of stock entitled to vote or at

least 80% of the total value of all shares, 26 C.F.R. § 1.414(c)-2(b)(2), and under ERISA,

members of a controlled group are jointly and severally liable for the withdrawal liability

of any other member. 29 U.S.C. § 1301(b)(1).

       RG Steel continued to make pension contributions to the Trust and other single-

and multiemployer pension plans on its employees’ behalf after it became owned by

Renco. However, by the fall of 2011, RG Steel was allegedly insolvent, and Renco was

being investigated by the Pension Benefit Guaranty Corporation (“PBGC”), a

government agency tasked with administering ERISA’s pension insurance program,

about RG Steel’s ability, and the ability of the other members of the Renco Controlled

Group, to cover its unfunded pension liabilities.

       On January 17, 2012, Renco transferred a 24.5% interest in RG Steel to Cerberus

Capital Management, LP (the “Cerberus Transaction”). The Trust alleges that Renco

reduced its ownership in RG Steel in order to remove the company from its controlled

                                             3
group so that it would not be liable for RG Steel’s withdrawal liability to the Trust if it

ceased operations. According to the Trust, this was the principal purpose of the Cerberus

transaction.

       Shortly thereafter RG Steel filed for Chapter 11 Bankruptcy (“the RG Steel

Bankruptcy”). RG Steel permanently ceased operations, which triggered its withdrawal

liability to the Trust under ERISA, 29 U.S.C. § 1383. Renco remained the majority owner

of RG Steel, holding 75.5% of the company. The Trust submitted Proofs of Claim for

withdrawal liability of over $86 million to the court-appointed Claims and Noticing

Agent in the RG Steel Bankruptcy on September 24, 2012. The Trust’s Proofs of Claim

were included in the Claims and Noticing Agent’s Claims Registers in the RG Steel

Bankruptcy, and they appeared on the same page as Proofs of Claim submitted by Renco

and Ilshar Capital. The Trust avers that the Claims and Noticing Agent made Renco or its

counsel aware of the Trust’s Proofs of Claim by providing copies shortly after they were

filed, but in any instance, Renco had notice of the Trust’s claims because all counsel

appearing in the RG Steel Bankruptcy, including counsel for Renco, received copies of

the Claim Register on January 11, 2013, April 8, 2013, and July 17, 2013. The Trust

avers that its Proofs of Claim constituted a lawful Notice and Demand for withdrawal

liability under Section 4219 of ERISA, 29 U.S.C. § 1399.

       On August 30, 2013, counsel for Renco wrote to the Trust acknowledging Renco’s

receipt of the Trust’s Proofs of Claim from the RG Steel Bankruptcy, and, without

identifying on what date Renco received actual notice of the Proofs of Claim, requested

review of the withdrawal liability assessment. Renco also asserted by letter that RG Steel

                                              4
was not part of the Renco Controlled Group because of the Cerberus Transaction, and

accordingly it was not liable for any of the withdrawal liability assessment. Although the

Trust maintains that this challenge was untimely because it came more than 90 days after

its Proofs of Claim were submitted, the parties agreed to toll any right to demand

arbitration pursuant to ERISA and MPPAA that Renco may have had as of January 28,

2014, so that a separate lawsuit by the PBGC against the Renco Controlled Group for RG

Steel’s unfunded pension liabilities could proceed. After the PBGC action settled, the

Trust sent Renco and the other members of the Renco Controlled Group a 60-Day Cure

Notice pursuant to ERISA Section 4219(c)(5), 29 U.S.C. § 1399(c)(5), demanding

quarterly payments of the withdrawal liability assessment. When no payment followed,

the Trust avers the entirety of the $86 million withdrawal liability became immediately

due and owing. Instead of paying the Trust the alleged withdrawal liability, Renco

demanded arbitration of the Trust’s withdrawal liability assessment.

       The Trust filed a two-count complaint in the United States District Court for the

Western District of Pennsylvania, alleging that Renco waived its right to arbitrate any

defenses to withdrawal liability because it did not timely request review of the Trust’s

determination, and seeking to set aside the Cerberus Transaction and consider RG Steel

part of the Renco Controlled Group because the principal purpose of the transaction was

to evade or avoid withdrawal liability. The District Court dismissed the Trust’s action and

                                             5
ordered the parties to arbitration, finding that both claims alleged disputes which ERISA

and the MPPAA require be resolved by an arbitrator. The Trust appeals.1

                                              II

       When an employer withdraws from a multiemployer pension plan, like the Trust,

it incurs withdrawal liability corresponding to its pro rata share of the unfunded vested

benefits due to the pension fund at the time of its withdrawal. See 29 U.S.C. §

1381(b)(1); Bd. of Trs. of IBT Local 863 Pension Fund v. C & S Wholesale Grocers,

Inc., 802 F.3d 534, 537 (3d Cir. 2015). The MPPAA treats entities that are part of a

controlled group as a single employer, and makes all members of a controlled group

jointly and severally liable for the withdrawal liability assessment of any member. See 29

U.S.C. § 1301(b)(1); IUE AFL-CIO Pension Fund v. Barker & Williamson, Inc., 788
F.2d 118, 127 (3d Cir. 1986).

       The MPPAA prioritizes the “quick and informal” resolution of withdrawal liability

disputes, and directs parties to arbitration in the first instance in most cases. Flying Tiger

Line v. Teamsters Pension Tr. Fund of Phila., 830 F.2d 1241, 1244 (3d Cir. 1987).

Collections of withdrawal liability generally proceed through three steps. First, when an

employer withdraws from a multiemployer plan, the plan’s sponsor or trustee must

determine the amount of the employer’s withdrawal liability, notify the employer of the

amount of liability, and demand payment in accordance with a schedule of payments. 29

1
 The District Court’s decision is an appealable final order under 28 U.S.C. § 1291.
Because the issues involved are purely legal, we exercise plenary review of the District
Court’s order. Bd. of Trs. of Trucking Emps. of N. Jersey Welfare Fund, Inc. – Pension
Fund v. Kero Leasing Corp., 377 F.3d 288, 294 (3d Cir. 2004).
                                               6
U.S.C. § 1382; Id. § 1399(b)(1). Second, the employer then has 90 days to request a

review of its withdrawal liability assessment, and the trustee must engage in a

“reasonable review” of its determination and inform the employer of any changes in its

withdrawal liability assessment. Id. § 1399(b)(2). Finally, either party may demand

arbitration to resolve a dispute concerning the withdrawal liability assessment, on a

timetable set by reference to the date on which the employer files its request for review

under section 1399(b)(2)(A). Id. § 1401(a)(1).

         The statute mandates arbitration for disputes “concerning a determination made

under sections 1381 through 1399 of this title.” Id.2 As we stated in Flying Tiger:

                [W]here 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.

Flying Tiger, 830 F.2d at 1247. However, if neither party demands arbitration under

section 1401(a), the amount of withdrawal liability determined by the trustee is due and

owing, on the schedule set by the trustee, and the trustee may bring an action in state or

federal court for collection. § 1401(b)(1). In short, the MPPAA sets forth two tracks for

2
    29 U.S.C. § 1401(a)(1) provides in relevant part:
                Any dispute between an employer and the plan sponsor of a multiemployer
                plan concerning a determination made under sections 1391 through 1399 of
                this title 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 1399(b)(2)(B) of this
                title, or (B) 120 days after the date of the employer’s request under section
                1399(b)(2)(A) of this title. The parties may jointly initiate arbitration within
                the 180-day period after the date of the plan sponsor’s demand under
                section 1399(b)(1) of this title.
                                                7
resolution of withdrawal liability disputes between a trustee and an employer: if a dispute

concerns sections 1381 through 1399, the provisions which define withdrawal liability,

how it is calculated, and the manner in which it must be demanded, the dispute must be

arbitrated in the first instance; but if the dispute concerns section 1401, which describes

the requirements for demanding arbitration, it need not be.

        In this case, both counts of the Amended Complaint concern disputes under

sections 1381 through 1399. First, the Trust’s claim that Renco waived its right to

arbitrate any defenses to the withdrawal liability assessment because it failed to timely

request review of the Trust’s demand is a dispute concerning the sufficiency of notice

under section 1399 and thus falls “within the purview of MPPAA provisions that are

explicitly designated for arbitration.” Flying Tiger, 830 F.2d at 1247. The Trust argues

that its waiver claim concerns Renco’s compliance with the arbitration demand procedure

under section 1401, a provision explicitly excepted from the MPPAA’s arbitration

requirement. It is undisputed that Renco demanded arbitration before the end date of the

parties’ tolling agreement. That event, however, does not necessarily mean that the

tolling period began before the statutory deadline for demanding arbitration expired.

More importantly, the Trust’s position misstates the crux of this dispute: whether the

Trust served statutorily sufficient notice of its demand for withdrawal liability, and

whether Renco timely requested review when it sent its challenge letter on August 30,

2013.

        These notice and review issues are governed by section 1399(b)(1)-(2). Indeed, the

Trust concedes that its case for federal court resolution rather than arbitration “hinges on”

                                              8
whether its Proofs of Claim submitted in the RG Steel Bankruptcy constituted sufficient

notice under the MPPAA, and whether Renco received actual or constructive notice of

the Proofs of Claim more than 90 days before it requested review. Appellant Br. at 27.

       Our decision in Doherty v. Teamsters Pension Trust Fund of Philadelphia and

Vicinity does not compel the opposite conclusion, as the Trust contends. There, we held

that it was for a court, and not an arbitrator, to determine whether arbitration was timely

demanded after the employer had requested review of the pension fund’s withdrawal

liability determination. 16 F.3d 1386, 1391 n. 4 (3d Cir. 1994). The question presented in

that case fell squarely within section 1401(a)(1), asking us to calculate the deadline for

demanding arbitration based on the particular date on which the employer challenged its

withdrawal liability. Here, the parties’ dispute focuses on steps preceding arbitration,

namely the sufficiency of notice and the timeliness of the request for review, which

Congress explicitly assigned to arbitration for resolution. The other cases the Trust cites

for the proposition that a court must always decide the timeliness of an arbitration

demand are inapposite because they, too, concern the timeliness of an arbitration demand

under distinguishable circumstances, in which the only factual disputes concerned the

third step of the withdrawal liability process. In those cases, it was undisputed either that

the employer requested review of its withdrawal liability,3 or that the employer received

3
  See Robbins v. Chipman Trucking, Inc., 866 F.2d 899, 901 (7th Cir. 1988) (parties
disputed when time to demand arbitration expired given a delay between the employer’s
request for review and the trustees’ response); Pension Plan for Pension Tr. Fund for
Operating Eng’rs v. Weldway Constr., Inc., 920 F. Supp. 2d 1034, 1046 (N.D. Cal. 2013)
(finding that even if a communication from the employer constituted a request for review,
the following request for arbitration occurred too late); Teamsters Pension Tr. Fund of
                                              9
something approximating notice and remained silent.4 Also distinguishable are cases in

which the parties consented to have a federal court determine issues that may instead be

arbitrable.5 To hold that a dispute regarding the sufficiency of notice or the timeliness of

a request for review can always be wrapped into a determination about the timeliness of

arbitration would ignore “the expressed congressional preference for arbitration under the

MPPAA.” Doherty, 16 F.3d at 1390. Rather, we find the District Court correctly looked

to the essence of the parties’ dispute – here, the adequacy of the Trust’s notice and the

date by which Renco had to request review in order to preserve its ability to demand

arbitration – rather than solely relying on the MPPAA provision with which the Trust

labels its “collection claim” in the Amended Complaint.

       Likewise, the Trust’s claim that the Cerberus Transaction was an attempt to evade

or avoid withdrawal liability must be arbitrated in the first instance. The MPPAA

specifically provides that transactions designed to “evade or avoid” withdrawal liability

may be disregarded and that those controlled group entities may still be treated as an

Phila. & Vicinity v. Laidlaw Indus., Inc., 745 F. Supp. 1016, 1025-26 (D. Del. 1990)
(noting that it was undisputed that the employer had received letters from four different
pension funds about withdrawal liability and that it had demanded review from some of
them but not arbitration).
4
  See Retirement Plan of Nat. Retirement Fund v. Lackmann Culinary Servs., Inc., No.
7:10-cv-6316, 2011 WL 3366354, at *1-*2, *6 (S.D.N.Y. July 29, 2011) (employer
admitted that it did not request a review of the withdrawal liability assessment until
federal court action was filed, and did not assert arbitrability as a defense in federal
court).
5
  The Seventh Circuit in Chicago Truck Drivers v. El Paso Co., 525 F.3d 591 (7th Cir.
2008), did not reach the issue. There, the parties agreed that the District Court could
resolve the adequacy of the trustee’s notice. Chi. Truck Drivers, Helpers & Warehouse
Workers Union (Indep.) Pension Fund v. El Paso CGP Co., No. 04-C-7872, 2005 WL
2737072, at *12 (N.D. Ill. Oct. 18, 2005).
                                             10
employer. 29 U.S.C. § 1392(c). Disputes concerning a determination under this section

undeniably fall under a provision of the MPPAA designated for arbitration in sections

1381 through 1399. See Id. § 1401(a)(1), supra. Our decision in Flying Tiger is directly

on point. In that case, the appellant sought to avoid withdrawal liability on the grounds

that the bankrupt entity that incurred the liability was not part of its controlled group, and

accordingly it was not an “employer” within the meaning of the MPPAA. We held that

“whether [the appellant] ceased to be a MPPAA employer in time to avoid liability for

[the related corporation’s] withdrawal . . . unavoidably raises an ‘evade or avoid’ issue

under section 1392(c).” 830 F.2d at 1250. Likewise, the Trust’s present allegations that

Renco sold off 24.5% of the equity in RG Steel to remove the company from the Renco

Controlled Group raise “evade or avoid” issues under section 1392(c) and are subject to

arbitration. Thus, the District Court was required to dismiss the Amended Complaint and

order the parties to arbitration.

                                              III

       For the foregoing reasons, we will affirm the District Court’s dismissal of the

Amended Complaint and denial of the Trust’s motion to stay arbitration.

                                              11