Court Opinion

ID: 2655460
Source: CourtListenerOpinion
Date Created: 2014-03-04 22:51:11.215389+00
Date Added: 2024-06-11T12:59:26.642313
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                       Pursuant to Sixth Circuit I.O.P. 32.1(b)
                              File Name: 14a0044p.06

             UNITED STATES COURT OF APPEALS
                           FOR THE SIXTH CIRCUIT
                             _________________

                                                X
                                                 -
 KNALL BEVERAGE, INC.,
                                                 -
 HDT EXPEDITIONARY SYSTEMS, INC., fka
 Hunter Manufacturing Company, and               -
                                                 -
                                                     No. 13-3698
 BEVERAGE DISTRIBUTORS, INC.,
                        Plaintiffs-Appellants, ,>
                                                 -
                                                 -
                                                 -
            v.
                                                 -
                                                 -
                                                 -
 TEAMSTERS LOCAL UNION NO. 293 PENSION

                       Defendants-Appellees. -
 PLAN, et al.,
                                                N
                  Appeal from the United States District Court
                 for the Northern District of Ohio at Cleveland.
               No. 1:12-cv-03125—Dan A. Polster, District Judge.
                           Argued: January 29, 2014
                       Decided and Filed: March 4, 2014
             Before: GUY, GIBBONS, and ROGERS, Circuit Judges.

                              _________________

                                  COUNSEL
ARGUED: Ronald L. Kahn, ULMER & BERNE LLP, Cleveland, Ohio, for Appellants.
David W. Alexander, SQUIRE SANDERS LLP, Columbus, Ohio, for Appellee Lipton.
John R. Doll, DOLL, JANSEN, FORD & RAKAY, Dayton, Ohio, for Teamsters and
Distillata Appellees. Azeez Hayne, MORGAN, LEWIS, BOCKIUS LLP, Philadelphia,
Pennsylvania, for Appellee American Bottling. Dan L. Makee, MCDONALD
HOPKINS LLC, Cleveland, Ohio, for Trustee Appellees. Shaylor R. Steele, BENESCH,
FRIEDLANDER, COPLAN & ARONOFF LLP, Cleveland, Ohio, for Appellee
DiGeronimo. ON BRIEF: Ronald L. Kahn, Brad A. Sobolewski, ULMER & BERNE
LLP, Cleveland, Ohio, John J. McGowan, Jr., Stephen C. Sutton, BAKER &
HOSTETLER LLP, Cleveland, Ohio, Adam R. Hanley, Jeffrey N. Lindemann, FROST
BROWN TODD LLC, Columbus, Ohio, for Appellants. David W. Alexander, SQUIRE
SANDERS LLP, Columbus, Ohio, Jeffrey J. Wedel, Ryan A. Sobel, SQUIRE
SANDERS LLP, Cleveland, Ohio, for Appellee Lipton. John R. Doll, DOLL, JANSEN,
FORD & RAKAY, Dayton, Ohio, for Teamsters and Distillata Appellees. Azeez Hayne,
Brandon J. Brigham, MORGAN, LEWIS, BOCKIUS LLP, Philadelphia, Pennsylvania,

                                        1
No. 13-3698 Knall Beverage, Inc., et al. v. Teamsters Local Union No. 293, et al. Page 2

Christopher A. Weals, MORGAN, LEWIS & BOCKIUS LLP, Washington, D.C., for
Appellee American Bottling. Dan L. Makee, William J. O’Neill, MCDONALD
HOPKINS LLC, Cleveland, Ohio, for Trustee Appellees. Shaylor R. Steele, Thomas O.
Crist, BENESCH, FRIEDLANDER, COPLAN & ARONOFF LLP, Cleveland, Ohio, for
Appellee DiGeronimo. James D. Kurek, FISCHER & PHILLIPS LLP, Cleveland, Ohio,
for Appellee American Metal. Scott Michael Hare, Pittsburgh, Pennsylvania, Robert D.
Anderle, SEELY, SAVIDGE, EBERT & GOURASH CO., LPA, Cleveland, Ohio, for
Appellee Cleveland Coca-Cola Bottling.
                                 _________________
                                        OPINION

                                 _________________

       ROGERS, Circuit Judge. The plaintiffs—three employers that were formerly
contributing members of the Teamsters Local Union No. 293 Pension Plan—appeal the
district court’s dismissal of their suit under the Multiemployer Pension Plan
Amendments Act. In withdrawing from the plan, the employers were required to pay,
and have paid, “withdrawal liability.” If the plan is terminated altogether by a “mass
withdrawal” of the remaining members within three years, the earlier withdrawing
members may be subject to additional “reallocation liability.” Under the Act, disputes
about the amount of such reallocation liability are subject to mandatory arbitration.
Plaintiffs claim that the mass withdrawal in this case—expedited as it was to occur
within the three-year period in order that plaintiffs would be subject to reallocation
liability—was invalid. Notwithstanding various arguments by plaintiffs, the district
court correctly ruled that the Act requires that this claim be arbitrated, and properly
dismissed the case without prejudice.

       Before Congress enacted the Multiemployer Pension Plan Amendments Act (“the
Act”), 29 U.S.C. §§ 1381–1461, employers had an incentive to withdraw from a pension
plan experiencing financial hardship. See Concrete Pipe & Prods. v. Constr. Laborers
Pension Trust for S. Cal., 508 U.S. 602, 608 (1993). Congress sought to eliminate this
incentive by making a contributor that chose to withdraw from a plan liable for its share
of the plan’s liabilities. Id. When a contributor withdraws from a plan, that contributor
must pay its share of the unfunded, vested benefits as calculated at the time of
No. 13-3698 Knall Beverage, Inc., et al. v. Teamsters Local Union No. 293, et al. Page 3

withdrawal from the plan. In the case of a mass withdrawal (i.e., when all of the
employers withdraw or stop contributing to the plan, 29 U.S.C. § 1341a), the Act
sometimes requires an employer that withdrew from the plan before the date of the mass
withdrawal to pay additional reallocation liability.

        In 2007 and 2008, each plaintiff independently reached an agreement with the
plan to terminate its individual membership. This meant that each plaintiff was subject
to—and the trustees assessed—withdrawal liability in an amount that reflected that
plaintiff’s share of unfunded, vested pension benefits pursuant to the Act. No party
disputes this liability, and the plaintiffs have either paid or are in the process of paying
those obligations. Rather, the plaintiffs challenge the trustees’ determination that the
plaintiffs owe reallocation liability following an alleged mass withdrawal by the rest of
the contributors to the plan. In 2009, the trustees determined that the fund terminated
by the mass withdrawal of the remaining employers. According to the plaintiffs, the
withdrawing employers achieved this mass withdrawal by reopening their collective
bargaining agreements and inserting “zipper clauses” into the agreements. These clauses
gave the employers the right to withdraw from the plan if all of the other contributors
withdrew. Then the employers simultaneously exercised their rights under the zipper
clauses, thereby causing the plan to terminate via mass withdrawal. Since the plaintiffs
had terminated their membership in the plan within three years of its eventual
termination, the trustees could assess reallocation liability against the plaintiffs.
29 U.S.C. § 1399(c)(1)(D). The trustees concluded that the plaintiffs together owed over
$12 million in additional reallocation liability. Plaintiffs challenge this assessment of
reallocation liability.

        As required by the Act, each plaintiff initiated an arbitration to dispute the
amount of reallocation liability assessed by the trustees. The plaintiffs subsequently
filed this civil action and claimed that the mass withdrawal itself was a sham. In light
of the civil action, the arbitration proceedings were put on hold. Various defendants
filed motions to dismiss and argued that the plaintiffs first had to complete arbitration
pursuant to 29 U.S.C. § 1401 before bringing their dispute in federal court. The district
No. 13-3698 Knall Beverage, Inc., et al. v. Teamsters Local Union No. 293, et al. Page 4

court agreed and dismissed the plaintiffs’ complaint without prejudice. The plaintiffs
appeal.

          Although the plaintiffs’ complaint requests that defendants continue contributing
to the plan and asks for a court to make certain declarations in support of its theories, the
only remedies sought in favor of the plaintiffs are relief from the obligation to make
reallocation liability payments, return of payments already made, termination of the
pending arbitration, and attorney fees and costs.           See Compl. at 48–49.        The
determination of whether plaintiffs are subject to reallocation liability is however
straightforwardly subject to mandatory arbitration by the Act.

          The plaintiffs cannot bring this action in federal court because they have not
complied with the Act’s arbitration requirement, 29 U.S.C. § 1401(a)(1), which states
that “[a]ny 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.” Sections 1381 through 1399 deal with the imposition and
calculation of liability for withdrawing from a plan, and specifically address the
redetermination required in the case of a withdrawal during a period three years before
a mass withdrawal. 29 U.S.C. § 1399(c)(1)(D). These provisions also contain the
statutory language relied upon by plaintiffs:

          If a principal purpose of any transaction is to evade or avoid liability
          under this part, this part shall be applied (and liability shall be
          determined and collected) without regard to such transaction.

29 U.S.C. § 1392(c). This provision, and the general provision that includes employers
as persons entitled to maintain a civil action under the provisions of ERISA regarding
withdrawal from multi-employer plans, 29 U.S.C. § 1451(a)(1), are conceded by
plaintiffs to be the “two statutes [that] form the basis of the Plaintiff-Appellants’ Civil
Action against of the Defendant-Appellees.” Knall Br. at 12.

          The plaintiffs argue that arbitration is not required because there was no plan
termination under § 1341a(a)(2) (a section not within §§ 1381–1399), which states that
a termination of a plan occurs as a result of “the withdrawal of every employer from the
No. 13-3698 Knall Beverage, Inc., et al. v. Teamsters Local Union No. 293, et al. Page 5

plan, within the meaning of [§1383].” In other words, arbitration is not required because
the validity of the mass withdrawal is not a determination made under §§1381–1399,
even though §1341a (not subject to mandatory arbitration) refers to and depends on
language in §§1381–1399 to determine when a termination is not valid. Indeed,
plaintiffs rely squarely on language from §§1381–1399 (i.e., § 1392(c)) to claim that the
termination is not valid, thus indirectly conceding the necessity of resolving an issue
subject to arbitration in order to adjudicate their claim.

        The circularity of the argument should be obvious. It is impossible to conclude
that the plan did not terminate under § 1341a without first making determinations under
§ 1392(c). According to the plaintiffs, the defendants shifted liability onto the plaintiffs
by amending their collective bargaining agreements, thereby initiating the mass
withdrawal and causing the plaintiffs to incur reallocation liability. Since the defendants
would otherwise have been responsible for this liability, the purpose of amending the
collective bargaining agreements was evading or avoiding liability.              Thus the
amendments to the collective bargaining agreements that made the mass withdrawal
possible are impermissible “evade or avoid” transactions and must be set aside under
§ 1392(c). And if those transactions are treated as never having happened pursuant to
§ 1392(c), then the defendant-employers never withdrew from the plan and a mass
withdrawal never occurred under § 1341a. Thus the plaintiffs’ claim under § 1341a is
inextricably intertwined with a determination under § 1392. Without making a finding
under § 1392, a decisionmaker could not conclude that the mass withdrawal never
occurred under § 1341a. And disputes about § 1392 determinations are subject to
mandatory arbitration. 29 U.S.C. § 1401(a)(1).

        Rejecting plaintiffs’ strained argument is fully consistent with Congress’s
apparent desire to subject disputes regarding trustees’ assessment of withdrawal and
reallocation liability to mandatory arbitration. See, e.g., Mason & Dixon Tank Lines,
Inc. v. Cent. States, S.E. & S.W. Areas Pension Fund, 852 F.2d 156, 164 (6th Cir. 1988);
Trustees of Colo. Pipe Indus. Pension Trust v. Howard Elec. & Mech. Inc., 909 F.2d
1379, 1385–86 (10th Cir. 1990); Teamsters Pension Trust Fund-Bd. of Trustees of W.
No. 13-3698 Knall Beverage, Inc., et al. v. Teamsters Local Union No. 293, et al. Page 6

Conference v. Allyn Transp. Co., 832 F.2d 502, 506 (9th Cir. 1987). At the end of the
day, this dispute is about whether the plaintiffs owe reallocation liability, and arbitration
is required in such cases.

        Plaintiffs’ arguments to the contrary are unconvincing. The plaintiffs argue that
the trustees made a “determination” under Plaintiffs § 1341a that there was a mass
withdrawal, without addressing whether § 1392(c) precluded such a determination, so
that there was no § 1392(c) “determination” subject to § 1401. The argument is but a
different way of couching the argument rejected above.

        Plaintiffs argue that an arbitration under § 1401 can only involve the plaintiff-
employer and the trustees, and that their theory of the case hinges on the conduct of
other parties (i.e. the union and the withdrawing employers). But the plaintiffs never
explain why the conduct of other parties cannot be considered during an arbitration to
determine the plaintiffs’ reallocation liability. There is no reason why, in reviewing the
trustees’ assessment of liability, the arbitrator cannot determine that the CBA
transactions were shams, that no mass withdrawal ever occurred, and that the plaintiffs
thus owe no reallocation liability.

        There is no basis for finding an exception in this case to the usual statutory
mandate for arbitration under the Act. To be sure, this court has recognized three
circumstances in which the parties may skip arbitration and proceed directly to federal
court: (1) when an employer makes a facial constitutional attack; (2) when an employer
has a verifiable claim that arbitration would lead to irreparable injury; and (3) when the
determination involves whether a company is an employer under the Act. Findlay Truck
Line, Inc. v. Cent. States, S.E. & S.W. Areas Pension Fund, 726 F.3d 738, 755 (6th Cir.
2013). Those exceptions encompass cases where arbitrating would not promote judicial
economy, or where pure constitutional or statutory interpretation is involved. Id.; Cent.
States, S.E. & S.W. Areas Pension Fund v. 888 Corp., 813 F.2d 760, 764 (6th Cir. 1987).
The plaintiffs candidly ask this court to create a fourth exception for determining
whether a plan terminated via mass withdrawal. But deciding that an ostensible mass
withdrawal was intended to “evade or avoid liability” is precisely the type of issue
No. 13-3698 Knall Beverage, Inc., et al. v. Teamsters Local Union No. 293, et al. Page 7

appropriate for arbitration. Nor does the logic underlying the employer-status exception
extend to a determination that a plan terminated via mass withdrawal. The employer-
status exception exists because only disputes “between an employer and the plan
sponsor” are subject to mandatory arbitration. 29 U.S.C. § 1401(a)(1). Whether a party
is an employer is a threshold question that must be answered in order to determine
whether that company has a duty to arbitrate in the first place. Mason & Dixon, 852
F.2d at 167. By contrast, the § 1401 duty to arbitrate in no way turns on whether or not
the plan terminated via mass withdrawal.

       We do not address plaintiffs’ due process arguments, which were not fully
presented to the district court. Generally, “an argument not raised before the district
court is waived on appeal to this Court.” Scottsdale Ins. Co. v. Flowers, 513 F.3d 546,
552 (6th Cir. 2008). While the plaintiffs did include a passing reference in their brief
below to a Supreme Court case involving due process, they never clearly argued that
submitting their dispute to arbitration would amount to a denial of due process.
“[V]ague references to an issue fail to clearly present it to the district court so as to
preserve the issue for appeal.” Thurman v. Yellow Freight Sys., Inc., 97 F.3d 833, 835
(6th Cir. 1996). In any event, due process challenges to the conduct of the arbitration
can be raised in the judicial review of the arbitrations permitted by 29 U.S.C.
§ 1401(b)(2).

       We need not address the various alternative grounds for affirmance asserted by
defendants. The judgment of the district court is affirmed.