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

$

< $ No. 96-370 “y

IN THE

Supreme Court of the United States

OCTOBER TERM, 1996

BOARD OF TRUSTEES, BAY AREA LAUNDRY AND

Dry CLEANING PENSION TRUST FUND,

Petitioner,

Vv.

FERBAR CORPORATION OF CALIFORNIA, INC.;

STEPHEN BARNES,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

MOTION FOR LEAVE TO FILE BRIEF AMICUS CURIAE

AND BRIEF AMICUS CURIAE ON BEHALF OF

MIDWEST MOTOR EXPRESS, INC.

IN SUPPORT OF PETITIONER

HERVEY H. AITKEN, JR.*

Roy A. SHEETZ

TAYLOR, THIEMANN & AITKEN L.C.

908 King Street, Suite 300

Alexandria, Virginia 22314

(703) 836-9400

Attorneys for

Midwest Motor Express, Inc.

July 17, 1997 * Counsel of Record

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

.

+ 7 , w+ 4

Rs Vaiaar .

or

* 7?) , ry “

ae twee P

wa s¥ ips. - Ft .

Sate De oa ST!

te 4 "4 ( ‘ 1

gets. OT adr eis ad ge

ha e 4 an 4

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 Writ of Certiorari to the

United States Court of Appeals

the National Labor Relations Board certification that the

Midwest employees decertified the union on April 15,

1994. Until that date, Midwest’s employees were members

of the International Brotherhood of Tcamsters (“Team-

sters”), and participated in the Central States Southeast

and Southwest Areas Pension Fund (“Central States”).

Central States assessed withdrawal liability against Mid-

west later in April 1994. Central States could not have

assessed withdrawal liability against Midwest prior to April

15, 1994, because of the labor dispute exception to with-

drawal liability. ERISA § 4218(2), 29 U.S.C. § 1398(2).

However, if applied to Midwest’s facts, the decision of

the Ninth Circuit that the statute of limitations begins to

run from the date of complete withdrawal would have

deprived Central States of nearly one-half of the six-year

statute of limitations for pension funds to sue withdraw-

ing employers. ERISA § 3401(f), 29 U.S.C. § 1451(f).

This would have encouraged Central States to assess with-

drawal liability against Midwest as soon as possible to

protect the fund against the running of the statute. Cen-

tral States’ suit for the collection of withdrawal liability

against Midwest while Midwest was fighting a labor strike

either would have overwhelmed Midwest or would have

forced it to capitulate to the Teamster demands it other-

wise resisted in the absence of a lawsuit.

The labor dispute exception is critical for employers

engaged in a strike. Its procedure provides an important

check and balance against hasty, unilateral action by plan

trustees.

The Ninth Circuit’s decision in the case at bar conflicts

with the labor dispute exception and creates the potential

for serious and irreparable damage to the system of col-

lective bargaining to a degree not provided for by labor

law nor intended by the Employee Retirement Income

Security Act of 1974 (“ERISA”), as amended by the

Multiemployer Pension Plan Amendments Act of 1980

(“MPPAA”). The resolution of this case has serious im-

plications for the continued viability of the labor dispute

exemption to withdrawal liability as well as assuring that

ERISA not be interpreted in such a manner as to under-

mine the collective bargaining process.

This case presents a critical question regarding the ac-

crual of a cause of action under MPPAA. Midwest

believes that the decision of the court below, if permitted

to stand, will have a significant and substantial negative

impact upon the future of multiemployer plans, upon the

resolution of future labor disputes and upon future inter-

play between MPPAA and the collective bargaining

process.

Accordingly, amicus respectfully moves for leave to file

the attached brief amicus curiae in support of Petitioner.

Respectfully submitted,

HERVEY H. AITKEN, JR.*

Roy A. SHEETZ

TAYLOR, THIEMANN & AITKEN L.C.

908 King Street, Suite 300

Alexandria, Virginia 22314

(703) 836-9400

Attorneys for

Midwest Motor Express, Inc.

July 17, 1997 * Counsel of Record

TABLE OF CONTENTS

STATUTORY PROVISION INVOLVED ............

INTEREST OF AMICUS CURIAE. ..........-...2-0.-...000--0--s

SUMMARY OF ARGUMENT ...0022..22....--cecceeeceeeeceee

I.

II.

THE NINTH CIRCUIT HAS ADOPTED AN

INAPPROPRIATE STANDARD FOR DETER-

MINING THE ACCRUAL OF A CAUSE OF

ACTION FOR WITHDRAWAL LIABILITY...

A. The Ninth Circuit’s Analysis of ERISA’s

Statute of Limitations is Fundamentally

EE SIT LE Cee

B. The Ninth Circuit’s Rule Regarding Accrual

of a Cause of Action For Withdrawal Liabil-

ity Encourages Multiemployer Pension

Funds to Interfere in Collective Bargaining

ti cesictndinictinsinnieniiinitneniinctianieeninaaianianiesiaapiiniaepess

THERE IS NO BASIS IN LAW OR FACT

FOR ADOPTION OF A STATUTE OF LIMI-

TATIONS THAT BEGINS TO RUN ANEW

FOR EACH PAYMENT MISSED BY A

WITHDRAWING EMPLOYER |...

I seeceniettnenitiscaterincemesnaptttentommmenmedinninimmnenesen

(i)

ive”

ii

TABLE OF AUTHORITIES

Cases: Page

Supreme Court Case:

Milwaukee Brewery Workers’ Pension Fund v.

Jos. Schlitz Brewing Company, 513 U.S. 414

III ili idinasie cinentatantaianieiatinninnaietinniiaieiaaMcasaasiitedinall 3, 5, 6, 12

Circuit Court Cases:

Bay Area Laundry & Dry Cleaning Pension Fund

v. Ferbar Corp., 73 F.3d 91 (9th Cir. 1996) ........ 5, 6, 11

Board of Trustees of the Construction Laborers

Pension Trust Fund v. Thibodo, 34 F.3d 914

Ee Seen eee 6

Board of Trustees of the District No. 15 Machin-

ists’ Pension Fund v. Kahle Engineering Corp..,

43 P26 GBB (94 Cir. 19064) ................................ passim

Central States, Southeast and Southwest Areas

Pension Fund v. Navco, 3 F.3d 167 (7th Cir.

SE cee ee ee ee ere a ee passim

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

(D.C. Cir.), cert. denied, 493 U.S. 918 (1989)... 7,9

Statutes:

Employer Retirement Income Security Act, 29.

ff EINE Ae ES SIE passim

Multiemployer Pension Plan Amendments Act, 29

a eeennieentel passim

i TD scinseeainiaiiabeediaiseelinainibies 4

Ee eee 1, 2, 5,7

39 U.S.C. § 1980(e) (1) (3B) ......................................-. i)

ee — 11

ET TELS AT Se RE 4,6

Te 8,4

Legislative History

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 Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF AMICUS CURIAE OF MIDWEST MOTOR

EXPRESS, INC. IN SUPPORT OF PETITIONER '

STATUTORY PROVISION INVOLVED

Section 1398 of Title 29 of the United States Code

provides:

Withdrawal not to occur merely because of change in

business form or suspension of contributions during

labor dispute

Notwithstanding any other provision of this part, an

employer shall not be considered to have withdrawn

from a plan solely because—

1 As required by Supreme Court Rule 37.6, amicus curiae Mid-

west Motor Express, Inc. states that no counsel for a party authored

this brief in whole or in part. No person or entity other than the

amicus curiae made a monetary contribution to the preparation or

submission of this brief.

2

(1) an employer ceases to exist by reason of—

(A) a change in corporate structure de-

scribed in section 4069(b) [29 U.S.C.

§ 1369(b)], or

(B) a change to an unincorporated form

of business enterprise, if the change causes

no interruption in employer contributions

or obligation to contribute under the plan,

or

(2) an employer suspends contributions under

the plan during a labor dispute involving its

employees.

For purposes of this part, a successor or parent cor-

poration or other entity resulting from any such

change shall be considered the original employer.

29 U.S.C. § 1398.

INTEREST OF AMICUS CURIAE

Midwest Motor Express, Inc. (“Midwest”) is an inter-

state motor carrier of freight located in Bismarck, North

Dakota, operating in thirteen states. Midwest is interested

in this case because the Ninth Circuit decision conflicts

with the labor dispute exception and creates the potential

for serious and irreparable damage to the system of col-

lective bargaining to a degree not provided for by labor

law, nor intended by the Employee Retirement Income

Security Act of 1974 (“ERISA”), as amended by the

Multiemployer Pension Plan Amendments Act of 1980

(“MPPAA”). Midwest was involved in a labor dispute

that lasted nearly three years, from August 12, 1991, until

April 15, 1994. ERISA § 4218(2), 29 U.S.C. § 1398

(2). In Midwest's situation, the Ninth Circuit rule that

the statute of limitations period on withdrawal liability

collection actions begins to run from the date of complete

withdrawal would have deprived the Central States South-

east and Southwest Areas Pension Fund (“Central States” )

3

of nearly one half of the six-year statute of limitations.

ERISA § 4301(f), 29 U.S.C. § 1451(f). This would en-

courage a prudent pension fund to assess withdrawal lia-

bility as soon as possible to protect itself against the run-

ning of the statute. Under those circumstances, the sub-

sequent suit for the collection of withdrawal liability either

would have overwhelmed Midwest or would have forced

it to capitulate to union demands it otherwise might have

resisted in the absence of the lawsuit. By contrast, the

rule regarding the accrual of a claim advocated by Peti-

tioner and applied in the District of Columbia Circuit,

among others, allowed Central States to observe the labor

dispute exception without losing any part of its statute of

limitations.

The resolution of the case at bar has serious implica-

tions for the continued viability of the labor dispute ex-

ception to withdrawal liability, and that resolution should

ensure that ERISA not be interpreted in such a manner

as to undermine the collective bargaining process.

Accordingly, amicus believes it will bring insights and

information beyond what is presented by Petitioner and

Respondents, which will be useful to the Court in deciding

the issue presented.

SUMMARY OF ARGUMENT

The Ninth Circuit’s decision that the statute of limita-

tions begins to run from the date of complete withdrawal

is fundamentally flawed because it is in direct conflict with

the ruling of this Court in Milwaukee Brewery Workers’

Pension Fund v. Jos Schlitz Brewing Co., 513 US.

414 (1995). In Jos Schlitz Brewing Co., the Court stated

that a withdrawing employer owes nothing to a pension

fund until such time as the fund demands that the em-

ployer pay its withdrawal liability. /d. at 423. Moreover,

the Ninth Circuit’s holding that the pension fund’s cause

of action accrues as of the date of the employer’s with-

drawal conflicts with the labor dispute exception codified

4

in ERISA and creates the potential for serious and ir-

reparable damage to the system of collective bargaining

to a degree not provided for by labor law nor intended

by ERISA.

Finally, the Seventh Circuit’s decision in Central States,

Southeast and Southwest Areas Pension Fund v. Navco,

3 F.3d 167 (7th Cir. 1993), cert. den., 510 U.S. 1115

(1994), provides a better alternative to the Ninth Circuit’s

flawed holding regarding accrual of the causes of action

than the alternative presented by the Third Circuit’s deci-

sion in Board of Trustees of the District No. 15 Machin-

ists’ Pension Fund v. Kahle Engineering Corp., 43 .F.3d

852 (3d Cir. 1994). The Third Circuit’s approach adopts

an analogy to installment payments which has no warrant

in ERISA and is factually inapposite to the case at bar.

In sum, a cause of action accrues at the time the employer

fails to make a demanded payment, and the six-year statute

of limitations runs from that date for the entire amount

of the withdrawal liability.

ARGUMENT

I. THE NINTH CIRCUIT HAS ADOPTED AN INAP-

PROPRIATE STANDARD FOR DETERMINING

THE ACCRUAL OF A CAUSE OF ACTION FOR

WITHDRAWAL LIABILITY.

Under ERISA, as amended by MPPAA, an employer

withdrawing from an under-funded multiemployer pen-

sion plan is responsible for paying the pension fund the

employer’s pro rata share of the funding deficit, so-called

withdrawal liability, after it withdraws. ERISA § 4201,

29 U.S.C. § 1381. The pension fund has the right to sue

the withdrawing employer to recover the withdrawal lia-

bility if the employer fails to pay on demand. ERISA

§ 4301(a)(1), 29 U.S.C. § 1451(a)(1). Section 4301

(f) of ERISA, 29 U.S.C. § 1451(f), gives the pension

fund six years to sue the withdrawing employer from the

time the fund is injured. ERISA § 4301(f), 29 U.S.C.

§ 1451(f). ERISA does not specify, however, what act

—

5

or omission creates a claim upon which the pension fund

can sue, thereby starting the running of the six-year statute

of limitations.

In the case at bar, Bay Area Laundry & Dry Cleaning

Pension Fund v. Ferbar Corp., 73 F.3d 971 (9th Cir.

1996), the Ninth Circuit held that “the limitations period

begins to run from the date of complete withdrawal. . . .”

Bay Area Laundry, 73 F.3d at 973. The Ninth Circuit's

holding, however, directly conflicts with this Court’s state-

ment in Jos. Schlitz Brewing Co., that “the statute

[ERISA] makes clear that the withdrawing employer owes

nothing until its plan demands payment... .” Jos. Schlitz

Brewing Co., 513 U.S. at 423 (emphasis added). The

Ninth Circuit’s decision in this case assumes a diametri-

cally opposed view of a withdrawing employer’s obliga-

tions, which view, if allowed to prevail, threatens serious

harm to the statutory framework established by Congress

to protect the participants and beneficiaries of multi-

employer pension plans. Moreover, the practical implica-

tions of the Ninth Circuit rule threaten to imbalance the

system of collective bargaining between employers and

their unionized employees which frequently depends on

the parties using the economic weapons at their command

to attain their bargaining objectives. Until Ferbar, multi-

employer pension funds have had little reason to inject

themselves into collective bargaining disputes, but the

Ninth Circuit has offered multiemployer pension funds a

perverse incentive to interfere in labor disputes to the

unique detriment of the employer. This outcome is directly

antagonistic to the statutory mandate that multiemployer

pension funds may not assess withdrawal liability against

an employer solely because the employer has suspended

contributions on account of the pendency of a labor dis-

pute. ERISA § 4218(2), 29 U.S.C. § 1398(2).

A. The Ninth Circuit’s Analysis of ERISA’s Statute

of Limitations is Fundamentally Flawed.

For a claim for withdrawal liability to accrue, there

must first be an injury to the fund. This is explicit in

6

section 4301(a)(1) of ERISA, 29 U.S.C. § 1451(a)(1),

which states in pertinent part, “[a] plan fiduciary, em-

ployer, plan participant, or beneficiary, who is adversely

affected by the act or omission of any party under this

subtitle with respect to a multiemployer plan . . . may

bring an action for appropriate legal or equitable relief or

both.” ERISA § 4301(a)(1) 29 U.S.C. § 1451(a)(1)

(emphasis added). ERISA makes clear that a potential

plaintiff must be “adversely affected” by “an act or omis-

sion” of a person, such as a withdrawing employer, in

order for a claim against the withdrawing employer to

accrue. In Ferbar, the Ninth Circuit, relying on its hold-

ing in Board of Trustees of the Construction Laborers

Pension Trust Fund v. Thibodo, 34 F.3d 914 (9th Cir.

1994), ruled, in effect, that the fund was adversely im-

pacted by the employer’s withdrawal from the fund.

Ferbar, 73 F.3d at ©73. In Thibodo, the Ninth Circuit

rejected an alternative approach to the question of when

the statute of limitations started running on the grounds

that “fi]t is anomalous to conclude that the limitations

period of [ERISA] § 1415(f) was running against the

Trustees before they had a right to sue.” Thibodo, 34 F.3d

at 917. The Ninth Circuit decided Thibodo without the

benefit of this Court’s decision in Jos. Schlitz Brewing Co.,

but, in light of that ruling, it is clear that the Ninth Circuit

has done in Ferbar what it found “anomalous” in Thibodo.

Under Jos. Schlitz Brewing Co., the employer owed noth-

ing, and therefore the fund had not been injured, until

the fund had demanded payment. Jos. Schlitz Brewing

Co., 513 U.S. at 423. Nonetheless, the Ninth Circuit’s

ruling in Ferbar indicates that the statute of limitations

starts running against the pension fund before it is owed

any withdrawal liability, much less before it has been in-

jured by non-payment of the liability. This fundamental

conflict between the Ninth Circuit’s decision in Ferbar

and this Court’s decision in Jos. Schlitz Brewing Co. re-

quires the reversal of Ferbar.

ee ee eee

7

B. The Ninth Circuit’s Rule Regarding Accrual of a

Cause of Action For Withdrawal Liability Encour-

ages Multiemployer Pension Funds to Interfere in

Collective Bargaining Disputes.

If a pension fund determines during the pendency of

a labor dispute that the employer has permanently ceased

contributing and that at the end of the labor dispute the

employer will cease to have an obligation to contribute,

the pension fund may decide that the employer has with-

drawn as of the date it ceased contributing. Under the

tule accepted in the District of Columbia,? Seventh

(Navco) and Third Circuits (Kahle Engineering), there is

no cause for concern by the pension fund: the statute of

limitations does not begin to run until such time as the

pension fund makes a demand on the withdrawing em-

ployer. Under the Ninth Circuit approach, however, the

pension fund must make its decision regarding withdrawal,

with its attendant difficulties of interpreting collective bar-

gaining disputes and the intentions of the employer, fairly

soon after the suspension of payments. This is not an

abstract concern. At the expiration of Midwest’s collec-

tive bargaining agreement in 1991, Midwest bargained

with its employees’ union for several months until the

employees went out on strike. Midwest stopped contribut-

ing to its multiemployer fund as soon as its employees

went out on strike on August 12, 1991, as it was allowed

to do under its pension fund’s trust agreement. However,

it was after nearly three years had passed, and the Na-

tional Labor Relations Board certified that Midwest's

employees had decertified the union on April 15, 1994,

that the pension fund decided that Midwest had withdrawn

in 1991. Until that time, Central States was barred from

assessing withdrawal liability against Midwest by section

4218(2) of ERISA, 29 U.S.C. § 1398(2), so long as

Midwest had only suspended its contributions during the

dispute rather than permanently withdrawn from the fund.

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

cert. den. 493 U.S. 918 (1989).

Under the Ninth Circuit rule, Central States would have

lost half of its statute of limitations during the strike.

The most serious danger presented by the Ninth Circuit

rule, however, is not that pension funds will be left at

the end of a labor dispute with no recourse against a with-

drawing employer. While that is possible, and undesirable,

the danger really lies with the funds’ reasonable efforts to

protect themselves from precisely that outcome. If, under

the Ninth Circuit rule, a fund fears that a prolonged labor

dispute is going to result in a withdrawal of the employer

from the fund some years after the initial cessation of

contributions, the prudent pension fund should demand

withdrawal liability at once to protect itself against the

running of the statute. The filing of a muli-million dollar

suit® against the employer while the employer is fighting

a strike either would overwhelm the employer or force it

to capitulate to union demands it might otherwise resist

in the absence of the lawsuit. This scenario conflicts with

the labor dispute exception and creates the potential for

serious and irreparable damage to the system of collective

bargaining to a degree not provided for by labor law nor

intended by ERISA. Congress clearly intended that

ERISA, as amended by MPPAA, should not undermine

the collective bargaining process: “Multiemployer plans

are creatures of collective bargaining. The committee be-

lieves: that the integrity of the collective bargaining proc-

ess must be preserved to the utmost extent consistent with

assuring the financial soundness of multiemployer plans to

meet benefit commitments.” H.R. Rep. No. 869, 96th

Cong., 2nd Sess. 51, 63, reprinted in 1980 U.S. Code

Cong. & Ad. News 2919, 2931.

This interference with the collective bargaining process

is a result which should, and can, be avoided while pro-

tecting the rights of pension plans to recover withdrawal

liability. All that needs to be done is to adopt the rule

8 Multi-million dollar withdrawal liability assessments are not

uncommon in some industries, such as trucking.

9

on accrual of withdrawal liability claims developed and

applied by the District of Columbia (Joyce), Seventh

(Navco) and Third Circuits (Kahle Engineering). If the

cause of action accrues only when the pension fund

demands payment and the employer fails to comply, then

the fund can stay out of the labor dispute, as Congress

intended when it enacted section 4218(2) of ERISA, 29

U.S.C. § 1398(2), without putting its ability to recover

withdrawal liability at risk.

Il. THERE IS NO BASIS IN LAW OR FACT FOR

ADOPTION OF A STATUTE OF LIMITATIONS

THAT BEGINS TO RUN ANEW FOR EACH PAY-

MENT MISSED BY A WITHDRAWING EM-

PLOYER.

The District of Columbia Circuit ruled in Joyce that

the statute of limitations for suits to collect withdrawal

liability begins to run from the date the withdrawing

employer has failed to make a payment of withdrawal lia-

bility demanded by a pension fund. Joyce, 871 F.2d at

1124. Both the Seventh and Third Circuits have adopted

the holding and reasoning of the D.C. Circuit. Although

the Seventh and Third Circuits agree that Joyce correctly

decided when the cause of action accrues, they disagree

whether there is a unitary claim for the entire amount of

withdrawal liability or whether a separate claim arises for

each payment under a fund’s amortization schedule.

In 1993, the Seventh Circuit held, in Navco, that “(t]he

pension fund had only one claim against the employer . . .:

the amount of withdrawal liability. Although a fund may

permit an employer to amortize this sum over 20 years,

29 U.S.C. § 1399(c)(1)(B), the whole amount is pre-

sumptively due at the outset.” Navco, 3 F.3d at 172

(emphasis in original). Under Navco, therefore, a pen-

sion fund has six years to sue a withdrawing employer

for the entire amount of withdrawal liability beginning

10

from the date the employer misses its first scheduled pay-

ment.

A year later, in Kahle Engineering, the Third Circuit

held that

under the statutory scheme established by the

MPPAA, a plan sponsor has six years from the date

a payment is due to sue for its recovery. Absent a

decision by the [pension] Fund to accelerate, the

cause of action for payments not yet due does not

begin to run when the first such payment is missed.

Kahle Engineering, 43 F.3d at 861. The Third Circuit's

approach is based upon an extended analogy between the

voluntary amortization of withdrawal liability which a

pension fund must offer a withdrawing employer and an

installment contract. This analogy is flawed as a matter

of law, and even if appropriate on the facts of Kahle, has

no appropriate application in this case.

First, the installment plan analogy drawn by the Third

Circuit in Kahle Engineering is flawed because there is

no basis in the statute for such an analogy. As noted by

the Seventh Circuit in Navco, “(t]he [payment] schedule

under [29 U.S.C.] § 1399(c), by contrast, is not contrac-

tual; the employer did not assent to a longer period for

payment and suit.” Navco, 3 F.3d at 172. More impor-

tant, in the case at bar there is no factual predicate for

application of the analogy at all. In some cases, such as

Kahle Engineering itself, in which a withdrawing employer

has made at least one periodic payment of withdrawal

liability according to the amortization table provided by

the pension plan, there may be a factual and legal basis

for the Third Circuit’s installment payment statute of

limitations.* Under such circumstances, there may be some

basis for assuming that there has been some quasi-contrac-

4In Kahle Engineering, the employer paid at least one quarterly

payment as required by the pension plan. Kahle Engineering, 43

F.3d at 855.

11

tual offer, acceptance and consideration sufficient to justify

the treatment of the payment of withdrawal liability as an

installment payment plan. The case at bar, however, is

not such a case: the withdrawing employer made no pay-

ments of any kind towards satisfaction of its withdrawal

liability. Ferbar, 73 F.3d at 972. Accordingly, there is

no basis for assuming that the employer and the pension

fund took any action that could support the imposition

of the installment payment statute of limitations on the

parties. In this case, the pension fund offered an amorti-

zation schedule, as required by ERISA, but the employer

never took any action to accept the extended payment

schedule. Under the circumstances of the case at bar,

imposition of the Kahle Engineering approach to the

statute of limitations is without any justification.

By contrast, the approach adopted by the Seventh Cir-

cuit in Naveco fits Ferbar exactly. In its Kahle Engineering

opinion, the Third Circuit objected to the Navco ap-

proach because, it argued, the Seventh Circuit had made

acceleration of the withdrawal liability debt at default

mandatory. This is simply inaccurate. ERISA itself left

acceleration to be optional with the pension fund.’ Under

the Navco approach, the pension plan has the option of

suing only for the amount of the one payment that has

been missed, but, if the pension plan chooses to sue, it

* The proffer of an amortization alternative to a lump-sum pay-

ment could be considered an offer which the withdrawing employer

accepts by making the demanded payments. This offer and accept-

ance is supported by consideration: the employer pays interest and

the pension fund accepts deferred payment of the total liability.

Although these quasi-contractual aspects of the process may be

overstated, in Kahle Engineering they provide some justification

for the installment-payment approach.

* Section 4219(c)(5) of ERISA, 29 U.S.C. § 1899(c) (5)

fe . 8.C. provides

that “[i)n the event of a default, a plan sponsor may require imme-

diate payment of the outstanding amount of an employer’s with-

drawal liability, plus accrued interest ....” ERISA § 4219(c) (5),

29 U.S.C. § 1399(c) (5) (emphasis added).

12

must do so for any remaining amounts that go unpaid

within six years of the original default. This hardly makes

mandatory what is optional under the statute. If a pen-

sion plan wishes to rehabilitate the delinquent employer

it may do so, but it must sue for the entire amount of

withdrawal liability within six years. This is hardly dra-

conian; rather it sets a reasonable time limit within which

the pension plan may exercise its efforts to recover the

maximum amount from the employer before resorting to

litigation. If the pension fund cannot work something out

within that time, or even a fraction of that time, common

sense suggests that nothing can be worked out.

CONCLUSION

The Ninth Circuit’s analysis of when a cause of action

for withdrawal liability accrues is fundamentally flawed

because it is in direct conflict with the ruling of this Court

in Jos. Schlitz Brewing Co. that a withdrawing employer

owes nothing to a pension fund until such time as the fund

demands that the employer pay its withdrawal liability.

Moreover, the Ninth Circuit’s holding that the pension

fund’s cause of action accrues as of the date of the em-

ployer’s withdrawal conflicts with the so-called labor dis-

pute exception codified in ERISA and creates the potential

for serious and irreparable damage to the system of col-

lective bargaining to a degree not provided for by labor

law nor intended by ERISA

Finally, the Seventh Circuit’s Navco decision provides

a better alternative to the Ninth Circuit’s flawed holding

regarding accrual of the cause of action than the alterna-

tive presented by the Third Circuit’s decision in Kahle

Engineering. The Third Circuit approach adopts an anal-

ogy to installment payments which has no warrant in

ERISA and is factually inapposite to this case. In sum,

under ERISA’s withdrawal liability provisions, a cause of

action accrues at the time the employer fails to make a

demanded payment, and the six-year statute of limitations

13

runs fron. that date for the entire amount of the with-

drawal liability.

Respectfully submitted,

HERVEY H. AITKEN, JR.*

Roy A. SHEETZ

TAYLOR, THIEMANN & AITKEN L.C.

908 King Street, Suite 300

Alexandria, Virginia 22314

(703) 836-9400

Attorneys for

Midwest Motor Express, Inc.

July 17, 1997 * Counsel of Record