Machinists Pension Fund, Dist. 15 v. Khale Engineering Corp. ( 1994 )

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
12-30-1994
Machinists Pension Fund, Dist. 15 v. Khale
Engineering Corp.
Precedential or Non-Precedential:
Docket 94-5160
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UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
No. 94-5160
BOARD OF TRUSTEES OF THE DISTRICT NO. 15
MACHINISTS' PENSION FUND,
Appellant
v.
KAHLE ENGINEERING CORPORATION, a New Jersey corporation
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil No. 93-cv-04285)
Argued: September 13, 1994
Before: SLOVITER, Chief Judge, MANSMANN
and ALARCON*, Circuit Judges
(Filed December 30, 1994)
Elizabeth Roberto (Argued)
Eames, Wilcox, Mastej, Bryant,
Swift & Riddell
Detroit, MI 48226
Attorney for Appellant
*.
Hon. Arthur L. Alarcon, United States Circuit Judge for the
Ninth Circuit, sitting by designation.
Joseph J. Malcolm (Argued)
Grotta, Glassman & Hoffman
Roseland, NJ 07508
On the Brief:
James M. Beach
Attorneys for Appellee
David S. Allen
Jacobs, Burns, Sugarman,
Orlove & Stanton
Chicago, IL 60606
Attorney for Amicus-Appellant
Chicago Truck Drivers, Helpers
and Warehouse Workers Union
(Independent) Pension Fund
Diana L.S. Peters
Feder & Associates
Washington, DC 20036
Attorney for Amicus-Appellant
National Coordinating
Committee for Multiemployer Plans
OPINION OF THE COURT
SLOVITER, Chief Judge.
The Board of Trustees of the District No. 15
Machinists' Pension Fund (Fund or Pension Fund) appeals the
dismissal of their action to collect an assessment of withdrawal
liability filed against Kahle Engineering Corp. under the
Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), Pub.
L. No. 96-364, 94 Stat. 1208 (1980) (codified as amended at 29
U.S.C. §§ 1001a, 1381-1453 (1988 & Supp. V 1993)), which amended
the Employee Retirement Income Security Act of 1974 (ERISA), Pub.
L. No. 93-406, 88 Stat. 832 (codified as amended at 29 U.S.C. §§
1001-1461 (1988 & Supp. V 1993)). The district court entered
summary judgment against the Fund on the basis of the statute of
limitations.
This appeal requires us to determine whether the
district court correctly held that the six-year statute of
limitations in the MPPAA began to run for the entire liability
when the employer first missed an installment payment, even
though the payout period was more than nine years. Apparently,
no federal appellate court has addressed this precise issue of
statutory interpretation under the MPPAA although two other
courts of appeals have decided cases which suggest possible, and
conflicting, interpretations.
I.
The Statutory Scheme
The MPPAA was enacted by Congress in 1980 as an
amendment to ERISA to insure the financial stability of
multiemployer pension plans by imposing mandatory liability on
employers withdrawing from a pension plan. See Laborers Health
and Welfare Trust Fund v. Advanced Lightweight Concrete Co., 484
U.S. 539, 545 (1987). In IUE AFL-CIO Pension Fund v. Barker &
Williamson, 788 F.2d 118 (3d Cir. 1986), we identified two goals
for the MPPAA: "'to protect the interests of participants and
beneficiaries in financially distressed multiemployer plans, and
. . . to ensure benefit security to plan participants.'" Id. at
127 (quoting H.R. Rep. No. 869, 96th Cong., 2d Sess. 71,
reprinted in 1980 U.S.C.C.A.N. 2918, 2939). The principal manner
in which these goals are effectuated by the act is by the
imposition of withdrawal liability on an employer who withdraws
from a multiemployer pension plan in the proportionate share of
the plan's unfunded vested benefits. Crown Cork & Seal v.
Central States Pension Fund, 982 F.2d 857, 861 (3d Cir. 1992),
cert. denied, 113 S. Ct. 2961 (1993); see also Concrete Pipe and
Prods. v. Construction Laborers Pension Trust for S. Cal., 113 S.
Ct. 2264, 2272 (1993).
The statute sets forth an intricate scheme for the
calculation and collection of the withdrawal liability and
resolution of disputes with respect thereto.1 When an employer
1
. The statutory scheme is supplemented by regulations
promulgated by the Pension Benefit Guaranty Corporation (PBGC).
As enacted in 1974, ERISA created the PBGC within the Department
of Labor "to administer and enforce a pension plan termination
withdraws from a multiemployer plan, the plan sponsor must
determine the amount of withdrawal liability, and "as soon as
practicable" notify the employer of the amount of liability and
the schedule for repayments and demand payment in accordance with
that schedule. See 29 U.S.C. §§ 1382, 1399(b)(1). The plan
sponsor must set up a schedule for withdrawal payments which may
impose liability to a maximum of twenty years. Id. §§
1399(b)(1)(A)(ii), 1399(c)(1). The first installment payment on
the schedule is due within sixty days of the plan sponsor's
demand. Id. § 1399(c)(2). Under an exception for labor-
disputes, the employer shall not be considered to have withdrawn
from a plan solely because an employer suspends contributions
during a labor dispute involving its employees. Id. § 1398.
No later than ninety days after the employer receives
notice from the plan sponsor of the determination of withdrawal
liability, the employer may ask the plan sponsor to review any
specific matter and to reassess the schedule of payments; "may
identify any inaccuracy in the determination of the amount of the
unfunded vested benefits allocable to the employer;" and may
furnish any additional relevant information to the plan sponsor.
Id. § 1399(b)(2)(A). The plan sponsor must conduct a reasonable
review of any matter raised by the employer, and notify the
(..continued)
insurance program" and granted it the statutory authority to
promulgate regulations in carrying out the purposes of ERISA.
See Concrete Pipe, 113 S. Ct. at 2271 (citing 29 U.S.C. §
1302(a)-(b)).
employer of its decision, the basis for its decision, and any
changes made as a result of the review. Id. § 1399(b)(2)(B).
An employer who wishes to contest the fact of its
liability or the amount must initiate arbitration. If it does
not, it waives the right to contest the assessment and the
amounts demanded by the plan sponsor become "due and owing" as
set forth on the payment schedule, and the employer may be sued
for collection in state or federal court. Id. § 1401(b)(1).
Under the acceleration provision of the statute
available in the event of a default, the "plan sponsor may
require immediate payment of the outstanding amount of the
employer's withdrawal liability, plus accrued interest on the
total outstanding liability from the due date of the first
payment which was not timely made." Id. § 1399(c)(5); see also
29 C.F.R. § 2644.2(b)(2). For purposes of this section, default
is defined as "the failure of an employer to make, when due, any
payment if not cured within sixty days after the employer
receives written notification from the plan sponsor of such
failure." 29 U.S.C. § 1399(c)(5)(A). A default can also be "any
other event defined by the plan rules which indicates a
substantial likelihood that an employer will be unable to pay its
withdrawal liability." Id. § 1399(c)(5)(B).
A PBGC regulation prohibits a declaration of default
for failure to make timely payments during the period, and for
sixty days thereafter, that an arbitration is pending or that the
plan sponsor is conducting the employer's requested review. See
29 C.F.R. § 2644.2(c)(1). However, the statute provides that
payments in accordance with the schedule set forth by the plan
sponsor must be made "notwithstanding any request for review or
appeal of determinations of the amount of such liability or of
the schedule." 29 U.S.C. § 1399(c)(2). If an employer misses a
scheduled payment, the fund may seek to collect by filing a
collection action but it may not accelerate the balance during
that protected arbitration period. See United Retail and
Wholesale Employees Pension Plan v. Yahn & McDonald, 787 F.2d
128, 131 (3d Cir. 1986), aff'd per curiam by an equally divided
court sub nom., PBGC v. Yahn & McDonald, 481 U.S. 735 (1987)
(hereinafter Yahn).
An action for liability under the MPPAA may be brought
by a plan fiduciary, employer, plan participant, beneficiary or
an employee organization which represents such a plan participant
or beneficiary "adversely affected by the act or omission of any
party" under the statute or by an employee organization. 29
U.S.C. § 1451(a)(1). That action must be filed within six years
after the date on which "the cause of action" arose. Id. §
1451(f)(1).2
2
. Under another prong of the statute of limitations provision,
not at issue here, the action may also be brought within three
years after the plaintiff knew or should have known of the
existence of such a cause of action except that in the case of
fraud or concealment, this "discovery prong" is extended to six
years. The full text of the provision is:
An action under this section may not be brought after
the later of -
(1) 6 years after the date on which the cause of
action arose, or
With the statutory scheme in mind, we turn to the facts
of this case. Our task is to determine when the Pension Fund's
"cause of action" that is the subject of this suit arose.
II.
Facts and Procedural History
Kahle was a contributing employer to the Pension Fund
pursuant to the collective bargaining agreements it entered into
with its union. Following a labor dispute in 1981, Kahle
suspended contributions to the Pension Fund. On April 23, 1984,
in accordance with 29 U.S.C. §§ 1382, 1399(b)(1), the Fund
notified Kahle in writing that it had determined that Kahle had
withdrawn from the Fund and requested payment of withdrawal
liability in the amount of $271,746, payable in thirty-eight
quarterly installment payments of $9,467 each, beginning on July
1, 1984, with a final thirty-ninth payment of $6,459, payable in
January, 1994.3 The April 23 letter also notified Kahle of its
(..continued)
(2) 3 years after the earliest date on which the
plaintiff acquired or should have acquired actual knowledge of
the existence of such cause of action; except that in the case of
fraud or concealment, such action may be brought not later than 6
years after the date of discovery of the existence of such cause
of action.
See 29 U.S.C. § 1451(f).
3
. We note that the payment figures total $366,205, which the
Pension Fund explained in the district court was attributable to
interest on the principal amount of $271,746. Kahle objected to
the interest, but it is unclear whether it objected to the fact
of interest or its computation. We will leave that issue to the
district court on remand.
statutory right to request review from the Fund, to identify any
inaccuracies, and to furnish any additional relevant information.
In response, on July 2, l984 Kahle wrote that it "has
not withdrawn from the Fund," that the cessation of contributions
was caused solely by a strike which commenced on June 22, 1981
and continued in 1982, and that the company remains ready and
willing to negotiate with the Union. The letter stated it
constituted an official request under section 4219(b)(2) of ERISA
[29 U.S.C. § 1399(b)(2)] for review of the Fund's determination
that the company had withdrawn, that withdrawal occurred on June
22, 1981 and of the figures used to calculate the withdrawal
liability. Kahle enclosed a first installment payment of $9,467
with the letter. App. at 26-27.
On August 2, 1984, the Fund's counsel advised Kahle by
letter that he would raise the request for review of the
withdrawal liability determination at the next meeting of the
Fund Trustees and would speak to the union about Kahle's claims
of continued negotiation and representation. Counsel also posed
questions to Kahle about its claim of continuing negotiation with
the union. App. at 59-60.
Kahle's response dated September 13, 1984 made clear
there were no negotiations to end the strike and that picketing
continued until April 1982, but that "[b]oth parties remained at
the call of the Federal Mediator." In the last sentence of that
letter, Kahle stated that "pursuant to 29 C.F.R. § 2644.2(c) the
Company will discontinue quarterly payments."4 App. at 28-29. In
fact, the referenced PBGC regulation did not authorize Kahle to
withhold the scheduled payments but merely prohibited the Fund
from declaring default during the pendency of arbitration. See
29 C.F.R. § 2644.2.
Kahle sent the Fund's counsel a letter on December 20,
1984, demanding arbitration.5 Before the Fund's counsel had
received the December 20, 1984, letter, he wrote to Kahle's
counsel on December 21, 1984, stating that the Trustees saw no
reason to change their determination that Kahle had withdrawn
from the Plan. App. at 30. The December 21 letter also stated,
"Please be . . . advised that your client is now in default in
its payments. Unless it cures this default by the 1st of January
1985, our client will have no alternative but to declare your
client 'in default' and seek all remedies available to it . . .
under appropriate federal legislation." App. at 30.
4
. The September 13 letter was never received by Fund counsel
although the Fund does not contest its contents, and there are
later letters that referred to it. The Fund appears to have
suggested in the district court that the September 13 letter
constituted a demand for arbitration that tolled the accrual of
its cause of action and the consequent statute of limitations,
but the district court gave that argument short shrift because it
is undisputed that neither party took any steps to invoke the
arbitration procedure. In the view we take of the statute of
limitations issue, we need not decide whether the allusion to
arbitration by the employer would have stopped the accrual of the
cause of action for any length of time.
5
. The contents of this letter, and particularly the demand for
arbitration, are referred to in the Fund counsel's subsequent
letter of December 28, 1984. App. at 61-62.
On December 28, 1984, the Fund noted receipt of Kahle's
letter of December 20, 1984, enclosed another copy of the Fund's
actuarial calculations, and stated again that the Fund saw no
reason to alter its determination of the fact of or date of
withdrawal, but indicated a willingness to review its
calculations if Kahle provided more specifics. The Fund
acknowledged Kahle's demand for arbitration and suggested that
the parties "proceed in accordance with the rules of the American
Arbitration Association for all purposes," reserving any
objections including timeliness for the arbitrators. The Fund
also offered to discuss "these matters on a less formal basis."
App. at 61-62.
There is no evidence of further communications,
negotiations, or arbitration proceedings after December 1984.
Kahle did not make any further payments. Almost four years
later, on August 9, 1988, the Fund notified Kahle "that the
company is in default in its withdrawal liability payments,"
demanded all past due payments plus interest, and stated that if
Kahle did not make such payments within sixty days the Fund would
require "immediate payment of the total withdrawal liability,
plus interest accruing from the date the first payment was due."
The Fund also demanded that Kahle post a bond for $271,746, the
full amount of withdrawal liability. App. at 63-64. The record
contains no evidence of further communications until the filing
of this suit.
The Pension Fund filed the complaint in the United
States District Court for the District of New Jersey on September
28, 1993. The parties filed cross-motions for summary judgment.
Following a hearing on February 28, 1994, the district court
granted Kahle's Motion for Summary Judgment and dismissed the
case as time-barred under the MPPAA's six-year statute of
limitations. See 29 U.S.C. § 1451(f)(1).
The district court had jurisdiction under 29 U.S.C. §§
1132(e)(1) and 1451(c) and we have appellate jurisdiction
pursuant to 28 U.S.C. § 1291. A district court's grant of
summary judgment is subject to our plenary review. Mitchell v.
Commission on Adult Entertainment Est., 10 F.3d 123, 129 (3d Cir.
1993). Our review of the statute of limitations under the MPPAA
is similarly plenary. Doherty v. Teamsters Pension Trust Fund,
16 F.3d 1386, 1389 (3d Cir. 1994).
III.
Discussion
On the date this lawsuit was filed, September 28, l993,
Kahle was still within the payout period established by the
Pension Fund pursuant to the MPPAA for Kahle to complete payment
of its withdrawal liability. That period was not scheduled to
expire until January 1994. Although the six-year statute of
limitations precludes the Fund's recovery of any payments due
more than six years before the filing of its complaint, and the
Pension Fund apparently so concedes, we fail to see any
persuasive reason why the Fund should not be entitled to recover
the payments due during the six years preceding the filing of its
lawsuit.
The district court reasoned that the Fund's cause of
action arose when Kahle missed its first payment in October 1984
and, at the latest, December 21, 1984.6 Under the district
court's theory, and that accepted by the dissent in this case,
the failure of the Fund to file its suit within six years from
that date meant that the Fund's action was untimely, even though
it was filed while there were still payments to be made.
We believe that the district court erred when it failed
to recognize that the employer's obligation to make the scheduled
payments is akin to the obligation to make installment payments.
In an installment contract, a new cause of action arises from the
date each payment is missed. See 4 A. Corbin, Corbin on
Contracts § 951 (1951).
The principles applying the statute of limitations to
installment payments are well established:
In the case of an obligation payable by instalments,
the statute of limitations runs against each instalment
from the time it becomes due, that is, from the time
when an action might be brought to recover it.
....
The rule that the statute of limitations begins to
run against each instalment of an obligation payable by
instalments only from the time the instalment becomes
due applies although the debtor has the option to pay
the entire indebtedness at any time. On the other
hand, 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 instalment, at the time the
instalment becomes due, unless the creditor exercises
6
. It is not clear from the record on what basis the district
court concluded that the latest date for accrual of the cause of
action was December 21, 1984.
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.
51 Am. Jur. 2d: Limitation of Actions § 133.
As Corbin explains, unless there is a repudiation
(analogous to a default and acceleration under the MPPAA), the
plaintiff may only sue for each breach as it occurs, and the
statute of limitations begins to run from that time. See Corbin
supra, § 989; see also United States v. La France, 728 F. Supp.
1116, 1119-20 (D. Del. 1990) (holding that the cause of action
for collection of installment payments under a Small Business
Administration loan accrues on each installment from the date it
falls due in the absence of acceleration).
The analogy of scheduled payments under the MPPAA to
installment payments was adopted by the Eleventh Circuit when it
held that interest accrues on overdue withdrawal liability from
the due date of each missed payment rather than from the due date
of the first installment. See Carriers Container Council v.
Mobile S.S. Ass'n, 948 F.2d 1219, 1222-24 (11th Cir. 1991). The
court reasoned that accruing interest from the date of the first
installment would amount to an improper retroactive acceleration
of interest. Id. at 1223. But cf. New York Teamsters Conference
Pension & Retirement Fund v. McNicholas Transp. Co., 658 F. Supp.
1469, 1476 (N.D.N.Y. 1987) (ordering interest from first date of
missed payment under schedule), aff'd, 848 F.2d 20 (2d Cir.
1988). Although the context of Carriers Container was different
than the case before us, that court's treatment of each
installment as a separate amount due is in line with the theory
proffered by the Pension Fund.
The Fund also refers us to Ludington News Co. and
Michigan UFCW/Drug Employers Pension Fund Workers Union and Drug
and Mercantile Employers Joint Pension Fund, 9 Employee Benefits
Cas. (BNA) 1913 (1988), an arbitrator's decision viewing the
withdrawal liability as an installment contract obligation under
which "the statute does not begin to run with respect to a
particular installment until that installment falls due." Id. at
1916. Although we recognize that Ludington is without
precedential effect, it was cited as relevant by another circuit.
See Joyce v. Clyde Sandoz Masonry, 871 F.2d 1119, 1124 (D.C.
Cir.), cert. denied, 493 U.S. 918 (1989). We also note that
Ludington relied on Jackson v. American Can Co., 485 F. Supp. 370
(W.D. Mich. 1980), a case that does provide a meaningful analogy.
In Jackson, the court declined to apply the statute of
limitations as a basis to summarily dismiss an action by a
retiree who had been told in l963 of the decision to give him
reduced pension benefits when they became due in l973. Id. at
374-75. The court noted that the pension plan may qualify as an
installment contract, under which claims do not accrue until each
payment comes due. Id. at 374.
The strongest authority in support of the holding of
the district court and the arguments of Kahle is the decision of
the Seventh Circuit in Central States, Southeast and Southwest
Areas Pension Fund v. Navco, 3 F.3d 167 (7th Cir. 1993), cert.
denied, 114 S. Ct. 1062 (1994), which, although it arose in
another context, rejected the position of the pension funds in
that case that a new cause of action arose when the employer
failed to make each scheduled payment when due.
In Navco, the pension funds sought to recover the
unpaid withdrawal liability from Navco, a partnership which was
part of a corporate group with two firms which withdrew from a
pension plan. The pension funds relied on the MPPAA provision
that all members of a group under "common control" are liable for
each other's withdrawal liability. Id. at 169 (citing 29 U.S.C.
§ 1301(b)(1)). Suit against Navco was filed more than six years
after the first payment by its affiliated corporations was due.
Id. at 170. The district court dismissed the suit as untimely,
rejecting the claim of the pension funds that they had six years
from their discovery of the existence of Navco to file suit. The
court of appeals affirmed, agreeing that the statute of
limitations ran from the accrual of the cause of action rather
than from the discovery of the identity of additional responsible
persons, id. at 172, an issue not before us.
Because suit was filed more than six years after the
first scheduled payment was due (but within six years of the last
scheduled payment), the court also had to consider when the cause
of action accrued. It agreed with the district court that the
whole claim comes due when the first payment is missed, phrasing
its analysis as follows:
The pension fund has only one claim against the
employer (and, derivatively, against the controlling
persons): the amount of withdrawal liability. Although
a fund may permit an employer to amortize this sum over
20 years, 29 U.S.C. § 1399(c)(1)(B), the whole amount
is presumptively due at the outset. Section 1391 calls
on the pension plan to determine an amount that is
owed; the financing options under § 1399(c) do not
break this single debt into little pieces with their
own statutes of limitations.
Id. at 172.
Even before turning to the policy behind the MPPAA, we
find the Navco decision unpersuasive. Consider, for example, a
mortgage with a twenty-year payout in a jurisdiction with a six-
year statute of limitations. If, for some reason, the mortgage
company fails to sue the mortgagor for more than six years after
the mortgagor fails to pay the first and succeeding payments,
would it be seriously argued that the mortgage company is
precluded thereafter from suing for those payments due within the
six years preceding the lawsuit or from exercising the
acceleration clause as to the remaining fourteen years?
Moreover, we believe that the reasoning of the Seventh
Circuit is not supported by the statutory language nor the
purposes behind the statutory scheme of the MPPAA. The position
of Kahle and Navco that the whole sum becomes due and the whole
claim accrues when the first payment is missed in effect imposes
a compulsory acceleration clause. This reads out of the statute
the relevant statutory provision with respect to acceleration
codified in 29 U.S.C. § 1399(c)(5), which makes acceleration
discretionary. That provision states:
(5) In the event of a default, a plan sponsormay
require immediate payment of the outstanding amount of an
employer's withdrawal liability, plus accrued interest on the
total outstanding liability from the due date of the first
payment which was not timely made.
29 U.S.C. § 1399(c)(5) (emphasis added).
One must assume that when Congress provided that in the
event of a default "a plan sponsor may require immediate payment
of the outstanding amount of an employer's withdrawal liability,"
Congress also intended that the plan sponsor could decide not to
accelerate the outstanding balance. That option is nugatory if
Kahle is correct, because the claim would accrue automatically
upon default.
We cannot overlook that the statute endorses setting a
schedule of periodic payments lasting up to twenty years. See 29
U.S.C. § 1399(c)(1)(B). If, after making timely payments for the
first year, the employer ran into financial difficulty and missed
two quarterly payments, under the literal language of the Navco
opinion the claim for the remainder of the unpaid liability would
have accrued at that time. Suppose, however, that the employer
regains some financial stability, pays the past due claims, and
resumes making timely payments for six years. Thereafter, it
ceases all payments. Is the pension fund's claim for the
remaining thirteen years of payments now barred because it failed
to file suit within six years of the first missed payment? We
see nothing in the statutory language that requires the patently
inequitable result of permitting an employer to escape much of
the twenty years of scheduled withdrawal payments because an
action to collect the entire balance is not brought within six
years after any one missed payment.
Indeed, such a result would, if accepted, set up
perverse incentives. Automatic default on the entire balance
from the date of the first missed payment discourages amicable
resolution of disputes and discourages reentry into the fund as a
contributing employer. If an employer is late on one payment or
misses a payment, must the plan sponsor refuse to accept a late
payment and press for the entire balance, even if this pushes the
company into insolvency? Forcing the plan sponsor into a
position where it must pursue zealous collection efforts at the
expense of facilitating negotiations over reentry or waiting for
a collective bargaining agreement between the employer and the
union undercuts the need for flexibility to ensure solvency.7
Although there is no evidence in the record as to
industry practice in these circumstances, there appears to be
some merit to the argument made in the brief of the Amicus Curiae
National Coordinating Committee for Multiemployer Plans in
support of the Pension Fund that presumptive default, as adopted
by the Seventh Circuit in Navco, will force trustees to
accelerate and sue, even though this action may not be in the
7
. There is support in the legislative history that Congress
intended to grant some discretion to plan sponsors.
Specifically, the House Education and Labor Report notes that the
MPPAA purposefully gave plan fiduciaries "a great deal of
flexibility to strike a balance among the competing
considerations of encouraging new entrants, discouraging
withdrawals, easing administrative burdens, and protecting the
financial soundness of a fund." H.R. Rep. No. 96-869, 96th
Cong., 2nd Sess. 67 reprinted in 1980 U.S.C.C.A.N. 2918, 2935.
Furthermore, even if the plan sponsor chooses rules that "would
eliminate or reduce liability, the choice of such a rule is not
per se a violation of a fiduciary standards [sic]; the
determination must be made as to whether the fiduciary has acted
reasonably . . . and in accordance with the fiduciary standards."
Id.
best interests of plan participants and beneficiaries. See
Amicus NCCMP Brief at 6.
The Pension Fund's position receives support from the
decision of the D.C. Circuit in Clyde Sandoz. 871 F.2d at 1120.
The court reversed the dismissal of an action brought by the
pension fund to recover the assessed withdrawal liability from
the employer because the district court had erroneously measured
the six-year period from the employer's withdrawal from the fund.
In its opinion, the D.C. Circuit held that the cause of action
arose from the date upon which the employer failed to make a
payment on its withdrawal liability demanded by the plan sponsor.
The court reasoned that the action that "adversely affected" the
plan was the failure to make the scheduled payment, and that
therefore the cause of action accrued at that time. The court's
discussion of the effect of an employer's failure to make a
payment that is "due and owing," 29 U.S.C § 1401(b)(1), according
to an amortized schedule lends some support to the Pension Fund's
argument that the cause of action for individual payments does
not accrue until the payment date has passed, because only then
is the payment "due and owing" within the statute. Id. at 1123-
24.
The Clyde Sandoz court also referred to the purpose of
the MPPAA in its interpretation of the statute, noting that that
purpose was to ensure fund solvency by continuing payments under
an amortized withdrawal liability schedule of payments. The
court observed that Congress's overriding purpose of ensuring
plan solvency was followed by a more general goal of facilitating
collection and a narrower goal of ensuring prompt collection.
Id. at 1126.
We are not unaware of the argument that Congress
signalled its interest in prompt resolution of withdrawal
liability by requiring the plan sponsor to send the withdrawing
employer a notice and demand for payment "as soon as practicable"
after the withdrawal, see 29 U.S.C. § 1399(b)(1), and that
spreading the time to file a complaint for missed payments under
the "installment contract" theory of liability would run counter
to this intent. But as the Clyde Sandoz court noted and the
Congressional history demonstrates, Congress was interested in
establishing a balance between different goals. When Congress
deems time of the essence, it establishes a statute of
limitations considerably shorter than the six-year statute in the
MPPAA, see 29 U.S.C. § 1451(f)(1), among the longest in federal
statutes. Congress's express authorization to the plan sponsor
to establish a lengthy twenty-year period for the schedule of
payments, see 29 U.S.C. § 1399(c)(1)(B), provides strong evidence
that Congress wanted to give the employer an extended period of
time to be able to accrue the funds to pay the withdrawal
liability. It is unlikely Congress would have done so had it
believed that the beneficiaries of multi-employer funds would
suffer drastically if the plan sponsors select payout periods
that give the employer up to a twenty-year period to pay out the
entire amount due.
We find apt the language used in Clyde Sandoz in
rejecting a similar argument that focused on the need for prompt
collection of withdrawal liability. The court stated:
Sandoz's reading of the purposes and
policies animating the MPPAA is curiously
one-dimensional. To be sure, Congress has
indicated that promptly collecting
outstanding sums is desirable. . . . The
employer's reading of the statute would
elevate one narrow statutory policy (favoring
prompt collection) over the more general goal
(collection) and overriding purpose
(solvency) which animate and generate that
narrow preference. There is no indication
that the Act requires, as Sandoz would have
it, either prompt collection or no collection
at all.
871 F.2d at 1126.
Kahle overstates its case when it argues that the
installment analysis would give the Fund "limitless time to file
a complaint," Appellee's Brief at 15, an argument echoed by the
dissent. The Fund is still subject to the six-year statute of
limitations. Thus, a plan sponsor which had established a twenty
year payout and chose to wait twenty years to pursue its cause of
action would only be able to collect the last six years of
installments and would necessarily forego the remainder, a result
which should provide adequate disincentive to unnecessary delay.
The plan sponsor remains subject to the fiduciary duties placed
on it by ERISA and the MPPAA, and it is therefore unlikely that
the running of the statute of limitations will be at the plan
sponsor's "whim," as the dissent suggests.8
8
. We find curious the dissent's concern that under this opinion
Kahle will escape payment of over $150,000 (presumably the amount
In light of the statutory language, we reject the
district court's holding that the cause of action for all of the
unpaid withdrawal liability accrues when the first installment
9
payment is missed.
IV.
CONCLUSION
(..continued)
the dissent calculates was due under the twelve payments from
October 1984 through July 1987), dissent typescript op. at 18,
when under the dissent's view Kahle would escape payment for the
remaining 26 payments, which a rough calculation shows would be
more than $250,000, assuming interest as computed by the Fund.
9
. The dissent appears to suggest that the notice of default
sent by the Pension Fund to Kahle on April 23, l984 could be
viewed as the acceleration notice authorized under 29 U.S.C. §
1399(c)(5). Kahle has not so argued nor did the district court
so view it. Nothing in the language of the April 23, l984 letter
suggested acceleration. The Pension Fund argues that there is a
distinction between the mandatory notice that sets the amount of
withdrawal liability and the schedule for repayments, required
under 29 U.S.C. §§ 1382, 1399(b)(1), and the discretionary notice
of acceleration authorized under 29 U.S.C. § 1399(c)(5), which it
contends it sent on August 9, l988. There is some statutory
support for the distinction, as the two notices are in separate
provisions, and the acceleration provision would have no
significance if the mandatory notice of the amount of withdrawal
liability were also to be viewed as a notice of acceleration.
In this case, we need not decide whether the plan
sponsor would retain the right to accelerate and sue for the
total amount due had it previously brought an action to recover a
delinquent payment, because that is not what happened here. The
Fund did not bring any earlier suit. Furthermore, because all of
the payments accelerated as of the August 9, l988 notice (from
August 9, l988 to the final payment due January, l994) are
covered by the six-year period before the filing of the complaint
(which would sweep back to September 28, l987), we need not
consider the effect of the August 9, l988 notice. Presumably,
the one or two quarterly payments due after the filing of the
complaint will be covered by supplement or amendment to the
complaint.
We conclude that under the statutory scheme established
by the MPPAA, a plan sponsor has six years from the date a
payment is due to sue for its recovery. Absent a decision by the
Fund to accelerate, the cause of action for payments not yet due
does not begin to run when the first such payment is missed. In
this case, it is undisputed that the great bulk of the unpaid
installments were due by Kahle within six years of the filing of
the complaint by the Pension Fund. It follows that the Fund was
not time-barred from bringing suit for the total of the quarterly
payments which fell due within the six years prior to the filing
of this suit.10
For the reasons set forth above, we will reverse the
grant of summary judgment dismissing the complaint and remand for
further proceedings.
10
. Because of the view we take of the dispositive facts, any
disputes between the parties as to the effect of the letters sent
in l984 are irrelevant to our disposition. For the same reason,
we need not consider equitable arguments raised by the Pension
Fund.
Board of Trustees of the District No. 15 Machinists' Pension Fund
v. Kahle Engineering Corporation, No. 94-5160
ALARCÓN, Circuit Judge, dissenting:
In this matter, we must decide when a cause of action arises
under the MPPAA for the unpaid balance of an employer's liability
after the employer has withdrawn from a pension fund. The
district court concluded that the clock begins to run from the
date an employer first fails to make a scheduled payment.
Because the current action for the unpaid balance was filed nine
years after the first missed payment, the district court
dismissed this matter as barred by the six-year statute of
limitations.
The Board of Trustees of District No. 15 Machinists Pension
Fund ("Fund") contends that its time for filing an action for the
unpaid balance runs six years from the date of the last scheduled
payment set forth in the Fund's formal demand letter.
Unfortunately, the majority has been persuaded by this argument.
The majority holds today that a cause of action for the unpaid
balance of an employer's liability to a pension fund is not
barred by the statute of limitations if it is filed within six
years of the last scheduled payment even if the employer failed
to make any quarterly payments for twenty years. Majority
opinion at 22. Because it is my view that the majority's
decision finds no support in the text of the MPPAA, and is
contrary to the law of the Third Circuit regarding the
application of statutes of limitations, I must respectfully
dissent.
In the MPPAA, Congress provided two straightforward options
to a pension fund when an employer fails to make a scheduled
payment on the liability flowing from a withdrawal. The pension
fund may bring an action for the missed payment within six years.
The pension fund may choose, instead, to bring an action for the
entire unpaid balance within six years of the first missed
payment.
The majority has created a third option for the pension
fund. Under this option, the Fund may elect not to bring an
action either for the first missed payment, or for the unpaid
balance, within six years of the default. Instead, the pension
fund may "cho[o]se to wait twenty years to pursue its cause of
action" for the unpaid balance, and would be able "to collect the
last six years of installments." Majority opinion at 22.
Contrary to the majority's view, the MPPAA does not place
the fixing of the date that the cause of action accrues for the
unpaid balance in the exclusive and unreviewable control of the
pension fund, regardless of the prejudice to the defendant caused
by delay in prosecuting the claim. The MPPAA provides that an
action must be filed within six years after the employer
defaults. Because this action was filed more than six years
after the employer missed its first scheduled payment, I would
affirm the district court's order dismissing this action.
I.
Before explaining the rationale that motivates my dissent, I
will set forth the facts pertinent to this appeal. Kahle was a
member of a multiemployer pension plan sponsored by the Fund. In
1981, Kahle was involved in a labor dispute with its employees.
As a result, the company suspended its contributions to the Fund.
On April 23, 1984, the Fund determined that the labor dispute had
terminated Kahle's obligation to continue making payments. The
Fund concluded that Kahle had effected a complete withdrawal from
the pension plan. Accordingly, the Fund sent Kahle a notice of
its assessment obligation of $271,746 along with a schedule of
quarterly payments and a demand for payment of the initial
quarterly obligation of $9,467. The payment schedule required
that Kahle make thirty-eight additional payments of $9,467, and a
final payment of $6,459. The Fund also notified Kahle that the
failure to begin payment as required would entitle the Fund to
seek immediate payment of the full amount of withdrawal
liability.11
11
. The relevant portion of the demand letter is as follows:
We have determined that your company has effected a
withdrawal from the Fund. In accordance with the Multi-
Employer Pension Plan Amendments Act of 1980 (the Act),
we hereby make request for payment of withdrawal liability
in accordance with the schedule described below.
According to our records, complete withdrawal occurred
on June 22, 1981. Based on the method chosen by the
Trustees in accordance with the Act, we have computed your
company's liability to the Fund to be $271,746.
Kahle made its initial quarterly payment on July 2, 1984.
That same day, Kahle informed the Fund that it had not withdrawn.
Kahle also requested a review of the Fund's determination that it
had completely withdrawn.
On August 2, 1984, the Fund requested that Kahle provide
additional information concerning the labor dispute in order that
the Fund could investigate Kahle's claim that it did not
withdraw. On September 13, 1984, Kahle responded to the Fund's
request for additional information and also informed the Fund
that it would discontinue making quarterly payments.
On December 20, 1984, Kahle sent the Fund a letter which
included a demand to arbitrate the pension dispute. The next
day, the Fund sent a letter to Kahle in which it explained that
it had found no basis for altering its prior decision that Kahle
had completely withdrawn. The Fund also warned Kahle that it had
defaulted on its payments and that, if not cured by January 1,
(..continued)
You are required to pay this amount in quarterly payments,
each in the amount of $9,467 (except for the last payment
which will be in the amount of $6,459).
Payments must begin no later than 60 days after receipt
of this notice, notwithstanding any request for review
or appeal. Accordingly, your company's first quarterly
installment is due on July 1, 1984.
Failure to begin payment of withdrawal liability as
required may constitute a default, which will entitle
the Fund to require immediate payment of the full
amount of the withdrawal liability owed.
1985, the Fund would declare a default and "seek all remedies
available to it" against Kahle.12
On December 28, 1984, the Fund's attorney notified Kahle
that Kahle's "letter of December 20, 1984, . . . must have
crossed in the mails with mine of December 21, 1984." The Fund's
December 28 letter reiterated its position that there was no
basis for reversing its conclusion that Kahle had withdrawn from
the plan. The Fund again advised Kahle that it was in default in
its payment and stated further that unless the missed payment was
made, the Fund would "seek all remedies available to it."
Kahle did not make any further payments nor did it initiate
arbitration proceedings. As the Fund candidly admitted in
12
. The Fund's letter dated December 21, 1984, states:
Since our . . . letter to you of August 2, 1984, the
Trustees
of the District No. 15 Machinists' Pension Fund have met and
considered your letter of July 2, 1984.
Please be advised that at this time and in part as a result
of your failure to respond to our earlier letter, the
Trustees can see no reason for changing their determination
that your client has withdrawn from the Plan. Thus, your
client continues to be obligated to pay its withdrawal
liability.
Please be further advised that your client is now in
default in its payments. Unless it cures this default
by the 1st of January 1985, our client will have no
alternative but to declare your client "in default"
and seek all remedies available to it [sic] client under
appropriate federal legislation.
argument before the district court, it took no further action
against Kahle until 1988.13
On August 9, 1988, the Fund sent Kahle a letter which
stated:
This letter is to inform you that the company
is in default in its withdrawal liability
payments. We hereby demand, on behalf of the
Fund, that the company immediately make all
the past due payments, plus interest. The
interest shall be equal to the current prime
rate, accruing from the date each such
payment was due. If you do not make such
payments, including interest, within sixty
(60) days from the date you received this
letter, the Fund will require, in accordance
with the Multiemployer Pension Plan
Amendments Act of 1980, immediate payment of
the total withdrawal liability, plus interest
accruing from the date the first payment was
due. If necessary, the Fund will file an
action in the United States District Court to
enforce the company's obligation to pay.
Kahle did not make any payments in response to this second
notification of its default. Over five years later, and nearly
13
. The following colloquy occurred between the district court
and the Fund's counsel, Ms. Roberto:
THE COURT: What happened in 1985, '86, '87? Zero.
MS. ROBERTO: Well, the Fund was waiting for--to see
what was going to happen with the arbitration
with the labor dispute.
THE COURT: Waiting for what? In '85, in '86, in '87?
Have you got any papers you want to show
me that arbitration was commencing, people
were looking for arbitrators and reviewing?
Nothing happened. I think candor on the
part of your client is, Nothing happened in
'85, '86, '87, so we sent the default in '88.
MS. ROBERTO: I don't dispute that. I have nothing to
show you otherwise.
nine years after Kahle missed its first payment, on September 28,
1993, the Fund filed this action seeking payment of the unpaid
balance of Kahle's withdrawal liability. The district court
granted Kahle's motion for summary judgment on the basis that the
Fund's action was barred by the six year statute of limitations
period in 29 U.S.C. § 1451(f)(1).
II.
The Fund contends that this action is not barred by the
six-year statute of limitations. It argues that its claim for the
unpaid balance did not accrue until it gave Kahle notice on August
9, 1988 that if all past-due payments were not made within 60
days, it would file an action for the total well-drained
liability. According to the Fund,
there are two (2) types of accrual dates for
collection of withdrawal liability
assessment. One occurs when an installment
payment is omitted. At that point the
pension fund has the right to bring suit for
that one (1) payment. The second is when the
pension fund exercises its option to
accelerate the outstanding balance after the
employers failure to cure a default. If the
employer does not meet the pension fund's
demand for the entire outstanding balance, a
cause of action accrues for the total amount.
Appellant's Opening Br. at 21.
The Fund asserts that the district court erred by
failing to distinguish between the accrual of
a cause of action for one installment payment
and for the total outstanding amount of the
assessment. Although the district court
stated that it was following Sandoz when it
held that the Pension Fund's cause of action
triggering the commencement of the MPPAA's
six-year statute of limitations accrued in
October 1984 or December 1984, it actually
followed the Court of Appeals for the Seventh
Circuit's decision in Central States Pension
Fund v. Navco, 3 F.3d 167 (7th Cir. 1993),
cert. denied, 114 S. Ct. 1062 (1994).
Appellant's Opening Br. at 23-24.
The Fund's reliance on Joyce v. Clyde Sandoz Masonry, 871
F.2d 1119 (D.C. Cir.), cert. denied, 493 U.S. 918 (1989), is
misplaced. There is no intercircuit conflict on the issue
presented in this case. A careful reading of the Navco and Sandoz
decisions demonstrates that these cases do not support the Fund's
and the majority's interpretation of the applicable statutes.
In Navco, two pension funds, the Central States, Southeast
and Southwest Areas Pension Fund ("Teamsters Fund") and the
Chicago Truck Drivers, Helpers and Warehouse Workers Union Pension
Fund ("Independent Fund"), filed actions against Navco for
withdrawal liability payments. Navco, 3 F.3d at 169. The
employers had completely withdrawn from their multiemployer
pension funds in January 1984. Id.
On April 6, 1984, the Teamsters Fund sent a formal notice of
withdrawal liability and a demand for payment to the employers.
Id. at 170. The employers were given sixty days to make the
demanded payment. Id. No payments were made in response to the
demand. Id. More than seven years after its demand, on May 1,
1991, the Teamsters Fund filed its cause of action. Id.
The district court granted the defendants' motion for
summary judgment. Id. The court held that the action was barred
by the six-year statute of limitations, which began to accrue on
June 5, 1984, when the demanded payment became delinquent. Id.
On appeal, the Teamsters Fund argued that the district court erred
when it held that the claim began to accrue when the payment
became overdue. Id.
On June 19, 1984, the Independent Fund sent the employers a
notice, payment schedule, and demand for payment as a result of
their withdrawal from the pension fund. Id. Pursuant to the
schedule, quarterly payments were to begin on July 1, 1984, and
continue until July 1, 1986. Id. The employers never made any
payments. Id. Nearly eight years after its demand, on March 13,
1992, the Independent Fund filed its cause of action. Id.
The district court granted the employers' motion for summary
judgment. Id. The court held that the Independent Fund's action
was barred by the statute of limitations because the claim began
to accrue on July 1, 1984. Id. The district court rejected the
Independent Fund's argument that a claim accrues for the unpaid
balance each time the employer fails to make a scheduled quarterly
payment. Id. On appeal, the Independent Fund asserted that the
cause of action began to accrue when it learned the identity of
persons within the control group who had the ability to pay the
withdrawal liability, as opposed to when the payment became
overdue. Id. The Independent Fund also reiterated its argument
that a cause of action accrued each time the employer failed to
make a required quarterly payment. Id. at 172.
 The Seventh Circuit in Navco consolidated the appeals of the
Teamsters Fund and the Independent Fund. Id. at 170. The Navco
court affirmed the grant of summary judgment by both of the
district courts. The Seventh Circuit held that "the claim [for an
employer's withdrawal liability] accrues as soon as payment
becomes overdue." Id. at 172. Because the funds filed their
actions more than six years from the date when the employers
failed to make their scheduled payments, the Seventh Circuit held
that the actions were barred by the statute of limitations. Id.
Additionally, the Navco court rejected the Independent Fund's
contention that a claim begins to accrue each time an employer
fails to make a scheduled payment. Id. The court held that the
"pension fund had only one claim against the employer . . . : the
amount of withdrawal liability. . . . [T]he whole amount [of
withdrawal liability] is presumptively due at the outset." Id.
In Sandoz, the trustee of the Bricklayers and Trowel Trades
International Pension Fund filed an action to collect the
accelerated balance of the employer's pension withdrawal
liability. Sandoz, 871 F.2d at 1121. Between 1977 and June 30,
1981, Sandoz made payments to the pension fund. Id. On July 16,
1981, a new collective bargaining agreement was reached between
Sandoz and its employees. Id. The agreement did not include an
obligation by Sandoz to continue making payments to the pension
fund. Id. Sandoz made a pension fund payment for work performed
by its employees from July 1 until July 15, 1981. Id. Sandoz
made no further payments. Id.
On July 13, 1987, the fund sent Sandoz a notice of
withdrawal liability along with a payment schedule. Id. On the
same day, the fund filed its action. Id. On October 8, 1987, the
fund notified Sandoz that it failed to make its scheduled payment
and would be in default unless it paid within sixty days. Id.
Sandoz did not make any payments in response to the fund's letter.
Id.
The district court dismissed the fund's action because it
was not filed within the six year statute of limitations period.
Id. The district court ruled that the cause of action began to
accrue when the employer completely withdrew from the plan on June
30, 1981. Id. On appeal, the fund asserted that the cause of
action began to accrue when the employer failed to make a
scheduled payment after receiving a demand. Id. at 1122.
The D.C. Circuit in Sandoz vacated the judgment of the
district court. Id. at 1127. The court held that
the [pension] plan is "adversely affected"
(and thus that a "cause of action" arises)
when the plan has not received payments which
are due and owing. The language of the
statute points firmly in the direction of the
conclusion that Sandoz's uncured failure to
pay the sum demanded adversely affected the
plan giving rise to a cause of action.
Id. at 1122. The D.C. Circuit rejected the district court's
determination that the cause of action begins to accrue on the
day the employer completely withdraws from the fund. Id. at
1123.
Thus, both the Seventh Circuit in Navco and the D.C. Circuit
in Sandoz each concluded that a cause of action for withdrawal
liability payments under the MPPAA begins to accrue when an
employer fails to make a scheduled payment. Contrary to the
Fund's position in this matter, there is no conflict between the
Seventh Circuit and the D.C. Circuit regarding the determination
as to when a cause of action begins to accrue. The difference
between Navco and Sandoz is that the Navco court expressly
rejected an argument which is also raised by the Fund in this
case, namely, that a cause of action accrues each time an
employer fails to make a scheduled payment after receiving a
demand. Navco, 3 F.3d at 172. This issue was not presented to
the D.C. Circuit in Sandoz. Neither Navco nor Sandoz support the
Fund's argument in this matter that the statute of limitations
does not begin to run until six years after the last scheduled
payment is due.
Under the MPPAA, after an employer withdraws from a fund,
"(1) [a]s soon as practicable after an employer's complete or
partial withdrawal, the plan sponsor shall--(A) notify the
employer of--(i) the amount of the liability, and (ii) the
schedule for liability payments, and (B) demand payment in
accordance with the schedule." 29 U.S.C. § 1399(b)(1). The
statute further provides:
In the event of a default [of a scheduled
payment], a plan sponsor may require
immediate payment of the outstanding amount
of an employer's withdrawal liability, plus
accrued interest on the total outstanding
liability from the due date of the first
payment which was not timely made. For
purposes of this section, the term "default"
means--
(A) the failure of an employer to make,
when due, any payment under this section, if
the failure is not cured within 60 days after
the employer receives written notification
from the plan sponsor of such failure, and
(B) any other event defined in rules
adopted by the plan which indicates a
substantial likelihood that an employer will
be unable to pay its withdrawal liability.
29 U.S.C. § 1399(c)(5).
An action under the MPPAA may not be brought more than "6
years after the date on which the cause of action arose." 29
U.S.C. § 1451(f)(1). Pursuant to section 1399(c)(5), the cause of
action for the outstanding amount of an employer's liability
arises upon the employer's failure to make a scheduled payment.
See Navco, 3 F.3d at 172 (claim begins to accrue when a scheduled
payment is overdue); Sandoz, 871 F.2d at 1122 (same). However, a
pension fund is not permitted to file its action for withdrawal
liability payment(s) until it has sent an employer the notice
described in section 1399(c)(5). The notice represents a
condition precedent which must be satisfied by a fund before it
may file its cause of action.
The MPPAA makes clear that a multiemployer pension fund has
the option after notifying an employer of a default of (1) filing
an action for a missed payment in accordance with the schedule
prepared by the fund after an employer has withdrawn, or (2)
filing an action for the total amount that is owing in accordance
with the schedule. A fund has only one claim against an employer.
It must decide whether to file an action for the missed payment or
the total withdrawal liability. Navco, 3 F.3d at 172. The fund
is required to file its action for payment of an employer's
withdrawal liability within six years of the date when the cause
of action arose, i.e., the date of the first missed payment. Id.
This statutory requirement avoids the problem of "improperly
plac[ing] the running of the limitations period in the control of
the plaintiff." Board of Trustees of the Constr. Laborers Pension
Trust v. Thibodo, 34 F.3d 914 (9th Cir. 1994).
In Thibodo, the defendant, a construction company, made
payments to a pension fund until June 15, 1983. Id. at 916. In
early 1984, the pension fund determined that the company had
withdrawn from the fund. Id. The fund sent the company an
assessment along with a payment schedule. Id. However, the
company believed that the fund had erroneously determined that it
had withdrawn, and the fund ultimately agreed. Id.
By the spring of 1985, the company had rehired numerous
construction workers. The pension fund subsequently reinstated
the company's withdrawal liability assessment. Id. The company
did not make any pension fund payments. Id. In April 1986, the
fund sent the company a written notification indicating that the
company had sixty days to begin making payments. Id. The company
never made any payments in response to the fund's notification.
Id. On June 20, 1989, the fund filed an action for withdrawal
liability payments. Id.
The district court stayed the proceedings while the parties
submitted the matter to an arbitrator. Id. The arbitrator
determined that the company had withdrawn from the pension plan on
June 15, 1983 and that Thibodo, the company's sole shareholder,
was personally liable for the company's withdrawal liability. Id.
Thibodo argued before the district court that the fund had filed
its action more than six years after the cause of action accrued
and was therefore barred by the statute of limitations. Id. The
district court agreed with Thibodo and dismissed the fund's
action. Id.
The Ninth Circuit reversed the judgment of the district
court. Id. at 918. The court held that the statute of
limitations under section 1451(f)(1) begins to accrue "from the
date on which the conditions for complete withdrawal specified in
§ 1383(b)(2) have been met." Id. at 917. The Ninth Circuit
recognized that its holding differed from that of the D.C. Circuit
in Sandoz, which held that the statute of limitations begins to
accrue when the employer fails to make a scheduled payment after
receiving a demand from the fund. Id. The Ninth Circuit's
decision in Thibodo, however, was concerned with discrete
statutory language used by Congress with reference to withdrawals
involving the construction industry. Id. Its conclusion that a
pension fund cannot manipulate the date when a claim begins to
accrue under the MPPAA, however, is consistent with the holding in
Navco on this issue.
III.
In this matter, the Fund's cause of action for the balance
of the withdrawal liability arose on October 1, 1984, when Kahle
missed a payment after receiving a payment schedule and a
corresponding demand. See Navco, 3 F.3d at 172 (cause of action
begins to accrue when a scheduled payment is missed); Sandoz, 871
F.2d at 1123 ("[T]he failure to pay gives rise to a cause of
action."). The Fund had six years from October 1, 1984 to
exercise its option to file an action for the missed payment or
the total unpaid balance of the employer's withdrawal liability.
29 U.S.C. § 1451(f)(1).
At oral argument, the Fund argued that it was authorized
under section 1451(f)(1) to file its action six years after the
employer had failed to make the penultimate payment due on October
1, 1993. The final payment in this matter was due on January 1,
1994. The Fund's interpretation of section 1451(f)(1) would
permit it to wait until the year 2000, approximately sixteen years
after the first payment was missed, to file its action for the
unpaid balance. This result would award a pension fund additional
time to file its action merely because it was dilatory in pursuing
its claim. See Navco, 3 F.3d at 172 (extending a six year statute
of limitations under Multiemployer Pension Plan Amendments Act of
1980 to twenty-six years "is a job best left to magicians").
Such a result is clearly inconsistent with the public policy
served by statutes of limitations. These statutes are designed
"to spare the courts from litigation of stale claims, and the
citizen from being put to his defense after memories have faded,
witnesses have died or disappeared, and evidence has been lost,"
to put potential defendants "on notice of adverse claims," and "to
prevent plaintiffs from sleeping on their rights." Sperling v.
Hoffman-La Roche, Inc., 24 F.3d 463, 471-72 (3d Cir. 1994)
(internal quotation omitted); see also Navco, 3 F.3d at 172
("Statutes of limitations serve vital social interests--the usual
ones of preventing stale claims that may be hard to prove, and
protecting the interest of potential defendants in knowing their
liabilities, and in the MPPAA the unusual one of protecting the
beneficiaries of the fund."). Additionally, permitting a fund to
choose the triggering date which begins the running of the statute
of limitations essentially makes the fund's dilatory decision
unreviewable by a court.
The majority has failed to point to any language in the
MPPAA that supports its conclusion that Congress intended to place
the running of the statute of limitations in the hands of the
pension fund. I agree with the majority that the MPPAA gives a
pension fund the option to file an action for a missed payment or
an action for the unpaid balance of the employer's liability after
a default. The fact that Congress gave the pension fund a choice
as to the remedy it may follow if a payment is missed, however,
does not affect the six-year statute of limitations.
The harm that can flow from delay in filing an action is
illustrated by the record in this case. The majority states that
"[t]here is no evidence of further communications, negotiations,
or arbitration proceedings after December 1984." Majority opinion
at 11. The explanation for the absence of a record of the actions
taken by the parties following the Fund's December 21, 1984 notice
of default is found in the Appellant's Opening Brief. Counsel
explains throughout his brief that correspondence between the
parties concerning the employer's withdrawal liability was "not
available from the Pension Fund's or Fund counsel's files,"
Appellant's Opening Br. at 6 n.2, that "[t]here is no information
in the Pension Fund's files to indicate course of events before
default notice," id. at 10 n.3, and further the "Fund's counsel
did not receive the September 13, 1984 letter." Id. at 5.
The Fund's dilatory tactics in this matter have affected its
own ability to prepare for trial. Moreover, Kahle will now be
forced to trial more than ten years after the facts that the Fund
alleges make it liable. Kahle's corporate records, counsel's
files, and witnesses' memories are subject to the same loss
already experienced by the Fund.
IV.
This court has explained that the goals of the MPPAA are "to
protect the interests of participants and beneficiaries in
financially distressed multiemployer plans and . . . to ensure
benefit security to plan participants." IUE AFL-CIO Pension Fund
v. Barker & Williamson, 788 F.2d 118, 127 (3rd Cir. 1986)
(internal quotation omitted). The majority's interpretation of
section 1399(c)(5) seriously frustrates Congressional intent.
Congress' concern that a pension fund act promptly in
protecting the integrity of the pension plan is reflected in the
requirement that the demand for payment of the employer's
liability after a withdrawal be made "as soon as practicable." 29
U.S.C. § 1399(b)(1). The majority's conclusion that a fund may
delay filing an action for the total amount of the outstanding
liability for up to twenty years is contrary to the expressed
concern of Congress that a pension fund take timely action to
resolve a dispute concerning an employer's liability.
In construing section 1399(c)(5) to place the running of the
statute of limitations in the hands of the pension plan, the
majority would apparently approve of the loss of fourteen years of
payments owed by the employee to the Fund. The majority's
construction of the MPPAA is clearly inconsistent with the
congressional goal of safeguarding the financial integrity of the
multiemployer plan. The Seventh Circuit's interpretation of
section 1399(c)(5) in Navco ensures that an employer who misses a
payment must make up that payment within sixty days of the
scheduled date, or be subject to an action for the total unpaid
balance of its withdrawal liability. Had the Fund filed its
action within six years of the first missed payment in this
matter, Kahle would have been liable to pay over $270,000. Under
the majority's view, Kahle will escape payment of over $150,000.
This will unfairly force the other participants to increase their
contribution to protect the beneficiaries of the Fund.
Traditional canons of construction require us to construe a
statute to avoid a result that defeats congressional intent.
Adoption of the reasoning in Navco would fully protect the
interests of the beneficiaries of a pension plan.
V.
The notice requirement in section 1399(c)(5) is solely
applicable to a cause of action for the total unpaid balance of an
employer's withdrawal liability. Thus, the Fund's December 21,
1984 threat to "seek all remedies available to it" could only
refer to an action for the total unpaid balance. As conceded by
the Fund, the MPPAA does not require service of a notice of
default where the pension plan elects to bring an action for a
misconduct. Appellants Opening Br. at 21.
The Fund attempts to escape the consequences of its failure
to file this action within the six-year limitation period by
arguing that the notice of default it sent to Kahle dated December
21, 1984 was "defective," and therefore did not trigger the
running of the statute of limitations. Appellant's Opening Br. at
29. This argument is frivolous. To accelerate payment of the
outstanding withdrawal liability pursuant to section 1399(c)(5),
the plan sponsor must give the employer written notification of
its failure to make any payment when due. The Fund's December 21,
1984 letter informed Kahle's counsel "that your client is now in
default in its payments." The letter further advised Kahle that
unless the default was cured, the Fund would "seek all remedies
available to it." The December 21, 1984 letter substantially
complied with the notice of default requirements of section
1399(c)(5). The running of the statute of limitations for the
total unpaid balance was therefore triggered by the December 21,
1984 notice of default.
VI.
The majority finds support for its conclusion that the
statute of limitations for the total unpaid balance begins to run
anew from the date of each scheduled payment in the common law of
contracts. The Seventh Circuit rejected a similar argument in
Navco:
The schedule under § 1399(c) . . . is not
contractual; the employer did not assent to a
longer period for payment and suit. We have
not seen any case extending the contractual
approach to the MPPAA, and like the district
court we believe it would be imprudent to
adopt a rule that relieves pressure on
trustees of pension funds to act with
dispatch. Six years is quite sufficient; the
trustees may not award themselves more.
Navco, 3 F.3d 167-68.
I would not borrow from the law of contracts to negate the
intent of Congress that pension funds must act promptly to avoid
compromising the financial integrity of the pension fund and
requiring other participants to shoulder the responsibility of
employers who withdraw. The majority's reliance on the
arbitrator's decision in Ludington News Co. and Michigan UFCW/Drug
Employers Pension Fund Workers Union and Drug and Mercantile
Employee Joint Pension Fund, 9 Employee Benefits Cas. (BNA) 1913
(1988), to support its contractual theory is questionable. The
majority states "[a]lthough we recognize that Ludington is without
precedential effect, it was cited as relevant by another circuit.
See Joyce v. Clyde Sandoz Masonry, 871 F.2d 1119, 1124 (D.C.
Cir.), cert. denied, 493 U.S. 918 (1989)." Majority opinion at
14-15. A careful reading of Sandoz, however, reveals that
Ludington was not "cited as relevant" for the proposition that a
new cause of action for the unpaid balance accrues when each
scheduled payment is due. That issue was not discussed by the
court in Sandoz. Instead, Ludington was cited because it, too,
concluded that no cause of action arises until the employer
refuses to meet the demand of the fund. Sandoz, 871 F.2d at 1124.
As noted above, the analogy to the law of contracts adopted by the
majority in this matter was expressly rejected by the Seventh
Circuit. Navco, 3 F.3d at 172-73.
CONCLUSION
Contrary to the majority's resolution of the issue before
this court, the MPPAA does not permit a pension fund to file a
cause of action for the unpaid balance of an employer's withdrawal
liability six years after the last payment is due, even if no
payments have been made for up to twenty years. Regrettably, the
majority has subjected the running of the statute of limitations
to the whim of the Fund. I find nothing in the law of the Third
Circuit or any other jurisdiction that supports this extraordinary
result. Accordingly, I cannot join in the majority's opinion. I
would affirm the well reasoned judgment of the district court.