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REFINED SUGARS, INC. v. LOCAL 807 LABOR-MANAGEMENT

February 29, 1984

REFINED SUGARS, INC., Plaintiff,
v.
LOCAL 807 LABOR-MANAGEMENT PENSION FUND AND THE BOARD OF TRUSTEES OF THE LOCAL 807 LABOR-MANAGEMENT PENSION FUND, Defendants.



The opinion of the court was delivered by: LASKER

LASKER, D.J.

Refined Sugars, Inc. ("RSI") brought this action for declaratory and injunctive relief against defendants Local 807 Labor-Management Pension Fund (the "Fund") and its Board of Trustees (the "Trustees") to prohibit them from asserting a claim for $192,639 against RSI under the withdrawal liability provisions of the Multi-Employer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. § 1381 et seq. *fn1" RSI claims that since it is not an "employer" as defined by the MPPAA, it has no withdrawal liability to the Fund. RSI also challenges the constitutionality of the MPPAA both on its face and as applied. The matter at hand turns on whether this court or an arbitrator should decide whether RSI is an "employer" under the MPPAA.

 The MPPAA provides that "[a]ny dispute between an employer and a plan sponsor of a multi-employer plan concerning a determination made under sections 1381 through 1399 shall be resolved through arbitration." 29 U.S.C. § 1401(a)(1). Defendants contend that the question whether RSI is an employer and hence subject to the Act's obligations and sanctions come within the arbitration provision. Defendants consequently seek a judgment on the pleadings dismissing the complaint. The motion is denied.

 I.

 The MPPAA provides that an employer who withdraws in whole or in part from a multi-employer plan after April 28, 1980 (the effective date of the Act) must pay a withdrawal liability in a sum determined under the statute. 29 U.S.C. § 1381(a). The amount of withdrawal liability is determined by the pension plan sponsor according to a statutory formula. 29 U.S.C. §§ 1381(b), 1391. Once the sponsor determines the employer's liability, it is to notify the employer of the amount of the liability, establish a schedule for its payment and demand payment accordingly. 29 U.S.C. §§ 1382, 1399(b)(1). The employer may request that the sponsor review any specific matter relating to the determination of the employer's liability and the schedule of payments. 29 U.S.C. § 1399(b)(2)(A). The sponsor, after a reasonable review of the matters raised by the employer, must then notify the employer of its decision and the basis for that decision. 29 U.S.C. § 1399(b)(2)(B). If the employer disputes the fact or amount of the detrmination of withdrawal liability due, the parties must submit the dispute to arbitration. 29 U.S.C. § 1401(a).

 II.

 In letters to RSI dated October 4 and October 7, 1982 the Fund asserted a claim for $192,639 against RSI pursuant to the withdrawal liability provisions of the MPPAA. The October 4 letter asserted, in pertinent part, that "as a result of the reduction or termination in covered employment under your labor agreement with Local 807, I.B.T., you have incurred an extra-contractual liability to the Fund." The October 7 letter set forth a payment schedule according to which RSI was to pay the Fund the $192,639. It also advised RSI of its right to seek review of the Fund's withdrawal liability determination.

 In a series of letters to the Fund dating from October 1982 to March 1983, *fn2" RSI contested its liability on the grounds that it is not an employer as that term is defined by the MPPAA, and that therefore the MPPAA does not apply to it nor has RSI any withdrawal liability to the Fund. RSI also requested review of the Fund's decisions that a complete withdrawal had occurred, and that RSI was responsible for withdrawal liability; RSI also requested review of the calculation of the alleged withdrawal liability.The Fund did not respond to RSI's request for review. In response to the Fund's demand for payment, *fn3" RSI has been making payments for the amount allegedly due into an escrow account according to the schedule set forth in the Fund's October 7, 1982 letter.

 III.

 RSI contends that the question whether or not it is an employer within the coverage of the MPPAA is for a court, not an arbitrator, to decide. It argues that since the MPPAA requires an "employer" to arbitrate disputes "concerning a determination made under sections 1381 through 1399," 29 U.S.C. § 1401(a)(1), and since the term "employer" is defined elsewhere in ERISA, at 29 U.S.C. § 1002, then, on its face the issue which the Fund seeks to arbitrate is not arbitrable under the MPPAA. Alternatively, RSI contends that even if the issue of its employer status is arbitrable under the MPPAA, "exhaustion" of the arbitration remedy is not required in this case. While arbitration is not an administrative remedy and "exhaustion" is not precisely the correct term for describing the parties' obligation to arbitrate their dispute, courts interpreting the MPPAA have held that the policies underlying the exhaustion doctrine are generally appliable to the arbitration proceedings established by the MPPAA. See Republic Industries v. Teamsters Joint Council, 718 F.2d 628 94th Cir. 1983); Republic Industries, Inc. v. Central Pennsylvania Teamsters, 693 F.2d 290 (3d Cir. 1982). These courts refer to the requirement to arbitrate disputes under the MPPAA as "exhaustion".RSI bases its position on the exceptions to the exhaustion of administrative remedies doctrine which hold that exhaustion is not required either when the issues presented revolve around statutory interpretation or when the questions presented include facial challenges to the constitutionality of legislation. *fn4"

 Defendants contend that since § 1002 is the general definitional section of ERISA, it is necessarily incorporated into any subsequent section which uses a defined word or term. Hence, they argue the definition of the term "employer" is necessarily included within sections 1381 through 1399. They also contend that any "determination" of withdrawal liability necessarily includes a determination that the entity against whom liability is assessed is an employer. Finally, they dispute the contention that any exceptions to the exhaustion doctrine apply to the MPPAA because § 1401(a)(1) provides that "any dispute . . . shall be resolved through arbitration." (Emphasis added.)

 IV.

 The MPPAA was enacted in September 1980.This motion raises a question which has not been addressed in this circuit: whether, under the MPPAA, the issue of whether RSI is an "employer" as defined by the Act is to be decided by the court or by an arbitrator.

 While exhaustion of statutorily prescribed remedies must usually precede resort to judicial resolution, Myers v. Bethlehem Ship Building Co., 303 U.S. 41, 50-51, 58 S. Ct. 459, 82 L. Ed. 638 (1938), and while the policies underlying the exhaustion doctrine are generally applicable to the arbitration proceedings established by the MPPAA, Republic Industries v. Teamsters Joint Council, supra; Republic Industries, Inc. v. Central Pennsylvania Teamsters, supra, there are exceptions to this doctrine which are applicable to this case. Exhaustion is not required, for example, where the issues involved require statutory interpretation. McKart v. United States, 395 U.S. 185, 197-98, 23 L. Ed. 2d 194, 89 S. Ct. 1657 (1969) (Exhauastion doctrine is not applicable where the question is "solely one of statutory interpretatioin. The resolution of that issue does not require any particular expertise on the part of the [agency]; the proper interpretation is certainly not a matter of discretion."). *fn5" Nor is exhaustion required where the questions presented include facial challenges to the constitutionality of the legislation involved. Oestereich v. Selective Service Board, 393 U.S. 233, 21 L. Ed. 2d 402, 89 S. Ct. 414 (1966) (Selective Service Act); Republic Industries v. Teamsters Joint ...


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