Central States, Southeast & Southwest Areas Pension Fund v. Nitehawk Express, Inc.

In the

United States Court of Appeals

For the Seventh Circuit

Nos. 99-2698, 99-2539 & 99-2629

Central States, Southeast and Southwest Areas

Pension Fund and Howard McDougall, Trustee,

Plaintiffs-Appellees/Cross-Appellants,

v.

Nitehawk Express, Inc., Six Transfer, Inc.,

Interstate Express, Inc., Midwest Jobbers

Terminals, Inc. and James LaCasse,

Defendants-Appellants/Cross-Appellees.

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

Nos. 95 C 3944 and 97 C 1402--John A. Nordberg, Judge.

Argued February 8, 2000--Decided August 4, 2000

Before Cudahy, Manion and Diane P. Wood, Circuit

Judges.

Cudahy, Circuit Judge.

I) Background

In some industries, particularly those where

jobs are "episodic," individual companies do not

sponsor pension plans. See Langbein & Wolk, Pension and

Employee Benefit Law 57 (2d ed.). Instead, groups of

firms in an industry make pension contributions

to a joint, or multiemployer, pension plan. See

id. In 1980, Congress passed the Multiemployer

Pension Plan Amendments Act of 1980 (MPPAA). See

29 U.S.C. sec.sec. 1381-1461. The MPPAA was

prompted by Congress’s fear that as individual

employers withdrew from joint plans without

providing funds to cover their workers’ accrued

benefits, a plan could be underfunded by the time

the workers retired and their benefits came due.

See Central States, Southeast and Southwest Areas

Pension Fund and Howard McDougall v. Hunt Truck

Lines, Inc., 204 F.3d 736 (7th Cir. 2000). To

avoid the development of this scenario, Congress

provided that when an employer withdraws from a

multiemployer plan, it must pay "withdrawal

liability" in an amount roughly equal to its

proportionate share of the plan’s unfunded vested

benefits. Thus, withdrawal liability essentially

forces employers to continue making payments on

behalf of fully vested workers so that, even

though the company is no longer a going concern,

its fully vested workers will receive the

benefits they earned there. The employer’s

"contribution history," or the level of

contributions it has made on behalf of workers

over a fixed period of time, provides a

substantial element in the calculation of

withdrawal liability. Generally, a higher

contribution history indicates a higher

proportionate participation in a plan, but it is

not unusual in a plan where each employer sets a

different benefit level that some employers may

be paying too little for their promised benefits

while others pay too much. Therefore, until a

pension fund calculates how much a withdrawing

employer would have to invest in order to pay at

the promised benefit level, it is hard to say

whether a higher contribution history necessarily

correlates with a higher withdrawal liability.

James LaCasse was the 100 percent shareholder

of three companies known as Hines Transfer, Inc.

(Hines), Six Transfer Co. (Transfer) and Nitehawk

Express, Inc. (Nitehawk). The three are

considered to be a "controlled group," and are

treated as a single employer. See 29 U.S.C. sec.

1301(b)(1). We refer to the three as the LaCasse

controlled group. Transfer had eighteen workers;

Nitehawk had four. All three companies had

entered into collective bargaining agreements

with local affiliates of the International

Brotherhood of Teamsters. Under the agreements,

the companies were to make pension payments on

behalf of their workers to the Central States,

Southeast and Southwest Areas Pension Fund

(Central States), which is a multiemployer

pension plan under ERISA. See 29 U.S.C. sec.sec.

1002(37) and 1301(a)(3).

Hines Transfer shut down in 1986, and it was

freed from its obligation to make contributions

to Central States. Central States did not assess

withdrawal liability because the LaCasse group’s

contributions to the Fund did not decline more

than 70 percent over the preceding three-year

period as a result of the Hines shutdown. See 29

U.S.C. sec. 1385. In September 1992, Transfer

sold its assets to Six Cartage (Cartage). The

MPPAA exempts some sales of assets from

withdrawal liability, if the buyers and sellers

structure the sale appropriately and comply with

certain reporting and bonding requirements. Once

the purchase agreement was complete, Transfer

notified Central States of the sale, but claimed

an exemption. Critically, Transfer did not comply

with all of the technical requirements set out in

the statute’s exemption provision. Central States

did not assess withdrawal liability against Six

Transfer at that time. In any event, Cartage

continued making payments on behalf of former

Transfer employees. A year later, Nitehawk shut

down. Central States then determined that the

controlled group had completely withdrawn from

Central States, and therefore owed withdrawal

liability in the amount of $456,620. The

controlled group initiated arbitration, while

Central States exercised its statutory

prerogative to sue for so-called interim

withdrawal liability payments. See 29 U.S.C. sec.

1399(c)(2). In 1996, the district court--properly

deferring consideration of the underlying case--

granted summary judgment on the interim payment

issue for Central States, and ordered the

controlled group to pay $456,620 plus liquidated

damages and attorney’s fees.

In 1997, the arbitrator found that the LaCasse

group owed no withdrawal liability because

Transfer’s sale of assets--which accounted for

the lion’s share of the group’s reduced

contribution to the Fund--was exempt from

withdrawal liability under the MPPAA. See

Appellant’s App. at 24 (In the Matter of

Arbitration Between Nitehawk Express and Six

Transfer, Inc. and Central States, Southeast and

Southwest Areas Pension Fund, AAA Case No. 51-

621-00147-94 at 13-14) (hereinafter In the Matter

of Nitehawk). Predictably, the LaCasse group

moved to enforce the arbitration award and vacate

the judgment ordering interim payment. The

district court determined that, contrary to the

arbitrator’s view, Transfer had failed to meet

the three conditions required to secure an

exemption from withdrawal liability. Because the

sale of assets was not exempt, the court

determined, it constituted a partial withdrawal

from the Fund. Although withdrawal liability was

not proper so long as one member of the

controlled group, Nitehawk, remained a going

concern, as soon as Nitehawk shut its doors, the

controlled group had to ante up. Therefore, the

court granted partial summary judgment to Central

States and ordered the LaCasse group to pay

withdrawal liability. But it went on to hold that

the group’s liability should be calculated

without reference to Transfer’s contribution

history because, in its view, Cartage had

essentially adopted Transfer’s contribution

history, which meant the Fund had suffered no

harm. See Central States et al. v. Nitehawk

Express, Inc. et al., No. 97 C 1402 (N.D Ill.

March 23, 1999) (hereinafter "Mem. Op.") at 15-

16. The LaCasse group appeals the award of

withdrawal liability, and Central States cross-

appeals the district court’s decision to allocate

Transfer’s contribution history to Cartage, as

well as its refusal to award attorney’s fees in

connection with Central States’ victory in the

interim payments case./1

II) Analysis

A) Background of the MPPAA

The MPPAA requires that a company choosing to

withdraw from a multiemployer pension plan must

pay "withdrawal liability," which is intended to

cover that company’s share of the unfunded vested

benefits that exist when it withdraws. See 29

U.S.C. sec.sec. 1381, 1391. Congress permits

multiemployer pension plans many options for

calculating withdrawal liability, all of which

are intended to assure that departing employers

bear their fair share of pension payments, and do

not leave others holding the bag. Most of the

methods endorsed by Congress calculate withdrawal

liability "as a function of contributions made by

the withdrawing employer, normally for the five

[or ten] plan years ending with the year in which

the unfunded vested benefits or change in the

unfunded vested benefits is determined." Ronald

A. Kladder, Asset Sales After MPPAA--An Analysis

of ERISA Section 4204, 39 Bus. Law. 101, 117

(November 1983).

Congress recognized that the daunting prospect

of withdrawal liability might deter a struggling

company from selling a failing division and

trying to salvage the others. In order to

encourage asset sales, Congress excused companies

from withdrawal liability when they sold assets.

See 29 U.S.C. sec. 1384. But this exemption was

potentially problematic. What if the purchaser

withdrew from the plan? Because the MPPAA

calculates withdrawal fees based on a five- or

ten-year history of contributions to the Plan,

"the purchaser’s withdrawal liability, calculated

as of the date of the sale, would be zero unless

the purchaser also had a preexisting contribution

obligation to the plan." See Kladder, supra, at

116.

To avoid the "zero liability" scenario, Congress

conditioned the seller’s withdrawal exemption on

the purchaser’s assumption of a preexisting

obligation to the plan. Specifically, Congress

established three conditions for exemption.

First, the buyer must assume an obligation to

make contributions to the plan at substantially

the same level as the seller’s contribution. See

29 U.S.C. sec. 1384(a)(1)(A). Second, the

purchaser must provide to the plan a bond or

escrow account for five plan years commencing

with the first plan year beginning after the sale

of assets. The bond must be roughly equivalent to

the seller’s annual contribution for recent

years, and will be paid to the plan if the buyer

withdraws or misses an annual contribution to the

plan at any time in the five years following the

sale. See 29 U.S.C. sec. 1384(a)(1)(B). Finally,

the contract for sale must provide that, if the

buyer fully or partially withdraws in the five

years following the sale and does not pay

withdrawal liability, the seller is secondarily

liable for the fee. See 29 U.S.C. sec.

1384(a)(1)(C).

B) The Transfer-Cartage Sale of Assets

In the present case, Central States contends

that Transfer failed to obtain an exemption when

it sold its assets to Cartage. The arbitrator

found that Transfer had properly obtained an

exemption. See In the Matter of Nitehawk,

Appellant’s App. at 37. The district court

disagreed. The LaCasse group urges us to defer to

the arbitrator. The district court reviewed the

arbitrator’s actions for clear error, and we

apply the same standard in reviewing the district

court’s decision as that court did in reviewing

the arbitrator’s interpretation. See Matteson v.

Ryder Sys. Inc., 99 F.3d 108, 112 (3d Cir. 1996).

Clear error may seem an unusually exacting

standard of review for an arbitration award. It

is true that Congress specifically stated that

"there shall be a presumption, rebuttable only by

a clear preponderance of the evidence, that the

findings of fact made by the arbitrator were

correct." 29 U.S.C. sec. 1401(c)./2 But we have

recognized that whether a party has successfully

structured a transaction to satisfy the statutory

standard for exemption is a "classic example[ ]

of [a] ’mixed question[ ] of law and fact.’"

Chicago Truck Drivers, Helpers and Warehouse

Workers Union (Independent) Pension Fund v. Louis

Zahn Drug Co., 890 F.2d 1405, 1409 (7th Cir.

1989). That is a particularly apt description of

the present case, in which the arbitrator was

required to compare the terms of the contract

with the statutory requirements, and to attach

legal significance to Cartage’s failure to post

a bond. Congress did not set forth a standard by

which to review an arbitrator’s findings on these

types of questions. We resolved in Zahn that the

proper standard of review for such questions is

for clear error. See id. at 1411. A finding is

clearly erroneous if the reviewing court, after

acknowledging that the factfinder below was

closer to the relevant evidence, is firmly

convinced that the factfinder erred. The district

court stated, and we agree, that the arbitrator

committed clear error on the question whether

Transfer’s sale of assets merited an exemption.

See Mem. Op. at 11.

In this case, the clear error is apparent upon

review of the Purchase Agreement, the provisions

of which are fatally noncompliant with the MPPAA.

As required by statute, the purchase agreement

does seem to obligate Cartage to make payments at

substantially the same level as Transfer, thus

satisfying the first precondition for

exemption./3 But the Purchase Agreement does not

assign secondary liability to Transfer. The

LaCasse group protests that the contract

accomplishes the goal of secondary liability

because it calls for Cartage’s liabilities to

revert back to it in the event of a breach. The

arbitrator agreed. See In the Matter of Nitehawk,

Appellant’s App. at 36. The LaCasse group says

"reversion" is called for in sections 14 and 15

of the Agreement. Section 14 states that

covenants and warranties will survive closing,

and section 15 provides for remedies in the event

of a breach of contract. That provision states

that in the event Cartage breaches the contract,

Cartage, "at [Transfer’s] option, will relinquish

all title, possession and control of the business

and all assets purchased under this agreement to

[Transfer]." Appellee’s App., Tab 2 at page 10,

sec. 15(b). LaCasse testified at his deposition

that this language required him to reassume

liabilities if Cartage were to breach the

contract. Contrary to that interpretation, the

plain language does not call for an automatic

reversion to Transfer or require that Transfer

reassume liabilities. It states only that Cartage

would have to turn the business back over to

Transfer "at [Transfer’s] option." Appellee’s

App., Tab 2 at page 10, section 15(b) (emphasis

added). We need not speculate whether Transfer

would have exercised that potentially dubious

option if Cartage’s prospects had gone south. As

discussed above, Congress did not want to leave

pension plans without recourse if buyers

"vamoosed" without paying withdrawal fees. See

Artistic Carton Company v. Paper Industry Union-

Management Pension Fund, 971 F.2d 1346, 1352-53

(7th Cir. 1992). Congress considered it crucial

that sellers be bound to pay withdrawal liability

if buyers proved unsound. The contract involved

here does not bind Transfer, and therefore the

sale of assets cannot be exempt.

This failure alone is enough to deprive the

asset sale of the exemption. Moreover, we note

that Transfer and Cartage bungled the bond

requirement. The arbitrator concluded that the

failure to post bond was "not determinative of

this dispute," because Central States’ interests

were protected. In the Matter of Nitehawk,

Appellant’s App. at 37. The district court

stated, and we agree, that this is a second

instance of clear error. As discussed above, the

purchaser must furnish a bond "commencing with"

the first plan year after the sale of assets. See

29 U.S.C. sec. 1384(a)(1)(B). This is not an

empty formality; it forces the buyer to back up

its promise to pay the seller’s withdrawal

liability until the buyer accrues its own

liability. See, e.g., Artistic Carton, 971 F.2d

at 1352. (One might wonder what the buyer

receives in exchange for accepting the liability

and putting additional money down. Presumably,

the sale price for the assets reflects the

liabilities that go along with them. See, e.g.,

5 Erisa Litigation Rep. 13, 16 (April 1996) ("the

issue of additional contingent liability [if the

contribution history is to be transferred to the

buyer] can be factored into the sales price.")).

In the present case, Cartage did not post a bond.

The plan may waive the bond requirement if the

parties request a waiver and meet certain

statutory conditions, one of which is a bond

amount less than $250,000. See 29 C.F.R. sec.

4204. There is no question in this case that the

parties would have qualified for the exemption

because the amount of the required bond was less

than $250,000. But the parties erred

procedurally. First, Transfer requested the bond

exemption alone, when the statute explicitly

states that "the parties" must request a waiver.

Further, Transfer waited until six months into

the first plan year to seek the bond waiver. See

Record Vol. I at Tab 5. Transfer argues that

Cartage did not have to post the bond until the

end of the first plan year, and therefore its

waiver request was timely if filed before the

expiration of the plan year.

We find the waiver request inadequate. First,

Cartage did not participate in the waiver

request. This alone makes it invalid. See

Brentwood Fin. Corp. v. Western Conference of

Teamsters Pension Fund, 902 F.2d 1456, 1461 (9th

Cir. 1990) (seller’s request for waiver

insufficient). And it is not as though we are

punishing Transfer for Cartage’s lapse; Transfer

could probably have met the requirement of a

joint request by simply asking a Cartage official

to sign the waiver request it drafted, but it did

not. Additionally, we doubt the request was

timely. We have stated as a general matter that

the determination as to whether the purchaser has

met the requirements for an exemption is at the

time of the sale, not afterwards. See Central

States, Southeast and Southwest Areas Health and

Welfare Fund v. Cullum Companies, Inc., 973 F.2d

1333, 1338 (7th Cir. 1992). This principle pulls

us towards the Fund’s view that Cartage had to

either post the bond or request the variance at

the start of the plan year./4 Transfer makes

another, more fanciful, argument, that a seller

need not satisfy the requirements for withdrawal

liability exemption until there is a complete

withdrawal. Cullum nips this argument in the bud:

the time of sale is the time to satisfy the

requirements. In sum, we conclude that when the

LaCasse group sold Transfer’s assets to Cartage,

it failed to comply with two of the three

requirements necessary to secure an exemption

from withdrawal liability.

The arbitrator held that the shutdowns of Hines

and Nitehawk were not sufficient to trigger

withdrawal liability because the Transfer sale

was exempt. That finding of exemption was clear

error on a mixed question of law and fact; once

it is reversed, the arbitrator’s conclusion

regarding the availability of withdrawal

liability (which is probably best characterized

as a mixed question of law and fact) is also

clearly erroneous. Together, the shutdowns of

Hines, the non-exempt sale of Transfer’s assets

and the shutdown of Nitehawk amounted to a

complete withdrawal from the Plan, sufficient to

trigger withdrawal liability.

C) Apportioning Contribution History

The remaining question is how to apportion the

LaCasse group’s contribution history among the

parties in this case. Because the arbitrator did

not think the group had withdrawn, it did not

hazard a calculation. The district court, in

granting summary judgment, deleted Transfer’s

contribution history from the LaCasse group and

attributed it to Cartage./5 We review this grant

of summary judgment de novo. See Hunt Truck

Lines, 204 F.3d at 742. The most precise and

authoritative guide to allocating contribution

history in the present circumstance has been

offered by the Pension Benefit Guaranty

Corporation. As the agency charged with

interpreting the MPPAA, the PBGC is entitled to

substantial deference when it construes the

statute. See Trustees of Iron Workers Local 473

Pension Trust v. Allied Products Corp., 872 F.2d

208, 210 n.2 (7th Cir. 1989). PBGC Opinion Letters

are not as authoritative as PBGC regulations, but

they have been discussed in the same vein as

Revenue rulings. See, e.g., Blessitt v.

Retirement Plan for Employees of Dixie Engine

Co., 848 F.2d 1164, 1170-73 (11th Cir. 1988). In

PBGC Opinion Letter 92-1, the agency considered

a complex scenario in which a controlled group

like LaCasse shed four subsidiaries, each

accounting for 25 percent of the group’s

contributions to a multiemployer pension plan.

See PBGC Op. Ltr. 92-1, 1992 WL 425182 (March 30,

1992) (hereinafter PBGC Letter). The PBGC’s

hypothetical controlled group sold the assets of

subsidiary B in a non-exempt sale, just as

LaCasse sold the assets of Transfer. See id. at

1. The PBGC stated that "the contribution history

of [the subsidiary] remains part of the

controlled group’s contribution history for

purposes of calculating amounts of subsequent

withdrawal liability." Id. at 2. Indeed, the PBGC

intimated that the only reason the sale of

subsidiary B did not trigger liability itself was

that it caused a drop of just 25 percent in the

controlled group’s contributions to the Fund. See

id. In the present case, the Fund explains that

it did not view Transfer’s withdrawal as causing

the required three-year drop in contributions to

qualify as a partial withdrawal. So the sale did

not--as in the PBGC hypothetical--trigger

liability. Therefore, Transfer is in exactly the

position of the PBGC’s hypothetical asset seller,

and just as the contribution history remained

with the seller in that case, it must remain with

the seller in this case.

The district court relied on a different and,

we think, less analogous passage in the PBGC

letter to reach the opposite result. In that

passage, the PBGC instructed that if the

controlled group sold the stock of one

subsidiary, and the controlled group later

withdrew, the group’s liability would be

determined without reference to the contribution

history of the subsidiary whose stock had been

sold. See id. at 3. Why? And why doesn’t the same

reasoning apply to a sale of assets? The answer

is that a sale of stock is covered by a different

provision of the statute, 29 U.S.C. sec. 1398,

which specifies that the successor employer

resulting from such a transaction "shall be

considered the original employer." Therefore,

under the statute, the contribution history of a

subsidiary whose stock is sold automatically

transfers to the buyer. See PBGC Ltr. at 2-3.

This statutory dictate reflects the longstanding

principle of corporate law that "a purchaser of

corporate stock takes the risk of all outstanding

corporate liabilities, except in so far as the

contract of purchase may provide otherwise." Ford

Motor Co. v. Dexter, 56 F.2d 760, 761 (2d Cir.

1932).

The Ninth Circuit analyzed a situation similar

to the one before us in Penn Central Corp. v.

Western Conference of Teamsters Pension Trust

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

the parent company of a controlled group shut

down two subsidiaries. It then sold the stock of

a third subsidiary. See id. at 533. Because the

stock sale caused the controlled group to cease

contributions to the Fund, withdrawal liability

was triggered. The Ninth Circuit attributed the

subsidiary’s contribution history to the

purchaser. But it allocated the contribution

history for the two shuttered subsidiaries to the

seller. Id. at 533. It reasoned that when the

MPPAA equated the purchaser with the "original

employer," it meant for the purchaser to become

responsible only for the liability of the

subsidiary it bought. This result confirms our

view that the "original employer" provision for

stock sales merely codifies the principle that a

stock purchaser takes the liability associated

with that stock.

In the present case, Cartage did not purchase

Transfer’s stock. So although the case seems

superficially analogous to Penn Central, it is

actually quite different. Under neither corporate

law nor the MPPAA did Transfer’s liabilities--in

particular, its contribution history--

automatically shift to the purchaser. The MPPAA

and the PBGC’s interpretations of it clearly

indicate that unless the purchaser of assets

assumes withdrawal liability by taking the

prescribed steps, the contribution history and

associated withdrawal liability stay with the

seller. So neither Penn Central nor the latter

portion of the PBGC Opinion Letter are as

instructive as the early portion of the PBGC

Opinion Letter which demonstrates that the

contribution history for a non-exempt sale of

assets remains with the seller.

But the district court did not rely solely on

the PBGC Opinion Letter and Ninth Circuit

opinion. The judge trusted his own eyes, and it

is much harder for us to discount his view than

it was to distinguish the authority he invoked.

At the time of the 1992 sale, Cartage was not

legally responsible/6 for Transfer’s pre-sale

contribution history and thus could have escaped

withdrawal liability. But by the time the case

reached Judge Nordberg in 1997, Cartage would

have been on the hook for withdrawal liability

based on the five-year contribution history it

had accrued since the purchase. The court seemed

to reason that because the Fund had suffered no

harm, it was not justified in seeking to punish

Transfer./7

The "no harm, no foul" approach is

instinctively appealing in the circumstances,

because a retrospective view may cast more light

on the relative rights and obligations of the

parties than would a prospective view at the time

of sale. Still, we must reject it. We have in the

past expressly refused to examine harm that

arises after a sale of assets in determining the

status of that sale. See Cullum, 973 F.2d at

1338. In Cullum, the parties completed an exempt

sale of assets, in which the buyer was obligated,

under the purchase agreement, to contribute to

the plan. See id. The buyer eventually reneged on

this obligation and the Fund assessed withdrawal

liability against the seller, reasoning that the

sale of assets was not exempt because the buyer

did not follow through on its obligation. We held

that the exempt status of the sale was to be

determined at the time of sale. See id. If the

buyer pledged to make contributions at the time

of sale, its eventual bad faith would not change

the status of the sale. The same principle that

worked to the seller’s advantage in Cullum must

be applied here to the seller’s detriment. At the

time of the transaction, the sale did not meet

the statutory requirements whereby Transfer’s

contribution history was shifted to Cartage.

Cartage’s good faith in continuing to make

contributions, thereby building up its own

history on which withdrawal liability could

eventually be calculated, does not change the

fact that the sale was not exempt. The LaCasse

group had one opportunity to discard Transfer’s

contribution history--during the sale--and it did

not do so.

We recognize that in some circumstances,

contemporaneous analysis will look like a trap

for the unwary. But the opposite approach--asking

courts to calculate withdrawal liability

retrospectively--would force the parties to scan

a kaleidoscope, in which constantly changing

facts assume rising and falling importance until

the arbitrary moment in time when an opinion

issues. That would undermine the very certainty

the MPPAA was meant to guarantee. So we have

adopted an arguably imperfect standard in the

service of MPPAA’s rules of general application

(which may ill fit, under particular

circumstances, the realities of these transient

corners of the economy). For instance, in Central

States, Southeast and Southwest Areas Pension

Fund v. Bellmont Trucking Co., 788 F.2d 428, 432

(7th Cir. 1986), we refused to excuse a bankrupt

company from withdrawal liability even though its

workers went on to retire and thus foreclose the

need for pension contributions, or went on to

obtain new jobs where the new employer paid their

contributions. We suggested that the Fund’s lack

of injury was merely fortuitous, and applied a

prospective approach to withdrawal liability that

would protect the Fund in the event it was not as

lucky the next time. See id. at 432 n.2.

The LaCasse group urges that we have taken a

flexible line in the past in order to achieve an

equitable result, citing Central States,

Southeast and Southwest Areas Pension Fund v.

Bell Transit, 22 F.3d 706 (7th Cir. 1994). In

Bell, the employer sold its assets in an exempt

sale, and retained an amount of cash. The Fund

learned of the withheld cash, and determined that

the seller had "liquidated." Id. at 708-09. Under

the MPPAA, if the seller liquidates within five

years after the sale, it is required to post a

bond, which the seller in Bell had not done.

Because the seller had posted no bond, the Fund

tried to assess withdrawal liability against it.

We blocked this effort, stating that the Fund

should only be able to recover the bond amount

(preferably through a civil action), instead of

assessing withdrawal liability against the seller

and giving the Fund a "windfall." Id. at 712. At

first blush, it may seem that we "manipulated"

the statute in order to achieve a "fair" result.

But a close reading of Bell reveals that it was

just another application of the "contemporaneous

analysis" rule. We found that the sale was exempt

when transacted, and could not be unraveled by a

subsequent failure to post bond for the eventual

liquidation. See id. at 711-12. The LaCasse group

argues that Bell sets a precedent against "extra"

payments to the Fund. But in Bell, the Fund was

not entitled to withdrawal liability at the time

of sale, so permitting a delayed assessment of

liability would have paid to the Fund something

that was not owed. Here, the Fund was entitled to

withdrawal liability at the time of sale.

Ultimately, the district court seemed persuaded

by the LaCasse group’s protestation that forcing

it to pay withdrawal liability would give the

Fund a "double recovery." See Mem. Op. at 13. We,

too, are troubled by the possibility that the

Fund may recover more than is required to fully

fund these workers’ benefits. After all, it is

the job of courts to do justice, not make

superfluous awards as punishment for technical

errors. However, on further examination, we see

nothing at stake here to compel us to ignore the

statutory requirement that sellers meet certain

conditions to qualify for an exemption or to

ignore our own precedent assessing the validity

of an exemption at the time of sale or the PBGC’s

instruction that non-exempt sellers retain their

contribution history.

In a pension plan, "[w]orkers’ benefits may be

stated as a percentage of their highest average

incomes . . . multiplied by the number of years

of covered employment." Artistic Carton, 971 F.2d

at 1351. Multiemployer pension plans generally

employ "cliff vesting," meaning that after a

fixed number of years of service, employees gain

a nonforfeitable right to the benefits they have

accumulated. See Angell & Polk, Multi-Employer

Plans, in II Employee Benefits Law sec. 14.6 (Illinois

Institute of Continuing Legal Education, 1994).

Then, as explained in Artistic Carton, an

employee’s vested benefits will continue to grow

as long as he continues to rack up additional

years of service. See 971 F.2d at 1351.

Importantly, one feature of multiemployer plans

is the "portability" of pension credits. See

Angell & Polk, supra, at sec. 14.7. This means

that a worker may leave one Plan participant and

join another, bringing with him the "years of

service" from his previous job. Withdrawing

employers stop making contributions on behalf of

employees before the employees have retired.

Withdrawal liability is supposed to represent the

amount that, "when invested, would theoretically

produce . . . a sum precisely sufficient to pay

(the employer’s proportional share of) a plan’s

estimated vested future benefits." Milwaukee

Brewery Workers’ Pension Plan v. Jos. Schlitz

Brewing Co., 513 U.S. 414, 426 (1995). Central

States apparently bases withdrawal liability on

an employer’s past ten years of contribution

history (at least that is what it did for the

LaCasse group)./8 At the time of withdrawal,

some variables necessary to determining each

workers’ benefits upon retirement are necessarily

unknown. For instance, the employer cannot know

how many years of service a worker will have

accrued by the time he retires or how much his

salary might rise before that time. And before

the Fund can calculate the amount of money that

must be invested today to guarantee adequate

benefits at retirement, it must discount future

benefits to their current value. The Fund has

wide discretion in adopting a valuation method,

but many such methods depend in part on current

market values, which will almost certainly

fluctuate over time. See, e.g., Masters, Mates &

Pilots Pension Plan v. USX Corp., 900 F.2d 727,

730-33 (4th Cir. 1990).

Based on this background, we see that the

equities of withdrawal liability are debatable in

a number of scenarios. In the paradigmatic case,

the non-exempt seller such as the LaCasse group

must pay withdrawal liability on behalf of its

employees. And a non-exempt buyer like Cartage

would have no withdrawal liability even if it

went out of business immediately. The MPPAA rules

were tailored to this circumstance, and they work

appropriately to guarantee that the Fund is

covered by the party who is equitably responsible

for the unfunded vested benefits. But the rule

leads to awkward results elsewhere. For instance,

what if a non-exempt seller were forced to pay

withdrawal liability, and the buyer in that sale

shut down only after ten years of pension

payments? The buyer would be assessed withdrawal

liability based on the ten-year contribution

history it had amassed, on top of the seller’s

withdrawal liability. Therefore, both the seller

and the buyer will have made "full" withdrawal

liability payments; that is, each will have paid

the amount that, when invested, would result in

the promised benefits at retirement. But, this is

not quite the case because, after working ten

years for the second employer, the workers’

promised benefits (which are based on accrued

years of service) will be higher. Additionally,

the applicable valuation rates and actuarial

estimates may have changed in the intervening

years, as they are based in part on market

values. So in this scenario--which is essentially

the same as the dispute between the LaCasse group

and the Fund--the Fund may have recovered more

than necessary to fully fund the workers’

unfunded vested benefits. But it is difficult for

a reviewing court--not privy to the Fund’s

changing valuation methods or the individual

workers’ records--to know how much "excess" the

Fund stands to recover. We are left only with the

queasy feeling that by mechanically applying a

rule of general application, we may be leaving

the Fund in this instance more than whole.

At the same time, it would not be feasible for

us to attempt to apply some general rule of

equity to right this seeming wrong because, when

dealing with the MPPAA and the many variables

involved in calculating withdrawal liability, it

is extraordinarily hard to know what is necessary

to adequately fund the pension plan and

simultaneously do equity to the participants.

What might come to mind is some sort of

overriding rule stating that ultimately the

seller can be liable for no more than is required

to make the Fund whole. This rule might be

feasible to administer, and would place on the

Fund the burden of demonstrating the extent of

its injury, an exercise it has not attempted in

the present case. But Congress has not seen fit

to provide such a rule, and especially

considering the uncertainties involved, it is

impermissible to provide one by judicial fiat.

Whether such a rule is warranted is a policy

judgment, requiring that the possibility of

excess recovery be weighed against the need for

guaranteeing adequate funding of pensions under

all circumstances.

At any rate, given our reluctance to fashion

some equitable rule on our own, we find that the

potential excess recovery in this case does not

violate the MPPAA and is probably within the

bounds of equity. To the extent that the

possibility of excess recovery might offend

considerations of equity, this may be an

inescapable price Congress has elected to pay in

adopting the statutory rules. We believe that the

statute and its administrative interpretations

must continue to be refined to minimize the

chance of duplicative recoveries and other

arguable inequities. And to relieve judicial

concern about excess recovery, the Fund must be

concerned with showing the equity of its demands

as well as their conformance with the technical

requirements of the Act.

D) Attorney’s Fees

Finally, Central States appeals the district

court’s decision to vacate the award of

attorney’s fees to Central States based on the

Fund’s success in securing interim payments while

the arbitration was pending. According to the

MPPAA, an employer must pay a withdrawal

liability assessment according to a schedule set

by the pension fund, "notwithstanding any request

for review or appeal of determinations of the

amount of such liability . . ." 29 U.S.C. sec.

1399(c)(2). This provision captures the MPPAA’s

"pay now, arbitrate later" principle. See Central

States, Southeast and Southwest Areas Pension

Fund v. Wintz Properties, Inc., 155 F.3d 868, 872

(7th Cir. 1998). The statute further provides that

"any failure of the employer to make any

withdrawal liability payment within the time

prescribed shall be treated in the same manner as

a delinquent contribution (within the meaning of

section 1145 of this title.)" 29 U.S.C. sec.

1451(b). Finally, the statute provides that in

any action by a plan to enforce an employer’s

delinquent contributions, "the court shall award

the plan" . . . "reasonable attorney’s fees and

costs of the action" if the action results in a

"judgment in favor of the plan." 29 U.S.C. sec.

1132(g)(2) (emphasis added).

The LaCasse group argues that "no notice of a

demand for payment was ever given to Six Transfer

and therefore, it cannot be liable for interim

payments." Appellant’s Br. at 19. But the notice

sent to the group upon the withdrawal of Nitehawk

states that it covers "all members of any

controlled group . . . of which [Nitehawk] is a

member." Appellee’s App. at 19. Notice to one

controlled group member constitutes notice to

all. See, e.g., Central States, Southeast and

Southwest Areas Pension Fund v. Slotky, 956 F.2d

1369, 1375 (7th Cir. 1992). Further, the Fund’s

extensive documentation of its liability

assessment clearly reflects that its calculations

reflected the contribution histories of Nitehawk,

Hines, and Transfer. So the LaCasse group must

have understood that it was to pay withdrawal

liability for Transfer. The LaCasse group did not

pay the liability before beginning arbitration,

and it was therefore delinquent. Section 1132

seems to us to mandate that the LaCasse group pay

the fees if Central States won a judgment on the

interim payment issue, notwithstanding the

ultimate outcome of the case. The district court

viewed the outcome of this case as a partial

victory for each side. See Appellant’s App. at 21

(Order of May 19, 1999). But we have suggested

that an interim payment order was a final order

on the limited issue of which party gets to hold

the stakes during an arbitration. See Trustees of

the Chicago Truck Drivers, Helpers and Warehouse

Workers Union (Independent) Pension Fund v.

Central Transport, Inc., 935 F.2d 114, 116-17 (7th

Cir. 1991). The MPPAA’s interim payment provision

reflects Congress’s concern that thinly

capitalized employers who are not forced to pay

prior to arbitration may empty their pockets by

the time an arbitrator determines they owe money

to the Fund. See id. So the interim payment

accomplishes a goal entirely different from the

arbitration on the merits. As such, the Fund’s

victory in securing interim payments cannot be

undone by a loss at the merits stage. Therefore,

the district court did not have discretion to

vacate the award of attorney’s fees for that

portion of the litigation.

III) Conclusion

In sum, we affirm the district court’s finding

that the Transfer-Cartage sale did not meet

statutory requirements and therefore did not

exempt Transfer from payment of withdrawal

liability. We affirm the district court’s

conclusion that when Nitehawk withdrew from

Central States, the LaCasse group effected a

complete withdrawal from the Fund. We affirm the

district court’s conclusion that the assessment

of withdrawal liability against the LaCasse group

is warranted. We reverse the district court’s

conclusion that Transfer’s contribution history

should be excluded from the computation of the

LaCasse group’s withdrawal liability, and remand

for a calculation reflecting the contribution

histories of all three employer-members of the

group. Finally, we reverse the district court’s

decision to vacate the attorney’s fees initially

awarded to the Fund for its success in securing

interim payments from the group, and we remand

for reimposition of an order in accord with this

opinion. Each party to bear its own costs.

/1 Central States filed its notice of appeal June

18, giving the LaCasse group 14 days to file its

appeal. It appears the LaCasse group sent its

papers via UPS Next-Day Air on June 29, 1999. The

clerk’s office inadvertently recorded receipt on

July 6, but noted the date July 1 on the check

sent with the appeal, suggesting that filing was

timely. Therefore, we reject Central States’

contention that the LaCasse group did not file

its appeal timely, and that this court does not

have jurisdiction.

/2 Notably, the standard of review for statutorily

mandated MPPAA arbitrations is not as deferential

as it is for labor arbitrations conducted

pursuant to collective bargaining agreements (the

arbitrator’s award must be enforced "so long as

it draws its essence from the collective

bargaining agreement." United Steelworkers of

America v. Enterprise Wheel & Car Corp., 363 U.S.

593, 597 (1960)), or voluntary commercial

arbitrations conducted pursuant to the Federal

Arbitration Act (a district court may vacate an

arbitration award if, inter alia, "the

arbitrators exceeded their powers, or so

imperfectly executed them that a mutual, final,

and definite award upon the subject matter

submitted was not made." 9 U.S.C. sec. 10(a)(4)).

"Section 1401(b)(3) of MPPAA indicates the

Arbitration Act, which governs voluntary

arbitration, applies only to the extent it is

consistent with MPPAA . . . [T]he severely

limited review required by section 10 of the

Arbitration Act is inconsistent with section

1401(b)(2) of MPPAA, and the latter prevails."

Union Asphalts and Roadoils, Inc. v. Mo-Kan

Teamsters Pension Fund, 857 F.2d 1230, 1234 (8th

Cir. 1988).

/3 The relevant provision reads as follows:

Buyer will assume all obligations of Six

Transfer, Inc. pursuant to any and all collective

bargaining agreements in effect between Six

Transfer, Inc. and Teamsters Local Union 120 of

St. Paul, Minnesota which contract covers certain

employees of Six Transfer, Inc.

Buyer will also assume any and all potential

withdrawal liability to the Central States

Pension Fund into which contributions were made

pursuant to the above referenced collective

bargaining agreement with Local 120. Buyer will

continue to make payments for contributions to

the pension fund and comply with any other

obligations pursuant to the collective bargaining

agreement.

Appellee’s App., Tab 2 at pages 7-8, sec. 7.

/4 The Ninth Circuit reached a similar conclusion in

a case where the seller claimed that it

"substantially satisfied" the bond requirement by

challenging withdrawal liability, thus notifying

the Fund that it was entitled to a bond waiver.

See Brentwood Fin. Corp. v. Western Conference of

Teamsters Pension Trust Fund, 902 F.2d 1456, 1461

(9th Cir. 1990). The court held that the

"practical effect" of such a course would be to

do away with the bond requirement. Here, too. If

Transfer’s theory were correct, parties to a sale

could evade the bond requirement for a year.

/5 One might wonder whether the district court

should have remanded the question of allocation

to the arbitrator, and whether we should do so.

There is no clear instruction in the MPPAA. But

we have stated as a general matter that "[w]hen

possible, . . a court should avoid remanding a

decision to the arbitrator because of the

interest in prompt and final arbitration." See

Publicis Communication v. True North

Communications Inc., 206 F.3d 725, 730 (7th Cir.

2000) (quoting Teamsters Local No. 579 v. B & M

Transit, Inc., 882 F.2d 274, 278 (7th Cir. 1989)

(citations omitted). In the present case, neither

party contested the district court’s authority to

decide a question left open by the arbitrator,

and both parties have briefed the issue to us. So

we think it sensible and fair to consider the

issue.

/6 When we speak of "legal responsibility," we do

not mean contractual responsibility. It is pretty

clear that the Purchase Agreement obligates

Cartage to make ongoing contributions and pay

withdrawal liability. But this obligation runs to

Transfer. Had Cartage withdrawn and declined to

pay withdrawal liability, the Fund faced

uncertain prospects for collecting from Cartage.

Cases construing the MPPAA have held that

successors in non-exempt sales may be liable for

withdrawal liability. See, e.g., Artistic Carton

Co. v. Paper Industry Union Management Pension

Fund, 971 F.2d 1346, 1352 (7th Cir. 1992). But

here a non-exempt successor has not posted a bond

and therefore the Fund would have to invest time

and money to collect the debt. And if a

"successor" suit against Cartage proved

fruitless, the Fund would have no recourse

against Transfer, which is not secondarily liable

under the Purchase Agreement. Because the Fund

would have no recourse against Transfer (this is

assuming Transfer need not pay withdrawal

liability), Transfer might well refuse to pay the

Fund. So Transfer--the only party to whom Cartage

owed a contractual duty to pay--would have no

reason to sue Cartage for damages. Consequently,

by "legal responsibility" we mean a

responsibility recognized by the MPPAA and

enforceable by the Fund.

/7 In effect, the Fund seemed to be saying, "Now we

know we didn’t lose any money, so why don’t you

give us some more?"

/8 Notably, if the parties had successfully

structured this as an exempt sale of assets, five

years of Transfer’s contribution history on

behalf of its employees would have "vanished."

See Angell & Polk, Multi-Employer Plans, in II

Employee Benefits Law sec. 14.29(5) (Illinois

Institute of Continuing Legal Education 1994).

Though the Fund will assess liability against

Transfer for ten years of contributions, Cartage

would have adopted just five years of Transfer’s

contribution history. If Cartage withdrew, it

would have owed significantly less than Transfer.