Petition for Writ of Certiorari — New York State Teamsters Conference Pension and Retirement Fund, Petitioner v. C&S Wholesale Grocers, Inc.
Supreme Court briefJun 1, 2022
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No. 21In the
Supreme Court of the United States
NEW YORK STATE TEAMSTERS CONFERENCE
PENSION AND RETIREMENT FUND,
Petitioner,
v.
C&S WHOLESALE GROCERS, INC.,
Respondent.
On Petition for a Writ of Certiorari to the United
States Court of A ppeals for the Second Circuit
PETITION FOR A WRIT OF CERTIORARI
Edward J. Meehan
Mark C. Nielsen
Samuel I. Levin
Groom Law Group, Chartered
1701 Pennsylvania Avenue, NW
Washington, DC 20006
(202) 857-0620
313065
Vincent M. DeBella
Counsel of Record
Paravati, K arl, Green
& DeBella, LLP
520 Seneca Street, Suite 105
Utica, New York 13502
(315) 735-6481
vdebella@pkgdlaw.com
A
(800) 274-3321 • (800) 359-6859
i
QUESTIONS PRESENTED
“Congress enacted the [Multiemployer Pension Plan
Amendments Act of 1980] MPPAA to protect the financial
solvency of multiemployer pension plans.” Bay Area
Laundry & Dry Cleaning Pension Tr. Fund v. Ferbar
Corp. of Cal., 522 U.S. 192, 196 (1997). One of MPPAA’s
central features is the mandatory payment of withdrawal
liability when an employer withdraws from participation
in a multiemployer plan, which “Congress imposed . . .
to discourage withdrawals ex ante and cushion their
impact ex post.” Id. at 201-02. In order to effectuate this
policy, Congress prohibited “any transaction” for which
“a principal purpose . . . is to evade or avoid” withdrawal
liability. 29 U.S.C. § 1392(c). Further, lower courts have
unanimously applied the “any substantial continuity”
successor liability doctrine articulated by this Court to
the collection of withdrawal liability.
The questions presented are:
1.
Whether the Second Circuit erred in holding that
29 U.S.C. § 1392(c) requires fraudulent conduct,
in conflict with, among others, the Third Circuit’s
holding that the statute “is unambiguous” and “[t]
he text in no way suggests that it only applies to
sham or fraudulent transactions.” SUPERVALU,
Inc. v. Bd. of Trs. of Sw. Pa. & W. Md. Area
Teamsters & Emps. Pension Fund, 500 F.3d 334,
343 (3d Cir. 2007).
2.
Whether the Second Circuit erred in refusing to
consider, as part of its “any substantial continuity”
analysis, all of the facts and circumstances of the
ii
case, including that the transaction at issue was
not at arm’s-length or for fair market value, in
conflict with, among others, the Sixth Circuit’s
holding that when “a sale . . . is not conducted at
arm’s-length, successor liability can apply” and
that “underpa[ying] for the profitable parts of [a
business]” while leaving pension liability behind
“do[es] not reflect commercial expectations that
this court should ever protect, certainly not under
ERISA.” Pension Benefit Guar. Corp. v. Findlay
Indus., Inc., et al., 902 F.3d 597, 612 (6th Cir.
2018).
iii
PARTIES TO THE PROCEEDING AND
CORPORATE DISCLOSURE STATEMENT
The caption contains the names of all the parties to
the proceedings below.
Pursuant to this Court’s Rule 29.6, undersigned
counsel state that New York State Teamsters Conference
Pension and Retirement Fund has no parent corporation
and no stock.
iv
STATEMENT OF RELATED PROCEEDINGS
This case arises from and is related to the following
proceedings in the United States District Court for the
Northern District of New York, the United States District
Court for the District of Columbia, and the United States
Court of Appeals for the Second Circuit:
• New York State Teamsters Conference Pension and
Retirement Fund v. C&S Wholesale Grocers, Inc.,
No. 5:16-cv-00084 (N.D.N.Y.), judgment entered
March 18, 2020;
• New York State Teamsters Conference Pension and
Retirement Fund v. C&S Wholesale Grocers, Inc.,
1:20-cv-02434 (D.D.C.), case transferred August
12, 2021;
• New York State Teamsters Conference Pension and
Retirement Fund v. C&S Wholesale Grocers, Inc.,
5:21-CV-00906 (N.D.N.Y.), case stayed August 13, 2021;
• C&S Wholesale Grocers, Inc. v. New York State
Teamsters Conference Pension and Retirement
Fund, 5:20-CV-01152 (N.D.N.Y.), case stayed
November 19, 2020;
• New York State Teamsters Conference Pension and
Retirement Fund v. C&S Wholesale Grocers, Inc.,
No. 20-1185 (2d Cir.), judgment entered January
27, 2022, rehearing denied March 3, 2022.
There are no other proceedings in state or federal trial
or appellate courts directly related to this case within the
meaning of this Court’s Rule 14.1(b)(iii).
v
TABLE OF CONTENTS
Page
QUESTIONS PRESENTED . . . . . . . . . . . . . . . . . . . . . . . i
PA R T I E S T O T H E P R O C E E D I N G
A N D C OR P OR AT E DI S CL O S U R E
STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
STATEMENT OF RELATED PROCEEDINGS . . . . . iv
TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . v
TABLE OF APPENDICES . . . . . . . . . . . . . . . . . . . . . viii
TABLE OF CITED AUTHORITIES . . . . . . . . . . . . . . ix
PETITION FOR A WRIT OF CERTIORARI . . . . . . . 1
OPINIONS BELOW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
STATUTORY PROVISIONS INVOLVED . . . . . . . . . . 1
STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . . 2
A. Legal Background . . . . . . . . . . . . . . . . . . . . . 2
B. Factual and Procedural History . . . . . . . . . 4
1.
The Primary Players . . . . . . . . . . . . . . . 4
vi
Table of Contents
Page
2. C&S’s Scheme to Take Over Penn
Traffic’s Supply Chain Business . . . . . . 5
3. The District Court’s Decisions . . . . . . 10
4. The Second Circuit’s Decision . . . . . . . 12
REASONS FOR GRANTING THE PETITION . . . . 13
A. The Decision Below Creates At Least
Two Circuit Splits . . . . . . . . . . . . . . . . . . . . 13
1.
T he Second Ci rcu it ’s Fraud
Requirement Is Inconsistent With
the Approaches Taken by the
Third and Seventh Circuits . . . . . . . . . 13
2. The Second Circuit’s Refusal to
Consider Whether the Transaction
Was at A rm’s-Length and for
Fa i r M a rket Va lue Is , at a
Minimum, Inconsistent With
t he Approa ch Ta ken by t he
Sixth Circuit . . . . . . . . . . . . . . . . . . . . . 14
B. The Decision Below Is Wrong and
Conflicts With This Court’s Decision in
Fall River . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
vii
Table of Contents
Page
1.
The Second Circuit’s Interpretation
of the Evade or Avoid Provision Is
Wrong . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2. The Second Circuit’s Application of
the “Any Substantial Continuity”
Successor Liability Test Is Wrong . . . 18
C. This Case Presents an Ideal Vehicle for
Resolving Important and Recurring
Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
viii
TABLE OF APPENDICES
Page
A P P E N DI X A — O P I N ION O F T H E
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT, DATED
JANUARY 27, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1a
A PPEN DI X B — M EMOR A N DU M
DECI SION A N D OR DER OF T H E
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF
NEW YORK, FILED MARCH 18, 2020 . . . . . . . . 39a
APPENDIX C — MEMORANDUM DECISION
AND ORDER OF THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN
DI S T R IC T OF N E W YOR K , DAT ED
MAY 1, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57a
APPENDIX D — DENIAL OF REHEARING
OF THE UNITED STATES COURT OF
APPEALS FOR THE SECOND CIRCUIT,
FILED MARCH 3, 2022 . . . . . . . . . . . . . . . . . . . . . 90a
ix
TABLE OF CITED AUTHORITIES
Page
Cases
Bay Area Laundry & Dry Cleaning Pension Tr.
Fund v. Ferbar Corp. of California,
522 U.S. 192 (1997) . . . . . . . . . . . . . . . . . . . . . . . . . 2, 21
Chicago Truck Drivers v. El Paso CGP Co.,
525 F.3d 591 (7th Cir. 2008) . . . . . . . . . . . . . . . . . . . . . 2
Fall River Dyeing & Finishing Corp. v.
N.L.R.B.,
482 U.S. 27 (1987) . . . . . . . . . . . . . . . . . . . . . . . . passim
Finkel v. Zizza & Assocs. Corp.,
No. 14-CV-4108(JS)(ARL), 2022 WL 970670
(E.D.N.Y. Mar. 31, 2022) . . . . . . . . . . . . . . . . . . . . . . . 21
Howard Johnson Co. v. Detroit Local Joint Exec.
Bd., Hotel & Rest. Emps. & Bartenders Int’l
Union, AFL-CIO,
417 U.S. 249 (1974) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Husky Int’l Elecs., Inc. v. Ritz,
578 U.S. 356 (2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Indiana Electrical Workers Pension Benefit
Fund v. ManWeb Servs., Inc.,
884 F.3d 770 (7th Cir. 2018) . . . . . . . . . . . . . . . . . 15, 18
x
Cited Authorities
Page
John Wiley & Sons, Inc. v. Livingston,
376 U.S. 543 (1964) . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Kawashima v. Holder,
565 U.S. 478 (2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Lombardo v. City of St. Louis, Missouri,
141 S. Ct. 2239 (2021) . . . . . . . . . . . . . . . . . . . . . . . . . 20
Monroe Sander Corp. v. Livingston,
377 F.2d 6 (2d Cir. 1967) . . . . . . . . . . . . . . . . . . . . . . . 19
Pension Ben. Guar. Corp. v. R.A. Gray & Co.,
467 U.S. 717 (1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Pension Benefit Guar. Corp. v.
Findlay Indus., Inc., et al.,
902 F.3d 597 (6th Cir. 2018) . . . . . . . . . . . . . . . . . 14, 18
Resilient Floor Covering Pension Tr. Fund Bd.
of Trs. v. Michael’s Floor Covering, Inc.,
801 F.3d 1079 (9th Cir. 2015) . . . . . . . . . . . . . . . . . 4, 14
Russello v. United States,
464 U.S. 16 (1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Santa Fe Pac. Corp. v. Cent. States, Se. & Sw.
Areas Pension Fund,
22 F.3d 725 (7th Cir. 1994) . . . . . . . . . . . . . . . . . . . . . 13
xi
Cited Authorities
Page
SUPERVALU, Inc. v. Bd. of Trs. of Sw. Pa. & W.
Md. Area Teamsters & Emps. Pension Fund,
500 F.3d 334 (3d Cir. 2007) . . . . . . . . . . . . . . . . . . 3, 13
Teamsters Joint Council No. 83 of the Va.
Pension Fund v. Weidner Realty Assocs.,
377 F. App’x 339 (4th Cir. 2010) . . . . . . . . . . . . . . . . . 13
Tsareff v. ManWeb Servs., Inc.,
794 F.3d 841 (7th Cir. 2015) . . . . . . . . . . . . . . . . . . . . . 3
Upholsterers’ Int’l Union Pension Fund v.
Artistic Furniture of Pontiac,
920 F.2d 1323 (7th Cir. 1990) . . . . . . . . . . . . . . . . . . . 14
Statutes and Other Authorities
28 U.S.C. § 1254(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
28 U.S.C. § 1331 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
29 U.S.C. § 1002(37)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
29 U.S.C. § 1002(37)(A)(ii) . . . . . . . . . . . . . . . . . . . . . . . . . 2
29 U.S.C. § 1369(a) . . . . . . . . . . . . . . . . . . . . . . . . . 3, 16, 17
29 U.S.C. § 1392(c) . . . . . . . . . . . . . . . . . . . . . . . . . . passim
29 U.S.C. § 1401(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
xii
Cited Authorities
Page
29 U.S.C. § 1401(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
29 U.S.C. § 1451(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Jones Day, C&S Wholesale Grocers defeats pension
liability claims on appeal (Jan. 2022) . . . . . . . . . . . 20
Michael G. McNally, Asset Purchaser Defeats
Successor Liability Claim for Unpaid
Withdrawal Liability, Fox Rothschild LLP
(Apr. 21, 2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1
PETITION FOR A WRIT OF CERTIORARI
New York State Teamsters Conference Pension and
Retirement Fund respectfully petitions for a writ of
certiorari to review the judgment of the United States
Court of Appeals for the Second Circuit in this case.
OPINIONS BELOW
The opinion of the Second Circuit is reported at 24
F.4th 163 and reproduced at App.1a. The Second Circuit’s
order denying rehearing is unpublished and reproduced
at App.90a.
The Northern District of New York’s summary
judgment decision is reported at 448 F.Supp.3d 188
and reproduced at App.39a. The Northern District of
New York’s motion to dismiss decision is unreported
but electronically available at 2017 WL 1628896 and
reproduced at App.57a.
JURISDICTION
The Second Circuit entered judgment on January
27, 2022 and denied Petitioner’s petition for rehearing on
March 3, 2022. The Second Circuit denied Petitioner’s
petition for rehearing on March 3, 2022. The jurisdiction
of this Court is invoked under 28 U.S.C. § 1254(1).
STATUTORY PROVISIONS INVOLVED
Section 4212(c) of the Employee Retirement Income
Security Act, 29 U.S.C. § 1392(c), states: “If a principal
purpose of any transaction is to evade or avoid liability
2
under this part, this part shall be applied (and liability
shall be determined and collected) without regard to such
transaction.”
STATEMENT OF THE CASE
A.
Legal Background
This case concerns multiemployer pension plan
withdrawal liability under the Employee Retirement
Income Security Act of 1974 (“ERISA”), as amended
by the Multiemployer Pension Plan Amendments Act
of 1980 (“MPPA A”). Multiemployer pension plans
are “maintained pursuant . . . collective bargaining
agreements between . . . employee organizations and
more than one employer[.]” 29 U.S.C. § 1002(37)(A)(ii). In
order to “protect the financial solvency of multiemployer
pension plans[,]” the statute “requires employers who
withdraw from underfunded multiemployer pension plans
to pay a ‘withdrawal liability.’” Bay Area Laundry & Dry
Cleaning Pension Tr. Fund v. Ferbar Corp. of California,
522 U.S. 192, 195-96 (1997). “This withdrawal liability is
the employer’s proportionate share of the plan’s ‘unfunded
vested benefits[.]’” Pension Ben. Guar. Corp. v. R.A. Gray
& Co., 467 U.S. 717, 725 (1984).
In order to “discourage[] companies from using
corporate forms and manipulations to shield themselves
from withdrawal liability[,]” Chicago Truck Drivers
v. El Paso CGP Co., 525 F.3d 591, 596 (7th Cir. 2008),
Congress prohibited transactions which have “a principal
purpose . . . to evade or avoid” withdrawal liability. 29
U.S.C. § 1392(c). This “evade or avoid” prohibition is
broader than a similar provision in a nearby section of
3
ERISA applicable to single employer plans. See 29 U.S.C.
§ 1369(a). Among other differences, the multiemployer
provision covers transactions which seek to “evade or
avoid” liability, 29 U.S.C. § 1392(c), while the single
employer provision only covers transaction which seek to
“evade” liability. 29 U.S.C. § 1369(a). The multiemployer
provision also applies to “any transaction” which has such
“a principal purpose,” 29 U.S.C. § 1392(c), while the single
employer provision applies only to transactions in which
a person who “would be subject [to liability]” “enter[s]
into any transaction” with such “a principal purpose.” 29
U.S.C. § 1369(a). Prior to the decision in this case, lower
courts had unanimously interpreted the multiemployer
“evade or avoid” provision as not requiring fraud. See,
e.g., SUPERVALU, Inc. v. Bd. of Trs. of Sw. Pa. & W. Md.
Area Teamsters & Emps. Pension Fund, 500 F.3d 334,
343 (3d Cir. 2007) (Ҥ 4212(c) is unambiguous. The text in
no way suggests that it only applies to sham or fraudulent
transactions.”).
Additionally, this Court has held, in the context of
certain labor and employment obligations, that successor
liability applies where “based upon the totality of the
circumstances of a given situation . . . there is ‘substantial
continuity’ between the enterprises.” See, e.g., Fall River
Dyeing & Finishing Corp. v. N.L.R.B., 482 U.S. 27, 43
(1987). Lower courts, including the Second Circuit in this
case, have unanimously applied this doctrine to withdrawal
liability cases under ERISA, where the purchaser is on
notice of the liability. See App.24a (“[W]e have held that (1)
a successor must have notice of its predecessor’s liability,
and (2) there must be ‘substantial continuity of identity in
the business enterprise.’”); see also App.27a-33a; Tsareff v.
ManWeb Servs., Inc., 794 F.3d 841, 845-47 (7th Cir. 2015);
4
Resilient Floor Covering Pension Tr. Fund Bd. of Trs.
v. Michael’s Floor Covering, Inc., 801 F.3d 1079, 1093-95
(9th Cir. 2015).
B. Factual and Procedural History.
1.
The Primary Players.
Petitioner New York State Teamsters Conference
Pension and Retirement Fund (the “Pension Fund”) is
a multiemployer pension plan as defined in Section 3(37)
(A) of ERISA, 29 U.S.C. § 1002(37)(A). See App.3a. The
Pension Fund is based in Syracuse, New York, and pays
pension and retirement benefits to nearly 34,000 active
and retired Teamsters members and their families. See
Pension Fund Second Circuit Brief, Dkt. 36 (“Fund Br.”)
at 2. At all relevant times, the Pension Fund has been
underfunded such that withdrawing employers would be
subject to withdrawal liability.
Respondent C&S Wholesale Grocers, Inc. (“C&S”)
is a wholesale grocery company, based in Keene, New
Hampshire, which operates warehouses and distributes
the groceries it procures to retail grocery stores. See
App.3a.
The Penn Traffic Company (“Penn Traffic”) was a
grocery company based in Syracuse that operated retail
grocery stores as well as two warehouses (one in Syracuse
that was associated with withdrawal liability, and one in
DuBois, Pennsylvania that was not) – which were used
to service both its own retail grocery stores and other
“independent” retail stores. See id. At its Syracuse
warehouse, Penn Traffic employed approximately 450
union employees pursuant to a collective bargaining
5
agreement that required Penn Traffic to contribute to
the Pension Fund. See id. Penn Traffic filed bankruptcy
in November 2009, less than a year after its transaction
with C&S. See App.5a.
2.
C&S’s Scheme to Take Over Penn Traffic’s
Supply Chain Business.
C&S wanted to acquire Penn Traffic’s supply chain
business without paying any of the associated withdrawal
liability. In 2007, C&S offered to procure groceries for
Penn Traffic and to operate its Syracuse and DuBois
warehouses, with a condition: Penn Traffic fire all of the
warehouse employees for the sole purpose of triggering
and paying withdrawal liability, so that C&S would
have no exposure to it. See Fund Br. at 8.1 When Penn
Traffic ultimately declined to structure the transaction
in a manner that would require it to pay any withdrawal
liability, C&S repeatedly proposed a multi-phase “master
plan.” See Fund Br. at 8-9, 12-13. First, C&S would take
over all of Penn Traffic’s procurement operations, purchase
the rights to service Penn Traffic’s “independent” retail
customers, and purchase all of Penn Traffic’s inventory
in the warehouses. See Fund. Br. at 12. Second, after
Penn Traffic’s collective bargaining agreement expired
(and, with it, the obligation to contribute to the Pension
Fund), C&S would take over the warehouses. See Fund.
Br. at 12-13.
1. The Second Circuit’s opinion states that “[i]n March
2008, C&S began investigating a possible acquisition of Penn
Traffic.” App.3a. C&S had actually been investigating that
possibility as early as 2001, with various iterations and schemes
in between. See, e.g., Fund Br. at 4-11.
6
C&S and Penn Traffic formally completed the first
phase of their “master plan” in December 2008, when they
executed an asset purchase agreement. See App.3a-4a.
C&S’s CEO Richard Cohen confirmed in an e-mail to C&S’s
Board of Advisors that “when [Penn Traffic’s] contract
expires with their union, we will do the distribution piece.
So that will add another 5 plus million dollars of Profit.”
Fund Br. at 15-16. As the Second Circuit explained:
C&S did not want to acquire Penn Traffic’s
Syracuse warehouse because of the pension
withdrawal liability associated with it. C&S
therefore attempted to structure its $43
million acquisition transaction, executed in
December 2008, in such a way as to limit its
exposure to that liability: C&S acquired “Penn
Traffic’s wholesale distribution contracts,
customers, equipment, files, records, goodwill,
intellectual property, accounts receivable, and
employees dedicated to Penn Traffic’s wholesale
distribution division who were not members
of Teamsters Local 317.” And C&S did not
purchase the Syracuse warehouse.
Follow ing the transaction, Penn Traffic
continued to run its Syracuse warehouse and
distributed products to both its own stores
and the independent stores that were now
C&S customers based on the December 2008
transaction. This activity was governed by a
third-party logistics agreement (“Logistics
Agreement”) that created an independent
contractor relationship between Penn Traffic
and C&S. Penn Traffic retained responsibility
7
for “all employees, [f ]acility and storage
leases, material handling and transportation
equipment, contracts and all other liabilities
associated with” the Syracuse warehouse.
App.3a-4a (footnote omitted). In order to ensure continuity
of operations and customer relationships, C&S hired senior
Penn Traffic employees, including Penn Traffic’s former
CEO. See Fund. Br. at 41-42. Following the transaction,
approximately 70% of the Syracuse warehouse was used
to service Penn Traffic’s retail stores (now supplied by
C&S) and approximately 30% of the warehouse was used
to service the “independent” customers C&S acquired
from Penn Traffic. See App.35a.
C&S, however, did not directly hire the union
employees at the Syracuse warehouse to continue
servicing the Penn Traffic retail stores or independent
customers. Instead, C&S entered into the third-party
Logistics Agreement with Penn Traffic, pursuant to
which C&S – the nation’s largest company specializing in
running retail grocery companies’ warehouses – paid a
retail grocery company to do warehousing on its behalf,
was unprecedented in C&S’s history. See Fund. Br. at 1415. It was the functional equivalent of a professional sports
team waking up one morning and deciding the best way to
make the playoffs was to hire some of its fans to play. It
made no business sense and was economically inefficient
for all parties – and it was only tolerated, as a temporary
measure, to avoid the payment of withdrawal liability. See
Fund. Br. at 14-16.
No part of the “master plan” was accomplished at
arm’s-length. C&S’s former Co-President, Mark Gross,
8
had been working to acquire Penn Traffic since 2001 (at
that time through a deal with Penn Traffic’s competitor,
and existing C&S customer, Tops Markets, LLC (“Tops
Markets”)). See Fund Br. at 4-5. Mr. Gross subsequently
left C&S, formed his own single-member LLC consulting
firm of which he was the sole employee – and within
months negotiated a consulting agreement to work for
Penn Traffic on corporate transactions, and lied to Penn
Traffic’s Board, claiming he was not still being paid by
C&S. See Fund Br. at 6-7. In reality, C&S was paying
Mr. Gross a base of $2 million per year, with incentive
fees for successful transactions, and his formation of the
consulting firm was a condition of his additional severance
payments. See Fund Br. at 6-7. C&S acknowledged in an
internal e-mail between its two most senior executives
that, “with respect to Mark [Gross] . . . working with [Penn
Traffic] on the wholesale business and the distribution
deal. I don’t see how that is not a conflict but I also don’t
see how it hurts us, as he is motivated highly to get a deal
done.” Fund Br. at 7.
Mr. Gross, acting as C&S’s double agent, “advocated
to [Penn Traffic] that they complete a total outsourcing
of their procurement and distribution operations with
C&S.” Fund Br. at 7. Meanwhile, Mr. Gross worked in
secret with a senior C&S executive to “reshap[e] the
[Penn Traffic] board.” Fund Br. at 7. Other examples of
overlapping personnel include Penn Traffic’s CEO being
a former C&S executive, Penn Traffic’s general counsel
coming over from C&S and providing legal advice to Penn
Traffic while still employed by C&S, and Penn Traffic
sending company-wide e-mails seeking to fill positions
for C&S. See Fund Br. at 48-49. It is no wonder that C&S
was able to pay substantially less than fair market value:
approximately $30 million for Penn Traffic’s wholesale
9
business, which had recently been appraised at $50 to $70
million. See Fund Br. at 16-17. 2
The terms of the transaction were so unfair that C&S
had an alternative to the second phase of its “master plan.”
C&S could wait, as originally planned, until the collective
bargaining agreements expired (which was not until
2011, see Fund Br. at 12-13), or it could help push Penn
Traffic into bankruptcy sooner and attempt to escape the
collective bargaining agreements that way. Within weeks
of acquiring Penn Traffic’s wholesale business for less than
fair market value, C&S began preparing for Penn Traffic’s
potential bankruptcy. See Fund Br. at 16. As a result of
the terms of the transaction orchestrated by C&S, Penn
Traffic’s primary lender became uncomfortable with
Penn Traffic’s financial stability, and began limiting Penn
Traffic’s liquidity, ultimately leading to its bankruptcy
in November 2009, less than a year after its asset sale
to C&S. See Fund Br. at 16; App.5a. As Penn Traffic’s
condition deteriorated, Mr. Gross fed C&S “inside info”
about Penn Traffic’s condition and position with its lender,
which caused C&S to refuse to remit to Penn Traffic
deductions it was owed – further accelerating Penn
Traffic’s decline. See Fund Br. at 18. C&S noted that “we
could probably get a better deal if [Penn Traffic] were to
fail,” and that “[w]e will let them go into bankruptcy.” See
Fund Br. at 18.
Prior to Penn Traffic’s bankruptcy filing, Mr. Gross
worked on C&S’s behalf with Tops to ensure that Tops
2. Although C&S paid Penn Traffic a total of $43 million,
see App.3a-4a, only $30 million of that $43 million was for the
wholesale business itself. See Fund Br. at 16.
10
would acquire Penn Traffic’s retail stores (which would be
C&S customers under an existing supply agreement with
Tops) in Penn Traffic’s bankruptcy, as well as the DuBois
warehouse (which Tops would transfer to C&S), leaving
the Syracuse warehouse and the pension liability behind,
while C&S shifted the work to other warehouses. See Fund
Br. at 17-19. There was no business purpose for closing the
Syracuse warehouse, as a senior C&S executive admitted
at his deposition: “[we were] never able to show real savings
[from closing Syracuse]. So the business advantage to closing
Syracuse really didn’t exist.” Fund Br. at 19. The result of
these grossly inefficient machinations was that C&S ended
up with, just as it planned, Penn Traffic’s entire supply chain
business, while – with surgical precision and otherwise
contrary to everyone’s interests – excising the only part of
the operation associated with withdrawal liability.
The Pension Fund filed a claim for withdrawal
liability of approximately $63.6 million in Penn Traffic’s
bankruptcy proceeding, but was only able to recover
approximately $5 million of that from Penn Traffic’s
bankruptcy estate – and, in the instant proceeding, sued
C&S to recover the remaining approximately $58 million
in unpaid withdrawal liability. App.5a.
3.
The District Court’s Decisions.
On May 1, 2017, the district court issued a decision
granting-in-part and denying-in-part C&S’s motion to
dismiss the Pension Fund’s Amended Complaint. See
App.57a. 3 The district court granted C&S’s motion to
dismiss the Pension Fund’s evade or avoid claim under
29 U.S.C. § 1392(c), holding that provision inapplicable
3. The district court had jurisdiction under 28 U.S.C. § 1331
and 29 U.S.C. § 1451(c).
11
because Penn Traffic’s transaction with C&S did not
render it “immediately insolvent.” See App.82a. The
district court, however, denied C&S’s motion to dismiss
the Pension Fund’s successor liability claim, explaining
that:
A strict rule that forecloses applying successor
liability for the singular reason that the
selling company continues to exist nominally
would create an arbitrary impediment to a
doctrine that has its foundation in equity and
flexibility. . . . Defendant’s position would create
a loophole where businesses would merely insist
on keeping the predecessor afloat for a period
of time after an asset sale to avoid withdrawal
liability. Successor liability, however, is not
about drawing lines in the sand; rather, it is an
equitable doctrine that flexes and bends based
“upon the totality of the circumstances of a
given situation” and the federal rights at stake.
App.72-a73a (citing Fall River, 482 U.S. at 43). The
district court also explained that “for successor liability to
apply in this factual context, the Court must give special
consideration to Defendant’s relationship with the work
that the union employees completed.” App.76a.
On March 18, 2020, the district court issued a decision
granting C&S’s motion for summary judgment on the
Pension Fund’s successor liability claim. App.39a. The
district court ruled that it “need not analyze Defendant’s
relationship with the work that the union employees
completed” because it had already determined that “the
Court finds that Defendant did not substantially continue
12
Penn Traffic’s business after the 2008 transaction.”
App.54a.
4.
The Second Circuit’s Decision.
On January 27, 2022, the Second Circuit affirmed
the district court’s decisions. App.1a. With respect to the
evade or avoid claim, the Second Circuit did not address
the Pension Fund’s argument that the district court erred
in imposing an “immediate insolvency” requirement. See
Fund Br. at 26-29.4 Instead, the Second Circuit held that
“[t]here are no allegations of fraud in this case,” and while
“non-employers” could be “liable for withdrawal liability
under an ‘evade or avoid’ theory . . . it is the exceptional
circumstance—involving fraud, or an employer who is
otherwise working with a non-employer to make recovery
on withdrawal liability unavailable . . . .” App.12a, 14a-15a.
With respect to the successor liability claim, the
Second Circuit limited itself to analyzing the same facts
discussed by the district court, without addressing the
Pension Fund’s argument that the district court should
have analyzed “Defendant’s relationship with the work that
the union employees completed” as part of the “substantial
continuity” analysis. See Fund Br. at 10-11. Without
considering, inter alia, whether the transaction was at
arm’s-length or for fair market value, the Second Circuit
held that “one overriding fact is ultimately decisive: C&S
did not purchase the Syracuse warehouse or employ the
Union members who worked there.” App.35a.
4. Among other arguments, the Pension Fund pointed
out that another provision in ERISA expressly contemplates
that an evade or avoid transaction can take place at least five
years before a company withdraws from a plan. See 29 U.S.C.
§§ 1401, (e) (f); Fund Br. at 28-29.
13
REASONS FOR GRANTING THE PETITION
A.
The Decision Below Creates At Least Two
Circuit Splits.
1.
The Second Circuit’s Fraud Requirement
Is Inconsistent With the Approaches
Taken by the Third and Seventh Circuits.
The Second Circuit’s holding that the Pension Fund’s
“evade or avoid” cause of action fell short because “[t]here
are no allegations of fraud in this case,” App.12a, conflicts
with the precedent of at least two other circuits. Both the
Third and Seventh Circuits have held that the provision
is not limited to fraudulent or sham transactions. See
SUPERVALU, 500 F.3d at 343 (Ҥ 4212(c) is unambiguous.
The text in no way suggests that it only applies to sham
or fraudulent transactions.”); Santa Fe Pac. Corp. v. Cent.
States, Se. & Sw. Areas Pension Fund, 22 F.3d 725, 72930 (7th Cir. 1994) (“The statutory criterion is not whether
the transaction is a sham, having no purpose other than
to defeat the goals of the Multi-employer Pension Plan
Amendments Act by leaving the other employers in the
multiemployer pension plan holding the bag.”). The Second
Circuit’s narrow construction of the “evade or avoid”
provision is also inconsistent with the Fourth Circuit’s
holding that Ҥ 1392(c) . . . be liberally construed in favor
of protecting the participants in employee benefit plans.”
Teamsters Joint Council No. 83 of the Va. Pension Fund
v. Weidner Realty Assocs., 377 F. App’x 339, 344 (4th Cir.
2010).
14
2.
The Second Circuit’s Refusal to Consider
Whether the Transaction Was at Arm’sLength and for Fair Market Value Is,
at a Minimum, Inconsistent With the
Approach Taken by the Sixth Circuit.
The Second Circuit’s refusal to consider all of the
facts and circumstances of the case, including that the
transaction was not at arm’s-length or for fair market
value, conf licts with, at a minimum, Sixth Circuit
precedent. The Sixth Circuit has held that when “a sale
is not conducted at arm’s-length, successor liability can
apply” and that “underpa[ying] for the profitable parts
of [a business]” while leaving pension liability behind
“do[es] not reflect commercial expectations that this
court should ever protect, certainly not under ERISA.”
Pension Benefit Guar. Corp. v. Findlay Indus., Inc.,
et al., 902 F.3d 597, 612 (6th Cir. 2018). Notably, the
divergent holdings of the Second and Sixth Circuits
resulted despite both courts relying on the same
precedent from other circuits regarding the standard
for successor liability. See id.; App.23a at n.52 (both
relying on Resilient Floor Covering, 801 F.3d 1079 and
Upholsterers’ Int’l Union Pension Fund v. Artistic
Furniture of Pontiac, 920 F.2d 1323, 1327 (7th Cir. 1990)
as the basis for applying the federal any substantial
continuity successor liability doctrine in the context of
ERISA cases).
The Second Circuit’s successor liability analysis is
also inconsistent with this Court’s decision in Fall River
Dyeing & Finishing Corp. v. National Labor Relations
Board, 482 U.S. 27 (1987), and the Seventh Circuit’s
15
decision in Indiana Electrical Workers Pension Benefit
Fund v. ManWeb Servs., Inc., 884 F.3d 770 (7th Cir. 2018).
In Fall River, this Court held that: (i) there was
substantial continuity where “60% to 70% of [a] business”
was not acquired, 482 U.S. at 30; and (ii) purchasing “some
of [a textile plant’s] remaining inventory” on the open
market at an auction supported a finding of successor
liability. Id. at 32, 44. By contrast, the Second Circuit:
(i) held that 70% “is a large enough majority” to weigh
against a finding of substantial continuity, App.35a; and
(ii) affirmed the district court’s decision to give no weight
to C&S’s acquisition of 100% of the warehouse’s inventory
– which was its most valuable asset – in a non-arm’s-length
transaction. See App.36a-37a. See also Fund Br. at 45.
In ManWeb, the Seventh Circuit vacated a “district
court [opinion which] emphasized the fact that no union
employees went to work for ManWeb,” and held there
was “significant continuity of the workforce” where the
successor hired “key individuals” from the predecessor.
See 884 F.3d at 780-81. By contrast, the Second Circuit
held that with respect “to the continuity of workforce and
management . . . the relevant [employees were] Union
employees,” App.35a, and did not even mention that C&S
hired Penn Traffic’s former CEO for the express purpose
of maintaining continuity. See Fund. Br. at 41-42.
16
B. The Decision Below Is Wrong and Conflicts
With This Court’s Decision in Fall River.
1.
The Second Circuit’s Interpretation of the
Evade or Avoid Provision Is Wrong.
As discussed above, the Second Circuit’s interpretation
of the “evade or avoid” provision as requiring fraudulent
conduct is inconsistent with Third and Seventh Circuit
precedent. See supra at 13. The Second Circuit’s outlier
interpretation is also objectively wrong. It is true that
the term “evade” is often associated with fraud. See, e.g.,
Kawashima v. Holder, 565 U.S. 478, 488 (2012) (holding that
“evasion-of-payment cases will almost invariably involve
some affirmative acts of fraud or deceit . . . .”); Husky
Int’l Elecs., Inc. v. Ritz, 578 U.S. 356, 357 (2016) (holding
that “‘actual fraud’ . . . encompasses other traditional
forms of fraud . . . such as a fraudulent conveyance of
property made to evade payment to creditors”). Congress,
however, not only prohibited “any” transaction with “a
principal purpose” to “evade” withdrawal liability, but
also those that seek to “avoid” withdrawal liability. 29
U.S.C. § 1392(c).
The clear intent of Congress to extend protection for
multiemployer plans well beyond fraudulent transactions
is further confirmed by comparison to a nearby provision
in ERISA applicable to transactions involving single
employer plans. While ERISA Section 4212(c) prohibits
“any transaction” with “a principal purpose . . . to
evade or avoid liability,” 29 U.S.C. § 1392(c) (applicable
to multiemployer plans), ERISA Section 4069(a) only
prohibits “any transaction” with “a principal purpose . . .
to evade liability.” 29 U.S.C. § 1369(a) (applicable to
17
single employer plans). By limiting the single employer
provision to only transactions which “evade” liability, while
prohibiting all transactions relating to multiemployer
plans which “evade or avoid” liability, Congress acted
“intentionally and purposely” to extend liability beyond
only those transactions involving fraud or evasion. See
Russello v. United States, 464 U.S. 16, 23 (1983) (“Where
Congress includes particular language in one section of
a statute but omits it in another section of the same Act,
it is generally presumed that Congress acts intentionally
and purposely in the disparate inclusion or exclusion.”)
(alteration omitted). 5
5. As the Second Circuit correctly held, C&S’s argument
that the evade or avoid provision is inapplicable to buyers
is “clearly . . . contrary” to precedent. See App.14a. That
precedent is consistent with the plain text of the “evade or
avoid” provision, which – unlike the provision applicable to
single employer plans – is not limited to transactions in which
a seller who is already subject to the liability seeks to evade it.
Compare 29 U.S.C. § 1369(a) (only prohibiting transactions for
which “a principal purpose of any person in entering into any
transaction is to evade liability to which such person would be
subject”) (emphasis added) with 29 U.S.C. § 1392(c) (prohibiting
“any transaction” for which “a principal purpose . . . is to evade
or avoid [withdrawal] liability”). Accordingly, there is no basis
to decline to apply the plain text of the statute based on a
policy concern that it would be “imprudent[],” absent fraud, to
impose liability on “[a] non-employer[.]” App.15a. In any event,
applying the evade or avoid prohibition to the circumstances at
issue here, where an acquisition is not at arm’s-length or for fair
market value, would not necessitate applying it to a transaction
in which a buyer “merely” “decline[s] to assume . . . liability”
by “not. . .purchas[ing] an encumbered asset.” Id.
18
2.
The Second Circuit’s Application of the
“Any Substantial Continuity” Successor
Liability Test Is Wrong.
Under this Court’s precedent, the Second Circuit
should have ensured that “the totality of the circumstances
of a given situation” was considered in determining
“whether there is ‘substantial continuity’ between the
enterprises.” Fall River, 482 U.S. at 43. The Second
Circuit did not do so, and failed to even mention – much
less analyze – numerous key facts, including: (i) C&S’s
former Co-President’s role as a conflicted double agent;
(ii) the incestuous relationship and overlap between senior
executives at C&S and Penn Traffic; and (iii) that C&S
paid only $30 million for Penn Traffic’s wholesale business,
despite it being valued at $50-$70 million. See supra at 7-8.
The Sixth Circuit’s holding that whether a transaction is
at “arm’s-length” and whether a buyer “underpaid” are
relevant considerations with respect to the applicability
of successor liability, see Findlay, 902 F.3d at 612, is
obviously correct. Unable to dispute the Sixth Circuit’s
holding, the Second Circuit simply ignored it and generally
limited its analysis to the same incomplete set of facts
discussed by the district court.6
6. The district court’s error appears to have been the result
of it turning a universally recognized two-stage test of “notice”
and “substantial continuity” into a three-stage test of “notice,”
“substantial continuity,” and “Defendant’s relationship with the
work that the union employees completed” (which should have
been analyzed as part of the “substantial continuity” test, but
the district court never reached). See App.54a (“the Court finds
that Defendant did not substantially continue Penn Traffic’s
business . . . . Therefore the Court need not determine . .
notice . . . , nor must it analyze Defendant’s relationship with
19
Nor can the Second Circuit’s decision be justified by its
statement that “one overriding fact is ultimately decisive:
C&S did not purchase the Syracuse warehouse or employ
the Union members who worked there.” App.35a. That
is not the test for successor liability. See, e.g., ManWeb,
884 F.3d at 783 (“Isolated individual factors must be
balanced as a whole to determine if successor liability is
appropriate. The presence or absence of any one factor
‘does not compel a particular conclusion.’”). And this Court
has made clear that where, as here, a company refuses
to hire union members solely to avoid the attendant
obligations, that self-serving action cannot be used as the
basis for declining to find successor liability. See Howard
Johnson Co. v. Detroit Local Joint Exec. Bd., Hotel &
Rest. Emps. & Bartenders Int’l Union, AFL-CIO, 417
U.S. 249, 262 n.8 (1974) (“[A] new owner could not refuse
to hire the employees of his predecessor solely because
they were union members or to avoid having to recognize
the union.”); see also Monroe Sander Corp. v. Livingston,
377 F.2d 6, 12 (2d Cir. 1967) (holding that in circumstances
where “the failure to hire . . . employees . . . [cannot]
be determinative” of successor liability, the fact that
otherwise “similar” operations are shifted to a different
physical location does not pose a hurdle to a finding of
“any substantial continuity”).
the work that the union employees completed”). See also supra at
11-12. This error was raised with the Second Circuit. See Fund
Br. at 36-37. Despite acknowledging that the proper test was
the two-stage test, see App.24a, the Second Circuit ignored the
district court’s error, while asserting that it was able to “easily
agree with [the district court’s] conclusion” that there was no
substantial continuity based on the district court’s purportedly
“tightly reasoned and thorough opinion.” App.33a.
20
The Second Circuit’s failure to consider “the totality
of the circumstances of a given situation,” Fall River,
482 U.S. at 43, is an error which warrants correction
regardless of whether C&S is ultimately held liable as
a successor. See, e.g., Lombardo v. City of St. Louis,
Missouri, 141 S. Ct. 2239, 2241-42 (2021) (per curiam)
(vacating and remanding a case to the Eighth Circuit to
consider “in the first instance” a multi-factor test that
“cannot [be] appl[ied] . . . mechanically” and “requires
careful attention to the facts and circumstances of each
particular case” where the Eighth Circuit’s opinion
“failed to analyze [certain] evidence or characterized it as
insignificant” and “could be read to” establish “ a per se
rule [that] would contravene the careful, context-specific
analysis required by this Court’s . . . precedent”).
C.
This Case Presents an Ideal Vehicle for
Resolving Important and Recurring Questions.
As counsel for C&S has acknowledged, the Second
Circuit’s decision is “an important new precedent on
withdrawal liability under ERISA,” and addresses “a
number of recurring legal issues . . . including the scope
of liability under the statute’s ‘evade or avoid’ provision . . .
and the framework for evaluating successor liability.”
Jones Day, C&S Wholesale Grocers defeats pension
liability claims on appeal (Jan. 2022).7 The Second
Circuit’s decision has already begun wreaking havoc at the
district court level, where it has been construed as holding
that if a party does “not want to acquire . . . withdrawal
7.
h t t p s : / / w w w. j o n e s d a y. c o m / e n / p r a c t i c e s /
experience/2022/01/camps-wholesale-grocers-defeats-pensionliability-claims-on-appeal.
21
liability” the parties may simply “transact[] around
it” even if the original employer “file[s] for bankruptcy
shortly after.” Finkel v. Zizza & Assocs. Corp., No. 14-CV4108(JS)(ARL), 2022 WL 970670, at *10 (E.D.N.Y. Mar.
31, 2022). Following that logic, the district court held that
the transfer of a consulting business to a newly-formed
entity in order to avoid the payment of withdrawal liability
cannot “support evade-or-avoid liability as articulated by
Second Circuit case-law” because “the Court cannot create
a transaction that never existed, such as by re-imagining
Mr. Zizza’s decision to move his advisory and consulting
business from Zizza & Co. to Zizza & Associates and then
to Bergen Cove as one that involved a transaction between
those parties.” Id.
The problem will only get worse as transactional
lawyers continue to see the case as “establish[ing] a
potential framework for structuring transactions” to
circumvent what had been the existing case law that
“purchasers are more often than not held liable as
successors[.]” Michael G. McNally, Asset Purchaser
Defeats Successor Liability Claim for Unpaid Withdrawal
Liability, Fox Rothschild LLP (Apr. 21, 2020). 8 This
ongoing harm is directly contrary to the purpose of
MPPAA, which is “to protect the financial solvency of
multiemployer pension plans.” Bay Area Laundry, 522
U.S. at 196.
The Second Circuit’s refusal to consider “the totality
of the circumstances of a given situation,” Fall River,
8. https://www.foxrothschild.com/publications/assetpurchaser-defeats-successor-liability-claim-for-unpaidwithdrawal-liability.
22
482 U.S. at 43, including factors previously identified as
relevant by other Circuits and this Court, makes this
case an ideal vehicle for this Court to clarify the proper
scope of the “any substantial continuity” successor liability
test. Notably, after a series of decisions on this topic
between 1964 and 1987, see, e.g., John Wiley & Sons, Inc.
v. Livingston, 376 U.S. 543 (1964); Fall River, 482 U.S.
27, this Court has not provided further guidance on the
“any substantial continuity” test, even though it remains
an area of active litigation in the district courts and courts
of appeals.
CONCLUSION
For the foregoing reasons, the Court should grant the
petition for a writ of certiorari.
Respectfully submitted,
Edward J. Meehan
Mark C. Nielsen
Samuel I. Levin
Groom Law Group,
Chartered
1701 Pennsylvania Avenue,
NW
Washington, DC 20006
(202) 857-0620
June 1, 2022
Vincent M. DeBella
Counsel of Record
Paravati, K arl, Green
& DeBella, LLP
520 Seneca Street, Suite 105
Utica, New York 13502
(315) 735-6481
vdebella@pkgdlaw.com
APPENDIX
1a
Appendix A — Appendix
opinionAof the UNITED
STATES COURT OF APPEALS FOR THE SECOND
CIRCUIT, DATED JANUARY 27, 2022
IN THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
No. 20-1185-cv
NEW YORK STATE TEAMSTERS CONFERENCE
PENSION AND RETIREMENT FUND, by
its Trustees, Michael S. Scalzo, Sr.,
John Bulgaro, Daniel W. Schmidt, Tom
J. Ventura, Bob Schaeffer, Brian
Hammond, Mark May and Paul Markwitz,
Plaintiff-Appellant,
v.
C&S WHOLESALE GROCERS, INC.,
Defendant-Appellee.*
May 3, 2021, Argued
January 27, 2022, Decided
As Corrected March 21, 2022.
On Appeal from the United States District Court for
the Northern District of New York.
* The Clerk of Court is directed to amend the caption as set
forth above.
2a
Appendix A
Before: Cabranes, Raggi, and Carney, Circuit Judges.
José A. Cabranes, Circuit Judge:
This case presents four questions: (1) whether the
United States District Court for the Northern District
of New York (Frederick J. Scullin, Jr., Judge) erred
in dismissing the claim of Plaintiff New York State
Teamsters Conference Pension and Retirement Fund (the
“Fund”) that Defendant C&S Wholesale Grocers (“C&S”)
“evaded and avoided” withdrawal liability under the
Employee Retirement Income Security Act (“ERISA”);
(2) whether the District Court erred in dismissing the
Fund’s claim that C&S was subject to withdrawal liability
under a theory of “common control”; (3) whether the
District Court erred in not finding that C&S was subject
to withdrawal liability as an “employer”; and (4) whether
the District Court erred in granting C&S’s motion for
summary judgment on the Fund’s claim that C&S was
subject to withdrawal liability as a “successor” under the
“substantial-continuity doctrine.” We hold that the District
Court did not err in dismissing the claims based on the
first two liability theories or in failing to find that C&S
was an “employer.” We also hold that while a “successor”
can be subject to withdrawal liability under ERISA, the
District Court, in the circumstances presented here, did
not err in granting the Defendant’s motion for summary
judgment as to that claim. Accordingly, we AFFIRM the
District Court’s order and judgment.
3a
Appendix A
I. BACKGROUND
Penn Traffic Company (“Penn Traffic”) was a
company based in Syracuse, New York, that operated
approximately 80 retail grocery stores. Penn Traffic
also operated two warehouses—one in Syracuse and
one in DuBois, Pennsylvania—where it stored wholesale
groceries, which it then distributed both to its own retail
stores and to other “independent” retail stores.
At its Syracuse warehouse, Penn Traffic employed
approximately 450 members of the Teamsters Local 317
union (“Union”) under a collective bargaining agreement
(“CBA”) that required Penn Traffic to contribute to the
Fund. The Fund, the Plaintiff-Appellant in this action, is
organized as a “multiemployer plan” regulated by ERISA,
under which Penn Traffic was subject to significant
“withdrawal liability” if it ceased to make contributions.
Briefly, if Penn Traffic “withdrew” from the Fund by
ceasing to make contributions to it, Penn Traffic was
liable to the Fund for its share of the Fund’s unfunded
vested benefits.1
Defendant C&S is a grocery wholesaler that also
operates warehouses and distributes groceries to
retailers. In March 2008, C&S began investigating a
possible acquisition of Penn Traffic. C&S did not want
to acquire Penn Traffic’s Syracuse warehouse because
of the pension withdrawal liability associated with it.
C&S therefore attempted to structure its $43 million
1. See Section II.A, infra.
4a
Appendix A
acquisition transaction, executed in December 2008, in
such a way as to limit its exposure to that liability: C&S
acquired “Penn Traffic’s wholesale distribution contracts,
customers, equipment, files, records, goodwill, intellectual
property, accounts receivable, and employees dedicated
to Penn Traffic’s wholesale distribution division who were
not members of Teamsters Local 317.” 2 And C&S did not
purchase the Syracuse warehouse.
Following the transaction, Penn Traffic continued
to run its Syracuse warehouse and distributed products
to both its own stores and the independent stores that
were now C&S customers based on the December 2008
transaction. This activity was governed by a third-party
logistics agreement (“Logistics Agreement”) that created
an independent contractor relationship between Penn
Traffic and C&S. Penn Traffic retained responsibility
for “all employees, [f]acility and storage leases, material
handling and transportation equipment, contracts and all
other liabilities associated with” the Syracuse warehouse. 3
The Logistics Agreement made clear that Penn Traffic
was still responsible for employees at the Syracuse
warehouse (the “Teamsters”), and that C&S was not:
Penn Traffic Employees shall not be considered
or deemed in any way to be employees of C&S.
C&S shall not exercise any authority over
the Penn Traffic Employees, including, but
not limited to, selecting, engaging, fixing the
2. App’x 44 ¶ 52 (emphasis in the original).
3. Suppl. App’x 126.
5a
Appendix A
compensation of, discharging and otherwise
managing, supervising and controlling the
Penn Traffic Employees and no joint employer
relationship shall exist.4
In November 2009, Penn Traffic filed for protection
under Chapter 11 of the Bankruptcy Code. C&S then
purchased the DuBois warehouse. A Penn Traffic
competitor and longtime C&S client purchased many
of Penn Traffic’s retail stores. The Syracuse warehouse
closed in May 2010, triggering the claimed withdrawal
liability for which the Fund filed a $63.6 million claim in
Penn Traffic’s bankruptcy proceeding. The bankruptcy
estate was able to cover only $5 million of that amount.
The Fund then sought the remainder of the withdrawal
liability—about $58 million—from C&S in this action,
alleging various theories under which Penn Traffic’s
withdrawal liability was either transferred to, or jointly
shared with, C&S.
The Fund’s initial complaint was filed on January 22,
2016. On March 21, 2016, C&S moved under Federal Rule
of Civil Procedure 12(b)(6) to dismiss the complaint for
failure to state a claim upon which relief can be granted.
On April 8, 2016, the Fund filed an amended complaint
alleging theories of C&S’s liability in four counts: (1) C&S
was subject to the withdrawal liability as the “successor”
to Penn Traffic (“successor liability”); (2) C&S had
intentionally avoided the withdrawal liability, triggering
a statutory provision, 29 U.S.C. § 1392(c), designed to
4. Suppl. App’x 144.
6a
Appendix A
re-impose the liability in such a case (“evade-or-avoid
liability”); (3) C&S was subject to the withdrawal liability
because it had “common control” over the Syracuse
warehouse Teamsters (“common control liability”); and
(4) C&S was subject to the withdrawal liability as a “joint
employer” of the Syracuse warehouse Teamsters (“joint
employer liability”).
On April 22, 2016, C&S filed a supplemental motion
to dismiss, addressing the Fund’s amended complaint.
On May 1, 2017, the District Court granted C&S’s
supplemental motion in part and denied it in part. The
District Court dismissed the theories of evade-or-avoid,
common control, and joint employer liability, leaving as
viable only the Fund’s theory of successor liability. The
District Court held that withdrawal liability could obtain
under a successor liability theory and that the Fund’s
pleadings on this count were sufficiently plausible to
withstand a motion to dismiss.
C&S moved for a certificate of appealability, under
28 U.S.C. § 1292(b), seeking to argue before us that, as a
matter of law, there was no successor withdrawal liability
under ERISA. On February 6, 2018, the District Court
denied that motion. The parties proceeded to discovery,
at the conclusion of which they filed cross-motions for
summary judgment.
On March 18, 2020, the District Court granted C&S’s
motion for summary judgment, holding that C&S “did
not substantially continue Penn Traffic’s business after
the 2008 transaction” and therefore could not “be held
7a
Appendix A
responsible for Penn Traffic’s withdrawal liability under
the doctrine of successor liability.”5
On appeal, the Fund challenges: (1) the District
Court’s dismissal of the “evade-or-avoid liability” theory;
(2) its dismissal of the “common control liability” theory;
(3) its finding that C&S was not an “employer” for the
purpose of determining withdrawal liability;6 and (4) its
grant of summary judgment to C&S on the “successor
liability” theory. We review each of these challenges in
turn.
II. DISCUSSION
We review de novo a dismissal of a complaint for
failure to state a claim upon which relief can be granted.7
Likewise, “[w]e review de novo a district court’s grant
of summary judgment after construing all evidence, and
drawing all reasonable inferences, in favor of the nonmoving party.”8
5. Special App’x 53-54 (emphasis omitted).
6. The Fund abandons its theory of “joint employer liability”
on appeal and asserts, instead, a challenge to the District Court’s
failure to find that C&S’s logistics agreement was a “subterfuge,”
rendering C&S an “employer” of the Syracuse warehouse
Teamsters. See Section II.D infra.
7. Kelleher v. Fred A. Cook, Inc., 939 F.3d 465, 467 (2d Cir.
2019).
8. Sotomayor v. City of New York, 713 F.3d 163, 164 (2d Cir.
2013).
8a
Appendix A
A. Withdrawal Liability
Congress enacted ERISA in 1974 in part “to ensure
that employees and their beneficiaries would not be
deprived of anticipated retirement benefits by the
termination of pension plans before sufficient funds have
been accumulated in the plans.” 9 Plans to which multiple
employers contributed jointly presented special concerns
in this regard, because if one employer pulled out, this
“reduce[d] a plan’s contribution base” and “pushe[d] the
contribution rate for remaining employers to higher and
higher levels in order to fund past service liabilities.”10
Within the first few years after ERISA’s enactment,
a “significant number” of multiemployer plans were
experiencing “extreme financial hardship.”11
To address this concern, in 1980, Congress passed
the Multiemployer Pension Plan Amendments Act
(“MPPAA”), which amended ERISA to provide that “[i]f
an employer withdraws from a multiemployer plan . . . then
the employer is liable to the plan in the amount determined
9. Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S.
717, 720, 104 S. Ct. 2709, 81 L. Ed. 2d 601 (1984).
10. Id. at 722 n.2 (quoting Pension Plan Termination
Insurance Issues: Hearings before the Subcomm. on Oversight of
the H. Comm. on Ways and Means, 95th Cong. 22 (1978) (statement
of Matthew M. Lind, Executive Director of the Pension Benefit
Guarantee Corporation)).
11. Id. at 721.
9a
Appendix A
. . . to be the withdrawal liability.”12 This statutory scheme
was designed to “reduc[e] the burden of withdrawal on the
plan and remaining employers,” 13 and thereby “protect
the financial solvency of multiemployer pension plans.”14
Withdrawal liability is calculated based on the
MPPA A, and generally represents the portion of a
multiemployer pension fund’s “unfunded vested benefits”
allocable to the withdrawing employer.15 A “complete
withdrawal,” which can trigger liability under the statute,
occurs when an employer “permanently ceases to have an
obligation to contribute under the plan” or “permanently
ceases all covered operations under the plan,” for example
by going out of business, or renegotiating the terms of
its CBA.16 When this occurs, “the entity maintaining
the plan[] must determine the amount of the employer’s
12. 29 U.S.C. § 1381(a); see generally R.A. Gray, 467 U.S.
at 720-25 (explaining the history of the passage of the MPPAA).
13. R.A. Gray, 467 U.S. at 722 (internal quotation marks
omitted).
14. Bay Area Laundry & Dry Cleaning Pension Tr. Fund
v. Ferbar Corp. of Cal., Inc., 522 U.S. 192, 196, 118 S. Ct. 542, 139
L. Ed. 2d 553 (1997).
15. 29 U.S.C. § 1381(b)(1); see generally ILGWU Nat’l Ret.
Fund v. Levy Bros. Frocks, Inc., 846 F.2d 879, 881 (2d Cir. 1988)
(outlining the statutory scheme for the imposition of withdrawal
liability).
16. 29 U.S.C. § 1383(a); see HOP Energy, LLC v. Loc. 553
Pension Fund, 678 F.3d 158, 161 (2d Cir. 2012) (noting that a
company may be subject to withdrawal liability if “it permanently
went out of business”).
10a
Appendix A
withdrawal liability, notify the employer of the amount[,]
and make a demand for payment.”17
B. Evade-or-Avoid Liability
The Fund argues that C&S acted intentionally to
“evade or avoid” withdrawal liability by structuring its
2008 acquisition of Penn Traffic’s distribution business
in such a way as to never assume control of the Syracuse
warehouse or its employees. According to the Fund, C&S
can therefore be held liable under 29 U.S.C. § 1392(c), a
provision of the MPPAA which establishes “evade-oravoid” liability.
Section 1392 provides that “[i]f a principal purpose of
any transaction is to evade or avoid [withdrawal] liability,”
then withdrawal liability “shall be applied (and liability
shall be determined and collected) without regard to
such transaction.”18 In other words, employers who are
subject to withdrawal liability generally cannot engage in
a transaction—the sale of their assets, for example—for
the purpose of evading or avoiding that liability. If they do,
they are subject to the liability as though the transaction
in question did not occur.19 Congress’s intent in imposing
17. Levy Bros. Frocks, 846 F.2d at 881; 29 U.S.C. § 1382.
18. 29 U.S.C. § 1392(c).
19. See, e.g., IUE AFL-CIO Pension Fund v. Herrmann, 9
F.3d 1049, 1053, 1056, 1057-58 (2d Cir. 1993) (noting that withdrawal
liability claim was sufficiently stated where the alleged “principal
purpose” of a company’s sale of assets and bonuses issued to the
company’s owner “was to evade or avoid withdrawal liability”).
11a
Appendix A
evade-or-avoid liability was to “prevent withdrawing
employers from threatening the financial stability of a plan
by requiring the employers to pay their share of unfunded
vested benefit liability.” 20
C&S argues that it was never subject to withdrawal
liability to begin with, because it never owned the Syracuse
warehouse or entered into an employment relationship
with the Teamsters who worked there. Therefore, the
first question we must answer is: Does “evade-or-avoid”
liability apply only to “employers” seeking to avoid their
withdrawal liability, or can non-employers also be held
liable under the statute?
In evaluating the issue, we consider our decision in
IUE AFL-CIO Pension Fund v. Herrmann. 21 There, an
employer (“Manufacturing”) entered into an agreement
with a buyer (“Mowers”), in which Mowers acquired
Manufacturing’s assets but did not assume any of
Manufacturing’s liability under a multiemployer pension
plan. Manufacturing’s owner, Herrmann, was alleged to
have siphoned significant funds away from his company
in the course of the acquisition, in the form of signing
bonuses and side-deals. The pension fund alleged that
“[t]hese transactions . . . rendered Manufacturing
insolvent.” 22 When Manufacturing went bankrupt and
20. SUPERVALU, Inc. v. Bd. of Trs. of Sw. Pa. & W. Md.
Area Teamsters & Emps. Pension Fund, 500 F.3d 334, 342 (3d
Cir. 2007).
21. 9 F.3d 1049.
22. Id. at 1053.
12a
Appendix A
withdrew from its multiemployer pension plan, the fund
sued not just Manufacturing (the relevant employer), but
also Herrmann and Mowers to recover under Section
1392. We held that “[t]o calculate and collect liability,
‘without regard to [the] transaction,’ any assets that were
transferred in order to ‘evade or avoid liability,’ as well as
the parties to whom they were improperly transferred,”—
i.e., non-employers Herrmann and Mowers—“must be
within the reach of the statute.” 23
According to the Fund, in the instant case, because
C&S clearly structured its acquisition of Penn Traffic’s
assets in a way that limited its exposure to the withdrawal
liability associated with the Syracuse warehouse and
the Teamsters, the logic of Herrmann exposes C&S to
liability under Section 1392.
In our view, Herrmann does not require that C&S
similarly “must be within the reach of the statute.” First,
the plaintiffs in Herrmann sufficiently pleaded that the
asset transfer at issue was fraudulent. 24 There are no
allegations of fraud in this case, and any such claims
would, at this stage, be waived. 25 Herrmann allegedly
23. Id. at 1056 (emphasis omitted) (quoting 29 U.S.C. §
1392(c)).
24. Id. at 1058 (finding that the “fraud claims alleged in the
[c]omplaint are legally sufficient”).
25. See Amalgamated Clothing & Textile Workers Union v.
Wal-Mart Stores, Inc., 54 F.3d 69, 73 (2d Cir. 1995) (“Generally, a
federal appellate court does not consider an issue not passed upon
below.” (internal quotation marks omitted)).
13a
Appendix A
controlled Manufacturing and worked together with
Mowers to illicitly direct Manufacturing’s funds so that
it could avoid Manufacturing’s withdrawal liability. The
analogous scenario in this case would be one in which Penn
Traffic worked with C&S to bankrupt itself in order to
avoid its own withdrawal liability. As the District Court
correctly pointed out, while C&S and Penn Traffic may
have structured their deal so that C&S avoided assuming
Penn Traffic’s withdrawal liability, “they did not structure
the transaction so that Penn Traffic became . . . unable
to pay [Penn Traffic’s] withdrawal liability.” 26 In that
hypothetical scenario, it might have made sense to bring
Section 1392 claims against Penn Traffic, and C&S as
well. But no such claims are alleged here.
In Herrmann, the reason Section 1392 could be
applied to non-employers Herrmann and Mowers was that
the assets at issue were alleged to have been “improperly
transferred” to them.27 Apportioning liability and engaging
in recovery “without regard to [the] transaction”—as
contemplated by the MPPAA—effectively required the
plaintiffs to be able to negate the transaction and recover
from the non-employer parties then possessing those
funds. 28
26. Special App’x 21.
27. Herrmann, 9 F.3d at 1056 (emphasis added).
28. Id. (“To calculate and collect liability, . . . any assets
that were transferred . . . as well as the parties to whom they
were improperly transferred, must be within the reach of the
statute.”); see also Connors v. Marontha Coal Co., 670 F. Supp.
45, 47 (D.D.C. 1987) (“Whenever a transaction has removed assets
14a
Appendix A
Here, by contrast, the Fund essentially alleges the
opposite: that C&S improperly failed to acquire the assets
at issue from Penn Traffic. This difference is critical. We
agree with what the First Circuit has held in a similar
context: that Section 1392 “requires courts to put the
parties in the same situation as if the offending transaction
never occurred; that is, to erase that transaction. It does
not, by contrast, instruct or permit a court to take the
affirmative step of writing in new terms to a transaction
or to create a transaction that never existed.” 29
This is not to say that non-employers cannot be liable
for withdrawal liability under an “evade or avoid” theory
simply because they were not the original employer subject
to that liability. Herrmann and the law of our Circuit
are clearly to the contrary. 30 But it is the exceptional
from the formal structure of the corporation being assessed for
withdrawal liability, liability can only be ‘collected’ if there is a
right of action against the transferee, whether or not it fits the
definition of ‘employer.’ If, for example, a defendant company
divided itself into two corporations for the purpose of evading
the collection of withdrawal liability, liability would undoubtedly
be collectible from both new corporations.” (emphasis added)).
29. Sun Cap. Partners III, LP v. New Eng. Teamsters &
Trucking Indus. Pension Fund, 724 F.3d 129, 149 (1st Cir. 2013);
see also Lopresti v. Pace Press, Inc., 868 F. Supp. 2d 188, 206
(S.D.N.Y. 2012) (“[T]here is a difference between declining to
assume withdrawal liability that one never had the obligation to
pay and evading withdrawal liability that one is already legally
obligated to pay.”).
30. See N.Y. State Teamsters Conf. Pension & Ret. Fund
v. Express Servs., Inc., 426 F.3d 640, 647 n.6 (2d Cir. 2005) (“[A]
15a
Appendix A
circumstance—involving fraud, or an employer who is
otherwise working with a non-employer to make recovery
on withdrawal liability unavailable 31—that brings the
collaborating employers and non-employers together
“within the reach” of Section 1392.
A non-employer cannot be said to evade or avoid
liability merely by declining to assume that liability in the
first place. To hold otherwise would be to paradoxically
and imprudently encumber with liability the perfectly
sensible business decision precisely not to purchase an
encumbered asset. The District Court therefore properly
dismissed the Fund’s claim for “evade or avoid” liability.
C. Common Control Liability
The Fund argues separately that Penn Traffic and
C&S were under “common control,” and that C&S is
therefore liable for withdrawal liability.
Under 29 U.S.C. § 1301(b)(1), “all employees of trades
or businesses . . . which are under common control shall
be treated as employed by a single employer and all
such trades and businesses as a single employer” for
non-employer . . . can be sued for engaging in evade-or-avoid
transactions. . . . The district court was therefore mistaken when
it stated that an evade-or-avoid lawsuit is more properly brought
against an admitted employer.” (cleaned up)).
31. See id. (noting that evade-or-avoid liability may obtain
against a non-employer who works “in conjunction with” an
employer).
16a
Appendix A
the purposes of determining withdrawal liability under
ERISA. ERISA adopts a definition of “common control”
from tax regulations promulgated by the Secretary of the
Treasury. 32 Under that definition, businesses are under
“common control” if they are: (1) part of the same parentsubsidiary corporate structure; (2) majority-owned by the
same group of five or fewer persons; or (3) a combination
of (1) and (2). 33
Reviewing the Fund’s amended complaint, we find
nothing to suggest that Penn Traffic and C&S satisfied any
part of this regulatory definition for common control. In
fact, the Fund does not plead that C&S and Penn Traffic
had any common owners. 34
32. See 29 U.S.C. § 1301(a)(14)(B). Such parallel definitions
are common, given that Title III of ERISA explicitly requires
the Secretary of Labor and the Secretary of the Treasury to
work together to administer ERISA. See 29 U.S.C. § 1204(a)
(“Whenever in this chapter or in any provision of law amended
by this chapter the Secretary of the Treasury and the Secretary
of Labor are required to carry out provisions relating to the
same subject matter (as determined by them) they shall consult
with each other and shall develop rules, regulations, practices,
and forms which . . . are designed to reduce . . . conflicting or
overlapping requirements . . . .”); see also Colleen E. Medill,
Introduction to Employee Benefits Law: Policy and Practice 2930 (5th ed. 2018) (explaining the division of authority between the
Department of Labor, the Treasury Department, and the Pension
Benefit Guaranty Corporation under ERISA).
33. See 26 C.F.R. § 1.414(c)-2.
34. Cf. App’x 36 (acknowledging the “technical separation
in ownership between C&S and the Penn Traffic Company under
state law”); id. at 38 ¶¶ 13-17.
17a
Appendix A
On appeal, the Fund suggests that common control
for the purposes of ERISA can be established by a
“partnership-in-fact.” Such a claim is without any basis
in the caselaw of our Circuit, but the First Circuit has
adopted an eight-part test from the jurisprudence of
the United States Tax Court to determine whether such
a “partnership-in-fact” exists and establishes common
control under ERISA. 35 Even assuming, without deciding,
that the law of the First Circuit is persuasive or applicable
here, the Fund’s claim would not succeed. The amended
complaint’s allegation that “C&S and Penn Traffic each
stood to realize a profit or loss” based on whether the
Syracuse warehouse business was successful neither
satisfies the First Circuit’s test nor convinces us that a
“partnership-in-fact” could have existed between these
businesses. 36
In sum, we agree with the District Court that the
Fund has “not even remotely” pleaded facts that would
sustain a claim under Section 1301(b). 37 The District Court
was therefore correct to dismiss the “common control”
count.
35. See Sun Cap. Partners III, LP v. New Eng. Teamsters &
Trucking Indus. Pension Fund, 943 F.3d 49, 57-58 (1st Cir. 2019)
(citing Luna v. Comm’r, 42 T.C. 1067, 1077-78 (1964)).
36. See App’x 51 ¶ 95.
37. Special App’x 23.
18a
Appendix A
D. Employer Liability
Next, the Fund argues that C&S used its Logistics
Agreement as a “subterfuge” to mask the fact that it
was actually the “employer” of the Syracuse warehouse
Teamsters, and that C&S is therefore subject to
withdrawal liability. 38 This argument is before us in a
somewhat unusual posture that requires analysis.
At the outset, it is important to distinguish this
argument from the fourth count of the Fund’s amended
complaint. Under that count, the Fund argued that C&S
was subject to withdrawal liability as an “employer” under
the “joint employer” doctrine, and the District Court
dismissed that count under Rule 12(b)(6) in its May 1, 2017
order. 39 On appeal, the Fund abandons that argument and
the associated count of its amended complaint.
By contrast, the Fund first articulated a version of
its “subterfuge” argument in its opposition to C&S’s
motion for summary judgment. Therefore, on appeal, the
“subterfuge” argument can only be properly understood
as an appeal of some error made by the District Court
in its summary judgment order of March 18, 2020, even
though that order dealt only with the “successor” liability
count of the amended complaint (the District Court having
already dismissed the other three counts).40 In effect,
therefore, the Fund in its “subterfuge” argument attempts
38. Appellant’s Br. 50-51.
39. Special App’x 23–26.
40. Id. at 45.
19a
Appendix A
to shoe-horn an “employer” theory of liability (that
might have been more appropriate under the dismissed
and abandoned fourth count of the Fund’s amended
complaint, or under a separate count entirely) into its
appeal of the District Court’s treatment of the separate
but sole-surviving first count of its amended complaint,
i.e., successor liability.
C&S therefore urges that the “subterfuge” argument
is “new” and “forfeited.”41 We recognize instead that the
argument was before the District Court at the summary
judgment stage, albeit in an abbreviated and defensive
form, rather than articulated—as it is on appeal—as an
independent theory of C&S’s withdrawal liability. Still, we
have no problem rejecting the Fund’s “subterfuge” theory
of “employer” liability and finding that the District Court
committed no error with regard to it.
Under the Logistics Agreement, C&S agreed to
reimburse a portion of the costs—including a portion of
the labor costs—Penn Traffic incurred on behalf of C&S
as an independent contractor operating the Syracuse
warehouse.42 The Fund argues that this reimbursement
contract was essentially a facade that allowed C&S
to employ the Teamsters without doing so officially.
Instead, in the Fund’s view, Penn Traffic continued to
act as the official employer, and C&S simply reimbursed
Penn Traffic’s costs—thereby reaping the benefits of the
Teamsters’ labor without having to assume the liabilities
of formal employment (such as withdrawal liability). This
41. Appellee’s Br. 50-51.
42. Suppl. App’x 129-31.
20a
Appendix A
argument relies on a single footnote in Division 1181
A.T.U.-New York Employees Pension Fund By Cordiello
v. City of New York Department of Education. There, we
opined:
There may be cases in which a plaintiff seeking to
recover withdrawal liability payments plausibly
alleges that the defendant used reimbursement
as a subterfuge to avoid accepting a contractual
obligation to contribute. We do not foreclose the
possibility that such allegations, if proven, could
render the reimbursing entity an “employer”
under the MPPAA.43
Far from “holding” that a defendant is made an
employer for the purpose of withdrawal liability by
engaging in a so-called subterfuge reimbursement,
in Division 1181 we merely declined to foreclose that
possibility. 44 We found such a holding unnecessary,
because the plaintiffs in that case had not, in fact, shown
any subterfuge.45
Just so here. The Fund submits that because
agreements such as the Logistics Agreement were
“not part of the ordinary course of C&S’s business,”
the agreement was therefore the type of “subterfuge”
contemplated in our Division 1181 footnote. 46 This
43. 910 F.3d 608, 616 n.4 (2d Cir. 2018).
44. Compare id. with Appellant’s Br. 51.
45. See Div. 1181, 910 F.3d at 616 n.4.
46. Appellant’s Br. 51.
21a
Appendix A
somewhat vague suggestion runs up against our actual
holding in Division 1181, and solid caselaw from our sister
circuits more broadly, that an obligation to reimburse an
independent contractor for contributions to a pension plan
is not the same as an obligation to contribute directly to
that plan: “[R]eimbursement and contribution are distinct
concepts under the MPPAA” and therefore “no obligation
to contribute” to a multiemployer pension plan “aris[es]
under . . . contracts” that require non-employers to
reimburse an employer’s contributions under such a plan.47
C&S entered into a well-recognized form of contractual
agreement in which C&S reimbursed Penn Traffic
for certain expenses that Penn Traffic incurred as
an independent contractor operating the Syracuse
warehouse. The fact of a reimbursement arrangement
alone—even for a company that may not frequently enter
into such arrangements—does not a “subterfuge” make.
Is sum, the Fund failed to allege that C&S was an
“employer” based on its “subterfuge” theory, and the
District Court committed no error in this regard.
E. Successor Liability
The Fund’s final theory of liability is that, based on
its acquisition of Penn Traffic’s wholesale and distribution
47. Div. 1181, 910 F.3d at 616-17; accord Transpersonnel, Inc.
v. Roadway Exp., Inc., 422 F.3d 456, 461 (7th Cir. 2005) (“[T]he
obligation to reimburse for contributions made by another is not
the equivalent of an obligation to contribute in the first instance,
and this distinction is important for purposes of [the] definition
of ‘employer’ under the MPPAA.”).
22a
Appendix A
business, C&S was the “successor” to Penn Traffic
and therefore C&S assumed Penn Traffic’s withdrawal
liability. In allowing this theory to proceed past the
motion-to-dismiss stage, the District Court held that
successor liability could apply to withdrawal liability
under ERISA.
Having never explicitly addressed that question
ourselves, we examine successor liability and its
application to withdrawal liability prior to turning back
to the circumstances of the instant case.
1.
Successor Liability Generally
Under the general common law rule, “a corporation
that merely purchases for cash the assets of another
corporation does not assume the seller corporation’s
liabilities.”48 However, the Supreme Court has “imposed
liability upon successors beyond the bounds of the common
law rule in a number of different employment-related
contexts in order to vindicate important federal statutory
policies.”49 The Supreme Court has held, for example, that
a “successor employer may be required to arbitrate with
[a] union” under a predecessor’s CBA, 50 or may be held
liable for a “predecessor employer’s unfair labor practices”
48. Stotter Div. of Graduate Plastics Co. v. Dist. 65, 991 F.2d
997, 1002 (2d Cir. 1993) (internal quotation marks omitted).
49. Upholsterers’ Int’l Union Pension Fund v. Artistic
Furniture of Pontiac, 920 F.2d 1323, 1326 (7th Cir. 1990).
50. John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 548,
84 S. Ct. 909, 11 L. Ed. 2d 898 (1964).
23a
Appendix A
under the National Labor Relations Act (“NLRA”). 51
Federal courts have further expanded the boundaries
of “successor liability” to include other federal statutory
schemes, such as ERISA, 52 the Fair Labor Standards
Act, 53 the Family and Medical Leave Act, 54 and Title VII
of the Civil Rights Act of 1964, 55 among others. 56
Successor liability is thus a “deviation” from the
general common law rule. 57 In fashioning this body of
51. Golden State Bottling Co. v. NLRB, 414 U.S. 168, 184,
94 S. Ct. 414, 38 L. Ed. 2d 388 (1973); see also Fall River Dyeing
& Finishing Corp. v. NLRB, 482 U.S. 27, 107 S. Ct. 2225, 96 L.
Ed. 2d 22 (1987).
52. See, e.g., Resilient Floor Covering Pension Tr. Fund Bd.
of Trs. v. Michael’s Floor Covering, Inc., 801 F.3d 1079, 1093-95
(9th Cir. 2015); Einhorn v. M.L. Ruberton Constr. Co., 632 F.3d
89, 99 (3d Cir. 2011); Artistic Furniture, 920 F.2d at 1327.
53. See, e.g., Teed v. Thomas & Betts Power Sols., LLC, 711
F.3d 763, 766-77 (7th Cir. 2013); Steinbach v. Hubbard, 51 F.3d
843, 845 (9th Cir. 1995).
54. See, e.g., Sullivan v. Dollar Tree Stores, Inc., 623 F.3d
770, 781 (9th Cir. 2010).
55. See, e.g., Bates v. Pac. Maritime Ass’n, 744 F.2d 705, 708
(9th Cir. 1984).
56. See, e.g., Scalia v. Wynnewood Refin. Co., 978 F.3d
1175, 1184 (10th Cir. 2020) (Occupational Safety and Health Act);
EEOC v. G-K-G, Inc., 39 F.3d 740, 747-48 (7th Cir. 1994) (Age
Discrimination in Employment Act); Musikiwamba v. ESSI,
Inc., 760 F.2d 740, 748-50 (7th Cir. 1985) (race-based employment
discrimination under 42 U.S.C. § 1981).
57. New York v. Nat’l Servs. Indus., Inc., 352 F.3d 682, 688
24a
Appendix A
law, federal courts have attempted to “strik[e] a balance
between the conflicting legitimate interests of the . . .
successor, the public, and the affected employee[s].”58 In
other words, “[s]uccessor liability is an equitable doctrine,
not an inflexible command.”59 The Supreme Court has
therefore emphasized that there is “no single definition
of ‘successor’ which is applicable in every legal context,”
and that the question of whether to hold a new employer
to the obligations of a former employer is one that must
be considered “in light of the facts of each case and the
particular legal obligation which is at issue.”60
In the cases where we have found it appropriate to
impose successor liability, we have held that (1) a successor
must have notice of its predecessor’s liability, and (2)
there must be “substantial continuity of identity in the
business enterprise.” 61 Other circuits have employed
similar formulations.62
(2d Cir. 2003) (Leval, J., concurring).
58. Golden State Bottling, 414 U.S. at 181.
59. Chi. Truck Drivers, Helpers & Warehouse Workers
Union (Indep.) Pension Fund v. Tasemkin, Inc., 59 F.3d 48, 49
(7th Cir. 1995).
60. Howard Johnson Co. v. Detroit Loc. Joint Exec. Bd., 417
U.S. 249, 263 n.9, 94 S. Ct. 2236, 41 L. Ed. 2d 46 (1974).
61. See, e.g., Stotter, 991 F.2d at 1001 (quoting Wiley, 376
U.S. at 551); see also Golden State Bottling, 414 U.S. at 185 (“[A]
successor must have notice before liability can be imposed . . . .”).
62. Ind. Elec. Workers Pension Benefit Fund v. ManWeb
Servs., Inc., 884 F.3d 770, 777 (7th Cir. 2018) (“Successor liability
under the MPPAA requires two distinct components: notice of the
25a
Appendix A
The Supreme Court has said that factors to consider
in order to establish “substantial continuity” include:
whether the business of both employers is
essentially the same; whether the employees
of the new company are doing the same jobs in
the same working conditions under the same
supervisors; and whether the new entity has
the same production process, produces the same
products, and basically has the same body of
customers.63
However, the Courts of Appeals have grouped these
considerations slightly differently,64 or emphasized certain
potential liability and substantial continuity of the business.”);
Resilient Floor, 801 F.3d at 1095 (“[A] bona fide successor can
be liable . . . so long as the successor had notice of the liability.”);
Einhorn, 632 F.3d at 99 (purchaser of assets may be liable “where
the buyer had notice of the liability prior to the sale and there
exists sufficient evidence of continuity of operations between the
buyer and seller”).
63. Fall River Dyeing, 482 U.S. at 43; see Proxy Commc’ns
of Manhattan, Inc. v. NLRB, 873 F.2d 552, 554 (2d Cir. 1989) (per
curiam).
64. Compare, e.g., Resilient Floor, 801 F.3d at 1090-91
(“Whether there has been a substantial continuity of the same
business operations; whether the new employer uses the same
plant; whether the same or substantially the same work force is
employed; whether the same jobs exist under the same working
conditions; whether the same supervisors are employed; whether
the same machinery, equipment, and methods of production are
used; and whether the same product is manufactured or the same
service is offered.” (cleaned up)), with Einhorn, 632 F.3d at 99
(“Under the substantial continuity test courts look to, inter alia,
26a
Appendix A
factors more than others, depending on the statutory
scheme to be vindicated and the circumstances of the
case.65
In other words, “the concept of substantial continuity”
is not “satisfied in the same way in each circumstance,”
and “the test developed for one statute differs from the
test developed for another.”66 Ultimately, the question
of whether there is substantial continuity between a
predecessor and a successor “is primarily factual in nature
and is based upon the totality of the circumstances of a
given situation.”67
As the Supreme Court itself has indicated, this factual
focus is “especially appropriate” given the “difficulty”
of the successorship doctrine and “the absence of
congressional guidance as to its resolution.”68
the following factors: continuity of the workforce, management,
equipment and location; completion of work orders begun by the
predecessor; and constancy of customers.”).
65. See, e.g., Resilient Floor, 801 F.3d at 1096 (explaining that
certain “factors are more relevant to NLRA contexts than to the
MPPAA withdrawal liability context,” and therefore weighting
factors differently).
66. Nat’l Servs. Indus., 352 F.3d at 688 (Leval, J., concurring);
accord Resilient Floor, 801 F.3d at 1093 (“[T]he cases that have
considered in various labor and employment law contexts whether
an employer is a successor have tailored their analyses to the
particular policy concerns underlying the applicable statute and
to the particular claim. The successorship standards are flexible
and must be tailored to the circumstances at hand.”).
67. Fall River Dyeing, 482 U.S. at 43.
68. Howard Johnson, 417 U.S. at 256.
27a
Appendix A
Therefore, some caution is appropriate when faced
with a decision—as we are in the instant case—as to
whether the doctrine is properly applied in a new context.
2.
Successor Liability for ERISA Withdrawal
Liability
We have previously applied successor liability to
delinquent pension fund contributions under ERISA. In
Stotter Division of Graduate Plastics Co. v. District 65,69
we considered the purchase of the assets of one plastic
goods manufacturer (“Stotter”) by another (“GPC”).
Stotter had been obligated to make contributions to a
union pension plan on behalf of its employees. Stotter fell
behind on its contributions, and the union representing its
employees commenced an arbitration. As the arbitration
was pending, GPC purchased Stotter, and the arbitration
resulted in an award for the union that the arbitrator ruled
was enforceable against GPC as Stotter’s successor.70
The district court applied the Supreme Court’s decision
in John Wiley & Sons, Inc. v. Livingston,71 which
held that an arbitration provision in a predecessor’s
CBA was enforceable against a successor where there
was “substantial continuity of identity in the business
enterprise.” 72 The district court held that successor
liability had therefore been properly applied to Stotter’s
69. 991 F.2d 997 (2d Cir. 1993).
70. Id. at 998-99.
71. 376 U.S. 543, 84 S. Ct. 909, 11 L. Ed. 2d 898 (1964).
72. Id. at 551.
28a
Appendix A
delinquent ERISA contributions, and we affirmed.73
In doing so, we noted the “substantial continuity
of Stotter’s operations under GPC” and concluded that
the arbitrator had correctly “impos[ed] liability for the
contribution delinquencies” on GPC.74
To be sure, the facts presented in Stotter differ from
those presented here. Most importantly, and as C&S
emphasizes, GPC had agreed to be bound by Stotter’s
CBA.75 Still, the logic of Stotter rested on Wiley, in
which the successor had not agreed to be bound by the
predecessor’s CBA—indeed, Wiley stands for the very
proposition that a successor “which did not itself sign
the collective bargaining agreement on which [a] [u]nion’s
claim to arbitration depends” can still be “bound” by that
arbitration provision.76 Based on Stotter, at a minimum,
we are confident that ERISA is precisely the sort of
statute—embodying the sort of federal labor relations
policy goals—to which the successor liability doctrine can
legitimately apply.
But we have never held that successor liability can be
applied to withdrawal liability under ERISA. Both the
Seventh and Ninth Circuits have considered that question
squarely, and both have concluded that it can.77
73. Stotter, 991 F.2d at 1000, 1002-03.
74. Id. at 1002-03.
75. Id. at 999.
76. Wiley, 376 U.S. at 547 (emphasis added).
77. See Tsareff v. ManWeb Servs., Inc., 794 F.3d 841, 845-47
(7th Cir. 2015); Resilient Floor, 801 F.3d at 1093-95.
29a
Appendix A
Both of those circuits had, themselves, previously
applied the doctrine to delinquent ERISA contributions,78
and neither saw any reason not to apply the same rule
to withdrawal liability as well. As the Ninth Circuit
explained:
We see no reason why the successorship
doctrine should not apply to MPPAA withdrawal
liability just as it does to the obligation to make
delinquent ERISA contributions. The primary
reason for making a successor responsible
for its predecessor’s delinquent ERISA
contributions is that, “absent the imposition of
successor liability, present and future employer
participants in the union pension plan will bear
the burden of the predecessor’s failure to pay
its share,” which will threaten the health of
the plan while the successor reaps a windfall.
That rationale applies with equal, if not greater,
force to a predecessor’s MPPAA withdrawal
liability.79
Relying on our decision in Stotter and persuaded by
the rationale of Resilient Floor, the District Court, in
its May 1, 2017 order, held that “the theory of successor
liability is applicable to withdrawal liability under
ERISA.”80 We agree.
78. See Artistic Furniture, 920 F.2d at 1327; Trs. for Alaska
Laborers-Constr. Indus. Health & Sec. Fund v. Ferrell, 812 F.2d 512,
516 (9th Cir. 1987); see also Einhorn, 632 F.3d at 99 (same).
79. Resilient Floor, 801 F.3d at 1093-94 (alterations omitted)
(quoting Artistic Furniture, 920 F.2d at 1328).
80. Special App’x 10.
30a
Appendix A
On appeal, C&S argues that 29 U.S.C. § 1384
demonstrates that successor liability ought not extend
to withdrawal liability. That section provides that, under
certain conditions, a seller-employer does not incur
withdrawal liability “as a result of a . . . sale of assets to an
unrelated party.”81 In other words, Section 1384 “protect[s]
an employer from withdrawal liability with respect to a
sale of assets that meets certain requirements.”82
But those requirements are all “designed to shift
the obligation for contributions to the purchaser while
leaving the seller secondarily liable.” 83 That is, sellers
are protected from withdrawal liability by the statute
if their purchasers effectively assume responsibility for
contributing to the plan themselves. But that does not
mean that, under Section 1384, purchasers can only
assume that liability “by consent” as C&S suggests. 84
Rather, if purchasers find a way to not assume withdrawal
liability pursuant to the terms of the asset sale—but they
do, in fact, qualify as successors under the substantial
continuity doctrine—they may still be liable. 85
81. 29 U.S.C. § 1384(a)(1).
82. Cent. States, Se. & Sw. Areas Health & Welfare Fund v.
Cullum Cos., 973 F.2d 1333, 1337 (7th Cir. 1992) (citation omitted).
83. Id. (citation omitted).
84. Appellee’s Br. 43.
85. Likewise inapposite is the specific case covered by §
1384(a)(1)(C), in which the purchaser subsequently withdraws
from the plan, triggering the seller’s secondary liability. While
this is “one circumstance in which a[] [purchaser] employer who
might . . . otherwise fit into the successor category is not liable
for withdrawal payments,” in that case the liability would shift
31a
Appendix A
More theoretically, C&S urges that the extension
of successor liability to withdrawal liability is the sort
of federal common lawmaking prohibited by United
States v. Bestfoods, 86 and analogous to our now-overruled
decision in BF Goodrich v. Betkoski, 87 which extended
the doctrine of successor liability to the Comprehensive
Environmental Response, Compensation, and Liability
Act of 1980 (CERCLA). 88
Following Bestfoods’s holding that CERCLA did
not displace common law principles regarding a parent
corporation’s liability for the actions of its subsidiary, and
its admonition that “to abrogate a common-law principle,
the statute must speak directly to the question addressed
by the common law,”89 we overruled Betkoski in New York
v. National Services Industries, Inc.90
back to the seller, and such a scenario therefore “does not address
whether the broader employment and labor law successorship
doctrine applies where those stringent conditions are not met.”
Resilient Floor, 801 F.3d at 1094 (emphasis omitted).
86. 524 U.S. 51, 118 S. Ct. 1876, 141 L. Ed. 2d 43 (1998).
87. 99 F.3d 505 (2d Cir. 1996).
88. Id. at 518-20.
89. 524 U.S. at 63 (internal quotation marks omitted).
90. 352 F.3d 682, 685 (2d Cir. 2003).
32a
Appendix A
But National Services is easily distinguishable. There,
the question was “whether, in the context of CERCLA, the
substantial continuity rule for successor liability” could
apply to liability for environmental harms. 91 We held
that while “the substantial continuity doctrine is well
established in the area of labor law,” the doctrine did not
apply “for CERCLA purposes.” 92 In other words, both
Bestfoods and National Services concerned CERCLA
specifically. They did not purport to address or undermine
the concept of successor liability in the labor law context.
Despite C&S’s suggestions to the contrary, the
successor liability doctrine is not limited to the NLRA or
collective bargaining per se. The Supreme Court has never
suggested as much, and multiple authorities demonstrate
the opposite.93 ERISA, too, effects the goals of federal
labor policy. It is therefore part of the labor law context
in which successor liability originates, and into which it
can be carefully yet confidently extended.94
91. Id. at 684 (emphasis added).
92. Id. at 686, 687 (emphasis added).
93. See supra notes 52–56.
94. Cf. Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355,
377, 122 S. Ct. 2151, 153 L. Ed. 2d 375 (2002) (“Congress intended
a ‘federal common law of rights and obligations’ to develop under
ERISA . . . .” (quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41,
56, 107 S. Ct. 1549, 95 L. Ed. 2d 39 (1987)).
33a
Appendix A
C&S’s warnings of a “potential policy catastrophe”
that will “wreak havoc on the free flow of capital”95 —while
raising an important issue worth considering in any
decision to broaden successor liability—are ultimately
unpersuasive in this instance. As the instant case
demonstrates (and as we explain below), just because
successor liability can apply to withdrawal liability
does not mean that any asset purchaser qualifies as a
successor under the substantial continuity doctrine. To
the contrary, a finding of substantial continuity depends
on a circumstance-specific inquiry.
3.
Successor Liability Analysis for C&S and Penn
Traffic
In a tightly reasoned and thorough opinion, the
District Court entered summary judgment for C&S on the
successor liability count of the Fund’s amended complaint,
holding that C&S “did not substantially continue Penn
Traffic’s business after the 2008 transaction.” 96 We easily
agree with this conclusion.
Again, the proper substantial continuity analysis takes
its general shape from the Supreme Court’s guidance:
[T]he focus is on . . . whether the business of
both employers is essentially the same; whether
the employees of the new company are doing
the same jobs in the same working conditions
95. Appellee’s Br. 46-47.
96. Special App’x 53 (emphasis omitted).
34a
Appendix A
under the same supervisors; and whether the
new entity has the same production process,
produces the same products, and basically has
the same body of customers.97
The substantial continuity doctrine is applied most
comfortably when a purchaser acquires the assets of a
seller—not when a purchaser fails to acquire those assets.
The latter situation in this case forces the Fund to argue
elliptically for each continuity factor, essentially asking us
(as it has, in different forms, for all its theories of liability)
to disregard Penn Traffic’s continued existence as C&S’s
independent contractor following the 2008 transaction. The
result is that while the factors in the substantial continuity
analysis are the same, the framing of our analysis differs
from the standard case where a purchaser acquires the
assets of a seller. The relevant questions become, for
example, whether C&S acquired Penn Traffic’s Syracuse
warehouse employees and customers, not whether Penn
Traffic’s Syracuse warehouse employees and customers
remained the same.
The District Court undertook this analysis in three
parts (workforce and management, customers, and
facilities and equipment), which was appropriate and
useful “in light of the facts of [the] case and the particular
legal obligation . . . at issue.” 98
97. Fall River Dyeing, 482 U.S. at 43.
98. Howard Johnson, 417 U.S. at 262 n.9. Other circuits have
enumerated substantial continuity factors in “cleaner” lists. See, e.g.,
Leib v. Ga.-Pac. Corp., 925 F.2d 240, 247 (8th Cir. 1991) (enumerating
35a
Appendix A
In our review, even construing all the facts in favor of
the Fund as we are required to do, one overriding fact is
ultimately decisive: C&S did not purchase the Syracuse
warehouse or employ the Union members who worked
there. Penn Traffic continued to own the warehouse and
employ the Union members.99
As to the continuity of workforce and management,
the record demonstrates that C&S did not acquire any of
the relevant Union employees from Penn Traffic (because
they remained employed by Penn Traffic). Similarly, as
to the continuity of facilities and equipment, C&S did not
acquire the Syracuse warehouse or the equipment there.
And as to the continuity of customers, it is enough to
note—and the Fund does not materially dispute—that
about 70% of the volume of product distributed by Penn
Traffic from the Syracuse warehouse was to Penn Traffic’s
own retail stores, not to the wholesale customers acquired
by C&S.100 This is a large enough majority, for the purpose
of a substantial continuity analysis, to tip the customer
continuity question in C&S’s favor. In other words, given
a seven-factor test); United States v. Carolina Transformer Co.,
978 F.2d 832, 838 (4th Cir. 1992) (enumerating an eight-factor
test). We decline to do so here, lest such a formulation be confused
as a definitive “substantial continuity test” in our Circuit. On the
contrary, unless the Supreme Court itself or the Congress speak
more definitively on substantial continuity, in our view the concept
must continue to be “flexible” and “tailored to the circumstances at
hand.” Resilient Floor, 801 F.3d at 1093.
99. App’x 465-66 ¶¶ 21-22; Suppl. App’x 126, 144.
100. Appellant’s Br. 43; Appellee’s Br. 8; App’x 461 ¶ 7, 469 ¶ 32.
36a
Appendix A
the structure of the 2008 transaction, we agree with the
District Court’s conclusion that C&S did not “substantially
continue” Penn Traffic’s business.
None of the Fund’s arguments on appeal upset this
conclusion.
The Fund’s cited authorities concerning workforce
continuity amount to the argument that a change in
workforce alone does not automatically defeat successor
liability.101 This is true. After all, substantial continuity
is established through a multifactor analysis. But this
certainly does not somehow transform a change in
workforce into a factor weighing in favor of finding
substantial continuity.
The Fund’s argument that the warehouse’s inventory—
owned by C&S—should be considered “facilities and
equipment” for the purposes of establishing substantial
continuity, is also unconvincing. Clearly, in assessing
continuity in a grocery warehousing business, the more
appropriate consideration is who owns the warehouse itself
(in this case, a third party, but leased by Penn Traffic),102
and who owns the forklifts and other warehousing
equipment (Penn Traffic itself),103 not who owns the crates
101. See Appellant’s Br. 39-42.
102. App’x 463 ¶ 15
103. Id. at 467 ¶ 28. That the Supreme Court in Fall River
Dyeing appeared to consider a successor’s partial possession of a
predecessor’s inventory as one factor in a successorship analysis,
see 482 U.S. at 32, again, only indicates that inventory might be
37a
Appendix A
of groceries passing through the warehouse bound for
retail.
Finally, even if, as the Fund suggests, 30% of the
customers receiving groceries from the warehouse
were, after the 2008 transaction, buying those groceries
from C&S, this does not tip the balance back towards
substantial continuity. Penn Traffic was still performing
the warehousing and distribution of C&S’s groceries
for those customers, which is the relevant “business” to
consider with reference to the Syracuse warehouse and
its Union employees.104
In sum, then, C&S did not take over any significant
part of—much less “substantially continue”—Penn
Traffic’s relevant business: the Syracuse warehouse or
the employment of its Union employees.105 C&S therefore
one factor considered in a multifactor analysis, depending on the
particularities of a given case. It does not upset our conclusion here.
104. We likewise reject the Fund’s argument that C&S
succeeded Penn Traffic because it acquired as customers Penn
Traffic’s retail stores that were sold to Tops (a Penn Traffic
competitor) in bankruptcy. Given the totality of the circumstances,
we find decisive that the Fund has adduced no evidence that these
retail stores were served out of the Syracuse warehouse, which was
closed in 2010 after Penn Traffic’s bankruptcy. Cf. Proxy Commc’ns,
873 F.2d at 554 (identifying successorship where the successor
“provided the same services . . . from the same location and for the
same customers”).
105. We need not address the important requirement that
a successor must have notice of a predecessor’s liability, as the
substantial continuity analysis decides the question in this case.
38a
Appendix A
is not subject to Penn Traffic’s withdrawal liability under
a theory of successor liability.
III. CONCLUSION
To summarize, we hold as follows:
(1) the District Court did not err in dismissing the
Fund’s “evade-or-avoid” liability theory;
(2) the District Court did not err in dismissing the
Fund’s “common control” liability theory;
(3) the District Court did not err in finding that C&S
was not an “employer” of the Union employees at the
Syracuse warehouse; and
(4) “successor liability” can, as a matter of law, apply
to withdrawal liability under ERISA, but
(5) the District Court in this case did not err in
granting C&S’s motion for summary judgment because
C&S did not substantially continue Penn Traffic’s relevant
business, and therefore was not subject to “successor
liability.”
For the foregoing reasons, we AFFIRM the District
Court’s May 1, 2017 order and its March 18, 2020 judgment.
39a
Appendix B
APPENDIX B — MEMORANDUM
DECISION AND
ORDER OF THE UNITED STATES DISTRICT
COURT FOR THE NORTHERN DISTRICT OF
NEW YORK, FILED MARCH 18, 2020
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
5:16-CV-84 (FJS/ATB)
NEW YORK STATE TEAMSTERS CONFERENCE
PENSION AND RETIREMENT FUND, BY
ITS TRUSTEES, MICHAEL S. SCALZO, SR.,
JOHN BULGARO, DANIEL W. SCHMIDT, TOM
J. VENTURA, BOB SCHAEFFER, BRIAN
HAMMOND, MARK MAY AND PAUL MARKWITZ,
Plaintiff,
v.
C&S WHOLESALE GROCERS, INC.,
Defendant.
MEMORANDUM-DECISION AND ORDER
I. INTRODUCTION
Pending before the Court are (1) Defendant’s motion
for partial judgment on the pleadings pursuant to Rule
12(c), see Dkt. No. 131; (2) Defendant’s motion for summary
judgment pursuant to Rule 56, see Dkt. No. 136; and (3)
Plaintiff’s cross-motion for summary judgment pursuant
40a
Appendix B
to Rule 56 of the Federal Rules of Civil Procedure, see
Dkt. No. 139.
II. BACKGROUND
A. Undisputed facts
The Penn Traffic Company (“Penn Traffic”) was a
publicly traded regional grocery business located in the
Northeastern United States. See Dkt. No. 136-1, Def.’s
Stmt. of Undisputed Material Facts (“DSUMF”), at ¶ 2.1
Before filing for bankruptcy in November 2009, Penn
Traffic owned and operated approximately 80 retail
grocery stores (“the corporate stores”) and a wholesale
business that procured, warehoused, and distributed
groceries for more than 100 independent retail grocery
stores. See id. at ¶¶ 3-4. Penn Traffic operated two
warehouse facilities, one of which was in Syracuse, New
York. See id. at ¶ 6. Penn Traffic was obligated under
three collective bargaining agreements (“CBAs”) with
Teamsters Local 317 to contribute to the New York State
Teamsters Conference Pension and Retirement Fund
(“Plaintiff” or “the pension fund”) for work members
of Teamsters Local 317 performed at the Syracuse
warehouse. See id. at ¶ 9.
C&S Wholesale Grocers, Inc. (“Defendant”) is a
privately-owned company that provides procurement,
1. The Court references Plaintiff’s Response to Def.’s Stmt
of Undisputed Material Facts (“PSUMF”) when there are minor
discrepancies, such as word-choice or conclusions of law; but the
Court emphasizes that all of the facts in this section are undisputed.
41a
Appendix B
warehousing, and distribution services for grocery
businesses across the United States. See id. at ¶ 1. In
December 2008, Defendant entered into an agreement
with Penn Traffic, whereby Penn Traffic agreed to
sell Defendant its relationships and contracts with its
wholesale customers in exchange for a cash payment. See
id. at ¶¶ 12-13. Defendant did not acquire Penn Traffic’s
retail stores, the Syracuse warehouse lease, or the
trailers, trucks, or forklifts used at the warehouse. See
id. at ¶¶ 14-16; PSUMF at ¶¶ 15(a)-16(a).
Pursuant to the 2008 transaction, Defendant agreed
to hire 30 Penn Traffic employees who had supported
Penn Traffic’s wholesale business, none of whom worked
in the Syracuse warehouse unloading trucks or storing,
selecting, packing, or shipping products. See DSUMF at
¶¶ 19, 22; PSUMF at ¶ 22(a). Defendant did not hire any
members of Teamsters Local 317, nor did it expressly
enter into a CBA with Teamsters Local 317. See DSUMF
at ¶¶ 17-18; PSUMF at ¶ 18(a). The 2008 transaction did not
alter Penn Traffic’s CBA with Teamsters Local 317, and
its obligation to contribute to the pension fund continued.
See DSUMF at ¶ 23.
Following the 2008 transaction, Penn Traffic and
Defendant entered into a separate agreement, in
which Defendant paid Penn Traffic as a subcontractor
for services provided at the Syracuse warehouse. See
generally id. at ¶ 34. These services included warehousing
and distributing products out of the Syracuse warehouse
for Defendant’s wholesale customers. See id. at ¶ 31.
42a
Appendix B
After Penn Traffic’s bankruptcy in November 2009,
Defendant did not purchase Penn Traffic’s interest in
the Syracuse warehouse or any of the equipment used at
the Syracuse warehouse from Penn Traffic’s bankruptcy
estate. See id. at ¶ 47. In May 2010, as part of its liquidation,
Penn Traffic closed the Syracuse warehouse; and, at that
time, it withdrew from the pension fund and incurred
withdrawal liability. See id. at ¶¶ 48, 49. The exact amount
of withdrawal liability is disputed, but Plaintiff alleged
that Penn Traffic owed nearly $60 million. See Dkt. No.
28, First. Amend. Compl. at ¶ 80. When Plaintiff filed its
complaint in 2016, Penn Traffic had only paid Plaintiff
$5,206,088.34 of that liability. See id.
B. Procedural history
As a result of Penn Traffic’s unpaid withdrawal
liability, Plaintiff filed its complaint in the instant action
on January 22, 2016. See generally Dkt. No. 1, Compl.
In its complaint, Plaintiff alleged the following three
counts against Defendant: (1) withdrawal liability as a
successor to Penn Traffic, (2) liability for transacting to
evade or avoid withdrawal liability, and (3) withdrawal
liability as an employer and/or joint employer. See id. at
¶¶ 48-61. Plaintiff amended its complaint on April 8, 2016,
to allege another cause of action for liability as an entity
under common control with Penn Traffic. See Dkt. No. 28
at ¶¶ 98-96. Defendant then moved to dismiss Plaintiff’s
amended complaint. See Dkt. No. 23.
On May 1, 2017, the Court granted Defendant’s
motion in part and denied it in part. See Dkt. No. 75,
Memorandum-Decision and Order, at 27 (“the 2017
43a
Appendix B
Order”). The Court ultimately dismissed Plaintiff’s claims
based on the theories of evade or avoid liability, common
control liability, and joint employer liability. See generally
id. The Court found that Plaintiff pled a plausible
cause of action against Defendant based on a theory of
successor liability. See id. at 17. In so finding, the Court
held—for the first time in this Circuit— that the theory
of successor liability is applicable to withdrawal liability
under the Employee Retirement Income Security Act of
1974 (“ERISA”). See id. at 10. Following that decision,
Defendant moved for a certificate of appealability on this
issue. See Dkt. No. 79. The Court denied that motion. See
Dkt. No. 97.
In addition to defending this case in federal court,
Defendant initiated a related arbitration proceeding
challenging Plaintiff’s calculation of withdrawal liability.
See Text Minute Entry, Feb. 28, 2018, re Dkt. No. 99,
Status Report; see also Dkt. No. 116, Text Order. The
arbitrator has yet to reach a decision on the amount of
withdrawal liability Defendant would have to pay if found
responsible. See Dkt. No. 182, Status Report. This ongoing
arbitration does not affect the parties’ agreement that
the Court address liability issues and not damages in the
pending round of dispositive motions. See Dkt. No. 116.
III. DISCUSSION
A. Parties’ cross-motions for summary judgment
After the Court’s 2017 Order, the only remaining cause
of action is based on Plaintiff’s argument that Defendant
is responsible for Penn Traffic’s withdrawal liability under
44a
Appendix B
the doctrine of successor liability. The parties address
this issue in their cross-motions for summary judgment,
which the Court discusses below. See generally Dkt. Nos.
136, 139.
1.
Legal standa rd gover ning motions for
summary judgment
Rule 56 of the Federal Rules of Civil Procedure
governs motions for summary judgment. Under this
Rule, the entry of summary judgment is warranted “if
the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a). When deciding
a summary judgment motion, a court must resolve any
ambiguities and draw all reasonable inferences in a light
most favorable to the nonmoving party. See Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91
L. Ed. 2d 202 (1986) (citation omitted).
2.
Defendant’s responsibility for Penn Traffic’s
withdrawal liability as a “successor”
a.
Introduction
In its 2017 Order, the Court determined that the
theory of successor liability could apply to withdrawal
liability under ERISA and the Multiemployer Pension
Plan Amendments Act of 1980 (“MPPAA”). See Dkt. No.
75 at 10. “[T]he primary reason for making a successor
responsible for resulting withdrawal liability is that,
‘“[a]bsent the imposition of successor liability, present
45a
Appendix B
and future employer participants in the union pension
plan will bear the burden of [the predecessor’s] failure to
pay its share,” which will threaten the health of the plan
while the successor reaps a windfall.’” See id. at 13-14
(quoting Resilient Floor Covering [Pension Trust Fund
Bd. of Trs. v. Michael’s Floor Covering, Inc.], 801 F.3d
[1079,] 1093 [(9th Cir. 2015)] (quoting Artistic Furniture,
920 F.2d at 1328)).
“An entity has successor liability where ‘(1) it “had
notice of its predecessor’s obligations” and (2) ‘“a sufficient
continuity of identity exists between the two businesses.”’”
See id. at 15 (quoting Romita v. Anchor Tank Lines, LLC,
No. 11 Civ. 9641, 2014 U.S. Dist. LEXIS 37621, 2014 WL
1092867, *4 (S.D.N.Y. Mar. 17, 2014) (quoting Bd. of Trs.
of the Sheet, Metal Workers Local Union No. 137, 1995
U.S. Dist. LEXIS 9330, at *3, 1995 WL 404873 (quoting
Stotter Div. of Graduate Plastics, 991 F.2d at 1002-03))
(other citation omitted). Thus, the Court must determine
whether Defendant had notice of Penn Traffic’s obligations
and whether Defendant “substantially continued” Penn
Traffic’s business. “Finally, for successor liability to
apply in this factual context, the Court must give special
consideration to Defendant’s relationship with the work
that the union employees completed.” See id. at 16 (citing
Howard Johnson [Co., Inc. v. Detroit Local Joint Exec.
Bd., Hotel & Rest. Emps. & Bartenders Int’l Union, ALFCIO], 417 U.S. [249,] 262 n.9, 94 S. Ct. 2236, 41 L. Ed. 2d
46 [(1974)]).
46a
Appendix B
b.
Substantial continuity factors2
“‘[S]ubstantial continuity in the operation of the
business before and after the sale’ of its assets is a
requirement for successor liability. For had the business
not changed there would be no reason for its financial
structure to change—no reason therefore to allow the
successor company to obtain a windfall by acquiring assets
free of liabilities, leaving its predecessor with liabilities
but no assets.” Bd. of Trs. of Auto. Mechanics’ Local No.
701 Union & Indus. Pension Fund v. Full Circle Grp.,
Inc., 826 F.3d 994, 998 (7th Cir. 2016) (quoting Tsareff
v. ManWeb Services, Inc., 794 F.3d [841,] 845 [(7th Cir.
2015)]). In its 2017 Order, the Court cited to the various
factors that courts analyze to determine whether there
is substantial continuity between businesses, including
“continuity of the workforce, management, equipment
and location” and “constancy of customers.” See Dkt. No.
75 at 12 (quoting [Einhorn v. M.L. Ruberton Constr. Co.,
632 F.3d 89,] 99 [(3d Cir. 2011)] (citing Fall River Dyeing
& Finishing Corp. v. NLRB, 482 U.S. 27, 43, 107 S. Ct.
2225, 96 L. Ed. 2d 22 (1987))) (other citation omitted).
2. In this section, the Court addresses the parties’ arguments
regarding whether Defendant substantially continued Penn Traffic’s
business immediately after the 2008 transaction but before Penn
Traffic went bankrupt. Defendant additionally argues that it did
not “substantially continue” the Syracuse warehouse operations
following Penn Traffic’s bankruptcy. See Dkt. No. 136-2, Def’s
Memorandum of Law, at 37-44. Because the Court ultimately
concludes that Defendant did not substantially continue Penn
Traffic’s business following the 2008 transaction, the Court does not
reach the merits of Defendant’s post-bankruptcy argument.
47a
Appendix B
i.
Continuity of the workforce and
management
The most important continuity factor that the Court
must consider is whether there was continuity of the
workforce and management. See Members of Bd. of
Admin. of Toledo Area Indus. UAW Ret. Income Plan
v. OBZ, Inc., 348 F. Supp. 3d 635, 648 (N.D. Ohio 2018).
The facts of this case present a novel scenario in which
a buyer of a business’s assets—but not its employees—
hires the business as a subcontractor so that the business
could continue to do the same work it did before the sale
of its assets. In cases where a buyer acquires the seller’s
assets, including its employees, other courts have found
substantial continuity of the workforce unless other
questions of fact were present. See, e.g., OBZ, Inc., 348 F.
Supp. 3d at 639; Einhorn v. M.L. Ruberton Constr. Co.,
632 F.3d 89, 91-92 (3d Cir. 2011).
For example, in Einhorn v. M.L. Ruberton Constr.
Co., Statewide, a highway construction company, faced a
series of financial hardships; and it was delinquent on its
contributions to Teamsters Local 676’s and other CBAs’
pension funds. See Einhorn, 632 F.3d at 91-92. To resolve
some of these issues, Local 676 and Ruberton, a general
construction company, entered into an agreement whereby
Ruberton would hire Statewide’s existing workforce
covered by the current CBA, and that the CBA would
govern such employment until a new CBA was negotiated.
See id. at 92. In a second agreement, Statewide sold its
assets to Ruberton for $1.6 million in cash. See id. In
addition to the existing employees, Ruberton hired more
48a
Appendix B
than half of Statewide’s former employees in the months
following the sale, including its Vice President and 33%
shareholder. See id. Statewide remained in business for
some time after the asset sale using subcontractors,
and it hired Ruberton as one such subcontractor, billing
Statewide more than $400,000 for rented employees and
equipment. See id.
The Einhorn court noted that the parties disputed
whether Ruberton continued Statewide’s business; and,
if so, to what extent. See id. at 100. For example, the
court noted, “Ruberton argues that ‘even if Ruberton
were deemed to have continued Statewide’s business,
that continuation would be limited to the ... business’
covered by the Local 676 CBA and it could not be liable
for contributions owed in connection with Statewide’s
other CBAs.” Id. (citation omitted). The court held that the
presence of factual disputes rendered summary judgment
inappropriate. See id.
Additionally, in OBZ, Inc., Lockrey, a machining
and fabricating company, executed an asset purchase
agreement with Toledo Wire, in which Lockrey would pay
Toledo Wire $250,000 for its machinery, customer list,
and its goodwill. See OBZ, Inc., 348 F. Supp. 3d at 639.
After the sale, Lockrey offered jobs to all of Toledo Wire’s
employees and hired former Toledo Wire manager Eric
Fodor. See id. at 640. The court noted that continuity of the
workforce was the “most important[ ]” factor that weighed
in favor of finding that Lockrey substantially continued
Toledo Wire’s business. See id. at 648. However, because
a reasonable person could draw conflicting inferences
49a
Appendix B
from Lockrey’s use of Toledo Wire’s intangible assets,
the court found that neither side was entitled to summary
judgment. See id. at 648-49.
The Court finds that the inverse of these courts’
rulings is true; if a buyer does not acquire a seller’s
employees, this weighs against substantial continuity.
There is no dispute that Defendant did not actually
employ the workers in the Syracuse warehouse; Penn
Traffic did. See DSUMF at ¶¶ 20-22; PSUMF at ¶¶ 20(a)22(a). 3 This weighs in favor of Defendant. It is further
undisputed that, from December 2008 until the closure
of the warehouse, Penn Traffic retained authority to
hire, terminate, and discipline employees who worked at
the Syracuse warehouse. See DSUMF at ¶¶ 37, 39. After
the 2008 transaction, Penn Traffic continued to handle
benefits and payroll for the members of the Teamsters
Local 317 who worked at the Syracuse warehouse. See
DSUMF at ¶ 38. The 2008 agreement did not alter Penn
Traffic’s CBA with Teamsters Local 317 or its obligation
to contribute to the pension fund at all. See DSUMF at
¶ 23. Additionally, from December 2008 until the closure
of the warehouse, Penn Traffic continued to employ the
3. Plaintiff denies this fact only insofar as Defendant claims
that its employees were physically located outside of the Syracuse
warehouse facility and that David Adamsen, the person in charge
of the entire wholesale business, was not present and in day-to-day
contact with Penn Traffic’s Vice President of Distribution, Tim Cipiti.
These are not genuine issues of material fact. Simply being in the
same building, by itself, does not show that Defendant substantially
continued Penn Traffic’s Syracuse warehouse. Additionally, Plaintiff
does not assert that Mr. Adamsen had authority over Mr. Cipiti, even
if they had day-to-day contact.
50a
Appendix B
managers who oversaw the Syracuse warehouse workers,
and those workers reported to supervisors at Penn Traffic.
See DSUMF at ¶¶ 40-41.
The Court finds that the above-stated facts, taken
together with the caselaw, show that Defendant’s failure
to acquire the warehouse workers as its own employees
ultimately means that it did not substantially continue
Penn Traffic’s workforce and management after the 2008
transaction. Thus, this factor weighs in Defendant’s favor.
ii.
Constancy of customers
To determine the second factor, courts look at whether
the successor took over the predecessor’s customers. See
generally Fall River Dyeing & Finishing Corp. v. NLRB,
482 U.S. 27, 57-58, 107 S. Ct. 2225, 96 L. Ed. 2d 22 (1987).
Before the 2008 transaction, the Syracuse warehouse
served two sets of customers: (1) independent stores that
contracted with Penn Traffic to obtain their products and
receive other services, and (2) the corporate stores owned
and operated by Penn Traffic itself. The corporate stores
were the dominant customers, responsible for greater than
70% of the volume of product that was shipped through
the warehouse, whereas the independent stores accounted
for only 30% of the warehouse traffic. See DSUMF at
¶¶ 6-7, 32.
Defendant arg ues that these percentages did
not change after it acquired Penn Traffic’s customer
relationships for the independent stores in the 2008
transaction. See Dkt. No. 136 -2 at 28. According
51a
Appendix B
to Plaintiff, however, Defendant made a “conscious
decision” to take over Penn Traffic’s relationships with
its independent wholesale customers; and, further,
taking over 30% of the warehouse inventory intended
for Defendant’s wholesale customers “is at least some
evidence of substantial continuity.” See Dkt. No. 139-2 at
44-45. To the contrary, Defendant responds that taking
over 30% of the operations should not justify imposing
on it 100% of Penn Traffic’s withdrawal liability. See Dkt.
No. 154, Def’s Reply, at 14. “That is why the successorship
doctrine requires ‘substantial’ continuity,” Defendant
asserts, and 30% is not substantial. See id.
The Court finds that this case is analogous to a case the
Second Circuit recently decided, in which the Department
of Education (“DOE”) and the Union negotiated a written
agreement whereby the DOE agreed to insert Employee
Protection Provisions into all of its transportation
contracts, including those with its Contractors who
employed drivers and escorts responsible for driving buses
and supervising and aiding students on their trips to and
from school. See Div. 1181 A.T.U. - N.Y. Emps. Pension
Fund v. City of New York Dep’t of Educ., 910 F.3d 608,
612-13 (2d Cir. 2018). The Employee Protection Provisions
required each Contractor to contribute to the Union’s
pension fund on behalf of the participating employees in
amounts determined by its DOE contract or with its CBA
with the union. See id. at 613.
Ultimately, the pension fund’s trustees determined
that the Contractors effected a “complete withdrawal”
from the fund, triggering “withdrawal liability” under
52a
Appendix B
the MPPAA. See id. (citing 29 U.S.C. § 1381(a)). After
discovery, which was limited to the pension fund’s alter ego
claim, the DOE moved for summary judgment. See id. The
district court granted Defendant’s motion, reasoning that
no reasonable jury could conclude, based on the evidence
proffered by the pension fund, that the Contractors were
the corporate alter egos of the DOE. See id. at 614. The
Second Circuit affirmed, thus holding that the DOE was
not responsible for the Contractors’ withdrawal liability.
See generally id. at 619.
The undisputed facts in this case show that Defendant
subcontracted Penn Traffic to handle distribution and
warehousing for its independent wholesale clients (whom
Defendant purchased from Penn Traffic). See DSUMF
at ¶ 31; PSUMF at ¶ 31(a). Based on this agreement,
Defendant paid Penn Traffic for the warehouse work it did
for Defendant’s customers, and Penn Traffic contributed
to the pension fund for that work. See Dkt. No. 154 at 14.
Defendant argues that this situation is essentially the
same as the DOE hiring Contractors to transport the
school district’s children to school and contribute to the
bus driver’s and escort’s pension fund for that work, which
did not result in liability for the DOE. See Dkt. No. 154
at 14 (citing Div. 1181 A.T.U., 910 F.3d at 618). The Court
finds this rationale persuasive; and, thus, the “constancy
of customers” factor weighs in Defendant’s favor.
iii. Continuity of facilities and equipment
This factor asks whether the successor acquired the
predecessor’s facilities and equipment. See generally
53a
Appendix B
Fall River Dyeing, 482 U.S. at 44. Defendant notes that,
although it purchased assets from Penn Traffic in 2008,
those assets were associated with the wholesale business,
not the Syracuse warehouse’s operations. See id. In fact,
Defendant asserts, the 2008 Asset Purchase Agreement
specifically excluded all tangible and intangible assets
relating to the warehouse facilities. See id. at 30. Plaintiff
argues that it is most important that Defendant owned
all the inventory inside of the warehouse; and, thus,
it owned the most valuable assets associated with the
warehouse. See Dkt. No. 139-2 at 49. Plaintiff asserts that,
by virtue of the fact that Defendant had “full and complete
ownership of any inventory” in the warehouse, it was de
facto Defendant’s warehouse. See id.
Defendant responds that it is “wrong ... to characterize
inventory as an ‘asset’ of the warehouse. The role of the
warehouse was to store and distribute inventory—not to
buy, sell, or own it. Thus, the relevant assets are those
used for warehousing work (e.g., forklifts, racking, and
trucks), not cases of groceries. [Defendant] was no more
the ‘de facto’ owner of Penn Traffic’s warehouse ... than
Amazon is the ‘de facto’ owner of the U.S. Postal Service’s
warehouse.” See Dkt. No. 154 at 17.
Looking at the undisputed facts, Penn Traffic
continued to lease the warehouse from a third party after
the 2008 transaction, meaning that neither Penn Traffic
nor Defendant owned the building. See DSUMF at ¶ 15;
PSUMF at ¶ 15(a). Penn Traffic also continued to own the
forklifts, trucks, trailers, and other equipment used at the
Syracuse warehouse up until it closed in May 2010. See
54a
Appendix B
DSUMF at ¶ 28; PSUMF at ¶ 28(a). Additionally, following
the 2008 transaction, Penn Traffic provided “warehousing
and distribution services” for Defendant’s customers out
of the Syracuse warehouse — not procurement or other
inventory-based services. See DSUMF at ¶ 31; PSUMF
at ¶ 31(a). Based on these facts, the Court finds that
Defendant did not substantially continue Penn Traffic’s
facilities or equipment; and, thus, this factor weighs in
Defendant’s favor.
iv.
Conclusion
For the above-stated reasons, the Court finds that
Defendant did not substantially continue Penn Traffic’s
business after the 2008 transaction. Therefore the Court
need not determine whether Defendant was on notice of
Penn Traffic’s pension obligations, nor must it analyze
Defendant’s relationship with the work that the union
employees completed. 4 Based on the Court’s finding,
Defendant cannot be held responsible for Penn Traffic’s
withdrawal liability under the doctrine of successor
liability. As such, the Court finds Plaintiff’s remaining
arguments are without merit.
4. However, if the Court were to decide the issue of notice, it
would find that Defendant was on notice of Penn Traffic’s withdrawal
liability. This is because “an asset buyer is on notice of, and therefore
subject to, successor liability if he has ‘notice that the seller may
be contingently liable for withdrawal liability’” under the MPPAA.
Full Circle Grp., Inc., 826 F.3d at 997 (quoting Tsareff v. ManWeb
Services, Inc., 794 F.3d at 844-47). Defendant admitted that “[o]f
course, [it] knew that the Fund was underfunded, and that if Penn
Traffic closed the warehouse, Penn Traffic would incur withdrawal
liability.” See Dkt. No. 136-2 at 34. Therefore, the notice element for
successor liability is satisfied.
55a
Appendix B
B. Defendant’s motion for partial judgment on the
pleadings
Also pending before the Court is Defendant’s motion
for partial judgment on the pleadings. See Dkt. No. 131.
This motion asks the court to “cap[ ] any liability at
the unpaid balance of the sum set forth in a settlement
agreement between Plaintiff and the Penn Traffic
Company.” See id. Notably, Plaintiff and Penn Traffic
reached a settlement during Penn Traffic’s bankruptcy
proceedings whereby the parties agreed that Plaintiff was
entitled to (1) a single general unsecured claim against
Penn Traffic in the amount of $32,096,880.00, (2) a single
administrative claim against Penn Traffic in the amount
of $991,768.00, and (3) priority claims against Penn Traffic
in the amount of $371,597.00. See Dkt. No. 131-3, Ex. 1.
The Court construes this motion as asking the Court
to cap damages. See Dkt. No. 131-1, Def.’s Memorandum in
Support of Mot. on Pleadings, at 6 (arguing “[Plaintiff]’s
recovery is capped at approximately $28 million, as a
matter of law. [Defendant] is thus entitled to judgment on
the pleadings respecting [Plaintiff]’s demands in excess of
that figure.” (citation omitted)). The Court does not reach
the merits of this motion, however, because it finds that
Defendant is not responsible for Penn Traffic’s withdrawal
liability. Thus, the Court denies Defendant’s motion for
partial judgment on the pleadings as moot.
56a
Appendix B
IV. CONCLUSION
After carefully considering the entire file in this
matter, the parties’ submissions, and the applicable law,
and for the above-stated reasons, the Court hereby
ORDERS that Defendant’s motion for summary
judgment, see Dkt. No. 136, is GRANTED; and the Court
further
ORDERS that Plaintiff’s cross-motion for summary
judgment, see Dkt. No. 139, is DENIED; and the Court
further
ORDERS that Defendant’s motion for partial
judgment on the pleadings, see Dkt. No. 131, is DENIED
as moot; and the Court further
ORDERS that the Clerk of the Court shall enter
judgment in favor of Defendant and close the case.
IT IS SO ORDERED.
Dated: March 18, 2020
Syracuse, New York
/s/ Frederick J. Scullin, Jr.
Frederick J. Scullin, Jr.
Senior United States District Judge
57a
Appendix C
APPENDIX C — MEMORANDUM
DECISION
AND ORDER OF THE UNITED STATES DISTRICT
COURT FOR THE NORTHERN DISTRICT
OF NEW YORK, DATED MAY 1, 2017
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
5:16-CV-84
(FJS/ATB)
NEW YORK STATE TEAMSTERS CONFERENCE
PENSION AND RETIREMENT FUND BY
ITS TRUSTEES, MICHAEL S. SCALZO, SR.,
JOHN BULGARO, DANIEL W. SCHMIDT, TOM
J. VENTURA, BOB SCHAEFFER, BRIAN
HAMMOND, MARK MAY AND PAUL MARKWITZ,
Plaintiff,
v.
C&S WHOLESALE GROCERS, INC.,
Defendant.
May 1, 2017, Decided;
May 1, 2017, Filed
SCULLIN, Senior judge
MEMORANDUM-DECISION AND ORDER
I. INTRODUCTION
Pending before the Court is Defendant’s motion to
dismiss for failure to state a claim pursuant to Rule 12(b)
58a
Appendix C
(6) of the Federal Rules of Civil Procedure. See Dkt. No.
23. Defendant filed this motion prior to Plaintiff amending
its complaint as of right. After Plaintiff filed its amended
complaint, the Court provided Defendant with the option
to file a new motion to dismiss or to supplement its original
motion. Defendant chose to supplement its original motion.
Therefore, Defendant’s motion, as supplemented, is
directed at Plaintiff’s amended complaint.
II. BACKGROUND
Penn Traffic Company (“Penn Traffic”) was a
Syracuse-based food retail and wholesale company that
operated under the “P&C Foods,” “Bi-Lo Foods,” and
“Quality Markets” trade names. See Dkt. No. 28, First
Amended Complaint, at ¶ 16. Penn Traffic owned two
warehouses located in Syracuse, New York, and DuBois,
Pennsylvania. See id. at ¶ 17. At the Syracuse warehouse,
Penn Traffic employed approximately 450 members of
Teamsters Local 317. See id. at ¶ 19. Penn Traffic was
a party to “various collective bargaining agreements
with Teamsters Local 317.” See id. at ¶ 20. Relevant to
this litigation, Penn Traffic was required to contribute
to a pension fund on behalf of employees who worked at
the Syracuse warehouse and whom Teamsters Local 317
represented. See id. at ¶ 20.
Plaintiff Pension Fund is managed by a Board of
Trustees and regulated pursuant to the Employee
Retirement Income Security Act of 1974 (“ERISA”)
and the Labor Management Relations Act (“LMRA”).
See id. at ¶ 9. Plaintiff Pension Fund is organized as a
59a
Appendix C
“multiemployer plan,” which means that Penn Traffic
is one of several employers who contribute to Plaintiff
Pension Fund. See id. Penn Traffic’s participation
in Plaintiff Pension Fund exposed it to substantial
withdrawal liability if it ceased making contributions.
See id. at ¶ 30.
In May 2010, after filing for bankruptcy, Penn
Traffic fired all 450 employees whom Teamsters Local
317 represented and permanently closed its Syracuse
warehouse. See id. at ¶ 73. Since the Teamsters Local
317 members were no longer employed, Penn Traffic was
no longer making any contributions to Plaintiff Pension
Fund. See id. Thus, Penn Traffic triggered withdrawal
liability pursuant to ERISA. See id.
In April 2010, Plaintiff Pension Fund delivered a
notice and demand for payment of the withdrawal liability
in the amount of $63,592,689.25 to Penn Traffic. See
id. at ¶ 75. Penn Traffic did not contest the amount of
withdrawal liability. See id. at ¶ 80. As a result of Penn
Traffic’s bankruptcy proceedings, however, Plaintiff
Pension Fund only received $5,206,088.34, leaving a
balance of $58,386,600.91 in unpaid withdrawal liability.
See id. at ¶ 80. Plaintiff Pension Fund commenced this
action in an attempt to recover the unpaid funds, not from
Penn Traffic, which is not a party to this lawsuit, but from
Defendant.
Defendant is a national wholesale supply company.
See id. at ¶ 13. Around March 2008, Defendant began
negotiations to acquire Penn Traff ic’s wholesale
60a
Appendix C
distribution division. See id. at ¶ 29. One complication in
Defendant’s plan was that an outright purchase of Penn
Traffic’s Syracuse warehouse would trigger Penn Traffic’s
withdrawal liability, a result Defendant wanted to avoid.
See id. at ¶¶ 42-43. Therefore, Defendant attempted to
structure the takeover to foreclose exposure to Penn
Traffic’s withdrawal liability — a strategy that Plaintiff
Pension Fund deems an actionable scheme and Defendant
labels “prudent business judgment.” See id.
In December 2008, Defendant entered into an asset
purchase agreement and other agreements to assume
control of specified assets and liabilities within Penn
Traffic’s wholesale distribution division. See Dkt. No. 28
at ¶ 51. “[Defendant] acquired, inter alia, Penn Traffic’s
wholesale distribution contracts, customers, equipment,
files, records, goodwill, intellectual property, accounts
receivable, and employees dedicated to Penn Traffic’s
wholesale distribution division who were not members
of Teamsters Local 317.” See id. at ¶ 52; see also Dkt.
No. 23-3, Miller Declaration Exhibit “A” at § 1.2(a)(h) (listing acquired assets), § 4.21(c) (providing that
Defendant would hire only those Penn Traffic employees
not subject to collective bargaining agreements). However,
Defendant did not acquire, among other things, Penn
Traffic’s retail business, facilities, leases and subleases,
cash, and employee benefit plans. See id. at § 1.3(a)-(e).
Furthermore, Defendant specifically disclaimed any
authority or power over any of Penn Traffic’s employees
who were associated with Teamsters Local 317. See Dkt.
No. 23-4, Miller Declaration Exhibit “B” at § 10.
61a
Appendix C
These agreements created an “independent contractor”
relationship between Penn Traffic and Defendant. See
id. Defendant shipped merchandise to Penn Traffic’s
warehouses, including the Syracuse warehouse; and Penn
Traffic stored, handled, and ultimately distributed the
merchandise to Defendant’s customers. See id. at § 1.2.
Under the contract, Penn Traffic retained responsibility
for “all employees, Facility and storage leases, material
handling and transportation equipment, contracts and
all other liabilities associated with the Facilities and any
other storage.” See id.
According to Plaintiff, operations at the Syracuse
warehouse “were materially identical to what they would
have been had [Defendant] formally acquired the entirety
of Penn Traffic’s wholesale distribution.” See Dkt. No. 28 at
¶ 64. The only difference was that Penn Traffic continued
to operate independently and remained the employer of
record for all 450 Teamsters Local 317 employees. See id.
Finally, Plaintiff alleges, and Defendant does not
dispute, that Defendant’s plan was to acquire Penn
Traffic’s wholesale business without becoming responsible
for Penn Traffic’s withdrawal liability. See Dkt. No. 42
at 4. Plaintiff claims that Defendant “modified the deal
structure for no reason other than shirking pension
obligations to the Syracuse employees and the Pension
Fund.” See id.; see also Dkt. No. 28 at ¶¶ 24-28.
62a
Appendix C
III. DISCUSSION
A. Standard of review
Courts use a two-step process when addressing a
Rule 12(b)(6) motion. “First, they isolate the moving
party’s legal conclusions from its factual allegations.”
Hyman v. Cornell Univ., 834 F. Supp. 2d 77, 81 (N.D.N.Y.
2011). Second, they accept factual allegations as true and
“determine whether [those allegations] plausibly give
rise to an entitlement to relief.” Ashcroft v. Iqbal, 556
U.S. 662, 679, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009). A
pleading must contain more than a “blanket assertion[]
of entitlement to relief.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 n.3, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007).
Thus, to withstand a motion to dismiss, a pleading must
be “‘plausible on its face’“ such that it contains “factual
content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Iqbal, 556 U.S. at 678 (quotation and other
citation omitted).1
1. When addressing a Rule 12(b)(6) motion, a court may
“consider documents attached to or incorporated by reference in
[a] complaint[.]” Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998)
(citation omitted). Even where “‘a plaintiff chooses not to attach to
the complaint or incorporate by reference a [document] upon which
it solely relies and which is integral to the complaint,’ the court may
. . . take the document into consideration in deciding the defendant’s
motion to dismiss, without converting the proceeding to one for
summary judgment.” Int’l Audiotext Network, Inc. v. Am. Tel. &
Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995) (quotation omitted). Since
the contracts between Penn Traffic and Defendant are integral to
Plaintiff’s amended complaint, the Court will consider them when
addressing the pending motion.
63a
Appendix C
B. Plaintiff’s first amended complaint
Plaintiff asserts four claims against Defendant. In its
first cause of action, Plaintiff alleges that Defendant is
responsible for Penn Traffic’s withdrawal liability as the
successor to Penn Traffic. See Dkt. No. 28 at ¶¶ 84-88.
Specifically, Plaintiff claims that Defendant was aware
of Penn Traffic’s withdrawal liability and understood
the approximate amount of liability to expect. See id. at
¶¶ 84-86. Furthermore, Plaintiff asserts that Defendant
maintained the same address, telephone number and
facility as Penn Traffic, serviced the same customers as
Penn Traffic, and used the same personnel as Penn Traffic.
See id. at ¶ 87. Therefore, according to Plaintiff, under
federal common law, Defendant is jointly and severally
liable for the outstanding withdrawal liability. See id. at
¶ 88.
In its second cause of action, Plaintiff alleges that
“a principal purpose of the Transaction undertaken
by [Defendant] and Penn Traffic was to evade or avoid
withdrawal liability, in violation of ERISA.” See id. at ¶ 91.
Thus, according to Plaintiff, under ERISA, Defendant is
liable for the balance of the withdrawal liability together
with interest, costs, attorney’s fees and penalties. See id.
at ¶ 92.
In its third cause of action, Plaintiff contends that
Defendant was an employer under ERISA in “common
control” with Penn Traffic and is thus jointly and severally
liable for withdrawal liability. See id. at ¶ 96. To support
this claim, Plaintiff asserts that Defendant and Penn
64a
Appendix C
Traffic jointly executed a plan to split up Penn Traffic’s
wholesale distribution business to avoid liability. See id. at
¶ 94. Furthermore, Plaintiff argues that Defendant and
Penn Traffic kept financial information about the Syracuse
facility separate from their other business lines and stood
to realize a profit based on the business. See id. at ¶ 95.
Finally, in its fourth cause of action, Plaintiff alleges
that Defendant shares liability as a joint employer. See
id. at ¶¶ 97-101. Plaintiff claims that Defendant made
payments to Penn Traffic that were related to obligations
under the collective bargaining agreement. See id. at
¶ 99. Alternatively, Plaintiff argues that Defendant had
a “duty” to Plaintiff under applicable law. See id. at ¶ 100.
C. Plaintiff’s first cause of action — successor liability
As a preliminary matter, the Court must determine
whether the theory of successor liability applies to
withdrawal liability under ERISA. The Second Circuit has
not squarely addressed this issue. 2 However, the Second
Circuit, as well as other circuits, has applied successor
liability in addressing delinquent contributions under
ERISA. See Stotter Div. of Graduate Plastics Co., Inc. v.
Dist. 65, United Auto Workers, AFL-CIO, 991 F.2d 997,
1002 (2d Cir. 1993); Einhorn v. M.L. Ruberton Constr. Co.,
2. At least one district court in the Second Circuit, however, has
applied successor liability in the context of a claim for withdrawal
liability. See Burke v. Hamilton Installers, Inc., No. 02 CV 519 A,
2004 U.S. Dist. LEXIS 18021, 2004 WL 1946457, *6 (W.D.N.Y. Aug.
31, 2004) (citing Truck Drivers Union v. Tasemkin, Inc., 59 F.3d 48
(7th Cir. 1995)).
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632 F.3d 89, 99 (3d Cir. 2011); Upholsterers’ Int’l Union
Pension Fund v. Artistic Furniture of Pontiac, 920 F.2d
1323, 1327 (7th Cir. 1990); Trs. for Alaska LaborersConstr. Indus. Health & Sec. Fund v. Ferrell, 812 F.2d
512, 516 (9th Cir. Cir. 1987). In this regard, the Ninth
Circuit has held that
[t]he primary reason for making a successor
responsible for its predecessor’s delinquent
ERISA contributions is that, “[a]bsent the
imposition of successor liability, present and
future employer participants in the union
pension plan will bear the burden of [the
predecessor’s] failure to pay its share,” which
will threaten the health of the plan while the
successor reaps a windfall.
Resilient Floor Covering Pension Trust Fund Bd. of
Trustees v. Michael’s Floor Covering, Inc., 801 F.3d 1079,
1093 (9th Cir. 2015) (quoting Artistic Furniture, 920 F.2d
at 1328).
Defendant attempts to distinguish cases applying
successor liability to delinquent contributions by
observing that delinquent contributions are extant
liabilities under a contract, whereas withdrawal liability
is a contingent liability arising under ERISA. See Dkt.
No. 23-1 at 27 n.3. However, withdrawal liability under
ERISA’s Multiemployer Pension Plan Amendment Act of
1980 (“MPPAA”) is mandatory, not contingent. See Textile
Workers Pension Fund v. Standard Dye & Finishing
Co., Inc., 725 F.2d 843, 857 (2d Cir. 1984) (stating that
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“[t]he MPPAA modified those existing provisions to effect
mandatory — rather than contingent — withdrawal
liability”). That being said, the fact that withdrawal
liability does not become due until a company withdraws
from the plan might be relevant in determining whether
a successor had notice of a predecessor’s withdrawal
liability, see Bd. of Trs. v. Full Circle Group, Inc., 826
F.3d 994, 997 (7th Cir. 2016) (holding that a successor had
notice of a predecessor’s withdrawal liability merely by
knowing that the predecessor employed union workers),
but it does not preclude applying successor liability to
withdrawal liability in the first instance.
Those circuits that have addressed the issue of whether
successor liability applies to withdrawal liability concluded
that it did. See Tsareff v. ManWeb Servs., Inc., 794 F.3d
841, 847 (7th Cir. 2015); Resilient Floor Covering, 801
F.3d at 1094 (finding that the rationale to apply successor
liability to delinquent contributions under ERISA applied
“with equal, if not greater, force” to withdrawal liability).
In Tsareff, the Seventh Circuit reasoned that “[s]uccessor
liability is an equitable doctrine, Tasemkin, 59 F.3d at 49,
and in every instance where we have found the imposition
of federal successor liability to be appropriate, we have
done so after carefully balancing the need to vindicate
important federal statutory policies with equitable
considerations.” Tsareff, 794 F.3d at 845. Likewise, the
Ninth Circuit noted that “[a] primary purpose of ERISA
is ‘to ensure that employees and their beneficiaries [a]re
not . . . deprived of anticipated retirement benefits by the
termination of pension plans before sufficient funds have
been accumulated in the plans.’“ Resilient Floor Covering,
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801 F.3d at 1094 (quoting R.A. Gray & Co., 467 U.S. at 722,
104 S. Ct. 2709). Therefore, in Resilient Floor Covering,
the Ninth Circuit held that “a bona fide successor can be
liable for its predecessor’s MPPAA withdrawal liability
. . . so long as the successor had notice of the liability.”
Id. at 1095 (footnote omitted); see also Full Circle Group,
Inc., 826 F.3d at 998 (explaining that there is “no reason
. . . to allow the successor company to obtain a windfall by
acquiring assets free of liabilities, leaving its predecessor
with liabilities but no assets”).
Defendant argues that this Court should not follow the
Seventh and Ninth Circuits because ERISA already has
a “‘detailed statutory scheme for allocating responsibility
for withdrawal liability between seller and purchaser
in a sale of assets.’” 3 See Dkt. No. 23-1 at 26 (quoting
Cent. States, Se. & Sw. Areas Health & Welfare Fund v.
Cullum Cos., Inc., 973 F.2d 1333, 1337 (7th Cir. 1992)).
However, ERISA’s statutory scheme does not address
how to allocate responsibility for withdrawal liability
after it has been assessed; rather, “[i]f the requirements
of section 1384 are met, an employer’s sale of assets is
not considered a withdrawal from the pension fund.”
3. Under § 1384, an employer’s sale of assets does not result
in withdrawal liability as long as the sale meets the following
requirements: (1) it must be a bona fide, arm’s-length sale, see 29
U.S.C. § 1384(a)(1); (2) the purchaser must have an obligation “for
substantially the same number of contribution base units for which
the seller had an obligation to contribute to the plan,” 29 U.S.C.
§ 1384(a)(1)(A); (3) the purchaser must provide a bond to secure its
contribution obligation, see 29 U.S.C. § 1384(a)(1)(B); and (4) the seller
must remain secondarily liable for withdrawals that occur within five
years after the sale, see 29 U.S.C. § 1384(a)(1)(C).
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Cent. States, Se. & Sw. Areas Health & Welfare Fund
v. Cullum Cos., Inc., 973 F.2d 1333, 1337 (7th Cir. 1992)
(emphasis added). Under § 1384, a purchaser assumes
the obligation to contribute to the fund and becomes
primarily liable for future withdrawal liability, while the
seller remains secondarily liable. See id. Thus, § 1384 is,
“‘in effect, a “safe harbor” protecting an employer from
withdrawal liability with respect to a sale of assets that
meets certain requirements, all of which are designed
to shift the obligation for contributions to the purchaser
while leaving the seller secondarily liable for a five-year
period after the sale.’” Id. (quoting I.A.M. National
Pension Fund v. Clinton Engines, Corp., 825 F.2d 415,
420, 263 U.S. App. D.C. 278 (D.C. Cir. 1987)). Therefore,
§ 1384 does not preclude applying successor liability to
withdrawal liability. See Resilient Floor Covering, 801
F.3d at 1094 (stating that, “[a]lthough § 1384 establishes
one circumstance in which an employer who might — but
would not necessarily — otherwise fit into the successor
category is not liable for withdrawal payments, it does
not address whether the broader employment and labor
law successorship doctrine applies where those stringent
conditions are not met”).
The Court finds the reasoning of the Seventh and
Ninth Circuits persuasive and, therefore, finds that the
theory of successor liability is applicable to withdrawal
liability under ERISA. Accordingly, the Court must
consider whether Plaintiff has alleged sufficient facts to
support a plausible claim of successor liability against
Defendant.
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Defendant argues that successor liability is not
applicable to this case because, in light of the fact that
Penn Traffic continued to exist and operate independently
after the asset sale, Defendant could not have succeeded
Penn Traffic. See Dkt. No. 23-1 at 24. In this regard,
Defendant asserts that the “test [for successor liability]
presupposes a ‘predecessor’ that ceases ‘operations,’ which
are then ‘continued’ by the asset-purchaser.” See id. at 23.
There do not appear to be any cases in which courts
have expressly addressed whether withdrawal liability
would apply in situations in which two companies exist
simultaneously. However, the Third Circuit has found
that successor liability can be applied to delinquent
ERISA contributions despite the selling company
remaining “in business for some time after the asset
sale[.]” Einhorn, 632 F.3d at 92. The facts in Einhorn
are somewhat similar to those in the present case. In
Einhorn, Statewide, a highway construction company,
was facing financial difficulties and allegations of fraud.
See id. at 91. During this time, Statewide was a party
to two collective bargaining agreements (“CBA”), which
bound it to contribute to two multiemployer benefit plans
established under ERISA. See id. Moreover, Statewide had
delinquencies owed under both the aforementioned CBAs.
See id. Ruberton, a general construction company, learned
of Statewide’s troubles and entered into negotiations to
purchase its assets. See id. During these discussions,
Ruberton specified that its objective was to ensure that
it would not be held to be the successor to Statewide and,
therefore, liable for Statewide’s delinquent contributions.
See id. at 92. To that effect, Ruberton agreed to hire,
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subject to need, Statewide’s existing workforce, which
was covered by the existing CBA, and to negotiate a new
CBA in the future. See id. On October 10, 2005, Statewide
sold its assets to Ruberton for $1.6 million in cash. See id.
Ruberton then began to make contributions to the fund.
See id. “Statewide remained in business for some time
after the asset sale using subcontractors to provide the
necessary equipment and labor. Ruberton was one such
subcontractor, billing Statewide more than $400,000 for
rented employees and equipment.” Id. In January 2006,
Statewide ceased all operations. See id.
On December 13, 2005, the pension funds filed an
action against Statewide and Ruberton, seeking to recover
the delinquent contributions. See id. at 93. Statewide
initially agreed to pay all of the delinquents funds but
was unable to do so because it became insolvent. See id.
Thereafter, the pension funds filed a new action against
Ruberton for the delinquent contributions, alleging that
Ruberton was Statewide’s successor and thus liable. See
id.
The Third Circuit, although not expressly mentioning
the simultaneous existence of Statewide and Ruberton,
held that successor liability was applicable to suits
seeking delinquent contributions under ERISA and
might be available in the case before it. Ultimately, the
Third Circuit remanded to the district court to consider
the substantial continuity test, focusing on the following
factors: “continuity of the workforce, management,
equipment and location; completion of work orders begun
by the predecessor; and constancy of customers.” Id. at
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99 (citing Fall River Dyeing & Finishing Corp. v. NLRB,
482 U.S. 27, 43, 107 S. Ct. 2225, 96 L. Ed. 2d 22 (1987);
Artistic Furniture, 920 F.2d at 1329). Importantly, the
Third Circuit held that, unlike the de facto merger and
mere continuation exceptions at traditional common
law,4 “commonality of ownership is not required” under
the substantial continuity test, id. (citations omitted),
insinuating that parallel existence was not an obstacle
to imposing liability based on the substantial continuity
doctrine.
Moreover, the Supreme Court has suggested that
“the real question in each of these ‘successorship’ cases
is, on the particular facts, what are the legal obligations
of the new employer to the employees of the former owner
or their representative?” Howard Johnson Co., Inc. v.
Detroit Local Joint Exec. Bd., Hotel & Rest. Emps. &
Bartenders Int’l Union, ALF-CIO, 417 U.S. 249, 262 n.9,
94 S. Ct. 2236, 41 L. Ed. 2d 46 (1974). In Howard Johnson,
the Court recognized that “[t]he answer to this inquiry
requires analysis of the interests of the new employer and
the employees and of the policies of the labor laws in light
of the facts of each case and the particular legal obligation
which is at issue,” which, in Howard Johnson, was the duty
to pay withdrawal liability. Id. Thus, the Court emphasized
that there was “no single definition of ‘successor’ which is
4. The mere continuation test “requires the existence of a single
corporation after the transfer of assets, with an identity of stock,
stockholders, and directors between the successor and predecessor
corporations.” B.F. Goodrich v. Betkoski, 99 F.3d 505, 519 (2d Cir.
1996), overruled on other grounds by New York v. Nat’l Servs. Indus.,
Inc., 352 F.3d 682, 685 (2d Cir. 2003) (citation omitted).
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applicable in every legal context. A new employer, in other
words, may be a successor for some purposes and not for
others.”5 Id. (citations omitted)
In the context of withdrawal liability, the primary
reason for making a successor responsible for resulting
withdrawal liability is that, “‘[a]bsent the imposition of
successor liability, present and future employer participants
in the union pension plan will bear the burden of [the
predecessor’s] failure to pay its share,’ which will threaten
the health of the plan while the successor reaps a windfall.”
Resilient Floor Covering, 801 F.3d at 1093 (quoting Artistic
Furniture, 920 F.2d at 1328). Furthermore, a primary
purpose of ERISA is “to ensure that employees and their
beneficiaries [a]re not . . . deprived of anticipated retirement
benefits by the termination of pension plans before sufficient
funds have been accumulated in the plans.” Pension Ben.
Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 720, 104
S. Ct. 2709, 81 L. Ed. 2d 601 (1984) (citations omitted). A
strict rule that forecloses applying successor liability for
the singular reason that the selling company continues to
exist nominally would create an arbitrary impediment to
a doctrine that has its foundation in equity and flexibility.
See Resilient Floor Covering, 801 F.3d at 1093 (stating
5. Ultimately given the factual context in Howard Johnson, the
Court found that the defendant could not be bound as a successor to
the prior company’s duty to arbitrate, noting that in that particular
legal context the most important factor to consider was whether the
new employer employed the same employees. See Howard Johnson,
417 U.S. at 260. However, the Court stated that the defendant
had succeeded in some aspects of the other business despite only
purchasing limited assets and leaving the other business largely
intact. See id. at 262 n.9.
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that “[t]he successorship standards are flexible and must
be tailored to the circumstances at hand”). Therefore, the
Court finds that the same policy considerations that favor
applying successor liability to withdrawal liability in the
first place favor rejecting Defendant’s formalistic argument
that successor liability cannot exist absent the dissolution
of a seller in a partial asset sale. See Lowen v. Tower Asset
Mgmt., Inc., 829 F.2d 1209, 1220 (2d Cir. 1987) (stating
that “[c]ourts have without difficulty disregarded form for
substance where ERISA’s effectiveness would otherwise
be undermined”).
In addition to the aforementioned policy considerations,
the statutory scheme imposing withdrawal liability
favors applying successor liability to parallel companies.
Withdrawal liability is triggered when an employer
“(1) permanently ceases to have an obligation to
contribute under the plan, or (2) permanently ceases all
covered operations under the plan.” 29 U.S.C. § 1383(a).
Axiomatically, withdrawal liability is triggered at the end
of the life of a business or entity. Defendant’s position
would create a loophole where businesses would merely
insist on keeping the predecessor afloat for a period of
time after an asset sale to avoid withdrawal liability.
Successor liability, however, is not about drawing lines
in the sand; rather, it is an equitable doctrine that flexes
and bends based “upon the totality of the circumstances
of a given situation” and the federal rights at stake. Fall
River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27,
43, 107 S. Ct. 2225, 96 L. Ed. 2d 22 (1987).6
6. The Court notes that, because there are many similarities
between alter ego liability and successor liability, cases discussing
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Accordingly, the Court concludes that, although
Penn Traffic did not cease to exist after its asset sale to
Defendant and both Penn Traffic and Defendant existed
simultaneously, this does not necessarily foreclose
Plaintiff from relying on a successor liability theory
as a basis for its claims against Defendant. That being
said, however, to withstand a motion to dismiss, Plaintiff
must allege sufficient facts to assert a plausible claim of
successor liability against Defendant.
An entity has successor liability where “(1) it ‘had
notice of its predecessor’s obligations’ and (2) ‘“a sufficient
alter ego liability are helpful to determine the applicability of
successor liability. See, e.g., Full Circle Group, Inc., 826 F.3d at
998 (noting that, “if fraudulent intent is subtracted as a factor [to
determine whether there is alter ego liability,] all that is left are
factors that establish successor liability”); Ret. Plan of UNITE
HERE Nat’l Ret. Fund v. Kombassan Holdings A.S., 629 F.3d 282,
288 (2d Cir. 2010) (rejecting the defendant’s argument that “alter ego
status [could not] apply where the entities exist[ed] simultaneously”);
Massachusetts Carpenters Cent. Collection Agency v. Belmont
Concrete Corp., 139 F.3d 304, 307-08 (1st Cir. 1998) (stating that,
“[a]lthough developed in the labor law context, alter ego or successor
liability analysis has been applied to claims involving employee
benefit funds brought under ERISA and the LMRA” and that,
“although the alter ego doctrine is primarily applied in situations
involving successor companies, ‘where the successor is merely a
disguised continuance of the old employer,’ . . . it also applies to
situations where the companies are parallel companies” (citations
omitted)); Roofers Local 195 Pension, Health & Accident, Annuity
& Joint Apprenticeship Training Funds v. Shue Roofing, Inc., No.
5:01-CV-562, 2004 U.S. Dist. LEXIS 1409, 2004 WL 395893, *1 n.2
(N.D.N.Y. Feb. 3, 2004) (finding that both alter ego and successor
liability applied to the facts of the case).
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Appendix C
continuity of identity” exists between the two businesses.’“
Romita v. Anchor Tank Lines, LLC, No. 11 Civ. 9641, 2014
U.S. Dist. LEXIS 37621, 2014 WL 1092867, *4 (S.D.N.Y.
Mar. 17, 2014) (quoting Bd. of Trs. of the Sheet, Metal
Workers Local Union No. 137, 1995 U.S. Dist. LEXIS
9330, at *3, 1995 WL 404873 (quoting Stotter Div. of
Graduate Plastics, 991 F.2d at 1002-03)) (other citation
omitted). This determination “is primarily factual in
nature and is based upon the totality of the circumstances
of a given situation[; successor liability thus] requires
that the [court]
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