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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2002
- **Citation:** 534 U.S. 1079

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_2571%3A3. Public record. Not legal advice.