Opposition Brief — Central States, Southeast & Southwest Areas Pension Fund v. Basic American Industries, Inc.

Supreme Court, U.S

FILED

@) NOV 80 200!

ae No. 01-563 BEC LERK

In the

Supreme Court of the Gnited States

CENTRAL STATES, SOUTHEAST AND

SOUTHWEST AREAS PENSION FUND,

A PENSION TRUST, AND HOWARD MCDOUGALL,

TRUSTEE,

PETITIONERS,

BASIC AMERICAN INDUSTRIES, INC., ETAL.,

RESPONDENTS.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

RESPONDENTS’ BRIEF IN OPPOSITION

James A. Cherney

LATHAM & WATKINS

233 South Wacker Drive

Suite 5800

Chicago, IL 60606-6401

(312) 993-9767

Richard P. Bress

LATHAM & WATKINS

555 Eleventh Street, N.W.

Suite 1000

Washington, DC 20004-1304

(202) 637-2200

Max W. Hittle, Jr.*

Linda J. Cooley

KRIEG DeVAULT LLP

One Indiana Square

Suite 2800

Indianapolis, IN 46204-2079

(317) 636-4341

* Counsel of Record

QUESTION PRESENTED

Whether the Seventh Circuit correctly held, consistent

with this Court’s decision in Bay Area Laundry & Dry

Cleaning Pension Trust Fund v. Ferbar Corp., 552 U.S. 192

(1997), that under the facts of this case a cause of action

arose respecting the entire withdrawal liability owed by a

bankrupt employer to an employee benefit plan, thereby

commencing the six-year statute of limitations for suit under

the Employee Retirement Income Security Act of 1974, as

amended, 29 U.S.C. §§ 1301 et seq., when the bankrupt

employer ceased operations (thus disabling itself from

fulfilling its withdrawal liability obligation) and the plan

demanded payment in full.

CORPORATE DISCLOSURE

None of the Respondents has a parent corporation, and

no public company owns stock in any corporation which is a

Respondent.

QUESTION PRESENTED

CORPORATE DISCLOSURE.

TABLE OF CONTENTS

TABLE OF CONTENTS

JURISDICTION inianoeets

STATUTORY PROVISIONS INVOLVED

STATEMENT OF THE CASE ..........c.cscscssssossssesesesesesoses

ARGUMENT

I.

II.

CONCLUSION.

POSSESSES ESE SES SESE OE EEEEE TESST ESESEESESE SD

eeereeee

SOP OSESS SEES ESSE SORES SESE EEEEEEESE SESE SESE SEHEEEOD

THE COURT OF APPEALS’

DECISION IS CORRECT AND DOES

NOT CONFLICT WITH THIS COURT’S

DECISION IN BAY AREA OR WITH

THE DECISION OF ANY OTHER

COURT OF APPEALS

THE JUDGMENT IN THIS CASE

COULD ALSO BE AFFIRMED, IN

THE ALTERNATIVE, BASED ON

PRIOR TRANSACTIONS THAT

WOULD HAVE TRIGGERED THE

STATUTE OF LIMITATIONS EVEN

EARLIER

15

18

iv

TABLE OF AUTHORITIES

CASES

Page(s)

American Hospital Supply Corp. v. Hospital

Products Ltd.,

780 F.2d 589 (7th Cir. 1986) ; - 8

Bay Area Laundry & Dry Cleanixg Pension Trust

Fund v. Ferbar Corp.,

552 U.S. 192 (1997) ‘ Stee passim

Board of Trustees of District No. 15 Machinists’

Pension Fund v. Kahle Engineering Corp.,

43 F.3d 852 (8rd Cir. 1994) Om

C.L. Maddoz, Inc. v. Coalfield Services, Inc.,

51 F.3d 76 (7th Cir. 1995) 8

Central States, Southeast & Southwest Areas

Pension Fund v. Mississippi Warehouse Corp.,

853 F. Supp. 1053 (N.D. Ill. 1994) 11

Central States, Southeast & Southwest Areas

Pension Fund v. Slotky,

956 F.2d 1369 (7th Cir. 1992) 11

Chicago Truck Drivers Union Pension Fund v.

Century Motor Freight, Inc.,

125 F.3d 526 (7th Cir. 1997).... 12

Vv

First National Bank v. Continental Illinois

National Bank & Trust Co.,

933 F.2d 466 (7th Cir. 1991)

Franconia Associates v. United States,

240 F.3d 1358 (Fed. Cir. 2001), petition for cert.

filed, 70 U.S.L.W. 3193 (U.S. Sept. 10, 2001)

(No. 01-455)

Graver Tank & Manufacturing Co. v. Linde Air

Products Co.,

336 U.S. 271 (1949)

LL.G.W.U. National Retirement Fund v. Meredith

Grey, Inc.,

190 F.R.D. 324 (S.D.N.Y. 1999)

Lambert v. Wicklund,

520 U.S. 292 (1997)

14

13

16

NYNEX Corp. v. Discon, Inc.,

525 U.S. 128 (1998)

Penn-Ohio Steel Corp. v. United States,

354 F.2d 254 (Ct. Cl. 1965)

White v. Prenzler,

131 N.E.2d 540 (Ill. 1956)

Wisniewski v. United States,

353 U.S. 901 (1957)

12

14

14

12

STATUTES

28 U.S.C. § 1254(1) 2

29 U.S.C. § 1301 et seq. i

29 U.S.C. § 1801(b)(1) 3,11

29 U.S.C. § 1881(b) 3

29 U.S.C. § 1382 ce)

29 U.S.C. § 1383(a)(2) 2,9, 10

29 U.S.C. § 1891 9

29 U.S.C. § 1399(b)(1) i)

29 U.S.C. § 1899(c)(2) 2,12

29 U.S.C. § 1899(¢)(5) 13, 14

29 U.S.C. § 1451(a)(1) 3

29 U.S.C. § 1451(f) 11

OTHER AUTHORITY

51 Am. Jur. 2d Limitations of Actions § 133 7

E. Allen Farnsworth, Contracts § 8.20 (8d ed. 1999)............... 8

Restatement (Second) of Contracts § 250(b) (1981)............... 10

In the

Supreme Court of the United States

No. 01-563

CENTRAL STATES, SOUTHEAST AND

SOUTHWEST AREAS PENSION FUND,

A PENSION TRUST, AND HOWARD MCDOUGALL,

TRUSTEE,

PETITIONERS,

V.

BASIC AMERICAN INDUSTRIES, INC., ET AL.,

RESPONDENTS.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

RESPONDENTS’ BRIEF IN OPPOSITION

JURISDICTION

The judgment of the court of appeals was entered on

June 5, 2001. A petition for rehearing was denied on July 3,

2001. The petition for a writ of certiorari was filed on

2

October 1, 2001. The jurisdiction of this Court is invoked

under 28 U.S.C. § 1254(1).

STATUTORY PROVISIONS INVOLVED .

In addition to the statory provisions included the petition

this case involves 29 U.S.C. § 1383(a)(2) and 29 U.S.C.

§ 1399(c)(2), included in the appendix hereto.

STATEMENT OF THE CASE

Prior to 1989, three affiliated employers, collectively

known as “Allied Grocers,” entered into collective bargaining

agreements that required them to make pension

contributions to petitioner Central States, Southeast and

Southwest Areas Pension Fund, a Pension Trust (“Central

States”), on behalf of certain employees. On June 22, 1989,

Allied Grocers filed for relief under Chapter 11 of the U.S.

Bankruptcy Code (the “Bankruptcy”). Under Central

States’ “Rules and Regulations Pertaining to Employer

Withdrawal Liability” (“Withdrawal Liability Rules”), this

entitled Central States to declare a default of Allied Grocers’

withdrawal liability obligation. The Withdrawal Liability

Rules also specifically provide that “(ijn the event of a

default, the outstanding amount of the withdrawal liability

shall immediately become due and payable.”! On May 18,

1990, Central States filed proofs of claim for the entire

withdrawal liability in Allied Grocers’ Bankruptcy

proceeding, an amount totaling $751,918.80. Pet. 4-5. ,

On or about June 2, 1990, Allied Grocers ceased

operations. As a result, Allied Grocers and all trades or

businesses under common control with them (the “Allied

Controlled Group”) effected as a matter of law a complete

withdrawal from Central States under Section 4201(b) of the

1 Defendants-Appellees’ Supplemental Appendix, filed in the court of

appeals (“7th Cir. Supp. App.”) at 23.

3

Employee Retirement Income Security Act of 1974

(“ERISA”), as amended by the Multiemployer Pension Plan

Amendments Act of 1980 (the “MPPAA”), 29 U.S.C.

§ 13881(b). | Consequently, all members of the Allied

Controlled Group became potentially liable for Allied

Grocers’ withdrawal liability to Central States. Although it

had already filed proofs of claim in the Bankruptcy, Central

States sent a notice and demand for payment of withdrawal

liability to Allied Grocers on or about June 18, 1990 (the

“Notice and Demand”). The amount of the Notice and

Demand, $751,918.80, was precisely the same amount that

Central States had demanded in its proofs of claim in Allied

Grocers’ Bankruptcy on May 18, 1990. Allied Grocers never

initiated arbitration on the correctness of Central States’

assessment of withdrawal liability. Pet. App. 2a-3a, 16a-17a.

On July 31, 1996, more than six years after the latest of

the foregoing events, petitioners filed a Complaint in the

United States District Court for the Northern District of

Illinois seeking to collect MPPAA withdrawal liability under

29 U.S.C. § 1451(a)(1) from certain members of the Allied

Controlled Group (the “Original Defendants”).2 The

Complaint asserted that the Original Defendants were

jointly and severally liable for withdrawal liability under 29

U.S.C. § 1801(b)(1), and sought to collect $751,918.80, the

same amount sought by Central States in its proofs of claim

in the Bankruptcy and in the Notice and Demand to Allied

Grocers. Later, petitioners filed a First Amended Complaint

adding additional members of the Allied Controlled Group

as co-defendants. All of the defendants (hereafter,

respondents) filed motions to dismiss the Complaint and the

First Amended Complaint on the ground that petitioners’

withdrawal liability claim was barred by the applicable

MPPAA six-year statute of limitations. Pet. App. 3a, 17a.

2 Central States had by that time already settled with Allied Grocers.

Pet. App. 3a.

+

On September 30, 1997, the district court made several

rulings which, in essence, granted respondents’ motions to

dismiss. Pet. App. 17a, 30a-3la. The court indicated that it

would issue a more detailed order setting forth the grounds

for these rulings on or before October 31, 1997, but it failed

to do so and petitioners pursued an appeal. Pet. App. 13a-

14a. On February 27, 1998, however, the Seventh Circuit

dismissed that appeal due to the lack of an explanation by

the district court and the absence of an entry of a final

judgment under Rule 58 of the Federal Rules of Civil -

Procedure. Pet. App. 13a-14a.

On remand, after considering supplemental briefs

addressing inter alia the impact of this Court’s decision in

Bay Area Laundry & Dry Cleaning Pension Trust Fund v.

Ferbar Corp., 522 U.S. 192 (1997), the district court

reaffirmed its original rulings and dismissed the action in its

entirety as time-barred by the MPPAA’s six-year statute of

limitations. Pet. App. 15a-28a.

The court of appeals affirmed. Pet. App. la-12a. Writing

for a unanimous panel, Judge Posner explained that the

“thrust” of this Court’s opinion in Bay Area~ “was to

assimilate statute of limitations issues under the [MPPAA]

to the legal principles generally applicable to statutes of

limitations issues,” Pet. App. 4a, and on that understanding

held that petitioners’ statute of limitations

beg{an] to run—still more- than six years before

Central States sued—no later than June 18, 1990,

when, Allied [Grocers] having ceased operations on

June 2, Central States served on Allied [Grocers] a

formal demand for payment of the withdrawal

liability set forth in the proof of claim that it had filed

in the bankruptcy proceeding. Complete cessation of

operations precipitates ...the employer’s (and any

affiliates’) withdrawal liability. That was the default,

5 Re een

and the demand determined its amount (before that

determination, a suit would have been premature).

Pet. App. 9a. The court of appeals acknowledged that, as

required by law, Central States had demanded payment

under an installment plan, but the court concluded that

under Bay Area this “statutory requirement does _not

prevent the fund from accelerating all future payments upon

default, thus making all the installments due at once.” Pet.

App. 10a-11a (citation omitted).

On June 19, 2001, Central States filed a petition for

rehearing and a petition for rehearing en banc. All of the

judges on the original panel voted to deny the petition, and

none of the active judges requested a vote on the petition for

rehearing en banc. Pet. App. 29a.

ARGUMENT

The Seventh Circuit held that a cause of action arose by

reason of acceleration of the entire amount due, thereby

commencing the six-year statute of limitations for

withdrawal liability suits, when Allied Grocers (already in

Chapter 11 proceedings) defaulted on its withdrawal liability

obligation by ceasing operations and Central States

thereafter demanded payment in full of the entire amount of

the withdrawal liability obligation. The decision in this case

is the first (and, so far, only) court of appeals decision

applying this Court’s teachings in Bay Area in circumstances

where the withdrawing employer is bankrupt and disabled

from paying its withdrawal liability.

In applying common law anticipatory repudiation rules in

this context to determine when petitioners’ cause of action

arose for statute of limitations purposes, the court of appeals

was expressly guided by this Court’s reliance on common law

principles in Bay Area. And the court of appeals’

conclusion—that petitioners’ suit is time-barred—followed

logically and reasonably from those principles.

6

Although petitioners disagree with the court of appeals’

decision in several respects, the decision is consistent with

Bay Area, and it does not conflict with the decision of any

other court of appeals. Central States’ statement (Pet. 10)

that the “Seventh Circuit’s decision in this case creates

uncertainty as to when a cause of action accrues under

MPPAA” fails to establish a confict—direct, apparent or

otherwise—that requires resolution by this Court. See

Lambert v. Wicklund, 520 U.S. 292 (1997). Nor have

petitioners demonstrated that the questions presented,

though important to the parties, are of significant national

importance. There is, accordingly, no warrant for this Court

to grant review. If a circuit conflict ultimately arises on

these issues—which have in the four years since Bay Area

featured solely in this one appellate case—this-Court can

resolve it then with the benefit of that further percolation in

the lower courts.

I. THE COURT OF APPEALS’ DECISION IS

CORRECT AND DOES NOT CONFLICT WITH

THIS COURT'S DECISION IN BAY AREA OR

WITH THE DECISION OF ANY OTHER COURT

OF APPEALS ;

In Bay Area, this Court addressed when the MPPAA’s

six-year statute of limitations began to run on a pension

fund’s action to collect unpaid withdrawal liability by

applying basic, common law limitations rules. As the court of

appeals observed, the “thrust of the [Bay Area]

opinion... was to assimilate statute of limitations issues

under the [MPPAA] to the legal principles generally

applicable to statutes of limitations.” Pet. App. 4a (citing

Bay Area, 522 U.S. at 195, 208, 210). In particular, this

Court held that the MPPAA “incorporates the standard rule

that the limitations period commences when the plaintiff ‘has

a complete and present cause of action,” and that “a cause of

7

action does not become ‘complete and present’ for limitations

purposes until the plaintiff can file suit and obtain relief.”

Bay Area, 522 U.S. at 201 (citation omitted).

This Court then applied that principle to the facts of the

case before it, using the common law rule applicable to

missed installment payments. Jd. at 208. Applying that rule,

it concluded that the plan’s cause of action did not accrue

until the employer failed to make its first payment, because

until that time the employer had not defaulted and the plan

had no cause of action. Jd. at 208-09. Moreover, because the

plan had not opted to accelerate the debt upon the first or

any successive missed payment, this Court held that, under

the standard installment-payment rule, the limitations

period started to run on each payment only when the

employer defaulted on that payment. Jd.

The Court recognized, however, that the installment-

payment rule is not always controlling. This Court stated:

Where there is an acceleration clause giving the

creditor the right upon certain contingencies to

declare the whole sum due, the statute begins to run,

only with respect to each installment, at the time the

installment becomes due, unless the creditor

exercises his option to declare the whole indebtedness

due, in which case the statute begins to run from the

date of the exercise of his option.

Id. at 209 n.5 (quoting Board of Trustees of Dist. No. 15

Machinists’ Pension Fund v. Kahle Eng’g Corp., 48 F.3d

852, 857 (8d Cir. 1994) (quoting 51 Am. Jur. 2d Limitations

of Actions §1383 (1970))) (internal quotations omitted)

(emphasis added). This Court did not purport, however, to

discuss or define all circumstances or events that might

result in “acceleration.” The task of clarifying the

application of acceleration principles to varying factual

situations, including those involving an employer’s

8

- bankruptcy, was appropriately left for development in the

lower federal courts.

In this case, the Seventh Circuit correctly recognized

that this Court’s application of the installment-payment

rule-—i.e., that “each missed payment [of an MPPAA

installment obligation] creates a separate cause of action

with its own six-year limitations period” —was rendered in

and is limited by the “context” of its decision in Bay Area,

“which did not include bankruptcy,” Pet. App. 4a (quoting

Bay Area, 522 U.S. at 195), and it correctly applied

acceleration principles, rather than the installment-payment

- rule, to the very different facts of this case.

The court of appeals observed that, in addition to failing

to make a payment that has become due, a payor can

likewise default “by repudiating the obligation to pay.” Pet.

App. 4a. “{A]nticpatory repudiation,” the court explained,

“4s a breach of contract that entitles the payee to sue without

waiting for the date when payment was due to come and go.”

Pet. App. 4a-5a. It is well established that “anticipatory

repudiation (sometimes called anticipatory breach) is

conceived of primarily as a trigger of a contract party’s right

of self-help, like the breach of a condition in a contract.” Pet.

App. 5a (citing C.L. Maddoz, Inc. v. Coalfield Servs., Inc., 51

F.3d 76, 81 (7th Cir. 1995); First Natl Bank v. Continental

Ill. Nat'l Bank & Trust Co., 933 F.2d 466, 469 (7th Cir. 1991);

American Hosp. Supply Corp. v. Hospital Prods. Ltd., 780

F.2d 589, 599 (7th Cir. 1986); E. Allan Farnsworth, Contracts

§ 8.20 (8d ed. 1999)). An anticipatory breach “occurs when it

is reasonably certain that the other party is not going to

meet its obligations under the contract in timely fashion. At

that point the potential victim is freed from its own

contractual obligations and authorized to take all reasonable

self-protective measures, including suing.” Pet. App. 12a.8

3 Petitioners claim that the doctrine of anticipatory repudiation is

inappropriate here because “there was no additional performance required

9

Applying that principle, the court of appeals found it

reasonably certain that Allied Grocers would not be able to

pay its withdrawal liability as of June 2, 1990, when Allied

Grocers, having previously filed for protection under

Chapter 11, ceased operations. Pet. App. 9a. Allied Grocers’

termination of operations effected its complete withdrawal

from the plan and triggered its withdrawal liability. 29

U.S.C. § 1383(a)(2). And, in light of Allied Grocers’

Bankruptcy, the court of appeals correctly recognized that

“{(w]hen Allied [Grocers] ceased operating, Central States

knew it would never see any of the scheduled installment

by the pension plan” and because the obligation to pay withdrawal liability

is akin to a contract requiring “the payment of money only.” Pet. 24-25.

Contrary to petitioners’ argument, the MPPAA and the terms of the

pension plan imposed a host of continuing obligations on Central States

after Allied Grocers’ complete withdrawal from the fund. To begin with,

Central States retained the core obligation to pay the pensions of Allied

Grocers’ former employees. Pet. App. 6a. Moreover, Central States was

required to calculate the amount of withdrawal liability owed by Allied

Grocers in accordance with the MPPAA and the terms of the pension plan,

see 29 U.S.C. $§ 1382, 1391, and further required to send proper written

notice and demand for payment of the amount of withdrawal liability, see

29 U.S.C. $§ 1382, 1399(b)(1). In sum, “MPPAA’s complex scheme for

calculating withdrawal liability” is simply not, as Central States alleges,

analogous to a contract solely for the payment of money. See Bay Area,

522 U.S. at 196. Petitioners seek to discount the significance of Central

States’ continuing nonmonetary obligations by protesting that Central

States’ obligation to pay pensions to affected employees is imposed by

statute, not contract, and that the plan is obliged by statute to pay these

pensions regardless of whether the employer pays its corresponding

withdrawal liability. Pet. 23. This argument misses the most fundamental

point in Bay Area—that the basic common law principles that determine

what triggers statutes of limitations for breaches of contract (in that case,

breaches of installment contracts) supply the rules of decision for

determining what triggers the statute of limitations for breaches of

MPPAA withdrawal liability obligations, even though the latter are not

purely contractual. See Bay Area, 522 U.S. at 208-10.

10

payments.” Pet. App. lla.4 As the court explained, because

Central States had an unsecured claim,

Allied [Grocers] could not make any of the

installment payments without violating the absolute

priority rule of 11 U.S.C. §1129(b). With fewer

assets than claims, Allied [Grocers] would certainly

pay the fund less than the full value of its claim. The

best the fund could hope for was a partial settlement

of the withdrawal liability. Jt should therefore have

concluded on June 2, 1990, that Allied [Grocers] had

repudiated its withdrawal liability. Put differently,

on that day it became clear that Allied [Grocers] had

disabled itself from paying the withdrawal liability.

Pet. App. 1la (emphasis added). Allied Grocers’ termination

of operations thus constituted a default on its entire

withdrawal liability obligation, since (as the court of appeals

observed) “[tJhe standard rule in contract law is that the

promisee is free to sue for anticipatory repudiation as soon

as the promisor has disabled itself from performing its

contractual obligations.” Pet. App. lla (citing Restatement

(Second) of Contracts § 250(b) (1981)).5

4 Petitioners contend that the court of appeals erred in this conclusion,

because an employer that ceases covered operations (the statutory event

that causes a complete withdrawal from a plan under 29 U.S.C.

§ 1383(a)(2)) does not necessarily cease all operations, and may in fact be

able to produce enough revenue from noncovered operations to pay

withirawal liability. Pet. 19. That argument is unavailing here because

the court of appeals’ finding that Allied Grocers ceased its operations was

_ not limited to Allied Grocers’ “covered operations.” See Pet. App. 2a, 9a,

lla.

5 Petitioners do not dispute the court’s conclusion that Central States

should have recognized by June 2, 1990, Allied Grocers’ inability to pay its

withdrawal liability. They argue, however, that Allied Grocers’

anticipatory repudiation should not carry over to affect the Allied

Controlled Group. Pet. 26. Contrary to petitioners’ argument, the court of

appeals correctly recognized that Allied Grocers’ default was

contemporaneous with the default of the Allied Controlled Group,

11

Having determined that Allied Grocers defaulted on its

withdrawal payment obligation on June 2, 1990, the court of

appeals reasonably concluded that Central States took the

last step necessary to establish a “complete and present

cause of action” within the meaning of Bay Area, thus

triggering the six-year statute of limitations, when it

“determin{ed] the amount [of withdrawal liability] due,

which happened, at the very latest, on June 18, more than six

years before the suit was brought.” Pet. App. lla. On that

date, Allied Grocers’ default, ie, the anticipatory

repudiation, and Central States’ formal Notice and Demand

for full payment of the withdrawal liability sent two weeks

later, i.¢e., the acceleration, converged to produce a full and

complete cause of action, thereby triggering the MPPAA six-

observing that “(cJomplete cessation of operations precipitates, as we have

seen, the employer’s (and any affiliates’) withdrawal liability.” Pet. App.

9a (emphasis added). Although petitioners contend that there could be no

anticipatory repudiation by Allied Grocers unless the entire Allied

Controlled Group were also hopelessly insolvent, petitioners cite no legal

authority to support that contention. To the contrary, the plain language

of the statute does not differentiate amongst employers, controlled group

members, or any other potential defendants, solvent or insolvent, in this

regard. See 29 U.S.C. § 1301(b)(1) (stating that where employer is under

“common control” with other trades or businesses, all entities are treated

as single employer). The limitations statute simply rings the bell for all to

hear. See Central States, Southeast & Southwest Areas Pension Fund v.

Slotky, 956 F.2d 1369, 1375 (7th Cir. 1992) (reiterating that notice to one

controlled group member is notice to all); Central States, Southeast &

Southwest Areas Pension Fund v. Mississippi Warehouse Corp., 853 F.

Supp. 1058, 1059 (N.D. Ill. 1994) (holding that action brought against

alleged controlled group member jointly and severally liable for

withdrawal liability must be commenced within six-year limitations period

under 29 U.S.C. § 1451(f)). Moreover, even if petitioners’ position were

better supported, there is no disagreement among the circuits on this

issue, and petitioners’ disagreement with the Seventh Circuit over this

aspect of the common law doctrine of anticipatory repudiation does not

warrant this Court’s review.

12

year statute of limitations for the entire amount of

withdrawal liability.§

Petitioners contend that these events were not sufficient

to trigger the statute of limitations because this Court

recognized in Bay Area that the statutory right to accelerate

the entire withdrawal liability upon a default is permissive

and, according to petitioners, Central States made no

election to accelerate here. See Pet. 16-18, 21-25. This

argument has no merit in fact or law. To begin with,

contrary to petitioners’ assertion, the court of appeals quite

reasonably concluded, in light of Allied Grocers’ Chapter 11

status, that Central States’ demand of full payment upon

Allied Grocers’ cessation of operations did, constitute an

election to accelerate the entire withdrawal liability. Indeed,

that is the only reasonable interpretation of Central States’

action, since Central States’ Withdrawal Liability Rules

provide that in the event of a default the full amount of the

withdrawal liability “shall immediately become due and

payable.” 7th Cir. Supp. App. at 23 (emphasis added).

6 Though Allied Grocers never sought arbitration, petitioners argue

that the statute of limitations could not begin to run until the close of the

period in which Allied Grocers could have requested arbitration. Pet. 20-

21. This argument is not reflected or fairly included within either of

petitioners’ questions presented, and it is therefore not preserved for this

Court’s review. See NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 140

(1998). Moreover, the argument is meritless and not remotely certworthy.

In light of the statutory requirement to pay withdrawal liability on

schedule irrespective of any request for arbitration, 29 U.S.C. § 1399(c)(2),

the court of appeals correctly noted that, once the statute of limitations

commenced by reason of Allied Grocers’ anticipatory repudiation, it ran

independently from any theoretical arbitration option. See Pet. App. 9a

(“{TJhe right to arbitration presupposes that the cause of action has

already arisen.”). The only case petitioners cite to the contrary is the

Seventh Circuit’s decision in Chicago Truck Drivers Union Pension Fund

v. Century Motor Freight, inc., 125 F.3d 526 (7th Cir. 1997). That case is

inapposite—as it did not involve a bankrupt and nonoperating employer,

and the employer did request arbitration—but even if it were closer to the

mark, an intra-circuit conflict would not warrant this Court’s intercession.

See Wisniewski v. United States, 353 U.S. 901, 902 (1957) (per curiam).

13

Petitioners’ disagreement with that factual finding is

meritless and, in any event, is hardly a matter warranting

this Court’s review. See, ¢.g., Graver Tank & Mfg. Co. v.

Linde Air Prods. Co., 336 U.S. 271, 275 (1949).

Moreover, petitioners fail to support their contention

that a voluntary election to accelerate is required as a matter

of law where, as here, the employer has taken action

disabling itself from compliance with its full withdrawal

payment obligations. Although the statute provides that a

plan may accelerate in the event of a default, see 29 U.S.C.

§ 1399(c)(5), that provision is not dispositive of the separate

question of when the statute of limitations begins to run. If

it were, this Court could have decided Bay Area hased on

the statute alone. Instead, the Court made it clear that the

MPPAA incorporates common law rules for determining

what events trigger its statute of limitations, 522 U.S. at 201,

and it applied the appropriate common law rule to decide the

case before it. Under the facts in Bay Area, which did not

involve bankruptcy, the Court concluded that the general

installment-payment rule applied. Under that rule, the

Court found that, absent a voluntary decision by the creditor

to accelerate, “a new cause of action,’ carrying its own

limitations period, ‘arises from the date each payment is

missed.” Id. at 208 (citation omitted). Under the very

different facts of this case, the court of appeals applied a

different common law rule, the doctrine of anticipatory

repudiation. The court rightly found that “nothing in [Bay

Area] or its logic...suggest[s] that the principles of

anticipatory repudiation have no role to play under the

MPPAA.” Pet. App. 6a.

Petitioners argue (Pet. 24-25) that the court of appeals

misapplied this common law doctrine, and that the common

law of anticipatory repudiation in fact vests the creditor with

complete discretion whether to accelerate the debt. But the

sources petitioners cite—mostly obsolete cases and

14

treatises—do not come close to establishing a current

majority rule to that effect and do not even address

circumstances where, as here, the debtor plainly and simply

has no ability to perform. The only current case petitioners

cite is Franconia Assocs. v. United States, 240 F.3d 1358

(Fed. Cir. 2001), petition for cert. filed, 70 U.S.L.W. 3193

(U.S. Sept. 10, 2001) (No. 01-455). This case, however, cuts

against (not for) their position. The Federal Circuit held

that, in circumstances “when an obligor communicates to an

obligee that he will commit a breach in the future,” the

statute of limitations “begins to run from the date of

performance specified in the contract unless the obligee

elects to sue earlier for anticipatory repudiation.” Id.

at 1363. But the Federal Circuit distinguished that

circumstance from the case before it, where Congress had

statutorily forbidden the government from complying with

the contract, in which case the court found that the cause of

action accrued, and the statute of limitations began to run, on

the date of Congress’s enactment. This case is more like the

latter circumstance, because here (as in Franconia) the

obligor did not merely renounce an intent to perform but

disabled itself from performing. The only other authorities

petitioners cite to support their supposed “general rule” of

voluntary acceleration are 36-year-old dictum from a

footnote in Penn-Ohio Steel Corp. v. United States, 354 F.2d

254, 272 n.35 (Ct. Cl. 1965), and a 45-year-old state court

decision, White v. Prenzler, 131 N.E.2d 540, 543 (Ill. 1956),

which turned on the plaintiffs lack of knowledge of the

purported anticipatory repudiation. These antiquated

citations demonstrate no split of authority, much less a

current conflict warranting a grant of certiorari.”

7 Petitioners argue that the MPPAA already includes the concept of

anticipatory repudiation as an event of statutory default and does not

except this class of defaults from its rule of permissive acceleration. See

Pet. 17-18 (citing 29 U.S.C. § 139%(c)(5)). Petitioners fail to appreciate the

distinction between circumstances presenting a substantial likelihood of

15

In sum, the court of appeals expressly relied on this

Court’s teaching in Bay Area when it applied the common

law doctrine of anticipatory repudiation to the circumstances

presented in this case. Its decision took account of the

relevant provisions of the MPPAA, and it does not conflict

with the decision of any other court of appeals. Indeed,

petitioners point to no other court of appeals case that deals

with the accrual of a withdrawal liability action in similar

circumstances, much less a case that conflicts with the

Seventh Circuit’s decision here. Their petition for certiorari

reduces to a contention that the court of appeals erred in its

application of Bay Area to the unique factual circumstances

of this case. As discussed above, petitioners are incorrect,

but even if their argument had more merit, they have

provided no justification for this Court to review this fact-

bound dispute.

Il. THE JUDGMENT IN THIS CASE COULD ALSO

BE AFFIRMED, IN THE ALTERNATIVE,

BASED ON PRIOR TRANSACTIONS THAT

WOULD HAVE TRIGGERED THE STATUTE OF

LIMITATIONS EVEN EARLIER

The court of appeals identified several dates and events

as potential triggers for the acceleration of Allied Grocers’

withdrawal liability obligation and the six-year statute of

limitations:

e May 18, 1990 - the date when Central States filed

proofs of claim in the Allied Grocers’ Bankruptcy.

nonpayment (the trigger for default under Section 1399(c)(5)) and the

circumstances of this case, where an employer in bankruptcy has, by

ceasing operations, rendered itself wholly unable to pay. Neither the

statute nor Bay Area specifically addresses the consequences of default in

these circumstances. In any event, Central States’ argument is purely

academic because, as noted above, Central States’ own rules in this case

provided for mandatory acceleration immediately upon Allied Grocers’

default.

16

e June 2, 1990 - the date when Allied Grocers ceased

operations and withdrew as a matter of law from the

Central States pension plan.

e June 18, 1990 - the date when Central States sent its

Notice and Demand to Allied Grocers, demanding

payment in full of the calculated withdrawal

liability.

Each of these events occurred more than six years before

Central States filed its collection action. Thus, the judgment

in this case is correct no matter which event, singly or in

combination, triggered Central States’ acceleration of Allied

Grocers’ withdrawal liability. )

That debt reasonably could have been accelerated (and

the statute of limitations begun) as early as May 18, 1990,

when Central States filed proofs of claims in Allied Grocers’

Bankruptcy, demanding payment in full of the calculated

withdrawal liability. Although the court of appeals rejected

this filing as the event constituting Allied Grocers’ default

and Central States’ acceleration, at least one district court

has found such an event qualifying. In J.L.G.W.U. National ~

Retirement Fund v. Meredith Grey, Inc., 190 F.R.D. 324

(S.D.N.Y. 1999), an employer filed for bankruptcy, and the

pension fund then filed a proof of claim in the bankruptcy

proceedings for the entire amount of withdrawal liability.

The district court, relying on this Court’s decision in Bay

Area, found as follows:

[OJn July 16, 1987, the Fund filed a proof of claim in

the [employer’s] bankruptcy proceedings, thereby

accelerating all payments and demanding the entire

amount of the withdrawal liability. Under Bay Area

Laundry, the statute of limitations began to run on

the full amount of the withdrawal liability upon the

acceleration of the debt. Accordingly, the relevant

17

limitations period expired on July 16, 1998—siz

years after the acceleration.

Id. at 328 (citation omitted) (emphasis added). The judgment

in this case is sustainable under this same analysis. -

The debt in this case could also reasonably have been

accelerated (and the statute of limitations begun) on June 2,

1990, when Allied Grocers ceased operations, thereby

effecting a complete withdrawal from Central States’

pension plan. Indeed, the court of appeals acknowledged

that “it is arguable that the statute of limitations actually

began to run earlier than June 18, on June 2, since Central

States had already computed the withdrawal liability and

sent notice of the amount, via the proof of claim, to

Allied ....” Pet. App. 10a. This provides a second

alternative basis for affirmance.

On June 18, 1990, Central States sent its Notice and

Demand for payment of withdrawal liability to Allied

Grocers for the same amount previously demanded in

Central States’ proofs of claim in the Bankruptcy. The court

of appeals held that the statute began to run at that time.

Coupled with the cessation of Allied Grocers’ operations, the

court concluded that the Notice and Demand completed the

chain of events leading from Allied Grocers’ default to the

commencement of the statute of limitations.

Under any of these analyses, the result is the same:

Central States’ suit was time-barred, since the Complaint

seeking payment in full of Allied Grocers’ withdrawal

liability was filed more than six years after any of these

relevant events. Because the judgment, amply justified by

the court of appeals’ opinion, is also sustainable on alternate

grounds, petitioners’ plea for error-correction should fall on

especially deaf ears.

_ CONCLUSION

The petition for a writ of certiorari should be denied.

Dated: November 30, 2001

James A.Cherney_ |

LATHAM & WATKINS

233 South Wacker Drive

Suite 5800

Chicago, IL 60606-6401

(312) 993-9767

Richard P. Bress

LATHAM & WATKINS

555 Eleventh Street, N.W.

Suite 1000

Washington, DC 20004-1304

(202) 637-2200

Respectfully submitted,

Max W. Hittle, Jr.*

Linda J. Cooley

KRIEG DeVAULT LLP

One Indiana Square

Suite 2800

Indianapolis, IN 46204-2079

(317) 636-4341

* Counsel of Record