Amicus Curiae Brief — Bay Area Laundry and Dry Cleaning Pension Trust Fund v. Ferbar Corp. of Cal.

Supreme Court, U.S

’ FILE D

No. 96-370 APR 21 1997

In the Supreme Court of the Gni —

OCTOBER TERM, 1996

Bay AREA LAUNDRY AND DRY CLEANING

PENSION TRUST FUND, PETITIONER

v.

FERBAR CORPORATION OF CALIFORNIA, INC., AND

STEPHEN BARNES

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE

UNITED STATES AS AMICUS CURIAE

SUPPORTING PETITIONER

WALTER DELLINGER

Acting Solicitor General

EDWIN S. KNEEDLER

Deputy Solicitor General

JAMES J. KEIGHTLEY pury

General Counsel LISA SCHIAVO BLATT

t to the Solicitor

JEFFREY B. COHEN Assistant to the Solicitor

General

Deputy General Counsel Department of Justice

ISRAEL GOLDOWITZ Washington, D.C. 20530-0001

Assistant General Counsel (202) 514-2217

Pension Benefit Guaranty

Corporation

Washington, D.C. 20005-4206

nr \ ,

QUESTION PRESENTED

Whether the statute of limitations for an action to

collect withdrawal liability under Section 104(2) of the

Multiemployer Pension Plan Amendments Act, 29 U.S.C.

1451(f), begins to run on the date an employer withdraws

from a pension plan or some other date.

(T)

TABLE OF CONTENTS

Page

Statutory and regulatory provisions involved ............... 2

LEED 3

Ti eeertetetncenntnnanserennneneennsensvensooeseces ll

SLT 19

TABLE OF AUTHORITIES

Cases:

Board of Trustees v. Kahle Enginerring Corp.,

43 F.3d 852 (8d Cir. 1994) ...........cccccccccccceeeeeees 12, 13, 15

Board of Trustees v. Thibodo, 34 F.3d 914

(9th Cir. 1994), cert. denied, 115 S. Ct. 1361 (1995) . 10

Borer v. Chapman, 119 U.S. 587 (1887) .................. 16

Central States Pension Fund v. Navco, 3 F.3d

167 (7th Cir. 1993), cert. denied, 510 U.S. 1115

i aceerrienceniaeteematnnsssnzcennee 12-13, 15, 18

Central States Pension Fund v. Central

Transport, Inc., 472 U.S. 559 (1985) 0.0.0.0... 14

Connolly v. PBGC, 475 U.S. 211 (1986) ................... 4

Joyce v. Clyde Sandoz Masonry, 871 F.2d 1119

(D.C. Cir.), cert. denied, 493 U.S. 918 (1989) ....... 10, 11,

12, 15

Milwaukee Brewery Workers’ Pension Plan v.

Jos. Schlitz Brewing Co., 115 S. Ct. 981 (1995) ....... 5, 15,

16, 17

PBGC vy. R.A. Gray & Co., 467 U.S. 717 (1984) ....... 4

Reiter v. Cooper, 507 U.S. 258 (1998) ...............00004. 16

United States v. Wurts, 303 U.S. 414 (1938) ........... 16

Statutes and regulativus:

Retirement Income Security Act of 1974,

IT i riccnistncennnnesnencesnencseensenseceee 1,2

TN 4

ED eeeiichicresinreneinteennssesessssanssene 14

29 U.S.C. 1301 et seg. (Tit. TV) .........ccccccccceeeeeeeees 1,2

(Il)

IV Vv

Statutes and regulations—Continued: Page Statutes and regulations—Continued:

Multiemployer Pension Plan Amendments Act of 29 C.F.R.:

1980, Pub. L. No. 96-364, 94 Stat. 1217 (29 U.S.C. Ee

CN I iiictterieinitienernitiantienn 1,2,3 Pt. 4219:

I cae 4,14 I

“\ | & *\ eee 5 Section 4219.31(b)-(C) .....cccccccccceseeeeceseeeeeeseneeceeeee

| eae: 2,4 Section 4219.31(D)(1) ....ccccccccccccecccseeeeseeeeeeneereeeeees

29 U.S.C. 1B8B(a) ...cccccccceceseeeeeeeeee’ panieliaiaale 4, 10 Section 4219.31(b)2) .........ccccecceceeceseeceseseeseneerenees

29 7 SE SAE Aa sey 4 Section 4219.31(C)(1) ....ccccccececceceeresesesescereneneesenees

CO EE, SLT 2 :

29 U.S.C. 1399(DMT) .ccccccccsecsseccsveesseeeneenens 4, 6, 14, 16 Miiscstanecun:

ET eT \ ee 5, 7 4 Arthur L. Corbin, Contracts (1951) ............c.cc0000-+.

29 U.S.C. 1399(DMSMKANE) .......ccccccececceseseeceeeeeeees 5 Pension Benefit Guaranty Corp., The Financial

OE aa 5 Condition of PBGC’s Multiemployer Insurance

is ED -tinticnicretnnsinatiinntepnecnnnnanin 18 Program: A Five-Year Report to Congress as

ieeniniernctctnticiinnincnticitniinninn 17 Required by Section 4022A(f) of the Employee

29 U.S.C. 1399(CM IMAG) ...cccecccccceceseeseseeeeseeeeees 5, 16 Retirement Income Security Act of 1974, as

1" & — “\ 5 eC EES ed

29 U.S.C. 13GOCCM IM CHI) ........cecceseceecerereeeereneeees 5 The Segal Company, Survey of the Funded Position

I iiieininiteriniemnins 6, 16 of Multiemployer Plans (1995) ...............cccccccceeeeeees

Gl tT TET 5

GD CR, CIID cecceccecececenetcecssncsececnsnseneencnsns 5, 18

AR a eae 6, 18

TT | \ eee 7

i a ee 6

I a 5,7 7

UG RE eee 6, 19

a ad 6

NS Ea 1

| See 2,3

aS 12, 16, 19

Sees 7

GS” RE Nea 7

Sere 13

| ARE ae 1,7

TS eae 9, 11

GD DEBE. BOBBIE nceccecesccccccnsssvcessssssesssssszeseseee 9

In the Supreme Court of the United States

OCTOBER TERM, 1996

No. 96-370

Bay AREA LAUNDRY AND Dry CLEANING

PENSION TRUST FUND, PETITIONER

v.

FERBAR CORPORATION OF CALIFORNIA, INC., AND

STEPHEN BARNES

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE

UNITED STATES AS AMICUS CURIAE

SUPPORTING PETITIONER

This brief is submitted in response to the Court’s order

inviting the Solicitor General to express the views of the

United States.’

! The Pension Benefit Guaranty Corporation (PBGC) is the federal

agency responsible for administering and enforcing Title IV of the

Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.

1301 et seq., including the provisions added by the Multiemployer

Pension Plan Amendments Act of 1980 (MPPAA), 29 U.S.C. 1381 et seq.

The PBGC has an interest because this case requires an interpretation

of 29 U.S.C. 1451(f), which governs the time for filing a civil action

under MPPAA. In addition, the PBGC has an interest because peti-

tioner is an insolvent multiemployer pension plan entitled to receive

financial assistance from the PBGC under 29 U.S.C. 1431. If petitioner

prevails in this litigation, the PBGC’s obligations under 29 U.S.C. 1431

could be reduced.

(1)

2

STATUTORY AND REGULATORY

PROVISIONS INVOLVED

In addition to the statutory and regulatory provisions

set out at Pet. App. 30a-49a, the following provisions of

29 U.S.C. 1382, 1399 and 1451, as added to Title IV of

the Employee Retirement Income Security Act of 1974

(ERISA) by the Multiemployer Pension Plan Amendments

Act of 1980 (MPPAA), Pub. L. No. 96-364, 94 Stat. 1217, are

relevant to this case:

1. Section 1382 of Title 29 U.S.C. provides:

Determination and collection of liability; noti-

fication of employer

When an employer withdraws from a multi-

employer plan, the plan sponsor, in accordance with

this part, shall—

(1) determine the amount of the employer’s

withdrawal liability,

(2) notify the employer of the amount of the

withdrawal liability, and

(3) collect the amount of withdrawal liability

from the employer.

2. Section 1399 of Title 29 U.S.C. provides, in relevant

part:

Notice, collection, etc., of withdrawal liability

*-_ + + * *

(c) Payment requirements; amount etc.

(1(A)(i) Except as provided in subparagraphs (B)

and (D) of this paragraph and in paragraphs (4) and

(5), an employer shall pay the amount determined

under section 1391 of this title, adjusted if appropri-

ate first under section 1389 and then under section

3

1386 of this title over the period of years necessary to

amortize the amount in level annual payments

determined under subparagraph (C) * * *. Actual

payment shall commence in accordance with sub-

paragraph (2).

(ii) The determination of the amortization period

described in clause (i) shall be based on the assump-

tions used for the most recent actuarial valuation for

the plan.

(B) In any case in which the amortization period

described in subparagraph (A) exceeds 20 years, the

employer's liability shall be limited to the first 20

annual payments determined under subparagraph (C).

*+-_ + *+ *&©

3. Section 1451 of Title 29 U.S.C. provides, in relevant

part:

Civil Actions

(c) Jurisdiction of Federal and State courts

The district courts of the United States shall

have exclusive jurisdiction of an action under this

section without regard to the amount in controversy,

except that State courts of competent jurisdiction

shall have concurrent jurisdiction over an action

brought by a plan fiduciary to collect withdrawal

liability.

STATEMENT

1. Under the Multiemployer Pension Plan Amend-

ments Act of 1980 (MPPAA), an employer that withdraws

from a multiemployer pension plan is required to pay

“withdrawal liability,” calculated pursuant to one of four

statutory methods for determining the employer's alloc-

able share of the plan’s unfunded vested liabilities.

29 U.S.C. 1381, 1391. Withdrawal liability protects the

financial stability of multiemployer plans and the retire-

ment dncome of millions of participants by requiring

withdrawing employers to pay a “proportionate share of

the plan’s ‘unfunded vested benefits.’” Connolly v. PBGC,

475 U.S. 211, 217 (1986) (quoting PBGC v. R.A. Gray &

Co., 467 U.S. 717, 725 (1984)). By requiring a withdrawing

employer to pay its fair “share of the plan’s obligations,”

Connolly, 475 U.S. at 225, Congress ensured that those

obligations would not fall on the remaining employers

and discourage new employers from joining the plan.

Gray, 467 U.S. at 721-723. Withdrawal liability is thus

the cornerstone of Congress’s efforts to protect multi-

employer plan participants against benefit losses.

A “complete withdrawal” from a multiemployer pension

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.”

29 U.S.C. 1383(a). When an employer withdraws from a

multiemployer plan, MPPAA requires the plan sponsor

(usually a joint labor-management board of trustees, 29

U.S.C. 1002(16)(B)) to “(1) determine the amount of the em-

ployer’s withdrawal lizbility, (2) notify the employer of

the amount of the withdrawal liability, and (3) collect the

amount of the withdrawal liability from the employer.” 29

U.S.C. 1382.

“As soon as practicable” after an employer's with-

drawal, MPPAA requires the plan sponsor to notify the

employer of its withdrawal liability and the schedule for

liability payments, and to demand payments in accordance

with that schedule. 29 U.S.C. 1399(b)(1). The schedule

must amortize the amount of withdrawal liability in “level!

annual payments” in accordance with a statutory formula,

based in part on the employer’s previous contributions

to the plan. 29 U.S.C. 1399(¢)(1)(A)(i) and (Ci). For amor-

tization periods that exceed 20 years, the employer's liabil-

ity usually is limited to the first 20 annual payments. 29

U.S.C. 1399(c)(1)(B). The Act requires the plan sponsor to

set forth a schedule for payment of the annual amount of

withdrawal liability in four equal installment payments

due quarterly or at other intervals specified by plan rules.

29 U.S.C. 1399(c)(3). The Act also permits the employer,

however, “to prepay the outstanding amount of the un-

paid annual withdrawal liability,” plus accrued interest.

29 U.S.C. 1399(c)(4). See Milwaukee Brewery Workers’

Pension Plan v. Jos. Schlitz Brewing Co., 115 S. Ct. 981,

986 (1995).

Within 90 days after the employer receives the plan

sponsor’s notice and demand for payment, the employer is

entitled to ask the plan sponsor “to review any specific

matter relating to the determination of the employer's

liability and the schedule of payments.” 29 U.S.C.

1399(b)(2)(A\i). “After a reasonable review of any matter

raised,” the plan sponsor must notify the employer of the

plan sponsor’s decision and the reasons for that decision.

29 U.S.C. 1399(b)(2)(B).

MPPAA then provides that “[aJny dispute between an

employer and the plan sponsor of a multiemployer plan

concerning ‘a determination made under [29 U.S.C. 1381-

1399] shall be resolved through arbitration.” 29 U.S.C.

1401(a)(1). Either party may initiate arbitration within a

60-day period ending after the earlier of (1) the date of

notification to the employer of the plan sponsor’s decision

under 29 U.S.C. 1399(b)(2B), or (2) 120 days after the date

of the employer’s request for review under 29 U.S.C.

1399(b)(2)(A). See 29 U.S.C. 1401(a)(i).

6

“{Njotwithstanding any request for review or appeal of

determinations of the amount of [withdrawal] liability

or of the schedule,” the employer’s withdrawal liability

becomes “payable in accordance with the schedule set

forth by the plan sponsor” beginning no later than 60 days

after the date of the plan sponsor’s demand. 29 U.S.C.

1399(c)(2). Similarly, “until the arbitrator issues a final

decision with respect to the determination submitted for

arbitration,” the employer is required to make payments

in accordance the plan sponsor’s schedule of payments,

subject to “any necessary adjustments in subsequent pay-

ments for overpayments or underpayments” arising out

of the arbitrator’s decision. 29 U.S.C. 1401(d). If no

arbitration proceeding has been initiated within the period

prescribed by 29 U.S.C. 1401, “the amounts demanded by

the plan sponsor under [29 U.S.C. 1399(b)(1)] shall be

due and owing on the schedule set forth by the plan spon-

sor,” and “{tJhe plan sponsor may bring an action in a

State or Federal court of competent jurisdiction for collec-

tion.” 29 U.S.C. 1401(b)(1).

In the event of “default,” “a plan sponsor may require

immediate payment of the outstanding amount of an

employer’s withdrawal liability, plus accrued interest on

the total outstanding liability from the due date of the first

payment which was no* timely made.” 29 U.S.C. 1399(c)(5).

A PBGC regulation further provides that, upon default, a

plan sponsor may require immediate payment of only a

portion of the outstanding amount of the employer's

liability. 29 C.F.R. 4219.31(b)(2).’ If the plan sponsor

chooses the latter course, the sponsor must establish a

new schedule of payments for the remaining amount. /bid.

2 Prior to July 1, 1996, regulations promulgated under MPPAA by

the PBGC appeared at 29 C.F.R. Pts. 2640-2677.

The Act defines “default” to include “the failure of an

employer to make, when due, any payment under [29

U.S.C. 1399], if the failure is not cured within 60 days after

the employer receives written notification from the plan

sponsor of such failure.” 29 U.S.C. 1399(c)(5)(A); see also

29 C.F.R. 4219.31(b)(1). PBGC regulations also set forth

rules that apply to the employer’s obligation to make

withdrawal liability payments during the period for plan

review and arbitration. In those instances, a default as a

result of a failure to make payments does not occur until

the sixty-first day after the last of (1) the expiration of the

90-day period within which the employer may request

review under 29 U.S.C. 1399(b)(2)(A); (2) if review is re-

quested within those 90 days, the expiration of the period

within which arbitration may be initiated under 29 U.S.C.

1401(a)(1); or (8) if arbitration is timely initiated, the date

the arbitrator issues a decision. 29 C.F.R. 4219.31(c)(1).

A plan fiduciary “who is adversely affected by the act or

omission of any party” under MPPAA “may bring an

action for appropriate legal or equitable relief” in federal

district court. 29 U.S.C. 1451(a)(1) and (c). Such action is

barred “after the later of—{1) 6 years after the date on

which the cause of action arose, or (2) 3 years after the

earliest date on which the plaintiff acquired or should have

acquired actual knowledge of the existence of such cause

of action; except that in the case of fraud or concealment,

such action may be brought not later than 6 years after

the date of discovery of the existence of such cause of

action.” 29 U.S.C. 1451(f).

2. For several years, respondent Ferbar Corporation

contributed to the Bay Area Laundry and Dry Cleaning

3 29 C.F.R. 4219.31(a) defines an “overdue” withdrawal liability

payment as one “not paid on the date set forth in the schedule of

payment established by the plan sponsor.”

8

Pension Trust Fund (Fund). In March 1985, Ferbar

ceased making contributions to the Fund. On December

12, 1986, the Fund sent Ferbar a notice assessing a with-

drawal liability obligation of $45,580.80. Pet. App. 2a. The

notice stated that Ferbar could discharge its withdrawal

liability obligation by paying the total amount within 60

days of receipt of the letter, or by paying monthly install-

ment payments of $345.50 for 240 months (with a final

payment of $344.96), beginning February 1, 1987. Jd. at 2a-

3a; Compl. ¥ 14; C.A. E.R. Tab 13. Ferbar made no pay-

ments in response to the Fund’s demand.

In a letter dated February 27, 1987, Ferbar requested

that the Fund review its assessment of withdrawal li-

ability. In a letter dated April 14, 1987, the Fund notified

Ferbar that its first payment was delinquent and that

Ferbar had 60 days from the date of that notice to cure the

delinquency, or it would be considered in default. Pet. App.

3a. Ferbar failed to cure its delinquency, but in a letter

dated April 28, 1987, Ferbar referred to its previous re-

sponse and asked when the Fund’s answer would be

forthcoming. /bid; Br. in Opp. 6. In a letter dated July 8,

1987, Ferbar requested arbitration of its disputed with-

drawal liability. Pet. 5. No arbitration proceedings were

held, and Ferbar did not make any withdrawal liability

payments. Pet. App. 7a; Br. in Opp. 6.

On February 9, 1993, petitioner, the Board of Trustees

of the Fund, filed a complaint against Ferbar and its share-

holder, Stephen Barnes, in the United States District

Court for the Northern District of California to collect

the employer’s withdrawal liability.‘ The parties filed

* Petitioner also sued Ferreira Farms, Inc., and Diablo Cleaners,

Inc., two dry cleaners, and Robert J. Ferreira, a shareholder in

Ferreira Farms, Diablo Cleaners, and Ferbar. Compl. 74 7-10. On

9

cross-motions for summary judgment on whether the stat-

ute of limitations had expired. Pet. App. 6a-7a. On May 9,

1994, the district court granted summary judgment in

favor of respondents. /d. at 6a-19a. The court first held

that the suit was barred by the three-year limitations

period set forth in 29 U.S.C. 1451(f)(2), because “plaintiffs

knew a cause of action existed no later than 1987, yet filed

their complaint in excess of three years of that time.”

Pet. App. lla (citation omitted). In the alternative, the

court held that petitioner’s action was barred by the six-

year limitations period set forth in 29 U.S.C. 1451(f)(1).

Pet. App. lla-19a. The court reasoned that the Fund was

“adversely affected when the first monthly payment was

not made” by the February 1, 1987 due date and, therefore,

that petitioner’s “cause of action arose and, concomitantly,

the statute of limitations began running,” on February 1,

1987. Jd. at 13a. Because February 1, 1987 “preced[ed] the

filing of the lawsuit by more than six years,” the court

concluded that the action was time-barred. /d. at 19a.

3. The court of appeals affirmed, but on different

grounds. Pet. App. la-5a. The court of appeals first held

that the district court erred in relying on the three-year

limitations period set forth in 29 U.S.C. 1451(f)(2). The

court explained that “the district court misread the plain

language of [29 U.S.C.] 1451(f), which clearly directs

courts to apply ‘the later of’ the two periods of limita-

tions.” Pet App. 3a. “On the facts of this case,” the court

concluded, the later limitations period “is six years from

the date the cause of action arose.” Jbid.

Turning to the district court’s alternative holding that

petitioner’s cause of action became time-barred six years

after February 1, 1987, the date on which the employer

June 3, 1994, petitioner dismissed those defendants from the complaint.

C.A. E.R. Tab 31.

10

missed its first installment payment, the court of appeals

determined that its decision in Board of Trustees v.

Thibodo, 34 F.3d 914 (9th Cir. 1994), cert. denied, 115

S. Ct. 1361 (1995), was controlling. In Thibodo, the Ninth

Cireuit held that “for actions to recover withdrawal

liability incurred as a result of complete withdrawal under

29 U.S.C. § 1383(b), the limitations period begins to run

from the date that the conditions for withdrawal specified

under that section are met.” /d. at 916-917. The court of

appeals recognized that “ Thibodo by its terms applies only

to actions arising under 29 U.S.C. § 1383(b), which defines

the conditions for complete withdrawal only in the build-

ing and construction industry,” and that the present case

is governed by 29 U.S.C. 1383(a), which defines complete

withdrawal for most other industries. Pet. App. 4a-5a.

The court saw “no basis for distinguishing” the two

types of actions, however, and concluded that “the period

of limitations began running in March, 1985, when

[respondent] effected a complete withdrawal from the

Fund.” Jd. at 5a. Because the Fund’s February 9, 1993,

complaint was filed more than six years later, the court

of appeals affirmed the district court’s order granting

summary judgment for respondents on the ground that the

action is time-barred. /bid.

Judge Trott wrote a concurring opinion. Pet. App. 5a.

In his view, the decision in Thibodo compelled the result

reached by the court. J/bid. He expressed the view,

however, that the decision of the United States Court of

Appeals for the District of Columbia Circuit in Joyce v.

Clyde Sandoz Masonry, 871 F.2d 1119, cert. denied, 498

U.S. 918 (1989) “does a better job of answering the

questions” posed by this case. PegApp. 5a. In Joyce, the

court held that a pension plan's cause of action for

withdrawal liability does not arise on the date an employer

effects a complete withdrawal. Rather, the court held that

1]

an employer’s failure to pay a scheduled payment triggers

the running of the limitations period under MPPAA. 871

F.2d at 1122-1124.

DISCUSSION

There are approximately 2,000 defined-benefit multi-

employer pension plans in the United States, covering an

estimated 8.7 million active and retired workers. As con-

strued by the court of appeals, the limitations period in 29

U.S.C. 1451(f)(1) would be immediately triggered every

time an employer withdraws from one of those plans, be-

fore the plan sponsor has even determined the amount of

the employer’s liability and set a payment schedule. If a

plan sponsor’s cause of action to collect withdrawal

liability payments arises on the date of withdrawal, the

plan sponsor’s ability to collect withdrawal liability pay-

ments could be significantly affected. The circuits are in

conflict on the proper date on which a cause of action

arises in a suit by a plan sponsor to collect an employer's

withdrawal liability. Many large multiemployer plans—

such as amicus Central States, Southeast and Southwest

Areas Pension Fund—have contributing employers in

several States. The plans and their contributing employ-

ers may thus be subject to different statutes of limita-

tions, depending on the happenstance of the forum for

litigation. Review of the statute of limitations issue by

this Court therefore is warranted.

1. Under the Ninth Circuit’s decision in this case, a

cause of action for collection of withdrawal liability arises

on the date of withdrawal. The Third, Seventh, and

District of Columbia Circuits have taken contrary views.

a. In Joyce v. Clyde Sandoz Masonry, 871 F.2d 1119,

cert. denied, 493 U.S. 918 (1989), the District of Columbia

Circuit rejected the view that the six-year limitations

period commences on the date of the employer’s complete

12

withdrawal from the plan. The court reasoned that “[tJhe

employer's complete withdrawal, without more, is an oc-

currence that hardly affects the plan adversely, but

merely sets in motion the usual (and routine) process of

calculation, notification, schedule, possible request for

review or arbitration, and payment.” 871 F.2d at 1124. The

court also observed that under MPPAA, “[bly virtue of

withdrawal alone * * *, the employer is not immediately

obligated to make payments, nor is the plan * * * entitled

to receive any such payments.” /d. at 1123. Instead, the

court noted, a plan is “adversely affected” under 29 U.S.C.

1451(a) only once the plan “fails to receive the payment it

has demanded and to which it is entitled.” Jd. at 1124.

Thus, the ¢ concluded that it is the employer's “fail-

ure to pay the demanded” that “giv(es] rise to a cause

of action,” id. at 1122, and therefore triggers the running

of the limitations period.

b The D.C. Cireuit’s decision in Joyce did not directly

address the further refinement of the statute of limita-

tions issue that was confronted by the Third Circuit in

Board of Trustees v. Kahle Engineering Corp., 43 F.3d

852 (1994), and the Seventh Circuit in Central States

Pension Fund v. Navco, 3 F.3d 167 (1993), cert. denied, 510

U.S. 1115 (1994). i

The Seventh Circuit in Navco held that a claim to col-

lect withdrawal liability under MPPAA “accrues as soon

as payment becomes overdue.” 3 F.3d at 172. The court

concluded, however, that a fund “ha[s] only one claim

against the employer * * * : the amount of withdrawal

liability.” Jbid. The court reasoned that “[aJlthough a

fund may permit an employer to amortize this sum over 20

years, the whole amount is presumptively due at the

outset.” Jbid. Thus, according to the Seventh Circuit,

“the financing options under [Section] 1399%(c) do not break

this single debt into little pieces with their own statutes

13

of limitations,” ibid., and the statute of limitations for

collecting the entire outstanding balance is triggered

whenever the employer misses a single payment, id. at

172-173.

In Kahle, the Third Circuit rejected the Seventh

Circuit’s view that a plan sponsor has only one cause

of action to sue for an employer's failure to pay its

withdrawal liability. The Third Circuit saw the em-

ployer’s obligation to make scheduled payments under

MPPAA as “akin” to an installment contract, in which “a

new cause of action arises from the date each payment

is missed.” 43 F.3d at 857 (citing 4 Arthur L. Corbin,

Contracts § 951 (1951)). The court thus concluded that

“{aJbsent a decision by the [flund to accelerate,” a fund is

“not time-barred from bringing suit for the total of the

* * * payments which fell due within the six years prior

to the filing of * * * suit.” Jd. at 861.

2. a. The confusion that this disparate appellate

authority has generated for plan administrators and

contributing employers is manifest. Multiemployer plans

may have contributing employers conducting business

in several circuits. Those plans and employers are cur-

rently subject to at least three different rules for when

the statute of limitations begins to run on an action to

collect an employer’s withdrawal liability. See Central

States, Southeast and Southwest Areas Pension Fund

Amicus Br. 4-5. Plans and their contributing employers

cannot be certain how to apply the law, and they may find

themselves involved in litigation in any of several jurisdic-

tions operating under differing versions of the same limi-

tations law.”

5 An action to collect withdrawal liability may be brought “in the

district where the plan is administered or where a defendant resides or

does business.” 29 U.S.C. 1451(d).

14

This conflict in the circuits places plan trustees in a

difficult position, because they have a fiduciary duty to

take appropriate steps to collect money owed to the plan.

See 29 U.S.C. 1104(a)(1); Central States Pension Fund v.

Central Transport, Inc., 472 U.S. 559, 571 (1985). The plan

trustees’ fiduciary duty extends to pursuing collection of

withdrawal liability. 29 U.S.C. 1381, 1399%(b)(1). Because

the circuits have reached inconsistent conclusions on the

statute of limitations question that this case presents,

review by this Court is warranted in order to furnish uni-

form guidance to plan trustees in the fulfillment of their

fiduciary responsibilities under ERISA.

Respondents argue (Br. in Opp. 10-11) that because the

majority of multiemployer pension plans are fully funded,

the question presented infrequently arises. In support of

that proposition, respondents point to a 475-plan survey in

which those plans were found to be fully or mostly funded.

Ibid. (citing The Segal Company, Survey of The Funded

Position Of Multiemployer Plans 3-4 (1995)). That sur-

vey is consistent with a recent PBGC study concluding

that MPPAA is achieving its goal of reducing plan under-

funding and thereby protecting workers’ retirement bene-

fits. See Pension Benefit Guaranty Corp., The Financial

Condition of PBGC’s Multiemployer Insurance Pro-

gram: A Five-Year Report to Congress as Required by

Section 4022A(f) of the Employee Retirement In-

come Security Act of 1974, as amended, at 3-4 (1996)

(“MPPAA’s imposition of withdrawal liability on em-

ployers that leave underfunded plans has encouraged

employers to remain as contributing sponsors, provided an

incentive to get plans funded, and increased the funding of

plans with departing sponsors.”). Collection of withdrawal

liability, however, continues to be a major concern for

many multiemployer plans that are not fully funded. The

total underfunding of such plans is estimated at $14 billion.

15

Id. at 4. And for those underfunded plans, the recent and

conflicting appellate decisions discussed above demon-

strate that the statute of limitations issue is of recurring

importance.

b. Contrary to respondents’ assertion (Br. in Opp. 8),

resolution of the circuit conflict would affect the outcome

of the current case. Under the Ninth Circuit’s decision,

petitioner’s complaint (filed on February 9, 1993) is un-

timely because it was filed more than six years after the

employer’s complete withdrawal in March 1985. Similarly,

under the view taken by the Seventh Circuit in Navco and

the district court below, petitioner’s action is time-barred

because it was filed more than six years after the date on

which the employer first missed a payment, February 1,

1987. By contrast, under the view taken by the Third

Circuit in Kahle, although petitioner’s suit to collect the

employer’s February 1, 1987 payment may be time-barred,

petitioner’s action is timely with respect to installments

due but unpaid thereafter.

3. a. On the merits of the limitations issue, the

decision of the court of appeals in this case is incorrect.

MPPAA authorizes a plan fiduciary to bring an action

to collect withdrawal liability whenever the plan is

“adversely affected by the act or omission of any party

under [the withdrawal liability provisions of Title IV of

ERISA].” 29 U.S.C. 145l(a). The “act or omission” that

adversely affects a plan is the employer’s failure to pay its

withdrawal liability as required by the Act.

“Withdrawal, in itself, does not visit any adverse effect

upon the plan that gives rise to the cause of action.”

Joyce, 871 F.2d at 1123. That is so because an employer

does not owe any withdrawal liability on the date of

its withdrawal from the plan. See Schlitz, 115 S. Ct. at

988 (“[T]he statute makes clear that the withdrawing

employer owes nothing until its plan demands payment.”).

16

MPPAA provides that “[aJs soon as practicable” following

a withdrawal, the plan sponsor must establish a schedule

of payments in accordance with the Act. 29 U.S.C.

139%b)\(1). The first payment is not due until as much as

60 days after the plan sponsor sets that schedule. 29

U.S.C. 1399(c)(2); see 29 U.S.C. 1399(c)(1 Ai) (“Actual

payment shall commence in accordance with paragraph

(2)."). Thus, “MPPAA contemplates that an employer

sometimes may pay its actual first installment long

after the withdrawal year.” Schlitz, 115 S. Ct. at 990.

Accordingly, not until an employer fails to pay its with-

drawal liability when due is a plan sponsor “adversely

affected” by an “act or omission” of the withdrawing

employer, 29 U.S.C. 1451(a), and it is only then that the

plan sponsor has a cause of action to collect withdrawal

liability payments.

Under the Ninth Circuit’s decision, the statute of

limitations always begins to run before a plan sponsor is

entitled to file suit. The Ninth Circuit’s decision is

therefore inconsistent with the principle that “the statute

of limitations will [not] be allowed to commence to run

against a right until that right has accrued in a shape to

be effectually enforced.” Borer v. Chapman, 119 U.S. 587,

602 (1887). See also Reiter v. Cooper, 507 U.S. 258, 267

(1993) (“While it is theoretically possible for a statute to

create a cause of action that accrues at one time for the

purpose of calculating when the statute of limitations

begins to run, but at another time for the purpose of

bringing suit, we will not infer such an odd result in the

absence of any such indication in the statute.”); United

States v. Wurts, 303 U.S. 414, 418 (1938) (“It would require

language so clear as to leave room for no other reasonable

construction in order to induce the belief that Congress

intended a statute of limitations to begin to run before the

right barred by it has accrued.”).

17

Indeed, a rule that the statute of limitations begins on

the date of an employer’s withdrawal would significantly

curtail the ability of plan sponsors to collect withdrawal

liability. The Ninth Circuit’s decision effectively pre-

vents plan sponsors from collecting any unpaid install-

ment payments that may become due more than six years

after the date of the employer’s withdrawal. That result

cannot be reconciled with the Act, which expressly

provides for a payment schedule that may extend as long

as 20 years. See 29 U.S.C. 1399(c)(1). Congress could not

have intended an employer that has a 20-year payment

schedule to avoid the bulk of its liability by making timely

payments for six years after it withdraws, and then re-

fusing to make any further payments on the ground that

the statute of limitations has already expired.°

b. In our view, petitioner’s complaint is not time-

barred to the extent it seeks payments from the employer

that became overdue on or after a date six years prior to

the filing of the complaint. Cf. Compl. 44 26, 27 (seeking

the entire amount of withdrawal liability or, alternatively,

the amount of the delinquent monthly payments owed be-

tween February 1987 and the time of trial). Petitioner

filed its complaint on February 9, 1993, more than six

years following the employer’s first missed payment on

February 1, 1987, but less than six years following the

employer’s next scheduled payment. Thus, petitioner has

® The Ninth Circuit’s holding that petitioner's claim arose on the

date of the employer's withdrawal also is difficult to reconcile with this

Court's decision in Schlitz, supra. There, the pension plan argued that

an employer's withdrawal liability payment schedule included interest

for the year in which withdrawal occurred. In rejecting that con-

tention, the Court observed that the “withdrawing employer's debt

does not arise” at that time, because “the statute makes clear that the

withdrawing employer owes nothing until its plan demands payment.”

115 S. Ct. at 988.

18

timely sued to collect the employer’s unpaid scheduled

payments due within the six years prior to February 9,

1993.

The fact that petitioner did not file suit within six years

after the employer's first missed payment on February 1,

1987 should not bar petitioner’s suit to collect the remain-

ing missed payments. The view taken by the Seventh

Circuit—that a fund has “only one claim against the

employer,” Navco, 3 F.3d at 172—is based on an incorrect

reading of the Act.

The court in Navco concluded that although MPPAA

“permit{s} an employer to amortize [its withdrawal liabil-

ity] over 20 years, the whole amount is presumptively due

at the outset.” Navco, 3 F.3d at 172 (citation omitted).

The Act, however, compels the opposite conclusion. Al-

though MPPAA permits an employer to prepay all or a

portion of its withdrawal liability, 29 U.S.C. 1399(c)(4),

MPPAA first requires the plan sponsor to demand pay-

ments in accordance with a schedule that amortizes the

debt in level payments pursuant to a statutorily prescribed

formula. 29 U.S.C. 1399(¢)(1)-(3). Absent default by the

employer, 29 U.S.C. 1399(c)(5); 29 C.F.R. 4219.31(b)-(c), the

plan sponsor can neither demand payment for the entire

outstanding amount of the employer’s withdrawal liability

nor bring a collection suit under the Act for the full

amount. Moreover, even upon the employer’s default,

the outstanding amount of the withdrawal liability is not

“presumptively due” (Navco, 3 F.3d at 172), because 29

U.S.C. 1399(c)(5) places the decision whether to accelerate

some or all of the outstanding liability within the discre-

tion of the plan sponsor. For those reasons, unless a plan

sponsor has accelerated payment of the employer’s entire

liability following the employer's default, the plan spon-

sor’s cause of action to collect an overdue payment, see

19

29 U.S.C. 1401(b)(1), 1451(a), arises each time an employer

misses a scheduled payment.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted.

WALTER DELLINGER

Acting Solicitor General

EDWIN S. KNEEDLER

JAMES J. KEIGHTLEY Deputy Solicitor General

General Counsel LISA SCHIAVO BLATT

Assistant to the Solicitor

JEFFREY B. COHEN G ;

Deputy General Counsel

ISRAEL GOLDOWITZ

Assistant General Counsel

Pension Benefit Guaranty

Corporation

APRIL 1997