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

In THE

Supreme Court of the United States

OCTOBER TERM, 1996

BOARD OF TRUSTEES, BAY AREA LAUNDRY AND

Dry CLEANING PENSION TRUST FUND,

¥. Petitioner,

FERBAR CORPORATION OF CALIFORNIA, INC.;

STEPHEN BARNES,

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

MOTION FOR LEAVE TO FILE BRIEF AMICUS CURIAE

AND BRIEF OF THE NATIONAL COORDINATING

COMMITTEE FOR MULTIEMPLOYER PLANS

a AS AMICUS CURIAE

IN SUPPORT OF PETITIONER

GERALD M. FEDER

DIANA L.S. PETERS *

FEDER & ASSOCIATES, P.C.

1350 Connecticut Avenue, N.W.

Suite 600

Washington, D.C. 20036-1712

(202) 955-8305

Attorneys for National

Coordinating Committee

for Multiemployer Plans

October 11, 1996 * Counsel of Record

WILSON - Eres Printinec Co., Inc. - 789-0096 - WASHINGTON, D.C. 20001

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In THE

~ Supreme Court of the United States

OCTOBER TERM, 1996

No. 96-370

BOARD OF TRUSTEES, BAY AREA LAUNDRY AND

Dry CLEANING PENSION TRUST FUND,

.. Petitioner,

FERBAR CORPORATION OF CALIFORNIA, INC.;

STEPHEN BARNES,

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

MOTION FOR LEAVE TO FILE BRIEF AMICUS CURIAE

To the Honorable Chief Justice and Associate Justices

of the Supreme Court of the United States:

Pursuant to Rule 37 of the Rules of this Court, the

National Coordinating Committee for Multiemployer

Plans (the “NCCMP”) respectfully moves this Court for

leave to file the accompanying Brief Amicus Curiae in

which we urge the Court to review the decision below.

At issue in this request for review is the proper con-

struction of the statute of limitations provision of the

Multiemployer Pension Plan Amendments Act of 1980

(“MPPAA”), an issue over which three separate ap-

proaches exist as a result of conflicting rulings in the

District of Columbia and Third Circuits, the Seventh Cir-

cuit, and now the Ninth Circuit. As a misreading of the

6-year limitations period can substantially curtail the

ability of multiemployer plans to collect withdrawal lia-

bility, the Ninth Circuit’s ruling, which takes the most

restrictive approach and is therefore least favorable to

plans, raises an issue of great national importance affect-

ing the multiemployer plan community, generally, the

participants and beneficiaries of multiemployer pension

plans, employers who continue to select multiemployer

pension plans as the vehicle for providing pension bene-

fits, and the public at large which may be presumed to

have a significant interest in workers’ receiving their antici-

pated benefits upon retirement. As will be discussed fur-

ther below, the NCCMP is well equipped to advise the

Court on the issues raised by the Ninth Circuit’s ruling

and therefore files this Motion, as Petitioner has consented

to the filing of an amicus Brief, but Respondent has not.

The letters granting and refusing the NCCMP’s request

for consent have been filed with the Clerk of the Court.

INTEREST OF THE NCCMP

The NCCMP is a nonprofit, tax-exempt organization

that was formed after the enactment of the Employee Re-

tirement Income Security Act of 1974 (“ERISA”) to

participate in the development of employee benefits legis-

lation and government regulations promulgated to imple-

ment ERISA and other laws affecting multiemployer

plans. Currently, more than 240 multiemployer plans and

related international unions, located in at least 37 states,

are affiliated with the NCCMP. These affiliated plans not

only represent a majority of participants in multiemployer

plans throughout the nation, but are also representative

of the multiemployer plan community generally.

Because of the broad range of experience of the

NCCMP’s constituent organizations and its close, ongoing

contacts with the hundreds of trustees charged with operat-

ing multiemployer plans, the NCCMP believes that it is

uniquely qualified to state the position of the trustees,

participants, and beneficiaries of such plans. For this

reason, the NCCMP frequently participates as an amicus

curiae before the Supreme Court of the United States as

well as before the various courts of appeals. With regard

to withdrawal liability assessments under MPPAA,’ the

NCCMP has the in ls ae

plans in Concrete and Products v. Construction

Pipe

Laborers Pension Trust, 508 U.S. 602 ‘(193): Connolly

. (1986); and PBGC v. R.A.

S. 717 (1984). The NCCMP also

e<¢

No. 15 Machinists’ Pension Fund v. Kahle Engineering

Corp., 43 F.3d 852 (3d Cir. 1994), which addressed the

precise issue at bar. In addition, the NCCMP has been

recognized as having had a “significant impact” on

MPPAA by the Senate cosponsors of that legislation. See

126 Cong. Rec. $9835 (daily ed. July 24, 1980), and

$10100 (daily ed. July 29, 1980).

In the present case, the NCCMP respectfully requests

this Court to clarify the operation of the 6-year statute

of limitations applicable to actions to collect withdrawal

liability under MPPAA.

Congress chose not to include a statute of limitations

provision applicable to actions to collect delinquent con-

tributions

1 ERISA was amended in 1980 by MPPAA, Pub. L. 96-364, 94

Stat. 1208 (1980).

2 Joyce v. Clyde Sandoz Masonry, 871 F.2d 1119 (D.C. Cir. 1989),

cert. denied, 498 U.S. 918 (1989).

® Board of Trustees of the District No. 15 Machinists’ Pension

Fund v. Kahle Engineering Corp., 48 F.3d (8d Cir. 1994).

* Central States, Southeast and Southwest Areas Pension Fund

v. Naveo, 3 F.3d 167 (7th Cir. 1998), cert. denied, 510 U.S. 1115

they retain the statutory discretion not to declare a default

and accelerate the debt.

Since the above results are inimical to the financial

health of multiemployer pension plans, the NCCMP, on

behalf of all of their affiliated pension plans, requests

leave to file an amicus brief in support of the Petition for

Certiorari. In analyzing the conflicting circuit court opin-

ions, the NCCMP will focus its discussion upon the prac-

tical consequences which a misreading of MPPAA'’s

statute of limitations will have on multiemployer plans,

a topic on which the NCCMP is uniquely able to provide

Respectfully submitted,

GERALD M. FEDER

DIANA L.S. PETERS *

FEDER & ASSOCIATES, P.C.

1350 Connecticut Avenue, N.W.

Suite 600

Washington, D.C. 20036-1712

(202) 955-8305

Ovtober 11, 1996 * Counsel of Record

TABLE OF CONTENTS

TABLE OF AUTHORITIES

PRELIMINARY STATEMENT

SUMMARY OF REASONS FOR GRANTING PETI-

TION

REASONS FOR GRANTING PETITION ...............

I, THE NINTH CIRCUIT’S DECISION IS IN-

CONSISTENT WITH RULINGS OF THIS

COURT AND THREE COURTS OF APPEALS..

Il. THE. NINTH AND SEVENTH CIRCUITS’

APPROACHES ARE INCOMPATIBLE WITH

THE STRUCTURE OF MPPAA AS WELL AS

WITH A GOVERNING PBGC REGULATION

AND RAISE SIGNIFICANT PRACTICAL

PROBLEMS FOR MULTIEMPLOYER

CONCLUSION .. aou spantijetpeem

(i)

=

11

11

14

19

. iii

tie TABLE OF AUSHUSETIES » TABLE OF AUTHORITIES—Continued

— | Page

Board of Trustees of the Constr. Laborers Pension |

Trust v. Thibodo, 84 F.3d 914 (9th Cir. 1994), rahe ; ance in aaa : ~

cert. denied, 115 S. Ct. 1861, 181 L.Ed.2d 217 a a :~

0 EAM MLE LEG DE AA EASES. 2, 8, 9, 18 ©. § 1899 (C) ....----------neeeeeeeeeeeeeeeeeeecceenreeentennnnnnn

Board of Trustees of the District No. 15 Machin- = aa ; sea roe (TB) onvsenssnrsneesvesvseseeneecneeneceeeeere on

papi y ht ped anny sancatene titel rate” ae 29 U.S.C. § 1899.(C) (5) eeccecevsvvovsesevecsnvsseeeeeesnsnseseeen 15

Contral States, Gedhéatt ed Gacihioa ites” 29 U.S.C. § 1899(c) (5) (B) -.nncnnmnnnnnn 17

Pension Fund v. Naveo, 3 F.3d 167 (7th Cir. toe : on fom sonencncenenenecennnencenencennennennneescencee .

1998), cert. denied, 510 U.S. 1115 (1994)....2, 10, 14, 17 ~ yy ) rename ee

Concrete Pipe and Products v. Construction Labor- ee —_—

ers Pension Trust, 508 U.S. 602 (1993) .............. 13 en

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

(D.C. Cir. 1989), cert. denied, 498 U.S. 918 ss aon Eaeeaeen pal soeoeeserneoeoneevesnnennnnnnnnenennnneeeet 4, -

(1989) EU Rak AE EE 2, 10, 18 oD Ee a A Dee ee

Milwaukee Brewery Workers’ Pension Plan v. Jos.

Schlitz Brewing Co., —— U.S. ——, 115 S. Ct.

981, 180 L.Ed.2d 982 (1995)... 9, 12

T.1.M.E.-DC, Inc. v. 1.A.M. Nat'l Pension Fund,

597 F. Supp. 256 (D.D.C. 1984) o.oo ccccssssossessesee 11

T..M.E.-DC v. 1L.A.M. Nat'l Pension Fund, 616

F. Supp. 400 (D.D.C. 1985) .oocccccccccecsooeeeeeoeoeooeeee 11

United Retail & Wholesale Emp.’s Teamsters Local

115 Pension Plan v. Yahn & McDonnell, Inc.,

787 F.2d 128 (3d Cir. 1986), aff'd by an equally

divided Court, 481 U.S. 735 (1987) ..................... 4

Federal Statutes

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I 11

In THE

Supreme Court of the United States

OCTOBER TERM, 1996

No. 96-370

BOARD OF TRUSTEES, BAY AREA LAUNDRY AND

Dry CLEANING PENSION TRUST FUND,

7 Petitioner,

FERBAR CORPORATION OF CALIFORNIA, INC.;

STEPHEN BARNES,

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF OF THE NATIONAL COORDINATING

COMMITTEE FOR MULTIEMPLOYER PLANS

AS AMICUS CURIAE

IN SUPPORT OF PETITIONER

PRELIMINARY STATEMENT

Section 1451(a)* of the Multiemployer Pension Plan

Amendments Act of 1980, 29 U.S.C. §§ 1381-1461

an action for legal or equitable relief, or both. Section

1451(f)(1) requires such an action to be brought within

six years of the date on which the cause of action arose.

* Further references to MPPAA will be to Title 29, U.S.C.A.

2

As both Congress and this Court have recognized, uni-

form rules for the governance of multiemployer plans are

of critical importance for the sound, cost-effective admin-

istration of these plans. To the extent federal courts of

appeals differ in their construction of MPPAA, however,

the objective of national uniformity is frustrated. The

Ninth Circuit’s ruling heightens the division of opinion

which now exists among the courts of appeals which have

issued rulings expressly construing MPPAA’s statute of

limitations provision; e.g., the Court of Appeals for the

District of Columbia Circuit,? the Third Circuit,’ the Sev-

enth Circuit * and now the Ninth Circuit. As a result,

three distinct approaches now exist which urgently require

resolution.

In the case at bar, the Ninth Circuit ruled that

MPPAA’s 6-year statute of limitations begins to run as

of the date of withdrawal, rather than as of the date an

employer fails to make a payment demanded by the

trustees. The court so ruled even though a plan cannot

determine—as of the date of withdrawal—whether the

employer has any liability as a result of the withdrawal

and cannot assert a legal claim to payment as of that date.

As a significant amount of time is likely to elapse before

a plan is able to determine with reasonable certainty that

a withdrawal has occurred, calculate the resulting liability

(if any), prepare a payment schedule, and issue a notice

and demand for payment, the Ninth Circuit's ruling will

result in trustees’ having far less than six years either to

® Joyce v. Clyde Sandoz Masonry, 871 F.2d 1119 (D.C. Cir. 1989),

cert. denied, 498 U.S. 918 (1989).

* Board of Trustees of the District No. 15 Machinists’ Pension

Fund v. Kahle Engineering Corp., 438 F.3d 852 (8d Cir. 1994).

* Central States, Southeast and Southwest Areas Pension Fund

v. Naveo, 3 F.3d 167 (7th Cir. 1998), cert. denied, 510 U.S. 1115

(1994).

* The court felt bound by another panel’s ruling in Board of

Trustees of the Constr. Laborers Pension Trust v. Thibodo, 34

F.3d 914 (9th Cir. 1994), cert. denied, 115 S.Ct. 1361, 181 -L.Ed.2d

217 (1995).

3

collect scheduled payments or to declare a default and

collect the accelerated debt. Moreover, because the stat-

ute of limitations is rigidly fixed on the date of with-

drawal, the trustees could risk losing all installments fall-

ing due six years after that date for any number of rea-

sons; for example, if an employer initially makes its

scheduled payments but then stops, knowing that the stat-

ute of limitations has run on the plan’s claim for the

balance and that it is also too late to declare a default and

collect the accelerated debt.

In contrast to the Ninth Circuit, the Seventh Circuit

has ruled that the limitations period begins to run from

the date of the first missed payment demanded by the plan

sponsor. However, the Seventh Circuit, like the Ninth

Circuit, failed to give proper weight to the fact that

MPPAA permits employers to make installment payments

for up to 20 years and also gives the trustees total discre-

tion whether or not to declare a default and accelerate the

debt as a result of the employer's failure to make a sched-

uled installment payment, at least in the absence of ad-

ministrative review or following an arbitrator’s award.

Although various provisions of MPPAA contemplate two

distinct causes of action, one to collect missed installment

payments and one to collect the accelerated debt (upon

notice of default), the court found that pension plans can

collect unpaid installments or to accelerate the debt and

collect the entire amount due. Although the Seventh Cir-

cuit’s approach differs from the Ninth Circuit's in that the

triggering date is different, both decisions suffer from the

same defect because they render MPPAA’s “20-year in

4

stallment payment cap” meaningless and eliminate the

trustees’ discretion whether and when to declare a default

and accerelate the debt.

A third (and much sounder) approach has been taken

by the Courts of Appeals for the District of Columbia and

the Third Circuits, in reco;nition that Congress made a

reasoned determination that plans would be most likely

to collect a withdrawal liability debt if employers had suffi-

cient time to pay it; and that practical and legal con-

straints exist with respect to the ability of trustees to de-

clare a default and to accelerate the debt. Under both

courts’ approach, a plan’s claim accrues only when an

employer fails to meet a demand for payment to which

the plan is entitled. Accordingly, a cause of action would

accrue each time an employer failed to make a scheduled

installment payment and the trustees would also have six

years from each such date to collect the amount due.

Under that rationale, the trustees would also have six

years from the date the accelerated payment was due

(following a notice of default) to file a collection action

for the accelerated debt.” The NCCMP specifically en-

dorsed this approach in Kahle Engineering, supra, and

continues to believe that the rulings of the District of

*According to a Pension Benefit Guarantee Corporation

(“PBGC”) Regulation, 29 C.F.R. § 2644.2(c) (1), which has been

consistently followed by most plans and accepted by almost all

federal courts to date, plans may not declare ¢ “fault and acceler-

ate a debt pending administrative review and .- oitration. This is,

indeed, one basis upon which the PBGC as well as numerous plans

have argued that the “pay now, dispute later’ structure of

MPPAA is not unconstitutional. United Retail & Wholesale Emp’s

Teamsters Local 115 Pension Plan v. Yahn & McDonnell, 787

F.2d 128 (8d Cir. 1986), aff'd by an equally divided Court, 481

U.S. 735 (1987).

* Under this approach, only unpaid installments falling due more

than six years prior to the filing of a complaint would be uncol-

lectible. Moreover, the trustees—at any point in the payment

schedule—could accelerate the debt and collect all future payments

~ ga

5

Columbia and Third Circuits reflect a correct reading of

the statute.

Congress clearly intended that actions to collect with-

drawal liability under Title [V of the statute should be

subject to-a uniform limitations period. The NCCMP is

concerned that without this Court’s review of the Ninth Cir-

cuit’s opinion, further misreadings of the statute will occur,

and hence, further divisions of opinion. More specifically,

the NCCMP is concerned that if either the Ninth or the

Seventh Circuit’s approach is adopted by those courts of

appeals which have not yet addressed the statute of limita-

tions issue, or by district courts in the absence of binding

appellate precedent, the statutory scheme for collecting

withdrawal liability will be substantially undermined, and

the effectiveness of MPPAA reduced. In addition, the

trustees’ ability to encourage withdrawn employers to re-

enter the plan under the statute’s abatement rules will be

substantially impeded unless they retain the statutory

discretion not to declare a default and accelerate the debt,

as acceleration could precipitate the employer into insolv-

ency or would require the employer to pay so large an

amount of “past due” withdrawal liability that there

would be no incentive to re-enter the plan.

Since all of these results are inimical to the financial

health of multiemployer plans, the NCCMP respectfully

urges the Court to grant the Petition for Certiorari for

reasons set forth in greater detail below.

SUMMARY OF REASONS FOR GRANTING PETITION

1. The Ninth Circuit's approach that MPPAA’s 6-year

statute of limitations begins to run against the trustees on

the date of an s withdrawal is inconsistent with

decisions of this Court and three courts of appeals. It is —

also premised on a misconstruction of the statutory harm

which gives rise to an action to collect withdrawal liability

payments. Although a plan is harmed in an abstract sense

when an employer withdraws, because any withdrawal

diminishes the plan’s contribution base, withdrawal liabil-

ity payments are intended to make plans whole for the

6

loss of future contributions. Therefore, a plan cannot

be harmed by an employer’s “act or omission” under

MPPAA's civil enforcement provision unless the plan first

determines that a withdrawal results in liability and the

employer fails to pay it.

Significantly, an employer can withdraw but incur no

liability as a result of MPPAA’s de minimis rule, or be-

cause of statutory exemptions, or because of the applica-

tion of controlled group principles. Moreover, this Court

has ruled that a withdrawing employer owes nothing until

a plan first demands a payment, while the District of Co-

lumbia, Third, and Seventh Circuits—either expressly or

by inference—regard the date of withdrawal as being ir-

relevant with respect to the accrual of the trustees’ claim

for withdrawal liability. However, as the courts of ap-

peals differ among themselves as to when trustees’ claims

do arise, this Court’s review is necessary to provide a uni-

form construction to a critical statutory provision, and

therefore to prevent other appellate or district courts from

selecting an approach that substantially curtails the

trustees’ enforcement rights in derogation of Congress’s

intent.

2. In establishing the date of withdrawal as the date

on which the trustees’ cause of action to collect withdrawal

liability accrues, the Ninth Circuit failed to understand

the realities in which multiemployer plans operate. Sec-

tions 1383 and 1385 of MPPAA set forth the criteria

for complete and partial withdrawals, while various other

provisions describe events that are not treated as with-

drawals as long as certain statutory requirements are met.

In addition, plans may disregard transactions designed

primarily to evade or avoid withdrawal liability. However,

consuming and difficult for plans to obtain, a problem

which is compounded by the requirement that trades or

businesses under common control must be treated as a

single employer under highly complex and technical rules.

<<»

7

Moreover, even if a plan is able to secure all of the

relevant information, the statutory formulae for calculat-

ing withdrawal liability and preparing a payment schedule

are highly complicated and frequently require the gather-

ing of data that is not necessarily immediately available,

a problem which again is compounded by controlled group

rules.

Knowing of these difficulties, Congress did not require

plans to assess or collect withdrawal liability as of the

date of withdrawal; rather, Section 1399(b)(1) requires

plan sponsors to notify employers of their withdrawal

liability and demand payment “as soon as practicable.”

If trustees issue a premature notice and demand without

sufficient inquiry, they risk an injunction against the as-

sessment as well as sanctions. However, if they undertake

the type of careful analysis which Congress intended when

it gave the trustees’ determinations a presumption of cor-

rectness (a presumption upheld by this Court), they risk

a significant foreshortening of their enforcement rights.

exceed five or six

Moreover, employers could manipulate the limitations

period to deprive plans of most of the liability owed; for

example, by complying with the payment schedule only

until the 6-year period has expired and then stopping, or

by curing any outstanding delinquencies arising within

the limitations period sc as to preclude acceleration of the

debt before the trustees’ “single” claim expires. In this

respect, the Ninth Circuit's approach shares this problema-

5

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In Joyce v. Clyde Sandoz Masonry, supra, the Court

of Appeals for the District of Columbia Circuit, the

first appellate court to issue a ruling construing Section

1451(f)(1), concluded—after parsing statute—that

MPPAA contemplates the accrual of two distinct types

scheduled payment. Viewing the trustees’ enforcement

rights under a “presumptive acceleration” theory, the court

reasoned that the whole amount of withdrawal liability is

due at the outset; thus a plan can have only one claim

against an employer, which accrues the date the first

11

Il. THE NINTH AND SEVENTH CIRCUITS’ AP-

PROACHES ARE INCOMPATIBLE WITH THE

STRUCTURE OF MPPAA AS WELL AS WITH A

GOVERNING PBGC REGULATION AND RAISE

SIGNIFICANT PRACTICAL PROBLEMS FOR

MULTIEMPLOYER PLANS

In ruling that the statute of limitations commences as

of the date of withdrawal, the Ninth Circuit failed to

understand the realities in which multiemployer plans

operate.

A. Determination and Assessment of Withdrawal

Liability

Sections 1383 and 1385 of MPPAA describe the

criteria for complete and partial withdrawals. Various

other provisions of MPPAA describe events which will not

disregard transactions that are designed primarily to evade

drawal or the existence of a bona fide statutory exemption

is frequently very difficult time-consuming for plans

to obtain. Yet, if a notice and demand is made pre-

maturely, as the result of an insufficient inquiry uiry, courts

12

Section 1301(b)(1) of ERISA treats as a “single em-

ployer” all trades or businesses under common control as

prescribed in regulations applicable to Section 414(b) of

the Internal Revenue Code. Although the existence of a

controlled group is of critical importance in determining

whether a withdrawal has occurred and, if so, whether

it is a complete or partial withdrawal, this information is

also very difficult for plans to secure, both because the

controlled group rules are highly technical and complex

and because employers are frequently unwilling or, in-

deed, unable to provide the information that is most

relevant.

the statutory formulae for calculating withdrawal liability

and preparing a payment schedule are very complicated

and may also depend on information that is not immedi-

ately available from the plan’s actuary or from other

sources. In addition, the amount of an employer’s with-

drawal liability may also depend on its membership within

a controlled group.

7

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13

stantial. Under the Ninth Circuit’s ruling, however, the

time needed to properly investigate the facts and

a notice and demand that must be reasonably correct

Although the Ninth Circuit in Thibodo rej

District of Columbia Circuit's approach because it

loath to allow trustees to “control” the statute of limita-

tions, a perspective that is not only totally inconsistent

with plaintiffs’ rights generally but with this Court’s rea-

soning in Concrete Pipe and Products v. Construction

* See Concrete Pipe, supra (MPPAA’s statutory presumptions

upheld as constitutional).

14

a period of time which, when combined with the interval

between the date of the withdrawal and the date the first

payment was due, equals six years. After that time, the

employer could stop making installment payments with

impunity; as the 6-year limitations period would have run

on the trustees’ single claim, they could neither collect

future installments nor accelerate and collect the remain-

ing debt. A similar result could be achieved by “curing”

intermittent delinquencies so as to preclude acceleration

during the 6-year limitations period. Although to a

somewhat lesser extent, the Seventh Circuit’s Navco deci-

sion could lead to a similar foreshortening of the trustees’

statutory enforcement rights.

B. Default and Acceleration

In establishing a single inflexible date for determining

the accrual of a plan’s cause of action to collect with-

drawal liability, the Ninth and Seventh Circuits—in con-

trast to the District of Columbia and Third Circuits—

have failed to appreciate existing restraints on trustees’

enforcement rights as well as the discretionary nature of

MPPAA’s default and acceleration provision.

As noted earlier, under Section 1399(c)(2), with-

drawal liability is payable in accordance with the trustees’

schedule, beginning no later than 60 days after the date

of demand, whether or not the employer requests a review

of the trustees’ determination or initiates arbitration. With

regard to the trustees’ enforcement rights, however, a criti-

cal distinction exists, depending on whether or not the

employer has sought review and initiated arbitration.

If the employer fails to request a review or fails to

initiate arbitration, it waives the right to contest the assess-

ment, and the amounts demanded by the trustees are due

and owing as set forth in the trustees’ payment schedule.

Consequently, if these payments are not made, the trustees

may file suit to collect the delinquent installments in ac-

cordance with Section 1401(b)(1). In addition, the

trustees may declare the employer in default and accelerate

the debt under Section 1399(c) (5).

15

For purposes of Section 1399(c)(5), the term “default”

means the failure to make a payment when due if that

failure is not cured within 60 days of the date on which

the employer received written notification of the failure.

Significantly, MPPAA’s “default” provision is not self-

executing. Rather, to put an employer in default, the

trustees must first notify the employer of its failure to

have made a required payment and then permit the em-

ployer 60 days in which to effect a cure. Moreover, Sec-

tion 1399(c)(5) does not require the trustees to accel-

erate the debt on default; this is entirely a matter of trustee

discretion and, as will be discussed below, it may well be

in the best interest of the plan not to declare a default.

In contrast to the above, if the employer has requested

a review and initiated arbitration, the trustees—under an

operative PBGC regulation—have no discretion whether

Or not to declare a withdrawn employer in default and

accelerate the debt during the period the employer has

for contesting the withdrawal liability assessment. Rather,

29 C.F.R. § 2644.2(c)(1) provides that a default cannot

occur earlier than 61 days after the employer’s time to

contest the withdrawal liability assessment has expired.

If an employer misses any payment prior to the occur-

rence of the last possible event; i.e., the arbitrator’s decision,

the trustees may assess interest on that payment, and seek

to collect the missing payment by filing a collection ac-

tion. However, the debt cannot be accelerated and the

trustees cannot bring an action to collect the entire amount

due.

Moreover, even when the trustees’ payment schedule

becomes final, the trustees have complete discretion not to

accelerate the debt but to pursue only the installments set

forth in that schedule. Significantly, Section 1399(c)(5)

States only that “in the event of a default, a plan sponsor

may require immediate payment of the outstanding

amount of an employer’s withdrawal liability... .” (Em-

phasis added.) The discretionary nature of MPPAA’s

default provision is further confined by PBGC regula-

tion 29 C.F.R. § 2644.2(b)(2), which states that, upon

16

default, the trustees are free to accelerate (if they so

desire) only a portion of the withdrawal liability.

Under the Ninth and Seventh Circuit’s rulings, how-

ever, the trustees would have no discretion whether or

not to declare a default and accelerate the debt; this

would have to be done within the fixed 6-year period

because (unlike the District of Columbia and Third Cir-

cuits, whose approach permits trustees to pursue separate

and distinct claims for installment payments and the ac-

celerated debt) neither the Ninth nor the Seventh Circuit

recognizes more than a single claim for withdrawal lia-

bility. However, this loss of discretion raises significant

problems for multiemployer plans.

Of particular concern to the NCCMP is the implication

that trustees have a fiduciary duty to accelerate an em-

ployer’s withdrawal liability debt either as soon as the

first payment is missed (under the Seventh Circuit's theory

of presumptive acceleration) or no later than six years

of the date of withdrawal (Ninth Circuit).

On the one hand, such a fiduciary duty could place

the trustees in the anomalous position of being required

to accelerate the debt without having the ability to en-

force a demand for full payment in the event the em-

ployer has requested review and initiated arbitration. On

the other hand, even if the trustees are given six years

from the date of the first missed payment to accelerate

the debt and initiate “a lawsuit, a fiduciary duty to ac-

celerate would eliminate the trustees’ discretion not to

declare a default and accelerate the debt if, at that point

in time, the trustees determined that acceleration would

not be in the best interest of the fund and its participants

and beneficiaries.

A number of reasons exist why trustees might determine

that it would not be in the fund’s best interests to accel-

erate withdrawal liability and sue for the full amount, at

least before such time as the prospect of receiving install-

ment payments becomes substantially unlikely. First, an

employer having financial difficulties may attempt to com-

ply with the trustees’ payment schedule, but may make its

17

installment payments late and also at sporadic intervals.

In such circumstances, acceleration of the debt and a

demand for full payment would likely prompt the em-

ployer to seek protection under the Bankruptcy Code.

The trustees might therefore determine that it would be

more prudent to pursue the monthly installments rather

than the accelerated amount, in the expectation of achiev-

ing a larger total recovery. Although the employer’s finan-

cial situation and payment practices might ultimately

prompt the trustees to determine that it would be best to

accelerate the debt, the desirability of exercising this

option might not become apparent within six years of the

date of withdrawal or the first missed installment. Under

Ferbar and Navco, however, the trustees would have to

accelerate the debt and sue for the full amount of with-

drawal liability within those periods or forever lose the

right to recover.

Additionally, Section 1399(c)(5)(B) allows plans to

adopt rules permitting the trustees to accelerate a with-

drawal liability debt where events other than nonpayment

indicate a substantial likelihood that an employer will be

unable to pay its withdrawal liability. Events such as the

employer’s insolvency, dissolution, and the commencement

of voluntary or involuntary bankruptcy proceedings could

trigger a default under this section; however, these events,

too, might not occur within six years of the date of with-

drawal or of a missed installment payment. Again, under

Ferbar and Navco, trustees could lose their right to ac-

celerate and collect the balance of the withdrawal liability

debt if the 6-year limitations period is rigidly linked to

the date of withdrawal or the date a first installment pay-

ment is missed.

Further, a rigid, single 6-year limitations period could

deprive trustees of flexibility in dealing with withdrawn

employers who may be considering re-entering the plan

for a variety of reasons, including the fact that their lia-

bility under MPPAA’s re-entry and abatement rules may

18

be less than the total withdrawal liability assessment.

Acceleration of the withdrawal liability debt and the fil-

ing of a collection action could chill the employer’s busi-

ness efforts as well as negotiations between the bargaining

parties. More importantly, acceleration could remove an

important incentive for re-entry as the employer could be

required to pay the entire accelerated debt, rather than a

lower amount of unpaid installments, as a condition pre-

cedent for reacceptance into the plan.

Finally, as noted earlier, an employer could manipulate

an inflexible limitations period by curing intermittent

delinquencies or by making payments on schedule until

the limitations period expires, and then stop, leaving a

plan without the ability to collect the balance of the debt.

In sum, there is no basis for the notion that trustees

have a statutory and fiduciary obligation to accelerate and

collect withdrawal liability within six years either of the

date of withdrawal or of the date of a first missed pay-

ment, and acceleration of the debt in accordance with

such a rule could well result in a loss to the fund. As

the District of Columbia Circuit noted in Joyce, supra,

a foreshortening of the trustees’ rights would be inimical

to the policies animating MPPAA. For, although “Con-

gress has indicated that promptly collecting outstanding

sums is desirable,” this “is one aspect of the Act’s more

general purpose of ensuring that plans collect the amounts

due from employers, a purpose subsidiary to the Act’s

overriding purpose of ensuring that plans remain solvent

despite employer withdrawals (and thus able to provide

pension payments to workers who have earned them).”

871 F.2d at 1126 (emphasis added).

Consistent with the purposes of ERISA as well as the

specific structure of MPPAA, the Ninth and Seventh Cir-

cuits’ construction of Section 1451(f)(1) should be re-

jected in favor of the sounder and more flexible construc-

tion offered by the District of Columbia and Third Cir-

cuits to assure that the federal courts do not impermissibly

19

intrude upon the trustees’ discretion and erroneously prej-

udice a plan’s collection rights. As the Third and District

of Columbia Circuits as well as Petitioner have indicated,

sufficient incentives exist to encourage plans to act with

reasonabie diligence. Moreover, employers who feel prej-

udiced by delay can raise their timeliness objections in

arbitration and can arguably also assert a laches defense

in federal court. The NCCMP therefore strongly supports

Petitioner’s request for review so that MPPAA’s statute

of limitations provision can be fully considered and clari-

fied to permit trustees a meaningful remedy under the

Statute.

CONCLUSION

The fundamental purpose of MPPAA was to establish

a mechanism by which employers who withdraw from

multiemployer plans continue to pay their fair share of

the plans’ liability for unfunded vested benefits. How-

ever, although employers have the option of paying an

assessment in a lump sum, Congress contemplated the

amortization of withdrawal liability debts over a long

period of time, though not to exceed 20 years. By mis-

construing MPPAA’s statute of limitations provision, the

Ninth Circuit impermissibly curtailed the trustees’ collec-

tion rights so that the “20-year payment cap” is effectively

reduced to less than six years. The Seventh Circuit like-

wise foreshortened the trustees’ ability to recover with-

drawal liability payments. In contrast, the District of

Columbia and Third Circuits have offered a reasonable

approach that is fairest to plans without prejudicing em-

ployers. As Congress intended that MPPAA’s civil en-

forcement provision be governed by a uniform statute of

limitations, and the federal courts are in disagreement as

to how the 6-year limitations period should be applied,

review is clearly necessary to clarify the statute and to

prevent yet further misconstruction. For all of the rea-

Sons stated above, the NCCMP respectfully urges the

20

Court to grant the Petition and to review and reverse the

decision below.

October 11, 1996

Kespectfully submitted,

GERALD M. FEDER

DIANA L.S. PETERS *

FEDER & ASSOCIATES, P.C.

1350 Connecticut Avenue, N.W.

Suite 600

Washington, D.C. 20036-1712

(202) 955-8305

Attorneys for National

Coordinating Committee

for Multiemployer Plans

* Counsel of Record