Opinion
A3-01-113.
January 24, 2002
MEMORANDUM AND ORDER
Before the Court is defendant's motion to dismiss or, in the alternative, to transfer to the Northern District of Illinois (doc. # 7). Plaintiff resists the motion. As set forth below, the motion to dismiss is GRANTED, and the case is ORDERED DISMISSED.
I. Legal and factual background
This case concerns the application of the Multiemployer Pension Plan Amendments Act (MPPAA), 29 U.S.C. § 1381-1461, one section of the Employee Retirement Income Security Act (ERISA). Generally, the MPPAA allows a plan sponsor, such as defendant Central States, Southeast and Southwest Areas Pension Fund ("the Fund"), to assess "withdrawal liability" against a participating employer to protect future benefits which may have vested for employees covered by the plan. See 29 U.S.C. § 1381(a); Rao v. Prest Metals, 149 F. Supp.2d 1, 5 (E.D.N.Y. 2001) (discussing MPPAA). Plaintiff Bladholm Brothers, Inc. ("Bladholm"), apparently participated in the Fund on behalf of its employees from November 1971 until November 2000, at which point the Fund determined it had completely withdrawn and so assessed $170,141.29; this will addressed further below.
First, however, the Court turns briefly to the process by which assessments and challenges to them are made, procedures spelled out by statute in meticulous detail. First, detailed formulae for calculating and assessing withdrawal liability is contained in detail at 29 U.S.C. § 1391. To challenge such an assessment, an employer must first ask the plan sponsor to review its calculation and may identify any particular inaccuracies; such review must be sought within 90 days of the demand for payment. § 1399(b)(2). If an employer is still unhappy, it must seek arbitration; § 1401(a)(1) provides that "[a]ny dispute between an employer and the plan sponsor . . . concerning a determination made under sections 1381 through 1399 of this title shall be resolved through arbitration."
Such arbitration must be sought within a 60-day period after the earlier of the date the plan responds to the employer's request for review or 120 days after such request for review is made. § 1401(a)(1)(A) and (B). If no arbitration is sought, the assessment becomes final; even if one is sought, the employer must continue to pay during the arbitration. § 1401(b)(1), (d). The arbitration is to be conducted in accordance with the Federal Arbitration Act, and a losing party may then seek to have the arbitration award vacated. § 1401(b). Courts have frequently upheld and applied these provisions. See generally Vaughn v. Sexton, 975 F.2d 498, 501 (8th Cir. 1992) (reviewing procedures).
The foregoing brief review was necessary to put in context the relevant facts of this case. As mentioned, plaintiff paid into the Plan on behalf of its employees for a number of years. According to plaintiff, in November 1999 it was paying on behalf of 50 employees. It then sold a portion of the business through a transaction by which 45 of those employees were fired and rehired by the purchaser, who then assumed liability for paying the Plan on their behalf. Plaintiff argues that this transaction qualified under the asset sale exception of MPPAA, which generally speaking exempts an employer from withdrawal liability when that withdrawal comes about as a result of a complete sale of assets to another who assumes liability. § 1384. Plaintiff asserts that it continued to pay on behalf of the five employees not affected by the sale until November 2000, when it discontinued the operations in which these employees were engaged and ceased payment. Thus, it concedes that it owes withdrawal liability for these five employees in November 2000, but it asserts the Plan has erroneously assessed liability for all fifty employees.
Defendant does not respond to the substance of this argument. Rather, it points out that plaintiff did not comply with the statutory procedure for challenging its liability. Defendant asserts that while plaintiff timely requested review, it did not properly seek arbitration; indeed, it is undisputed that there has been no arbitration. Defendant thus seeks either a dismissal of the action or its transfer to the Northern District of Illinois where, according to the Plan documents, any arbitration would occur. As will be discussed below, plaintiff's response is that it is not required to arbitrate at all since it raises a legal question of statutory construction, but that if it must arbitrate — and it requests arbitration as alternative relief in its complaint — then it need not do so in Illinois. The Court will address these arguments below.
II. Discussion
First, the Court examines plaintiff's argument that its quarrel with the assessment need not be arbitrated. Courts have generally explained that the arbitration requirement is not a complete bar to federal jurisdiction; rather, it is more in the nature of an exhaustion requirement. See Giroux Bros. Transp., Inc. v. New England Teamsters Trucking Industry Pension Fund, 73 F.3d 1,4 (2d Cir. 1996). In keeping with this analysis, courts have recognized several exceptions to the arbitration requirement. As another district court recently explained, this is the case when the dispute is not a factual one but rather "involves a constitutional question or, in some cases, a matter of statutory interpretation." Rao, 149 F. Supp.2d at 6.
Plaintiff argues it fits within this exception because it requests "a legal determination that its 1999 asset sale was a qualifying asset transfer pursuant to 29 U.S.C. § 1384." (Pl. Resp. at 7.) It asserts that since neither the facts of the two sales nor the "underlying contribution amount" are in dispute, "[t]he only issues presented are matters of statutory interpretation." (Id. at 8.) In short, it asserts that the question of whether the sale at issue qualifies under § 1984 is legal, not factual, and thus is not subject to arbitration. As explained below, the Court disagrees.
First, the plain language of the statute undercuts this theory. Sec. 1401(a) requires arbitration of "[a]ny dispute between an employer and the plan sponsor . . . concerning a determination made under sections 1381 through 1399." Plaintiffs essentially raise a dispute about a determination defendant has made under section 1384. Therefore, the plain language of the statute seems clearly to require arbitration. The question is thus whether any exceptions to the general rule operate here.
A brief review of the kinds of cases held not subject to arbitration shows why plaintiff's argument must fail. First, the Eighth Circuit has held that the question of "whether an entity ever became an employer under the MPPAA" is not subject to arbitration. Rheem Mfg. v. Cent. States S.E. S.W. Pen. Fund, 63 F.3d 703, 705-06 (8th Cir. 1995) (citing several other circuits). This exception is based on the statutory language that a dispute between a plan and an "employer" must be arbitrated; one who is not an employer, or who claims not to be, is not subject to this requirement. Id. Courts have similarly held that arbitration is not required when an employer claims it did not "become an MPPAA employer in time to incur liability for a related company's withdrawal." Doherty v. Teamsters Pen. Trust Fund of Philadelphia and Vicinity, 16 F.3d 1386, 1390 (3d Cir. 1994). Obviously, these related exceptions cannot apply; plaintiff concedes it was an employer subject to MPPAA; its only argument concerns the degree of liability. Moreover, this exception shows the kind of cases that will not require arbitration: Those in which there is an issue separate and apart from a determination under the MPPAA.
Another example of this rule is found in a Second Circuit case, T.I.M.E.-DC, Inc. v. Mgmt-Labor Welfare Funds, 756 F.2d 939, 945 (2d Cir. 1985). In T.I.M.E., the court exempted from arbitration a claim concerning the interaction of the MPPAA with another, non-MPPAA ERISA provision. Id. The court held this was a purely legal question of statutory construction and was "outside the scope of those issues that Congress directed to the arbitrator." Id. Again, this kind of question — the technical relationship between the MPPAA and other laws — is not at all like the issue here. To the contrary, plaintiff's claim involves a section explicitly entrusted to arbitration by § 1401(a). Therefore, this exception does not seem to help plaintiff.
A final example of a case allowed to bypass arbitration is Republic Indus., Inc. v. Teamsters Joint Council No. 83 of Virginia Pen. Fund, 718 F.2d 628, 634 (4th Cir. 1983). In that case, the employer launched a constitutional challenge to the retroactive provisions of the MPPAA. Id. Such a challenge is clearly appropriate for judicial resolution as opposed to arbitration, but it is not even suggested here. Therefore, this exception also does not help plaintiff. In short, the Court concludes that these exceptions do not exempt plaintiff's claim from arbitration.
To the contrary, other courts have held that claims such as plaintiff's must be arbitrated. Most recently, the Seventh Circuit, while reviewing an arbitrator's determination that a transaction satisfied the asset sale exception, concluded that this determination should be reviewed for clear error because it was "a classic example of a mixed question of fact and law." Cent. States. S.E. S.W. Pen. Fund v. Nitehawk Exp., 223 F.3d 483, 488 (7th Cir. 2000). Similarly, another district court has concluded that an employer was required to submit to arbitration the question whether it "fully withdrew" from the plan at issue, a question that, like this one, involved determining whether a certain set of facts met a statutory test. See Rao, 149 F. Supp.2d at 8.
Other cases could be cited to support this proposition, but the issue is perhaps best summarized by a New York district court: "The law is clear . . . that where there is any factual dispute, the `exhaustion of administrative remedies' doctrine is implicated and arbitration of that dispute is required." Bd. of Trs. of Trucking Employees of North Jersey Welfare Fund, Inc.-Pen. Fund v. Canny, 900 F. Supp. 583, 590 (N.D.N.Y. 1995). Here, despite plaintiff's protestations to the contrary, there is a factual, not a legal, dispute. Whether certain events took place and whether those events fit a statutory definition is not a question of statutory interpretation, as plaintiffs urge. See Nitehawk Exp., 223 F.3d at 488 (holding compliance with § 1384 as a mixed question of fact and law).
Even assuming, arguendo, that the facts are undisputed, this is still the case. Statutory construction is "the act or process of interpreting a statute," Black's Law Dictionary 1424 (7th ed. 1999), and cases bypassing arbitration on this basis focus solely on the statute itself,. See, e.g., T.I.M.E.-DC, 756 F.2d at 945 (holding that determination of relationship between MPPAA and unrelated statute did not require arbitration). What plaintiff wants is not statutory construction in this sense, but rather the application of a statute to certain facts, the precise kind of question for which arbitration is expressly required. See 29 U.S.C. § 1401(a)(1); Rao, 149 F. Supp.2d at 8 (requiring arbitration of claim that employer had not withdrawn from plan). The Court holds that plaintiff's claim that it qualified under sec. 1384 had to be arbitrated before it could be heard by any court. The motion to dismiss the case is therefore GRANTED.
The Court notes that there is a second issue in the case, that is, where such arbitration had to take place. Specifically, defendant urges that any such action had to take place in Illinois pursuant to its regulations; plaintiff resists this. The Court makes no ruling on this issue, and it declines defendant's invitation to transfer the case to Illinois. It is evident that the case cannot be in this Court in its current posture, and the Court therefore dismisses it. The nature of any further proceedings is left to the parties.
III. Conclusion
As set forth above, defendant's motion to dismiss (doc. # 7) is GRANTED. Therefore, the case is ORDERED DISMISSED.
IT IS SO ORDERED.