# Petition for Writ of Certiorari — Trustees of Teamsters Pension Trust Fund of Philadelphia v. Federal Express Corp. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386013_0128%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1997 - **Citation:** 520 U.S. 1151 ## Text Supreme Court, U.S. FiLeéeD 961149 JAN 2 1 1997, Neo, cnnsennane 26 22 es oe 2 a on i 2 TTre IN THE Supreme Court of the United States OCTOBER TERM, 1996 THE TRUSTEES OF TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY; TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY AND CHARLES J. SCHAFFER, JR., its administrator and fiduciary, Petitioners, FEDERAL EXPRESS CORPORATION; THE FLYING TIGER LINES, INC-:: WARREN TRANSPORT, INC.; TIGER INTERNATIONAL, INC., Respondents. Petition for Writ of Certiorari to the United States Court of Appeals for the Third Circuit PETITION FOR WRIT OF CERTIORARI KENT CPREK (Counsel of Record) SAGOT, JENNINGS & SIGMOND 510 Walnut Street—16th Floor Philadelphia, PA 19106-3683 (215) 351-0615 DAVID C. MCBRIDE BARRY M. WILLOQUGHBY YOUNG, CONAWAY, STARGATT & TAYLOR llth Floor Rodney Square North P.O. Box 391 Wilmington, DE 19899-0391 (302) 571-6666 Attorne Ys for Pe tatione rs i WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001 QUESTIONS PRESENTED |. Whether a multiemployer pension plan must show that a donee of a business with substantial withdrawal liability debt had wilful criminal intent to defraud a pen- sion plan in accepting a gift in order to impose civil liabilty on the donor by disregarding the gift as a trans- action with a principal purpose to evade or avoid with- drawal liability within the meaning of 29 U.S.C. § 1392 €q}. 2. Whether the “presumption of correctness” in 29 U.S.C. § 1401(a)(3)(A) accorded to a factually detailed determination of a fraudulent conveyance and a transac- tion to evade withdrawal liability may be overcome by the testimony of an interested witness at trial concerning “plausible and valid” reasons for a sale even though those reasons have no support in contemporaneous documents nor the testimony of disinterested witnesses and do not explain a $15 Million sales discount nor other aspects of the actual transaction without material impetus from withdrawal liability. 3. Whether a multiemployer plan reasonably deter- mined that both groups emerging from a division of a control group “employer” remain jointly and severally liable for unpaid pension liability which accrued in annual pieces during the period of affiliation. (i) ii LIST OF PARTIES Parties to the proceedings below were the Petitioners, Teamsters Pension Trust Fund of Philadelphia and Vicin- ity, its trustees and Charles J. Schaffer, Jr., its adminis- trator and a fiduciary charged with collection of with- drawal liability. The Teamsters Pension Trust Fund of Philadelphia and Vicinity is a trust under 29 U.S.C. § 186(c)(5) whose trustees sponsor a multiemployer plan and an employee pension benefit plan under the Employee Retirement Income Security Act, 29 U.S.C. §§ 1002(2), (37) (A), 1301(a)(3). The Respondent before this Court is Federal Express Corporation (“FedEx”). FedEx is a corporate successor, by merger, to Tiger International, Inc. whose subsidiaries included The Flying Tiger Lines, Inc. and Warren Trans- port, Inc. The status of any other parent company, sub- sidiary or affiliate of FedEx (within the meaning of Rule 29.1 of this Court) is not currently known to Petitioners. TABLE OF CONTENTS Page QUESTIONS PRESENTED i i LIST OF PARTIES ii TABLE OF AUTHORITIES V OPINIONS BELOW l STATEMENT OF JURISDICTION 2 CONSTITUTIONAL AND STATUTORY PROVI- SIONS INVOLVED 8 STATEMENT OF CASE 6 REASONS FOR GRANTING THE WRIT 15 .. THE THIRD CIRCUIT’S “GOOD FAITH” STANDARD REQUIRING PROOF OF CRIM- INAL FRAUDULENT INTENT BY A TRANSFEREE TO IMPOSE CIVIL PENSION LIABILITY ON A TRANSFEROR IS IN CON- FLICT WITH OTHER CIRCUITS 17 Il. THE ISSUES PRESENTED ARE IMPOR- TANT TO PREVENT DUMPING OF UN.- FUNDED PENSION LIABILITY IN THE BILLIONS ON OTHER EMPLOYERS AND THE FEDERAL GOVERNMENT 23 CONCLUSION 26 APPENDIX Third Circuit Order, Trustees of Teamsters Pen- sion Trust Fund of Philadelphia and Vicinity v. Federal Express Corp., 96 F.3d 1482 (8d Cir. 1996) (table) ; la (iii) iv TABLE OF CONTENTS—Continued Trustees of Teamsters Pension Trust Fund of Philadelphia and Vicinity v. Federal Express Corp., 1995 WL 7913871, 20 E.B.C. 1050 (D.Del. 1995) Third Circuit Sur Petition for Rehearing Trustees of Teamsters Pension Trust Fund of Philadelphia and Vicinity v. Federal Express Corp., 96 F.8d 1432 (3d Cir. 1996) (table) Demand Letter & Determination, Teamsters Pen- ston Trust Fund of Philadelphia & Vicinity (Jan- uary 20, 1988) Suppiemental Demand Letter & Determination, Teamsters Pension Trust Fund of Philadelphia & Vicinity (December 2, 1988) Review Response & Determination, Teamsters Pension Trust Fund of Philadelphia & Vicinity (December 2, 1988) Flying Tiger Line - and - Teamsters Pension Trust Fund of Philadelphia & Vicinity, 19 E.B.C. 2830 (Nagle, Arb. 1993) 24a 27a 48a T2a V TABLE OF AUTHORITIES Cases Page American Hospital Association v. NLRB, 499 U.S. 606, 111 S.Ct. 1539, 113 L.Ed.2d 675 (1991) 20 Beacon Auto Radiator Co., Inc. v. Comm’r, 52 T.C. LOO (19698) ............ sie aicenel 22 Bobsee Corp. v. U.S., 411 F.2d 281 (5th Cir. 1969) _..... iuiaie : 21 Botany Worsted Mills v. U.S., 278 U.S. 282, 49 S.Ct. 129, 73 L.Ed. 379 (1929) .. 17 Central States, S.E. & S.W.A. Pension Fund v. Robinson Cartage, 55 F.3d 1318 (7th Cir. 1995) 24 Central States, S.W. & S.W.A. Pension Fund v. Santa Fe Industries, 22 F.8d 725 (7th Cir. 1994) passim Cheek v. U.S., 498 U.S. 192, 111 S.Ct. 604, 112 L.Ed.2d 617 (1991) 19 Coastal Oil Storage v. Comm’r, 242 F.2d 396 (4th Cir. 1957) . ’ 21 Combs v. Classic Coal Corporation, 931 F.2d 96 (D.C. Cir. 1991) 17 Comm’r v. Tufts, 461 U.S. 300, 108 S.Ct. 1826, 75 L.Ed.2d 863 (1983) 25 Concrete Pipe and Products of California, Inc. v. Construction Laborers Pension Trust for South- ern California, 508 U.S. 602, 113 S.Ct. 2264, 124 L.Ed.2d 539 (19938) .. 16, 17 Cuyamaca Meats, Inc. v. San Diego & I.C. Butchers Pension Fund, 638 F. Supp. 885 (S.D. Cal. 1986) 18 Dillier v. Comm’r, 41 T.C. 762 (1964) 22 Dorn’s Transportation v. Teamsters Pension Trust Fund of Philadelphia and Vicinity, 787 F.2d 897 (3d Cir. 1986) 18 Douglas Guardian Warehouses v. Jones, 405 F.2d 427 (10th Cir. 1969) 20 Duncan v. First Nat’l Bank of Cartersville, Ga., 597 F.2d 51 (5th Cir. 1979) 20 Flying Tiger Line v. Central States S.E. & S.W.A. Pension Fund, 7 E.B.C. 2385 (D. Del. 1986) 2 vi TABLE OF AUTHORITIES—Continued Page Flying Tiger Line v. Central States S.E. & S.W.A. Pension Fund, 659 F. Supp. 18 (D. Del. 1986) 2 Flying Tiger Line v. Central States S.B. & S.W.A. Pension Fund, 8 E.B.C. 1241, 1986 WL 14904 (D. Del. 1986) 2 Flying Tiger Line v. Central States S.E. & S.W.A. Pension Fund, 704 F. Supp. 1277 (D. Del. 1989) 2 Flying Tiger Line v. Central States S.E. & S.W.A. Pension Fund, 715 F. Supp. 1284 (D. Del. 1989) Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia and Vicinity, 830 F.2d 1241 (3d Cir. 1987) 2, 15, 16, 22, 25 Flying Tiger Line - and - Teamsters Pension Trust Fund of Philadelphia & Vicinity, 19 E.B.C. 2830 ~ (Nagle, Arb. 1993) passim Herculite Protective Fabrics Corp. v. Comm’r, 387 F.2d 475 (3d Cir. 1968) t7, 23 House Beautiful Homes v. Comm’r, 405 F.2d 61 (10th Cir. 1968) 21 In Re: Juvenile Shoe Corp. of America, 99 F.3d 898 (8th Cir. 1996) 25 Orvis v. Higgins, 180 F.2d 537 (2d Cir. 1950) 21, 23 PBGC v. LTV Corp., 496 U.S. 6338, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990) 24 PBGC v. White Consolidated Industries, 998 F.2d 1192 (8d Cir. 1993) 18 Price Waterhouse v. Hopkins, 409 U.S. 228, 109 S.Ct. 1775, 104 L.Ed.2d 268 (1989) 19 Scroll, Inc. v. Comm’r, 447 F.2d 612 (5th Cir. 1971) 17, 21 Shannon v. U.S., 512 U.S. 573, 114 S.Ct. 2419, 129 L.Ed.2d 459 (1994) 21 Slappey Drive Industrial Park v. U.S., 561 F.2d 572 (5th Cir. 1977) 21 Southeastern Canteen Co. v. Comm’r, 410 F.2d 615 (6th Cir. 1969) 21 vii TABLE OF AUTHORITIES—Continued Page Teamsters Pension Trust Fund of Philadelphia and Vicinity v. Brigadier Leasing, 880 F. Supp. 388 (E.D. Pa. 1995) 14 Trustees of Amalgamated Insurance Fund v. McFarlin’s, 789 F.2d 98 (2d Cir. 1986) 25 Trustees of Teamsters Pension Trust Fund of Philadelphia and Vicinity v. Federal Express Corp., 96 F.3d 1432 (8d Cir. 1996) (table) | Trustees of Teamsters Pension Trust Fund of Philadelphia and Vicinity v. Federal Express Corp., 1995 WL 791371, 20 E.B.C. 1050 (D. Del. 1995) ] Teamsters Pension Trust Fund of Philadelphia & Vicinity v. Fuqua Industries, Inc., 509 U.S. 901, 113 S.Ct. 2989, 125 L.Ed.2d 684 (1993) 16 Teamsters Pension Trust Fund of Philadelphia & Vicinity v. Fuqua Industries, Inc., 981 F.2d 1248 (3d Cir. 1992) (table) 16 Teamsters Pension Trust Fund of Philadelphia & Vicinity v. Fuqua Industries, Inc., 1992 WL 70418, 15 E.B.C. 2271 (E.D. Pa. 1992) 17 U.S. v. Janis, 428 U.S. 438, 96 S.Ct. 3021, 49 L.Ed.2d 1046 (1976) 17 U.S. v. Tabor Court Realty Corp., 803 F.2d 1288 (3d Cir. 1986) 19 U.S. v. Yellow Cab Co., 338 U.S. 338, 70 S.Ct. 177, 94 L.Ed. 150 (1949) 23 Vulcan Materials Co. v. U.S., 446 F.2d 690 (5th Cir. 1971) 17, 2] In Re: Woodfield, 978 F.2d 516 (9th Cir. 1992) 20 Statutes Bankruptcy Code, 11 U.S.C. § 547 12 Internal Revenue Code, Title 26 U.S.C. 26 U.S.C. § 269 3,17 26 U.S.C. § 269 (a) 2] 26 U.S.C. § 404 25 26 U.S.C. §§ 1501-1504 25 viii TABLE OF AUTHORITIES—Continued Judicial Code, Title 28 U.S.C. Page 28 U.S.C. § 1254(1) 3 28 U.S.C. § 2101 (c) 3 National Labor Relations Act, 29 U.S.C. § 186 (c) (5) ii Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. § 1001 et seq. 29 U.S.C. § 1002 (2) i 29 U.S.C. § 1002 (37) (A) i] 29 U.S.C. § 1801 (a) (3) il 29 U.S.C. § 1201 (b) 6, 8, 12 29 U.S.C. § 1801 (b) (1) (1976) 1,16 29 U.S.C. § 1862(d) (1976) 5, 25 29 U.S.C. § 1862(d) (38) (1976) 6 29 U.S.C. § 1869 18, 24 29 U.S.C. § 1381 (a) 24 29 U.S.C. § 1892 (c) passim 29 U.S.C. § 1898 (1976) 5, 6, 25 29 U.S.C. § 1401 15 29 U.S.C. § 1401 (a) (3) (A) i, 4, 16 Multiemployer Pension Plan Amendments Act of 1980, Pub. L. 96-364, § 405, 29 U.S.C.A. § 1461 note (uncodified) 2.4 Rules Federal Rules of Appellate Procedure, Title 28 U.S.C. Appendix Rule 35 3 Rule 40.. 3 Supreme Court Rule 29.1 1] Third Circuit Rule 12 (6) 2 Third Circuit, Internal Operating Procedures 9.5.1 3 6.2.2(d) 18 Other 1996 Green Book 24 Pension Benefit Guaranty Corporation, Press Re- lease 97-09 24 IN THE Supreme Court of the United States OCTOBER TERM, 1996 THE TRUSTEES OF TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY; TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY AND CHARLES J. SCHAFFER, JR., its administrator and iduciary, Petitioners, Vv. FEDERAL EXPRESS CORPORATION; THE FLYING TIGER LINES, INC.; WARREN TRANSPORT, INC.; TIGER INTERNATIONAL, INC., Respondents. Petition for Writ of Certiorari to the United States Court of Appeals for the Third Circuit PETITION FOR WRIT OF CERTIORARI OPINIONS BELOW The judgment order of the Court of Appeals for the Third Circuit is reported in table format at 96 F.3d 1432 (table) and is reprinted in the Appendix to this Petition, p. la, along with the order on the petition for rehear ing, p. 24a. The memorandum decision of the District Court is published as Trustees of Teamsters Pension Trust Fund of Philadelphia and Vicinity v. Federal Express Corp., 1995 WL 791371, 20 Employee Benefits Cas. (E.B.C.) 1050 (D. Del. 1995). It is reprinted in the 2 Appendix to this Petition, page 5a. The decision of Arbitrator Robert E. Nagle is reported at 19 E.B.C. 2830. It is reprinted in the Appendix to this Petition, p. 72a. The determinations of the Fund are reprinted in the Ap- pendix at pp. 27a, 41a, 43a. They are not reported. This petition arises from a suit by Tiger International, Inc. and its affiliates against Petition and other multi- employer plans in Delaware for a declaration that it was not an “employer” responsible for withdrawal liability. See, Flying Tiger Line v. Central States S.E. & S.W.A. Pension Fund, 7 E.B.C. 2385 (D. Del. 1986) (case is not arbitrable); Flying Tiger Line v. Central States S.E. & S.W.A. Pension Fund, 659 F. Supp. 13, 7 E.B.C. 2392 (D. Del. 1986) (on reargument, case is subject to arbitra- tion); Flying Tiger Line v. Central States S.E. & S.W.A. Pension Fund, 8 E.B.C. 1241, 1986 WL 14904 (D. Del. 1986) (certification of appeal); Flying Tiger Line, Inc. v. Central States, S.E. & S.W.A. Pension Fund, 659 F. Supp. 13, 7 E.B.C. 2392 (D. Del. 1986) (denying motion for certification of defendant class); Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia and Vicinity, 830 F.2d 1241, 8 E.B.C. 2505 (3d Cir. 1987) (claims were subject to statutory arbitration under 29 U.S.C. § 1401). In Flying Tiger Line v. Central States S.E. & S.W.A. Pension Fund, 704 F. Supp. 1277, 10 E.B.C. 1882 (D. Del. 1989), the United States Dis- trict Court for the District of Delaware directed the arbi- tration leading to the present petition. See further, Flying Tiger Line, Inc. v. Central States, S.E. & S.W.A. Pension Fund, 715 F. Supp. 1284, 11 E.B.C. 1219 (D. Del. 1989) (attorney fee issues). These decisions and order are not involved in this Petition and have not been reproduced. STATEMENT OF JURISDICTION A panel of the United States Court of Appeals for the Third Circuit entered a judgment order under Rule 12(6) (3d Cir.), on August 20, 1996, p. la. The judg- 3 ment affirmed an order of the United States District Court for the District of Delaware, p. 5a. A timely combined petition for rehearing by the panel and sugges- tion of rehearing in banc pursuant to Fed.R.App.Pro. 40, 35 and Internal Operating Procedure 9.5.1 (3d Cir.) was filed on September 3, 1996. The petition for rehear- ing was denied on October 21, 1996, p. 24a. The ju- risdiction of this Court is invoked under 28 U.S.C. §§ 1254(1), 2101(c) on a petition for a writ of certiorari to review a final judgment of the United States Court of Appeals for the Third Circuit. CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED 26 U.S.C. § 269. Acquisitions made to evade or avoid income tax (a) In General—If— (1) any person or persons acquire, or acquired on or after October 8, 1940, directly or indirectly, control of a corporation, or (2) any corporation acquires, or acquired on or after October 8, 1940, directly or indirectly, property of an- other corporation, not controlled, directly or indirectly, immediately before such acquisition, by such acquiring corporation or its stockholders, the basis of which prop- erty, in the hands of the acquiring corporation, is deter- mined by reference to the basis in the hands of the trans- feror corporation, and the principal purpose for which such acquisition was made is evasion or avoidance of federal income tax by securing the benefit of a deduction, credit, or other allowance which such person or corporation would not otherwise enjoy, then the Secretary may disallow such deduction, credit or other allowance. For purposes of paragraphs (1) and (2), control means the ownership of 4 stock possessing at least 50 percent of the total combined voting power of all classes of stock entitled to vote or at least 50 percent of the total value of shares of all classes of stock of the corporation. 29 U.S.C. § 1392(c). Obligation to Contribute; Special Rules (c) If a principal purpose of any transaction is to evade or avoid withdrawal liability under this part, this part shall be applied (and liability shall be determined and collected) without regard to such transaction. 29 U.S.C. § 1401(a)(3)(A). Arbitration proceedings; matters subject to arbitration, procedures applicable, etc. (3)(A) For purposes of any proceeding under this sec- tion, any determination made by a plan sponsor under sections 1381 through 1399 of this title and section 1405 of this title is presumed correct unless the party contesting the determination shows by a preponderance of evidence that the determination was unreasonable or clearly errone- ous. 29 U.S.C. § 1301(b)(1)(1976). Definition. (b)(1) An individual who owns the entire interest in an unincorporated trade or business is treated as his own employer, and a partnership is treated as the employer of each partner who is an employee within the meaning of section 401(c)(1) of Title 26. For purposes of this sub- chapter, under regulations prescribed by the corporation, all employees of trades or businesses (whether or not in- corporated) which are under common control shall be treated as employed by a single employer and all such trades and businesses as a single employer. The regula- tions prescribed under the preceding sentence shall be consistent and coextensive with regulations prescribed for similar purposes by the Secretary of the Treasury under section 414(c) of Title 26. Section 405, Pub. L. 96-364. “(a) Except as otherwise provided in the amendments made by [the Muiti-employer Pension Plan Amendments Act, P.L. 96-364] and in subsection (b), if the way in which any such amendment will apply to a particular circumstance is to be set forth in regulations, any reason- able action during the period before such regulations take effect shall be treated as complying with such regulations for such period. “(b) Section (a) shall not apply to any action which violates any instruction issued, or temporary rule pre- scribed, by the agency having jurisdiction but only if such instruction or rule was published, or furnished to the party taking the action, before such action was taken.” 29 U.S.C. § 1398 (1976) (obsolete). 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 em- ployer shall not be considered to have withdrawn from a plan solely because— (1) an employer ceases to exist by reason of— (A) a change in corporate structure described in section 1362(d) of this title, or (B) a change to an unincorporated form of business enterprise, if the change causes no interruption in em- ployer contributions nor obligations to contribute under the plan, or For purposes of this part, a successor or parent corpora- tion or other entity resulting from any such change shall be considered the original employer. 6 29 U.S.C. § 1362(d) (1976) (obsolete). Liability of em- ployer (d) Corporate reorganizations For purposes of this section the following rules apply in the case of certain corporate reorganizations: (1) If an employer ceases to exist by reason of a reorga- nization which involves a mere change in identity, form, or place of organization, however effected, a successor corporation resulting from such reorganization shall be treated as the employer to whom this section applies. (2) If an employer ceases to exist by reason of a liquida- tion into a parent corporation, the parent corporation shall be treated as the employer to whom this section applies. (3) If an employer ceases to exist by reason of a merger, consolidation, or division, the successor corporation or corporations shall be treated as the employer to whom this section applies. STATEMENT OF CASE This case concerns a decision of the United States Court of Appeals for the Third Circuit which overturned a determination of the Trustees of the Teamsters Pension Trust Fund of Philadelphia & Vicinity (“Philadelphia Fund” or “Fund”) that Federal Express Corporation f/k/a Tiger International Corporation (“FedEx” or “Tiger”) was liable to the Fund for withdrawal liability pursuant to 29 U.S.C. §§ 1392(c), 1398, 1301(b) fol- lowing the shutdown of Tiger’s former subsidiary, Hall’s Motor Transit Company (“Hall’s”). Hall’s was solvent and profitable when Tiger Inter- national Corp. acquired 100% of the stock of Hall’s Motor Transit for $45,198,000 in January 1980. Hall’s remained a wholly-owned subsidiary of Tiger International, Inc. until January 1985 when Tiger “sold” the stock of Hall’s to Hall’s Acquisition Corporation, a corporation 7 formed by Hall’s chief financial officer, Alvin Bodford, for $1,000. The entire unamortized withdrawal liability due to the Fund admittedly accrued during this period of common control. Later in 1980, Tiger acquired two other trucking com- panies, Warren Transport, a profitable truckload carrier, and Dohrn Transfer, a very troubled Midwestern “less- than-truckload” carrier. Tiger merged Dohrn’s into Hall’s in April, 1981 and added another $15 million in with- drawal liability and additional $12 million in bank debt to Hall’s balance sheet. Tiger abandoned Hall’s traditional business and merged Dohrn into Hall’s in a grand shot at “one-stop” shopping on combined air, rail and trans- portation services in conjunction with other Tiger affil- iates. With the new Dohrn’s debt imposed by Tiger and loss of traditional business, Hall’s went into a downward spiral from which it never recovered. Tiger and its creditors were well aware of Tiger’s responsibility for unpaid pension debt of Hall’s or other subsidiaries. The potential liability was tracked by Arthur Andersen, Tiger’s auditors, based on fund confirmations from 1981 forward and was noted in annual financial statements. In 1983, Tiger and its affiliates defaulted on various debt and Flying Tiger, Tiger’s principal operating company, and Tiger executed the “Override Agreement” to cure defaults on approximately $588 million of debts in December 1983. The Override Agreement had a unique default clause that was triggered by the assessment of withdrawal liability (or other pension debt) against Tiger or Flying Tiger in an amount over $5 million. In December 1983, Tiger also executed a promissory note (the “Tiger Note”) for $132 million which was pledged to lenders for advances previously made to Tiger by North American Car Corporation (“NAC”) or “North American”), another Tiger subsidiary, as part of NAC’s restructuring agreements. The Tiger Note was due in 8 1991, but would be accelerated upon a default under the main NAC restructuring agreement or the Override Agreement. Tiger also restructured Hall’s inherited Dohrn’s debt with Prudential Capital and Exchange Na- tional Bank in 1983 through a new agreement involving Heller Financial—with a default clause in the absence of continuing Tiger ownership. The refinancing did not stop the red ink at Hall’s. Arthur Andersen gave qualified opinions for Hall’s from 1982 forward based on Hall’s working capital deficits, declining net equity, a proprietary failure model showing an 86% likelihood of near-term failure for Hall’s and other factors. By early March, 1984, Alvin Bodford, the chief financial officer of Hall’s, was telling Tiger that Hall’s was going nowhere and that something had to be done or Hall’s would be out of business. In March, 1984, Wayne Hoffman, the chief executive officer of Tiger, dispatched James Cronin, his special assistant “to deter- mine what was going on at Hall’s to make a recommenda- tion as to what should be done.” By May 10, 1984, Robert J. Harter, Tiger’s in-house counsel and a bankruptcy lawyer, prepared a set of materials for a Tiger Finance Committee meeting, explain- ing the problems at Hall’s in light of the liability of a parent corporation for withdrawal liability under 29 U.S.C. $ 1301(b). Hall's Motor Transit Company 1. Potential Net Worth Default. If operating results do not improve, Hall’s will violate the net worth covenant in its major loan agreement. Unless a waiver is obtained, this default could lead Hall’s lenders to foreclose on the equipment and accounts receivable which secure this debt. 2. MEPA Liability. Tiger’s exposure results from Hall’s $35,000,000 multiemployer pension plan liability. 9 (emphasis supplied). On May 16, 1984, six days after the Finance Committee meeting, Hoffman announced Cronin’s appointment as president of Hall’s. Despite Cronin’s appointment, Hall’s financial performance con- tinued to decline. By October 1984, John Lafferty of Arthur Andersen requested a meeting with Mr. Cronin because the “outlook for [Hall’s] continuing operations [was] very uncertain” and “survival [was] . . . the number one issue.” Mr. Lafferty “documented” a meeting with Cronin on October 6, 1984 in a contemporaneous memo: Yesterday I met with Jim Cronin, President and Chief Executive Officer to discuss with him the cur- rent operating situation at Hall’s and his outlook for the future. . . . I spent approximately one hour with Cronin and he very candidly acknowledged that the outlook for continued operations is very uncertain and that he and Tiger management are considering various alternatives at the present time. * * *k * As a result of the above two meetings, several things are noteworthy and I have listed them below simply to document them—.... 4) Cronin mentioned the multi-employer pension lia- bility (approximately $35 million) several times in several contexts. It’s clear that he and Tiger have focused on this as a real obstacle to doing something with Hall’s. 5) Cronin discussed the recent tender offer by Time- DC for Transcon and suggested that it might also he motivated by the multi-emplover pension liability. This offer was written up in the last issue of Trans- port Tonics on page 1. Although Cronin’s memory conveniently lapsed, Mr. Lafferty’s “documentation” is corroborated by a press release from William (“Bill”) Legg of Alex Brown & 10 Sons, whom Cronin had previously consulted, on October 5, 1984, about the structuring of the TIME-DC offer to avoid withdrawal liability. On November 2, 1984, the collateral agent for certain bank lenders to Tiger’s North American Car Corporation subsidiary advised Tiger that a net worth default had occurred as of September 30, 1984. This claim of default was not a surprise as it was was part of an ongoing problem with recalcitrant North American lenders and a settlement was reached to avoid default through a major public offering of depository convertible preferred stock in February 1995. Tiger (and Alvin Bodford, Hall’s CFO and the eventual “buyer” of the company) Knew that Hall’s would be out of cash and collapse by mid-January 1985 so as to trigger withdrawal liability and the related default clause in the Override Agreement. Tiger immediately engaged Alex Brown & Sons to sell Hall’s “now and cheap.” Tiger’s drive to close, despite better offers, was explained in a memorandum dated December 29, 1984 by Martin Imm of Prudential. Recent problems at Tiger International (Hall’s 100% owner) have led to its decision to precipitously sell 75% of its interest in Hall’s to its management for a nominal amount. Tiger plans to file a registration statement for some debt it is proposing to issue in the near future. By selling its control this weekend, prior to filing the registration statement, Tiger will avoid disclosing the large potential liability Tiger might face under Hall’s multi-employer union contract if Hall’s should ae (emphasis supplied). The disclosure related to the fact that an assessment of withdrawal liability of $5 Million or more was an event of default under Tiger’s Override Agreement covering some $588 Million in debt. 1] On December 5, 1996, Whit Lee proposed an acquisi- tion of Hall’s for the $15-20 Million price (60% of book equity) sought by Cronin and Alex Brown on an orderly basis and subject to due diligence. Alex Brown’s internal notes show a December 6 call to Lee: 12/6 Questions for Whit: —Close by year end? —Is $2.5 [the cash portion of the offer] real avail- able? —How real is ability to finance deal and make viable? (Meppa concern) —Steps to closing Lee cut his price to $1,000 in response for reasons docu- mented by a contemporaneous memorandum of Donald Goffman from Exchange Bank of a December 19, 1984 meeting of Cronin, Bodford, Hall’s lenders and Lee: He [Lee] went on to explain that he saw a need for $5 million in cash for Hall’s to get them through the first three period (January-March). Given that com- ment I asked Mr. Lee what we could expect from him as a capital infusion as its new owner to which he replied, “None!” Needless to say, this surprised all attendants, espe- ciallly Mr. Cronin. It was his understanding that the new owner would contribute somewhere between $5 million to $10 million. Therefore, it was Mr. Lee’s plan all along for Tiger to finance the buyout of itself while the current lenders pumped in another $5 mil- lion to keep Hall’s going. Wherein, Mr. Lee would then be around if and when Hall’s became profitable. It was Mr. Lee’s contention that upon consummation of the transaction, his risk would be the assumption of a $38 million unsecured and unfunded liability arising from the company’s pension plan. (emphasis supplied). Whit Lee’s December 19, 1984 proposal was literally an offer to Tiger to take Hall’s with- drawal liability off Tiger’s hands for $1,000. Tiger was willing to accept immediately. Lee overplayed his hand with boasts of his use of bankruptcy proceedings to reject labor contracts at IML Freight and alienated Hall’s lenders who had to join the deal. The lenders had no loan agreement nor security with Terminal Rental, Inc. (“TRI”), Hall’s real estate holding company and subsidiary. The real estate assets of TRI, as a trade or business under common control, would thus fall to pension creditors under 29 U.S.C. $ 1301(b) in the event that Hall’s shutdown and trig- gered liability. The lenders wanted additional security in the real estate of Hall's and its Terminal Rental sub- sidiary in order to be “S[enio]lr to MEPA [withdrawal liability claims]” in a Hall’s bankruptcy. They feared that Lee would put Hall’s in bankruptcy to avoid labor con- tracts (as he had done with IML Freight) and that the bankruptcy would invalidate the new security as a pref- erence under 11 U.S.C. § 547. Hoffman explained that Tiger gave the company away to Bodford in desperation for the $1,000 and terms pro- posed by Lee, even though he was not a ‘credible buyer,” because Tiger had run out of “reasonable alternatives” to meet the December 31 disclosure deadline. Bodford understood “. .. that Tiger expected Hall’s to assume the [withdrawal] liability but, in essence, knew they couldn’t get away from the liability.” Bodford jumped in to take the Company for nothing as he had nothing to lose and did not want it to be given away to an outsider. Bodford confirmed this in a 1985 letter to Tiger noting that the sale was not a bona fide arms-length transaction. While the lenders’ internal notes indicated that * Bod- ford not to be CEO,” Hall’s lenders waived a default by reason of a lack of Tiger ownership and consented to the 13 sale when Tiger and Bodford gave the lenders new se- curity. The Hall’s lenders got real estate collateral worth $36 million for a $5 million line of credit (a net advance of $2.5 million over existing lines) with no future com- mitment for additional credit to Hall’s or Terminal Rental. The loans were explicitly done on an “asset-based financ- ing” protocol rather than on the basis of projected earn- ings of Hall’s. The Tiger Board of Directors approved the sale of 75% of Hall’s for $1,000 in a telephone conference on New Year’s Eve, December 31, 1984 at 9:00 a.m. Neither Cronin, Hoffman nor any contemporaneous Tiger docu- ments provide any rationale for the Bodford giveaway to the Board. Bodford found the “whole process . . . very amusing.” On January 7, 1995, Tiger “sold” 75% of the equity of Hall’s for one thousand dollars. Tiger paid $1 Million in closing costs, agreed to continue its guarantees and bonds related to Hall’s insurance coverage needs for one year after the sale and reduced its claim against Hall’s by $1.3 Million. Tiger got a subordinated security interest for its $10.5 million inter-company debt against a future Hall’s oankruptcy. By the end of 1985, Tiger had com- pletely written off the note as worthless. Tiger also re- tained a nominal 25% equity share in Hall’s but imme- diately wrote it off in full on December 31, 1984 to show a complete loss of its investment in Hall’s as a discontinued operation. Bodford’s quid pro quo was an explicit agree- ment not “to take any action which might result in any liability of [Tiger] under MPPAA.” Hall’s (not Bodford) also agreed to indemnify Tiger for any MPPAA liability Tiger might incur. Hall’s had no reasonable chance of survival after the Bodford giveaway. Its financial condition prevented it from obtaining insurance or worker compensation cover- age which was necessary to operate. Tiger agreed to 14 supply this coverage only for one year—the bankruptcy preference period for an insider under 11 U.S.C. § 547. At the time of the sale, Arthur Andersen noted that the wall-to-wall security interest given to Tiger and the lenders deprived Hall’s of any source of cash to fund anticipated losses. Hall’s got a temporary reprieve from an agree- ment with employees for a 15% wage reduction in ex- change for an employee stock ownership plan (“ESOP”) which ultimately was to hold 40% of the stock of Hall’s. By the fall of 1985, however, Hali’s losses had mounted to $9 million and Hall’s encountered a “severe liquidity crisis. With Hall’s going down the tubes, Bodford scheduled a meeting to redeem all outstanding shares in Hall’s, other than Tiger’s shares in early December 1985, so as to leave Tiger once again Hall’s 100% shareholder with exposure to withdrawal liability. Harter and other responsible Tiger officials were profoundly “embarrassed” that they had made such a planning error in the disposition of Hall’s. Tiger agreed to sacrifice its remaining debt interest and all of its remaining equity in Hall’s for nothing in order to avoid the “gun to [Tiger’s] head” of MPPAA liability. Bodford then canceled the meeting to redeem the stock.’ Hall’s was pushed into bankruptcy within a month after Tiger and the lenders withdrew support when their new security was no longer subject to attack as a preference in bankruptcy. Hall’s filed for reorganization in bank- ruptcy in March 1986 and shut down operations outside Pennsylvania so as to trigger a duty to pay withdrawal liability to the Central States Southeast & Southwest Areas Pension Fund and other plans at the time. Even though 1 After the bankruptcy, Bodford had the $15 Million Hall’s net operating loss (NOL) carry forward and acquired Epes Transport where he is now president, Teamsters Pension Trust Fund of Philadelphia and Vicinity v. Brigadier Leasing, 889 F.Supp. 388 (E.D. Pa. 1995). Like withdrawal liability, use of the multimillion dollar NOL carry forwards of Hall’s in an acquisition requires 80% common control. 15 no withdrawal from the Philadelphia Fund had occurred, Tiger (a Delaware corporation based in Los Angeles) sued the Philadelphia Fund and other multiemployer plans in Delaware for a declaration that it was not an “em- ployer” responsible for withdrawal liability on July 3, 1986 and litigated whether the issues would be tried in court or arbitration. In Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia and Vicinity, 830 F.2d 1241 (3d Cir. 1987), the Third Circuit found that Tiger’s claims were subject to statutory arbitration under 29 U.S.C. § 1401. Hall’s subsequently shut down in Pennsylvania in 1987 and withdrew from the Philadelphia Fund. On January 20, 1988, the Fund assessed Tiger for allocable unfunded vested benefits of $2,100,228 to be paid in 23 quarterly installments of $109,085 and a final payment of $82,904, p. 27a, and issued a detailed factual determination to support its assessment, pp. 43a-7la. Arbitration and judicial review under 29 U.S.C. § 1401 followed. REASONS FOR GRANTING THE WRIT Should UPS (the Petitioner’s major and largest single contributor) really be required to pay the pension debt of FedEx? The Third Circuit held that the Fund cannot recover from FedEx without unequivocal proof that Bodford had criminal intent to defraud the Fund in taking a gift of Hall’s for $1,000 and that FedEx had no “plausible and valid” reason to dispose of Halls other than evasion of withdrawal liability. In Central States, SW. & S.W.A. Pension Fund v. Santa Fe Industries, 22 F.3d 725, 726- 727 (7th Cir. 1994), the Seventh Circuit explicitly re- jected this restrictive approach as inconsistent with the plain language of the statute which invalidates any trans- action with “a principal transaction to evade or avoid withdrawal liability” even though other motives may be present. 16 The purpose of withdrawal liability is “. . . to protect other employers in the multiemployer pian from having to pay for those [pension] benefits which are properly the responsibility of other employers,” Santa Fe, 29 F.3d at 726-727. For this and tax reasons, see p. 25 and n.5, infra, the liability extends to a contributing business and trades or businesses under 80% common control, 29 U.S.C. § 1301(b)(1); Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia and Vicinity, 830 F.2d 1241, 1244 (3d Cir. 1987). 29 U.S.C. § 1392(c) correspondingly provides that “[i]f the principal purpose of any transaction is to evade or avoid withdrawal liability under this part, this part shall be applied (and liability shall be determined and collected) without regard to such transaction.” The Fund issued a detailed determination explaining that the gift of Hall’s to Bodford was a fraudulent con- veyance under common law standards, pp. 49a-58a, which should be disregarded under 29 U.S.C. § 1392(c) so that Tiger and its subsidiaries would remain under com- mon control with Hall’s and be liable for the withdrawal liability incurred during common control. All of the con- temporaneous documents and disinterested witnesses con- firmed these conclusions at trial and showed that the gift to Bodford was driven by a need to avoid an imminent assessment of withdrawal liability. The uncontested evidence of fraud should have ended the matter as the Fund’s determination was presumptively correct under 29 U.S.C. § 1401(a)(3)(A) and Tiger failed to carry its burden of proof to show that with- drawal liability was not an important factor in the gift to Bodford, Concrete Pipe and Products of California, Inc. v. Construction Laborers Pension Trust for Southern California, 508 U.S. 602, 113 S.Ct. 2264, 124 L.Ed.2d 539 (1993); Teamsters Pension Trust Fund of Philadel- phia & Vicinity v. Fuqua Industries, Inc., 509 U.S. 901, 113 S.Ct. 2989, 125 L.Ed.2d 684 (1993) reversing 981 IN gt i i SS cr 17 F.2d 1248 (3d Cir. 1992) (table) and 1992 WL 70418, 15 E.B.C. 2271 (E.D. Pa. 1992) (reversing evade or avoid decision allocating burden of proof on evade or avoid claim under 29 U.S.C. § 1392(c) to Fund for fur- ther proceedings under Concrete Pipe).- The Arbitrator was however a former PBGC official with his own views of the statute which Congress should have written who— as in his prior rulings—merely gave lip service to the presumption while “. . . not in fact afford[ing] the trus- ees’ determination the benefit of the presumption,” Combs v. Classic Coal Corporation, 931 F.2d 96, 100 (D.C. Cir. 1991) (reversing Nagle on this basis). The Third Circuit effectively reversed Concrete Pipe and Fuqua with its unqualified endorsement of the arbitrator’s impossible standard as a correct statement of the law in a per curiam decision to deflect further review in this Court. I. THE THIRD CIRCUITS “GOOD FAITH” STAND- ARD REQUIRING PROOF OF CRIMINAL FRAUD- ULENT INTENT BY A TRANSFEREE TO IMPOSE CIVIL PENSION LIABILITY ON A TRANSFEROR IS IN CONFLICT WITH OTHER CIRCUITS If the gift of Halls to Bodford for $1,000 in this case is not an example of “a transaction with a principal pur- pose to evade or avoid” pension liability which is disre- garded under 29 U.S.C. § 1392(c), there is no such case and the statute is meaningless. The Third Circuit none- theless rejected the Fund’s determination based on its conclusion that 29 U.S.C. § 1392(c) is merely a “good * The rule of Concrete Pipe is consistent with the rule applied to tax cases under the parallel language of 26 U.S.C. § 269. See, Herculite Protective Fabrics Corp. v. Comm’r, 387 F.2d 475, 476 (3d Cir. 1968); Scroll, Inc. v. Comm’r, 447 F.2d 612, 616 (5th Cir. 1971); Vulcan Materials Co. v. U.S., 446 F.2d 690, 698-699 (5th Cir. 1971). It has been the rule on tax cases for decades. Botany Worsted Milis v. U.S., 278 U.S. 282, 289-290, 49 S.Ct. 129, 73 L.Ed. 379 (1929); U.S. v. Janis, 428 U.S. 4383, 440, 96 S.Ct. 3021, 49 L.Ed.2d 1046 (1976). 18 faith” requirement, Dorn’s Transportation v. Teamsters Pension Trust Fund of Philadelphia and Vicinity, 787 F.2d 897, 902 (3d Cir. 1986) which is not implicated ‘“. . when the seller enters a transaction to escape lia- bility, but the buyer has no intention of taking subsequent actions that will reduce the payments owing to the plan.” Dorn’s, 787 F.2d at 902. The Third Circuit has now gone further to conclude that there is no “error of law,” Internal! Operating Procedure 6.2.2(d) (3d Cir.), in the arbitra- tor’s conclusion that a mere “good faith expectation,” p. 112a, by the donee Bodford that he could continue the business of Hall’s against all odds is sufficient to prevent imposition of liability on FedEx—notwithstanding the arbi- trator’s concession that this interpretation is at odds with the plain language of the statute, p. 107a, n.6. PBGC v. White Consolidated Industries, 998 F.2d 1192 (3d Cir. 1993) similarly concluded that the parallel evasion lan- guage of 29 U.S.C. § 1369 on single-employer pension plan liability likewise requires proof that the “buyer” of a business had no reasonable chance of success in order to impose liability on the “seller.” In the view of the arbitrator and Third Circuit, Section 1392(c) is limited to “essentially fraudulent maneuvers lacking in economic substance,” p. 107a, n.6. See also, Cuyamaca Meats, Inc. v. San Diego & 1.C. Butchers Pen- sion Fund, 638 F.Supp. 885, 890 (S.D.Cal. 1986) aff'd 827 F.2d 491 (9th Cir. 1987) (same phrase). The trans- action will have sufficient “economic substance” to avoid attack as long as the employer articulates “plausible and valid” reasons for a sale after the fact, p. 12la, even though those reasons do not explain the form, price and timing of the actual transaction absent evasion of with- drawal liability. The simple proposition that a creditor must show the fraudulent intent of a donee to recover from the donor is unprecedented and illogical. The gift to Bodford and his active participation in the fraud with knowledge of Tiger’s purpose would negate “good faith’ ’and allow 19 recovery from a transferee in the ordinary law of fraud, U.S. v. Tabor Court Realty Corp., 803 F.2d 1288, 1299 (3d Cir. 1986) quoting The Uniform Fraudulent Con- veyance Act in Pennsylvania, 5 U.Pitt.L.Rev. 161, 186 (1939) (“good faith” defense by recipient for fraudulent conveyance requires proof that the transfer was made for value and “without knowledge” of the fraudulent purpose of the transferor). The “good faith expectation” standard of the Third Circuit goes further to track the standard of Cheek v. U.S., 498 U.S. 192, 202, 111 S.Ct. 604, 611, 112 L.Ed.2d 617 (1991) on “good faith” as a defense to negate willfulness in criminal evasion of income tax based on “a good-faith misunderstanding and belief submission, whether or not the claimed belief or misunderstanding is objectively reasonable” in a civil case. The Third Circuit’s allowance for a post hoc articula- tion of. “plausible and valid” reasons for any sale as a defense transforms the statutory language to require proof that evasion of withdrawal liability was the only economic reason for a transaction. With the burden of persuasion on intent clearly placed on Tiger by statute, this contra- dicts the conclusion of Price Waterhouse v. Hopkins, 409 U.S. 228, 252, 109 S.Ct. 1775, 1791, 104 L.Ed.2d 268 (1989) that “. . . the employer may not, .. , prevail .. . by offering a legitimate and sufficient reason for its deci- sion if that reason did not motivate it at the time of the decision.” The Seventh Circuit decision in Santa Fe emphatically rejected the restrictive approach of the Third Circuit: The statutory criterion is not whether the transaction is a sham, having no purpose other than to defeat the goals of the Multi-employer Pension Plan Amend- ments Act by leaving the other employers in the multiemployer pension plan holding the bag. It is whether the avoidance of withdrawal liability by the seller (not necessarily by the purchaser as well) is 20 one of the principal purposes of the transaction.” Santa Fe, 22 F.3d at 729-730.* The imposition of withdrawal liability in a sale of business situation requires only that a principal pur- pose of the sale be to escape withdrawal liability. It needn’t be the only purpose; it need only have been one of the factors that weighed heavily in the seller’s thinking .. ., . . . we would be doing violence to the language and purpose of the statute if we read “a principal” as “the principal.” Santa Fe, 22 F.3d at 727. See also American Hospital Association v. NLRB, 499 U.S. 606, 111 S.Ct. 1539, 113 L.Ed. 2d 675 (1991) (plain meaning of “a” means one of several). 46 The arbitrator’s . Opinion, . . ., is devoted to irrelevant questions, such as whether Santa Fe had reasons independent of withdrawal liability to divest itself of SFTT and whether it knew that the purchaser of SFTT was likely to flop. The issue is not whether Santa Fe had compelling reasons independent of withdrawal liability to divest itself of SFTT; that is a given. The issue is the form the divestiture took— the sale of stock rather than of assets. Santa Fe, 22 F.3d at 729 (emphasis in original). Under the Santa Fe test, Tiger’s willingness to accept $1,000 for Hall’s as long as Bodford or Lee accepted the withdrawal liability after rejecting prior offers from Bod- ford and Lee for $10 to $15 Million (subject to due dili- gence and without assumption of withdrawal liability) is sufficient to establish that withdrawal liability was ‘“a” principal purpose of the transaction. 3 The common law of fraud may look to the identity of the buyer as an insider or the knowledge of the donee or “buyer” as eviden- tiary “badges of fraud” but does not make them necessary elements of a claim against the “seller.” See, e.g. Jn re: Woodfield, 978 F.2d 516, 518 (9th Cir. 1992); Douglas Guardian Warehouses v. Jones, 405 F.2d 427, 429 (10th Cir. 1969); Duncan v. First Nat’l Bank of Cartersville, Ga., 597 F.2d 51, 56 (5th Cir. 1979) (close relation- ship between transferor and transferee). 21 The Santa Fe approach is supported by “the general rule that adoption of wording of a statute from another legislative jurisdiction carries with it the previous judicial interpretations of the wording.” Shannon v. U.S., 512 U.S. 573, 114 S.Ct. 2419, 2425, 129 L.Ed.2d 549 (1994) quoting Carolene Products Company vy. U.S., 323 US. 18, 26, 65 S.Ct. 1, 5, 89 L.Ed. 15 (1944). The parallel language of 26 U.S.C. § 269(a) on civil liability for evasion of income taxes has consistently applied the Santa Fe standard. See, Slappey Drive Industrial Park v. U-.S., 561 F.2d 572, 586 (Sth Cir. 1977) (decision maker for company failed to relate vague contentions, many palpably trivial, to the actual decision and transaction); Scroll, Inc. v. Comm’r, 447 F.2d 612, 616-617 (Sth Cir. 1971) (taxpayer with burden of proof in 26 U.S.C. § 269 case must show that the non-evasive reasons required the form chosen and not just that they could have justified it as “afterthoughts” or “window dressing”); Vulcan Materials Co. v. U.S., 446 F.2d 690, 699 (Sth Cir. 1971) (proof that the actual reason for the merger was alleged concern about the steel industry was required); Bobsee Corp. v. U.S., 411 F.2d 231, 239 (5th Cir. 1969) (uncontradicted reasons did not explain the existence of seven separate corporations); Southeastern Canteen Co. v. Comm’r, 410 F.2d 615, 623 (6th Cir. 1969) (transaction invalidated where no reason shown for particular form of transaction other than evasion of taxes); House Beautiful Homes v. Comm’r, 405 F.2d 61, 67 (10th Cir. 1968) (principal purpose need not be sole motivation; showing of general non-tax purpose to minimize risk is insufficient defense) ; Herculite Protective Fabrics v. Comm’r, 387 F.2d 475, 475-476 (3d Cir. 1968) (bargain price shows evasion; taxpayer failed to overcome presumption and show a non- evasive purpose under 26 U.S.C. § 269); Coastal Oil Storage v. Comm’r, 242 F.2d 396, 397 (4th Cir. 1957) (stated reasons insufficient where separate bookkeeping would have met all stated goals); Orvis v. Higgins, 180 F.2d 537, 539 (2d Cir. 1950) (no reason other than 22 evasion shown to explain life estate trusts); Beacon Auto Radiator Co., Inc. v. Comm’r, 52 T.C. 155, 162 (1969) (no connection between transfer and stated reason); Dillier v. Comm’r, 41 T.C. 762, 785-788 (1964) aff'd 357 F.2d 647 (9th Cir. 1966) (no stated reasons ex- plained why one corporation was not adequate; partner- ship form was used for most profitable investment). Neither the Third Circuit nor arbitrator advanced any rationale for a different rule for the same language in 29 U.S.C. § 1392(c). The factual similarity between Tiger and Santa Fe is uncanny with claimed differences smacking of semantics rather than substance. Although “actors in our free enter- prise system are not primarily guided by their eleemo- synary impulses,” Flying Tiger, 830 F.2d at 1254, n. 21, Tiger, like Santa Fe, attributed its desire to take $1,000 and a complete loss of investment on its books to con- cern that the higher yield for an orderly sale or “ piecemeal liquidation could not be known for sure in advance .. .,” Santa Fe, 22 F.3d at 729. Wayne Hoff- man, Tiger’s chairman, ultimately could explain the gift to Bodford only as a direction from even higher authori- ties who ordained a “godsend” to free Hall’s from Tiger. Tiger sought to avoid the “gun to its head” of MEPPA liability while Santa Fe was only “. . . sort of hit with the two by four about MPAA.” Santa Fe, 22 F.3d at 728. Tiger and Cronin focused on withdrawal liability “. as a real obstacle to doing something with Hall’s,” while withdrawal liability was only “. . . a major stumbling block in implementing the liquidation . . .” of its SFTT subsidiary to Santa Fe, Santa Fe, 22 F.3d at 728. As in Santa Fe, Tiger had a subsidiary “whose prospects for a turnaround were not good.” Santa Fe, 22 F.3d at 728, and initially sought a “large, financially strong purchaser” but then turned to “ ‘desperation moves,’ Santa Fe, 22 F.3d at 729, by selling to Bodford for $1,000 even though he was not a “credible buyer” because Tiger had run out 23 of “reasonable alternatives” to sell Hall’s before it collapsed. The arbitrator’s claims, pp. 128a-135a, that he was “not able to attribute . . . smoking gun significance” to the Lafferty memo, p. 130a, and could not find an evasive purpose in the uncontested lender memoranda, repeated references to “MPPA” throughout negotiations and the testimony of every disinterested witness that withdrawal liability drove the sale of Hall’s are not findings of fact to which a court should defer. See, Orvis v. Higgins, 180 F.2d at 539 citing U.S. v. Yellow Cab Co., 338 USS. 338, 70 S.Ct. 177, 94 L.Ed. 150 (1949) (court reviews documentary evidence and uncontested matters for appli- cation of law in tax evasion case without deference to trial court). As in Santa Fe, they are simply “an inference from the testimony (and other evidence) not the testimony itself’ and furnish no basis to ignore uncontested and “[{iJnternal documents that cannot be explained away [which] make clear that . . . management was both aware of the company’s potential withdrawal liability .. . and aware that a sale of the company might avoid it.” Santa Fe, 22 F.3d at 728, 729. Il. THE ISSUES PRESENTED ARE IMPORTANT TO PREVENT DUMPING OF UNFUNDED PEN- SION LIABILITY IN THE BILLIONS ON OTHER EMPLOYERS AND THE FEDERAL GOVERNMENT With evisceration of the prohibitions on evasion of pen- sion liability by the Third Circuit, any Delaware corpora- tion with the money to write “sale” papers and file suit can follow Tiger’s declaratory judgment route (from its base in Los Angeles) into Delaware to obtain judicial immunity against future actions by PBGC or pension plans. This places the public at risk on more than $80 Billion of unfunded pension liability insured by PBGC, PBGC Release 97-09 (Pension Underfunding and Top 50 List) (estimated $64 Billion in unfunded pension 24 liabilities for single employer plans); 1996 Green Book, § 15 (Pension Benefit Guaranty Corporation) (multi- employer plan exposure of $20 Billion in 1993). The multiemployer plan exposure and the $20 Billion in pen- sion debt of companies with bond ratings below invest- ment grade, PBGC Release 97-09, is most directly affected. The Third Circuit is separately home to a dispropor tionate share of plans with significant unfunded liabilitics which pose a real risk to the public fisc. The $180,561,694 in unfunded liabilities for the Teamsters Pension Trust Fund of Philadelphia & Vicinity is open game as the decision below makes it impossible to pursue prior con- trol group members in the Third Circuit. The Third Circuit also covers many of the most underfunded single- employer pension plans in the country including LTV Corporation ($1.444 Billion), see PBGC v. LTV Corp., 496 U.S. 633, 110 S.Ct. 2668, 110 L.Ed. 2d 579 (1990) (restoring $2.1 Billion in pension debt for LTV Steel); Westinghouse Electric Co. ($2.843 Billion); Bethlehem Steel ($2.222 Billion); Inland Steel ($612 Million); Armco, Inc. ($587 Million); Unisys ($505 Million); US Air ($458 Million); Natural Steel ($458 Million); Crown Cork & Seal, Inc. ($396 Million) and Mack Trucks ($332 Million. With no teeth in the “evade or avoid” prohibi- tions of 29 U.S.C. $$ 1369, 1392(c), the business incen- tive to shed pension debt, in whole or in part, through sales of failing businesses to weak buyers for nominal sums and closing costs will be virtually irresistible. The Third Circuit precluded any claim against prior control group members in rejecting the Fund’s partner- ship approach to control group changes which should have been enforced under § 405 of MPPAA, P.L. 96-364, 29 US.C.A. § 1461 note (uncodified). To paraphrase Central States, S.E. & S.W.A. Pension Fund v. Robinson Cartage, 55 F.3d 1318, 1323 (7th Cir. 1995), “[t]he simple use of the present tense in [29 U.S.C. § 1381(a)] 25 is not enough to indicate which time period should be used . . . [to] yield a logical fesult” in identifying the “employer” who is responsible for withdrawal liability. 29 U.S.C. § 1398, 1362(d) (1976) do however treat both groups emerging from a “division” of the control group “employer”’—-such as the sale of Hall’s—as the “original employer.” * The Fund thus concluded that Tiger, as well as Hall’s, remained jointly and severally liable for the unamortized balance of withdrawal liability which accrued during their affiliation based on analogous rules for annualized income tax liability® and partnership dissolution concepts. See, 26 C.F.R. §§ 1.1502-6(b), 1.1502-77(b) (1980) (termi- nation of common control does not relieve an affiliate of joint and several liability for income tax which arose during affiliation); Crane & Bromberg, The Law of Part- nership, pp. 444, 447 (1968) (departure of a partner “dissolves” the partnership [in MPPAA and tax: causes the control group “employer” to “cease to exist”] but the departing partner remains liable for debt incurred before the dissolution until it is paid in full). The Third Circuit’s rejection of this view conflicts with the conclusion of Trustees of Amalgamated Insurance Fund v. McFarlin’s, 789 F.2d 98, 103 (2d Cir. 1986) that “with- drawal liability represents an employer’s accelerated con- * The statute has been amended but its 1976 version is applicable to this matter, Flying Tiger. 886 F.2d at 1253-1254 & n.20. * Control group liability for unfunded pension debt balances the favorable tax treatment of contributions under 26 U.S.C. 8 404 which is available to any member of a controlled group of corpora- tions under 26 U.S.C. §§ 1501-1504 to assure that the debt under- lying the deduction actually is paid. C.F., Comm’r vy. Tufts, 461 U.S. 300, 103 S.Ct. 1826, 1830 n.4, 1833-4, 75 L.Ed.2d 863 (1983) (imputed income on forgiveness of loan justifying prior interest deduction is logical even if the overall] transaction is “ruinous” as a result); In Re: Juvenile Shoe Corp. of America, 99 F.3d 898, 901 (8th Cir. 1996) (reversion tax of 26 U.S.C. § 4980 iS a reason- able counterbalance to correct lost income tax). 26 tribution of funds needed to finance employees’ pension rights . . . which have not been fully funded . . .” and does not simply spring out of nowhere at the pinpoint of withdrawal. The disagreement on this point affects the national economy on the bankruptcy priority issues of McFarlin’s and assures the dumping of billions of dollars in pension liability. CONCLUSION The Court should issue a writ of certiorari to the United States Court of Appeals for the Third Circuit. Respectfully submitted, KENT CPREK (Counsel of Record) SAGOT, JENNINGS & SIGMOND 510 Walnut Street—16th Floor Philadelphia, PA 19106-3683 (215) 351-0615 DAVID C. MCBRIDE BARRY M. WILLOUGHBY YOUNG, CONAWAY, STARGATT & TAYLOR 11th Floor Rodney Square North P.O. Box 391 Wilmington, DE 19899-0391 (802) 571-6666 Attorneys for Petitioners APPENDICES la APPENDIX A UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT No. 96-7050 PHE FLYING TIGER Line, INC., a Delaware corporation; TIGER INTERNATIONAL, INC., a Delaware corporation; WARREN TRANSPORT, INC., an lowa corporation; V. CENTRAL STATES, SOUTHWEST AND SOUTHRAST ARRAS PENSION FUND, a multiemployer pension plan; TEam- STERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY, a multiemployer pension fund; WESTERN PENNSYLVANIA TEAMSTERS AND EMPLOYERS PENSION FUND, a multiemployer pension plan; TRAMSTERS LocaL 641 PENSION FUND, a multiemployer pension plan; TRUCKING EMPLOYEES OF NorTH JERSEY WEI FARE FUND, a multiemployer pension plan; CENTRAI PENNSYLVANIA TEAMSTERS PENSION FUND, a multi employer pension plan, each sued individually and as a member of a class of similarly situated multiemployer pension plans who assert withdrawal liability, against Hall’s Motor Transit Company, Under the Multi- employer Pension Plan Amendments Act of 1980 (D.C. No. 86-cv-00304) TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY; THE TRUSTEES OF TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND _ VICINITY: CHARLES J. SCHAFFER, Jr., its administrator and fidu- clary V. 2a FEDERAL EXPRESS CORPORATION: THE FLYING TIGER LINES, INC.: WARREN TRANSPORT, INC.: TIGER INTERNATIONAL (D.C. No. 94-cv-00017 ) FEDERAL EXPRESS CORPORATION; THE FLYING TIGER LINE, INC.; WARREN TRANSPORT, INC.; TIGER INTERNATIONAL Ve TEAMSTERS PENSON TRUST FUND OF PHILADELPHIA AND VICINITY; THE TRUSTEES OF TEAMSTERS PENSION TRUST FFUND OF PHILADELPHIA AND _ VICINITY; CHARLES J. SCHAFFER, JR. (D.C. No. 94-cv-00033 ) FEDERAL EXPRESS CORPORATION; THE FLYING TIGER LINES, INC.; WARREN TRANSPORT, INC.; TIGER INTERNATIONAL THE TRUSTEES OF TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY; TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA; CHARLES J. SCHAFFER, JR., its administrator (D.C. No. 94-cv-00112) THE TRUSTEES OF TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY; TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY; CHARLES J. SCHAFFER, JR., its administrator and fiduciary Vv. 3a FEDERAL EXPRESS CORPORATION; THE FLYING TIGER LINES, INC.: WARREN TRANSPORT, INC.: TIGER INTERNATIONAI (D.C. No. 94-cv-00130) THE TRUSTEES OF TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY; TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY; CHARLES J. SCHAFFER, JR., its administrator and fiduciary, Appellants Appeal from the United States District Court for the District of Delaware (D.C. Civil No. 86-00304 ) District Judge: Honorable Sue L. Robinson ARGUED August 7, 1996 BEFORE: NYGAARD, LEWIS and MCKEE. Cir- cuit Judges. JUDGMENT ORDER After consideration of all contentions raised by the appellants, it is ADJUDGED AND ORDERED that the judgment of the district court entered on December 27, 1995. be and is hereby AFFIRMED, essentially for the reasons set forth in the district court’s opinion. 4a Costs taxed against the appellants. By THE COURT: s/ [Illegible] Circuit Judge Attest: /s/ [Illegible] Chief Deputy Clerk Dated: August 20, 1996 Sa APPENDIX B IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE Civil Action Nos. 86-304; 94-017; 94-033: 94-112; and 94-130-SLR THE TRUSTEES OF TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY. TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY, and CHARLES J. SCHAFFER, JR., its administrator and fiduciary, Plaintiffs, V. FEDERAL EXPRESS CORPORATION, THE FLYING TIGER LINES, INC., WARREN TRANSPORT, INC., and TIGER INTERNATIONAL, INC. ° we Defendants, and FEDERAL EXPRESS CORPORATION, THE FLYING TIGER LINE, INC... WARREN TRANSPORT, INC., and TIGER INTERNATIONAL, INC.. a INC Plaintiffs, ¥. THE TRUSTEES OF TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY, TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY, and CHARLES J. SCHAFFER, JR.. its administrator. Defendants. Dated: December 27, 1995 Wilmington, Delaware 6a MEMORANDUM OPINION ROBINSON, District Judge I. INTRODUCTION This litigation is the latest chapter in a case that has lingered for nearly ten years. The dispute arose from the bankruptcy of Hall’s Motor Transit Company, Inc. (“Hall’s”) in March 1986, and the company’s resulting withdrawal from the Teamsters Pension Trust Fund of Philadelphia and Vicinity (“the Philadelphia Fund”). Between 1980 and 1985, Hall’s was a fully owned sub- sidiary of Tiger International, Inc. (“Tiger”). In January 1985, Tiger sold 75% of Hall’s shares to a management buyout group, Hall’s Acquisition Corporation (“HAC”), and later transferred its remaining 25% interest as well. After Hall’s declared bankruptcy in 1986, the trustees of several pension plans to which Hall’s had been con- tributing assessed withdrawal liability against Tiger. In response, Tiger filed suit seeking a declaration that it was not responsible for Hall’s withdrawal liability. Tiger eventually settled with all of the funds except the Phil- adelphia Fund, and the remaining dispute was ordered into arbitration by the Third Circuit. Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia & Vicinity, 830 F.2d 1241 (3d Cir. 1987). The Philadelphia Fund now brings this suit pursuant to 29 U.S.C. § 1401(b)(2) to vacate the arbitrator’s deci- sion finding no withdrawal liability on the part of Tiger. Tiger has moved to enforce the arbitrator’s award. Be- cause the court finds no clear error in the arbitrator’s conclusions of fact and no error of law, Tiger’s motion to enforce the award will be granted, and the Philadelphia Fund’s motion to vacate will be denied. 7a Il. BACKGROUND The facts as set out in the Arbitrator’s Findings, Opin- ion and Award (D.I. 254 at 6131 et seq.) are as fol- lows: * Tiger was a transportation services holding company whose subsidiaries included Flying Tiger Lines, Inc. (“Flying Tiger”), a cargo airline; North American Car Corpoartion (“North American”), a rail car leasing com- pany; Tiger Air, Inc. (“Tiger Air”), which sold and leased aircraft and provided aviation services: and sev- eral other companies in the fields of computer and equip- ment leasing, aircraft charter and leasing, and mortgage insurance. Between 1979 and 1981, Tiger acquired three trucking companies, including Hall’s. (D.I. 254 at 6140-41) During the first year of Tiger’s ownership, Hall’s re- ported net gains and was a substantial cash source for Tiger. Beginning in 1981, however, Hall’s began to feel the effects of the recession, deregulation, and other changes in the trucking industry. (D.I. 254 at 6142) At the same time, Tiger and its other subsidiaries were also facing a fiscal crises. In February 1983, Flying Tiger, North American, anud other Tiger subsidiaries declared a mora- torium on debt payments and invited their lenders to re- structure their outstanding loans. (D.I. 254 at 6143) The resulting agreements led to the gradual disman- tling of Tiger Air and North American, and strict limita- tions on the amounts and purposes of cash advances from the subsidiaries to Tiger. These conditions limited Tiger’s overall cash flow and prevented Tiger from channeling funds from a healthy subsidiary to a troubled one, such as Hall’s. (D.I. 254 at 6144-46) The restructuring also produced the “Override Agreement,” which set out the events that would cause immediate default on Flying Tiger’s loans. One of the events that would trigger de- 1 Although the parties disagree on the inferences to be drawn from the facts, the basic sequence of events is undisputed. 8a fault was “Aggregate Plan Liability” in excess of $5 mil- lion. Aggregate liability was to be determined by adding a) unpaid liability resulting from the terminaton of any single employer pension plan by Tiger or any of its sub- sidaries; b) withdrawal liability assessed by the trustees of any multiemployer pension plan against a Tiger- affiliated company; and c) unpaid delinquent pension contributions owed by any Tiger-affiliated company. (Override Agreement, D.I. 262 at 68-384, Supplemental Joint Appendix ) Meanwhile, the financial situation at Hall’s worsened. The company had reported operating losses for three years in a row and its net worth was steadily declining. Hall’s auditors gave qualified opinions in 1982 and 1983, based substantially on the poor financial health of its parent company, Tiger. (D.I. 254 at 6146) James Cronin, who had participated in management and plan- ning at other Tiger subsidiaries, was asked to evaluate Hall’s in early 1984. By mid-year he was appointed Hall’s president. Cronin believed that Hall’s could be turned around, but only if the company could negotiate wage concessions in exchange for an Employee Stock Option Plan (“ESOP”). By the end of 1984, it was clear that Hall’s would need an infusion of capital to survive. The company was al- ready carrying approximately $12 million in debt, secured by liens on its rolling stock, and the existing lenders ap- peared unwilling to lend any more. (D.I. 254 at 6143) Tiger’s own poor financial condition and the restrictions imposed upon it by the restructuring agreements limited its ability to contribute the needed capital. Labor costs were soaring, but Hall’s had not yet been able to secure a wage cut in return for the implementation of an ESOP. Cronin and others in the organization believed that Tiger’s ownership of Hall’s played a significant role in the union’s refusal to accept wage concessions. Cronin also discovered that Hall’s competitors were using Tiger’s well-publicized financial troubles to lure away customers 9a concerned about having their goods abandoned or tied up in bankruptcy proceedings. (D.I. 254 at 6149) In November 1984, Cronin engaged Alex, Brown & Sons to find a purchaser for Hall’s. (D.I. 254 at 6150) Several prospective buyers responded to the selling memo- randum, and on December 12, 1984. Tiger representa- tives met with one of the respondents, Whit Lee. Lee offered $10 to $15 million for Hall’s stock, and proposed that Hall’s $12 million intercompany debt to Tiger be forgiven, After learning that Tiger wished to close the transaction before December 31, 1984, Lee revised his proposal. He offered only $1,000 in cash, but would leave $10.5 million of the intercompany debt in place. Alvin Bodford, Hall’s chief financial Officer, then pro- posed a management buyout of the company on the same terms that Lee had offered. Hall’s lenders preferred Bod- ford to Lee as a purchaser, so Tiger discontinued nego- tiations with the latter. (D.I. 254 at 6150-55) According to the terms of the resulting agreement, which Tiger’s board approved on December 31, 1984, Tiger sold 75% of Hall’s shares to HAC, which Bodford had formed for the purpose of the sale. Tiger retained the remaining 25% of Hall’s stock and reserved the right to name a director to Hall’s board.” Tiger also paid the closing costs, which amounted to approximately $1 mil- lion. In return, HAC paid $1,000 in cash and gave Tiger a note for $10.5 million, secured by Hall’s real estate but junior to the secured rights of Hall’s outside lenders. The agreement required HAC to continue con- tributions to the pension plans at the pre-sale level. Hall’s lenders also participated in the agreement, promising $5 million in new capital in exchange for first liens on all unencumbered real estate and rolling stock. (D.I. 254 at 6156-57) * Tiger never exercised this right. 10a Under HAC’s ownership, Hall’s downward spiral accel- erated. Within a few months of the sale, a substantial part of the management team and the turnaround specialist hired at the lenders’ urging had departed, citing “differ- ences in management philosophies.” (D.I. 254 at 6161) Hall’s operating revenues dropped from $190 million to $160 million, and its market share declined 25% over the course of 1985. (D.I. 254 at 6161) In November 1985, Bodford approached Tiger and demanded that Tiger relinquish both its remaining 25% interest in Hall’s and its $10.5 million note. Tiger initially refused. Bodford then threatened to redeem HAC’s 75% stake in Hall’s. He pointed out that by doing so he would force Tiger to resume full ownership of Hall’s, and full liability for pension fund withdrawal if Hall’s should fail. (D.I. 254 at 6162) Realizing that Hall’s demise was at that point likely, Tiger acceded to Bodford’s demands. (D.1I. 254 at 6162) Hall’s filed for bankruptcy under Chapter 11 on March 10, 1986. By the end of 1987, it had ceased all con- tributions to the pension funds to which it had assumed obligations. (D.I. 254 at 6163) lI. DISCUSSION A. Standard of Review In reviewing the findings of fact of an arbitrator in the context at bar, “there shall be a presumption, rebut- table only by a clear preponderance of the evidence, that the findings of fact made by the arbitrator were correct.” 29 U.S.C. § 1401(c). The “clear preponderance” lan- guage of the statute has been used interchangeably with “clear error.” See, e.g., Santa Fe Pacific Corp. v. Central States, Southeast & Southwest Areas Pension Fund, 22 F.3d 725 (7th Cir.), cert. denied, 115 S. Ct. 483 (1994). “A finding is clearly erroneous if the reveiwing court, after lla duly acknowledging the superior proximity of the factfinder to the witnesses is firmly convinced that the finding is er- roneous.” Santa Fe, 22 F.3d at 727, citing Concrete Pipe & Products, Inc. v. Construction Laborers Pension Trust, 113 S. Ct. 2264, 2279-80 (1993). The arbitrator’s legal conc.usions are reviewed de novo. Crown Cork & Seal Co. v. Central States Southeast & Southwest Areas Pen- sion Fund, 982 F.2d 857, 860 (3d Cir. 1992), cert. denied, 113 S. Ct. 2961 (1993). B. Evade or Avoid Liability The arbitrator found that Tiger is not liable for the unfunded vested pension obligations of Hall’s because evading such liability was not a principal purpose of the sale of Hall’s. The Philadelphia Fund raises three challenges to the arbitrator’s conclusions on this issue. First, the Fund contends that the arbitrator erred as a matter of law by not applying the correct presumptions to the determination of the plan sponsor. Second, the arbitrator erred as a matter of law by focusing on whether Tiger had any other plausible reasons for selling Hall’s, rather than on whether avoiding withdrawal liability was a principal purpose of the transaction. Finally, the Fund argues that the arbitrator’s factual conclusions are clearly erroneous. 1. The Statutory Scheme Under the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”). which amended the Employee Retirement Income Security Act (“ERISA”), participating employers contribute to a common fund for employee pensions. Each employer contributes in amounts deter- mined through the collective bargaining process. The pension plan is administered by trustees, half of whom are selected by the employers and half selected by the union. To protect the othe: employers as well as the pensions themselves, the MPPAA imposes liability for ° n _ 12a unfunded benefits on an employer who withdraws from a plan. The statute defines withdrawal as occurring “when an employer (1) permanently ceases to have an obliga- tion to contribute under the plan, or (2) permanently ceases all covered operations under the plan.” 29 U.S.C. § 1381. The MPPAA provides several exceptions to the imposition of liability upon withdrawal from a plan, in- cluding § 1398, which provides that liability shall not be imposed in the case of a mere change in corporate structure which does not interrupt the employer’s contributions. The MPPAA also sets out a crucial exception to the exceptions, providing that “[i]f a principal purpose of any transaction is to evade or avoid liability under this part, this part shall be applied (and liability shall be determined and collected) without regard to such transaction.” 29 U.S.C. § 1392(c). Therefore, if the sale of Hall’s was undertaken principally to avoid MPPAA liability, with- drawal liability would properly be assessed against Tiger as if it had never sold Hall’s to the Podford management group. 2. Deference to the Plan Sponsor’s Conclusions ERISA requires arbitrators to accord deference to the factual determinations and accounting assumptions of the plan sponsor. 29 U.S.C. § 1401(a)(3). This section States that an arbitrator shall presume correct any deter- mination made by a plan sponsor “unless the party con- testing the determination shows by a preponderance of evidence that the determination was unreasonable or clearly erroneous.” As interpreted by the Supreme Court in Concrete Pipe, this section “plac[es] the burden of persuasion as to historical fact on the employer.” Con- crete Pipe, 113 S. Ct. at 2282. The employer has the burden of disproving the plan sponsor’s conclusions by a preponderance of evidence . Id. at 2283. 13a The Philadelphia Fund contends that the arbitrator erred as a matter of law in deciding that evading with- drawal liability was not a primary purpose of the sale of Hall’s. It is a question of law, the Fund maintains, because the arbitrator failed to apply the presumption of correctness required by 29 U.S.C. § 1401(a)(3). To support this claim, however, the Fund simply argues its version of the facts. The essence of this argument is that the arbitrator must have applied the wrong standard be- cause he reached the “wrong” conclusion. This court finds that the arbitrator did correctly articulate the pre- sumption and burden of proof, and there is no indication that he did not fully understand and apply them in this case. Therefore, the court concludes that the arbitrator did not err as a matter of law by failing to apply, or by incorrectly applying, the presumption of correctness re- quired by § 1401 (a) (3). 3. The Statutory Standard The Philadelphia Fund contends that the arbitrator erred as a matter of law by incorrectly interpreting § 1392 (c). This section provides that where a primary purpose of a transaction is evasion or avoidance of withdrawal liability, that transaction shall be disregarded when as- sessing such liability. According to the Philadelphia Fund, the arbitrator considered only whether Tiger had any legitimate reasons to sell Hall’s. This analysis was erroneous, the Fund maintains, because the statute re- quires only that evasion be a primary purpose for the transaction, not the primary purpose. In deciding this issue, the arbitrator correctly relied on Dorn’s Transportation, Inc. v. Teamsters Pension Trust Fund of Philadelphia & Vicinity, 787 F.2d 897 (3d Cir. 1986).* The facts of Dorn’s are similar to the present 8 The arbitrator also noted that this provision has not been widely applied, and has usually been construed narrowly. See, e.g., Cuyamaca Meats, Inc. v. San Diego & Imperial Counties Butchers’ 14a case. In Dorn’s, a trucking business was sold to a com- pany that had identical collective bargaining agreements with the union pension plan. The buyer company con- tinued contributions until it went bankrupt. The pension fund attempted to assess withdrawal liability against the seller, claiming that the sale was made for the purpose of avoiding liability. The court held that the seller was not liable under § 1392, because “when the seller enters a transaction to escape liability, but the buyer has no intention of taking subsequent actions that will reduce the payments owing to the Plan, it does not appear that a ‘principal purpose of the transaction’ as a whole is to escape liability.” Dorn’s, 787 F.2d at 902. The court in Dorn’s was able to decide the issue of evade or avoid liability as a matter of law because there was no evidence that the buyer even knew oi the seller’s potential withdrawal] liability. Therefore, in the absence of a material fact issue, the court could decide the issue without sending the case to arbitration. Id. at 902-03.* In this case, in contrast, there were disputed issues of material fact, and there is evidence to support either inference on the issue of the buyer’s intent. The arbitrator found as a factual matter that HAC did not have any intent to aid Tiger in avoiding withdrawal liability. He concluded that the evidence, rather than supporting the inference of collusion, indicated a confrontational rela- tionship between Bodford and Tiger’s management. Alter- natively, recognizing that the Philadelphia Fund main- & Food Employers’ Pension Trust Fund, 827 F.2d 491 (9th Cir. 1987), cert. denied, 485 U.S. 1008 (1988) (an employer’s attempt to minimize the amount of withdrawal liability did not constitute an attempt to evade or avoid under § 1392(c)). The Philadelphia Fund argues that Dorn’s is inapplicable to this case because the Third Circuit subsequently limited the hold- ing to the facts of that case. The Third Circuit did limit Dorn’s to its particular factua! circumstances, but only on the issue of when an ERISA dispute may avoid arbitration. Flying Tiger Line v. Teamsters Pension Trust Fund, 830 F.2d 1241 (3d Cir. 1987). 15a tained that Dorn’s did not apply, the arbitrator made a Specific factual finding that evading withdrawal liability was not a primary purpose of the transaction for either party. The issue of evade or avoid liability, therefore, was decided as an issue of fact by the arbitrator and Should be reviewed by this court for clear error. 4. The Arbitrator’s Factual Findings The Philadelphia Fund argues that the overwhelming weight of the evidence points to an intent to evade with- drawal liability. Specifically, the Fund argues that such intent is reflected by the low purchase price, the large amount of liability that Tiger was facing, the likelihood that Hall’s would fail, Tiger’s willingness to give Bodford its remaining 25% stake in Hall’s, and what the Fund argues was a collusive relationship between Bodford and Tiger’s management. In addition, the Fund focuses on several “smoking guns,” which it contends establish both awareness of the potential MPPAA liability and an intent to avoid liability through the sale of Hall’s. (See D.I. 254 at 6171-73) To support its factual arguments, the Philadelphia Fund relies heavily on Santa Fe Pacific Corp. v. Central States, Southeast & Southwest Areas Pension Fund, 22 F.3d 725 (7th Cir. 1994). In Santa Fe, as in this case, there were two possible means of disposing of a troubled trucking subsidiary. One was an asset Sale; the other, a sale of stock. In both Santa Fe and this case, the evidence established that an asset sale would have been more profitable to the parent company but for the potential withdrawal liability. In Santa Fe, the arbitrator made ® An asset sale does not fal! under the change in corporate struc- ture exception of § 1398. It is governed instead by 29 U.S.C. § 1384, which requires the seller to post a bond or escrow for all current withdrawal liability plus one year’s contributions. More significantly, the section imposes secondary withdrawal liability on the seller if the buyer withdraws from the plan within five years of the sale. l6a no findings on other possible reasons for the sale struc- ture chosen, and apparently ignored or discounted docu- ments which left no room for doubt that the company was aware of the withdrawal liability issue and had even considered “ ‘desperation moves,’ including ‘selling [the subsidiary] to someone in trouble.’” Jd. at 729. The appellate court found the “arbitrator’s treatment of these issues [to be] entirely inadequate” and concluded, con- trary to the arbitrator, that a principal purpose for the sale was to avoid withdrawal liability. Jd.° In contrast, the arbitrator in this case made explicit findings on each one of the Fund’s contentions. He con- cluded that although the asset sale might have turned out to have netted more for Tiger, there were other plausible reasons for structuring the transaction as a sale of stock, most importantly the belief that Hall’s could eventually be turned around as a going concern under new manage- ment. This conclusion was bolstered by the fact that Tiger retained a 25% interest in Hall’s. “[A]s long as Hall’s was losing money,” the arbitrator reasoned, “Tiger, as 100% owner, had no prospect either of collecting on its [$12 million intercompany] debt or receiving profits. If, however, . . . Hall’s had more favorable prospects for returning to profitability under other ownership, then the potential return to Tiger from the sale obviously far exceeded Bodford’s $1,000.” (D.I. 254 at 6205) The arbitrator also found specific support for this conclusion in the apparently widespread belief that a non-Tiger con- trolled Hall’s had a better chance of negotiating wage concessions in exchange for an ESOP, and thus returning Hall’s to profitability. 6 The Fund also urges this court to adopt the Sania Fe court’s legal ruling that a finding of evade or avoid liability depends en- tirely on the seller’s motives. Significantly, this ruling is not con- trolling law in this circuit. Rather, this court must accept the interpretation set out in Dorn’s, that escaping withdrawal liability can only be a primary purpose of the transaction as a whole where both buyer and seller have that intent. 17a As for the “smoking guns,” the arbitrator found that although Tiger, HAC, Whit Lee, and others involved in the deal all seemed to be aware of MPPAA liability, there was nothing to connect that awareness to an evasive intent. He could find “nothing sinister about a business manager being aware that certain actions—such as down- sizing portions of the operation—might trigger withdrawal liability, or that potential purchasers might have some reluctance about acquiring a company which is subject to such a contingent liability.” (D.I. 254 at 6203 ) The court agrees with this conclusion, and again finds this case distinguishable from Santa Fe. None of the documents pointed to by the Fund makes an explicit Statement of the type found in Santa Fe that the potential liability might lead to “selling to someone in trouble.” The Fund also focused on the timing of the sale as evidence that Tiger’s true reason for selling was avoid- ance of MPPAA liability. It points out that Tiger was planning a public offering of preferred stock in early 1985, and that by selling Hall’s before the end of the year, the subsidiary’s potential withdrawal liability, and ‘ts triggering effect under the Override Agreement, did not have to appear in the registration statement. In so arguing, the Fund appears to equate avoidance of report- ing potential withdrawal liability with avoidance of the liability itself. Only the latter is Sanctioned by § 1392. Furthermore, the arbitrator addressed the Fund’s con- tentions and concluded that the sale was timed so as to enable Tiger to report that it had disposed of an un- profitable subsidiary. The arbitrator noted that even after the sale, Tiger’s registration statement included Hall’s potential withdrawal liability as if it were still Tiger’s. The registration statement also contained no mention of the other default-triggering events covered in the Override Agreement. The arbitrator concluded that he was “unable to read this evidence as establishing that Tiger was attempting to avoid a further disclosure—the relationship between the Override Agreement and with- 18a drawal liability—that all of the other evidence indicates that Tiger was very unlikely to have considered providing in any event.” (D.I. 254 at 6197-6202) The Fund has not met its burden of showing that this conclusion is erroneous. With respect to Tiger’s transfer of its retained 25% interest to Bodford a year after the sale, the arbitrator noted that Bodford specifically threatened Tiger with the redemption of his 75% interest, which would make Tiger the sole owner of a company whose fortunes had taken a dramatic turn for the worse.” He concluded that “[t]he fact that Tiger so acted ‘because of [MPPAAI]’ . . . does not, as the Fund suggests, demonstrate that Tiger had acted for the same reason a year earlier when it made the original transfer to HAC.” (D.I. 254 at 6209) The court agrees with this assessment. Bodford’s letter threat- ening to redeem his interest in Hall’s does not support a finding that the initial sale was made for the purpose of evading liability. (Exhibit 326, Joint Appendix at 3425- 26) In addition, the acrimonious tone of the correspond- ence belies any inference of collusion. The court, therefore, is not convinced that the arbitrator erred in his finding that the sale of Hall’s was not under- taken to evade or avoid MPPAA liability. C. Accrual Liability The Philadelphia Fund has set forth an alternative theory of recovery, that of accrual liability. According to this theory, even after a subsidiary is sold, the parent company (or any member of the controlled group as defined by 29 U.S.C. § 1301(b)) remains liable for the “debt” to the pension fund accrued up to the year of the sale, until such debt is fully amortized. The arbitrator, relying on a number of cases in which the theory had been 7 MPPAA imposes liability, by reference to the Internal Revenue Code, on owners of at least ©" 4 of the corporation’s stock. 29 U.S.C. § 1801; I.R.C. § 1563, 19a rejected in similar contexts, refused to impose withdrawal liability on Tiger based on the accrual theory. (D.I. 254 at 6210-17) Because the accrual theory is an issue of law, the court will review the arbitrator’s decision de novo. ERISA provides that “all employees of trades or busi- nesses . . . which are under common control shall be treated as employed by a single employer and all such trades and businesses as a single employer.” 29 U.S.C. § 1301(b). Section 1398 provides that in the case of a change in corporate structure, “a successor or parent corporation or any other entity resulting from any such change shali be considered the Original employer.” The Philadelphia Fund contends that when a controlled group splits up, as in the sale of a subsidiary, all of the original members of the group remain “original employers,” and each, therefore, retains a contingent liability for the with- drawal of any of the other members. The original mem- bers are responsible for the amount of the withdrawal liability that was “accrued” up to the time the group split up. As noted by the arbitrator, several courts have analyzed and rejected the accrual liability theory. Teamsters Pen- sion Trust Fund of Philadelphia & Vicinity v. Central Michigan Trucking, Inc., 857 F.2d 1107, 1109-10 (6th Cir. 1988); Godchaux v. Conveying Techniques, Inc., 846 F.2d 306 (Sth Cir. 1988); Teamsters Pension Trust Fund of Philadelphia & Vicinity v. Headley’s Express & Storage Co., 1993 WL 18933 (E.D. Pa. June 3, 1993). These cases reveal two flaws in the accrual liability theory. The first concerns the Fund’s definition of the employer; the second involves the Fund’s determination of when withdrawal liability arises. The Fund bases its interpretation of who is liable for the withdrawal of a former member of a controlled group in part on analogy to certain provisions of the Internal Revenue Code and corresponding regulations concerning 20a controlled groups. 26 U.S.C. §414(c); 26 C.F.R. §§ 1.1502-6(b), 1.1502-77(b). However, as the Sixth Circuit noted in Central Michigan Trucking, 857 F.2d at 1111 (6th Cir. 1988), the cited Internal Revenue Code provisions are not among those explicitly incorporated into the ERISA/MPPAA statute. “Absent such an ex- press provision, tax precepts governing successorship are not dispositive of the meaning of MPPAA’s successorship provision.” Jd. The Fund’s theory also does not fit the plain meaning of § 1398: Terming the spun-off company as the “original em- ployer” clearly shows that under MPPAA the new employment entity will be deemed the original em- ployer, consequently only that employer and any control group to which it belongs at the time of with- drawal will be responsible for withdrawal liability. Id. at 1109. The Sixth Circuit noted further that neither the statutory scheme of MPPAA nor the legislative his- tory supports the Fund’s definition of “original employer.” Rather, when a subsidiary is sold, the control group as a single employer ceases to exist. The spun-off company, and any new control group of which it becomes a part, becomes the “original employer” and is solely responsible for any withdrawal by the spun-off company. /d. at 1109- 10. The accrual theory is also flawed in its interpretation of when liability for withdrawal arises. The Fund argues that liability accrues over time, before actual withdrawal, whenever the plan to which an employer contributes de- velops unfunded vested liabilities. The section of MPPAA that defines withdrawal liability, however, does not sup- port this reading: “If an employer withdrawals from a multiemployer plan in a complete withdrawal or a partial withdrawal, then the employer is liable to the plan in the amount determined under this part to be the withdrawal liability.” 29 U.S.C. § 1381(a). See Godchaux, 846 F.2d at 310. In addition, a plan’s unfunded vested liability can 2la vary greatly from year to year, depending on factors such as how well the plan is managed or changes in benefits. Id. at 311. It is not something that accrues steadily, nor is it a fixed amount that can be amortized over time. The court, therefore, adopts the analysis of the Fifth and Sixth Circuits, and concludes that the accrual liability theory is invalid under ERISA/MPPAA. IV. CONCLUSION For the reasons stated above, the court concludes that the arbitrator did not err in his legal or factual determi- nations. The motion to enforce the arbitrator’s award, therefore, will be granted, and the motion to vacate will be denied. An order consistent with this memorandum Opinion will issue. 22a IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE Civil Action Nos. 86-304; 94-017; 94-033; 94-112; and 94-130-SLR THE TRUSTEES OF TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY, —TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY, and CHARLES J. SCHAFFER, JR., its administrator and fidu- Clary, Plaintiffs, v. FEDERAL EXPRESS CORPORATION, THE FLYING TIGER LINES, INC., WARREN TRANSPORT, INC., and TIGER N ° INTERNATIONAL, INC., Defendants, and FEDERAL EXPRESS CORPORATION, THE FLYING TIGER LINE, INC., WARREN TRANSPORT, INC., and TIGER ERNATIONAL, INC., — INTERNATI . Plaintiffs, V. THE TRUSTEES OF TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY, TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY, and CHARLES J. SCHAFFER, JR., its administrator and fidu- clary, Defendants. ORDER At Wilmington this 27th day of December, 1995, con- sistent with the memorandum opinion issued this same date; 23a IT IS ORDERED that the motions by Flying Tiger Line et al. to enforce the arbitrator’s award (D.I. 229, 232) are granted, and the motions by the Teamsters Pen- sion Trust Fund to vacate or modify the arbitrator’s award and order, and to stay proceedings pending review (D.I. 225, 226, 234) are denied. The motion by Federal Ex- press Corp. et al. for leave to file a surreply brief (D.I. 266) is granted. /s/ Sue L. Robinson SUE L. ROBINSON United States District Judge 24a APPENDIX C UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT No. 96-7050 THE FLYING TIGER LINE, INC., a Delaware corporation; TIGER INTERNATIONAL, INC., a Delaware corporation; WARREN TRANSPORT, INC., an [owa corporation; VS. CENTRAL STATES, SOUTHWEST AND SOUTHEAST AREAS PENSION FUND, a multiemployer pension plan; TEAM- STERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY, a multiemployer pension fund; WESTERN PENNSYLVANIA TEAMSTERS AND EMPLOYERS PENSION FUND, a multiemployer pension plan; TEAMSTERS LocaL 641 PENSION FUND, a multiemployer pension plan; TRUCKING EMPLOYEES OF NORTH JERSEY WEL- FARE FUND, a multiemployer pension plan; CENTRAL PENNSYLVANIA TEAMSTERS PENSION FUND, a multi- employer pension plan, each sued individually and as a member of a class of similarly situated multiemployer pension plans who assert withdrawal liability, against Hall’s Motor Transit Company, Under the Miulti- employer Pension Plan Amendments Act of 1980 (D.C. No. 86-cv-00304) TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY; THE TRUSTEES OF TEAMSTERS PENSION 25a TRUST FUND oF PHILADELPHIA AND VICINITY; CHARLES J. SCHAFFER, JR., its administrator and fidu- ciary VS. FEDERAL EXPRESS CORPORATION; THE FLYING TIGER LINES, INC.; WARREN TRANSPORT, INC.: TIGER IN- TERNATIONAL D.C. No. 94-cv-00017) FEDERAL EXPRESS CORPORATION; THE FLYING TIGER LINE, INC.; WARREN TRANSPORT, INC.: TIGER IN- TERNATIONAL VS. TEAMSTERS PENSON TRUST FUND OF PHILADELPHIA AND VICINITY; THE TRUSTEES @F TEAMSTERS PENSION TRUST FUND oF PHILADELPHIA AND VICINITY; CHARLES J. SCHAFFER, JR. (D.C. No. 94-cv-00033 ) FEDERAL ExpREss CORPORATION; THE FLYING TIGER LINES, INC.; WARREN TRANSPORT, INC.: TIGER IN- TERNATIONAL VS. THE TRUSTEES OF TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY; TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA; CHARLES J. SCHAFFER, JR., its administrator (D.C. No. 94-cv-00112) THE TRUSTEES OF TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY; TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY; CHARLES J. SCHAFFER, JR., its administrator and fiduciary VS. 26a FEDERAL EXPRESS CORPORATION; THE FLYING TIGER LINES, INC.; WARREN TRANSPORT, INC.; TIGER IN- TERNATIONAL (D.C. No. 94-cv-00130) THE TRUSTEES OF TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY; —TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY; CHARLES J. SCHAFFER, JR., its Administrator and fiduciary, Appellants SUR PETITION FOR REHEARING PRESENT: SLOVITER, Chief Judge, BECKER, STAPLETON, MANSMANN, GREENBERG, SCIRICA, COWEN, NYGAARD, ALITO, ROTH, _EWIS, and McKEE, Circuit Judges. The petition for rehearing filed by the appellants in the above-entitled case having been submitted to the judges who participated in the decision of this court and to all other available circuit judges in regular active service, and no judge who concurred in the decision having asked for rehearing, and a majority of the circuit judges in regular active service not having voted for rehearing by the court in banc, the petition for rehearing is denied. BY THE CouRT, s/ Timothy K. Lewis TIMOTHY K. LEwIs Circuit Judge Date: Oct. 21, 1996 27a APPENDIX D [Logo] TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY of Philadelphia and Vicinity Fourth and Cherry Streets Philadelphia, Pennsylvania 19106 Walnut 3-6300 January 20, 1988 Flying Tiger Line, Inc. 7401 World Way West Los Angeles, CA 90009 RE: Withdrawal Liability Contributing Business: Hall’s Motor Transit Company Gentlemen: We have determined that the employer(s) including Hall’s Motor Transit Company effected a complete with- drawal from the Teamsters Pension Trust Fund of Phila- delphia and Vicinity (the Fund) during the 1987 Plan Year by permanently ceasing covered operations. As required under the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multiemployer Pension Plan Amendments Act of 1980 (the Act), we hereby make demand for payment of withdrawal liability. The Board of Trustees resolved to apply the “presump- tive” allocation method described in Section 4211(b) of the Act. Based on the formula set forth in this Section, we have computed total withdrawal liability due the Fund to be in the amount of $2,100,228.40. Under Section 4219(c)(1)(C) (i), the employer(s) owe annual pay- ments of $424,027.08, with the first payment due as of January 1, 1988. Attached is a schedule which summar- 28a izes the determination of the withdrawal liability and the annual payment amount. The annual payments must be paid in equal quarterly installments. (See Section 4219(c)(3).) Thus, liability payments are due on the first day of each calendar quarter throughout the amortization period until the liability is satisfied in full. The employer(s) is required to make a total of 23 quarterly installments to the Fund, each in the amount of $109,084.90, and a final partial quarterly installment equal to $82,903.81. In lieu of installment payments, an employer may pre- pay the outstanding amount of withdrawal liability, plus accrued interest, in whole or in part at any time without penalty. An employer(s) is required to begin payment of the quarterly installments described above no later than sixty (60) days after the date of this demand, notwith- Standing any request or appeal, which you have the right to make, as described below. Accordingly, the first pay- ment is due to the Fund 60 days after the date of this letter, in the amount of $109,085.90, which includes one back payment. If an employer fails to make a payment when due, interest on the payment shall accrue from the due date until the date on which the payment is made. In addi- tion, in the event of default in payments, the Fund is entitled to require immediate payment of the total out- Standing amount of withdrawl liability plus interest ac- crued on the total outstanding liability from the due date of the first payment which is not timely made. Interest on the overdue liability payments will be charged at the prevailing market rates for comparable obligations or at higher rates in the event of litigation. We have determined that you were under common control with Hall’s Motor Transit Company in the period from September 26, 1980 to at least the date of a claimed “corporate reorganization” by division under Section 4218 ee 29a of the Act. Section 4218 of the Act provides that the successor in a corporate reorganization will be treated as the original employer. The successor in a division is defined by reference to Section 4062(d) of ERISA (as in effect in 1980) to encompass all corporations or employers resulting from the division. As part of a successor to the employer resulting from a claimed “division” of the former group of trades or businesses under common control, you remain an “employer” liable for unamortized withdrawal liability incurred during the period of common control. The entire amount of unamortized withdrawal liability in this instance was incurred under the statute and “pre- sumptive method” in the period September 26, 1980 to 1984. Your liability and payment schedule accordingly follow the schedule set forth above. This moots the issue of a potential continuation of common control past Janu- ary, 1985. Based on available information, the Fund would otherwise determine that common control continued to the date of withdrawal by reason of either actual or con- structive ownership of Hall’s Sectior 4212(c) of the Act. This determination is addressed and applicable to you and your affiliates under common control in the period September 26, 1980 to December 31, 1984, including: Warren Transport, Inc. Tiger Leasing Group Tiger Air, Inc. Tiger International, Inc. This demand is not applicable to Hall’s and other debtor entities to the extent prohibited by the Bankruptcy Code. You have the right to request a review of the deter- mination described in this letter. In this regard, within 90 days after receipt of this letter, you may, in writing: (1) Ask the undersigned to review any specific mat- ter relating to the determination of liability and the schedule of payments. 30a (2) Identify any inaccuracy in-the determination of the amount of unfunded vested benefits allocable to an employer. (3) Furnish any additional relevant information to the undersigned. After review of such matters submitted in a timely man- ner, the Board of Trustees will notify you of its decision, the basis for the decision and the reason for any change in the determination of withdrawal liability or the payment scheduled. Failure to request a review in writing within 90 days, as set forth above, shall make the determination herein final. Very truly yours, /s/ Charles J. Schaffer, Jr CHARLES J. SCHAFFER, JR. Administrator CJS:djh Enclosures cc: Douglas Broadwater, Esq. James Pack, Esq. Kent Cprek, Es. Hall’s Motor Transit Co., Inc. Other Listed Affiliates Employers Name Firm Number 3la TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY Address City/State ZIP Withdrawal Date Halls Motor Transit 18-3774, 18-3775, 81-3776, 81-3777, 1987 Withdrawal WITHDRAWAL LIABILITY CALCULATION SUMMARY Part I Part II Part ITI Part IV Part V Part VI Part VII Part VIII Part IX Part X Part XI Part XII Part XIII Part XIV Part XV Total Unfunded Vested Liability De Minimis (If Applicable) Net Withdrawal Liability Prepared By ——_—___) A.B. $1,103,310.54 $271,969.23 $1,786.27 $303,541.16 $10,772.69 $86,561.04 $9,145.20 $157,079.87 $11,146.03 $317,727.84 $11,197.70 ($112,817.69) $12,631.21 ($92,730.98) $8,908.27 $2,100,228.40 $0.00 $2,100,228.40 Date 10/14/87 32a TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY PartI Share of Unfunded Vested Liability . Total Contributions Required for Five Years Ended 12/31/79 $619,776.37 . Total Contributions for All Participating Employers for Five Years Ended 12/31/79 $99,865,122.10 . Unfunded Vested Benefit Liability of Fund 1. As of 12/31/79 $273,509,641.00 2. Unamoritized Amounts as of 12/31/86 (Item C.1. less 35 pct.) $177,781,266.65 . Employer’s Share of Unfunded Vested Liability (A Divided by B X L.C. 2) $1,103,310.54 TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY PartII Share of Change in Unfunded Vested Liability for 1980 A. Total Contributions Required for Five Years Ended 12/31/80 $815,214.47 . Total Contributions for All Participating Employers for Five Years Ended 12/31/80 $118,492,735.88 . Change (+ or —) in Unfunded Vested Benefit Liability 1. 12/31/79 to 12/31/80 $56,472,016.00 2. Unamortized as of 12/31/86 (Item C. 1 Less 30 Pct.) $39,530,411.20 . Employer’s Share of Unfunded ; Vested Liability-1980 $271,969.23 33a Part III Share of Reallocated Unfunded Vested Benefit Liability for 1980 . Total Amounts of “De Mininis” Offsets Allowed to Employers Who Withdrew in 1980, and Other Amounts Determined by Trustees in 1980 to Be Uncollectable 1. As of 12/31/80 $370,903.45 2. Unamortized Amt as of 12/31/86 (Item III.A. Less 30 Pct) $259,632.42 . Employer’s Share of Reallocated Unfunded Vested Benefit Liability—1980 $1,786.27 TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY PartIV Share of Change in Unfunded Vested Liability for 1981 . Total Contributions Required for Five Years Ended 12/31/81 $1,000,648.19 . Total Contributions for All Participating Employers for Five Years Ended 12/31/81 $128,460,433.53 . Change (+ or —) in Unfunded Vested Benefit Liability 1. 12/31/80 to 12/31/81 $51,953,986.00 2. Unamortized Amounts as of 12 31/86 (Item C.1. Less 25 Pct.) $38,965,489.50 . Employer’s Share of Unfunded Vested Liability—1981 $303,541.16 D 34a Part V Share of Reallocated Unfunded Vested Benefit Liability for 1981 Total Amounts of “De Mininis” Offsets Allowed to Employers Who Withdrew in 1981, and Other Amounts Determined by Trustees in 1981 to Be Uncollectable 1. Asof 12/31/81 $1,843,849.54 2. Unamortized Amt as of 12/31/86 (Item V.A. Less 25 Pct.) $1,382,887.16 . Employer’s Share of Reallocated Unfunded Vested Benefit Liability—1981 $10,772.69 TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY Part VI Share of Change in Unfunded Vested Liability for 1982 Total Contributions Required for Five Years Ended 12/31/82 $1,160,518.72 . Total Contributions for All Participating Employers for Five Years Ended 12/31/82 $135,567,265.92 . Change (+ or —) in Unfunded Vested Benefit Liability 1. 12/31/81 to 12/31/82 $12,640,339.00 2. Unamortized as of 12/31/86 — (Item C.1. Less 20 Pct.) $10,112,271.20 Employer’s Share of Unfunded Vested Liability—1982 $86,561.04 ae ee bbaisb Ty mae at chars DiaeT eanlogen Neebad Tie AW ee mC. ei ae Oooo oes PO MBSER SALEM BRR E IN ARIE NE tS. LL EN Eg TC eer eae B. Employer’s Share of Reallocated A. Total Contributions Required for B. Total Contributions for All Participating C. Change (+ or —) in Unfunded Vested 35a Part VII Share of Reallocated Unfunded Vested Benefit Liability for 1982 A. Total Amounts of “De Mininis” Offsets Allowed to Employers Who Withdrew in 1982, and Other Amounts Determined by Trustees in 1982 to Be Uncollectable l. As of 12/31/82 $1,385,455.52 2. Unamortized Amt as of 12/31/86 (Item VII.1.Less 20 Pct.) $1,068,364.42 Unfunded Vested Benefit Liability—1982 $9,145.20 TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY Part VIII Share of Change in Unfunded Vested Liability for 1988 Five Years Ended 12/31/83 $1,318,980.36 Employers for Five Years Ended 12/31/83 $145,393,034.90 Benefit Liability 1. 12/31/82 to 12/31/83 $20,370,354.00 2. Unamortized as of 12/31/86 (Item C.1 Less 15 Pct.) $17,314,800.90 . Employer’s Share of Unfunded Vested Liability—1983 $157,079.87 36a Part IX Share of Reallocated Unfunded Vested Benefit Liability for 1983 . Total Amounts of ‘“‘De Mininis” Offsets Allowed to Employers Who Withdrew in 1983, and Other Amounts Determined by Trustees in 1983 to Be Uncollectable 1. Asof 12/31/83 $1,445,433.52 2. Unamortized Amt as of 12/31/86 (Item IX.A. Less 15 Pct.) $1,228,618.49 . Employer’s Share of Reallocated Unfunded Vested Benefit Liability—1983 $11,146.03 TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY Part X Share of Change in Unfunded Vested Liabilitv for 1984 . Total Contributions Required for Five Years Ended 12/31/84 $1,416,485.37 . Total Contributions for All Participating Employers for Five Years Ended 12/31/84 $154,581,799.58 . Change (+ or —) in Unfunded Vested Benefit Liability 1. 12/31/83 to 12/31/84 $38,527,877.00 2. Unamortized as of 12/31/86 (Item C.1 Less 10 Pct.) $34,675,089.30 . Employer’s Share of Unfunded Vested Liability—1984 $317,727.84 37a Part XI Share of Reallocated Unfunded Vested Benefit Liability for 1984 A. Total Amounts of “De Mininis” Offsets Allowed to Employers Who Withdrew in 1984, and Other Amounts Determined by Trustees in 1984 to Be Uncollectable 1. As of 12/31/84 $1,357,839.98 2. Unamortized Amt as of 12/31/86 (Item X.A. Less 10 Pct.) $1,222,055.98 . Employer’s Share of Reallocated Unfunded Vested Benefit Liability—1984 $11,197.70 TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY Part XII Share of Change in Unfunded Vested Liability for 1985 Total Contributions Required for Five Years Ended 12/31/85 $1,458,643.20 Total Contributions for All Participating Employers for Five Years Ended 12/31/85 $161,336,529.68 . Change (+ or —) in Unfunded Vested Benefit Liability 1. 12/31/84 to 12/31/85 ($13,135,213.00) 2. Unamortized as of 12/31/86 (Item C.1 Less 5 Pct.) ($12,478,452.35) Employer’s Share of Unfunded Vested Liability—1985 ($112,817.69) 38a Part XIII Share of Reallocated Unfunded Vested Benefit Liability for 1985 . Total Amounts of “De Mininis’’ Offsets Allowed to Employers Who Withdrew in 1985, and Other Amounts Determined by Trustees in 1985 to Be Uncollectable 1. Asof 12/31/85 $1,470,634.97 2. Unamortized Amt as of 12/31/86 (Item X.A. Less 5 Pct.) $1,397,103.22 . Employer’s Share of Reallocated Unfunded Vested Benefit Liability—1985 $12,631.21 TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY Part XIV Share of Change in Unfunded Vested Liability for 1986 . Total Contributions Required for Five Years Ended 12/31/86 $1,186,143.92 . Total Contributions for All Participating Employers for Five Years Ended 12/31/86 $171,202,708.27 . Change (+ or —) in Unfunded Vested Benefit Liability 1. 12/31/85 to 12/31/86 ($13,384,956.00) 2. Unamortized as of 12/31/86 (Item C.1 Less 0 Pct.) ($13,384,956.00) . Employer’s Share of Unfunded Vested Liability—1986 ($92,730.98) i dateeag inl Sian inant 39a Part XV_ Share of Reallocated Unfunded Vested Benefit Liability for 1986 A. Total Amounts of “De Mininis” Offsets Allowed to Employers Who Withdrew in 1986, and Other Amounts Determined by Trustees in 1986 to Be Uncollectable 1. As of 12/31/86 2. Unamortized Amt as of 12/31/86 (Item X.A. Less 0 Pet.) B. Employer’s Share of Reallocated Unfunded Vested Benefit Liability—1986 A. Plan Year Ending 1980 ———_-) B. Plan Year Ending 1981 ) C. Plan YearEnding 1982 ) D. Total During 3 Highest = E. Average= 1 Highest Average Annual # of Days Worked Over Three Consectuive Years. — 2 Highest Contribution Rate to Date PF Withdrawal, ) 3 Amount of Each Annual Payment. = 4 Number of Annual Payment (If) 20 then 20) = 5 Amount of Final Installment. : 6 Amount of Each Quarterly Payments: 7 Number of Full Quarterly Payments = 8 Amount of Fina] Quarterly Installments $1,285,835.79 $1,285,835.79 $8,908.27 31009 29233 26888 87130 29043.33 29043 $14.60 $424,027.80 5 $399,314.52 $109,085.90 23 $82,903.81 40a Withdrawal Liability (ML) ) $2,100,228.40 Annual Payment (AP) = $424,027.80 I) Number of Full Year Payments. = 4,9530441164 4.312127 N= 5 V-N= 0.680583 II) Amount of Last Partial Annual Payments (PA) PA= (WL- (AP+A-))/V-N= $399,314.52 III) Determine the Amount of Each Full Quarterly Payments. = AP/3.8871= $109,085.90 IV) Determine Number of Full Quarterly Payments in Last Year (NQ) = 3 V) Amount of Last Partial Quarterly Payment PQ=: If NQ=0 Then PQ=PA 0 If NQ=1 Then PQ=PA-—Q) /.9809 0 If NQ=2 Then PQ= (PA -— (1.9809 +Q) ) /9623) 0 If NQ=3 Then PQ= (PA— (2.9482 + Q) /9439) 82903.80536 Coe De coming LA ast dodh didi dite Vedas balls 4la [Logo] TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY Fourth and Cherry Streets Philadelphia, Pennsylvania 19106 Walnut 3-6300 December 2, 1988 James A. Cronin, III Tiger International Corporation The Flying Tiger Line, Inc. 7401 World Way West Los Angeles, CA. 90009 Re: Withdrawal Liability Contributing Business: Hall's Motor Dear Mr. Cronin: By letter dated January 20, 1988, the trustees of the Teamsters Pension Trust Fund of Philadelphia and Vicip- ity (“Fund”) demanded payment of withdrawal liability from the employer, including the Contributing Business, Tiger International Corporation, the Flying Tiger Line, Inc, and various affiliates. Your counsel has since claimed that the notice is invalid because it does not state a claim under ERISA § 4212(c) in his interpretation. The Fund and its trustees disagree both with the interpretation and the need to set forth a specific theory as well as the Statutory requirements of demand, an amount and a Pay- ment schedule but leave those matters to the Court. As a protective measure, however, the Fund and its trustees now explicitly demand payment of liability on alternative grounds under 29 U.S.C. §§ 1301(b), 1392(c) or 1398, as detailed in the Fund’s briefs, in the event that your position about the original demand is sustained in litigation. We enclose a copy of the January 20, 1988 42a letter to provide notice of the amount, payment schedule and identified trades or businesses under common control to whom this protective demand is addressed. If the prior demand is found inadequate, actual payment must begin no later than 60 days from the date of this letter. Under ERISA § 4219(c), your initial payment should be $ 545,424.50 covering four payments back to January 1, 1988 and one installment accruing on January 1, 1989. Future installments would be due on the first day of each subsequent calendar quarter until the schedule is com- pleted. To the extent that a new demand is required, you have the right to seek review as detailed in the January 20 letter. Sincerely, /s/ Charles J. Schaffer, Jr. CHARLES J. SCHAFFER, Jr. Administrator For the Trustees CJS:jp cc: Peter Gold, Esq. Kent Cprek, Esq. William Bowser, Esq. Barry Willoughby, Esq. ae es ea ee ee eee eo een 43a [Logo] TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY Fourth and Cherry Streets Philadelphia, Pennsylvania 19106 Walnut 3-6300 December 2, 1988 Peter Gold, Esquire Blank, Rome, Comisky & McCauley 1200 Four Penn Center Plaza Philadelphia, PA 19103 Re: Withdrawat Liability Contributing Business: Hall’s Motor Dear Mr. Gold: This letter concerns your letters of April 18, 1988 and May 23, 1988 about an assessment of withdrawal liability issued by this Fund to the employer including Halls Motor Transit Company (“Halls”), Tiger International Corpora- tion, the Flying Tiger Line, Inc., Warren Transport, Inc. (jointly, “Tiger” and with Halls and any other trades or businesses under common control. “Employer”). You wrote for Tiger International Corporation, The Flying Tiger Line, Inc. and Warren Transport, Inc. Rudolph Barbee wrote on April 19, 1988 to adopt your claims for Tiger Air, Inc. and Tiger Leasing Group, Inc. We ask that you forward a copy of this letter to him. The Trustees of the Fund have reviewed the letters, sought additional information, consulted with legal and actuarial counsel and affirmed the initial assessment. In September, 1988, the Fund sent a request for in- formation under ERISA Section 4219(a) concerning your letters and documentation of your claims. On October 7, 1988, you responded that direct requests about docu- mentation and research concerning the claim divestiture 44a of Halls were premature, overly broad, unduly burden- some and oppressive. Due to the failure to document claims, the Fund and its trustees have proceeded on the assumption that the information would be adverse to the interest of the Employer. The Fund has examined re- ceived available information from other sources as noted below. Summary The central objection is that Tiger was not under com- mon control with Halls as of the date of its withdrawal from the Fund in 1987. Your objection is unfounded, based on the information available to the Trustees, for several reasons. The Fund assessed liability on three alternative bases: the “accrual” or year-by-year principle (ERISA §§ 4001(b), 4218), continued ownership (ERISA § 4001(b)) or an evasive transaction (ERISA § 4212(c)). Using the year-by-year control group prin- ciple adopted by the Fund under ERISA §§ 4001(b), 1398, Tiger is responsible for the share of unfunded vested liabilities of the Fund assessed to employers in the plan years from September 26, 1980 to, at least, 1984, even if Tiger divested itself of Halls before the date of withdrawal from the Fund. The total net lia- bility in this case is based on the unamortized portion of these tiers. Due to the failure to produce documenta- tion, we have further assumed that Tiger had or acquired either actual or constructive ownership of stock providing control of Halls as of the date of its withdrawal and thus affirm the alternative ground of assessment on this basis. The Fund’s January 20, 1988 demand letter also relied on ERISA § 4212(c) as the other alternative ground of assessment. The transaction between Halls and Tiger makes no economic sense absent consideration and at- tempted avoidance of withdrawal liability. The structure of the transaction as well as direct testimony confirms that a principal purpose of the transaction was to evade or avoid withdrawal liability. In this circumstance, ERISA § 4212(c) provides that withdrawal liability shall be as- 45a sessed and collected without regard to the evasive trans- action. Your objections about data and actuarial assumptions (Items 6, 7, 9, 10, 11 and 16) are standard and do not have application to the specific circumstances of the Fund. The suggestions on benefits and fiduciary duty (Items 5 and 8) are irrelevant to withdrawal liability and, in some cases, illegal. The Trustees have, in all events, conducted the affairs of the Fund in a prudent fashion consistent with law and the conduct of a similar organization of comparable size. The remaining objections about con- tractual and trust limitations on employer obligations, withdrawal liability exceptions and quarterly payment amounts (Items 2, 4, 12, 13, 14, 15 and 17) are contrary to legal precedent and in at least one case, frivolous. Discussion April 18 Letter Your letter of April 18 characterizes itself as a “Re- quest for Review.” It states only the following in terms of objection to the assessment om behalf of Tiger. As you know, Tiger’s Action also asserts that certain provisions of MPPAA are unconstitutional on their face and as applied (Counts II and III of the Amended Complaint, respectively). This Request for Review includes only those determinations which are subject in the first instance to plan determination, review and arbitration as set out in ERISA Sections 4219 and 4221. The language of the letter does not ask for “review of any specific matter,” “identify any inaccuracy” or “furnish additional relevant information” under MPPAA. Any claims reflected in the letter are denied. The Fund is unable to address constitutional objections without further detail. The only constitutional challenge 46a sustained in any court to our knowledge is a challenge to the “presumption” in favor of the Fund under ERISA § 4221(a)(3)(B). The Fund has reviewed this decision and believes that its actuarial assumptions are correct with or without the presumptions. The “as applied” chal- lenge, is denied by reason of the failure to furnish sup- porting documentation. We are able, from past experience, to explain our evaluation of constitutional claims in a general sense. MPPAA was under active consideration in Congress in 1978, with serious consideration in 1979. The statute was substantially complete and extant in the business world by 1980. On policy grounds, there may be reason- able argument that Congress should have continued some form of five-year reachback matching former ERISA § 4064 rather than allocating all existing liability to em- ployers as of 1980. As a legal matter, however, Congress chose the 1980 effective date and that decision has been upheld by the Supreme Court against constitutional challenges. Congress designated the plan as a defined benefit plan—not the collective bargaining representatives. Halls and Tiger received information on the Fund and its bene- fits through summary plan descriptions and other docu- ments distribu [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386013_0128%3A1. Public record. Not legal advice.