Opinions of the United
1994 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


7-15-1994

Adams v. Trustees of New Jersey Brewery
Precedential or Non-Precedential:

Docket 93-5480




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                 UNITED STATES COURT OF APPEALS
                     FOR THE THIRD CIRCUIT

                          ___________

                          No. 93-5480
                          ___________


              GUSTAV A. ADAMS; ANDREW F. DOPKINS;
and ROBERT MALCOLM, DECEASED, BY HIS EXECUTRIX LILLIAN MALCOLM;

                               v.

TRUSTEES OF THE NEW JERSEY BREWERY EMPLOYEES' PENSION TRUST FUND;
     LOCAL UNION 843, INTERNATIONAL BROTHERHOOD OF TEAMSTERS;
                 FALSTAFF BREWING CORPORATION; and
  JOSEPH M. BYRNE CO., A CORPORATION OF THE STATE OF NEW JERSEY

                 (Newark New Jersey District Civil No. 76-01931)


                   BRUNO MICHOTA; WALTER LEMKE;
         ABRAHAM GELLMAN; LAWRENCE BALBACK; BOLLY BONK;
     WILLIAM DUNNE; BERNARD KOSCIEWICZ; SIEGFRIED MILCHRAM;
          HOWARD SEARS; STEPHEN GARDZINSKI; HARRY WOLF;
      BRUNO DZIEDZIC; WILLIAM RIEDEL; SALVATORE GUARNERI;
           SAMUEL MONTO; FERMIN LOMA; VINCENT SADOWSKI;
     STANLEY KIESNOWSKI; ANTHONY BELLINA; FRANK PAVOLONIS;
       WILLIAM ROESCH; MICHAEL DUDA; EDWARD STRITTMATTER;
         FREDERICK HUBNER; PETER RUDY; HAROLD WANTHOUSE;
                    JOSEPH DUFFY; JOSEPH COYLE;
           GRACE GREEN, WIDOW OF HAROLD GREEN, DECEASED

                               v.

             ANHEUSER-BUSCH, INCORPORATED, (BUDWEISER);
            P. BALLANTINE & SONS; PABST BREWING COMPANY;
                    FALSTAFF BREWING CORPORATION;
    INVESTORS FUNDING CORPORATION; RHEINGOLD BREWERIES, INC.;
      THE NEW JERSEY BREWERY EMPLOYEES' PENSION TRUST FUND;
   HENRY T. HAMILTON; HERBERT V. JOHNSON; FRANK A. JACKIEWICZ;
    FRANK SULLIVAN; HERBERT HEILMANN, JR.; HENRY TCHORZEWSKI;
         BENNO MERKER; and ARTHUR SPINELLO, AS TRUSTEES OF
       THE NEW JERSEY BREWERY EMPLOYEES' PENSION TRUST FUND

                 (Newark New Jersey District Civil No. 77-02543)


                                Pension Benefit Guaranty


                               1
                                   Corporation ("PBGC"),
                                                     Appellant


         _______________________________________________

         On Appeal from the United States District Court
                  for the District of New Jersey
           (D.C. Civil Action Nos. 76-01931 & 77-02543)
                        ___________________


                       Argued March 1, 1994

         Before:   STAPLETON and SCIRICA, Circuit Judges
                    and SMITH, District Judge*

                      (Filed July 15, 1994)


PATRICIA A. SCOTT-CLAYTON, ESQUIRE (Argued)
BERNARD P. KLEIN, ESQUIRE
Pension Benefit Guaranty Corporation
1200 K Street, N.W.
Washington, D.C. 20005

SUSAN C. CASSELL, ESQUIRE
Office of United States Attorney
970 Broad Street, Room 502
Newark, New Jersey 07102

  Attorneys for Appellant,
  Pension Benefit Guaranty Corporation


ROSEMARY ALITO, ESQUIRE (Argued)
EDWARD F. RYAN, ESQUIRE
Carpenter, Bennett & Morrissey
100 Mulberry Street
Three Gateway Center
Newark, New Jersey 07102

  Attorneys for Appellee,
  Anheuser-Busch, Inc. (Budweiser)




                                2
*The Honorable D. Brooks Smith, United States District Judge for
the Western District of Pennsylvania, sitting by designation.




                               3
JOHN J. RIZZO, ESQUIRE (Argued)
Stryker, Tams & Dill
Two Penn Plaza East
Newark, New Jersey 07105

  Attorney for Appellee,
  Pabst Brewing Company

                          __________________

                        OPINION OF THE COURT
                         __________________


SCIRICA, Circuit Judge.



          After a four and one-half year hiatus, the Pension

Benefit Guaranty Corporation attempted to reopen its case against

Pabst Brewing Co. and Anheuser-Busch, Inc. for unfunded benefits

in a terminated pension fund.     The district court dismissed the

case for lack of prosecution under Federal Rule of Civil

Procedure 41(b) and denied as untimely the PBGC's motion for

reconsideration.

          The PBGC appeals contending the district court abused

its discretion in dismissing the case.     The PBGC also claims its

motion for reconsideration was timely, and that due process

required notice and a hearing before dismissal.

          We hold the district court correctly found the motion

for reconsideration was untimely, and that the PBGC received

adequate notice.   Nonetheless, without considering the evidence

the PBGC proffered with its motion for reconsideration,

we find the district court should not have dismissed the case

with prejudice.    We agree that the PBGC's behavior was negligent



                                  4
and inexcusable, but think dismissal was too harsh a sanction.

Therefore we will remand for reinstatement of the case and

consideration of lesser sanctions.
                                I.

           In 1956, Pabst, Anheuser-Busch, and other breweries

entered into an agreement with the New Jersey Brewers'

Association, the Brewery Workers Joint Local Executive Board of

New Jersey, and certain of its local unions to establish the "New

Jersey Brewery Workers Trust Fund" (the Fund).   Each brewery

negotiated periodic collective bargaining agreements specifying

the amount it would contribute to the Fund, which was to provide

brewery workers' retirement pensions.

           As employment in the brewing industry declined in the

late 1960s, the Fund's unfunded liabilities mounted, exceeding

$50 million by 1970.   To protect its solvency and reduce the

actuarial deficit, the Fund's trustees adopted a Partial

Termination Clause, limiting benefits for participants whose

employers had withdrawn from the fund.

           In 1973, Pabst and Anheuser-Busch (collectively, the

Breweries) withdrew from the Fund and set up separate funds for

their employees.   Other breweries also withdrew throughout the

1970's.   In 1978 the Fund was terminated and the PBGC was

appointed statutory trustee under Title IV of the Employee

Retirement Income Security Act (ERISA), 29 U.S.C. § 1342(b)&(c)

(1988).

           Coinciding with the termination, 29 employees (the

Employees) sued Pabst, Anheuser-Busch, other breweries, the Fund,


                                5
its trustees, and the PBGC, for benefits under the Labor

Management Relations Act of 1947, 29 U.S.C. §§ 185 & 186 (1988 &

Supp. IV 1992), and ERISA, 29 U.S.C. §§ 1132, 1302, 1303 (1988 &

Supp. IV 1992).   In 1979, the PBGC was substituted for the

Trustees, and the Employees added a fifth count solely against

the PBGC, seeking a declaration that the PBGC was required to

guarantee them certain nonforfeitable rights to pension benefits.

A class was certified for this count.

          The PBGC filed cross-claims against Pabst, Anheuser-

Busch, and Rheingold (another brewery), seeking employer

indemnification under 29 U.S.C. § 1364 (1988 & Supp. IV 1992) for

benefits the PBGC might be required to pay employees under 29

U.S.C. § 1322.0   The PBGC filed a similar claim against Chock-

Full O'Nuts Corp., parent company of Rheingold.0   The Breweries

filed cross-claims against the PBGC seeking to recover or offset


0
 Subject to a number of qualifications, 29 U.S.C. § 1322(a)
(Supp. IV 1992) provides that the PBGC will "guarantee . . . the
payment of all nonforfeitable benefits . . . under a single-
employer plan" in the event of its termination. "Single-employer
plans" include plans such as this one to which a number of
employers contribute, each pursuant to an individual collective
bargaining agreement with its respective employee organization.
See 29 U.S.C. § 1301(a)(3)&(b)(2) (1988).
          Section 1364, "Liability of employers on termination of
plan maintained by more than one employer," assigns liability for
unfunded benefits of such single-employer plans to all employers
maintaining it or who made contributions to it in any of the five
years preceding its termination. It also provides that the PBGC
will determine the liability of each employer and gives the
formula for so doing. The formula essentially divides the plan's
unfunded benefits among all employers in proportion to what each
employer should have contributed during the plan's last five
years of operation. 

(1988 & Supp. IV 1992).
0
 Claims between the PBGC and Rheingold and Chock-Full O' Nuts
were later dismissed by stipulation.


                                 6
their liability to the PBGC because of payments into both the

Fund and the individual corporate plans.

          All parties filed summary judgment motions.    On

September 22, 1980, the district court granted summary judgment

to the Employees against the PBGC on the fifth count, holding

that the Partial Termination Clause was invalid; and granted

summary judgment against the Employees on all their other claims.

Michota v. Anheuser-Busch, Inc., 

(D.N.J. 1980).

Thus, all causes of action by the Employees against the Breweries

were disposed of, but the Employees' claims against the PBGC

continued, as did the cross-claims between the PBGC and the

Breweries.

             On appeal, we reversed the district court only on the

summary judgment for the Employees on the fifth count, holding

the Partial Termination Clause was not void.    We remanded,

however, for determination of whether the Employees received

proper notification of the clause.    Adams v. New Jersey Brewery

Employees' Pension Trust Fund, 

(3d Cir. 1982).

          After discovery on the notice issue, the PBGC and the

Employees renewed their summary judgment motions, and the

Breweries filed for summary judgment to dismiss the PBGC cross-

claims for statutory employer indemnification.     Because ERISA was

not enacted until 1975, the Breweries claimed that statutory

employer liability was not meant to apply to employers who had

withdrawn from the Trust Fund in 1973, and in the alternative,

that such liability would violate the Due Process Clause.



                                  7
          On October 7, 1983, after the case was transferred to

another judge, the district court granted the Employees' summary

judgment motion on the fifth count, holding they did not receive

adequate notice of the Partial Termination Clause.   The court

denied Pabst and Anheuser-Busch's summary judgment motions,

ruling that liability was appropriate under 29 U.S.C. § 1364 and

the Due Process Clause.   The court certified the issues for

interlocutory review.

          On a second appeal, we reversed the grant of summary

judgment for the Employees, holding they received adequate

constructive notice of the Partial Termination Clause as a matter

of law.   Michota v. Anheuser-Busch, Inc., 

, 332 (3d

Cir. 1985).   We declined to address the certified questions, and

remanded "for a final determination of the employers' liability

on the PBGC's cross-claim for any remaining unfunded portions of

the Brewery Pension Fund."   

          On October 1, 1986, the district court granted the

PBGC's motion to dismiss the Breweries' cross-claims against the

PBGC for reduction of their statutory liability based on their

payments to the Employees through their corporate pension plans.

The court also denied the Breweries' motion for reconsideration

of their due process objection to liability under 29 U.S.C.

§1364.

          In January, 1987, after the case was transferred to yet

another judge, the Employees again raised their claims for

guaranteed benefits from the PBGC.   The court held we had ruled

with finality that the Partial Termination Clause defeated those

                                8
claims, and granted summary judgment to the PBGC against the

Employees.    Michota v. Anheuser-Busch, Inc.,   C.A. No. 77-2543

(D.N.J.March 17, 1988) (Memorandum Opinion and Order).     We

affirmed by judgment order, October 4, 1988. Adams v. Trustees of

the New Jersey Brewery Employees' Pension Trust Fund, No. 88-5305

(3d Cir. Oct. 4, 1988) (judgment order).

             Following our affirmance, the only claims remaining

were the PBGC's cross-claims against the Breweries for employer

indemnification.    From October, 1988 to March, 1993 there was no

contact among the parties and the court, although the PBGC

engaged in limited, informal discovery with third parties on

these claims.     In December, 1992, the PBGC contacted the district

court and was informed by the clerk that the case had been

administratively closed.     On March 19, 1993, the PBGC moved to

reopen the case, seeking summary judgment against the Breweries.

Without explaining the four and one-half year break in pursuing

its claims, the PBGC contended the only remaining issue in the

case was the amount of the Breweries' liability and described how

that liability should be calculated.     In response, Anheuser-Busch

argued that the case should be dismissed under Federal Rule of

Civil Procedure 41(b), noting that the court could do so sua

sponte and discussing the relevant factors for dismissal.       Pabst

included in its letter response a form for an order denying the

PBGC's motion to reopen and dismissing the case with prejudice.

Neither party, however, formally moved for dismissal with

prejudice.



                                  9
          In reply, the PBGC argued that the court should regard

the administrative closure of the case as a clerical mistake and

reopen under Rule 60(a).   The PBGC responded to some of the

Breweries' assertions -- whether the PBGC was inappropriately

seeking relief under Civil Procedure Rule 60(b) (relief from a

final judgment) and whether the case had in fact already been

dismissed -- but did not explain its delay in prosecution,

contending that a dismissal under Rule 41(b) would be

inappropriate because it had not failed to comply with any

procedural rules or court orders, and that the defendants had not

moved for dismissal.

          On June 7, 1993, the district court dismissed the

PBGC's claims under Rule 41(b).    Noting that the PBGC had given

no explanation for its dilatory conduct, the court said that for

equitable reasons it would sua sponte treat the defendants'

motions and responses as a 41(b) motion to dismiss for lack of

prosecution.   Acknowledging that a dismissal for lack of

prosecution was a harsh sanction because it operates as an

adjudication on the merits, the court evaluated the case in light

of the six factors set forth in Poulis v. State Farm Fire &

Casualty Co., 

(3d Cir. 1984), and found all factors

pointed toward dismissal except the factor evaluating the merits

of the PBGC's case.

          On June 24, 1993, the PBGC filed a motion under Federal

Rule of Civil Procedure 59(e) for alteration or amendment of the

dismissal order.   The PBGC submitted an explanation of the delay

in prosecution, describing how the case was shifted from one

                                  10
overloaded attorney to another, and documented a small amount of

"informal discovery" during the hiatus, consisting of a few

letters between the PBGC and consultants or fund managers.      The

court denied the motion as untimely, noting that Rule 59(e)'s

ten-day time limit was jurisdictional.   The court also stated

that had the motion been timely, it would have affirmed its prior

holding, having found nothing in the proffered arguments and

documents giving cause for reconsideration.

          The PBGC filed a timely notice of appeal.
                               II.

          The district court had jurisdiction of the PBGC's ERISA

employer liability claim against the Breweries under 29 U.S.C.

§1303(e)(3).   The court's dismissal of that claim and its denial

of the motion for reconsideration are final orders.   We have

jurisdiction under 28 U.S.C. § 1291.

          The motion for reconsideration was denied because a

jurisdictional time limit had expired.   We exercise "plenary

review of the district court's choice and interpretation of

applicable tolling principles,"    Sheet Metal Workers Local 19 v.

2300 Group, Inc., 

, 1278 (3d Cir. 1991), and of

jurisdictional decisions by the district court, Anthuis v. Colt

Indus. Operating Corp., 

, 1002 (3d Cir. 1992).    The

question of whether due process required formal notice and a

hearing before dismissal is also subject to plenary review.

Gregoire v. Centennial Sch. Dist., 

, 1370 (3d Cir.),

cert. denied, 

(1990).



                                  11
          We review the dismissal for failure to prosecute under

Rule 41(b) for abuse of discretion.   "The question, of course, is

not whether [the Supreme] Court, or whether the Court of Appeals,

would as an original matter have dismissed the action; it is

whether the District Court abused its discretion in so doing."

National Hockey League v. Metropolitan Hockey Club, 

,

642 (1976) (per curiam).   While we defer to the discretion of the

district court, we are mindful that dismissal with prejudice is

only appropriate in limited circumstances:   "Because [an order of

dismissal] deprives a party of its day in court, our precedent

requires that we carefully review each such case to ascertain

whether the district court abused its discretion in applying such

an extreme sanction," Scarborough v. Eubanks, 

, 875

(3d Cir. 1984), and in this review "doubts should be resolved in

favor of reaching a decision on the merits,"   

                               III.

                Rule 59(e) requires a motion for reconsideration

to "be served not later than 10 days after entry of the

judgment."   Fed. R. Civ. P. 59(e).   Rule 6(a) provides that in

computing any time period under the Rules of Civil Procedure, the

day of the event from which the designated period of time begins

to run shall not be included, nor shall intermediate Saturdays,

Sundays, or legal holidays, if the period is less than eleven

days.   Rule 6(b) provides that the time limit of Rule 59(e) may

not be judicially extended; as we have explained, the ten-day

period "is jurisdictional, and cannot be extended in the



                                12
discretion of the district court."    Welch v. Folsom, 

, 669 (3d Cir. 1991) (internal quotations omitted).

          The district court's order denying the PBGC's motion to

reopen the case and dismissing it with prejudice was dated May

25, 1993, and docketed June 7.     The PBGC served a "Motion to

Alter or Amend the Judgment" under Rule 59(e), with accompanying

affidavits and documents, on June 24.     Not counting weekend days,

ten days after June 7 would be June 21.     Therefore, the June 24

service by PBGC was not timely.0

          The PBGC argues that Rule 6(e) extended the deadline by

three days, rendering its motion timely. Rule 6(e) provides:
          Whenever a party has the right or is required
          to do some act or take some proceedings
          within a prescribed period after the service
          of a notice or other paper upon the party and
          the notice or paper is served upon the party
          by mail, 3 days shall be added to the
          prescribed period.


Fed. R. Civ. P. 6(e) (emphasis added).    The PBGC claims that

since they were "served" the judgment of the court by mail, the

rule applies to extend the period.

          The Rule 6(e) extension is inapplicable here.    Rule

59(e) gives the right to move for reconsideration "not later than

10 days after entry of the judgment." (Emphasis added.)     Thus,

the period for bringing the 59(e) motion begins with "entry of

judgment."   Rule 6(e) only extends time limits that begin with

0
 The district court apparently considered the date the PBGC's
59(e) motion was docketed, June 28, rather than the date of
service, June 24, as the relevant event to end the 59(e) period.
However, the error was harmless since, as shown above, June 24
also falls outside the time limit.

                                 13
"service of a notice or other paper upon the party."      See, e.g.,

Fed. R. Civ. P. 12(a)(1)(A) (requiring defendant's service of

answer "within 20 days after being served with the summons and

complaint").

           This facial reading is explicitly supported by our

caselaw.   In Sonnenblick-Goldman Corp. v. Nowalk, 

(3d Cir. 1970), a party claimed the time limit for his Rule 59(e)

motion should be extended by three days under Rule 6(e).     He

asserted "that since the Clerk notified the parties by mail of

entry of the judgment, he should have had three additional days

within which to serve the motion."    

   We stated, "it

appears that filing of a motion such as defendant's [59(e)

motion] is not conditioned upon notice of entry of judgment," and

concluded 6(e) did not apply.   

PBGC argues in the alternative that the dismissal

violates due process, or constitutes an abuse of discretion,

because there was no formal notice or hearing.      We find the PBGC

had adequate notice of the dismissal, and forewent its

opportunities to respond.

           Link v. Wabash R.R., 

, 632 (1962) gives
guidance on notice and hearings prior to 41(b) dismissals.      Link

sued Wabash Railroad in U.S. district court in 1954 after his car

collided with a Wabash train.   After three years he prevailed

against Wabash's motion for judgment on the pleadings, and a

trial date was set but then vacated by the court.     In 1959, after

three years of little activity, the court initiated a hearing to

                                14
show cause why it should not dismiss.    Deciding to retain the

case, the court set a trial date for July, 1959, which it later

vacated at the defendant's request.    More interrogatories were

exchanged, and a pre-trial conference was set for October, 1960.

On the day of the conference, Link's lawyer called and said he

was in another city doing other work, and asked that the

conference be rescheduled.   The court declined, and dismissed the

case with prejudice for failure of plaintiff's counsel to appear

and failure to prosecute as an exercise of its inherent power.

          The Supreme Court affirmed, stating that a court could

dismiss sua sponte under Rule 41(b).    The Court further held that

"the absence of notice as to the possibility of dismissal or the

failure to hold an adversary hearing" does not "necessarily

render such a dismissal void." 

It explained:
          It is true, of course, that the fundamental
          requirement of due process is an opportunity
          to be heard upon such notice and proceedings
          as are adequate to safeguard the right for
          which the constitutional protection is
          invoked. But this does not mean that every
          order entered without notice and a
          preliminary adversary hearing offends due
          process. The adequacy of notice and hearing
          respecting proceedings that may affect a
          party's rights turns, to a considerable
          extent, on the knowledge which the
          circumstances show such party may be taken to
          have of the consequences of his own conduct.
          The circumstances here were such as to
          dispense with the necessity for advance
          notice and hearing.

and citations omitted).    The Court also

stated that the availability of relief from judgment for mistake,


                                15
excusable neglect, etc., under Rule 60(b), which the plaintiff

had not sought, "renders the lack of prior notice of less

consequence."    

in Link showing the plaintiff should

have known it risked dismissal included three years of

inactivity, a motion from the court to show cause why the case

should not be dismissed after three years of inactivity, the

plaintiff's failure to answer interrogatories, and, on the day of

dismissal, the plaintiff's attorney's missing a pretrial

conference.     

n.2, 634-35 n.11.   Under these

circumstances, an attorney should be on notice that dismissal may

ensue, so that advance notice is not required, especially where

Rule 60(b) provides an "escape hatch" by allowing the reopening

of cases inadvisedly closed.     

          While the harshness of dismissal with prejudice

generally counsels giving formal notice in advance, the PBGC had

adequate opportunity to defend itself against dismissal without

such formal notice.     Before dismissal, the PBGC did not engage in

problematic behavior like the Link plaintiff:      there had been no

previous hearing to show cause why the court should not dismiss,

the PBGC had met discovery requests, and it did not miss any

court appointments.      But other factors clearly warned the PBGC it

risked dismissal:      Anheuser-Busch's brief argued for 41(b)

dismissal and went through the 6-factor Poulis analysis, and
Pabst included a draft of a dismissal order in its response to

the motion to reopen.     Even if these factors alone did not put

the PBGC on notice, the balance is tipped by the availability of

                                   16
the Rule 59(e) motion.   After the court's order of dismissal, the

PBGC had the opportunity to present its explanation of the delay

in a motion to alter or amend the judgment of dismissal under

Rule 59(e).   Like the plaintiff in Link, the PBGC did not avail

itself of this escape hatch.0   Having foregone this opportunity,

the PBGC cannot claim it was denied due process or that the court

abused its discretion because of a lack of notice and hearing.

          Notwithstanding, the PBGC argues that we should extend

it the right to notice and a hearing before dismissal under

Dunbar v. Triangle Lumber & Supply Co., 

, 129 (3d

Cir. 1987).   We disagree.   In Dunbar, observing no evidence

implicating the client in the attorney's dilatory behavior and

bad faith, we expressed concern over the trend of dismissal of

legal actions for dereliction of duty by counsel.    To protect

litigants, we held that any motion to dismiss by court or counsel

"based on an apparent default on the part of litigant's counsel"

be pleaded with particularity and with supporting material, and

that "where the papers demonstrate reasonable grounds for

dismissal on that basis the court shall direct the clerk of the

court to mail notice directly to the litigant of the time and

place of a hearing on any such motion."    

  This is to

"put the client on notice of possible jeopardy to his or her

legal interests by counsel's conduct at a time when the client


0
 The motion filed outside of the jurisdictional time limit was as
good as no motion at all. There is irony in a party's seeking to
explain why its delay in prosecuting a case is excusable rather
than dilatory, but missing the deadline for making the
explanation.

                                 17
can take appropriate action and when the Poulis balance has not

been irretrievably struck in favor of the moving party."    

argues that without Dunbar protection, parties

with in-house counsel, such as the government, will unfairly

suffer dismissal without the formal warning given to parties with

outside counsel.   However, Dunbar specifically establishes

special procedural protection for parties with outside counsel in

order to benefit the client that had no part in, and no knowledge

of, its attorney's delinquent behavior.   Where a client had or

should have had independent knowledge of the delinquency that was

the grounds for dismissal, we have held notice and hearing are

not required.   See   Comdyne I, Inc. v. Corbin, 

,

1147 (3d Cir. 1990) (no Dunbar proceedings required where

plaintiff had been personally sanctioned for misconduct and had

issued certifications contesting dismissal); Curtis T. Bedwell &

Sons, Inc. v. International Fidelity Ins. Co., 

, 693

(3d Cir. 1988) (no Dunbar proceedings required where plaintiff

present at hearings regarding attorney's misconduct and possible

sanctions).   Without formal notice and hearing, a responsible

client might be unaware that its attorney is risking dismissal; a

party with in-house counsel, however, is deemed to be aware of

how its case is proceeding, and of circumstances indicating

dismissal may be imminent.   The PBGC, represented by in-house

counsel, is held to have known whatever its agents, including its

attorneys, knew.   It merits no further notice than that required

in Link.



                                 18
          Because the PBGC has already had (and failed to use)

adequate opportunity to present its excuses on the delay, we will

not consider the affidavits and documents it submitted with its

motion for reconsideration.   We do not, however, accept Pabst's

contention that we should also refuse to consider the legal

arguments against dismissal the PBGC now raises on appeal.     While

"[w]e can consider the record only as it existed at the time the

court below made the order dismissing the action," Jaconski v.

Avisun Corp., 

, 936 n.11 (3d Cir. 1966), the party is

not required to test its legal arguments before the district

court in a Rule 59(e) motion before making them on appeal.    We

have discretion to hear not only arguments but also claims raised

for the first time on appeal, Singleton v. Wulff, 

,

121 (1975).
                                V.

          In evaluating whether the district court abused its

discretion in dismissing with prejudice, our review is "guided by

the manner in which the trial court balanced [six] factors . . .

and whether the record supports its findings."   

.   The six factors are:
           (1) the extent of the party's personal
           responsibility;
           (2) the prejudice to the adversary caused by
           the failure to meet scheduling orders and
           respond to discovery;0
           (3) a history of dilatoriness;
           (4) whether the conduct of the party or the
           attorney was willful or in bad faith;


0
 In evaluating Rule 41(b) dismissals, we look more generally for
"[p]rejudice to the other party." 

.


                                19
             (5) the effectiveness of sanctions other
             than dismissal, which entails an analysis of
             alternative sanctions; and
             (6) the meritoriousness or the claim or
             defense.

.

          The district court thoroughly considered all of the six

Poulis categories, and found all except meritoriousness indicated

dismissal.    We likewise will consider each factor in turn.
                  1.   The party's personal responsibility

                                   a.

          Although a party may justly suffer dismissal "because

of his counsel's unexcused conduct," 

, we

"have increasingly emphasized visiting sanctions directly on the

delinquent lawyer, rather than on a client who is not actually at

fault."   Carter v. Albert Einstein Medical Ctr., 

,

807 (3d Cir. 1986); see also Burns v. MacMeekin, 

, 35

(3d Cir. 1983) (holding district court must consider alternative

remedy to dismissal, because "[t]he brunt of the order [to

dismiss] falls on plaintiffs, who have been deprived of the
opportunity to litigate their case on the merits, when the only

culpable party may be their attorney.").      Thus, in determining

whether dismissal is appropriate, we look to whether the party

bears personal responsibility for the action or inaction which

led to the dismissal.
                                   b.

             The district court held the PBGC personally

responsible, explaining, "[t]his is not the sympathetic situation



                                   20
of an innocent client suffering the sanction of dismissal due to

dilatory counsel whom it hired to represent it."    Michota v.

Anheuser-Busch, Inc, C.A. No. 77-2543, slip op. at 7 (D.N.J. May

25, 1993).   We agree.   The PBGC is personally responsible for

delay by its in-house counsel.

          We do not accept the PBGC's argument that because it

administers a pension guarantee program in which employers

participate, we should consider the employers' lack of personal

responsibility for the delay.    The PBGC contends that because

those employers pay premiums into a common fund that backs

pension funds, they will have to pay higher premiums to cover the

loss if the PBGC cannot prosecute this case.    The focus on a

party's personal responsibility, the PBGC argues, is to protect

innocent parties such as these participants in ERISA's Title IV

program, so for their sake dismissal is inappropriate.

          While it may be true that the PBGC's loss would

eventually be passed on to parties who were not responsible, the

personal responsibility criterion does not aim to protect all

innocent victims from dismissal of a case.    If it did, a vast

range of parties could claim immunity from dismissal to prevent

suffering to third parties.     Carter and Dunbar aim to protect

clients who try their best to litigate cases properly, but are

thwarted by their attorneys' delinquent behavior.    Where, as

here, a party is personally responsible for failure to prosecute,

the effect of dismissal on third parties cannot be dispositive.
                2.   Prejudice to adversary

                                  a.


                                  21
             Evidence of prejudice to an adversary "would bear

substantial weight in support of a dismissal or default

judgment."    

.   Examples of prejudice

include "the irretrievable loss of evidence, the inevitable

dimming of witnesses' memories, or the excessive and possibly

irremediable burdens or costs imposed on the opposing party."

includes deprivation of information through

non-cooperation with discovery, and costs expended obtaining

court orders to force compliance with discovery.     

.    Prejudice need not be "irremediable harm that could

not be alleviated by [the] court's reopening discovery and

postponing trial."     

marks omitted)

(alteration in original).
                                  b.

             The district court held that the defendants would be

prejudiced by the amount of interest they would have to pay on

their liability, which would exceed the liability itself, and by

the difficulty of mounting a defense so long after the events at

issue.   We cannot agree.

             Interest paid on money owed does not amount to

prejudice, but rather represents the value of possession of the

money by the debtor.     It is the amount the Breweries should have

made on their money if they had kept it prudently invested during

these 17 years.     If the resolution of this case is that they had

no right to the money in the first place, neither do they have

right to the value they have gained from it while the case was

litigated.

                                  22
          The argument that the delay will prejudice the

Breweries' defense, though not meritless, is ultimately

unconvincing.    The PBGC claims the determination of the

employer's statutory liability for unfunded portions of the

Brewery Pension Fund involves computing, as of the date of plan

termination, the value of the plan's assets and the participants'

guaranteed benefits, and determining Anheuser-Busch's and Pabst's

proportionate share of liability for the unfunded benefits.      

note Error! Bookmark not defined..     The PBGC asserts that

if there are any genuine issues of material fact, the evidence

will be computational or documentary.

           The Breweries contend that each side will call expert

witnesses and fact witnesses, including the Fund's actuary, to

testify on the status and investments of the Fund in the 1970s

before and after termination.    They would also reargue their

claims regarding the applicability of ERISA to employers who

withdrew from a fund before ERISA's enactment.

           We do not see much if any prejudice resulting from the
delay.   The Breweries do not challenge the PBGC's

characterization of the computation process, which is a records-

based determination.    Expert witnesses would only comment on

evidence; there should be no problem with dimmed memories.

Similarly, fact witnesses would rely primarily on records to

describe the fund's history.    The Breweries have claimed neither

that any records have been lost, nor that their discovery is

incomplete.     Even if trial had taken place in 1988 after our last

ruling, the case still would have turned on events over a decade


                                  23
old -- the Breweries' withdrawal in 1973 and the Fund's

termination in 1977.   Finally, we note that the Breweries'

principal contentions are statutory and constitutional arguments

on whether ERISA properly applies to them, and these could be

made at any time.

          It is possible the Breweries may suffer some prejudice

from this delay, in the form of additional costs or lost

information.   But there has been no testimony to this effect, and

such prejudice, if it exists, would be minor and appropriately

addressed by more modest sanctions than dismissal.
                3.   History of dilatoriness

                                 a.

          Extensive or repeated delay or delinquency constitutes

a history of dilatoriness, such as consistent non-response to

interrogatories, or consistent tardiness in complying with court

orders.   

;    Comdyne 

.

On the other hand, "sloppiness" while an attorney is moving

offices that results in untimely response to two court orders and

a late retention of local counsel does not amount to "a pattern

of deliberate dilatory action," Donnelly v. Johns-Manville Sales
Corp., 

, 343 (3d Cir. 1982), and "inexcusable"

lateness of one or two weeks in meeting four court deadlines is

not a "default comparable to Poulis," where the plaintiff was

non-responsive and tardy, 

.

          Furthermore, a party's problematic acts must be

evaluated in light of its behavior over the life of the case.    In

Dyotherm Corp. v. Turbo Machine Co., 

(3d Cir. 1968),

                                 24
we overturned a dismissal for want of prosecution, despite

Dyotherm's failure to inform the court of its activities as

requested, its late and unprepared appearance at trial without

its key witness, and its failure to produce an adequate excuse

for the witness's absence.   While acknowledging the inexcusable

behavior of plaintiff's counsel, we noted, among other mitigating

factors, that there was no indication of dilatory tactics during

the first two and a half years in which the case was litigated.

                                b.

          The district court found that "[t]he history of

dilatoriness also favors dismissal," and said it was at a loss to

understand why the PBGC had stopped prosecution so abruptly or

why it began again after so long.    Michota, slip op. at 8.   We

agree the failure to prosecute for more than four years amounts

to a history of dilatoriness.

          Four and one-half years is a significant and

inexcusable delay, and could constitute grounds for dismissal

under Rule 41(b):
          "[F]ailure to prosecute" under the Rule 41(b)
          does not mean that the plaintiff must have
          taken any positive steps to delay the trial
          or prevent it from being reached by operation
          of the regular machinery of the court. It is
          quite sufficient if he does nothing, knowing
          that until something is done there will be no
          trial.


Bendix Aviation Corp. v. Glass, 

, 377 (E.D. Pa.
1962), aff'd 

(3d Cir.) (per curiam), cert. denied,

(1963).


                                25
          This history of dilatoriness weighs toward, but does

not mandate, dismissal.   The delay here is not on the scale of

that in Bendix, where the case lay dormant for 11 years, 

nor was there dilatoriness as in Bedwell, where the

plaintiff repeatedly and strategically delayed and disobeyed

court orders.   Bedwell, 

(3d Cir. 1988).   There has

been no dispute that the PBGC has met all deadlines and court

dates during the course of the litigation.   Under Dyotherm the

four and one-half year delay is somewhat mitigated by the PBGC's

ten years of responsible litigation.




                                26
                 4.   Was the attorney's conduct

                      willful or in bad faith?

                                  a.

            In evaluating a dismissal, this court looks for "the

type of willful or contumacious behavior which was characterized

as `flagrant bad faith,' in National Hockey League, [427 U.S. at

643]."    

; see also 

.     In National Hockey League, the district court dismissed

the case after 17 months in which the plaintiffs failed to answer

crucial interrogatories despite numerous extensions, and broke

promises and commitments to the court.       The Supreme Court

approved the dismissal as a proper response to such behavior.

            Willfulness involves intentional or self-serving

behavior.    In Donnelly, when the plaintiff's case was transferred
from Texas to New Jersey, he was tardy meeting court orders to

obtain New Jersey counsel.    We held the plaintiff's difficulties

did not amount to an inability to comply, but rather, "[a]t best

. . . show[ed] a failure to move with the dispatch which the

notice and order to show cause required, and provide[d] no basis

for exculpation of plaintiff's Texas counsel on the grounds of

inability."     

.   Noting, however, that

the Texas lawyer had timely attempted to locate local counsel, we

also held, "no willfulness is mirrored in the record."       

(internal quotation omitted).      Thus, tardiness not excused

for inability is not necessarily willful.        See also 

(where attorney filed all required papers, albeit

some tardily, behavior was not willful or contumacious); c.f.


                                  27


(where plaintiff and attorney did not

comply with court orders and discovery requests without plausible

excuses and delay appeared to be calculated, district court

properly found conduct willful, not merely negligent).
                                 b.

            The district court considered that it had received no

explanation from the PBGC regarding the four and one-half year

hiatus, no suggestion that intervening events had prevented the

PBGC from prosecuting the case, and no hint that the PBGC had

done anything except some limited discovery since the Court of

Appeals ruled in 1988.   It inferred from this "at least an

absence of a good faith effort to prosecute and a willful failure

to act."    Michota, slip op. at 8. The PBGC argues that the court

was improperly presuming willfulness or contumacity.

            While there may have been an absence of a good faith

effort to prosecute, this does not necessarily amount to

willfulness or bad faith as this court has defined it.   The

behavior here was different from the contumacious behavior in

National Hockey League or Bedwell, where there were repeated and

self-serving instances of flouting court authority and

professional irresponsibility.   Rather, there is a resemblance to

Donnelly, as circumstances here also "show a failure to move with
the dispatch" reasonably expected of a party prosecuting a case.

.    We will not call the PBGC's delay

willful as there is no indication it was strategic or self-

serving.    Rather, it is a prime example of inexcusable negligent

behavior.

                                 28
                 5.   Alternative sanctions

                                  a.

          Before dismissing a case with prejudice, a district

court should consider alternative sanctions.     In Titus v.
Mercedes Benz, 

, 748-49 (3d Cir. 1982), the district

court dismissed the case after the plaintiffs repeatedly failed

to prepare a draft pretrial order.     On appeal, we stated,

"district courts should be reluctant to deprive a plaintiff of

the right to have his claim adjudicated on the merits," 

and held the district court was required to consider

sanctions other than dismissal, 

and record its

findings, 

    If further findings supported a dismissal

with prejudice, the court could reinstate the dismissal with

prejudice.    Id.; 

(Fullam, J., concurring).   In other

cases, we have remanded for consideration of alternative

sanctions with a bar on dismissal.     See, e.g., 

; 

.
                                  b.

             The district court considered and rejected alternative

sanctions.    While it noted it could charge the PBGC for the costs

the Breweries incurred because of the delay, the court reasoned

this would not compensate for the prejudice to the Breweries or

the harm to the efficient administration of justice.

             It has not been shown, however, that the Breweries'

case has been seriously compromised.     Rather, we have found the

delay caused no significant prejudice to the defendants.       Among

other sanctions, favorable treatment for defendants on

                                  29
evidentiary issues affected by the delay, if there are any, and

payment of attorneys' fees and/or costs to the Breweries related

to the delay might be appropriate here.   And while we join the

district court's condemnation of the PBGC's irresponsibility

toward the judicial process, we believe lesser sanctions will

chasten effectively without the extreme result of "depriv[ing]

the plaintiff of the right to have [its] claim adjudicated on the

merits."   

.
                6.   Meritoriousness of the claim

                                 a.

           The standard of meritoriousness when reviewing a

dismissal is moderate:
          [W]e do not purport to use summary judgment
          standards. A claim, or defense, will be
          deemed meritorious when the allegations of
          the pleadings, if established at trial, would
          support recovery by plaintiff or would
          constitute a complete defense.

.    Where a plaintiff makes out a prima

facie case, but the defendant raises a prima facie defense, the

factor may not weigh in favor of the plaintiff.     

                                 b.

           The district court found the facial meritoriousness of

the PBGC's claims to be the one Poulis factor weighing against

dismissal.   Pabst concedes this facial meritoriousness, although

both Pabst and Anheuser-Busch reiterate their statutory and

constitutional arguments against the applicability of ERISA.

           We agree with the district court that the PBGC's claims

are facially meritorious.   The district court rejected the


                                 30
Breweries' statutory and constitutional defenses to liability. We

then denied a request for interlocutory review, and denied the

Breweries' motion for reconsideration and granted the PBGC

summary judgment on the Breweries' cross-claims to reduce their

ERISA liability.   We remanded the case "for a final determination

of the employers' liability on PBGC's cross-claim for any

remaining unfunded portions of the Brewery Pension Fund." Michota

v. Anheuser-Busch, 

.   Although Pabst argues

that the district court can undo its previous decision on

retroactive liability, the Breweries do not cite any new rulings

on the issue.0   Because of the facial strength of the PBGC's

case, the meritoriousness factor weighs heavily against

dismissal.0
0
 Rather, they refer to general language from Henglein v. Informal
Plan, 

(3d Cir. 1992), and dicta from Concrete Pipe
and Prods., Inc. v. Construction Laborers Pension Trust, 113 S.
Ct. 2264, 2293 (1993) (O'Connor, J., concurring), on retroactive
application of ERISA. Neither authority resolves this issue, or
even applies directly.
0
 The parties argue at length over whether, in light of two pre-
Poulis cases, the strength of the PBGC's case controls the
decision regarding dismissal. In Glo Co. v. Murchison & Co., 

(3d Cir. 1967) (per curiam), aff'd on rehrg., 

(3d Cir. 1968) (per curiam), cert. denied, 

(1968), an action commenced in 1954 was dismissed after an order
to show cause in 1963. Although we noted that a dismissal
"certainly seems justified by the inaction of counsel in failing
to move for trial after repeated warnings," we reversed because
"there appears to be no dispute that an amount of money is owed
to plaintiff under the contracts in suit." 

Glo Co.
was followed in Spering v. Texas Butadiene & Chem. Co., 

(3d Cir. 1970), cert. denied, 

(1971), where an
attorney sued a former client in 1965 for payment for services
rendered between 1954 and 1964. The defendants denied his claims
except for services rendered after February, 1964. 

After a year of litigation, the plaintiff did virtually nothing
in the case for three years, and the court dismissed in 1969. 

We found there had been no abuse of discretion and


                                31
                              VI.

          Having considered the evidence before the district

court when it dismissed this action with prejudice, we find the



affirmed the dismissal, but also ruled that, because there was no
dispute over the defendant's debt to plaintiff for services in
1964, the plaintiff should be allowed to pursue that claim. We
then noted, without elaboration, that the "unusual nature of the
circumstances" of Glo Co. was not present in Spering. 

          Glo Co. and Spering do not purport to set out a rule,
and at any rate the facts in this case are different in a
critical way. Here, unlike in Glo Co. and Spering, the
defendants have not admitted liability. We also note that those
cases pre-date Poulis, and should not be taken to indicate that a
court need not consider all six Poulis factors. We do, however,
endorse the general principle of Glo Co. and Spering, that where
a party contesting dismissal has a strong case, the
meritoriousness factor weighs more heavily in its favor.
          The PBGC makes an additional argument regarding
meritoriousness, that "absent truly extraordinary circumstances,
no meritorious statutory claim of the federal government should
be dismissed without prior warning." Brief for Appellants at 42.
It points to Fed. R. Civ. P. 55(e), which bars default judgments
against the United States "unless the claimant establishes a
claim or right to relief by evidence satisfactory to the court",
and the doctrine that the government is not subject to the
defense of laches, see, e.g., United States v. Gera, 

, 120 (3d Cir. 1969).
          We cannot agree. As Pabst points out, the reference to
Rule 55(e) proves too much. Rule 55 governs default judgments,
and specifically excuses the government from its application
under certain circumstances. By contrast, Rule 41(b) specifies
no exceptions for the government. It is hard to avoid the
implication that there is, then, no such exception to Rule 41(b).
          Furthermore, this court and others have found Rule
41(b) applicable to government agencies in the past. For
example, in Livera v First Nat'l State Bank, 

, 1193-
94 (3d Cir.), cert. denied, 

(1989), we remanded a
41(b) dismissal of a claim by the Small Business Administration
to the district court because the court had not applied the
Poulis factors, and instructed the district court to determine
whether dismissal was appropriate. 

see also, e.g.,
Securities & Exchange Comm'n v. Power Resources Corp., 

, 298 (10th Cir. 1974) (affirming district court dismissal
under Rule 41(b) of S.E.C. action for failure to prosecute).


                               32
sum of the six Poulis factors weighs against dismissal with

prejudice, so that dismissal did not constitute the sound

exercise of discretion.   In a close case, "doubts should be

resolved in favor of reaching a decision on the merits."

.   While we agree with the able and

experienced district judge that the PBGC bears personal

responsibility for the delay in prosecution, and also that there

was a history of dilatoriness, these are outweighed by the

absence of significant prejudice to the adversary and lack of

willfulness or bad faith on the part of the PBGC, by the

availability of alternative sanctions, and by the meritoriousness

of the PBGC's claim.0   We share the frustration of the district

court at the PBGC's irresponsible conduct, and acknowledge the

court's thoughtful consideration of the many factors relevant to

the issue of dismissal.   However, "[d]ismissal must be a sanction

of last, not first, resort," 

, and in this

case lesser sanctions should be applied.

          We will vacate the order of the district court and

remand for reinstatement of the PBGC's claims and for the

imposition of sanctions other than dismissal as appropriate.
0
 We have previously overturned a default judgment against a
defendant on the same three grounds. In Gross v. Stereo
Component Sys., Inc., 

(3d Cir. 1983), we vacated the
judgment "[b]ecause no prejudice accrued to the plaintiff, a
potentially meritorious defense was available to the defendant,
and defendant's conduct in failing to timely answer was not
willful." Donnelly is also similar to the instant case: after
finding neither willfulness by the attorney, prejudice to the
adversary, nor personal responsibility on the part of the client
with regard to the tardiness in finding local counsel, we ordered
reinstatement of the case and consideration of lesser sanctions.

.

                                33
Each side to bear its own costs.




                     34