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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1997
- **Citation:** 522 U.S. 192

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0018%3A04. Public record. Not legal advice.