Board of Trustees of the Automobile Mechanics' Local No. 701 Union and Industry Pension Fund v. River Oaks Ford, Inc. et al

Filing 63

MEMORANDUM Opinion and Order Signed by the Honorable Milton I. Shadur on 6/25/2013. Mailed notice by judge's staff. (srb,)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
BOARD OF TRUSTEES OF THE
AUTOMOBILE MECHANICS’ LOCAL
NO. 701 UNION AND INDUSTRY
PENSION FUND,
Plaintiff,
v.
HENNESSY FORD, INC., et al.,
Defendants.

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No.

13 C 484

MEMORANDUM OPINION AND ORDER
When this Court’s colleague Honorable Suzanne Conlon elected
to retire from the bench on May 31, the consequent random
reassignment of the remaining cases on her calendar brought this
action to the calendar of this Court.

Its threshold look at the

case revealed that it carried with it the baggage of a fullybriefed dispute between the litigants as to the enforcement of
the withdrawal liability provisions of ERISA--more precisely, the
Multiemployer Pension Plan Amendments Act (“MPPAA,” 29 U.S.C.
§§1381-1461).1
At this point no dispute exists between plaintiff Board of
Trustees of the Automobile Mechanics’ Local No. 701 Union and
Industry Pension Fund (“Trustees”) on the one hand and
codefendants Hennessy, Inc. and River View Ford, Inc. on the

1

All further citations to MPPAA will take the form
“Section--,” employing the section numbers in Title 29 but
omitting the prefatory “29 U.S.C.”

other as to the motion by those defendants to stay the
proceedings against them pursuant to Section 1401(f)(2) until
February 6, 20142 by reason of the pending arbitration
proceedings as to the defendants’ potential withdrawal liability.
Nor will those codefendants be required to make withdrawal
liability payments unless and until the arbitrator upholds the
determination made by the employee benefit plan sponsor.

Instead

the only current issue that requires resolution here is as to the
withdrawal liability vel non of codefendant River Oaks Ford, Inc.
(“River Oaks”), a subject on which it and Trustees have submitted
two memoranda apiece.
As River Oaks would have it, our Court of Appeals’ 2010
decision in Cent. States Se. & Sw. Areas Pension Fund v. O’Neill
Bros. Transfer & Storage Co., 620 F.3d 766 (7th Cir. 2010) has
somehow trumped the long-established and uniformly applied “pay
now, dispute later” mandate of MPPAA by holding that an
assertedly withdrawing employer is entitled to a stay of judicial
proceedings (and, most importantly, can hold off on the interim
payment of the statutorily-defined installments of the disputed
withdrawal liability) during the pendency of an arbitration
brought to address substantive disputes between the parties.

But

that contention is dead wrong, for it violates the very

2

As the cited statute makes clear, that is an outside
date--if the arbitration produces a final decision in Trustees’
favor by then, the stay may be terminated earlier.
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principles of statutory construction that produced the typically
thoughtful and thorough analysis by Judge Kenneth Ripple for the
panel in the O’Neill case.
Here is the provision of MPPAA (Section 1399(c)(5)) that was
at issue in O’Neill:
In the event of a default, a plan sponsor may require
immediate payment of the outstanding amount of an
employer's withdrawal liability, plus accrued interest
on the total outstanding liability from the due date of
the first payment which was not timely made. For
purposes of this section, the term “default” means—
(A) the failure of an employer to make, when
due, any payment under this section, if the
failure is not cured within 60 days after the
employer receives written notification from the
plan sponsor of such failure, and
(B) any other event defined in rules adopted
by the plan which indicates a substantial
likelihood that an employer will be unable to pay
its withdrawal liability.
Although the litigants’ quarrel in that case related to the
“second kind of default, commonly referred to as an ‘insecurity
default’” (620 F.3d at 771), the Court of Appeals--by way of
contrast--also took the occasion to construe the provision that
set out “the first kind of default, commonly referred to as a
‘missed-payment default’” (id.).

In the latter respect O’Neill,

id. at 773-74 bought into the interpretation arrived at by the
Pension Benefit Guaranty Corporation (“PBGC”), which had adopted
a regulation providing that such a “default” does not occur until
61 days after the disputes between an employer and the plan

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sponsor that they have submitted to arbitration (Section
1401(a)(1)) have been ruled on by the arbitrator.
But what River Oaks glosses over--or more likely prefers to
ignore--is that the statutorily-defined “default” involves an
acceleration of the entire withdrawal liability, while Trustees
have not asked for that--instead they seek only the interim
installment payments on account of such claimed liability.

Note

the striking difference between those enforcement efforts.
As to any total acceleration of claimed withdrawal liability
(the subject of the “default” provisions quoted both in O’Neill
and earlier in this opinion), it is surely reasonable to require
“a substantial likelihood that an employer will be unable to pay
its withdrawal liability” (Section 1399(c)(5)(B), extended to
subsection (A) by the construction adopted by PBGC and now by our
Court of Appeals).

In total contrast, Section 1401--the very

provision that calls for the resolution of disputes between
employers and plan sponsors through arbitration (Section
1401(a)(1))--expressly specifies what the employer must do until
the arbitrator issues a final decision.

Here is Section 1401(d):

Payments shall be made by an employer in accordance
with the determinations made under this part until the
arbitrator issues a final decision with respect to the
determination submitted for arbitration, with any
necessary adjustments in subsequent payments for
overpayments or underpayments arising out of the
decision of the arbitrator with respect to the
determination.
And that “pay now, dispute later” mandate is echoed in Section
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1399(c)(2), part of the section that establishes the employer’s
obligation to make interim quarterly payments on account of
asserted withdrawal liability while any substantive disputes are
being arbitrated.
In short, the same principles of statutory construction that
flow from the premise that Congress knew what it was doing when
it set up the structure for dealing with withdrawal liability
(the premise that drove the O’Neill decision) also confirm that
Congress knew what it was doing when it provided for mandatory
interim payments (not total acceleration of the type provided for
in a typical mortgage note or other installment note) when it
omitted any provision for putting a benefit plan and its
participants at risk while the parties fought out the substantive
issues through arbitration.
Indeed, River Oaks’ attempted reliance on the O’Neill
decision is torpedoed entirely by our Court of Appeals’
reaffirmance, a year after that decision came down, of the “pay
now, dispute later” principle in precisely the same context that
is posed here.

Here is an excerpt from Nat’l Shopmen Pension

Fund v. DISA Indus., Inc., 653 F.3d 573, 576 (7th Cir.
2011)(emphasis added) that could well have been written for this
case:
As we have said time and again, an employer is almost
always required to make payments while it seeks review
of a fund's calculation of withdrawal liability, see
§1399(b)(2)(A), or pursues arbitration, see
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§1401(a)(1). Central States, Se. and Sw. Areas Pension
Fund v. Hunt Truck Lines, Inc., 272 F.3d 1000, 1002–03
(7th Cir. 2001). This is to ensure that the pension
plan remains solvent while the parties resolve their
dispute—a process that can take many years. To this
end, the MPPAA requires an employer to make interim
payments “in accordance with the schedule set forth by
the plan sponsor...notwithstanding any request for
review or appeal of determinations of the amount of
such liability or of the schedule.” §1399(c)(2). If
the employer defaults by failing to make the
appropriate payments, see §1399(c)(5)(A), matters
progress in one of two ways. Assuming that the
employer refuses to make “interim” liability payments,
meaning while arbitration is pending, the plan may file
suit to collect only the interim payments, not the
entire amount.
Importantly, that quoted language is followed by a quotation from
Section 1399(c)(5) that spells out the contrasting alternative
identified in O’Neill, under which a “default” as defined there
entitles a plan sponsor to require immediate payment of an
employer’s total withdrawal liability in case of a “default” as
defined there.

Simply put, for River Oaks’ counsel to promote

O’Neill under the circumstances reflects either seriously flawed
research or, if counsel was aware of Nat’l Shopmen but failed to
cite it, seriously flawed lawyering (and see Ill.S.Ct. RPC Rule
3.3(a)(2)).
Conclusion
For the reasons set out in this memorandum opinion and
order:
1.

Hennessy, Inc.’s and River View Ford, Inc.’s joint

motion to stay the proceedings against them pursuant to

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Section 1401(f) is granted until February 6, 2014.
2.

River Oaks Ford’s corresponding motion to stay the

proceedings against it is denied.
3.

River Oaks Ford, Inc. is ordered, during the

pendency of the existing arbitration proceedings, to pay
all interim installments on account of its asserted
withdrawal liability, with the timetable for payment of the
past-due installments to be set at the next status hearing.
4.

This action is set for a next status hearing at

9:15 a.m. July 11, 2013.
At the next status hearing the parties should also come prepared
to discuss Trustees’ motions for a turnover order (Dkt. 46) and
for summary judgment against River Oaks Ford, Inc. (Dkt. 51),
although the latter of those two motions might well be rendered
superfluous by the rulings in this opinion.

________________________________________
Milton I. Shadur
Senior United States District Judge
Date:

June 25, 2013

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