to represent Jayne's Motor Freight in bankruptcy proceedings.
W. Jayne Aff., ¶ 15; D. Jayne First Aff., ¶ 8. Gary Jayne, the
other shareholder of Jayne's Motor Freight, had, by the time of
the bankruptcy filing, resigned any office or directorship in
Jayne's Motor Freight and did not participate in the management
of Jayne's Motor Freight, including the decision to file for
bankruptcy. G. Jayne Aff., ¶¶ 5, 6. On 14 October 1987,
Wasserman filed a voluntary bankruptcy petition under 11 U.S.C. § 301
for Jayne's Motor Freight in the U.S. Bankruptcy Court
for the District of New Jersey ("Chapter 11 Bankruptcy").
Wasserman Aff., ¶ 4; W. Jayne Aff., ¶ 16.
Wasserman was retained solely to represent Jayne's Motor
Freight in the bankruptcy proceedings and was not retained to
represent Elizabethport or Bro-Jen in any matter. G. Jayne
Aff., ¶ 6, 8-9. Wasserman also did not represent Gary Jayne,
Douglas Jayne or Willard Jayne in any other proceeding or
matter. Id.; D. Jayne First Aff., ¶ 10; W. Jayne Aff., ¶ 18.
The Fund owned a security interest in assets belonging to
Jayne's Motor Freight. At the time of the Chapter 11
Bankruptcy, the assets of Jayne's Motor Freight consisted
primarily of tractors and trailers (the "Assets"). G. Jayne
Aff., ¶ 12. Pursuant to an Order of United States Bankruptcy
Judge Daniel Moore, dated 30 December 1987, the Fund enforced
the security interest it had against the Assets. Wasserman
Aff., ¶ 6. The Fund, however, delayed in removing the Assets,
apparently depriving Elizabethport rentable space at the
Elizabeth Property. G. Jayne Aff., ¶ 12.
On 29 January 1988, the Chapter 11 Bankruptcy was converted
into a Chapter 7 liquidation proceeding ("Chapter 7
Bankruptcy"). 11 U.S.C. § 1112. Wasserman Aff., ¶ 4; W. Jayne
Aff., ¶ 16. Robert Levitt, Esq. ("Levitt"), was appointed
Trustee in Bankruptcy. Wasserman Aff., ¶ 7. After the
conversion, Wasserman's role was limited to reviewing and
evaluating Levitt's requests with respect to the Chapter 7
Bankruptcy. Id., ¶ 5.
According to the submissions, on 17 October 1988, Jayne's
Motor Freight ceased contributing to the Fund, ceased "covered
operations" under the Fund and completely withdrew from the
Fund. Vaccaro Aff., ¶ 8. According to the Fund, the withdrawal
of Jayne's Motor Freight from the Plan subjected it to
withdrawal liability under 29 U.S.C. § 1381(a). Id., ¶ 7.
Proceeding under the ERISA scheme pertaining to employers who
cease contributions to pension plans, the Fund calculated the
amount of withdrawal liability owed by Jayne's Motor Freight.
Id., ¶ 9. The Fund's actuaries calculated the initial amount to
be $1,483,628.00.*fn6 Id., This represented the proportionate
share of unfunded vested liabilities owed by Jayne's Motor
Freight. Id. After applying the de minimis reduction provisions
of ERISA, 29 U.S.C. § 1389, the amount was later recalculated
by the actuaries to be $1,390,077.00. Id.
The Fund's contract administrator, Frank M. Vaccaro
("Vaccaro"), sent a letter
(the "Demand Letter") to Jayne's Motor Freight via registered
mail on 17 November 1988 to inform Jayne's Motor Freight of the
withdrawal liability. The Demand Letter stated the Fund had
assessed a withdrawal liability of $1,483,628.00 against
Jayne's Motor Freight, subject to de minimis reductions. Demand
Letter, ¶ 2. In the Demand Letter, quarterly payments of
$73,559.00 were demanded beginning 17 January 1989.*fn7 Id. To
date, no withdrawal liability payments have been made. Vaccaro
Aff., ¶ 7.
Although addressed to Jayne's Motor Freight at its business
address at the Elizabeth Property, the Demand Letter was
rerouted and received by Levitt. D. Jayne Second Aff., ¶ 2. The
parties disagree over how the letter was rerouted. Id.
Plaintiffs contend they sent the Demand Letter to Jayne's Motor
Freight at the Elizabeth Property. Pls.' Reply Br. at 4.
According to Plaintiffs, sometime after Vaccaro had placed the
Demand Letter in the mail, a sticker was placed over the
Elizabeth Property address, redirecting the Demand Letter to
Levitt. Id. Plaintiffs surmise that either the Post Office or
Douglas Jayne may have redirected the Demand Letter. Id. at
Douglas Jayne "strenuously and categorically" denied having
redirected the letter. D. Jayne Second Aff., ¶¶ 2, 3. Douglas
Jayne leases an office at the Elizabeth Property. D. Jayne
First Aff., ¶¶ 22. In the past, Douglas Jayne received mail on
behalf of Jayne's Motor Freight at the Elizabeth Property and
currently continues to do so. Id., ¶¶ 22, 24. According to
Douglas Jayne, he has been at the Elizabeth Property daily,
except for weekends, holidays and vacations, since 1978. Id., ¶
22. Douglas Jayne contends he would have received the Demand
Letter had it been sent to the Elizabeth Property address. D.
Jayne Second Aff., ¶¶ 4, 5.
After receiving the Demand Letter, Levitt wrote to Vaccaro on
23 November 1988 informing him "to the extent your letter
asserts a claim against the Estate [Jayne's Motor Freight], you
should have filed a Proof of Claim. . . ." Letter to Vaccaro
from Levitt, dated 23 November 1988. The following day, Levitt
forwarded to Wasserman a copy of the Demand Letter and a copy
of his letter to Vaccaro. Wasserman Aff., ¶¶ 7. On 23 February
1989, the Fund filed an amended proof of claim ("Proof of
Claim") in the Chapter 7 Bankruptcy for $1,390,077.00, the
amount of withdrawal liability which the Fund alleges Jayne's
Motor Freight owed to the Fund. Proof of Claim att. as Ex. A to
Pls.' Reply Br.
Upon receiving a copy of the Demand Letter, Wasserman filed
the Demand letter and did nothing with it. Wasserman Aff.,
¶ 7. Wasserman did not immediately forward the Demand Letter to
Jayne's Motor Freight because the Demand Letter was "not a
bankruptcy document and . . . because only the Trustee [Levitt]
was then empowered to act on behalf of Debtor's estate." Id.,
¶¶ 7-9. Additionally, Wasserman contended he had no authority
to accept notices on behalf of Defendants. Id., ¶ 11. According
to Wasserman, he was precluded by the Bankruptcy Code and
relevant case law from representing the principals or
potentially related entities of a debtor corporation. Id.
For unstated reasons, on or about 2 March 1990, Wasserman
finally forwarded a copy of the Demand Letter to the attorneys
for the Individual Defendants. Willard Jayne, Douglas Jayne and
Gary Jayne admit receiving a copy of the Demand Letter on 8
March 1990 when their attorney forwarded a copy of the Demand
Letter to them. W. Jayne Aff., ¶ 24; D. Jayne First Aff., ¶¶
18, 19; G. Jayne Aff., ¶ 17.
The Trustees claim they did not discover that Willard Jayne,
Douglas Jayne and Gary Jayne owned Elizabethport until Jayne's
Motor Freight was undergoing Chapter 7 Bankruptcy proceedings.
Vaccaro Aff., ¶ 13. Accordingly, on 23 April 1990, the Fund
Administrator, Edward J. Geiger, sent certified letters to
and each of its three general partners*fn8 notifying them that
Jayne's Motor Freight was delinquent in making its withdrawal
liability payments and that each is responsible for the
withdrawal liability. Id., ¶ 14. The certified letters were
claimed by Douglas Jayne on 24 April 1990. Id., ¶ 15.*fn9
On 1 May 1990, Willard Jayne, as a creditor of Jayne's Motor
Freight, filed a motion in the Bankruptcy Proceeding objecting
to Plaintiffs' Proof of Claim. W. Jayne Aff., ¶ 27. Willard
Jayne contended the amount asserted in the Proof of Claim was
excessive for failing to apply reductions provided to insolvent
employers undergoing liquidation pursuant to 29 U.S.C. § 1405.
On 27 June 1990, the Fund and the Trustees commenced a suit
against Defendants in the United States District Court for the
Eastern District of Pennsylvania. Plaintiffs excluded Jayne's
Motor Freight from their suit.
On 30 November 1990, Judge Hutton issued a scheduling order
(the "Scheduling Order") which set 10 May 1991 as a deadline
for the completion of discovery. Scheduling Order of Judge
Hutton, dated 30 November 1990. During the discovery period,
Defendants served a document request and interrogatories on
Plaintiffs. Pls.' Objections to Defs.' Req. to Reopen and to
Take Further Disc. at 2. Plaintiffs served timely responses to
the requests and included objections to some of the discovery
requests. Id. The parties exchanged correspondence concerning
the validity of the objections to the discovery requests.*fn10
In the meantime, Judge Hutton transferred the action to the
District of New Jersey on 26 March 1991.
Following the close of the discovery period, as set by Judge
Hutton, Defendants moved before Ronald J. Hedges, United States
Magistrate Judge, to reopen and to take discovery and to compel
discovery. In a conference call with Magistrate Judge Hedges on
16 July 1991, Defendants' counsel identified two general areas
in which they sought discovery. These areas included the
calculation of withdrawal liability and the knowledge of the
Trustees as to the existence and whereabouts of other entities
which may be jointly liable for the withdrawal liability of
Jayne's Motor Freight. Id. at 3.
The parties' counsel appeared for oral argument before
Magistrate Judge Hedges on 30 July 1991 on Defendants' request
for discovery. Defs.' Req. to Reopen and Take Further Disc.
Magistrate Judge Hedges issued an order (the "First Discovery
Order") on 9 August 1991 rescinding the Scheduling Order issued
by Judge Hutton. First Discovery Order. Additionally,
Magistrate Judge Hedges ordered Plaintiffs to respond and
produce certain documents pertaining to the assessment and
calculation of withdrawal liability*fn11 and to respond
to interrogatory thirty of the Defendants' First Set of
Interrogatories. Id. Defendants were ordered to submit an
expert's report (the "Expert's Report") assessing the
calculations made by Plaintiffs. Id.
On 4 September 1991, Magistrate Judge Hedges informed counsel
he intended to rescind the First Discovery Order because he did
not believe the broad discovery which he had previously ordered
was necessary. Spadoro Aff., ¶ 6. In a conforming order, dated
17 September 1991 (the "Second Discovery Order"), Magistrate
Judge Hedges stayed all discovery in the case pending a
decision on the cross-motions for summary judgment. Second
Discovery Order, ¶ 2. Discovery was limited to documents
setting forth the contribution histories for employers who
contributed to the Fund from 1978. Id. Magistrate Judge Hedges
retained the requirement that an Expert's Report be submitted
by 13 September 1991. Id., ¶ 5.
On 13 September 1991, Defendants filed a copy of their
Expert's Report. In an affidavit submitted with the Expert's
Report, George Spadoro ("Spadoro"), Defendants' attorney,
asserted that some of the documents ordered by Magistrate Judge
Hedges to be produced were withheld from production. Spadoro
Aff., ¶ 5. Defendants' expert, Morton Dickstein ("Dickstein")
reviewed the available documents and concluded several aspects
of Plaintiffs' calculations may be incorrect. Id., ¶ 8.
Dickstein, in his Expert's Report, decided he could not compute
the withdrawal liability of Jayne's Motor Freight without the
withdrawal liability reports (the "Withdrawal Liability
Reports"). Expert's Report, ¶¶ 3, 5.*fn12 According to
Dickstein, the Withdrawal Liability Reports would provide
specific information regarding how the Fund determined the
unfunded vested benefits on which they based withdrawal
liability. Id., ¶ 4.
Plaintiffs move for summary judgment for the failure of the
Defendants to make withdrawal liability payments. Plaintiffs
contend that Defendants are jointly and severally liable for
the withdrawal liability of Jayne's Motor Freight. Plaintiffs
argue that the Partnership Defendants are liable because they
are in common control with Jayne's Motor Freight under ERISA.
Plaintiffs also argue the Individual Defendants are liable as
partners in the Partnership Defendants.
Defendants cross-move for summary judgment and alternatively
for a stay of the litigation pending the completion of the
bankruptcy proceedings. Defendants argue they are not liable
because Plaintiffs have failed to notify them of their
withdrawal liability as required by ERISA.
29 U.S.C. § 1399(b)(1). The Defendants also argue that Plaintiffs' summary
judgment motion should be denied because they did not have a
chance to conduct discovery. In the alternative, Defendants
argue the time which they had to request review or arbitration
under ERISA should be extended under the equitable tolling
doctrine. Moreover, Defendants argue that if liability is
imposed, the amount should be reduced under ERISA for employers
who are insolvent.
A. Summary Judgment Standard of Review
To prevail on a motion for summary judgment, the moving party
must establish "there is no genuine issue as to any material
fact and that [it] is entitled to judgment as a matter of law."
Fed.R.Civ.P. 56(c). The present task is to determine whether
disputed issues of fact exist; a district court may not,
however, resolve factual disputes in a motion for summary
judgment. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249-50, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202
(1986); see Nathanson v. Medical College of Pennsylvania,
926 F.2d 1368, 1380 (3d Cir. 1991) ("Summary judgment may not be
granted . . . if there is a disagreement over what inferences
can be reasonably drawn from the facts even if the facts are
undisputed."). All evidence submitted must be viewed in a light
most favorable to the party opposing the motion. Boyle v.
Governor's Veterans Outreach & Assistance Center, 925 F.2d 71,
75 (3d Cir. 1991); Weldon v. Kraft, Inc., 896 F.2d 793, 797 (3d
Cir. 1990); see Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538
(1986); Todaro v. Bowman, 872 F.2d 43, 46 (3d Cir. 1989);
Joseph v. Hess Oil, 867 F.2d 179, 182 (3d Cir. 1989). "`Any
"unexplained gaps" in material submitted by the moving party .
. . if pertinent to material issues of fact, justify denial of
a motion for summary judgment.'" Ingersoll-Rand Fin. Corp. v.
Anderson, 921 F.2d 497, 502 (3d Cir. 1990) (quoting O'Donnell
v. United States, 891 F.2d 1079, 1082 (3d Cir. 1989) ).
Although the summary judgment hurdle is a difficult one to
overcome, it is by no means insurmountable. As the Supreme
Court has stated, once the party seeking summary judgment has
pointed out to the court the absence of a genuine issue of
its opponent must do more than simply show that
there is some metaphysical doubt as to the
material facts. . . . In the language of the Rule,
the nonmoving party must come forward with
`specific facts showing that there is a
genuine issue for trial.' . . . Where the record
taken as a whole could not lead a rational trier of
fact to find for the nonmoving party, there is no
`genuine issue for trial.'
Matsushita, 475 U.S. at 586-87, 106 S.Ct. at 1356 (emphasis in
original, citations and footnotes omitted). In other words, the
inquiry involves determining "`whether the evidence presents a
sufficient disagreement to require submission to a jury or
whether it is so one-sided that one party must prevail as a
matter of law.'" Brown v. Grabowski, 922 F.2d 1097, 1111 (3d
Cir. 1990) (quoting Anderson v. Liberty Lobby, 477 U.S. at
251-52, 106 S.Ct. at 2512), cert. denied, ___ U.S. ___, 111
S.Ct. 2827, 115 L.Ed.2d 997 (1991).
The Supreme Court elaborated on the summary judgment standard
in Anderson: "If the evidence [submitted by a party opposing
summary judgment] is merely colorable . . . or is not
significantly probative . . . summary judgment may be granted."
477 U.S. at 249-50, 106 S.Ct. at 2511 (citations omitted). The
Supreme Court went on to note in Celotex Corp. v. Catrett,
477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986): "One of the
principal purposes of the summary judgment rule is to isolate
and dispose of factually unsupported claims or defenses, and we
think it should be interpreted in a way that allows it to
accomplish this purpose." Id. at 323-24, 106 S.Ct. at 2553
Once a case has been made in support of summary judgment, the
party opposing the motion has the affirmative burden of coming
forward with specific facts evidencing a need for trial. see
Fed.R.Civ.P. 56(e); see also Maguire v. Hughes Aircraft Corp.,
912 F.2d 67, 72 (3d Cir. 1990) (non-moving party may not rest
upon mere allegations); Schoch v. First Fidelity
Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990) (neither
unsupported allegations in pleadings and memoranda of law nor
conclusory allegations in affidavits will establish genuine
issue of material fact); Hozier v. Midwest Fasteners, Inc.,
908 F.2d 1155, 1165 (3d Cir. 1990) (cannot create issue of fact
merely by questioning credibility of movant's witnesses.
circumstantial evidence may raise issue of fact); Aronow
Roofing Co. v. Gilbane Bldg. Co., 902 F.2d 1127, 1128 (3d Cir.
1990) ("Summary judgment will be granted where the non-moving
party fails to `establish the existence' of an element
essential to the case"); Carlson v. Arnot-Ogden Memorial Hosp.,
918 F.2d 411, 413 (3d Cir. 1990) ("`nonmoving party must adduce
more than a mere scintilla of evidence in its favor,'" quoting
Williams v. Borough of West Chester, 891 F.2d 458 (3d Cir.
B. Overview of MPPAA
The Multiemployer Pension Plan Amendments Act of 1980
("MPPAA"), 29 U.S.C. § 1381-1461, under which Plaintiffs bring
their claims, was enacted as an amendment to ERISA. The MPPAA
was intended, in part, to discourage employers from withdrawing
from multiemployer pension plans and leaving plans with
inadequately funded liabilities. United Retail & Wholesale
Employees Teamsters Union Local No. 115 Pension Plan v. Yahn &
McDonnell, Inc., 787 F.2d 128, 130 (3d Cir.), aff'd,
481 U.S. 735, 107 S.Ct. 2171, 95 L.Ed.2d 692 (1987); Trustees of
Amalgamated Ins. Fund v. Sheldon Hall Clothing, Inc.,
862 F.2d 1020, 1021 (3d Cir.), cert. denied, 490 U.S. 1082, 109 S.Ct.
2104, 104 L.Ed.2d 665 (1989); Colteryahn Dairy, Inc. v. W.
Pennsylvania Teamsters & Employees Pension Fund, 847 F.2d 113,
116 (3d Cir.), cert. denied, 488 U.S. 1041, 109 S.Ct. 865, 102
L.Ed.2d 989 (1989); Flying Tiger Line v. Teamsters Pension
Trust Fund, 830 F.2d 1241, 1243 (3d Cir. 1987).*fn13 The MPPAA
attempts to do so by imposing upon the employer a mandatory
liability, defined in the statute as the employer's adjusted
"allocable amount of unfunded vested benefits."
29 U.S.C. § 1381(b)(1). "ERISA also established the Pension Benefit
Guaranty Corporation ("PBGC"), a government corporation, to
insure employees' benefits against a plan's termination for
insufficient funds." Yahn & McDonnell, 787 F.2d at 130.
Under MPPAA's statutory scheme, once an employer withdraws
from a pension plan, the plan's trustees determine the amount
of withdrawal liability. 29 U.S.C. § 1381. The trustees are
then required to notify the employer of the liability, provide
a schedule for payments and otherwise formally demand payment.
29 U.S.C. § 1399(b)(1). Within ninety days after receiving
notice, the employer has the option of requesting review of the
liability by the plan's trustees. Id., § 1399(b)(2)(A). Either
party may initiate arbitration proceedings if the dispute over
the existence or amount of liability persists after review.
Id., § 1401(a)(1).
"Provisions for the quick and informal resolution of
withdrawal liability disputes are an integral part of MPPAA's
statutory scheme." Flying Tiger, 830 F.2d at 1244; see also
Colteryahn Dairy, 847 F.2d at 117. Therefore, regardless of
whether an employer requests review of the liability amount,
initiates arbitration or does nothing at all, the employer must
begin making interim payments of the withdrawal liability in
accordance with the plan's schedule within sixty days of
notice. 29 U.S.C. § 1399(c)(2), 1401(d). This has been
characterized as a "pay now, dispute later" procedure. Flying
Tiger, 830 F.2d at 1244 (quoting Robbins v. Pepsi-Cola Metro
Bottling Co., 636 F. Supp. 641, 677 (N.D.Ill. 1986)).
C. Joint and Several Liability of Elizabethport and Bro-Jen
Section 1301(b)(1) provides, in part, that:
[A]ll 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
as a single employer.
29 U.S.C. § 1301(b)(1) (emphasis added). The threshold question
for determining withdrawal liability under ERISA, therefore, is
determining which entities form the single employer ("Single
Employer") subject to withdrawal liability. A finding that
Elizabethport and Bro-Jen are trades or
businesses under common control with Jayne's Motor Freight will
subject them to joint and several liability as a Single
Employer with Jayne's Motor Freight for the withdrawal
liability. Id., § 1399(b)(1); see also Sheldon Hall, 862 F.2d
at 1024; Flying Tiger, 830 F.2d at 1244; IUE AFL-CIO Pension
Fund v. Barker & Williamson, 788 F.2d 118, 123 (3d Cir. 1986);
O'Connor v. DeBolt Transfer, Inc., 737 F. Supp. 1430, 1442
(W.D.Pa. 1990); United Food & Commercial Workers Union v.
Progressive Supermarkets, 644 F. Supp. 633, 636 (D.N.J. 1986).
1. Common Control
ERISA uses the "controlled group" standards of the Internal
Revenue Code to determine whether two entities are within a
controlled group and liable as a Single Employer.*fn14
Flying Tiger, 830 F.2d at 1244 n. 2; Barker & Williamson, 788
F.2d at 123; Debolt Transfer, 737 F. Supp. at 1440. Under the
Internal Revenue Code, individuals are held to be in common
control if: (1) they own a controlling interest in the relevant
organizations; and (2) if they are in effective control of each
organization. Businesses are deemed to be under common control
(i) the same five or fewer persons . . . own . . .
a controlling interest in each organization, and
(ii) taking into account the ownership of each such
person only to the extent [that it] is identical
with respect to each such organization, such
persons are in effective control of each
26 C.F.R. § 1.414(c)-2(c) (emphasis added). The term
"organization" includes partnerships and corporations. Id., §
1.414(c)-2(a). Although the tests for controlling interest and
effective control overlap, the former goes to the issue of a
controlling ownership interest whereas the latter focuses on
effective voting control.