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TRUSTEES OF AMALGAMATED INS. FUND v. SALTZ

March 27, 1991

THE TRUSTEES OF THE AMALGAMATED INSURANCE FUND, PLAINTIFFS,
v.
NATHAN SALTZ AND JACK SALTZ, DEFENDANTS.



The opinion of the court was delivered by: Sweet, District Judge.

OPINION

Plaintiffs, the Trustees of the Amalgamated Insurance Fund ("the Fund"), have moved for summary judgment on their claim for ERISA pension plan withdrawal liability against the defendants Nathan and Jack Saltz ("the Saltzes"). For the following reasons, the motion is granted.

The Parties

The Fund is a trust fund designed to provide health, welfare and retirement benefits to eligible employees of businesses in contractual relations with the Amalgamated Clothing and Textile Workers Union ("the Union") and its affiliates. The Fund actually consists of two distinct sub-funds: the Retirement Fund and the Social Insurance Fund. The Retirement Fund is a multiemployer pension plan as that term is defined by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001-1461, as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"). 29 U.S.C. § 1381-1405.

The Saltzes are the sole shareholders of Frank Saltz & Sons, Inc. ("the Corporation"), which prior to 1989 had a collective bargaining agreement with the Union under which it contributed to the Fund on behalf of its employees. The Saltzes are also the owners as joint tenants with rights of survivorship of the property at which the Corporation's business was located.

The Statutory Framework

Under ERISA and the MPPAA, an employer who ceases making regular contributions to a multiemployer pension plan is required to assume responsibility for its share of the plan's "unfunded vested benefits." 29 U.S.C. § 1381. It is the responsibility of the plan sponsor to notify the employer of the amount of its withdrawal liability and to make arrangements to collect that liability. 29 U.S.C. § 1382.

An employer who receives a notice of withdrawal liability may seek further review by the plan sponsor pursuant to § 1399(b)(2)(A), and if still dissatisfied may seek arbitration of the dispute under § 1401. Except in unusual circumstances, arbitration must be initiated within 60 days of the sponsor's final notification of liability. Notwithstanding the timely initiation of arbitration, the employer is required to make all scheduled payments during the pendency of the arbitration. Upon an employer's failure to make timely payment as requested by the sponsor, § 1451(b) authorizes the sponsor to bring suit to enforce the withdrawal liability.

For the purposes of ERISA and the MPPAA, the term "employer" is defined to include all "trades or businesses" which are controlled in common with the actual employing entity:

  For purposes of this subchapter, under regulations
  prescribed by the [PBGC,] all employees of trades
  or businesses (whether or not incorporated) which
  are under common control shall be treated as
  employed by a single employer and all such trades
  and businesses [shall be treated] as a single
  employer.

29 U.S.C. § 1301(b)(1); see also 29 C.F.R. § 2612.3 (1990). Under regulations promulgated in connection with this section of the statute, the term "trades or businesses (whether or not incorporated) which are under common control" is given the same meaning as that provided in § 414(c) of the Internal Revenue Code, 26 U.S.C. § 414(c). 29 C.F.R. § 2612.2 (1990). Section 414(c) and the regulations promulgated thereunder describe in detail how to determine when several "trades or businesses" are commonly controlled, 26 C.F.R. § 1.414(c) (1990), but do not define the term "trade or business" itself.

The Facts

The relevant facts in this case are undisputed. The Saltzes each own fifty percent of the shares of the Corporation, which operated its clothing manufacturing business from 347 Chestnut Street ("the Property") in Passaic, New Jersey. The Property was owned by the Saltzes beginning in 1979 and was owned by them as joint tenants with rights of survivorship from 1985. The Corporation leased the Property from the Saltzes through a net lease under which it paid rent and assumed responsibility for managing and maintaining the Property. The lease extended from March 1, 1987 to February 28, 2001. Pursuant to the lease, the Saltzes received rental income during 1987 and 1988 and took depreciation on the Property while the Corporation paid all real estate taxes.

The Corporation was party to a collective bargaining agreement with the Union under which it was to make contributions to the Fund on behalf of its employees. On August 7, 1989 the Corporation ceased operations, and on August 10 the Fund notified the Corporation by mail that the Corporation's withdrawal liability had been calculated at $1,211,491.27 and that the first payment would be $161,679.81, due on October 1, 1989. The letter included a cursory explanation of the process for initiating a review of the liability by the sponsor and the possible consequences of failing to make payment. No mention was made of the statutory requirement that disputes be arbitrated or of the time limit ...


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