# Petition for Writ of Certiorari — Trustees of Iron Workers Local 473 Pension Trust v. Allied Products Corp.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1989
- **Citation:** 493 U.S. 847

## Text

FILED
JUL 11 1889

.
' 89-37
JOSEPH F. SPANIOL, JR,

No. | CLERK
In The ’
Supreme Court of the United States
@ctober Germ, 1988

TRUSTEES OF IRON WORKERS LOCAL
473 PENSION TRUST,

Petitioner,

US.

ALLIED PRODUCTS CORPORATION,
Respondent.

On Petition For A Writ Of Certiorari
To The United States Court Of Appeals
For The Seventh Circuit

PETITION FOR WRIT OF CERTIORARI

CHARLES B. WoLF
(Counsel Of Record)
MICHAEL I. RICHARDSON

Of Counsel:
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, Illinois 60601
(312) 609-7500

American Reprographic s Management, Inc.™ (312) 332-2764

i
QUESTION PRESENTED

Whether an employer completely withdraws from a mul-
tiemployer pension plan, within the meaning of section 4203(a)(2)
of the Employee Retirement Income Security Act, 29 U.S.C.
§1383(a)(2), when it ceases normal business activity, rather than
when it completes liquidation of the business and terminates
the last bargaining unit employee.

a
PARTIES

The parties to the proceeding in the United States Court

of Appeals for the Seventh Circuit were the Trustees of Iron

Workers Local 473 Pension Trust and Allied Products Corpo-
ration. The Trustees are not incorporated.

TABLE OF CONTENTS

Page
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B. The Seventh Circuit Decision ...................... 4
SS. 4

I. TheSeventh Circuit's Interpretation of Section

4203 Conflicts with Established Rulings and

Will Cause Confusion in the Administration
res vice ke eke east ieeeceeness 4

II. This Case Presents an Important Question of
Federal) Law Which Has Not Been Settled By

Ill. Contrary to the Rulings of This Court, the
Seventh Circuit Disregarded Clearly
Expressed Legisiative Intent in Interpreting
Section 4203

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iv

TABLE OF AUTHORITIES
Page
Cases
Aaron v. Securities and Exchange Commission, 446 U.S.

ee Ge Ae So kik nos narra a cs cues ei beak bees t nape eek 9
American Tobacco Company wu. Patterson, 456 U.S. 63,

CR a oie wc hoa sp hres cas peck choca chee cs eaekeapaw anes 9
Consumer Product Safety Comm’n v. GTE Sylvania, Inc.,

WET Th Pes PE LI ois clea scan pera nu et tenanseesy 9
North Dakota v. United States, 460 U.S. 310, 312

hs) IR RAR RA ERE CUR a ter Ane RL Ae suteapgs ee eh ier OEE: et 9
United States v. American Trucking Ass’n, Inc.,

a re Se eI no oa cua k eauGas wae h eet peciaeoess 8
Watt v. Alaska, 451 US. 259, 266 (1961) ....... cece ccenes 9,10
Barbizon Corp. v. ILGWU Nat. Retirement Fund, 842 F.2d

627, 632 (2d Cir.), cert. denied, 109 S. Ct. 495 (1988) ......... 6
Combs v. Leishman, 691 F.Supp. 424, 430-31

FEO SE aro k ctcas cones vexneb ceases ccee ee eEcaewen ts 5

Connors v. Economy Bldg. Systems, 651 F. Supp.
COR: Ba i: CN Scab ee van Nearer saneesee se veatt 5, 6

Crown Cork and Seal Co. v. Central States Southeast
and Southwest Areas Pension Fund, No. 84 Civ. 5737,
slipop. at 11-12 (E.D. Pa. Dec. 30, 1988), appeal

docketed, No. 89-1086 (3d Cir. 1989) ...............02008- 5, 6
F. H. Cobb Co. v. N. Y. State Teamsters Pension

Fund, 584 F. Supp. 1181, 1182 (N.D.N.Y. 1984) ............. 5
ILGWU Nat. Retirement Fund v. Weatherall Fashions,

Inc., No. 84 Civ. 0772, slip op. (S.D.N.Y. 1986) .............. 5
Speckman v. Barford Chevrolet Co., 535 F. Supp.

es es SUE ioe bere eee i da edwaercupades 5

Textile Workers Pension Fund v. Standard Dye &
Finishing Co., 607 F. Supp. 570 (S.D.N.Y. 1985) ............ 5

Page
Statutes

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Legislative History

H.R. Rep. 96-869(1), 96th Cong., 2d Sess., reprinted in
1980 U.S. Code Cong. & Ad. News 2918, 2936, 2941
GOD Sia eviseieossvraexivekoere ee 4,10

The Committee on Labor and Human Resources of
the United States Senate, 96th Cong., 2d Sess.,
The Multiemployer Pension Plan Amendments
Act of 1980: Summary and Analysis of
Consideration 12-13 (Comm. Print SE ev aapuokanies 5, 7, 10

a 2
7

ites ea

masse

aac eo
7 i

<n Sh

No.

In The
Supreme Court of the United States
@ctober Term, 1988

TRUSTEES OF IRON WORKERS LOCAL
473 PENSION TRUST,

Petitioner,

US.

ALLIED PRODUCTS CORPORATION,
Respondent.

On Petition For A Writ Of Certiorari
To The United States Court Of Appeals
For The Seventh Circuit

PETITION FOR WRIT OF CERTIORARI

Petitioner respectfully prays that a writ of certiorari issue
to review the decision of the United States Court of Appeals
for the Seventh Circuit entered in this case on April 13, 1989.

OPINIONS BELOW

This Petition seeks review of a decision of the United States
Court of Appeals for the Seventh Circuit reported at 872 F.2d
208. It appears in Appendix A, infra (App. 1a-14a). The opinions
of Judge Nordberg and Magistrate Rosemond of the United States
District Court for the Northern District of Illinois are reported

2

at 8 EBC 1966 and 8 EBC 1959 respectively and are set forth
in Appendices B and C, infra (App. 15a-28a).

JURISDICTION

The decision of the Court below issued on April 13, 1989.
Jurisdiction of this Court is invoked under 28 U.S.C. §1254(1).

STATUTE INVOLVED

Section 4203(a) of the Employee Retirement Income Security
Act of 1974 (“ERISA”) as amended by the Multiemployer Pension
Plan Amendments Act of 1980 (“MPPAA”), 29 U.S.C. §1383(a),
provides in pertinent part as follows:

For the purposes of this part, a complete withdrawal
from a multiemployer plan occurs when an employer-

(1) permanently ceases to have an obli-
gation to contribute under the plan,
or

(2) permanently ceases all covered oper-
ations under the plan.

STATEMENT OF THE CASE

Atissue in this case is the proper interpretation to be accorded
section 4203(a)(2) of ERISA. More particularly, it presents the
issue of when “an employer . . . permanently ceases all covered
operations under the plan” within the meaning of section
4203(a)(2). 29 U.S.C. §1383(a)(2).

A.
The Facts

The facts are straightforward and were stipulated by the
parties in the proceedings below. Steel Weldments Division of
Allied Products Corporation (“Allied” or “the Company ’’)
contributed to the Iron Workers Local 473 Pension Plan (“the
Plan”) pursuant to collective bargaining contracts at its Bedford
Park, Illinois plant. In the ten-year period ending June 30, 1982,
Allied’s average annual contribution covered over 290,000 hours
of work. This amounted to an average of over 178 full-time
equivalent employees per year.

3

On June 16, 1982, Allied announced that it had decided to
permanently shut down and close its Bedford Park plant
operations. Within a few months, Allied implemented this
decision. On July 2, 1982, the Company executed a Shutdown
and Severance Pay Agreement with the Union. By October 1982,
the Company terminated over 40 of the remaining bargaining
unit employees leaving only three unit members on the payroll.
Allied employed this skeleton crew for the purpose of cleaning,
maintenance and shipping inventory. During the remainder of
the plan year ending June 30, 1983, the Company made con-
tributions for approximately 300 hours per month.

During the 1984 plan year, only two bargaining unit
employees were employed for the purpose of cleaning, mainte-
nance and the shipment of parts, scrap, raw materials, fixtures
and inventory. Their only production work amounted to approx-
imately 20 hours of machining in August or September of 1983.
All of these activities constituted bargaining unit work. On March
30, 1984, Allied sold the plant and terminated the last covered
employee.

The Trustees of Iron Workers Local 473 Pension Trust (the
“Trustees”) determined that Allied completely withdrew from the
Plan during the plan year ending June 30, 1983 when Allied
ceased virtualiy all covered operations at the facility and stopped
normal business operations. Allied, on the other hand, asserted
that its withdrawal occurred in the plan year ending June 30,
1984, when the last bargaining unit employee was terminated.
Depending on the date of Allied’s withdrawal, there is a difference
of approximately $235,000 in the amount of withdrawal liability
owed to the Trust.

The dispute was submitted to Arbitrator Harold E. Dreyer
on a stipulated record pursuant to ERISA section 4221(a), 29
U.S.C. §1401(a) (1982). On May 24, 1984, the Arbitrator ruled
in Allied’s favor concluding that Allied’s complete withdrawal
did not occur until the plan year ending June 30, 1984.

On June 22, 1984, the Trustees timely filed their Complaint
in the United States District Court for the Northern District of
[linois, to vacate the Arbitrator’s award and to collect withdrawal
liability. Jurisdiction in the district court was based upon a federal

4

question. 28 U.S.C. §1331 (1982). The case was referred to
Magistrate Rosemond and the parties filed cross-motions for
summary judgment. Tne Magistrate entered his Report and
Recommendation in favor of the Trustees. On June 8, 1987 the
district court adopted the Magistrate’s recommendations and
granted summary judgment in favor of the Trustees.

B.
The Seventh Circuit Decision

On April 13, 1989, the United States Court of Appeals for
the Seventh Circuit reversed the district court. The Seventh
Circuit held that “Section 1383(a)(2)’s plain language requires
a finding that all covered operations permanently stop before
a complete withdrawal occurs.” (App. 14a). The court applied
the “maxim of statutory construction that, unless otherwise
defined, words should be given their ordinary, common meaning”
and defined “all” as 100 percent (App. 12a). In reaching its
conclusion, the court refused to apply the interpretation adopted
by other federal courts and contained in the legislative history
which defines a complete withdrawal as “a virtually complete
cessation of contributions, e.g., a 98-percent reduction.” (App. 10a
n.8). The court reasoned that “resort to legislative history was
unnecessary. . . because the statute is clear and unambiguous.”
(App. 10a-1la). Therefore, it determined that a complete with-
drawal did not occur until the plan year ending June 30, 1984.

REASONS FOR GRANTING THE WRIT
I.

THE SEVENTH CIRCUIT'S INTERPRETA-
TION OF SECTION 4203 CONFLICTS WITH
ESTABLISHED RULINGS AND WILL CAUSE
CONFUSION IN THE ADMINISTRATION OF
THE STATUTE.

Since its inception, section 4203 consistently has been
interpreted to mean that a complete withdrawal occurs where
an employer has “ceased virtually all operations at the facility
for which the employer makes contributions to the plan.” H.R.
Rep. 96-869(I), 96th Cong., 2d Sess., reprinted in 1980 U.S. Code
Cong & Ad. News 2918, 2936 (1980). Congress expressed this

»

~

o

intent throughout the legislative history. This was the only
interpretation given section 4203 by Congress. Id. at 2941; See
also The Committee on Labor and Human Resources of the
United States Senate, 96th Cong., 2d Sess., The Multiemployer
Pension Plan Amendments Act of 1980: Summary and Analysis
of Consideration 12-13 (Comm. Print 1980).

Moreover, since its enactment, every other court that has
interpreted section 4203 has concluded that a complete withdra-
wal occurs when the employer has ceased normal business
operations even though it continues work related to liquidation.
Crown Cork and Seal Co. v. Central States Southeast and
Southwest Areas Pension Fund, No. 84 Civ. 5737, slip op. at
11-12 (E.D. Pa. Dec. 30, 1988), appeal docketed, No. 89-1086 (3d
Cir. 1989); Combs v. Leishman, 691 F.Supp. 424, 430-31 (D.D.C.
1988); Connors v. Economy Bldg. Systems, 651 F. Supp. 849,
853 (D.D.C. 1986); ILGWU Nat. Retirement Fund v. Weatherall
Fashions, Inc., No. 84 Civ. 0772, slip op. (S.D.N.Y. 1986); Textile
Workers Pension Fund v. Standard Dye & Finishing Co., 607
F. Supp. 570 (S.D.N.Y. 1985); F.H. Cobb Co. v. N.Y. State
Teamsters Pension Fund, 584 F. Supp. 1181, 1182 (N.D.N.Y. 1984);
Speckman v. Barford Chevrolet Co., 535 F. Supp. 488 (E.D. Mo.
1982).

Now, despite almost a decade of uniform interpretation, the
Seventh Circuit has departed from this principle in ruling that
a complete withdrawal can only occur where there is a “100
percent” cessation of bargaining unit work, i.e., after the last
man is terminated (App. 12a). The Seventh Circuit’s decision
is in direct conflict with the decisions of the district courts cited
above which uniformly hold that “a minimal amount of work
does not defeat a complete withdrawel,” Connors v. Economy

6

Bldg. Systems, 651 F.Supp. 849, 853 (D.D.C. 1986).! Unless this
conflict is resolved, the Seventh Circuit’s decision will cause
confusion in administration of MPPAA.

The withdrawal liability provisions of MPPAA are not
centrally administered. Rather, under MPPAA, the plan sponsor
determines in the first instance whether a withdrawal has
occurred. Thereafter, the plan sponsor shall determine the amount
of withdrawal liability, notify the employer of the amount and
collect the withdrawal liability. 29 U.S.C. §§1382, 1399. Because
the sponsor of each individual plan must determine when a
withdrawal occurs, it is likely that some plans will adopt the
Seventh Circuit’s interpretation while others will follow the
traditional view. Consequently, employers who contribute to more
than one fund could be faced with inconsistent demands for
withdrawal liability even though those demands are based upon
the same conduct.

Additionally, if the split between the Seventh Circuit and
the district courts is not resolved, the sponsor of a multiemployer
fund may be required to apply different definitions of a complete
withdrawal to participating employers depending upon the
location of the facility for which the employer is contributing
to the plan. This is because multiemployer funds are frequently
administered in more than one judicial circuit. Thus, the Court
should review the decision of the Seventh Circuit in this case
to insure uniformity in the administration of MPPAA.

1 The Seventh Circuit is the first federal court of appeals to address
this issue. Thus, there currently is no conflict with the decision of another
federal court of appeals on the same matter. However, an imminent
conflict exists because a case involving this same issue is on appeal
before the Third Circuit Court of Appeals. Crown Cork and Seal Co.
v. Central States Southeast and Southwest Areas Pension Fund, No.
84 Civ. 5737, slip op. at 11-12 (E.D. Pa. Dec. 30, 1988), appeal docketed,
No. 89-1086 (3d Cir. 1989). Also, the United States Court of Appeals
for the Second Circuit has recognized that “the mere retention of a few
emplovees for the purpose of winding down a business operation” does
not prevent a complete withdrawal. Barbizon Corp. v. ILGWU Nat.
Retirement Fund, 842 F. 2d 627, 632 (2d Cir.), cert. denied, 109 S. Ct.
495 (1988).

7

II.
THIS CASE PRESENTS AN IMPORTANT
QUESTION OF FEDERAL LAW WHICH HAS
NOT BEEN SETTLED BY THIS COURT.

The issue of when a complete withdrawal occurs is of
paramount importance to the administration of multiemployer
pension plans. As the Committee on Labor and Human Resources
of the United States Senate explained:

—

The cessation of contributions by an employer to a
multiemployer plan can seriously harm the plan. The
plan is often obligated to pay benefits to that employ-
er’s employees, yet because benefits are funded over
many years after they are promised, the withdrawing
employer may not have made sufficient contributions
to the plan to fund a share of the cost of those benefit
promises. (96th Cong., 2d Sess., The Multiemployer
Pension Plan Amendments Act of 1980: Summary and
Analysis of Consideration 12 (Comm. Print 1980)).

In response to this problem, MPPAA generally requires that a
withdrawing employer fund its share of the unfunded vested
liabilities when it withdraws from the plan.

The Seventh Circuit’s interpretation of section 4203 frustrates
the objectives of Congress by assessing withdrawal liability when
the last covered employee is terminated instead of when con-
tributions are diminished. Here for example, Allied was a
substantial contributor to the Plan. Between July 1, 1972 and
June 30, 1981, Allied contributed over $1.3 million to the Plan,
which amounts to more than seven percent of total contributions.
As it wound down its business activity and terminated covered
employees, however, Allied’s contributions dropped to a low of
$327.56 in November of 1982. Yet, che employees have a right
to receive pension benefits from the Plan. Thus, the Plan was
placed in the position of having to pay benefits while contri-
butions were greatly reduced.

If a complete withdrawal does not occur until the last covered
employee is terminated, the burden of funding the employer's
share of promised benefits will fall on multiemployer plans during

8

the time that the employer winds down covered operations.” This
result is contrary to the federal policy of “assuring the equitable
character of such plans and their financial soundness.” 29 U.S.C.
§1001(a). Because of the importance of employee benefit plans
to “the continued well-being and security of millions of employees
and their dependents,” id., this Court should grant this Petition
for a Writ of Certiorari to settle, once and for all, when an employer
“permanently ceases all covered operations under the plan.”

ITI.
CONTRARY TO THE RULINGS OF THIS
COURT, THE SEVENTH CIRCUIT DISRE-
GARDED CLEARLY EXPRESSED LEGISLA-
TIVE INTENT IN INTERPRETING SECTION
4203.

Relying on the plain meaning rule of statutory construction,
the Seventh Circuit determined that its interpretation of section
4203 was compelled by what it considered clear and unambiguous
statutory language (App. 10a-l1la). Yet, Congress and the courts
have given the phrase “all covered operations” a contrary
interpretation. For that reason alone, the Seventh Circuit
misapplied the plain meaning rule.

Moreover, the Seventh Circuit’s decision is flawed because
it disregarded clearly expressed legislative intent, thus substi-
tuting its own interpretation of section 4203 for that of Congress.
In so doing, the Seventh Circuit ignored established rulings of
this Court.

It is well accepted that “{iJn the interpretation of statutes,
the function of the courts is easily stated. It is to construe the
language so as to give effect to the intent of Congress.” United
States v. American Trucking Ass’n, Inc., 310 U.S. 534, 542 (1940).
This Court frequently has enunciated the rule to be applied in
such cases as follows:

2 Although MPPAA includes liability for a partial withdrawal, 29 U.S.C.
§1385, that provision only applies where there has been a seventy percent
reduction in contributions for the past three testing years.

9

[In determining the scope of a statute, one is to look
first at its language. Absent a clearly expressed
legislative intention to the contrary, that language
must ordinarily be regarded as conclusive. (North
Dakota v. United States, 460 U.S. 300, 312 (1983)
(quoting Consumer Product Safety Comm’n v. GTE
Sylvania, Inc., 447 U.S. 102, 108 (1980)).

See also American Tobacco Company uv. Patterson, 456 U.S. 63,
68 (1982); Aaron v. Securities and Exchange Commission, 446
U.S. 680, 695 (1980). However, where there is a clearly expressed
legislative intent to the contrary, this Court has stated:

[A]scertainment of the meaning apparent on the face
of a single statute need not end the inquiry. This is
because the plain meaning rule is “rather an axiom
of experience than a rule of law, and does not preclude
consideration of persuasive evidence if it exists.” The
circumstances of the enactment of particular legisla-
tion may persuade a court that Congress did not intend
words of common meaning to have their literal effect.
(Watt v. Alaska, 451 U.S. 259, 266 (1981) (citations
omitted)).

The Seventh Circuit’s refusal to consider the legislative history
in this case is completely at odds with the rulings of this Court
because Congress clearly expressed the intention that a complete
withdrawal could occur where there is less than a 100 percent
reduction in bargaining unit work.

In enacting MPPAA, Congress consistently expressed the
intent that a complete withdrawal may occur even though some
minimal level of work incidental to the liquidation of the business
is being performed. The House Report on MPPAA states:

It is intended . . . that a complete withdrawal occurs,
as under current law, where an employer has ceased
virtually all operations at the facility for which the
employer makes contributions to the plan.

* * *

The bill would treat an employer as withdrawing
from a multi-employer plan when the employer (1)

10

permanently ceases to have an obligation to contribute
under the plan, or (2) permanently ceases all covered
operations under the plan. Current law does not define
a withdrawal. As under current. law, a virtually
complete cessation of contributions, e.g., a 98% reduc-
tion, that has the same effect on the plan as a complete
cessation of contributions, is a complete withdrawal.

H.R. Rep. 96-869(I), 96th Cong., 2d Sess., reprinted in 1980 U.S.
Code Cong. & Ad. News 2918, 2936, 2941 (1980). The Committee
on Labor and Human Resources of the United States Senate
expressed a similar view:

The Committee intends that covered operations be
treated as having ceased when business activity
substantially ceases or when it continues but no longer
gives rise to contributions under the plan. (96th Cong.,
2d Sess., The Multiemployer Pension Plan Amend-
ments Act of 1980: Summary and Analysis of Con-
sideration 12-13 (Comm. Print 1980)).

Despite this clear expression of legislative intent, the Seventh
Circuit erroneously held that “all (100 percent) of the covered
operations must permanently cease before finding that an
employer has completely withdrawn from a multiemployer plan,”
and that any ongoing unit work whatsoever - even de minimis
maintenance functions attendant to liquidation - constituted
covered operations (App. 12a, 13a n.10).

As this Court has recognized, “{sJole reliance on the ‘plain
language’ of [the statute] would assume the answer to the
question at issue.” Watt v. Alaska, 451 U.S. at 266. If this decision
is allowed to stand, Congress’s intent will be thwarted. Therefore,
the petition should be granted to insure that this federal statute
is administered in accordance with congressional intent.

11
CONCLUSION

For the foregoing reasons, this Petition for a Writ of Certiorari
should be granted.

Respectfully submitted,

CHARLES B. WoLF
(Counsel Of Record)
MICHAEL I. RICHARDSON

Of Counsel:
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, Illinois 60601
(312) 609-7500

Dated: July 11, 1989

APPENDICES

APPENDIX A
In the

United States Court of Appeals
For the Seventh Circuit

No. 87-2108

TRUSTEES OF IRON WORKERS
LOCAL 473 PENSION TRUST,

Plaintiff-Appellee,
v.

ALLIED PRODUCTS CORPORATION,
Defendant-Appellant.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 84 C 5329—John A. Nordberg, Judge.

ARGUED JANUARY 7, 1988—DEcIDED APRIL 13, 1989

Before FLAUM, MANION, and KANNE, Circuit Judges.

MANION, Circuit Judge. Allied Products Corporation
(“Allied”) appeals the district court’s decision granting
summary judgment. in favor of the Trustees (‘‘Trustees”’)
of Iron Workers Local 473 Pension Trust (‘‘the Plan’’).
The Trustees sought to vacate or modify a withdrawal
liability arbitration award and to collect withdrawal liabil-
ity payments under the Employee Retirement Income Se-
curity Act of 1974, as amended by the Multiemployer Pen-
sion Plan Amendments Act of 1980. The arbitrator had
held that Allied completely withdrew from the Plan in
the plan year ending June 30, 1984, while the Trustees

2a
2 No. 87-2108

claimed that Allied completely withdrew from the Plan
in the plan year ending June 30, 1983. (Depending on the
date of Allied’s withdrawal, there is a swing of nearly
$200,000 in the amount owed in withdrawal liability.) The
district court vacated the arbitrator’s award. For the rea-
sons stated below, we reverse the district court’s judg-
ment, but hold that it properly reviewed the arbitrator’s
legal determinations de novo.

I.

The facts are straightforward and undisputed.'! Since
May 1, 1959, Allied and Shopmen’s Local Union No. 473
of the International Association of Bridge, Structural and
Ornamental Iron Workers, AFL-CIO (“Union”) were par-
ties to collective bargaining agreements covering production
and maintenance employees at Allied’s plant in Bedford
Park, Illinois. These agreements required, among other
things, contributions by Allied to the Plan based on each
hour worked by covered employees. The Plan was most
recently amended and restated as of May 1, 1979.

The pension plan year (“plan year’’) runs from July 1
through June 30. On June 16, 1982, Allied informed the
Union that it would permanently shut down its Bedford
Park plant operations. On July 2, 1982, Allied and the
Union executed a Shutdown and Severance Pay Agree-
ment which stated in part: ‘(t]he terms and conditions
as set forth in the collective bargaining agreement .. .
as amended, shall continue in full force and effect, except
as hereinafter modified by this Severance Agreement, as
long as any bargaining unit member remains employed.”’

In the plan year ending June 30, 1982, Allied contrib-
uted $79,669.91 for 111,573 participant hours. For the plan
year ending June 30, 1983, Allied’s contributions declined

' With slight modification we have lifted the magistrate’s recita-
tion of the facts, and note that the parties stipulated to the facts
before the arbitrator.

3a
No. 87-2108 3

to $10,338.56 for 13,854.75 participant hours. From July 1,
1983, through December 1983, Allied’s contributions fell
to $1,432.50 for 1,910 participant hours.

There were 48 employees working for Allied for the
payroll week ending July 4, 1982. Five employees re-
mained at the plant by the end of August 1982. Of these
five, two were terminated in September and two more
in December 1983. One employee, Donald Steele, a main-
tenance man, worked continuously at the Bedford Park
plant and was still on the payroll at the end of December
1983. Two of the five remaining employees, Charles Hearod,
a forklift operator, and Lester Banks, a fitter/welder, were
recalled by Allied in February 1983. Banks subsequently
was terminated in April 1983, while Hearod wu.‘ed at
the plant continuously from the date of his recall through
December 1983.

Banks was called back to work for the purpose of weld-
ing and finishing certain heat exchangers which were pre-
assembled but not finished. Hearod and Steele assisted
in the finishing work as well, and also worked the shear
press and brake press to machine certain seal retainers
in August and/or September 1983 for approximately ten
hours each. In June 1983, these employees also performed
16 hours of welding on exhaust duct assembly units. All
other work performed by these employees included clean-
ing and maintenance work and the identification, weighing
and shipment of parts, scrap, raw materials and fixtures
in inventory. These activities, it was stipulated, all con-
stituted bargaining unit work.

Although Allied informed the Union in June 1982 of its
intent to permanently shut down its Bedford Park plant
operations, Allied still received, processed and filled seven
purchase orders during 1983, the last one in September
1983. In addition, after July 1, 1982, Allied identified,
loaded and shipped numerous items of scrap, parts, and
fixtures to its other divisions.

On November 15, 1982, the Trustees sent Allied a notice
of multiemployer plan withdrawal liability, a demand for

4a
4 No. 87-2108

payment of $559,108.57, and stated that the entire amount
was due by January 1, 1983. Alternatively, the Trustees
permitted Allied to make 27 monthly installment pay-
ments of $23,791.33 with a 28th payment of $7,495.81, be-
ginning January 1, 1983. The amount of withdrawal lia-
bility was determined by the Trustees as of June 30, 1982,
based on the Trustees’ conclusion that a complete with-
drawal had occurred during the plan year ending June
30, 1983.

On February 14, 1983, Allied submitted to the Trustees
a request for review. On June 17, 1983, the Trustees re-
sponded to Allied’s request, refusing to alter its Novem-
ber 15. 1982 notice and demand. Allied then initiated ar-
bitration proceedings on August 10, 1983, seeking review
of the Trustees’ determination under 29 U.S.C. § 1401(a).

The arbitrator concluded that “the Plan’s determination
that [Allied] withdrew from the Plan during the plan year
ending June 30, 1983 and that [Allied’s] withdrawal liabil-
ity should therefore be determined based on the Fund’s
unfunded vested benefits as of June 30, 1982 is clearly
erroneous and must be set aside.”’ The arbitrator further
concluded that a complete withdrawal had occurred dur-
ing the plan year ending June 30, 1984, and that the Plan
should immediately determine Allied’s withdrawal liabil-
ity based on the Fund’s unfunded vested benefits as of
June 30, 1983.

The district court referred the Trustees’ suit to vacate
the arbitration award to a magistrate. Reviewing the
arbitrator’s decision de novo, the magistrate held that
the arbitrator misinterpreted 29 U.S.C. § 1383(aX2) (with-
drawal occurs when an employer permanently ceases all
covered operations), and thus vacated the award. The ar-
bitrator read § 1383(aX2) literally (all means all), while the
magistrate, relying on a single passage of legislative his-
tory, held that all meant ‘virtually all.” Under the lat-
ter interpretation, the magistrate held that Allied com-
pletely withdrew from the Plan in the plan year ending
June 30, 1983, as the Trustees claimed. The district court

5a
No. 87-2108 5

adopted the magistrate’s report and recommendation,
writing separately to emphasize the court’s authority to
review de novo the arbitrator’s decision.

Il.

We confront two issues on appeal:? the proper standard
of review of an arbitrator’s award, and the interpreta-
tion to be given 29 U.S.C. § 1883(aX2).

A. Statutory Background

ERISA subjects employers who withdraw from inulti-
employer pension plans to so-called withdrawal liability
in an amount equal to their statutory share of the plan’s
unfunded vested liabilities. 29 U.S.C. § 1381. A “complete
withdrawal” occurs 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. § 1388(a).3 “(T]he date of a complete
withdrawal is the date of the cessation of the obligation
to contribute or the cessation of covered operations.” 29
U.S.C. § 1383(e).

Following an employer’s withdrawal from a multiem-
ployer pension plan, the plan sponsor is required to deter-
mine the amount of withdrawal liability owed, notify the
employer of this amount, and demand payment. 29 U.S.C.
§§ 1382, 1399(bX1). The amount of an employer’s with-
drawal liability is determined as of the last day of the

2 We are aided by the Pension Benefit Guaranty Corporation’s
(“PBGC’”’) amicus curiae brief. The PBGC’s views are entitled to
deference because of its responsibility to enforce Title IV of
ERISA, 29 U.S.C. §§ 1301-1461 (which includes ERISA’s with-
drawal liability provisions). Robbins v. McNicholas Transportation
Co., 819 F.2d 682, 686 (7th Cir. 1987).

3 On appeal, the Trustees have abandoned their claim that Allied
ceased to have an obligation to contribute under the Plan. 29
U.S.C. § 1383(aX1).

6a
6 No. 87-2108

plan year preceding the plan year in which the withdrawal
occurs.* 29 U.S.C. § 1391(bX2XA). Within 90 days after
notice and demand have been made, the withdrawing
employer may request that the Plan review its deter-
mination. 29 U.S.C. § 1399(bX2XA). The Plan must notify
the employer of its decision after its review. 29 U.S.C.
§ 13899(bX2XB). An employer may then initiate arbitration
within the 60-day period after the earlier of (1) the date
of notification to the employer of the Plan’s decision on
review, or (2) 120 days after the date of the employer’s
request for review. 29 U.S.C. § 1401.

Any party to the arbitration may appeal to an appro-
priate federal district court to ‘enforce, vacate, or modify
the arbitrator’s award.” 29 U.S.C. § 1401(bX2). “[T]o the
extent consistent with [Title IV of ERISA],” arbitration
proceedings ‘“‘shall . . . be conducted in the same man-
ner, subject to the same limitations, carried out with the
same powers (including subpoena power), and enforced in
United States courts as an arbitration proceeding carried
out under Title 9 [((Federal Arbitration Act)].”” 29 U.S.C.
§ 1401(bX3). On review, “‘there shall be a presumption,
rebuttable only by a clear preponderance of the evidence,
that the findings of fact made by the arbitrator were cor-
rect.” 29 U.S.C. § 1401(c).

B. Arbitrator’s Award; Standard of Review

Like every other federal appellate court which has ad-
dressed this question, we hold that district courts may

4 This is what this dispute really is all about. If Allied’s with-
drawal is said to have occurred in the plan year ending June 30,
1984, as Allied urges, the alleged withdrawal liability equa!s $364,000.
If, on the other hand, the Trustees are correct and a complete
withdrawal occurred in the plan year ending June 30, 1983, the
alleged withdrawal liability jumps to $559,108.57. (Given our resolu-
tion of this case, we need not consider whether the Trustees are
correct in asserting that the district court made a clerical error
and that this amount should be $599,108.57.)

Ta
No. 87-2108 7

fully review the arbitrator’s legal determinations. Union
Asphalts and Roadoils, Inc. v. Mo-Kan Teamsters Pen-
sion Fund, 857 F.2d 1230, 1233-34 (8th Cir. 1988); Trustees
of Amalgamated Ins. Fund v. Geltman Industries, Inc.,
784 F.2d 926, 928-29 (9th Cir.), cert. denied, 479 U.S. 822
(1986); Board of Trustees of the Western Conference of
Teamsters Pension Fund v. Thompson Bldg. Materials,
Inc., 749 F.2d 1396, 1405-06 (9th Cir. 1984), cert. denied,
471 U.S. 1054 (1985); Int’l Ass’n of Machinists Nat’l Pen-
sion Fund Benefit Plan C v. Stockton Tri Industries, 727
F.2d 1204, 1207 n.7 (D.C. Cir. 1984); Republic Industries,
Inc. v. Teamster Joint Council No. 83 of Virginia Pen-
sion Fund, 718 F.2d 628, 641 (4th Cir. 1983), cert. denied,
467 U.S. 1259 (1984).

We also agree with the Eighth Circuit that neither
United Retail & Wholesale Employees Teamsters Union
Local No. 115 Pension Plan v. Yahn & McDonnell, Inc.,
787 F.2d 128 (8d Cir. 1986), aff'd by an equally divided
court, 481 U.S. 735 (1987) (per curiam) nor Washington
Star Co. v. Int'l Typographical Union Negotiated Pen-
sion Plan, 729 F.2d 1502 (D.C. Cir. 1984) are to the con-
trary. As that court explained:

In United Retail and Washington Star Co., the courts
did not review an arbitrator’s legal determinations;
instead, the courts dealt with constitutional issues in-
volving MPPAA. See United Retail, 787 F.2d at 129;
Washington Star Co., 729 F.2d at 1503. We do not
believe either decision can be characterized as desig-
nating a standard for review of the arbitrator’s legal
determinations. See United Retail, 787 F.27 s+ 135
n.9 (passing remark in a footnote); Washingto:. Star
Co., 729 F.2d at 1505 (introductory outline of section
1401 that did not mention Stockton Tr Industries,
727 F.2d at 1207 n.7). Thus, although UA looks to
United Retail and Washington Star Co. for support,
the courts in those cases did not decide the current
issue.

8a
8 No. 87-2108

Union Asphalts, 857 F.2d at 1233-34. Moreover, we re-
ject Allied’s argument that Washington Star, supra, over-
ruled Stockton Tri Industries, supra. These cases were
decided only a few weeks apart, Washington Star (the lat-
ter of the two) made no mention of Stockton Tri Indus-
tries, let alone claimed to overrule it, and Judge Edwards,
the author of Washington Star, was on both panels.5

We also find United Retail unpersuasive (on the stan-
dard of review issue) for another reason. There, the Third
Circuit refused to read § 1401(c)’s omission of any stan-
dard of review regarding arbitral legal determinations as
“suggesting that the district court has plenary review
over the arbitrator’s findings of law.”” United Retail, 787
F.2d at 135 n.9. In support of its conclusion, the court
relied on its “settled policy of extreme deference to an
arbitrator’s legal as well as factual determinations,” citing
United Steelworkers of America, District 36 v. Adbill
Management Corp., 754 F.2d 138 (3d Cir. 1985). United
Retail, 787 F.2d at 135 n.9 The court’s reliance on Ad-
bill, however, was misplaced. Adbill involved the review
of a labor arbitrator’s award issued pursuant to the par-
ties’ collective bargaining agreement. In that situation,
judicial deference is “‘mandated by Congress’ preference
that this contractually agreed upon vehicle for dispute
resolution be the ‘final’ method of adjustment among par-
ties.”” Stockton Tri Industries, 727 F.2d at 1207 n.7. By
contrast, withdrawal liability arbitration is a statutorily
required proceeding (29 U.S.C. § 1401(aX1)), the matters

5 It is true, though, as Allied points out, that the D.C. Circuit,
in stating that the arbitrator’s decision is “fully reviewable to
determine whether applicable statutory law has correctly been ap-
plied and whether the findings comport with the evidence,”’ in-
correctly cited to § 1401(aX3XA) (plan sponsor’s determinations
presumed correct) for that proposition, and not to § 1401(c) (rebut-
table presumption that arbitrator’s findings of fact were correct).
Stockton Tri Industries, 727 F.2d at 1207-08 n.7. But given that
court’s parenthetical explanation (which refers to the arbitrator's
decision) we don’t believe it misread or misunderstood ERISA,
as the Trustees believe.

9a
No. 87-2108 i]

of which are to be determined by Congress’ intent, not
the parties’. See Teamsters Pension Trust Fund v. Allyn
Transportation Co., 832 F.2d 502, 505 (9th Cir. 1987); see
also Stockton Tri Industries, 727 F.2d at 1207 n.7.

Allied also contends that the extremely limited power
of review provided for by the Federal Arbitration Act,
9 U.S.C. §§ 1-14, controls here. We disagree. While it is
true that § 1401(bX3) (which concerns withdrawal liability
arbitration proceedings) incorporates the Federal Arbitra-
tion Act,® it does so only to the extent it is consistent
with 29 U.S.C. §§ 1301-1461. As have the Fourth and
Eighth Circuits, we hold that the limited review permitted
by § 10 of the Arbitration Act (9 U.S.C. § 10) is incon-
sistent with § 1401(bX2)’s broad mandate allowing courts
to “enforce, vacate, or modify the arbitrator’s award.”’
Union Asphalts, 857 F.2d at 1234; Republic Industries,
718 F.2d at 641. Thus, we conclude that courts may fully
review an arbitrator’s legal determinations.

C. Section 1383(aX2)’s Interpretation.

So far as is relevant here, a complete withdrawal oc-
curs when an employer ‘“‘permanently ceases all covered
operations under the plan.’”’ 29 U.S.C. § 1383(aX2). But
in spite of the clear language requiring that ‘‘all covered
operations” cease before a complete withdrawal occurs,
the district court held it was sufficient if ‘virtually all’’
(as opposed to “‘all’’) covered operations came to a halt

6 Actually, § 1401(bX3) does not expressly incorporate § 10 of the
Federal Arbitration Act. Section 10 lists the various grounds for
which an arbitrator’s award may be vacated (fraud, bias, arbitral
misconduct, etc.). Section 1401(bX3), though, does not speak of suits
to vacate arbitration awards, but rather, says the Federal Arbitra-
tion Act will, to the extent it is consistent with ERISA, govern
“arbitration proceedings” and the “enforce{ment]’” of the arbi-
trator’s award. Thus, S 10's limited grounds for review arguably
have no application to suits to vacate withdrawal liability awards.
We need not decide this issue, though, because of our holding that,
even if § 10 does apply, it would be inconsistent with § 1401(bX2).

10a
10 No. 87-2108

in order to trigger withdrawal liability. [t did so, as have
other district courts,’ by relying on a passage from the
relevant legislative history. H.R. Rep. No. 896 Part I,
96th Cong., 2d Sess. 73, reprinted in 1980 U.S. Code
Cong. & Admin. News 2918, 2941.8 The resort to legisla-

7 These cases include: Combs v. Leishman, 691 F.Supp. 424,
430-31 (D.D.C. 1988); Connors v. Economy Building Systems, Inc.,
651 F.Supp. 849, 853-54 (D.D.C. 1986); JLGWU National Retire-
ment Fund v. Weatherall Fashions, Inc., No. 84 Civ. 9772, slip
op. (S.D.N.Y. 1986); F. H. Cobb Company v. New York State
Teamsters Conference Pension and Retirement Fund, 584 F.Supp.
1181, 1183 (N.D.N.Y. 1984); Speckman v. Barford Chevrolet Co.,
535 F.Supp. 488, 491 (E.D. Mo. 1982). None of these cases con-
cluded § 1383(aX2) was ambiguous, unclear, or would lead to ab-
surd or unjust results if the plain language were followed before
turning to the legislative history.

8 That passage states:

The bill would treat an employer as withdrawing from a multi-
employer plan when the employer (1) permanently ceases to
have an obligation to contribute under the plan, or (2) per-
manently ceases all covered operations under the plan. Cur-
rent law does not define a withdrawal. As under current law, a
virtually complete cessation of contributions, e.g., a 98-percent
reduction, that has the same effect on the plan as a complete
cessation of contributions, is a complete withdrawal.

At oral argument, the Trustees also brought to our attention
a portion of the report drafted by the Senate’s Labor and Human
Resources Committee. But that section has to do with whether
a particular withdrawal was permanent, not with whether all or
only some covered operations ceased. Thus, the Report states “‘{a]
plan sponsor need only make a reasonable determination based on
the evidence available that the cessation of covered operations or
obligation to contribute is not merely temporary. The Committee
intends that covered operations be treated as having permanent-
ly ceased when business activity substantially ceases or when it
continues but no longer gives rise to contributions to the plan.”’
S. Rep. 1076, 96th Cong., 2d Sess. at 12, 13. Here, the question
is not whether Allied’s cessation of business activity was per-
manent or merely temporary (everyone agrees it was permanent);
rather, the question is when “all covered operations’ came to a
halt. The Report hardly clarifies the issue here; but even if it was
consistent with the House Report, there was no need to resort
to legislative history because the statute itself is clear.

lla
No. 87-2108 ll

tive history was unnecessary, however, because the stat-
ute is clear and unambiguous. See Blum v. Stenson, 465
U.S. 886, 896 (1984) (where “resolution of a question of
federal law turns on a statute and the intention of Con-
gress, we look first to the statutory language and then
to the legislative history if the statutory language is
unclear’). Legislative history may be consulted in rare
and exceptional circumstances even when the statute is
clear, or if the application of the statute’s plain language
produces absurd or unjust results. Meredith v. Bowen, 833
F.2d 650, 654 (7th Cir. 1987); Wilson v. Harris Trust &
Savings Bank, 777 F.2d 1246, 1249 (7th Cir. 1985) (per
curiam); Pullman-Standard v. Interstate Commerce Com-
mission, 705 F.2d 875, 879 (7th Cir. 1983). But where,
as here, none of these factors are present, the clear lan-
guage should be the guide to congressional intent. Discard-
ing the plain language of a statute in favor of committee
reports or other legislative history ignores the realities
of the legislative process. The crafting of specific language
often reflects legislative compromise reached after hard
fought battles over the means to reach even common
goals. Courts should only reluctantly turn to legislative
history for fear of upsetting the delicate balance reflected
in a finally worded piece of legislation.? Cf Central States
Southeast and Southwest Areas Pension Fund v. Bell-
mont Trucking Co., Inc., 788 F.2d 428, 433-34 (7th Cir.
1986) (quoting Board of Governors of the Federal Reserve
System v. Dimension Financial Corporation, 474 U.S.
361, 373-74 (1986)). In this case “‘the plain language”’ of the

® Relying on legislative history, especially where, as here, the
statute is clear, can produce odd results and even encourage poten-
tial abuse. ““‘Committee reports that contradict statutory language
or purport to explicate the meaning or applicability of particular
statutory provisions can short-circuit the legislative process, leading
to results never approved by Congress or the President.” Wallace
v. Christensen, 802 F.2d 1539, 1560 (9th Cir. 1986) (Kozinski, J.,
dissenting); see also Hirschey v. FERC, 777 F.2d 1, 7-8 (D.C. Cir.
1985) (Sealia, J., concurring).

12a
12 No. 87-2108

statute ‘is the best evidence of [its] meaning.” Meredith,
833 F.2d at 654.

Section 1383(aX2) says that “all covered operations’’
must permanently cease for a complete withdrawal! to oc-
eur. 29 U.S.C. § 1383(aX2). “It is a maxim of statutory
construction that, unless otherwise defined, words should
be given their ordinary, common meaning.” Ulane v.
Eastern Airlines, Inc., 742 F.2d 1081, 1085 (7th Cir. 1984),
cert. denied, 471 U.S. 1017 (1985). The common meaning
of “all” is 100 percent. Central States Southeast and
Southwest Areas Pension Fund v. Bellmont Trucking Co.,
Inc., 610 F.Supp. 1505, 1510 (N.D. Ind. 1985), aff'd, 788
F.2d 428 (7th Cir. 1986). That Congress meant 100 per-
cent when it said “‘all” is buttressed by the fact that in
several other places, the statute qualifies “all” by using
the phrase “‘substantially all.” 29 U.S.C. §§ 13883(bX1XA),
1384(aX3XA), 1889%(c), and 1405(aX1). Plainly, Congress
knew the difference between “all,” “substantially all,” and
“virtually all’; and it opted for the unqualified ‘‘all’” in
29 U.S.C. § 1883(aX2). As we read § 1383(aX2), then, there
simply is no other way to remain faithful to Congress’
iatent, as expressed by the statute’s clear and unambig-
uous language, other than to hoid that all (100 percent)
of the covered operations must permanently cease before
finding an employer has completely withdrawn from a
multiemployer plan. We therefore agree with Allied and
the PBGC, and respectfully decline to follow the lead of
those district courts (see supra n.7) which have relied on
the legislative history to reach a different result.

The Trustees argue, though, that our reading of § 1383(aX2)
may invite manipulation and abuse by scheming employers
who will retain skeleton crews to avoid (delay) the impo-
sition of withdrawal liability. We arc not persuaded. First,
there is no allegation of such manipulation or abuse on
the part of Allied, so we do not face that situation here.
But, more important, a remedy already exists for such
a case. Under 29 U.S.C. § 1392(c), “ilf a principal pur-
pose of any transaction is to evade or avoid liability .. .
(the withdrawal liability provisions] shall be applied (and

13a
No. 87-2108 13

liability shall be determined and collected) without regard
to such transaction.” Jd. Had Allied recalled its employees
or kept them on the payroll merely to “evade or avoid
liability,” the Trustees could have pursued Allied under
§ 1392(c) regardless of the number of employees remain-
ing or the continuation of covered operations. Thus, there
is no need for us to take the drastic—indeed impermis-
sible—step of rewriting the statute as the Trustees in-
vite us to do.

Having interpreted § 1383(aX2), we must now decide
when Allied completely withdrew from the Plan. Allied
announced in June 1982, its decision to close its Bedford
Park plant. Allied and the Union negotiated a Shutdown
Agreement to facilitate the closing and agreed to continue
their collective bargaining agreement in effect for as long
as any bargaining unit member was employed. The bar-
gaining unit included all of Allied’s production and main-
tenance employees engaged in the fabrication of iron,
steel, metal and other products, or in maintenance work
in or about the plant.

All the work performed at Allied’s Bedford Park plant
since June 30, 1983, was production and maintenance work
within the meaning of the collective bargaining agree-
ment,!° and was performed by bargaining unit members.

10 The district court equated ‘“‘covered operations” under 29
U.S.C. § 1383(aX2) with what it termed “normal business opera-
tions” or with production work only. Section 1383(aX2), however,
speaks of “‘all covered operations under the plan,” not production
work. We think “covered operations” refers to those operations
which are covered by the collective bargaining agreement (through
the relevant bargaining unit definition) for which the employer
must contribute to pension plan. Cf. Speckman, 535 F.Supp. at
491 (employer ceases ‘‘covered operations” if it ceases the business
activity that gave rise to contributions to the plan). The business
activity giving rise to contributions is the performance of bargain-
ing unit work. Thus, the issue is whether bargaining unit work
is being performed for which contributions are made, not simply
whether production work is being performed. Here the Trustees
stipulated that bargaining unit work was performed after June
1983.

l4a
14 No. 87-2108

Allied’s employees produced and shipped products to some
of its primary customers even after June 30, 1983 (the
end of the 1983 plan year). Allied also received several
purchase orders after June 30, 1983. Finally, throughout
this period Allied continued to contribute to the Plan as
provided for by the collective bargaining agreement.

On this record, we agree with the arbitrator that the
Plan’s determination that Allied completely withdrew dur-
ing the plan year ending June 30, 1983 (and that its with-
drawal liability should be determined based on unfunded
vested benefits as of June 30, 1982) was clearly erroneous.
As the arbitrator found, a complete withdrawal occurred
during the plan year ending June 30, 1984; thus, Allied’s
withdrawal liability should be based on unfunded vested
benefits as of June 30, 1983.

ITI.

In sum, we hold that the district court properly re-
viewed the arbitrator’s award under the de novo stan-
dard of review. But the district court misinterpreted 29
U.S.C. § 1383(aX2), finding a complete withdrawal occur-
red before all of Allied’s covered operations permanently
ceased. Section 1383(aX2)’s plain language requires a find-
ing that all covered operations permanently stop before
a complete withdrawal occurs. Therefore, we reverse the
district court and reinstate the arbitrator’s award.

REVERSED.
A true Copy:
Teste:

Clerk of the United States Court of
Appeals for the Seventh Circuit

USCA 79004—Midwest Law Printing Co., Inc., Chicago—4-13-89—500

15a
APPENDIX B
DOCKETED
JUN 12 1987

UNITED STATES DISTRICT COURT,
NORTHERN DISTRICT OF ILLINOIS,

EASTERN DIVISION
Name of
Assigned Judge John A. Nordberg
Case Number 84 C 5329 Date June 8, 1987

Case Trustees of Iron Workers Local 473 Pension Trust v.
Title Allied Products Corp.

MOTION: (Im the following box (a) indicate the party filing
the motion, e.g., plaintiff, defendant, 3d-party
plaintiff, and (b) state briefly the nature of the
motion being presented.)

Cross-Motions For Summary Judgment

DOCKET ENTRY (The balance of this form is reserved for
notations by court staff.)

(1) Judgment is entered as follows:

Having reviewed the Report and Recommendation of the
Magistrate, and the pleadings, briefs and objections of the parties,
the court accepts and adopts the Magistrate’s Report and
Recommendation, with the clarifications noted on the reverse
of this order, and hereby grants plaintiffs motion for summary
judgment, denies defendant’s motion for summary judgment,
vacates the arbitrator’s opinion and award, and reinstates the
Trustees’ withdrawal liability assessment of $559,108.57.

(12) [For further detail see

order on the reverse of

order attached to the original minute order form.]

rs | PS | OPS PSX

Docketing to mail notices.

16a

(Reserved for use by the Court)
ORDER

The court further notes that a finding that the court could
not review legal conclusions of the arbitrator de novo would make
little sense, exposing an arbitrator’s factual findings to greater
judicial scrutiny than his legal conclusions. Also, such a holding
could render the statute unconstitutional. See Board of Trustees
of Western Conference of Teamsters Pension Trust Fund uv.
Thompson Building Materials, Inc., 749 F.2d 1396, 1404-06 (9th
Cir. 1984) (employers not denied Article III judge because court
reviews conclusion of law de novo), cert. denied, 471 U.S. 1054,
105 S.Ct. 2116 (1985).

17a
APPENDIX C

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

TRUSTEES OF IRON WORKERS
LOCAL 473 PENSION TRUST,

Plaintiff,

v, No. 84C 5329
Judge Nordberg

ALLIED PRODUCTS
CORPORATION,

Defendant

REPORT AND RECOMMENDATION

TO THE HONORABLE JOHN A. NORDBERG, one of the
Judges of the United States District Court for the Northern
District of Illinois.

This is an action to vacate or modify an arbitration award
and to collect withdrawal liability payments pursuant to the
Multiemployer Pension Plan Amendments Act of 1980
(“MPPAA’’), 29 U.S.C. §§ 1001-1461, which amended the
Employee Retirement Income Security Act of 1974 (“ERISA”).
Plaintiff Trustees are the administrator and named fiduciary of
the Iron Workers Local 473 Pension Plan (“the Plan’’), a
multiemployer pension plan as defined in 29 U.S.C § 1002 (37)(A).
Defendant Allied Products Corporation (“Allied”) is an employer
within the meaning of 29 U.S.C. § 1002 (5). Presently before the
court are the parties’ cross-motions for summary judgment. These

motions center around one basic issue: when did Allied withdraw
from the Plan within the meaning of the MPPAA?

FACTS

The facts are clear and undisputed. The legal significance
of those facts under applicable federal statutes is, however, hotly
contested. Beginning on May 1, 1959, Allied and Shopmen’s Local
Union No. 473 of the International Association of Bridge,
Structural and Ornamental Iron Workers, AFL-CIO (“‘the

18a

Union”) have been parties to collective bargaining agreements
covering production and maintenance employees at Allied’s plant
in Bedford Park, Illinois. These agreements require, among other
things, contributions by Allied to the Plan on the basis of specified
cents per hour worked by covered employees. The Plan was most
recently amended and restated as of May 1, 1979.

Under the agreement, the Pension Plan year runs from July
1 through June 30. On June 16, 1982, Allied informed the Union
by letter that Allied had decided to permanently shut down and
close its plant operations at Bedford Park, Illinois. Shortly
thereafter, on July 2, 1982, Allied and the Union executed a
Shutdown and Severance Pay Agreement which stated in part:
“(t]he terms and conditions as set forth in the collective bar-
gaining agreement... as amended, shall continue in full force
and effect, except as hereinafter modified by this Severance
Agreement, as long as any bargaining unit member remains
employed.”

In the ..an Year ending June 30, 1982, Allied contributed
$79,669.91 for 111,573 participant hours. However, for the Plan
Year ending June 30, 1983, Allied contributed only $10,338.56
for 13,854.75 participant hours; while from July 1, 1983 through
December 1983, Allied’s contributions were reduced by an even
larger margin, $1,432.50 for 1,910 participant hours.

There were 48 employees working for Allied for the payroll
week ending July 4, 1982. By the end of August 1982, only five
employees remained at the plant. Of these five, two were
terminated in September and two in December 1983. One
employee, Donald Steele, a maintenance man, worked contin-
uously at the Bedford Park plant and was still on the payroll
at the end of December 1983. Two of the four previously ter-
minated employees, Charles Hearod, a fork lift operator, and
Lester Banks, a fitter/welder, were recalled by Allied in February
1983. Banks was terminated again in April 1983, but Hearod
worked at the plant continuously from the date of his recall
through December 1983.

Banks was called back to work for the purpose of welding
and finishing certain heat exchangers which were pre-assembled
but not finished. Hearod and Steele assisted in the finishing work

19a

as well and also worked the shear press and brake press to
machine certain seal retainers in August and/or September 1983
for approximately ten hours each. In June 1983 these employees
also performed 16 hours of welding on exhaust duct assembly
units. All other work performed by these employees was as
follows: a) cleaning and maintenance work, and b) the identi-
fication, weighing and shipment of parts, scrap, raw materials
and fixtures in inventory. These activities all constituted
bargaining unit work.

Although Allied informed the Union in June 1982 that it
had decided to permanently shut down operations at the Bedford
Park plant, Allied still received, processed and filled seven
purchase orders during 1983, the last one being in September
1983. In addition, since July 1, 1982, Allied identified, loaded
and shipped numerous items of scrap, parts and fixtures! to its
other divisions.

On November 15, 1982, the Trustees of the Plan sent to Allied
a notice of multiemployer plan withdrawal liability, a demand
for payment of $559,108.57, and stated that the entire amount
was due by January 1, 1983. Alternatively, Allied was permitted
to make 27 monthly installment payments of $23,791.33 with
a 28th payment of $7,495.81, beginning January 1, 1983. The
amount of withdrawal liability was determined by the Trustees
as of June 30, 1982 based on the Trustees’ conclusion that a
“complete withdrawal” had occurred during the Plan Year
beginning July 1, 1982 and ending June 30, 1983.2

On February 14, 1983, Allied submitted a request for review
pursuant to ERISA § 4219 (b)(2)(A), 29 U.S.C. § 1399 (b)(2)(A).
On June 17, 1983, the Trustees responded to this request for
review, concluding that the November 15, 1982 notice and demand
should stand without change. Allied then initiated arbitration
on August 10, 1983, seeking review of the Trustees’ determination

1 According to the custom and usage of the welding industry, a “fixture”
is a durable casement or tooling device used in the mass fabrication
of steel welded parts.

2 The Trustees do not make a claim for “partial withdrawal liability.

20a

pursuant to ERISA § 4219 (a), 29 U.S.C. § 1401 (a). In arbitration,
Allied challenged the Trustees’ determination of withdrawal
liability on two grounds. First, Allied asserted that it did not
withdraw prior to July 1, 1983. Second, Allied asserted that
installment payments should have been required on a quarterly,
rather than monthly basis.

On May 24, 1984, the arbitrator issued his opinion concluding
that, “the Plan’s determination that [Allied] withdrew from the
Plan during the plan year ending June 30, 1983 and that [Allied’s]
withdrawal liability should therefore be determined based on the
Fund’s untunded vested benefits as of June 30, 1982 is clearly
erroneous and must be set aside.’’? The arbitrator further
concluded that a complete withdrawal had occurred during the
plan year ending June 30, 1984 and that the Plan should
immediately determine Allied’s withdrawal liability based on the
Fund’s unfunded vested benefits as of June 30, 1983. However,
the arbitrator did uphold the Trustees’ determination that Allied’s
withdrawal liability should be paid monthly rather than
quarterly.‘ Less than a month later, on June 22, 1984, the Trustees
filed this complaint in federal court to vacate the arbitrator’s
award and to collect the withdrawal liability as initially
determined by the Trustees.

DISCUSSION

As a preliminary matter, this court must determine the
standard of review for an arbitrator’s legal rulings. Allied
contends that the court’s role in reviewing an arbitration award
is strictly limited and is confined to determining whether or not
one of the grounds specified by Section 10 of the United States

3 See Arbitrator’s Opinion attached as Exhibit “A” to plaintiff's
complaint.

4 Allied does not appeal this ruling of the Arbitrator.

2la

Arbitration Act for vacation of an award exists.5 Further, Allied
asserts that an arbitration award will not be vacated on the
ground that the arbitrator misinterpreted applicable law.
Plaintiffs on the other hand, argue that this court should decide
the legal issues in this case de novo and not give the arbitrator's
decision any deference whatsoever.

This court finds that it is not bound by the legal rulings
of an arbitrator’s decision under the MPPAA. As the Court of
Appeals for the D.C. Circuit stated:

[a]rbitration under MPPAA is quite plainly to be
distinguished from arbitration based upon the contrac-
tual provisions of a collective bargaining agreement.
Judicial deference to the latter kind of arbitration is
mandated by Congress’ preference that this contrac-
tually agreed upon vehicle for dispute resolution be

5 Section 10 of the United States Arbitration Act, 9 U.S.C. 10, specifies
oe grounds upon which an Arbitrator’s award may be vacated,
as follows:

In either of the following cases the United States court in and
for the district wherein the award was made may make an order
vacating the award upon the application of any party to the
arbitration

(a) Where the award was procured by corruption, fraud, or undue
means.

(b) Where there was evident partiality or corruption in the
arbitrators, or either of them.

(c) Where the arbitrators were guilty of misconduct in refusing
to postpone the hearing, upon sufficient cause shown, or in refusing
to hear evidence pertinent and material to the controversy; or of
any other misbehavior by which the rights of any party have
been prejudiced.

(d) Where the arbitrators exceeded their powers, or so imperfectly
executed them that a rautual, final, and definite award upon the
subject matter submitted was not made.

(e) Where an award is vacated and the time within which the
agreement required the award to be made has not expired the
court may, in its discretion, direct a rehearing by the arbitrators.

22a

the “final” method of adjustment among parties.
[citations omitted] Therefore, agreements to arbitrate
are routinely enforced, [citations omitted] and judicial
review of arbitration decisions is very limited. [citations
omitted] Under MPPAA, however, the decisions of a
typical administrative agency, are fully reviewable to
determine whether applicable statutory law has
correctly been applied and whether the findings
comport with the evidence. [citations omitted]

LA.M. National Pension Fund v. Stockton TRI Industries, 727
F.2d 1204, 1207 n. 7 (D.C. Cir. 1984). In arguing for a strictly
limited and confined judicial review, Allied fails to distinguish
between arbitration under the MPPAA from arbitration based
upon a collective bargaining agreement.

The cases relied on by Allied deal with arbitration in a non-
MPPAA setting. The one case cited by Allied that can even
remotely support its position is Washington Star Co. v. Inter-
national Typographical Union Negotiated Pension Plan, 729 F.2d
1502 (D.C. Cir. 1984), an MPPAA case which states in dicta that
a “court must enforce the arbitrator’s decision in accordance with
the United States Arbitration Act,... which authorizes only
limited review.” Jd., at 1505. However, the very next sentence
indicates that the court is referring to an arbitrator’s factual
findings: “[flurthermore, the court must presume that the
arbitrator’s findings of fact are correct, unless they are rebutted
by a clear preponderance of the evidence. . . ” Jd. In any event,
the Washington Star court does not refer to the legal rulings
of an arbitrator, which is the problem that this court must solve.
Thus, Washington Star is inapposite to the situation at hand.

Finally, we agree with the Fourth Circuit’s interpretation
of this dilemma that “[tJhe clear authorization of §1401(b)(2) for
judicial review ‘to enforce, vacate, or modify the arbitrator’s
award’ gives a right to review an arbitrator’s legal rulings.”
Republic Industries v. Teamsters Joint Council, 718 F.2d 628,
641 (4th Cir. 1983). Because this case involves the arbitrator’s
statutory interpretation of ERISA §4203(a), 29 U.S.C. §1383(a),
it calls for a review of his legal ruling. Accordingly, this court
will review the legal issue present in these motions de novo.

23a

As stated previously, the only issue for this court to resolve
is when did Allied completely withdraw from the Plan within
the meaning of the MPPAA. ERISA Section 4203(a), 29 U.S.C.
§1383(a), which was added by the MPPAA of 1980, defines
“complete withdrawal” as follows:

For purposes of this part, a complete withdrawal
from a multiemployer plan occurs 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.

Both parties agree that the crucial issue here is in what Plan
Year, 1982 or 1983, did Allied permanently cease all covered
operations under the plan.

The first obstacle which this court must hurdle is what is
meant by the phrase “all covered operations.” The arbitrator
ruled that in the context of §1383(a), “all” means 100 percent
and not some lesser amount. In reaching this conclusion, the
arbitrator disregarded the legislative history of §1383(a), and
instead, found that, “nothing could be clearer than the language
of the statute itself that a complete withdrawal means the
permanent cessation of all covered operations...” This court
respectfully disagrees with the arbitrator’s conclusion for we
believe that the phrase “all covered operations” is not altogether
clear in meaning, and thus, this court will look to the legislative
history, and also, to other sources for guidance as to the proper
definition of “all covered operations.”

The House report on the MPPAA makes clear that a virtually
complete cessation of contribution, e.g., a 98% reduction, will be
treated as a complete withdrawal. H.R. Rep. No. 896, 96th Cong.,
2d Sess. 73, reprinted in (1980) U.S. Code Cong. & Ad. News
2918, 2941. Regarding this piece of legislative history, one district
court has noted, “{tJhe case law uniformly follows this ‘practical
approach’ in determining whether there has been a complete
withdrawal”. F.H. Cobb. Co. v. N.Y.S. Teamsters Conference,
584 F. Supp. 1181, 1183 (N.D.N.Y. 1984); see also Speckman uv.
Barford Chevrolet Co., 535 F. Supp. 488 (E.D. Mo. 1982). This

24a

court elects to follow this “practical approach” and concludes
that the word “all” in the phrase “all covered operations” does
not mean a 100% cessation of covered operations, but rather,
something less than 100%. In other words, a virtually complete
cessation for covered operations.

The next step is to determine what is meant by the term
“covered operations.” An employer “ceases covered operations”
if it ceases the business activity that gave rise to contributions
to the plan. Speckman v. Barford, supra; Ford, McNamara, and
Stanger, “Withdrawal Liability Under ERISA After the Multiem-
ployer Pension Plan Amendments Act of 1980,” N.Y.U. 39th
Annual Inst. on Fed. Tax., ERISA Supp., §1002 at 10-46. Accord-
ingly, this court must determine in what plan year did Allied
accomplish a virtually complete cessation of its business activity
that gave rise to its contributions to the Plan.

Plaintiffs contend that Allied ceased its covered operations
under the Plan prior to July 1, 1983, and thus, were properly
assessed withdrawal liability as of Plan Year ending June 30,
1982. Allied on the other hand, contends that it withdrew from
the Plan subsequent to July 1, 1983, and therefore, should only
be assessed withdrawal liability based on the Funds unfunded
vested benefits as of June 30, 1983. At stake is approximately
$235,000 - the difference between the Trustees’ assessment of
$559,108.57, based upon a June 30, 1982 determination, and
$364,000, which would be the assessment based upon a June
30, 1983 determination.

It is undisputed that on June 16, 1982, Allied informed the
Union by letter that Allied had decided to permanently shut down
and close the plant operations in Bedford Park. However, an
expression of intent to withdraw does not constitute an actual
withdrawal within the meaning of the MPPAA. See I.A.M.
National Pension Fund Benefit Plan v. Stockton TRI Industries,
727 F. 2d at 1211.

It is also not disputed that on March 30, 1984, Allied sold
the Bedford Park plant property, and officially went out of
business. However, March 30, 1984 is also not the relevant date
because the test is not when the employer went out of business,

25a

but rather, when did the employer cease covered operations.‘
Thus, the court must look to the period of time between June
16, 1982 and March 30, 1984, to ascertain when Allied ceased
its covered operations under the Plan.

During a ten-year period ending June 30, 1982, Allied
contributed over $1.3 million to the Plan, based on over 2.9 million
hours worked by bargaining unit employees was slightly over
290,000 hours, or slightly over 24,000 hours per month. In contrast,
by July 1982, the participating hours contributed by Allied to
the Plan had dropped to slightly under 8,000 hours for that month.
In August 1982, that number decreased even more, to just under
2,000 hours for that month. By September 1982 through December
1983, Allied’s contribution hours averaged approximately 300
hours per month, which accounted for a minimal $300 a month
in contributions.” 7

Moreover, in early July 1982, there were 48 bargaining unit
_employees on Allied’s payroll at the Bedford Park plant. There
were still 28 remaining in early August 1982, but by the end
of that month, only five remained employed. Donald Steele, a
maintenance man, remained employed at the plant until the land
was sold on March 30, 1984. Charles Hearod, a fork lift operator,
who was terminated in December 1982 but recalled in February
1983, also worked on the plant until March 30, 1984. Therefore,
in just two months after its decision to close down operations,
Allied employed merely a skeletal crew, if that, to clean and do
maintenance work, and also, to identify, weigh and ship parts,
scrap, raw materials and fixtures in inventory.®

Allied points out that since February 1983, it received and
processed seven purchase orders for shipment of parts. The court
notes, however, that two of these orders were received prior to
July 1, 1983, and the remaining five occurred in August and

6 ILGWU National Retirement Fund, et al., v. Weatherall Fashions,
Inc., No. 84 Civ. 0772, slip op. (S.D.N.Y. Feb. 24, 1986).

7 See Stipulation of Facts, attached as Exhibit “A” to Defendant’s
Statement of Material Facts, p. 4.

8 Id., at 5.

26a

September 1983. In any event, these minimal activities can hardly
be classified as normal business operations. In addition, the
shipment of inventory to other divisions within the Allied family
cannot be considered normal business activity. These are simply
activities that are necessitated when a company has already
ceased normal business operations. Accordingly, this court finds
that Allied ceased “all covered operations” within the meaning
of the MPPAA prior to July 1, 1983. (In fact, this court opines
that Allied ceased its covered operations by the very latest,
December 1982).

This conclusion is supported by applicable case law. A
permanent cessation can occur even though an employer remains
signatory to a collective bargaining agreement requiring
contributions to the plan. Speckman v. Bedford Chevrolet Co.,
535 F. Supp. at 491. In Speckman, an automobile dealership closed
down and sold its facilities prior to the effective date of the
MPPAA. The employer retained one employee to perform phase-
out work and made pension plan contributions on behalf of that
employee subsequent to the effective date of the MPPAA. The
Speckman court held that the employer’s retention of a sole
employee and its contribution to the Plan on his behalf did not
prevent its cessation of all covered operations from being complete
within the meaning of the MPPAA.9

Further, in Textile Workers Pension Fund v. Standard Dye
& Finishing Co., Inc., 607 F. Supp. 570 (S.D.N.Y. 1935), the court
found that where an employer which ceased its normal business
operation, liquidated its assets and maintained a skeleton staff
to aid in clean-up work effected a complete withdrawal from the
plan. Ta 3%

Finally, in ILGWU National Retirement Fund, et al., v.
Weatherall Fashions, Inc., No. 84 Civ. 0772, slip op. (S.D.N.Y.

9 The arbitrator distinguished Speckman on the ground that the
dealership in Speckman had been sold while the Bedford Park plant
in this case was not sold until March 30, 1984, and that is when “all
covered operations” ceased. The arbitrator misread Speckman. Clearly,
the importance of Speckman centers around the retention of the one
employee and the employer’s contributions on his behalf.

27a

Feb. 24, 1986), a case that closely resembles this one, the court
found that the employer’s minimal continued operations does
not postpone withdrawal liability under the MPPAA. In
Weatherall, the employer ceased covered operations in December
1981, and began rapidly winding down meaningful business
activity, retaining only one employee, a shipping clerk. However,
the firm remained in existence until 1985, when the office finally
closed. The employer contended that it could not incur withdrawal
liability in December 1981 because of its continuation in business
until 1985. The court rejected this argument, noting that “the
Fund does not assert that Weatherall went out of business in
1981, but rather that it ‘ceased covered operations’ in December,
1981 and that the continued viability of Weatherall’s corporate
form does not prevent withdrawal liability from attaching.”
Similarly, here the Trustees simply determined that Allied
“ceased covered operations” prior to July 1, 1983, and not that
Allied went out of business prior to that date. As stated previously,
the facts clearly support this determination.

28a

CONCLUSION

The court finds that defendant Allied ceased “all covered
operations” within the meaning of the MPPAA prior to July
1, 1983 as the Trustees of the Plan had originally determined.
Therefore, the Trustees’ withdrawal liability assessment of
$559,108.57, based upon a June 30, 1982 determination is correct.
Accordingly, this court recommends that plaintiffs motion for
summary judgment be granted and the defendant’s summary
judgment motion be denied; that the arbitrator’s opinion and
award be vacated; and that the Trustees’ withdrawal liability
assessment of $559,108.57 be reinstated.1°

Dated: December 8, 1986

Respectfully submitted,
/s/ W.THomaAs ROSEMOND, JR.

W. Thomas Rosemond, Jr.
United States Magistrate

10 Counsel are given ten days from the date hereof to file exceptions
to this Report and Recommendation with the Honorable John A.
Nordberg. Failure to file objections within the specified time waives
the right to appeal the magistrate’s order. Video Views, Inc., v. Studio
21 Ltd., et al., No. 86-1039, slip. op. at 3 (7th Cir. August 4, 1986).

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_1660%3A1. Public record. Not legal advice.