A MULTIEMPLOYER PENSION PLAN WITHDRAWAL LIABILITY ARBITRATION OF FIRST IMPRESSION

Ludington News and UFCW/Drug Employers Pension Fund, 9 EBC 1913; 1988 WL 1591408; 111 LRP 3971 (Cornelius Arb, 1988); also posted here.

This was a case of first impression under the Multiemployer Pension Plan Amendments Act of 1980, decided by arbitrator E Frank Cornelius, PhD, JD (Website: arbitrator.org). When the Federal Circuits split, the Supreme Court settled the issue in Bay Area Laundry and Dry Cleaning Pension Trust Fund v Ferbar Corp, 522 US 192 (1997), precisely as first decided in Ludington News, which was cited in three of the briefs to the Supreme Court.

Ludington News has been cited in:

(a) Employee Benefits Law (ABA/BNA 2nd ed 2000), @ 1321, n 528

(b) Labor and Employment Arbitration (Matthew Bender 2nd ed 1988, updated thru August 1996 Cum Supp), Sec 40.02[1][a] @ 40-11 & n 7

(c) Machinists' Pension Fund v Kahle Eng, 43 F3d 852, 858, 869; 1994 US App LEXIS 36945; 19 EBC 1079, 1084, 1096 (CA 3 1994)

(d) Fred Olson Co v Chicago Truck Drivers, Helpers & Warehouse Workers Union Pension Fund, 15 EBC 2404, 2414 (Jaffe Arb 1992)

(e) Note: Multiemployer Pension Plan Withdrawal Liability: Limitations Without Limits, 42 Case W Res L Rev 255, @ 263 n 40 (1992)

(f) Joyce v Clyde Sandoz Masonry, 871 F2d 1119, 1124; 1989 US App LEXIS 4242; 276 US App DC 379; 10 EBC 2185, 2190 (CA DC1989); cert den, 493 US 918; 1989 US LEXIS 4891; 11 EBC 1880

(g) Korman Corp and Teamsters Pension Fund, 10 EBC 1608, 1612 (Pereles Arb 1988)

Arbitrator E Frank Cornelius, PhD, JD has handled a variety of employee benefits cases. His mathematics background provides a distinct advantage in benefit funding and withdrawal liability cases. He can be contacted directly at frankcornelius@alum.MIT.edu.

Here is an AI summary of Ludington News:

LUDINGTON NEWS COMPANY, INC. AND MICHIGAN UNITED FOOD AND COMMERCIAL WORKERS UNIONS AND DRUG AND MERCANTILE EMPLOYERS JOINT PENSION FUND

American Arbitration Association · Multiemployer Pension Plan Withdrawal Liability Arbitration · AAA No. 54-621-0005-87 · April 1, 1988

OPINION OF THE ARBITRATOR — SUMMARY

The Issue

The question presented is whether the six-year statute of limitations contained in Section 4301(f) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1451(f), or alternatively the six-year limitation period contained in MCLA § 600.5813, bars the Michigan United Food and Commercial Workers Unions and Drug and Mercantile Employers Joint Pension Fund from assessing and collecting withdrawal liability against the Ludington News Company, Inc.

The parties submitted the matter upon a stipulated record. The issue, therefore, is one of law rather than fact.

The Facts

Ludington News Company, Inc., a Michigan corporation engaged primarily in the wholesale distribution of magazines and paperback books, participated in the Pension Fund pursuant to collective bargaining agreements covering certain employees of its Metropolitan Airport Newsstand division. Its participation commenced on July 1, 1971, and continued until September 30, 1980, when the division was closed and Ludington withdrew from the Fund.

On November 7, 1986, more than six years after the withdrawal, the Fund notified Ludington that its withdrawal liability had been determined to be $24,169 and demanded payment according to a prescribed schedule. Ludington requested review of the determination on December 1, 1986. The Trustees considered the request and, on December 18, 1986, reaffirmed the assessment and payment schedule.

Ludington thereafter demanded arbitration on February 17, 1987. It contended that the Fund's assessment and collection efforts were barred by the applicable statutes of limitation. The Fund maintained that neither statute prevented its demand.

The parties stipulated that, if the claim was not time-barred, the amount assessed by the Trustees was due and owing according to the established payment schedule, less the interim payments already made by Ludington.

DISCUSSION

Federal Preemption

ERISA § 514(a), 29 U.S.C. § 1144(a), provides that the provisions of ERISA supersede state laws insofar as they relate to an employee benefit plan. The preemptive reach of this provision has been construed broadly, and there can be no serious question that the collection of withdrawal liability falls within the federal statutory scheme.

ERISA § 4301(f), 29 U.S.C. § 1451(f), provides a six-year limitation period for an action brought under that section. Ludington argues that this limitation should operate in the ordinary manner: an employer withdraws from a pension plan, six years pass without action by the plan sponsor, and the claim is thereafter barred.

Such an argument would be persuasive if the statute applied in that fashion. The difficulty, however, is that the statutory language does not impose a six-year deadline upon the plan sponsor's initial assessment or demand for payment. Section 4301(f) limits the commencement of an action under the statute; it does not expressly prohibit a plan sponsor from making a demand for withdrawal liability after six years have elapsed.

The distinction is material. The Fund's November 7, 1986, letter was a demand for payment, not the commencement of a judicial action to collect the assessment. Accordingly, the six-year period contained in § 4301(f) does not, by its terms, invalidate the demand merely because it was made more than six years after Ludington's withdrawal.

Nor may Ludington rely upon the six-year Michigan statute of limitations. The assessment and collection of withdrawal liability are governed by the federal statutory scheme. A state limitation period that would bar the Fund's claim is therefore preempted by ERISA to the extent that it relates to the employee benefit plan. It follows that neither of the asserted statutes of limitation bars the Fund's assessment and collection of withdrawal liability.

The Effect of Delay

The conclusion that the statutory limitation period does not directly bar the Fund's demand does not dispose of every question concerning the delay. ERISA § 4219(b)(1), 29 U.S.C. § 1399(b)(1), requires that the plan sponsor notify the employer of its withdrawal liability as soon as practicable after a complete or partial withdrawal.

That requirement raises the possibility that, in an appropriate case, an employer might defend against an untimely demand on principles analogous to laches. Such a defense would require more than proof of the passage of time. The record must establish the necessary detrimental reliance or resulting prejudice. Here, more than six years elapsed between Ludington's withdrawal and the Fund's demand. Nevertheless, the stipulated record contains no facts demonstrating that Ludington detrimentally relied upon the Fund's failure to act sooner.

There is an additional consideration. The Fund is not entitled to additional interest for the period between Ludington's withdrawal and the demand for payment. The delay, therefore, has not increased the amount Ludington must pay by imposing an interest charge for that period. Ludington has, in the meantime, had the use of its money without such additional charge.

Under these circumstances, the delay does not provide a sufficient basis for denying recovery under a laches-type theory. Although the six-year limitation period may offer guidance in considering the timeliness of a demand, it cannot substitute for the proof necessary to establish detrimental reliance. That proof is absent here. The Fund's claim is consequently not barred by the passage of time.

Burden of Proof

The parties' dispute also raises the broader question of the burden of proof in withdrawal liability arbitration. ERISA § 4221(a)(3)(A), 29 U.S.C. § 1401(a)(3)(A), provides that a plan sponsor's determination is presumed correct unless the party contesting it establishes, by a preponderance of the evidence, that the determination was unreasonable or clearly erroneous.

The statutory language presents difficulties because it combines the ordinary civil standard of proof with terminology associated with judicial review of factual findings and legal conclusions. Prior arbitration decisions have attempted to reconcile these provisions by placing upon the party contesting the plan sponsor's determination the burden of establishing a mistake or demonstrating that the determination cannot be sustained under controlling law.

It is unnecessary to resolve the general burden-of-proof question in the present case. The parties have submitted a stipulated record presenting a pure question of law. Moreover, the matter has been jointly submitted for arbitration, and the parties have thereby placed the issue of the applicability of the limitation periods before the Arbitrator. The decision may therefore be reached without reliance upon the statutory presumption in favor of the Trustees' determination.

Costs

The Fund has prevailed upon the issue submitted. Nevertheless, the dispute presents a question of first impression, and Ludington's position is not without a reasonable foundation. Under ordinary circumstances, the passage of six years might well bar a claim of this nature. The Fund's recovery depends upon the particular statutory framework established by ERISA. In view of these circumstances, an award of all costs to the prevailing party would not be appropriate. The costs of the arbitration, including attorney's fees to the extent authorized by the applicable rules, should be divided equally between the parties.

CONCLUSION AND AWARD

For the foregoing reasons, it is concluded that ERISA § 4301(f), 29 U.S.C. § 1451(f), preempts the alternative state limitation period contained in MCLA § 600.5813 and does not bar the Pension Fund's assessment and collection of withdrawal liability against Ludington News Company, Inc. The Fund's assessment of $24,169 is therefore payable according to the payment schedule established by the Trustees, less the interim payments made by Ludington.