On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil No. 83-1690)
Before: SEITZ and BECKER, Circuit Judges, and ROSENN, Senior Circuit Judge.
This case presents three important questions concerning the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. § 1381 et seq. (1982): 1) whether MPPAA authorizes a right of action to collect withdrawal liability payments pending arbitration proceedings at which employers withdrawing from the plan may challenge assessments of withdrawal liability made by plan trustees; 2) whether the statutory scheme, under which the determination of withdrawal liability is made by trustees who themselves owe a fiduciary duty to the plan, and whose findings must be presumed correct by the arbitrator, deprives withdrawing employers of an impartial tribunal in violation of their procedural due process rights under the Fifth Amendment (and whether the alleged offending provisions are severable from the statutory scheme); and 3) whether MPPAA makes an award of attorney's fees, liquidated damages and costs mandatory upon an entry of a judgment for delinquent payments in favor of a pension plan, even though arbitration and review of arbitration in the district court have yet to take place. The district court held that withdrawal liability may be pursued in court prior to arbitration; that MPPAA comports with the constitutional requirement of due process; and that it would be premature to award a pension plan attorney's fees, liquidated damages and costs prior to the final resolution of the controversy.
We agree with the district court that MPPAA provides for a cause of action to collect withdrawal liability pending arbitration. We find, however, that the scheme violates the due process rights of withdrawing employers. We further find that the scheme is severable, and accordingly strike down only the portion of the scheme that requires the arbitrator to accord the trustees; determination of withdrawal liability a presumption of correctness. Finally, we hold that once the district court granted judgment for delinquent payments in favor of the pension plan, it was required to award attorney's fees, liquidated damages and costs even though the matter had yet to go to arbitration. Accordingly, we affirm in part and reverse in part.
Because of MPPAA's complexity, we must commence our analysis with a rather detailed description of its historical background and statutory scheme.
I. HISTORICAL BACKGROUND & STATUTORY SCHEME
Under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. (1976), amended by 29 U.S.C. § 1301 et seq. (1982), employers contribute to a pension plan on behalf of each of their employees who is a member of a participating union. The amount of the payments is determined by a collective bargaining agreement between each employer and its employees. The plan is administered by trustees, half of whom are chosen by contributing employers and half by the union. 29 U.S.C. § 186(c)(5)(B). The trustees set the level of benefits paid to participants and determine investment policy. ERISA also established the Pension Benefit Guaranty Corporation ("PBGC"), a government corporation, to insure employees' benefits against a plan's termination for insufficient funds.
Prior to MPPAA, 29 U.S.C. § 1381 et seq. (1982), an employer who withdrew from a pension plan incurred a contingent liability: if a multi-employer plan terminated within five years following an employer's withdrawal, the employer was liable to the PBGC, but if the plan did not terminate within five years, the employer had no liability. The maximum of each employer's liability was 30% of its net worth. Because an employer who withdrew from a plan more than five years prior to its termination escaped with no liability, the remaining employers bore a greater share of liability. There was thus an incentive for employers to withdraw from plans in order to avoid future liability. Many withdrawals resulted, and the solvency of pension plans was threatened.
In 1980, Congress passed MPPAA, amending ERISA to discourage withdrawals from multiemployer pension plans and to ensure the solvency of such plans. H.R. Rep. No. 869, 96th Cong. 2d Sess. 67, reprinted in 1980 U.S. Code Cong. & Ad. News. 2935. MPPAA, inter alia, imposed mandatory liability on withdrawing employers regardless of whether the plan terminated, and repealed the provision that set 30% of an employers' net worth as its maximum liability. Because MPPAA was signed into law on September 26, 1980, but imposed retroactive liability on employers who ceased contributing to a plan on or after April 29, 1980, in a worst case scenario an employer could be liable for all of its assets even if the plan remained solvent and even if the employer had left the pension plan prior to the enactment of MPPAA.*fn1
Once an employer's withdrawal liability is calculated, the plan is required to notify the employer and demand payment on an installment schedule. 29 U.S.C. § 1399(b)(1). After the employer receives notice of the amount of his withdrawal liability, he may, within ninety days, ask for a review by the plan's trustees. 29 U.S.C. 1399(b)(2)(A). After a "reasonable review," the trustees must notify the employer of their determination. 29 U.S.C. 1399(b)(2)(B). If a dispute persists, either party may initiate arbitration proceedings, in which the trustees' determination is presumed correct unless the party contesting it shows "by a preponderance of the evidence that the determination was unreasonable or clearly erroneous." 29 U.S.C. § 1401(a)(3)(A). Section 1401(c) provides that the arbitrator's decision is subject to review in a district court where there is also a presumption, rebuttable by a clear preponderance of the evidence, that the arbitrator's factual findings are correct.
Under §§ 1399(c)(2) and 1401, the employer must commence payments within 60 days of being informed of its liability, regardless of whether a review has been requested or arbitration proceedings initiated. Under § 1132(g), if the plan wins judgment for a delinquent payment, attorney's fees and other costs must be paid by the employer.
II. FACTUAL AND PROCEDURAL HISTORY
In December 1980, appellant Yahn & McDonnell, Inc. ("Yahn") and Teamsters Union Local No. 115 entered into a collective bargaining agreement requiring Yahn to make specified weekly contributions to the union's ERISA pension plan, Teamsters Union Local No. 115 Pension Plan ("the Plan"), appellees in this action, on behalf of all of Yahn's employees who were members of Local 115. Yahn made all plan contributions expressly required by the collective bargaining agreement. The agreement itself does not provide for the imposition of withdrawal liability. The pension plan was administered by four trustees, two appointed by Local 115 and two appointed by contributing employers.
In November 1981, Yahn ceased operations and withdrew from the pension plan. In April 1982, the Plan demanded withdrawal liability totalling almost $458,000, and informed Yahn that the Plan had the right to look to a parent company for payment if Yahn could not pay.*fn2 In July, Yahn requested a review, raising several issues, e.g., whether Yahn's liability might be reduced by its poor financial condition and/or the fact that most of its employees who were members of Local 115 had been hired by another company which had contributed and was continuing to contribute to the pension plan. After condicting the review, The trustees notified Yahn that its assessment would not be altered. On January 31, 1983, the Plan informed Yahn that if Yahn failed to make liability payments, the Plan would file suit within 60 days. Yahn demanded arbitration, and informed the Plan of its intention to challenge the constitutionality of MPPAA in district court. The parties agreed to hold arbitration in abeyance pending resolution of the constitutional issues. In April 1983, the Plan brought suit in the district court for the Eastern District of Pennsylvania against Yahn seeking a withdrawal liability payment.
In the district court Yahn argued that MPPAA does not confer a right of action to collect withdrawal liability payments while arbitration is pending. Yahn also argued that MPPAA denied it due process because the initial determination of liability is made by biased trustees. Yahn maintained that the right of appeal to an arbitrator and a district court did not eliminate the bias because the trustees' determination is presumed to be correct under the Act and must be reviewed deferentially in arbitration and in the district court. Additionally, Yahn filed a counterclaim alleging that the trustees, by pledging benefits that were not fully funded, had been negligent in their management of the pension fund.
After considering the submissions of the parties, the district court filed a memorandum and order in which it: 1) granted summary judgment against Yahn; 2) held that MPPAA does not violate procedural due process; 3) denied the Plan's request for attorney's fees, liquidated damages and costs; and 4) dismissed Yahn's counterclaim, noting that it would be resolved at arbitration. Shortly thereafter it entered judgment against Yahn in the sum of $258,000. Yahn has appealed the district court's judgment with respect to withdrawal liability and the constitutionality of MPPAA.*fn3 The Plan has cross-appealed, alleging that the district court erred in denying it attorneys' fees, costs, and liquidated damages.*fn4
III. PROPRIETY OF A CAUSE OF ACTION PENDING ARBITRATION
We turn first to the question whether MPPAA authorizes a right of action to collect withdrawal liability payments pending arbitration. The statutory scheme is unclear on this point. See Republic Industries v. Teamsters Joint Council No. 83, 718 F.2d 628, 641-42 n. 16 (4th Cir. 1983). Several provisions strongly suggest that there is such a cause of action. Section 1399(c)(2) says "withdrawal liability shall be payable in accordance with the schedule set forth by the plan . . . no later than 60 days after the date of the demand notwithstanding any request for review or appeal . . . ." Section 1401(d) is perhaps even more to the point:
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.
(emphasis added). These sections explicitly provide for payments pending the arbitrator's decision, and would appear meaningless if there were no cause of action to enforce them.*fn5 Indeed, § 1451(a)(1) establishes such a cause of action, saying that "[A] plan fiduciary, employer, plan participant, or beneficiary, who is adversely affected by the act or omission of any party . . . may bring an action for appropriate legal or equitable relief, or both."
Yahn argues that these provisions establish retroactive payments plus interest in the event that the arbitrator affirms a finding of liability, and that pension plans, therefore, are not "adversely affected" within the meaning of § 1451 until after the arbitrator's decision. This position requires downplaying a plan's cash/flow problems. In Pantry Pride v. Retail Clerks Tri-State Pension Fund, 747 F.2d 169, 171 (3d Cir. 1984), we emphasized Congress' concern with an uninterrupted flow of pension payments, and implicitly recognized that there is a cause of action to collect interim liability pending arbitration. In that case, an employer filed suit challenging the assessment of withdrawal liability, and the plan moved for withdrawal payments during litigation. The district court limited payments to an amount less than the schedule set forth by the plan trustees. On appeal we were faced with the threshold question whether that holding was appealable as an interlocutory order. We said:
[T]he denial of the claim to interim withdrawal benefits is a serious one. Congress believed that it was important to insure that the flow of employer withdrawal liability payments was not delayed by an employer disputing liability . . . . If no interlocutory review were possible, the Fund could effectively lose its statutory protection against interruptions in the pre-arbitration flow of contributions that Congress mandated through the interim liability provisions.
Id. at 171 (emphasis added).
Because the pension plan had not filed a counterclaim, we held that the district court should not have addressed the question of interim liability payments at all. However, as the quoted passage makes clear, we implicitly recognized that there is a cause of action to collect withdrawal liability pending arbitration (Judge Hunter went further, dissenting on the grounds that MPPAA made it mandatory upon the court to order withdrawal liability payments notwithstanding deficiency in the plan's pleadings). The courts which have considered this question directly have reached the same conclusion. See Trustees of the Retirement Fund of the Fur Manufacturing Industry v. Lazar-Wisotzky, Inc., 550 F. Supp. 35 (S.D.N.Y. 1982), aff'd without opinion, 738 F.2d 419 (2d Cir. 1984); Commission Drivers Local 187 Pension Fund v. Hertz Corp., 3 E.B.C. 1801 (E.D.Pa. 1982).
On the other hand, there is strong language in the statutory scheme contradicting the apparent implication of §§ 1399(c), 1401(d) and 1451 that there is a cause of action to collect withdrawal liability payments pending arbitration. Specifically, § 1401(b) provides:
1) If no arbitration proceeding has been initiated pursuant to subsection(a) of this section, the amounts demanded by the plan sponsor under section 1399(b)(1) of this title shall be due and owing on the schedule set forth by the plan sponsor. The plan sponsor may bring an action in a State or Federal court of competent jurisdiction for collection.
2) Upon completion of the arbitration proceedings . . . any party thereto may bring an action . . . to enforce, vacate or modify the arbitrator's award . . . .
By explicitly conferring a right of action to collect payments only "If no arbitration proceeding has been initiated," and "Upon completion of the arbitration proceedings," Section 1401(b) can be read to imply that no such right of action exists prior to arbitration.*fn6
While the conflicting provisions within MPPAA render this question difficult, we have found strong authority for the proposition that there is a cause of action to collect withdrawal liability payments pending arbitration. In addition to the courts in Pantry Pride, Hertz and Lazar-Witsotzky, the PBGC, while acknowledging the lack of clarity on this point in the statutory scheme, has stated its view that there exists a right of action to collect payments pending arbitration. 49 Fed. Reg. 22,644 (1984). In light of Congress' obvious desire to ensure the solvency and stability of pension plans, see supra p.5, we believe this statutory interpretation is correct. Accordingly, we will affirm the district court's grant of summary judgment for the Plan with respect to an interim liability payment. However, we hope that Congress will soon clarify the confusion resulting from conflicting provisions within MPPAA.*fn7
IV. ATTORNEY'S FEES, LIQUIDATED DAMAGES, AND COSTS
After granting summary judgment for the Plan with respect to Yahn's withdrawal liability, the district court considered the Plan's application for attorney's fees, liquidated damages and costs, and determined that an award on such matters would be premature because arbitration had yet to take place. The plan asserts that the district court erred because MPPAA compels the award of attorney's fees, liquidated damages and costs upon a judgment in favor of a pension plan for delinquent payments.
Section 1451(b) provides that failure to make withdrawal liability payments shall be treated as delinquency in contribution within the meaning of § 1145. Thus, the plan's suit in district court was an action to enforce a ...