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Barbizon Corp. v. Ilgwu National Retirement Fund

decided: March 18, 1988.


Appeal from a judgment of the United States District Court for the Southern District of New York (Weinfeld, J.), entered upon a decision denying appellant's motion for summary judgment, granting appellees' cross-motion for summary judgment, and rejecting appellant's challenge to a determination of its liability for a pro rata share of unfunded vested pension plan benefits. Affirmed.

Lumbard, Kearse, and Pierce, Circuit Judges.

Author: Pierce

PIERCE, Circuit Judge:

This case presents a challenge by appellant The Barbizon Corporation ("Barbizon") to a determination of its liability to contribute to appellee the ILGWU National Retirement Fund (the "Fund"). Appellees Sol C. Chaikin and Joseph Moore are officers of the Fund and members of its Board of Trustees. Barbizon appeals from a judgment of the United States District Court for the Southern District of New York, Edward Weinfeld, Judge, entered upon a decision, reported at 667 F. Supp. 994, that denied appellant's motion for summary judgment and granted appellees' cross-motion for summary judgment. We agree with the district court that Barbizon is liable for its assessed share of the unfunded vested benefits in the pension plan, and we therefore affirm.


The Fund is a multiemployer pension plan within the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., as modified by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), Pub. L. No. 96-364, 94 Stat. 1208. See 29 U.S.C. §§ 1002(37), 1301(a)(3) (1982). The Fund provides retirement and other benefits for workers in the garment industry.

Barbizon is a New York corporation engaged in the design and sale of finished garments. Until approximately June 30, 1980, Barbizon, through its wholly-owned subsidiary, Barbizon of Utah, Inc., manufactured most of its finished garments at a plant in Provo, Utah; it also operated a wholesale distribution center at Montville, New Jersey. Barbizon's garment workers were employed pursuant to successive master collective bargaining agreements between Barbizon and the International Ladies Garment Workers Union (the "Union"), which were supplemented by separate agreements covering the employees at Provo and Montville, respectively. Under the master agreements, Barbizon was obliged to contribute to the Fund on behalf of the unionized employees working both at Provo and at Montville. The labor agreements also provided that if Barbizon contracted with other companies to perform any of its production work, with a few limited exceptions, it would only engage the services of companies that also employed workers represented by the Union. Barbizon was also required to contribute to the Fund on behalf of the contractors' employees with respect to any such subcontracted work.

On or about June 30, 1980, Barbizon closed its Provo, Utah plant and terminated the employment of its workers at that location pursuant to a supplementary collective bargaining agreement dated June 24, 1980 that it had negotiated with the Union (the "Termination Agreement"). The work that previously had been performed at Provo was thereafter performed by independent contractors to Barbizon's specifications with fabric supplied by Barbizon; in some instances, Barbizon sold or lent to these contractors some of the speciality-designed equipment that it had used previously at the Provo plant. Barbizon did not discontinue any of its product lines, alter any trademarks, or modify its marketing procedures as a result of closing the Provo plant. And as Barbizon's counsel conceded at oral argument, it did not lose any productive capacity or suffer any diminution of sales, either.

In January 1983, Barbizon withdrew from the Fund within the leaning of the MPPAA, and in June 1983, the Fund assessed Barbizon's withdrawal liability, as required by the MPPAA, see ERISA §§ 4201-4225, 29 U.S.C. §§ 1381-1405 (1982 & Supp. III 1985). In essence, the statute requires an employer that withdraws from a multiemployer pension plan to "pay a fixed and certain debt to the pension plan," which represents "the employer's proportionate share of the fund's 'unfunded vested benefits,' calculated as the difference between the present value of vested benefits and the current value of the plan's assets." Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 725, 81 L. Ed. 2d 601, 104 S. Ct. 2709 (1984) (citing 29 U.S.C. §§ 1381, 1391); see generally Barbizon Corp. v. ILGWU National Retirement Fund, 667 F. Supp. at 996-97 (describing purpose of MPPAA). The proportion for which the employer is liable is determined primarily by reference to the extent of the employer's prior participation in the pension plan. See 29 U.S.C. § 1391 (1982 & Supp. III 1985); see generally Peick v. Pension Benefit Guaranty Corp., 724 F.2d 1247, 1255-56 (7th Cir. 1983) (describing MPPAA and its effect on prior ERISA requirements), cert. denied, 467 U.S. 1259, 82 L. Ed. 2d 855, 104 S. Ct. 3554 (1984). However, in calculating the employer's withdrawal liability, the plan sponsor must exclude from the employer's contribution base, upon which the withdrawal liability is determined, any contributions attributable to work performed at a facility where all covered operations ceased prior to September 26, 1980 (the effective date of the MPPAA, see Deficit Reduction Act of 1984, Pub.L. No. 98-369, 98 Stat. 494), or to work performed either at a facility or under a collective bargaining agreement for which there was a permanent cessation of the obligation to contribute prior to that date. ERISA § 4217(a), 29 U.S.C. § 1397(a) (Supp. III 1985).

The Fund assessed Barbizon's withdrawal liability at an amount in excess of $1.5 million, which was calculated without excluding contributions attributable to the Provo plant. The Fund's entitlement to collect this withdrawal liability was dependent substantially upon the nonavailability of any § 4217 exclusion arising from Barbizon's termination of its Provo operations. Barbizon claims to be entitled to such an exclusion because of the closure of its Provo plant prior to September 26, 1980, pursuant to the Termination Agreement with the Union.

Under protest, Barbizon paid substantially all of the assessed liability and, in November 1985, instituted a declaratory judgment action in the United States District Court for the Southern District of New York, seeking to have the liability assessment set aside and recalculated after excluding any portion attributable to contributions made for work that had been performed at the Provo plant. The Fund counterclaimed for a declaratory judgment that the withdrawal liability assessed was payable in full. The parties entered a joint pre-trial order of stipulated facts in August 1986, and shortly thereafter cross-moved for summary judgment. Judge Weinfeld heard oral arguments on the motions in October 1986, and on August 10, 1987, he rendered a decision, reported at 667 F. Supp. 994, denying Barbizon's motion and granting the Fund's cross-motion. Judgment was thereafter entered dismissing Barbizon's complaint, and this appeal followed.

The issue presented in this case is whether the conditions for application of § 4217 of ERISA required the Fund to exclude Barbizon's contributions with respect to the Provo plant when it calculated Barbizon's withdrawal liability. We conclude that the requirements of § 4217 were not met and that the Provo contributions therefore were properly included when Barbizon's liability was determined.


Section 4217 of ERISA, 29 U.S.C. § 1397 (Supp. III 1985), as amended, reads in ...

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