EUSA-ALLIED ACQUISITION CORP. v. TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA & VICINITY et al

Filing 22

OPINION. Signed by Judge Jerome B. Simandle on 06/16/2011. (tf, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

EUSA-ALLIED ACQUISITION CORP.,
Plaintiff,

Civil Action
No. 11-3181 (JBS-AMD)

v.
TEAMSTERS PENSION TRUST FUND
OF PHILADELPHIA & VICINITY,
and LOCAL UNION 312
INTERNATIONAL BROTHERHOOD OF
TEAMSTERS,

OPINION

Defendants.

APPEARANCES:
James P. Anelli, Esq.
Joseph P. Paranac, Esq.
Robert M. Pettigrew, Esq.
LECLAIRRYAN
One Riverfront Boulevard
16th Floor
Newark, NJ 07102
Counsel for Plaintiff
Jo Bennett, Esq.
Frank C. Sabatino, Esq.
STEPHENS & LEE
1818 Market Street
29th Floor
Philadelphia, PA 19103
Counsel for Defendant Teamsters Pension Trust Fund of
Philadelphia & Vicinity
Susan A. Murray, Esq.
FREEDMAN & LORRY, PC
1601 Market Street
2nd Floor
Philadelphia, PA 19103
Counsel for Defendant Local Union 312, International
Brotherhood of Teamsters

SIMANDLE, District Judge:
I.

INTRODUCTION
This matter comes before the Court on the motion of

Plaintiff EUSA-Allied Acquisition Corp. for a temporary
restraining order entering a stay of any interim payments or
penalties being sought by Defendant Teamsters Pension Trust Fund
of Philadelphia and Vicinity under the Multi-employer Pension
Plan Amendments Act (MPPAA) of 29 U.S.C. §§ 1381-1453.

The Court

received briefing in support of the motion from Plaintiff EUSAAllied [Docket Item 1], and in opposition to the motion from
Defendant Teamsters Pension Trust Fund [Docket Item 8] as well as
from Defendant Local Union 312, International Brotherhood of
Teamsters [Docket Item 13].

In addition, Plaintiff submitted the

Declaration of Edward Burke, the Chief Financial Officer of EUSAAllied’s parent company, North American Propane, Inc., in support
of Plaintiff’s contention of irreparable injury.
9.]

[Docket Item

The Court held a hearing on the motion on Tuesday, June 7,

2011, at which all parties appeared through counsel.
reserved decision on the motion at that time.

The Court

On June 15, 2011,

the Court convened a telephone conference and announced its
decision to deny the motion on the record, with all parties in
attendance.

This Opinion sets out the reasoning of that

decision.

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II.

FACTUAL BACKGROUND1
Plaintiff is a subsidiary corporation of North American

Propane (“NAP”).

In February of 2006, Plaintiff negotiated an

acquisition of Allied Propane.

As part of its acquisition of

Allied Propane, EUSA-Allied agreed to assume Allied’s obligations
under its collective bargaining agreement (CBA) with Defendant
Local Union 312.

One of those obligations was to contribute to

Defendant Teamsters Pension Trust Fund.

Plaintiff alleges that

one of the key components of this negotiation was the duration
that Plaintiff would be obligated to participate in the Plan and
at what point it would face withdrawal liability under the MPPAA.
Consequently, as part of the ultimate acquisition, the parties
(EUSA-Allied, Allied Propane, Teamsters Pension Trust Fund, and
the Local Union 312) drew up an agreement that stated that,
pursuant to Article IX, Section G of the Pension Plan, EUSAAllied would have a “free look” period under the Plan.
Specifically, EUSA-Allied would face no withdrawal liability to
the Fund under the MPPAA so long as it contributed to the Fund
“for no more than five consecutive plan years.”
The referenced section of the Plan, Article IX, Section G,
governs the “free look” period for all employer contributors.
states that “Pursuant to ERISA Section 4210, 29 U.S.C. Section
1390, an employer who withdraws from the Plan in a complete or

1

All facts, unless stated otherwise, are taken from the
Plaintiff’s Verified Complaint.
3

It

partial withdrawal is not liable to the Plan if the employer . .
. had an obligation to contribute to the Plan for no more than
five consecutive plan years preceding the date on which the
employer withdraws.”

In the Definitions section of the Plan, it

states that “[t]he Plan Year shall be the calendar year.”

(Plan,

Art. I, Sec. A.)
The referenced section of the statute, 29 U.S.C. § 1390, is
a provision of the MPPAA, which governs permissible “free look”
periods under applicable plans (such as Defendant).

That section

states that “An employer who withdraws from a plan in complete or
partial withdrawal is not liable to the plan if the employer . .
. (2) had an obligation to contribute to the plan for no more
than the lesser of (A) 6 consecutive plan years preceding the
date on which the employer withdraws, or; (B) the number of years
required for vesting under the plan.”
In November of 2010, Plaintiff notified Defendants of their
intention to withdraw from the plan on December 31, 2010, and
referenced the “free look” agreement as a basis for their claim
that the withdrawal should be without liability to the plan.
(Cleves Decl. Ex. D.)

On December 20, 2010, Defendant Trust Fund

replied to Plaintiff’s stated intention to withdraw that its
interpretation of the “Free Look Agreement,” read in conjunction
with Article IX Section G of the Plan and the relevant section of
the MPPAA, established that the free look period had expired
earlier in 2010 because at least one of the Plaintiff’s

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participating employees had fully vested in the plan already and
that, therefore, under § 1390(a)(2)(B), the free look period had
expired.

(Cleves Decl. Ex. E.)

Therefore, Defendant explained

that if Plaintiff withdrew as announced, it may face withdrawal
liability under the MPPAA.

On December 31, Plaintiff withdrew

from the Plan as announced.
On April 19, 2011, Defendant sent Plaintiff a withdrawal
liability letter, stating that it had determined that the
Plaintiff had withdrawn from the plan after the expiration of the
free look period, and that it therefore had incurred withdrawal
liability under the MPPAA. It calculated a full withdrawal
liability under the MPPAA at approximately $680,000, and
established a quarterly interim payment structure, to begin with
a payment of $109,000 on June 18, 2011.

(Cleves Decl. Ex. B.)

On June 2, 2011, Plaintiff filed this action with its motion
for temporary relief from this repayment schedule.

The

Complaint, among other relief, seeks (1) a declaratory judgment
that, under the “Free Look” agreement, the Plaintiff had no
withdrawal liability; and (2) relief from MPPAA withdrawal
liability on the grounds that Defendants fraudulently induced
Plaintiff into acquiring Allied Propane in February of 2006 with
the promise that no withdrawal liability would accrue until after
the expiration of the fifth plan year, but that Defendants “had
no intention of honoring their express representations of fact”

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on this point.

Plaintiff also seeks contract and other state-law

damages.

III.

DISCUSSION
A.

Standard

When evaluating a motion for a temporary restraining order,
the Court must consider four factors: “(1) the likelihood of
success on the merits after a full hearing; (2) whether the
movant will be irreparably injured without the restraint; (3)
whether the party to be enjoined will be irreparably injured if
the preliminary relief is granted; and (4) whether the public
interest will be served by the preliminary relief.”

Value Group,

Inc. v. Mendham Lake Estates, L.P., 800 F. Supp. 1228, 1231
(D.N.J. 1992) (citing Opticians Ass'n of America v. Independent
Opticians of America, 920 F.2d 187, 191-92 (3d Cir.1990)).

On

the second prong, to warrant granting a TRO, irreparable harm
alone is not enough.

A plaintiff has the burden of proving a

"clear showing of immediate irreparable injury."

Continental

Group, Inc. v. Amoco Chemicals Corp., 614 F.2d 351, 359 (3d Cir.
1980).

The "requisite feared injury or harm must be

irreparable--not merely serious or substantial," and it "must be
of a peculiar nature, so that compensation in money cannot atone
for it."

Glasco v. Hills, 558 F.2d 179, 181 (3d Cir. 1977).

A

plaintiff must establish that all four factors favor preliminary
relief.

Opticians Ass'n of America, 920 F.2d at 192.

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B.

Likelihood of Success on the Merits
1.

Plaintiff’s Fraudulent Inducement Claim

Plaintiff seeks to avoid its alleged withdrawal liability
and set aside the arbitration requirements of the Plan and MPPAA
under a theory of fraudulent inducement, claiming that it only
agreed to enter into the free look agreement and assume Allied’s
obligations under the CBA in reliance on Defendants’
representations that it would be permitted to withdraw from the
Plan within five calendar years from the date it acquired Allied
Propane in February of 2006.
The Third Circuit has recognized the existence of a defense
to liability under the MPPAA by a plaintiff/employer that it was
fraudulently induced into contributing to a multi-employer
pension plan, Carl Colteryahn Dairy, Inc. v. Western Pennsylvania
Teamsters & Employers Pension Fund, 847 F.2d 113, 115 (3d Cir.
1988).
Assuming the truth of Colteryahn's allegations, the
substantial withdrawal liability assessed upon
Colteryahn in this case stemmed in large part (if
not entirely) from fraudulent misrepresentations by
the Fund, for which the federal common law of
pension plans would provide a remedy. Indeed, we
would find it quite curious if Congress had given
multi-employer plans the immense power that the
Fund has exercised in this case--viz., the power to
assess upon a withdrawing employer a substantial
penalty while providing the employer with few
defenses--yet did not intend to place some check on
the conduct and practices of such plans. Moreover,
we doubt that Congress intended that innocent
employers, penalized by the fraudulent exercise of
such powers, would be without remedy.
Finally,
given the predominant federal interest in the

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conduct of pension plans' affairs, any check on
such power must be available in federal court.
Id. at 121-22.
Thus, were Plaintiff to prevail on its fraudulent inducement
claim, it would be entitled to relief from withdrawal liability.
However, the Court concludes that Plaintiff has not demonstrated
a probability of success on the merits of this claim.
To prevail on its claim of fraudulent inducement under the
“federal common law of pension plans”, EUSA-Allied must prove
(1) a misrepresentation, (2) a fraudulent
thereof, (3) an intention by the maker
recipient will thereby be induced to
justifiable reliance by the recipient
misrepresentation, and (5) damage to the
as the proximate result.

utterance
that the
act, (4)
upon the
recipient

Carl Colteryahn Dairy, Inc. v. Western Pennsylvania Teamsters and
Employers Pension Fund, 1993 WL 120457 at * 2 (W.D. Pa. Feb. 9,
1993) (considering merits of plaintiff’s fraudulent inducement
claim after remand from Third Circuit) (quoting Scaife Co. v.
Rockwell-Standard Corp., 446 Pa. 280, 284 (1971)).
The Court finds that Plaintiff has not shown a likelihood
that it will be able to prove many of these elements.

Plaintiff

alleges that it interpreted the “free look” agreement, and the
language of the Plan itself in Art. IX, Section G, to state
unambiguously that Plaintiff was free to withdraw from the Fund
without liability up to five calendar years after EUSA-Allied
acquired Allied Propane and assumed its obligations under the
CBA.

Defendant Fund contends that the Plan and “free look”

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agreement never state that free look period extends to five
“full” plan years, and that, read in conjunction with the
referenced statute, § 1390(a)(2)(B) limits the free look period
in the agreement and Plan to “the number of years required for
vesting under the plan.”

Thus, because a participating employee

of Plaintiff could have vested in the plan after four full plan
years and 750 hours of service in the fifth year, the free look
period under the Plan expired after four plan years and 750 hours
of covered work.
Plaintiff alleges that it justifiably interpreted the
language of the “free look” agreement to mean that it would not
be assessed withdrawal liability if it withdrew from the Plan on
December 31, 2010.

It further asserts that Defendants

fraudulently intended Plaintiff to so interpret the agreement and
to rely on that fact.

Plaintiff also alleges that, had it known

that the free look period extended only to four full plan years
plus 750 hours in the fifth year, it would not have acquired
Allied Propane and assumed its obligations under the CBA.
However, the Court notes that, based upon the
representations of counsel for both Defendants in this case,
Plaintiff itself drafted the language of the free look agreement.
Additionally, the free look agreement explicitly references the
Plan, which explicitly states that it is to be interpreted
“pursuant to” the statute.

“When a contract expressly

incorporates a statutory enactment by reference, that enactment

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becomes part of a contract for the indicated purposes just as
though the words of that enactment were set out in full in the
contract.”

Williston on Contracts (4th ed.) § 30:19, citing

United States v. Insurance Co. of North America, 131 F.3d 1037
(D.C. Cir. 1997).

See also, Williams v. Stone, 109 F.3d 890, 896

(3d Cir. 1997) (holding statutory provision referenced in
contract to be “implicitly incorporated” into the contract).
Therefore, Plaintiff was on constructive, if not actual, notice
that the statutory limitation on free look periods might apply
and could influence the interpretation of the “free look”
agreement.
The Court finds that Plaintiff is not likely to be able to
prove that the language of the free look agreement was a
misrepresentation, that Defendants were the “makers” of that
misrepresentation, that Defendants intended to induce Plaintiff
to act by such a “misrepresentation”, or that any reliance on
such a “misrepresentation” would have been justified.

Further,

the Court finds no evidence to support the unlikely proposition
that, had Plaintiff known in February of 2006 that its free look
period to withdraw from the Plan extended to only four years plus
750 hours rather than five full calendar years, it would have
chosen to forgo the acquisition Allied.

Consequently, Plaintiff

has not demonstrated a probability of success on its fraudulent
inducement claim.

At this point, it does not appear likely that

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Plaintiff can set aside the Plan, with its mandatory arbitration
provision, on grounds of fraudulent inducement.
2.

Statutory Limitation on Staying Relief

Another bar to Plaintiff’s relief on the merits is the
MPPAA’s “pay first dispute later” provisions.

Defendants argue

that the Court is without authority to enter any injunction
staying interim payments in this matter because such payments are
mandatory under MPPAA, citing to the statute's requirement that
interim withdrawal liability payments be made during the pendency
of any challenge to the assessment of liability.

Section

1399(c)(2) states that "withdrawal liability shall be payable 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." (emphasis added.)

Similarly, § 1401(d) states that

interim payments must be made during the employer's challenge, if
any, in arbitration, and, should the employer's challenge to the
liability be vindicated by the employer, the employer will be
reimbursed for any overpayment.
The Court agrees with Defendants.

The Court finds that the

statutory language of MPPAA and controlling precedent in the
Third Circuit is very clear that an employer such as Plaintiff
must comply with the interim withdrawal liability payments during
the pendency of a challenge to the assessment of withdrawal
liability, regardless of equitable considerations.

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The Third

Circuit has held, unambiguously, that a fund that has assessed
withdrawal liability "is entitled to collect interim payments
even when an employer launches a facial constitutional challenge
to the statute.

Additionally, payments must be made whether the

underlying dispute is resolved through arbitration or by a
federal court."

Board of Trustees of Trucking Employees of North

Jersey Welfare Fund, Inc. v. Centra, 983 F.2d 495, 507 (3d Cir.
1992).
The Third Circuit recognizes no equitable exceptions to this
mandatory rule.

In its most recent decision considering

equitable exceptions to the “pay now dispute later” structure of
the MPPAA, the court noted that "we have never held that there
are any equitable exceptions to the statutory provisions on
interim payments, and we decline to do so now."

Galgay v.

Beaverbrook Coal Company, 105 F.3d 137, 140 (3d Cir. 1997)
(citing Centra, 983 F.2d at 507-08).
Plaintiff urges the Court to apply a narrow equitable
exception recognized in the Fifth and Seventh Circuits that a
district court can grant a stay of interim payments to an
employer upon the combined showing of both irreparable injury and
that the Fund's claim is not colorable or is frivolous.

See

Trustees of the Plumbers and Pipefitters National Pension Fund v.
Mar-Len, Inc., 30 F.3d 621 (5th Cir. 1994), Robbins v. McNicolas
Transp. Co., 819 F.2d 682 (7th Cir. 1987).

Plaintiff argues that

the reasoning of the Third Circuit's opinion in Galgay v.

12

Beaverbrook was compatible with such an exception.

The Court

concludes that, while such an exception is not explicitly
prohibited by Beaverbrook, it is certainly not approved either.
The Court expressed limited agreement with the Fifth and Seventh
Circuit courts on the issue that irreparable harm alone is
“insufficient to warrant equitable relief from interim payment
liability.”

Id. at 141.

However, the Beaverbrook majority

opinion concluded that, because the employer had not raised the
argument that the fund’s claim was frivolous, it would not
consider the issue.

Thus, the Circuit is silent on whether this

Court could apply an equitable exception in a case of irreparable
injury and frivolous liability, and the Court finds no district
court opinion in this circuit following the direction of the
Fifth and Seventh circuits on this issue.

The Court also notes

that at least one other circuit, the First Circuit, has erected
even more stringent requirements around staying interim
withdrawal liability payments.

See Giroux Bros. Transp., Inc. v.

New England Teamsters & Trucking Indus. Pension Fund, 73 F.3d 1,
5 (1st Cir. 1996) (requiring employer show threat of imminent
liquidation, rather than lower standard of “irreparable injury”
from Seventh and Fifth Circuits).
Secondly, the Court additionally finds that, even under the
Fifth and Seventh Circuit doctrines, the Court would be compelled
to deny Plaintiff’s motion.

Under this line of cases, the courts

have permitted a district court to stay interim withdrawal

13

liability payments on the showing of both irreparable injury to
the employer and that the fund’s underlying withdrawal liability
claim is frivolous.

See Robbins v. McNicolas Transp. Co., 819

F.2d 682 (7th Cir. 1987).

However, even in the Fifth and Seventh

Circuits, this exception has been applied rarely and with
caution.

The Seventh Circuit has clarified that this exception

“is at most a recognition that if the fund's claim is frivolous –
if the arbitrator is almost certain to rule for the employer –
then the plan is engaged in a ploy that a court may defeat. . . .
Having assured itself that the plan's claim is legitimate,
however, the court should order the making of interim payments
and leave the rest to the arbitrator.”

Trustees of the Chicago

Truck Drivers, Helpers and Warehouse Workers Union (Independent)
Pension Fund v. Central Transport, Inc., 935 F.2d 114, 119 (7th
Cir. 1991).
Plaintiff’s attempt to fit within this exception is
clarified by noting that, even in the Fifth and Seventh Circuits,
the courts are skeptical of employers’ claims that the fund’s
argument is frivolous.

In the Fifth Circuit case of Mar-Len,

supra, the court determined that the fund’s assessment of
withdrawal liability was not sufficiently frivolous to qualify
for the exception.

30 F.3d at 626.

The same result obtained in

the Seventh Circuit case of Trustees of the Chicago Truck
Drivers, Helpers and Warehouse Workers Union (Independent)
Pension Fund v. Rentar Industries, Inc., 951 F.2d 152, 155 (7th

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Cir. 1991).

The only examples of sufficiently “frivolous” claims

under these circuits found by the Court are cases where the fund
seeks to extract withdrawal liability in explicit conflict with
the provisions of MPPAA itself.

See Robbins v. McNicolas Transp.

Co., 819 F.2d 682 (7th Cir. 1987) (finding fund’s assessment of
withdrawal liability against employer that ceased making
contributions during labor dispute, despite explicit “labor
dispute” exception to liability under MPPAA, 29 U.S.C. §
1398(2)).
In the instant case, Plaintiff argues that Defendant
Teamsters Pension Trust Fund’s claim for withdrawal liability is
not colorable or is frivolous.

As explained above in the

fraudulent inducement section, the Court is not convinced that
the Fund’s claim for withdrawal liability, premised as it is on
the statutory language, is frivolous.
To determine whether withdrawal liability was properly
assessed in this case requires an inquiry into the extent to
which the terms of the free look provisions of the statute
control the interpretation of the Plan and the parties’ “free
look agreement.”

The Court recognizes that this determination is

a difficult question, but, for that very reason, denies that the
claim for withdrawal liability is “frivolous” as required to
enter a stay of interim withdrawal payments.

It is not frivolous

to argue that when a contractual provision incorporates the
restrictions of a statute by reference, the terms of that statute

15

would limit the protections of the contract, even if it is later
determined that, in this case, EUSA’s interpretation of the
agreement and statute are ultimately vindicated.
Stone, 109 F.3d 890, 896 (3d Cir. 1997).

See Williams v.

It is certainly not

frivolous to the degree found in McNicolas, where assessment of
withdrawal liability plainly conflicted with an exception to
liability in the MPPAA statute.
Consequently, the Court concludes that, even if it were to
apply the Fifth and Seventh Circuits’ exception to the general
“pay now dispute later” rule under the MPPAA, the exception would
not be justified in this case.
C.

Immediate and Irreparable Injury

Alternatively, the Court also concludes that Plaintiff is
not entitled to the TRO that it seeks at this time because, while
the Court assumes without deciding that a finding of irreparable
injury is satisfied by the financial data attached to the
Declaration of Edward Burke, Plaintiff has not demonstrated that
this injury is immediate as required.

Upon review of the facts

of the case and the MPPAA repayment schedule, the Court finds
that the threat of injury is not sufficiently immediate to
warrant the emergency injunctive relief being sought.
Plaintiff alleges that the injury is immediate because the
first interim withdrawal liability payment is due on June 18,
2011, according to Defendant Teamsters Pension Trust Fund’s April
19, 2011 demand letter, attached as Exhibit B to Plaintiff’s

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verified Complaint.

Plaintiff alleges that if the first interim

payment is not made by June 18, 2011, the entire calculated
withdrawal liability of $679,325.13 will become due immediately.
However, as counsel for Defendant Trust Fund indicated in
the hearing on this matter, the default provisions of MPPAA
actually provide for a longer period.

Under 29 U.S.C. §

1399(c)(5)(A), Plaintiff’s initial payment, if not made on the
demanded date of June 18, 2011, will only enter default 60 days
after Plaintiff receives written notification from Defendant
Trust Fund of Plaintiff’s failure to make payment on June 18,
2011.

Thus, under this schedule, even if no payment is made on

June 18, Plaintiff will not be in default under MPPAA until, at
the earliest, August 17, 2011.

Meanwhile, the preliminary

injunction hearing will be convened before August 17 when the
question of immediacy can be revisited.2
The Court finds this timeline does not meet the exacting
demands of “immediate” harm to warrant the temporary restraints
being sought pending a preliminary injunction hearing, as
required under Fed. R. Civ. P. 65.

Consequently, the Court will

also deny Plaintiff’s TRO on this alternative basis.

2

By separate Order filed June 16, 2011, the Court, after
discussion with all counsel, has provided for expedited
discovery, a supplemental briefing schedule, and a hearing date
of August 3, 2011 upon the motion for preliminary injunction.
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VI.

CONCLUSION
Therefore, because the Court finds that Plaintiff has not

demonstrated a probable success on the merits of its fraudulent
inducement claim, has not demonstrated that the Court has the
discretion to enter the equitable relief it seeks, and has not
demonstrated that its potentially irreparable injury is
sufficiently immediate, the Court will deny its motion for a
temporary restraining order.

The accompanying Order shall be

entered.

June 16, 2011
Date

s/ Jerome B. Simandle
JEROME B. SIMANDLE
U.S. District Judge

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