United States District Court, Southern District of New York
April 12, 1990
ILGWU NATIONAL RETIREMENT FUND, IRWIN SOLOMON AND JOSEPH MOORE, PLAINTIFFS,
SMART MODES OF CAL., INC. D/B/A MADISON 7, DEFENDANTS.
The opinion of the court was delivered by: Robert P. Patterson, Jr., District Judge.
OPINION AND ORDER
Plaintiffs ILGWU National Retirement Fund ("Fund") and two of
its trustees move for summary judgment pursuant to Federal Rule
of Civil Procedure 56 on its claim against defendant Smart
Modes of Ca., Inc d/b/a Madison 7 ("Smart Modes") for
withdrawal liability allegedly due under the Employee
Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001
et seq., as amended by the Multiemployer Pension Plan
Amendments Act of 1980 ("MPPAA"), 29 U.S.C. § 1381, et seq.,
plus interest, liquidated damages, attorneys fees and costs.
The Fund is a multiemployer pension plan within the meaning of
29 U.S.C. § 1002(2) and (37).
The withdrawal liability provisions of ERISA were amended by
MPPAA in 1980. Under MPPAA, an employer who withdraws from a
multiemployer plan, with certain exceptions not relevant here,
is assessed withdrawal liability, such that the employer is
required to continue funding its proportionate share of the
plan's unfunded vested benefits. 29 U.S.C. § 1381, 1391. An
employer completely withdraws from a plan when it either
permanently ceases to have an obligation to contribute to the
plan, or permanently ceases all covered operations under the
plan. 29 U.S.C. § 1383. Withdrawal liability may also be
imposed for partial withdrawals. 29 U.S.C. § 1381, 1385.
When an employer withdraws from a multiemployer plan, the
plan sponsor must calculate the amount of withdrawal liability
owed, give notice to the employer of the amount and demand
payment. 29 U.S.C. § 1382. Section 1399 provides that the plan
sponsor must notify an employer of the amount of its withdrawal
liability and the schedule of payments "[a]s soon as
practicable after an employer's complete or partial
withdrawal." 29 U.S.C. § 1399(b)(1). The employer then has 90
days to ask the plan sponsor to 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)(i).
Notwithstanding any request for review or demand for
arbitration, withdrawal liability is payable in accordance with
the schedule of payments established by the plan sponsor
beginning no later than 60 days after the date of demand,
29 U.S.C. § 1399(c)(2). Upon default, the plan sponsor may require
immediate payment of the outstanding amount of withdrawal
liability, plus accrued interest, 29 U.S.C. § 1399(c)(5).
MPPAA requires that "[a]ny dispute between an employer and
the plan sponsor of a multiemployer plan concerning a
determination made under sections 1381 through 1399 of this
title shall be resolved through arbitration."
29 U.S.C. § 1401(a)(1). Arbitration may be initiated within 60 days after
the earlier of (1) the date the employer is notified of the
plan's decision upon review, or (2) 120 days after the date the
employer requests such a review. Id. If no arbitration
proceeding is initiated, the plan sponsor may bring an action
in state or federal court to collect the amount due and owing,
29 U.S.C. § 1401(b)(1), 1451(a), including liquidated damages,
interest, costs and attorneys fees. 29 U.S.C. § 1451.
Smart Modes is a California corporation no longer in
business, which had its principal place of business in Los
Angeles, California. The correct name of the company is Smart
Modes of Calif. Inc., and it is undisputed that Madison 7 was
a separate California corporation. Smart Modes was a member of
the Los Angeles Coat & Suit
Manufacturers Association, a trade association which entered
into collective bargaining agreements with local affiliates of
the ILGWU. Jules Reinis was the president of the company. Smart
Modes was obligated to contribute to the Fund on behalf of
those employees covered by collective bargaining agreements
negotiated and entered into by the Association and the ILGWU.
It is undisputed that Smart Modes resigned from the
Association in 1978, that the collective bargaining agreement
to which it was a party at that time terminated on May 31,
1979, and that, by 1979, Smart Modes had ceased all
manufacturing operations. It is also undisputed, however, that
the Fund continued to receive contributions from or on behalf
of defendant through 1982. See Reply Affidavit of Sanford S.
Stevens at ¶ 4.
By letter dated August 17, 1987, and addressed to Jules
Reinis at his apartment in Los Angeles, the Fund notified
defendant that the Fund had determined that Smart Modes had
completely withdrawn from the Fund as of 1982, informed it that
the Fund had calculated its withdrawal liability to be
$150,671, set forth a payment schedule, demanded payment of the
first payment, and notified it of its right to ask for review
of the calculation and its right to seek arbitration. Mr.
Reinis admits receiving the August 17, 1987 letter.
On October 30, 1987 the Fund gave written notice to Smart
Modes that it had failed to make the required payment set forth
in the August 17, 1987 letter. Smart Modes never responded to
the August 17 or October 30 notices in any manner. Smart Modes
never sought review by the Fund or through arbitration, and
failed to make any of the scheduled payments.
On May 6, 1988, the Fund commenced the present action, and
served the summons and complaint on Jules Reinis on May 9,
1988. The defendants answered on July 22, 1988, and some
discovery has been completed.
Summary judgment is appropriate where there is "no genuine
issue as to any material fact and . . . the moving party is
entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c);
Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91
L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In deciding a
motion for summary judgment, the "fundamental maxim" is that
the court "`cannot try issues of fact; it can only determine
whether there are issues to be tried.'" Donahue v. Windsor
Locks Bd. of Fire Comm'rs, 834 F.2d 54, 58 (2d Cir. 1987)
(quoting Heyman v. Commerce & Industry Ins. Co., 524 F.2d 1317,
1319-20 (2d Cir. 1975)). "Moreover, in determining whether a
genuine issue has been raised, a court must resolve all
ambiguities and draw all reasonable inferences against the
moving party." Id. at 57.
In opposition to plaintiffs' motion, defendant does not raise
genuine issues of material fact, but contends that plaintiffs'
action is barred by the statute of limitations or the doctrine
of laches, that it was not an employer on the effective date of
MPPAA, and that the Fund did not properly notify it of its
1. Statute of Limitations and Laches
Defendant argues that plaintiffs' action is barred by the
statute of limitations or the doctrine of laches. The
applicable limitations period is set forth in § 1451(f) of
MPPAA, which provides
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
(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.
Defendant argues that plaintiffs' cause of action arose when
the collective bargaining agreement to which Smart Modes was a
party expired in 1979, and therefore this action fails under
both of the periods set forth in § 1451(f). Plaintiffs respond
that a cause of action for withdrawal liability
arises when an employer fails to make a payment demanded by the
Fund, and therefore this action was brought well within either
of those periods.
In Joyce v. Clyde Sandoz Masonry, 871 F.2d 1119 (D.C. Cir.
1989), the Court of Appeals for the District of Columbia
Circuit decided the precise issue presented here: "[w]hat acts
or omissions trigger section 1451(f)'s time bar as applied to
efforts to collect withdrawal liability?" In a well-reasoned
and thorough opinion, the court held that a cause of action for
collection of withdrawal liability under the MPPAA arises when
the employer fails to make a required payment demanded by the
plan, not upon the expiration of the collective bargaining
Defendant cites Connors v. Mulvehill, 679 F. Supp. 1071
(N.D.Ala. 1988) in support of their argument that accrual of a
cause of action runs from the date of the expiration of the
collective bargaining agreement. In that case, however, the
court held that it did not have jurisdiction, and indicated
only in passing dicta that withdrawal liability under the MPPAA
accrued when the collective bargaining agreements at issue
Accordingly, the Court follows the holding in Joyce that the
event which gives rise to an MPPAA collection claim is not the
employer's complete withdrawal, but rather the employer's
failure to honor the pension plan's demand for payment. In this
case, then, the § 1451(f) limitation period began to run when
Smart Modes failed to make the required payment demanded by the
Plan. Since the Fund commenced this suit well within three
years after defendant failed to make its required payments,
defendant's statute of limitations defense is unfounded.
Defendant also argues that its assertion of the defense of
laches should prevent entry of summary judgment against it.
However, it is well-established that, where the applicable
statute of limitations has not yet expired, the defense of
laches is inapplicable. See IAM National Pension Fund v.
Cullman Industries, Inc., 640 F. Supp. 1284, 1286-87 (D.D.C.
1986). See also United States v. Repass, 688 F.2d 154, 158 (2d
Cir. 1988); United States v. Mack, 295 U.S. 480, 489, 55 S.Ct.
813, 818, 79 L.Ed. 1559 (1935) ("[l]aches within the statute of
limitations is no defense at law").
Defendant appears to make a somewhat related argument that
plaintiffs' action should be barred because plaintiffs failed
to make demand for payment "as soon as practicable," as
required by the MPPAA. However, as will be shown
infra, this is a defense that is required to be raised in
arbitration and accordingly cannot be raised here.
2. Arbitration Requirement Plaintiffs claim that the remainder
of defendant's defenses cannot be raised because it failed to
seek timely arbitration, relying on § 1401(a)(1), which
requires that "[a]ny dispute between an employer and the plan
sponsor of a multiemployer plan concerning a determination
made under sections 1381 through 1399 of this title shall be
resolved through arbitration." Defendant argues that it never
became obligated to arbitrate because it was not an employer
on the effective date of the MPPAA. The cases on point,
however, reject that position.
It has become well-established that, under the remedial
scheme enacted by Congress in the MPPAA, an employer's failure
to seek timely arbitration of defenses to a pension plan's
calculation of withdrawal liability precludes it from asserting
those defenses, regardless of their merit, in an action to
collect that liability. ILGWU Nat'l Retirement Fund v. Levy
Bros. Frocks, Inc., 846 F.2d 879
(2d Cir. 1988); IAM National
Pension Fund v. Clinton Engines Corp., 825 F.2d 415, 417 (D.C.
Cir. 1987) ("`arbitrate first' is indeed a rule Congress stated
unequivocably. . . ."), citing Grand Union Co. v. Food
Employers Labor Relations Association, 808 F.2d 66, 70 (D.C.
Cir. 1987); Teamsters Pension Trust Fund v. Allyn
Transportation Co., 832 F.2d 502
, 504 (9th Cir. 1987).
In Allyn Transportation, the Ninth Circuit held that an
employer which claimed it had ceased operations prior to the
effective date of MPPAA could not raise that fact as a defense
to the pension plan's suit in the
district court because it failed to demand arbitration after
the plan demanded payment. The court specifically rejected the
arguments made by defendant here. The rationale of Allyn
Transportation was cited with approval by the Second Circuit in
Levy Bros., 846 F.2d at 885. As in that case, defendant here
never sought arbitration of the plan's demand for payment and
is therefore barred from raising in this Court its claim that
it withdrew from the plan before MPPAA's effective date.
While this result may be harsh, the Second Circuit made clear
in Levy Bros. That
Congress intended that disputes over withdrawal
liability would be resolved quickly, and
established a procedural bar for employers who
fail to arbitrate disputes over withdrawal
liability in a timely manner. . . . If a party
wishes to seek judicial resolution of its dispute
without first submitting to arbitration it should
seek declaratory and/or injunctive relief against
the imposition of withdrawal liability before the
time period to initiate arbitration expires. . . .
The failure to seek such relief on a timely basis
may, in some instances, lead to a harsh result,
but the harshness of the default is largely "a
Id. at 887 (citations omitted) (quoting IUE AFL-CIO Pension
Fund v. Barker & Williamson, 788 F.2d 118 at 129 (3rd Cir.
1986)). Under the scheme enacted by Congress, when defendant
received the Plan's demand for payment, which included
notification of the right to seek review and arbitration, it
was incumbent upon defendant to act. Defendant's failure to
take any action whatsoever to preserve its defenses precludes
it from raising those defenses now.*fn1
Defendant also seeks to raise as a defense that the plan did
not demand payment of withdrawal liability "as soon as
practicable," as required by 29 U.S.C. § 1399(b)(1) of the
statute. Defendant reads the court's discussion in Levy Bros.
as suggesting that the issue of whether the Fund acted as soon
as practicable need not be arbitrated and may be decided by the
district court in determining whether the statutory conditions
precedent to a suit for collection of withdrawal liability have
been met. 846 F.2d at 887. It is apparent, however, that the
court meant only to correct an erroneous interpretation made by
the district court. In fact, the court held that Congress did
not intend to impose a strict deadline for notifying employers
of their withdrawal liability, but rather "intended that demand
for withdrawal liability should be made `as soon as
practicable' as part of the overall scheme to provide for
prompt payment of withdrawal liability." 846 F.2d at 887. See
also I.A.M. National Pension Fund v. Cullman Industries, Inc.,
640 F. Supp. 1284, 1288 (D.D.C. 1986) ("if Congress had wished
to create a tangible notification deadline, it could, and
would, have done so.").
In any event, the issue of whether the Fund's demand was made
"as soon as practicable" is best suited for initial
determination by the arbitrator, since it involves resolution
of questions of fact, statutory interpretation and requires
knowledge of, as the Levy Bros. court put it, the "detailed and
demanding" procedures for identifying withdrawals and
calculating and collecting withdrawal liability. Since the
arbitration of these matters will likely "lead to the
application of superior expertise," the "as soon as
practicable" issue is controlled by the statutory direction to
resort initially to arbitration. Grand Union Co. v. Food
Employers Labor Relations, 808 F.2d 66, 70 (D.C. Cir. 1987).
See also I.A.M. Nat'l Pension Fund Benefit Plan C v. Stockton
Tri Indus., 727 F.2d 1204 (D.C. Cir. 1984); Retirement Fund of
Fur Manufacturing Industry v. Getto & Getto, Inc., 714 F. Supp. 651,
653-55 (S.D.N.Y. 1989). Indeed, in Joyce the court
indicated its preference that the "as soon as practicable"
determination be made by the arbitrator. 871 F.2d at 1127.
3. Notice of Liability
Finally, defendants suggest that the Fund's notice of
withdrawal liability to defendant
was insufficient. It is undisputed that the notice was sent to
the residence of Jules Reinis, who was president of Smart Modes
while it was in operation. Defendant does not dispute that Mr.
Reinis received the notice. Accordingly, the notice was
sufficient. Debrecini v. George Lamoureux & Co., 629 F. Supp. 598,
601 (D.Mass. 1986).
For the foregoing reasons, plaintiff's motion for summary
judgment is granted. Plaintiff is ordered to submit a proposed
judgment, including interest, liquidated damages, costs and
attorneys fees, on 5 days notice to defendant within 10 days of
the entry of this opinion, and defendant shall file any
objections thereto within ten days thereafter.