Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Einhorn v. J&S

September 22, 2008


The opinion of the court was delivered by: Honorable Joseph E. Irenas


Presently before the Court is the Motion to Dismiss the Third-Party Complaint or, Alternatively, to Stay All Proceedings on the Third-Party Complaint and Compel Arbitration by Third-Party Defendant Eckerd Corporation d/b/a Brooks/Eckerd Corporation ("Eckerd").*fn1 For the reasons set forth below, the present motion shall be granted in part and denied in part.

1. Any claim of J&S alleged to arise from ERISA or the MPPAA is dismissed on the merits.

2. Any claim of J&S based on state law, including contract, shall not be dismissed.

3. All remaining state law claims shall be sent to arbitration and the Third Party Complaint shall be dismissed.


Plaintiff William J. Einhorn, Administrator of the Teamsters Pension Trust Fund of Philadelphia & Vicinity (the "Pension Fund"),*fn2 brought a three-count complaint against Defendants J&S, Inc. ("J&S"), Bristol Consolidators, Inc., Ghaznavi Investments, Inc., G&G Investments, Inc.,*fn3 and John J. Ghaznavi seeking recovery of sums to satisfy pension withdrawal liability.*fn4 Count One asserts a claim for pension withdrawal liability against J&S based on a series of collective bargaining agreements with General Teamsters, Chauffeurs and Helpers Local Union No. 470, I.B.T. ("Local 470") pursuant to which J&S was to make monthly contributions to the Pension Fund on behalf of J&S's employees represented by Local 470. (Complaint ¶ 12.)*fn5 Count Two asserts a claim for pension withdrawal liability against J&S, Bristol Consolidators, Inc., Ghaznavi Investments, and G&G Investments, Inc., on the basis that they constitute one "employer" for purposes of J&S's withdrawal liability because they were all under "common control" as defined in Section 4001(b)(1) of ERISA, 29 U.S.C. § 1301(b)(1), on the date that J&S allegedly withdrew from the Pension Fund. (Complaint ¶ 22.) Finally, in Count Three, Einhorn requests that the Court impose a constructive trust on the assets of John J. Ghaznavi for those funds that should have been used to pay the withdrawal liability.*fn6

(Complaint ¶ 29.)

In response, Defendants filed an answer and third-party complaint against Eckerd, and subsequently filed a First Amendment to the Third-Party Complaint (the "Third-Party Complaint"). According to the Third-Party Complaint, the relationship between Thrift Drug, the predecessor-in-interest to Eckerd, and J&S began in the early 1970s when Thrift Drug agreed to finance the original start-up of the J&S business.*fn7 (Third-Party Complaint ¶ 13.) Thrift Drug sought to extract itself from the "day-to-day relationship" with the Teamsters Union, and thus, it agreed to pay for all costs of the J&S operation, including those related to the Union, in exchange for J&S's operation of the trucking business for Thrift Drug. (Id. ¶ 14.) From the early 1970s to February 2006, J&S states that it "stood in the shoes of Thrift and Eckerd with respect to the [Teamsters Union], receiving orders and payments from Eckerd to be implemented with and paid to the Teamsters Union." (Id. ¶ 15.)

J&S asserts that, prior to executing any collective bargaining agreement with Local 470, it submitted such agreements directly to Thrift Drug, "which in turn approved the concepts [] and/or language."*fn8 (Id. ¶ 18.) Thus, J&S alleges that Thrift Drug was aware that contributions to the Pension Plan were part of J&S's reasonable costs of doing business with Thrift Drug. (Id. ¶ 19.) Further, J&S states that Thrift Drug paid J&S all contributions due under the collective bargaining agreements for J&S's Local 470 employees, and that J&S then submitted such contributions to Local 470. (Id. ¶ 20.) J&S asserts that both the procedure for approving collective bargaining agreements as well as the payment of union member contributions to J&S continued after Thrift Drug merged with Eckerd. (Id. ¶¶ 24-27.) Neither Thrift Drug nor Eckerd were named parties to the collective bargaining agreement between J&S and Local 470 that covered the period from May 1, 2003, to April 30, 2006. (Eckerd 56.1 Stat ¶¶ 5-6; Rosen Aff., Ex. A.)*fn9 During this time period, on February 11, 1992, Thrift Drug notified J&S that it sought to terminate the services of J&S at Thrift Drug's Atlanta Distribution Center. (Eckerd 56.1 Stat. ¶ 8.) As a result of this termination, J&S and Thrift Drug simultaneously executed two agreements on October 30, 1996, a Settlement Agreement and Mutual Release,*fn10 effective immediately ("Settlement Agreement"), and a Transportation Agreement, effective September 1, 1995 ("Transportation Agreement").*fn11

The Settlement Agreement provided that the "execution of the Transportation Agreement shall be a condition precedent to the effectiveness" of the Settlement Agreement. (Rosen Aff., Ex. B.) Likewise, the Transportation Agreement stipulated that "this Agreement is entered into pursuant to the provisions of the [Settlement Agreement] executed by the parties simultaneously herewith." (Rosen Aff., Ex. C.)

Pursuant to the Transportation Agreement, J&S agreed to provide motor carrier services to Thrift Drug for the transportation of general commodities. (Third-Party Complaint ¶ 12, Ex. A.) The Transportation Agreement was "to continue for a period of ten (10) years, and annually thereafter, unless and until terminated, with or without cause, by either party upon not less than six (6) months prior written notice." (Rosen Aff. Ex. C.) The parties executed two amendments to the Transportation Agreement on February 28, 2000, effective September 5, 1999, and April 15, 2003, effective January 1, 2003, respectively. (Rosen Aff. Ex. D & E.)

The Settlement Agreement has two provisions related to pension withdrawal liability. The first, "Pension Withdrawal Liability" provides the following:

J&S is a participant in certain Employer-Teamsters Union jointly trusted multi-employer pension plans. J&S and Thrift warrant and represent that they have in the past and will continue to use their respective best efforts to see that no pension withdrawal liability is incurred.... If, despite the diligent efforts of J&S to avoid pension withdrawal liability within the meaning of ERISA and MPPAA, actions by Thrift... result in J&S incurring withdrawal liability, the parties agree to resolve the matter on the following basis: One of the components of the "buy-out" liability of $1,520,000 as provided in subparagraph 3.2 is the sum of $390,000 attributable to pension withdrawal liabilities. This sum is to be amortized at the rate of $3,250 per month for each full month that J&S continues to provide trucking services to Thrift pursuant to the Transportation Agreement and is included in the total monthly amortization amount of $12,666.66 provided for in subparagraph 3.2a. If, as a result of any action by Thrift, J&S incurs any withdrawal liability, Thrift will promptly pay to J&S the amount of the withdrawal liability or an amount equal to the unamortized portion of the buy out liability attributable to pension withdrawal liabilities as of the date on which such liability is payable by J&S, whichever amount is less. In such event, the monthly amortization amount provided for in subparagraph 3.2 shall be reduced pro-rata to reflect the aforesaid payment.

(Rosen Aff., Ex. B.) Subparagraph 3.2, "Buy-Out Liability," provides that the parties agree to a buy-out liability of $1,520,000 paid by Thrift Drug to J&S as a means of resolving all liabilities. (Id.) For each month that J&S provides trucking services to Thrift Drug pursuant to the Transportation Agreement, the buy-out liability is reduced by $12,666.66. (Id.) Subparagraph 3.2 is explicitly made subject to the terms of the Pension Withdrawal Liability provision. (Id.)*fn12

Both the Settlement Agreement and the Transportation Agreement contain an identical arbitration clause, calling for binding arbitration of "any dispute under this Agreement" in front of a single arbitrator in accordance with American Arbitration Association procedures. (Rosen Aff., Exs. B & C.) The parties stipulated that there is no right to appeal the decision of the arbitrator. (Id.)

Although Eckerd sought to terminate the Transportation Agreement in February 2005, as of that September, Eckerd and J&S had subsequently agreed to extend their business relationship. (Third-Party Complaint ¶¶ 45-46.) While it appears that such an agreement was not memorialized in writing, J&S asserts that Eckerd agreed to a three-year extension of the Transportation Agreement wherein Eckerd continued to pay J&S for all "known and reasonable costs," including all Pension Plan contributions to Local 470 and withdrawal liability. (Id. ¶¶ 46-50.)*fn13 On January 23, 2006, Eckerd provided notice to J&S of its intent to terminate the Transportation Agreement, effective in thirty days. (Id. ¶ 37.) By letter dated April 5, 2007, the Pension Fund notified J&S of its claim for withdrawal liability. (Eckerd 56.1 Stat. ¶ 23.) It is unclear whether J&S responded to such notice, although it has not initiated statutory arbitration as a means of contesting its liability. (Id.)

Defendants filed a seven-count third-party complaint against Eckerd for the following claims: (1) breach of contract arising from Eckerd's failure to provide the requisite six months notice prior to termination of the Transportation Agreement (Count I); (2) breach of contract arising from Eckerd's commitment to pay all reasonable costs, including withdrawal liability, during the three-year extension of the Transportation Agreement (Count II); (3) promissory estoppel based on Eckerd's promise to extend the contract for at least three years and pay all known and reasonable costs (Count III); (4) breach of the Settlement Agreement arising from Eckerd's representation that it would pay J&S the amount of any withdrawal liability (Count IV); (5) liability under the Multiemployer Pension Plan Amendments Act ("MPPAA") as a joint employer (Count V); (6) breach of contract and breach of the duty of good faith based on Eckerd's ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.