BENJAMIN COHEN, Bankruptcy Judge.
The matters before the Court are:
1. The Debtor's Objection to Proof of Claim Number 802 Filed by United Food and Commercial Workers Unions and Employers Pension Fund filed on August 7, 2009. Docket No. 1355;
2. The Motion of the United Food and Commercial Workers Unions and Employers Pension Fund to Compel Arbitration or, Alternatively, for Relief From Automatic Stay to Pursue Arbitration of Claim filed on August 26, 2009. Docket No. 1440;
3. The Official Committee of Unsecured Creditors' Objection to (I) the Motion of the United Food and Commercial Workers Unions and Employers Pension Fund to Compel Arbitration or, Alternatively, for Relief from Automatic Stay to Pursue Arbitration of Claim and (II) the Motion to Expedite Hearing on Same filed on September 1, 2009. Docket No. 1486;
4. The Supplemental Objection of the Debtor to the Claims of the United Food and Commercial Workers Unions and Employers Pension Fund (Claim Nos. 802 & 947) filed on September 15, 2009. Docket No. 1576;
5. The Liquidating Trustee's Memorandum of Law in Support of the Objection to the Motion of the United Food and Commercial Workers Unions and Employers Pension Fund To Compel Arbitration or, Alternatively, for Relief From Automatic Stay to Pursue Arbitration of Claim filed on August 20, 2010. Docket No. 2589; and
6. The Reply Brief in Support of Motion of the United Food and Commercial Workers Unions and Employers Pension Fund to Compel Arbitration or, Alternatively, for Relief from Automatic Stay to Pursue Arbitration of Claim filed on August 30, 2010. Docket No. 2598.
A hearing was held on September 2, 2010. Appearing were: Mr. John D. Elrod and Mr. James Sacca, attorneys for Mr. William Kaye, the Liquidating Trustee; and Mr. Rufus T. Dorsey, IV, the attorney for the United Food and Commercial Workers Unions and Employers Pension Fund ("Fund").
The matters were submitted on the briefs and pleadings, the record in this case, and arguments of counsel. For the reasons expressed below, the Court finds that the Fund's motion should be granted. Discretionary abstention in favor of arbitration of the Fund's claim and of the Debtor's objection is warranted. As such, the Fund should be granted relief from the stay to initiate arbitration.
During the course of this Chapter 11 case, the debtor ceased operations, sold substantially all of its property, and filed a plan providing for the disposition of the money realized. Its cessation of operations resulted in its withdrawal from the United Food and Commercial Workers Unions and Employers Pension Fund and concomitant incurrence of "withdrawal liability" for unfunded vested pension benefits.
The Fund filed a proof of claim for the liability incurred by the Debtor as a result of the Debtor's withdrawal. The Debtor
The purpose and general structure of the Multiemployer Pension Plan Amendments to the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq., of which section 1401, is a part, were succinctly described in Chicago Truck Drivers v. El Paso Co., 525 F.3d 591 (7th Cir. 2008). The opinion here included:
Id. at 595.
Section 1401(a)(1) of Title 29 provides that, "Any dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination made under sections 1381 through 1399 of this title shall be resolved through arbitration." Id. That provision would include the dispute in
In addition to mandating arbitration of disputes with respect to withdrawal liability, however, in 29 U.S.C. § 1451(a), the MPPAA paradoxically authorizes a plan fiduciary or employer, as well as other designated parties in interest, "adversely affected by the act or omission of any party under this subtitle with respect to a multiemployer plan ... [to] bring an action for appropriate legal or equitable relief, or both." Id. (parenthetical added). Moreover, subsection (c) of that statute squarely imbues district courts of the United States with exclusive jurisdiction to entertain any such actions. It reads, "The district courts of the United States shall have exclusive jurisdiction of an action under this section without regard to the amount in controversy, except that State courts of competent jurisdiction shall have concurrent jurisdiction over an action brought by a plan fiduciary to collect withdrawal liability." Id.
The above raises the question: What happens if an action is brought to ascertain and enforce withdrawal liability in a court without arbitration first having been instituted and completed, as is the present situation? In that circumstance, courts have universally concluded that the arbitration requirement of section 1401(a)(1) is not jurisdictional, but rather constitutes an exhaustion of administrative remedies requirement.
The goals sought to be achieved by Congress in mandating arbitration for MPPAA disputes are: (1) to have technical issues decided by persons expert in deciding those issues; (2) to conservation of judicial resources; and (3) to have those issues decided in a forum and by a procedure which it intended to be more efficient and economical for the parties involved than the courts.
One goal sought to be achieved by Congress in mandating arbitration is to have issues of how and when to assess withdrawal liability, and the amount of such liability, which primarily require application of the technical provisions of the MPPAA, determined by persons who: (1) specialize in determining those issues; (2) have developed a particular expertise in doing so; and (3) are therefore necessarily more expert and adept at deciding such issues than the general judiciary. "These policies include the application of the administrative body's superior expertise, promotion of judicial economy, and deference to the statutory scheme Congress created." T.I.M.E.-DC, Inc. v. Management-Labor Welfare & Pension Funds, of Local 1730 Intern. Longshoremen's Ass'n, 756 F.2d 939, 945 (2nd Cir. 1985) (emphasis added). "By generally mandating arbitration in the first instance with review by a federal court, MPPAA has created arbitrators who are experts in applying the technical provisions of how and when to assess withdrawal liability." Board of Trustees of Trucking Employees of North Jersey Welfare Fund, Incorporated-Pension Fund v. Centra, 983 F.2d 495, 506 (3rd Cir. 1992). "The primary purpose of this exhaustion doctrine is to allow an administrative agency or an arbitrator to perform functions within its special competence: to create a factual record, to apply its expertise, and to correct its own errors so as to eliminate potential controversies that would otherwise end up in federal court." Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia, 830 F.2d 1241, 1252 (3rd Cir. 1987) (emphasis added). "The exhaustion requirement furthers many important legislative and administrative policies, such as ... to permit the agency to exercise its discretion or apply its expertise...." Central States Southeast and Southwest Areas Pension Fund v. T.I.M.E.-DC, Inc., 826 F.2d 320, 328 (5th Cir. 1987) (quoting Patsy v. Florida Int'l Univ., 634 F.2d 900, 903 (5th Cir. 1981)) (quoting McKart v. United States, 395 U.S. 185, 193-95, 89 S.Ct. 1657, 23 L.Ed.2d 194 (1969), rev'd and remanded on other grounds sub nom., Patsy v. Board of Regents, 457 U.S. 496, 102 S.Ct. 2557, 73 L.Ed.2d 172 (1982)). "The purpose of the exhaustion of administrative remedies doctrine is to permit an administrative agency to apply its special expertise in interpreting relevant statutes and in developing a factual record without premature judicial
A second goal of the arbitration requirement of the MPPAA is to promote judicial economy. Sending matters to arbitration conserves precious and limited judicial resources. "These policies include the application of the administrative body's superior expertise, promotion of judicial economy, and deference to the statutory scheme Congress created." T.I.M.E.-DC, Inc. v. Management-Labor Welfare & Pension Funds, of Local 1730 Intern. Longshoremen's Ass'n, 756 F.2d 939, 945 (2nd Cir. 1985) (emphasis added). "Arbitration of withdrawal liability disputes... bears a burden that would otherwise fall on the federal courts." Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia, 830 F.2d 1241, 1248 (3rd Cir. 1987). "`[A]rbitration promotes judicial economy and judicial restraint, both because the arbitrator's decision may dispose of the suit, and even if one party appeals the arbitrator's decision, the court will have the benefit of the arbitrator's analysis.'" Id. (quoting Robbins v. Chipman Trucking, Inc., 693 F.Supp. 628, 635 (N.D.Ill. 1986)). "The primary purpose of this exhaustion doctrine is to ... eliminate potential controversies that would otherwise end up in federal court." Id. at 1252. "Third, the exhaustion requirement fosters judicial economy both by permitting the administrative tribunal to vindicate a complaining party's rights in the course of its proceedings, thereby obviating judicial intervention, and by encouraging the tribunal to make findings of fact on which courts can later rely in their decision making." Republic Industries, Inc. v. Central Pennsylvania Teamsters Pension Fund, 693 F.2d 290, 293 (3rd Cir. 1982). "Our analysis begins with recognition of the fact that the exhaustion doctrine acts as a prudential rule that provides the courts `with a method to exercise comity toward administrative agencies and to promote efficient use of judicial resources while protecting the rights of parties who have come before the court seeking relief.'" McDonald v. Centra, Inc., 946 F.2d 1059, 1063 (4th Cir. 1991) (quoting Morrison-Knudsen Co., Inc. v. CHG Int'l, Inc., 811 F.2d 1209, 1223 (9th Cir. 1987)), cert. denied, 488 U.S. 935, 109 S.Ct. 358, 102 L.Ed.2d 349 (1988). "The exhaustion requirement furthers many important legislative and administrative policies, such as ... to conserve scarce judicial resources, since the complaining party may be successful in vindicating rights in the administrative process and the courts may never have to intervene...." Central States Southeast and Southwest Areas Pension Fund v. T.I.M.E.-DC, Inc., 826 F.2d 320, 329 (5th Cir. 1987) (quoting Patsy v. Florida Int'l Univ., 634 F.2d 900, 903 (5th Cir. 1981)) (quoting McKart v. United States, 395 U.S. 185, 193-95, 89 S.Ct. 1657, 23 L.Ed.2d 194 (1969), rev'd and remanded on other grounds sub nom., Patsy v. Board of Regents, 457 U.S. 496, 102 S.Ct. 2557, 73 L.Ed.2d 172 (1982)). "Arbitration serves several important purposes, not the least of which is the promotion of `"judicial economy and judicial restraint."'" Mason and Dixon Tank Lines, Inc. v. Central States, Southeast and Southwest Areas Pension Fund, 852 F.2d 156, 164 (6th Cir. 1988) (quoting Flying Tiger Line v. Teamsters Pension Trust Fund, 830 F.2d 1241, 1248 (3rd Cir. 1987)) (quoting Robbins v. Chipman Trucking, Inc., 693 F.Supp. 628, 635 (N.D.Ill. 1986)). "An overall goal is to promote judicial economy." Central States, Southeast and Southwest Areas Pension
A third goal of the arbitration requirement of the MPPAA is to provide pension funds with an economical and expeditious alternative to the courts for establishing withdrawal liability. "Arbitration of withdrawal liability disputes substantially reduces the expenses incurred by multiemployer plans...." Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia, 830 F.2d 1241, 1248 (3rd Cir. 1987). "Congress did not intend to create a new, broad category of litigation that would force benefit plans to spend their assets on court costs and attorneys fees. Rather, it chose to require arbitration, with judicial review, to create a more efficient dispute-resolution process." Board of Trustees, Sheet Metal Workers' Nat. Pension Fund v. BES Services, Inc., 469 F.3d 369, 374 (4th Cir. 2006). "Arbitration is supposed to speed final decision and reduce the costs of getting there." Trustees of Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent) Pension Fund v. Central Transport, Inc., 935 F.2d 114, 119 (7th Cir. 1991). "In enacting the MPPAA, Congress sought to channel disputes over withdrawal liability into the informal and expeditious procedure of arbitration." Trustees of Colorado Pipe Industry Pension Trust v. Howard Elec. & Mechanical Inc., 909 F.2d 1379, 1385-1386 (10th Cir. 1990). "Congress presumably determined that a substantial portion of disputes could be promptly and efficiently resolved through informal procedures." I.A.M. Nat. Pension Fund, Plan A, A Benefits v. Clinton Engines Corp., 825 F.2d 415, 422 (D.C.Cir. 1987).
As mentioned above, even though Congress clearly designed arbitration, with judicial review, as the proper mechanism for dispute resolution, some exceptions to the arbitration requirement have been recognized; however, as some courts have recognized, those exceptions are narrow and only applicable in very limited, rare, and extraordinary circumstances.
The Debtor, Liquidating Trustee, and OCUC do not argue that any of the exceptions to the arbitration requirement of section 1401(a)(1) apply in the case, which involves a dispute over the proper amount of the Fund's claim. And the reported cases do not suggest any situation where the calculation of the amount of the withdrawal liability maybe accomplished by the Court.
In contrast, the Debtor, Liquidating Trustee, and OCUC do insist that the employer's bankruptcy changes that requirement. They argue that the arbitration requirement of the MPPAA collides head long and irreconcilably conflicts with the procedure specified for resolving claims filed in bankruptcy cases, and that the former must necessarily yield to the latter. Indeed 11 U.S.C. § 502(b) provides that if a claim is filed in a bankruptcy case, and an objection to the claim is filed, the bankruptcy court "... shall determine the amount of such claim in lawful currency of the United States as of the date of the filing of the petition, and shall allow such claim in such amount...." Id. Moreover, the Supreme Court, "has long recognized that a chief purpose of the bankruptcy laws is to secure a prompt and effectual administration and settlement of the estate of all bankrupts within a limited period, and that provision for summary disposition, without regard to usual modes of trial attended by some necessary delay, is one of the means chosen by Congress to effectuate that purpose." Katchen v. Landy, 382 U.S. 323, 328-329, 86 S.Ct. 467, 15 L.Ed.2d 391 (1966)(internal quotation marks and citations omitted). "It is equally clear that the expressly granted power to `allow,' `disallow' and `reconsider' claims, [now embodied in 11 U.S.C. § 502], which is of basic importance in the administration of a bankruptcy estate, is to be exercised in summary proceedings and not by the slower and more expensive processes of a plenary suit." Id. at 329, 86 S.Ct. 467 (internal quotation marks and citations omitted)(parenthetical added). "This power to allow or to disallow claims includes full power to inquire into the validity of any alleged debt or obligation of the bankrupt upon which a demand or a claim against the estate is based. This is essential to the performance of the duties imposed upon [the bankruptcy court]." Id. (internal quotation marks and citations omitted)(parenthetical added). "The trustee is enjoined to examine all claims and to present his objections ... and when objections are made, the court is duty bound to pass on them." Id. (internal quotation marks and citations omitted).
Indeed, there appears to be a conflict between 29 U.S.C. § 1401(a)(1), which requires disputes over the existence and amount of withdrawal liability to be determined in arbitration proceedings and 11 U.S.C. § 502, which requires the bankruptcy court to hear objections to claims, ostensibly including claims for withdrawal liability filed in a bankruptcy case.
What then is the proper test for ascertaining Congressional intent when the command of one federal statute directly conflicts with the command of another? The Eleventh Circuit Court of Appeals addressed a very similar situation involving conflict between the bankruptcy code and another federal statute mandating arbitration in other situations. In The Whiting-Turner Contracting Co. v. Electric Machinery Enterprises, Inc. (In re Electric Machinery Enterprises, Inc.), 479 F.3d 791 (11th Cir. 2007), a subcontractor in Chapter 11 filed an adversary proceeding to compel turnover of money that it was allegedly owed by its general contractor. The general contractor moved to compel arbitration pursuant to an arbitration agreement between the parties. The bankruptcy court denied the motion based on conclusions that: (a) the general contractor was holding the money in constructive trust for the debtor; (b) it had jurisdiction over the res of the constructive trust; and (c) the determination of the amount of the res of the constructive trust was a "core" proceeding. The district court affirmed that decision.
The Eleventh Circuit reversed. In doing so, it recognized the clear conflict between the Bankruptcy Code, which empowered the bankruptcy court to hear and decide the issues in the case, and the Federal Arbitration Act ("FAA") which provides that arbitration agreements, "shall be valid, irrevocable, and enforceable, save upon grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The court determined that, "The FAA establishes a federal policy favoring arbitration," 479 F.3d at 795, so that a cause of action that arises from another federal statute must be submitted to arbitration if the parties to the action are privy to an agreement which requires disputes between them to be settled through arbitration, "unless Congress has clearly expressed an intention to preclude arbitration of the statutory claim...." Id. And the court said that the burden is on the party opposing arbitration, and demanding that the claim be decided by the court, to prove, "`that Congress intended to preclude a waiver of judicial remedies for [the particular claim] at issue.'" Id. (quoting Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 227, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987)).
The court employed a three factor test, first promulgated by the United States Supreme Court in McMahon, to determine whether Congress intended to create an exception to the FAA in the Bankruptcy Code. Those factors are: (1) the text of the statute; (2) the statute's legislative history; and (3) whether there exists an inherent conflict between arbitration and the underlying purposes of the statute. In addition, consideration of those factors must not be colored by any bias against arbitration or preference for judicial determination of issues. The court added, "In
In applying the McMahon factors to the Bankruptcy Code, the court did not find any, "evidence within the text or in the legislative history that Congress intended to create an exception to the FAA in the Bankruptcy Code." Id. It therefore proceeded to address the question of, "whether an inherent conflict exists between arbitration and the underlying purposes of the Bankruptcy Code." Id.
The bankruptcy court had determined that it was not required to refer the issues involved in the turnover proceeding to arbitration for resolution because the turnover proceeding was, "a core proceeding over which the bankruptcy court had exclusive jurisdiction." Id. The Court of Appeals disagreed and held that regardless of the fact that the bankruptcy court had jurisdiction, even exclusive jurisdiction, over the turnover proceeding, and even if it had been a "core" proceeding, it was still subject to arbitration because the plaintiff had failed to prove, and the bankruptcy court had failed to, "assess whether enforcing the parties' arbitration agreement would inherently conflict with the underlying purposes of the Bankruptcy Code." Id. at 799. "Furthermore, even if we were to find that EME's claim against Whiting-Turner constitutes a core proceeding, we find that EME did not sustain its burden under McMahon to demonstrate that Congress intended to limit or prohibit waiver of a judicial forum for the type of claim that EME brought against Whiting-Turner." Id. at 798. "Only if the bankruptcy court actually makes a sufficient finding that enforcing an arbitration agreement would inherently conflict with the Bankruptcy Code does it have the discretion to deny enforcement of the arbitration agreement." Id. at 799. "Therefore, even if this dispute is in fact core, it is still subject to arbitration." Id. (emphasis added).
The Debtor, Liquidating Trustee, and OCUC argue that Electric Machinery is inapplicable because it deals with the FAA and arbitration agreements rather than the MPPAA and statutory mandated arbitration. They also say that no test is required to resolve the conflict between section 1401(a)(1) of the MPPAA and section 502 of the Bankruptcy Code because section 1401(a)(1) has no application to bankruptcy cases and section 502 provides the sole method for liquidating claims in bankruptcy.
It is unnecessary, however, in this case to decide whether arbitration of the Fund's claim, and the Debtor's objection to allowance of that claim, is mandated by McMahon and Electric Machinery, or whether, under the present circumstances, the test enunciated in those cases must be applied to determine whether arbitration of those matters is required or not, or whether MPPAA section 1401(a)(1) trumps Bankruptcy Code section 502(b), or vice versa. The reason is—interests of justice plainly indicate that abstention in favor of arbitration is warranted in this case pursuant to 28 U.S.C. § 1334(c)(1).
Abstention in this case will serve to accomplish easily and conveniently both the goals and purposes of section 1401(a) of the MPPAA and the goals and purposes of 11 U.S.C. § 502. In fact, the claims allowance process is the perfect "core" candidate for arbitration. Arbitration is more or less designed to be a summary proceeding as is the claims allowance process in bankruptcy. The goal of both is to determine if anything is owed and, if so how much. In other words, to liquidate the claim.
The Liquidating Trustee, OCUC, and Debtor argue that arbitration will offend, disrupt, or impede the bankruptcy process or case ipso facto because the claims allowance process is a core proceeding. This Court disagrees. Just because something has been referred to the bankruptcy court to be decided, or the bankruptcy court has been empowered to decide a particular issue, or has been given the duty of liquidating, allowing (or disallowing) claims does not limit the means by which the court may accomplish that objective. As explained by the Supreme Court in Nathanson v. NLRB, 344 U.S. 25, 73 S.Ct. 80, 97 L.Ed. 23 (1952):
Id. at 30, 73 S.Ct. 80.
Section 1334(c)(1), 28 U.S.C. § 1334(c)(1), provides the means of exercising that sound discretion. It includes, "nothing in this section prevents a district court in the interest of justice, or in the interest of comity with State courts or respect for State law, from abstaining from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11." Id.
Furthermore, this Court rejects the argument that a core matter should not be arbitrated simply because it is a core proceeding. If arbitration of the core matter will not in fact offend, disrupt, delay, or impede progression of the bankruptcy case or administration of the bankruptcy estate then there is no reason for it not to be arbitrated. Only where arbitration of a claim: (1) will take inordinately longer than the claims allowance process; or (2) will cost the estate inordinately more money than the claims allowance process; or (3) does not involve determinations that a more specialized tribunal can, because of its experience and expertise, make more efficiently and possibly more accurately, will there be a problem. There is no evidence of these factors in this case.
Possibly the most important factor to this Court is that the Supreme Court, the Fifth Circuit Court of Appeals, the Federal Circuit Court of Appeals, the Tenth Circuit Court of Appeals, and the Temporary Emergency Court of Appeals have concluded that bankruptcy courts should defer to more specialized tribunals if possible when faced with matters within the expertise of the latter because the latter are more qualified to decide technical issues within the realm of their expertise than are nonspecialized courts which have relatively little or no experience with such issues, i.e., a specialized tribunal is more likely to make the right decisions and accurately mete out a just result. Nathanson v. N.L.R.B., 344 U.S. 25, 73 S.Ct. 80, 97 L.Ed. 23 (1952); Order of Railway Conductors v. Pitney, 326 U.S. 561, 66 S.Ct. 322, 90 L.Ed. 318 (1946); Smith v. Hoboken Railroad Co., 328 U.S. 123, 66 S.Ct. 947, 90 L.Ed. 1123 (1946); Gary Aircraft Corp. v. United States (In re Gary Aircraft Corp.), 698 F.2d 775 (5th Cir. 1983); Quality Tooling, Inc. v. United States, 47 F.3d 1569 (Fed.Cir. 1995); United States v. Bagley (In re Murdock Mach. and Engineering Co. of Utah), 990 F.2d 567 (10th Cir. 1993); Kellogg v. United States Department of Energy (In re Compton Corp.), 889 F.2d 1104 (Em.App. 1989).
In Gary Aircraft Corp., the government filed claims in the bankruptcy case of a debtor based on a contract between the government and the debtor to overhaul airplane engines, and the debtor objected to allowance of those claims. The contract contained a clause that required any dispute arising under the same: first, to be addressed by the contracting officer; second, if either party was displeased with the officer's decision, the case would be heard by the Armed Services Board of Contract Appeals ("ASBCA"); and third, if either party was displeased with the ASBCA's decision, it could take the case to the Court of Claims under the Wunderlich Act, 41 U.S.C. §§ 321, 322 (1976).
The ASBCA was established by statute (41 U.S.C. § 7105(a)(1)), "to decide any appeal from a decision of a contracting officer of the Department of Defense, the Department of the Army, the Department of the Navy, the Department of the Air Force, or the National Aeronautics and Space Administration relative to a contract made by that department or agency." 41 U.S.C. § 7105(e)(1)(A). The matter had proceeded through the contracting officer stage and was set to be heard by the ASBCA when the debtor filed bankruptcy. The government moved to have the matter referred to the ASBCA for resolution. The bankruptcy court denied that request, conducted an extensive hearing on the claims contest, and denied the government's claims. The district court affirmed the bankruptcy court but was reversed by the Fifth Circuit Court of Appeals, which held, "that the bankruptcy court improperly exercised its jurisdiction in liquidating the contract claims and that it should have deferred jurisdiction for the purpose of liquidation to the Armed Services Board of Contract Appeals." 698 F.2d at 776.
In reaching that decision, the court in Gary relied exclusively on its conclusion
In support of that conclusion, the court in Gary opined that the three Supreme Court cases referred to above, namely Nathanson, Order of Railway Conductors, and Smith, represent, "three occasions the Supreme Court has held that bankruptcy jurisdiction should yield to the expertise of an administrative tribunal." Id. at 781. Moreover, it concluded that those cases, "represent a judgment that in a particular class of disputes, judgments committed by Congress to the exclusive expertise of an administrative body, the broad principles of bankruptcy would consistently lead to one particular decision, i.e., the bankruptcy court should defer," Id. at 783, and, if the mechanisms of dispute resolution are not Congressionally mandated (albeit Congressionally created and authorized), "... at least can stand for the general proposition that a bankruptcy court should defer a complicated, technical dispute to a specialized forum." Id.
In Quality Tooling, Inc. v. United States, 47 F.3d 1569 (Fed.Cir. 1995), the court was called on, "to reconcile the jurisdiction of the United States Court of Federal Claims over contract disputes to which the Federal Government is party with the power of the United States District Court, sitting in bankruptcy, to bring all matters affecting the bankrupt's estate into one proceeding." 47 F.3d at 1570-1571. With respect to the matter in dispute, "Congress gave concurrent jurisdiction to both the District Court, under the Bankruptcy Act of 1978 ... and the Court of Federal Claims, under the Contract Disputes Act." Id. In that case, the United States Army contracted with Quality Tooling for the manufacture of parts for a missile system. The Army terminated the contract for alleged default by Quality. Quality brought suit against the government in the Court of Federal Claims pursuant to the Contract Disputes Act of 1978, 41 U.S.C. § 609, which purports to make the Court of Federal Claims the exclusive trial court for hearing disputes over government contracts of the nature involved. While the suit was pending, Quality filed a Chapter 11 bankruptcy petition. Quality's contract claim eventually ended up in the district court, sitting in bankruptcy. The government then moved to transfer the dispute back to the Court of Federal Claims. The district court denied the motion on the grounds that it was not required to relinquish jurisdiction over the dispute to the Court of Federal Claims.
The Federal Circuit Court of Appeals reversed on the grounds that the proper question was not whether the district court was required to defer the matter to the Court of Federal Claims, but instead was whether the district court should have exercised its discretion to defer the matter to the Court of Federal Claims. Because the district court's, "memorandum opinion was concerned with whether or not the court could refuse the Government's motion to transfer the case, and gave scant attention to why the court has chosen to refuse the motion," id. at 1580-1581, the case was remanded for the district court to determine whether it should defer to the Court of Federal Claims in light of the precepts enunciated by the Federal Circuit in its decision. "Consequently, we vacate the trial court's denial of the Government's motion to transfer, and remand the case to
The Quality court concluded that the bankruptcy court, or, as in that case, the district court presiding over a bankruptcy dispute, has the discretion to either hear and decide a dispute over a claim or defer it to a more specialized tribunal that was designed and intended to decide such disputes. "We hold, as did the Tenth Circuit [in United States v. Bagley (In re Murdock Mach. and Engineering Co. of Utah), 990 F.2d 567 (10th Cir. 1993)], that the matter of deferral is committed to the discretion of the district court, which is reviewable for abuse." Id. at 1580 (parenthetical added). However, the exercise of that discretion must be tempered by the caveat, "that `a bankruptcy court should defer a complicated, technical dispute to a specialized forum.'" Id. (Quoting Gary Aircraft, 698 F.2d at 783). "Government contract law is a specialized, even arcane, field. In many cases, bankruptcy courts should stay their proceedings while the contractual issues are resolved by the Court of Federal Claims, which is accustomed to the intricacies of government contracts." Id. The court directed that deference is "preferable," and would be contraindicated only if it, "would cause substantial losses to the creditors of the bankrupt estate" or impede the bankruptcy goal of "providing fair and expeditious relief to creditors." Id. "It is likely that, by and large, [deference] is preferable. There may be times, however, when transfer of a relatively straightforward contract claim would cause substantial losses to the creditors of the bankrupt estate, while resolution of the claim would do no harm to the fabric of government contracting law." Id. (parenthetical added). "If the interest expressed by the Bankruptcy Act in providing fair and expeditious relief to creditors is greater than the interest expressed by the CDA in resolving government contract claims in familiar, and expert, fora, then the district court may, in its discretion, retain jurisdiction over the contract claims." Id.
United States v. Bagley (In re Murdock Mach. and Engineering Co. of Utah), 990 F.2d 567 (10th Cir. 1993) involved a contract between Murdock and the Navy for construction of anti-submarine rocket launchers that was terminated by the Navy for default. After the contract was terminated, Murdock filed bankruptcy. The government filed proofs of claims based on Murdock's alleged contract default in the bankruptcy case. Murdock possessed a cause of action against the government for the Navy's wrongful termination of the contract. The bankruptcy trustee filed a complaint with the Armed Services Board of Contract Appeals ("ASBCA") based on that cause of action. After trial, the ASBCA ruled that the Navy rightfully terminated the contract and denied the trustee's claims for relief. The trustee appealed the case to the Federal Circuit, which reversed the ASBCA and remanded the case to the ASBCA for a calculation of the damages owed by the government to Murdock. Before the ASBCA could rule, the trustee requested the bankruptcy court to disallow the government's claim based on the Federal Circuit's decision. The government asked the bankruptcy court to abstain from ruling given the pendency of exactly the same issue before the ASBCA. The bankruptcy court refused on the grounds that it had jurisdiction over the claims and that proper circumstances for deferral to the ASBCA were not present, and, based on the Federal Circuit's ruling, denied the government's claims but left the issue of what damages were owed by the government to the bankruptcy estate for determination
The Court of Appeals described the issues on appeal as, "whether the district court erred in not deferring to the Armed Services Board of Contract Appeals (ASBCA) for resolution of claims disputes relating to government contracts that apparently comprise the only asset and unresolved liabilities of Murdock in this long-standing bankruptcy case, and, if deferral was unnecessary, whether the court erroneously denied the government's claims against the bankruptcy estate." 990 F.2d at 568.
While recognizing that a bankruptcy court has the discretion to either resolve a contest of claim or defer litigation of the issues of liability on and amount of a claim to another tribunal, it concluded that such exercise of discretion must be guided by the precept that when a specialized tribunal exists which is designed to resolve, and intended for the purpose of resolving certain types of claims, then a bankruptcy court should usually defer resolution of those claims to those specialized tribunals. "[W]hen jurisdiction over disputed claims is placed by law in a specialized tribunal, we expect that the litigation over the trustee's claims to recovery will be conducted in that forum." Id. at 570. "[W]hen a forum such as the ASBCA exists, which has special expertise applicable to determination of particular claims a creditor has against the bankruptcy estate, the bankruptcy court usually should defer to that forum." Id. at 572. Ultimately, for reasons not relevant to the issues involved herein, the court determined that under the peculiar circumstances of that case, resolution of the issue of whether the bankruptcy court abused its discretion in not deferring the question of the debtor's liability vel non on the claim to the ASBCA was unnecessary.
In Kellogg v. United States Department of Energy (In re Compton Corp.), 889 F.2d 1104 (Em.App. 1989), Compton, a crude oil reseller during the period in which mandatory petroleum price and allocation regulations were in effect, filed Chapter 7 bankruptcy. The Department of Energy (DOE) subsequently issued a proposed remedial order (PRO) requiring Compton to pay $9,000,000, more or less, for alleged crude sale overcharges in violation of certain federal regulations and filed a proof of claim in the bankruptcy case based on that PRO. The trustee filed an objection to the PRO, thereby initiating formal administrative proceedings before the Office of Hearings and Appeals (OHA), as well as a motion in the bankruptcy court to subordinate the DOE's claim and a motion to stay the OHA proceeding. The bankruptcy court granted both motions, and the district court reversed. The trustee appealed. The Temporary Emergency Court of Appeals dismissed the appeal on the grounds that the district court order was not a final, appealable order because it did not finally determine the amount of the DOE's claim. In so holding, it directed the bankruptcy court, on remand from the district court, to defer liquidation of the DOE's claim to the OHA, citing as authority for that directive Nathanson and Gary. "On remand from the district court, an administrative hearing before the OHA is necessary to determine the DOE's claim. Although the bankruptcy court will maintain jurisdiction over the liquidation procedure, it must defer to the OHA for liquidation of the DOE's claim." 889 F.2d at 1107.
The Gary, Quality, Murdock, and Compton cases all relied on Nathanson v. N.L.R. B., 344 U.S. 25, 73 S.Ct. 80, 97 L.Ed. 23 (1952), in which the Supreme Court affirmed the district court's order directing the bankruptcy referee to defer
344 U.S. at 29-30, 73 S.Ct. 80.
Paraphrasing the above, in the present case, the fixing of withdrawal liability "is one of the functions confided solely to the [arbitrator]." 344 U.S. at 29, 73 S.Ct. 80 (parenthetical added). And, "it is the [arbitrator],
In other words, since Congress wished for withdrawal liability claims to be decided by arbitration, and that wish may be readily accommodated by deferring resolution of the Fund's withdrawal liability claim to arbitration, and there is no evidence or indication in the record that so doing will adversely impact administration of the bankruptcy estate in this case, then this Court should, in accordance with Nathanson, Gary, Quality, Murdock, and Compton, exercise its discretion to abstain from determining and liquidating the Fund's withdrawal liability claim so that such determination and liquidation of said claim may be addressed and accomplished by arbitration.
Such a determination is also consistent with the more universal doctrine of primary jurisdiction. "[P]rimary jurisdiction... is a doctrine specifically applicable to claims properly cognizable in court that contain some issue within the special competence of an administrative agency. It requires the court to enable a `referral' to the agency, staying further proceedings so as to give the parties reasonable opportunity to seek an administrative ruling." Reiter v. Cooper, 507 U.S. 258, 268, 113 S.Ct. 1213, 122 L.Ed.2d 604 (1993) (emphasis added). The Fifth Circuit Court of Appeals explains how the doctrine operates:
Mercury Motor Exp., Inc. v. Brinke, 475 F.2d 1086, 1091-1092 (5th Cir. 1973).
"`[T]he main justifications for the rule of primary jurisdiction are the expertise of the agency deferred to and the need for a uniform interpretation of a statute or regulation.'" Boyes v. Shell Oil Products Co., 199 F.3d 1260, 1266 (11th Cir. 2000) (quoting County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295, 1310 (2nd Cir. 1990) (emphasis added)). "[R]ecently the expert and specialized knowledge of agencies involved has been particularly stressed [as the reason for the doctrine]." Mercury Motor Exp., Inc. v. Brinke, 475 F.2d at 1092. "Similarly, primary jurisdiction
"This is so even though the facts after they have been appraised by specialized competence serve as a premise for legal consequences to be judicially defined." Watts v. Missouri-Kansas-Texas R. Co., 383 F.2d 571, 582 (5th Cir. 1967) (in class action by holders of subordinated income debentures of railroad company against railroad company to recover interest, district court was required to refer questions concerning accounting procedures used by railroad to Interstate Commerce Commission pursuant to primary jurisdiction doctrine) (quoting Far East Conference v. United States, 342 U.S. 570, 574, 72 S.Ct. 492, 96 L.Ed. 576 (1952)). "It is undoubtedly an implied aspect of the statutory purpose that a specialized administrative tribunal has been created to deal with problems in a certain area; statutes setting up agencies may be assumed to focus the solution of the problem in terms of the development of special competence." Id. at 583, 72 S.Ct. 492 (quoting Jaffe, Primary Jurisdiction, 77 Harvard L.Rev. 1037, 1041 (1964)).
Since the courts treat the MPPAA arbitration process as an exhaustion of administrative remedies requirement, it stands to reason that the doctrine of primary jurisdiction, applicable to matters cognizant before administrative agencies, at least provides substantial analogous support for the proposition that withdrawal claims in bankruptcy should be referred to arbitration when practical because of the special competence and expertise of MPPAA arbitrators in resolving issues presented by those claims.
Conserving judicial resources is one of the primary goals sought to be achieved by both section 1401(a)(1) of the MPPAA, as indicated by the cases cited before herein, and section 1334(c)(1) of title 28, as indicated by the following cited cases. Collins & Aikman Litigation Trust v. Detkowski (In re Collins & Aikman Corp.), 2009 WL 1469630, *1 (E.D.Mich. 2009); Beane v. United States (In re Beane), 404 B.R. 942, 948-949 (M.D.Fla. 2008); Estate of KDC, Inc. ex rel. McNeilly v. Kraklow, 368 B.R. 769, 784 (W.D.Wis. 2007); Master-Halco, Inc. v. D'Angelo, 351 B.R. 267, 272 (D.Conn. 2006); In re Compact Disc Minimum Advertised Price Antitrust Litigation, 456 F.Supp.2d 131, 161 (D.Me. 2006); In re Enron Corp. Securities, Derivative & "ERISA" Litigation, 511 F.Supp.2d 742, 765 (S.D.Tex. 2005); In re Enron Corp.
In addition, judicial economy is an important consideration in the resolution of other jurisdictional and procedural issues which arise in bankruptcy cases. Nelson v. Welch (In re Repository Technologies, Inc.), 601 F.3d 710, 724 (7th Cir. 2010) (deciding whether to exercise supplemental jurisdiction); Vacation Village, Inc. v. Clark County, Nev., 497 F.3d 902, 914 (9th Cir. 2007) (withdrawal of reference); Internal Revenue Service v. Luongo (In re Luongo), 259 F.3d 323 (5th Cir. 2001) (deciding whether to abstain from determining tax liability pursuant to 11 U.S.C. § 505(a)(1)); Chapman v. Currie Motors, Inc., 65 F.3d 78, 80-81 (7th Cir. 1995) (determining proper disposition of adversary proceeding that is not yet concluded when the bankruptcy case has come to an end); Security Farms v. International Broth. of Teamsters, Chauffers, Warehousemen & Helpers, 124 F.3d 999, 1008 (9th Cir. 1997) (withdrawal of reference); Benedor Corp. v. Conejo Enterprises, Inc. (In re Conejo Enterprises, Inc.), 96 F.3d 346, 353 (9th Cir. 1996) (deciding whether to allow creditor relief from the stay to pursue state court contract action); Quality Tooling, Inc. v. United States, 47 F.3d 1569, 1578 (Fed.Cir. 1995) (deciding whether debtor government contractor's breach-of-contract claims against federal government should be heard by district court or by Court of Federal Claims); Porges v. Gruntal & Co. (In re Porges), 44 F.3d 159, 162-163 (2nd Cir. 1995) (deciding whether to dismiss adversary proceeding following dismissal of underlying bankruptcy case or to continue to exercise jurisdiction over and litigate claims involved in the adversary proceeding); In re Querner, 7 F.3d 1199, 1202 (5th Cir. 1993) (deciding whether bankruptcy court should retain jurisdiction over related matters after the underlying bankruptcy case is closed); Miller Resources, Inc. v. Kemira, Inc. (In re Lemco Gypsum, Inc.), 910 F.2d 784, 787 (11th
Furthermore, judicial economy is likewise a cornerstone consideration in non-bankruptcy abstention situations. Hawaii Housing Authority v. Midkiff, 467 U.S. 229, 237, 104 S.Ct. 2321, 81 L.Ed.2d 186 (1984)(abstention pursuant to Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971)); National City Mortg. Co. v. Stephen, 647 F.3d 78, 83 (3rd Cir. 2011) (
And finally, judicial economy is an important consideration in many other areas of jurisdictional and procedural federal jurisprudence, and a basic objective sought to be achieved by many statutory enactments. Ashcroft v. al-Kidd, ___ U.S. ___, 131 S.Ct. 2074, 2080, 179 L.Ed.2d 1149 (2011) (courts should think carefully before expending scarce
See also Oliver v. Ralphs Grocery Co., 654 F.3d 903, 910 (9th Cir.2011) (considerations of
The Fund's withdrawal claim against the Debtor is intertwined with claims it has asserted elsewhere against two other corporate entities, namely "BI-LO" and "Lone Star," who it contends are part of the Debtor's "controlled group," and are consequently jointly and severally liable with the Debtor, and vice versa, for the withdrawal liability which forms the basis of the claim it has filed in this case. If arbitration is not permitted in this case, the Fund will be forced to litigate its claims against those entities in one or more separate proceedings in addition to having to proceed in this Court against the Debtor. If arbitration is permitted via abstention, the Fund will be able to litigate all of its claims against the Debtor, BI-LO, and Lone Star in one arbitration proceeding by virtue of an agreement it has reached with the latter two entities. The opportunity presents itself, therefore, to not only save substantial judicial resources in this court, and to have technical withdrawal liability issues decided by an expert arbitrator, and to honor Congressional intent to have withdrawal liability issues arbitrated, and to provide the parties with an economic and efficient forum and process to resolve their dispute, but also to prevent the Fund from suffering undue hardship.
In In re Hawley Coal Mining Corp., 5 EBC (BNA) 2680 (S.D.W.V., Dec. 7, 1984), the court concluded that 29 U.S.C. § 1401(a)(1) requires the allowance vel non and liquidation of withdrawal liability claims filed by a pension plan in a bankruptcy case to be determined by an arbitrator, not by the bankruptcy court. "[P]ursuant to 29 U.S.C. § 1401, the withdrawal liability must be determined by an arbitrator, not by the Bankruptcy Court or this Court...." Id. at 2681. "Inasmuch as there is no statutory or common law authority exempting a debtor in bankruptcy from the arbitration process made mandatory by Section 1401, the Court concludes that the Trustees and the debtor coal companies must arbitrate the issue of the debtor coal companies' withdrawal liability under 29 U.S.C. §§ 1301-1451." Id.
Moreover, in In re The Mason and Dixon Lines, Inc., Case No. B-84-00377C-11 (Bankr. M.D.N.C., filed April 9, 1987), the Honorable Rufus W. Reynolds also held that objections filed to withdrawal liability claims must be submitted to arbitration for resolution, stating:
In re The Mason and Dixon Lines, Inc., Case No. B-84-00377C-11, page 5 (Bankr. M.D.N.C., filed April 9, 1987).
Those courts concluded that MPPAA section 1401(a)(1) effectively overrides section 502 of the Bankruptcy Code and mandates that disputes over withdrawal claims filed in bankruptcy cases be referred to arbitration. It stands to reason they would likewise conclude a fortiori that Congress's desire and intent to have withdrawal liability disputes resolved by arbitration, in order to accomplish the laudable objectives which the MPPAA arbitration requirement was designed to achieve, warrants abstention pursuant to 28 U.S.C. § 1334(c)(1), especially in circumstances where no harm will come to other creditors and administration of the bankruptcy estate would not be disrupted.
In support of their contentions, the Debtor, OCUC, and Liquidating Trustee have cited cases in which bankruptcy courts have indeed refused to send claims for withdrawal liability to arbitration for liquidation, namely In re Interco Incorporated, 137 B.R. 993 (Bankr.E.D.Mo.1992); In re T.D.M.A., Inc., 66 B.R. 992 (Bankr. E.D.Pa.1986); In re Amalgamated Foods, Inc., 41 B.R. 616 (Bankr.C.D.Cal.1984); and In re Cott Corp., 26 B.R. 332 (Bankr. D.Conn.1982). The Court finds those cases to be unpersuasive.
Unlike the present case, In re Interco Incorporated, 137 B.R. 993 (Bankr. E.D.Mo.1992) involved a viable, ongoing reorganization with an operating debtor-in-possession. The issue in that case was, "whether deferral of [liquidation of the
In this case, the Debtor no longer exists and no reorganization will take place. There will be no need, therefore, to employ the extra-expedient procedure of estimating the Fund's withdrawal liability claim pursuant to 11 U.S.C. § 502(c) in order to facilitate the Debtor's ability to formulate and implement a plan of reorganization or to avoid the risk of frustrating the reorganization case. Claims estimation is simply not an issue. Consequently, the Interco court's assessment that, "Neither the provisions of ERISA, nor the established case law mandates that the bankruptcy court defer to arbitration the estimation of Debtors' partial withdrawal liability for the purpose of allowance under Section 502," is not relevant to the present case. Id. at 997 (emphasis added).
Furthermore, unlike in Interco, there is no evidence here: (1) of how long arbitration of the Fund's withdrawal liability claim might take; (2) that suggests that arbitration will take longer than liquidation of the claim through the normal claims process; or (3) that suggests that sending the claim to arbitration will adversely affect the Debtor's ability to formulate and implement a plan a fortiori since a simple plan has already been filed requiring only liquidation of remaining assets and distribution of net proceeds to creditor's holding allowed claims.
Moreover, Interco relies in part on three FAA cases ("Other bankruptcy courts have similarly permitted debtors to utilize bankruptcy procedures rather than submit to arbitration. See, e.g., In re Glen Eagle Square, Inc., 1991 WL 71782 (Bankr. E.D.Pa., May 1, 1991); In re J.T. Moran Financial Corp., 118 B.R. 233, 235-236 (Bankr.S.D.N.Y.1990); In re Chas. P. Young Co., 111 B.R. 410 (Bankr.S.D.N.Y. 1990)."). The parties in this case opposing arbitration suggest McMahon and Electric Machinery are not controlling because they are FAA cases, but that Interco is controlling even though it relies on FAA cases to support its decision.
The parties opposing arbitration in this case also cite In re T.D.M.A., Inc., 66 B.R. 992 (Bankr.E.D.Pa.1986); In re Amalgamated Foods, Inc., 41 B.R. 616 (Bankr. C.D.Cal.1984), and In re Cott Corp., 26 B.R. 332 (Bankr.D.Conn.1982). While these cases are factually closer to the present situation, they are also unpersuasive. All three of those decisions involved liquidating chapter 11 cases; however, all three were decided prior to McMahon, so that the judges in those cases did not have the benefit of the emphatic endorsement of the federal policy favoring arbitration found in that case or its revelation of the proper
By way of background, the courts in T.D.M.A. and Amalgamated would disagree with this Court's analysis by recognizing that the bankruptcy claims process is preeminently more expeditious and economical than the arbitration process otherwise mandated for the resolution of MPPAA withdrawal liability disputes. Or if not more expeditious and economical then at least as expeditious and economical, placing the burden on the proponent of arbitration to prove otherwise. "A concern that is pervasive throughout the Bankruptcy Code is that of a speedy resolution of the bankruptcy proceedings." T.D.M.A., 66 B.R. at 996. "`The economic fragility of the bankrupt's estate, the excess of creditors' demands over debtor's assets, and the goal of rehabilitating the debtor all argue for expeditious resolution of the bankruptcy proceeding.'" Id. (quoting Zimmerman, 712 F.2d at 58). "[T]he bankruptcy claims process is designed to be expeditious." Id. at 997. "I agree with [the debtor-in-possession] that the bankruptcy claims process is designed to be expeditious. And indeed, the Pension Fund nowhere asserts that it will receive slower resolution in the Bankruptcy Court." Amalgamated, 41 B.R. at 617 (parenthetical added). "All of this speaks of a procedure designed to facilitate the expeditious disposition of the assets of the estate." Id. at 618. "In the same vein, the capacity for quick disposition of claims is part and parcel of the bankruptcy process." Id. "[L]egislative policy ... found in Bankruptcy Code Section 502(c) ... providing that the Court may estimate any contingent or unliquidated claim which would unduly delay the closing of the estate.... clearly voices a policy of speedy disposition.... [which] ... legislative policy seems to me to control." Id. (parenthetical added).
This Court believes the better view is that Congress formulated the MPPAA arbitration provisions to be the preeminent method for resolving withdrawal liability disputes because it believed them to constitute the most expeditious and economical method for resolving those disputes. To accentuate that point, the authorities and quotations previously cited herein bear repetition: "Arbitration of withdrawal liability disputes substantially reduces the expenses incurred by multiemployer plans...." Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia, 830 F.2d 1241, 1248 (3rd Cir. 1987). "Congress did not intend to create a new, broad category of litigation that would force benefit plans to spend their assets on court costs and attorneys fees. Rather, it chose to require arbitration, with judicial review, to create a more efficient dispute-resolution process." Board of Trustees, Sheet Metal Workers' Nat. Pension Fund v. BES Services, Inc., 469 F.3d 369, 374 (4th Cir.2006). "Arbitration is supposed to speed final decision and reduce the costs of getting there." Trustees of Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent) Pension Fund v. Central Transport, Inc., 935 F.2d 114, 119 (7th Cir.1991). "In enacting the MPPAA, Congress sought to channel disputes over withdrawal liability into the informal and expeditious procedure of arbitration." Trustees of Colorado Pipe Industry Pension Trust v. Howard Elec. & Mechanical Inc., 909 F.2d 1379, 1385-1386 (10th Cir.1990). "Congress presumably determined that a substantial portion of disputes could be promptly and efficiently resolved through informal procedures." I.A.M. Nat. Pension Fund, Plan A, A Benefits v. Clinton Engines Corp., 825 F.2d 415, 422 (D.C.Cir.1987).
The Liquidating Trustee argues that if this Court requires arbitration of the pension fund's withdrawal liability claim it will be the only court to have ever done so in a bankruptcy case. The implication, of course, is that if this Court rules different than the four cases of Interco, T.D.M.A., Amalgamated, and Cott, which the Liquidating Trustee and OCUC have cited for the proposition that arbitration of withdrawal liability claims filed in bankruptcy cases is neither required nor desirable, this Court will necessarily be wrong because of the numerical superiority of the opposing authorities. This Court cannot agree.
First, this Court disagrees with the basic premise of the Liquidating Trustee's and OCUC's 4-against-1 argument, that this Court would be the only court to yet require arbitration of a withdrawal liability claim filed in a bankruptcy case. As indicated before the courts in In re Hawley Coal Mining Corp., 5 EBC (BNA) 2680 (S.D.W.V., Dec. 7, 1984) and In re The Mason and Dixon Lines, Inc., Case No. B-84-00377C-11 (Bankr.M.D.N.C., filed
Second, the Liquidating Trustee and OCUC cannot know whether any other courts have referred withdrawal liability claims filed in bankruptcy cases to arbitration for liquidation because all decisions of bankruptcy courts are not reported.
Third, this Court is not bound by or required to follow the four cases cited by the Liquidating Trustee and OCUC.
In this case, neither the Debtor, nor the OCUC, nor the Liquidating Trustee has offered any evidence that having the present matter arbitrated will impede or delay the administration of the estate in this case or result in prejudice to other creditors. On the other hand, the Fund will suffer hardship if its not allowed to arbitrate its claim against the Debtor in the same proceeding involving its claims against BI-LO and Lone Star. It will be required to participate in multiple proceedings involving the same withdrawal liability with concomitant additional expense and expenditure of time, effort, and resources.
Furthermore, arbitration, by whatever avenue mandated, i.e., agreement or statute, does not conflict with the policy or purpose of the Bankruptcy Code as a whole or 11 U.S.C. § 502 in particular. Nothing in either the Bankruptcy Code, or section 502, or the statutes granting and defining bankruptcy jurisdiction, or the Congressional history behind any of those statutes, indicates that claims may not be liquidated, or that objections to claims may not be resolved, by arbitration or before tribunals other than the bankruptcy court, or that arbitration in particular is a forbidden or undesirable methodology for resolving claim disputes.
To the contrary, Nathanson, Gary, Quality Tooling, Inc., Murdock Mach., Compton Corp., Hawley Coal, and Mason and Dixon, all cited and discussed herein, provide ample authority for the contrary conclusion, which is that claims may be liquidated, and objections to claims may be resolved, before tribunals other than the bankruptcy court, including in arbitration proceedings. And the teaching of Electric Machinery is that disputes in bankruptcy, including core proceedings, can, under proper circumstances, be resolved through arbitration.
In fact, the claims administration process is comparable to arbitration. Both provide parties with an efficient, summary, relatively quick and inexpensive procedure for resolving disputes. So neither the Debtor nor the Fund should suffer any more delay, expense, or inconvenience than they would if the matter was retained for resolution by this Court.
Moreover, withdrawal liability claims, absent prejudice to other creditors or substantial interference with bankruptcy administration, should be determined by the arbitrators to whom Congress has assigned that job because they are better equipped to do the job in the accurate, efficient, and relatively inexpensive manner expected by virtue of superior experience, training, and expertise. The job of this Court then, having learned that intent of the legislative branch, is to rule in accordance with the same unless other considerations, such as prejudice to other creditors or substantial interference with bankruptcy administration, which may not have been considered by that body when drafting the MPPAA, indicate that "interests
And finally, as fully documented above, judicial economy is a primary and overarching consideration in procedural and jurisdictional federal jurisprudence including abstention. Abstaining in this case will free up substantial judicial time and resources which can be fruitfully applied to the Court's other work by not only eliminating the necessity of managing and presiding over the present contested matter, as well as the many ancillary and preliminary proceedings which invariably precede the trial of such matters, but also obviating the necessity of getting up to speed on the methodology of resolving withdrawal liability disputes.
The foregoing conclusions abundantly support the Court's ultimate conclusion in this matter, which is that it should, in the interest of justice, abstain from hearing the Debtor's objection to the Fund's claim so that the same may be resolved through arbitration.
In accordance with the foregoing, it is hereby
Apparently contrary statements can be found in the same and other circuits. "Moreover, with increasing judicial awareness of the legitimacy and competency of arbitration as a viable forum for legal as well as factual matters, a number of courts have held that even questions of statutory interpretation, standing alone, are not exempt from arbitration under the MPPAA." Teamsters Joint Council No. 83 v. Centra, Inc., 947 F.2d 115, 123 (4th Cir. 1991). "We also agree with a growing number of circuits that questions of statutory construction, standing alone, are not exempt from arbitration under the MPPAA." Mason and Dixon Tank Lines, Inc. v. Central States, Southeast and Southwest Areas Pension Fund, 852 F.2d 156, 164 (6th Cir. 1988).
Moreover, analysis of the cases making those general pronouncements, as well as other cases in which the "statutory construction" argument against arbitration was made, reveals that such pronouncements have not been in fact liberally applied to all instances of statutory construction, but instead have been severely limited in application to circumstances so particularly defined that they can scarcely be found. For instance, the "statutory construction exception to arbitration" has been held to have no application to issues and disputes requiring construction of sections 1381 through 1399 of the MPPAA, 29 U.S.C. §§ 1381-1399, since section 1401(a)(1) specifically requires arbitration of "[a]ny dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination made under sections 1381 through 1399 of [title 29]...." 29 U.S.C. § 1401(a)(1). Giroux Bros. Transp., Inc. v. New England Teamsters & Trucking Industry Pension Fund, 73 F.3d 1, 4 (1st Cir. 1996) ("[A]ny dispute regarding the timeliness of the Fund's demand under § 1399(b)(1) is statutorily committed to arbitration in the first instance...." even if "it may also involve a measure of statutory interpretation."); Bowers v. Andrew Weir Shipping, Ltd., 27 F.3d 800, 807 (2nd Cir. 1994) ("[C]ongress envisioned that decisions regarding statutory interpretation under § 1384 `would be made by the arbitrator in the first instance.'" (citations omitted)); Crown Cork & Seal Co., Inc. v. Central States Southeast and Southwest Areas Pension Fund, 881 F.2d 11, 18 (3rd Cir. 1989) ("[I]t is now established that `where the issue of statutory interpretation "involves only a MPPAA section that Congress explicitly reserved for arbitration," arbitration is the appropriate route for resolution of the dispute.'" (citations omitted)); Id. ("[C]ircuit precedent clearly directs that in view of Congress' plain mandate to `arbitrate first,' even pure issues of statutory interpretation are subject to MPPAA's arbitration requirements if they involve sections 1381-1399."); Carl Colteryahn Dairy, Inc. v. Western Pennsylvania Teamsters and Employers Pension Fund, 847 F.2d 113, 122 (3rd Cir. 1988) (issue under section 1391 of whether certain payments made at the time of the merger should be counted as "contributions" for the purpose of apportioning Fund's unfunded vested liabilities among its member employers must be submitted to arbitration before proceeding on claim in district court despite employers contention that it was purely a legal issue, the resolution of which required only the interpretation of a statute and no factual development); ILGWU Nat. Retirement Fund v. Levy Bros. Frocks, Inc., 846 F.2d 879, 886 (2nd Cir. 1988) ("[T]he issues of statutory interpretation raised by the Corporation largely involve interpretations under sections 1381 through 1399, interpretations which we believe Congress envisioned would be made by the arbitrator in the first instance.").
Hence, "whether the principal purpose of a transaction in which one company divests itself of an interest in another is to `evade or avoid' withdrawal liability within the meaning of 29 U.S.C. § 1392(c)" is an issue that must be arbitrated. Board of Trustees of Trucking Employees of North Jersey Welfare Fund, Incorporated—Pension Fund v. Centra, 983 F.2d 495, 506 (3rd Cir. 1992); Banner Industries, Inc. v. Central States, Southeast and Southwest Areas Pension Fund, 875 F.2d 1285, 1288 (7th Cir. 1989). And an action involving an employer's request for information pursuant to 29 U.S.C. § 1399 and a pension fund's alleged refusal to honor that request constitutes a "dispute between an employer and the plan sponsor" for purposes of section 1401(a)(1) and is, therefore, subject to dismissal if brought prior to arbitration. Board of Trustees of Const. Laborers' Pension Trust for Southern California v. M.M. Sundt Const. Co., 37 F.3d 1419, 1421 (9th Cir. 1994).
Moreover, disputes with respect to section 1405 limitations must, by virtue of section 1401(a)(1), be arbitrated, "Because withdrawal liability determinations that are `made under' § 1381 necessarily and explicitly include consideration of the § 1405 limitations and because § 1405 is only relevant as a step in making a withdrawal liability calculation under § 1381...." Board of Trustees, Sheet Metal Workers' Nat. Pension Fund v. BES Services, Inc., 469 F.3d 369, 373 (4th Cir. 2006). Also, the issue of whether a trucking terminal was a "facility" within the meaning of § 1397(a)(2) is a mixed question of law and fact which must be decided by arbitration. Republic Industries, Inc. v. Teamsters Joint Council No. 83 of Virginia Pension Fund, 718 F.2d 628, 634 (4th Cir. 1983).
Furthermore, under 29 U.S.C. § 1401(a)(1), an employer must first exhaust the administrative remedy of arbitration before proceeding in court on a claim seeking a determination of whether certain payments made at the time of a merger should be counted as "contributions" for the purpose of apportioning a fund's unfunded vested liabilities among its member employers under section 1391(f). Carl Colteryahn Dairy, Inc. v. Western Pennsylvania Teamsters and Employers Pension Fund, 847 F.2d 113, 122 (3rd Cir. 1988). In addition, arbitration of an employer's claim that a fund had wrongfully inflated its liability by including the liability of two unrelated companies was required because that issue is governed by section 1391(a), which provides that, "The amount of the unfunded vested benefits allocable to an employer that withdraws from a plan shall be determined in accordance with ... this section." 29 U.S.C. § 1391(a). Doherty v. Teamsters Pension Trust Fund of Philadelphia and Vicinity, 16 F.3d 1386, 1390 (3rd Cir. 1994). And a dispute under section 1385(a)(2) as to when an employer permanently ceased to have an obligation to contribute to the fund for its employees must be resolved by the arbitral process provided within the statutory scheme and is not an issue for the court to decide prior to or in lieu of arbitration. Marvin Hayes Lines, Inc. v. Central States, Southeast and Southwest Areas Pension Fund, 814 F.2d 297, 300 (6th Cir. 1987).
Decisions which came to a different conclusion are Dorn's Transp., Inc. v. Teamsters Pension Trust Fund of Philadelphia and Vicinity, 787 F.2d 897, 903 (3rd Cir. 1986) (district court did not abuse discretion in not requiring arbitration of issues under sections 1392 and 1398 in this "rare case in which there was no need for the development of a factual record" and "there was no disputed issue of material fact."); and I.A.M. Nat. Pension Fund Ben. Plan C. v. Stockton TRI Industries, 727 F.2d 1204, 1210 (D.C.Cir. 1984) (district court did not abuse discretion in not requiring arbitration of issue of whether employer permanently ceased to have an obligation to continue under the plan under section 1383(a)(1) where there were neither questions of fact nor issues of contractual interpretation to resolve and issue was purely one of statutory interpretation). The contrarian pronouncements in Dorn and Stockton, however, have been restricted and implicitly repudiated by subsequent opinions rendered by those respective Courts of Appeal and, therefore, lack continued viability. "From the unambiguous language by which Congress established the primacy of arbitration in withdrawal liability disputes and in light of our decisions interpreting those terms, it should be beyond cavil that the existence of an issue of statutory interpretation, standing alone, does not justify bypassing arbitration." I.A.M. Nat'l Pension Fund, Plan A, A Benefits v. Clinton Engines Corp., 825 F.2d 415, 418 (D.C.Cir. 1987). See also Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia, 830 F.2d 1241, 1253-1254 (3rd Cir. 1987) (limiting Dorn); Grand Union Co. v. Food Employers Labor Relations Ass'n, 808 F.2d 66, 70 (D.C.Cir. 1987) (also limiting Stockton).
The flip side of that conclusion, i.e., that pure issues of law requiring statutory construction of sections 1381-1399 are strictly for the arbitrator, is "that an arbitrator lacks the power to decide issues that do not implicate one of the enumerated provisions." Board of Trustees of Trucking Employees of North Jersey Welfare Fund, Incorporated—Pension Fund v. Centra, 983 F.2d 495, 506 (3rd Cir. 1992). "[T]here is no indication that Congress contemplated that § 1401(a)(1) would empower an arbitrator to make decisions outside the context of sections 1381 through 1399." T.I.M.E.-DC, Inc. v. Management-Labor Welfare & Pension Funds, of Local 1730 Intern. Longshoremen's Ass'n, 756 F.2d 939, 945 (2nd Cir. 1985) (exception to arbitration requirement warranted where issue was whether compliance with § 1415 transfer provisions is a condition precedent to the assessment of withdrawal liability).
Hence, ordinarily, "fraud and misrepresentation are not arbitrable issues under MPPAA." Board of Trustees of Trucking Employees of North Jersey Welfare Fund, Incorporated-Pension Fund v. Centra, 983 F.2d 495, 506 (3rd Cir. 1992). In Carl Colteryahn Dairy, Inc. v. Western Pennsylvania Teamsters and Employers Pension Fund, 847 F.2d 113 (3rd Cir. 1988), the employer filed suit for fraud and misrepresentation against the pension fund contending it was fraudulently induced to join and remain in the fund by the latter's concealment and failure to disclose unfunded liabilities that preceded its merger with another fund. The district court held that arbitration could provide a full and fair remedy for the employer's fraud claims. The Third Circuit Court of Appeals disagreed, stating:
Carl Colteryahn Dairy, Inc. v. Western Pennsylvania Teamsters and Employers Pension Fund, 847 F.2d 113, 118-119 (3rd Cir. 1988).
In Board of Trustees of Trucking Employees of North Jersey Welfare Fund, Incorporated— Pension Fund v. Centra, 983 F.2d 495, 506 (3rd Cir. 1992), the question raised by the pension fund was whether fraud or mistake vitiated a settlement agreement with respect to withdrawal liability which it had entered into with an alleged member of the employer's control group that was in bankruptcy, the fraud or mistake relating to the fund's lack of knowledge that the solvent employer was part of the bankrupt's controlled group. That issue was not addressed in arbitration and the fund first raised it in court in response to the solvent employer's contention that litigation of the issue was foreclosed because it was not arbitrated as required by 1401(a)(1). The Third Circuit Court of Appeals held that resolution of the issue by the district court was not foreclosed because it was not arbitrable in the first place, stating: "Just as fraud is not among the technical provisions describing the formulas by which to calculate withdrawal liability and the timing of payments (sections 1381-1399), the breach of contract argument that the Fund asserts does not fall into any category that MPPAA deems arbitrable." Id.
Exception has even been made to the apparently necessary implication that an arbitrator may not decide issues which do not fall within the confines of sections 1381 through 1399. In McDonald v. Centra, Inc., 946 F.2d 1059 (4th Cir. 1991), a corporate group invoked the statutory construction exception by arguing that, as a matter of law, the discharge in bankruptcy of the withdrawal liability of one of the members of the group operated to discharged the withdrawal liability of all members of the group, and that it should be allowed to raise the bankruptcy discharge as a defense in the collection suit brought by the pension fund even though it had failed to raise it during arbitration. The district court refused to entertain that defense because it had not been raised in the arbitration proceeding. In affirming the district court, the Fourth Circuit Court of Appeals did not mention the issue in the context of sections 1381 through 1399 of the MPPAA, but instead held, as to an issue which appears to fall outside that context, i.e., the effect of a bankruptcy discharge of one group member on the withdrawal liability of other group members, that arbitration of the issue was mandatory since the fund had "timely presse[d]" the arbitration requirement in the district court, and that court had not determined that arbitration would have "neither lead to the application of superior expertise nor promote[d] judicial economy." 946 F.2d at 1064 (parenthetical added). "The control group should only be allowed to avoid arbitration if neither party timely presses the [arbitration requirement], and the court finds that deferring a court contest while the parties repair to arbitration will neither lead to the application of superior expertise nor promote judicial economy." Id. (citations and internal quotation marks omitted).
Moreover, application of the exception for pure questions of law involving statutory construction is contraindicated if such construction requires the prerequisite development or resolution of any factual issues or even mixed questions of law and facts. "[E]ven when a dispute raises a mixed question of law and fact, the Act's statutory framework dictates that arbitration should be the initial forum for dispute resolution." Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia, 830 F.2d 1241, 1255 (3rd Cir. 1987). "[E]ven if the `legal' aspects of some of the relevant inquiries outweigh the `factual' ones, it does not follow that a preliminary determination by a MPPAA arbitrator would not be worthwhile." Crown Cork & Seal Co., Inc. v. Central States Southeast and Southwest Areas Pension Fund, 881 F.2d 11, 19 (3rd Cir. 1989). "We have made clear, however, that where there is any factual dispute, the policies of the exhaustion doctrine are clearly implicated and, barring extraordinary circumstances, arbitration of that dispute is required: `[t]he Act subjects to arbitration factual issues the resolution of which is necessary to calculate withdrawal liability.... Disputes over these issues are not subject to judicial decision.'" New York State Teamsters Conference Pension & Retirement Fund v. McNicholas Transp. Co., 848 F.2d 20, 22 (2nd Cir. 1988) (quoting T.I.M.E.-DC, Inc. v. Management-Labor Welfare & Pension Funds, of Local 1730 Intern. Longshoremen's Ass'n, 756 F.2d 939, 945 (2nd Cir. 1985)). See also ILGWU Nat. Retirement Fund v. Levy Bros. Frocks, Inc., 846 F.2d 879, 886 (2nd Cir. 1988) (exception not warranted where "issues of fact—such as, what contract obligations did the Corporation agree to and how did the Corporation conduct its affairs with respect to the union and the Fund—and issues of contract interpretation pervade[d]" the employer's argument).
Generally speaking, an exception from arbitration exists for questions of law which must be resolved in order to ascertain whether the statutory scheme applies to a particular employer in the first place, i.e., a condition precedent to the assessment of withdrawal liability. "Because Congress in Section 1401(a) did not state in clear, unequivocal terms that the judiciary is barred from hearing an action until the administrative agency has come to a decision, federal courts have intervened to take jurisdiction prior to arbitration in the rare case where the defendant has raised a legitimate legal question of statutory interpretation which must be resolved in order to ascertain whether the statutory scheme applies to that defendant at all." Teamsters Joint Council No. 83 v. Centra, Inc., 947 F.2d 115, 122 (4th Cir. 1991) (citations and internal quotation marks excluded). For instance, the issue of whether an old pension fund was required to comply with 29 U.S.C. § 1415 by transferring the appropriate assets and liabilities to a new pension fund as "a condition precedent to the assessment of withdrawal liability" against an employer "is an issue of statutory interpretation," which the employer may have decided by the court instead of seeking arbitration. T.I.M.E.-DC, Inc. v. Management-Labor Welfare & Pension Funds, of Local 1730 Intern. Longshoremen's Ass'n, 756 F.2d 939, 945 (2nd Cir. 1985).
Likewise, the issue of whether someone, "is an `employer' within the meaning of the MPPAA is properly for the courts, not an arbitrator, to determine ..." because "[a]rbitration is prescribed only for disputes `between an employer and the plan sponsor.'" Bowers v. Transportacion Maritima Mexicana, S.A., 901 F.2d 258, 261 (2nd Cir. 1990) (quoting 29 U.S.C. § 1401(a)(1)). As explained by the Eleventh Circuit Court of Appeals in Carriers Container Council, Inc. v. Mobile S.S. Ass'n Inc.-Intern. Longshoreman's Ass'n, AFL-CIO Pension Plan and Trust, 896 F.2d 1330 (11th Cir. 1990):
896 F.2d at 1345.
"Thus, the MPPAA does not preclude judicial resolution of the threshold legal issue whether [someone] is an employer within the meaning of the statute." Bowers v. Transportacion Maritima Mexicana, S.A., 901 F.2d 258, 261 (2nd Cir. 1990) (parenthetical added). "[D]isputes over whether an entity has ever become an employer ... must be resolved in the courts." Galgay v. Beaverbrook Coal Co., 105 F.3d 137, 141 (3rd Cir. 1997). "[A]n entity which has never been an employer within the meaning of MPPAA is not subject to the arbitrator's jurisdiction, since 29 U.S.C. § 1401(a)(1) only mandates arbitration for disputes between `"an employer and the plan sponsor."'" Id. at 142. "Therefore, entity's employer status is a legal question to be resolved by the court." Id. "[An] exception to the statutory arbitration command has been found applicable only in cases where the employer claims that it did not become an employer for MPPAA purposes in time to acquire withdrawal liability, or where the employer asserts that it was never an MPPAA employer and thus is not subject to ERISA's dispute resolution procedures." Teamsters Joint Council No. 83 v. Centra, Inc., 947 F.2d 115, 122 (4th Cir. 1991) (parenthetical added). "This exception allows a company to bypass arbitration for the limited purpose of determining whether it is an `employer' within the meaning of section 1401(a)(1)." Mason and Dixon Tank Lines, Inc. v. Central States, Southeast and Southwest Areas Pension Fund, 852 F.2d 156, 167 (6th Cir. 1988). "Since only an `employer' is required to arbitrate, the district court may address this threshold question before arbitration." Id. "Section 1401 applies to disputes between employers and plan sponsors; since the district court was deciding whether Rheem was, or ever had been, an employer, § 1401 does not apply to Rheem's action for declaratory judgment." Rheem Mfg. Co. v. Central States Southeast and Southwest Areas Pension Fund, 63 F.3d 703, 706 (8th Cir. 1995). "Courts that have resolved employer status questions prior to arbitration have been concerned with entities that never have been employers subject to MPPAA and that, therefore, legitimately question application of MPPAA's dispute resolution procedures to them." Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia, 830 F.2d 1241, 1251 (3rd Cir. 1987). "Whether a corporation has acquired control of a contributing employer by the date the contributing company withdraws from a multiemployer pension fund is a legal question for a district court to decide." Board of Trustees of Trucking Employees of North Jersey Welfare Fund, Incorporated-Pension Fund v. Centra, 983 F.2d 495, 501 (3rd Cir. 1992). And "... whether an individual has ever had control of a contributing company as an alter ego is a question for the courts to decide," as well. Doherty v. Teamsters Pension Trust Fund of Philadelphia and Vicinity, 16 F.3d 1386, 1390 (3rd Cir. 1994).
That exception also has an exception: it does not apply in situations where the alleged employer contends that, although it was once an "employer" for purposes of the MPPAA, it was no longer such when the purported withdrawal occurred. "[W]e have distinguished between disputes over whether an entity has ceased to be an employer within the meaning of MPPAA, which must be resolved in arbitration, and disputes over whether an entity has ever become an employer, which must be resolved in the courts." Galgay v. Beaverbrook Coal Co., 105 F.3d 137, 141 (3rd Cir. 1997). A dispute as to when an alleged "employer" ceased to have an obligation to contribute to a multiemployer pension fund is, "to be resolved by the arbitral process provided within the statutory scheme and are not issues for the courts prior to arbitration." Marvin Hayes Lines, Inc. v. Central States, Southeast and Southwest Areas Pension Fund, 814 F.2d 297, 300 (6th Cir. 1987). "While the Defendants claim that they were no longer MPPAA employers at the time of the withdrawal, this defense needs to be raised in arbitration." Chicago Truck Drivers v. El Paso Co., 525 F.3d 591, 598 n. 1 (7th Cir. 2008). Hence, "the question of whether a business, once a member of a control group, has relinquished its control prior to the withdrawal date ... is for an arbitrator to decide." Board of Trustees of Trucking Employees of North Jersey Welfare Fund, Incorporated-Pension Fund v. Centra, 983 F.2d 495, 501 (3rd Cir. 1992). Also, an alleged employer's claim, "that, by virtue of a new and separate ownership history arising from the stock repurchase in 1985, it ceased to be an MPPAA employer in time to avoid liability for [the purchasing company's] withdrawal," must be arbitrated. Teamsters Joint Council No. 83 v. Centra, Inc., 947 F.2d 115, 123 (4th Cir. 1991) (parenthetical added). "This argument fails in light of the holding that, as long as a withdrawing entity was a part of the control group of an employer subject to the MPPAA at some point in time, and where the issues in dispute fall under the provisions explicitly designated for arbitration, the arbitration procedure must be followed." Id.
Another situation that formerly arose within the context of the statutory construction exception to section 1401(a)(1)'s arbitration requirement involved section 558 of the Deficit Reduction Act of 1984 (DEFRA). Pub.L. No. 98-369, 98 Stat. 494, 899, reprinted in Historical Note accompanying 29 U.S.C.A. § 1381. Prior to section 588's enactment, the MPPAA, although it did not become law until September 26, 1980, imposed withdrawal liability on employers who either partially or completely withdrew from a plan after April 29, 1980. 29 U.S.C. § 1461(e) (1982) (amended 1984). Section 558 eliminated MPPAA's retroactive effect, and provided for the refund of any amount paid because of its retroactive application. If there was no factual issues with regard to the date of withdrawal, arbitration with respect to the issue of the proper application of section 558 was not required. Central States, Southeast and Southwest Areas Pension Fund v. 888 Corp., 813 F.2d 760, 764 (6th Cir. 1987). Arbitration of section 558 issues was, however, required if the date of withdrawal was in dispute. Crown Cork & Seal Co., Inc. v. Central States Southeast and Southwest Areas Pension Fund, 881 F.2d 11, 19 (3rd Cir. 1989); Robbins v. Admiral Merchants Motor Freight, Inc., 846 F.2d 1054, 1057 (7th Cir. 1988).
A few other narrow exceptions to the arbitration requirement of section 1401(a)(1) exist. If an issue as to the constitutionality vel non of any section is raised, that issue may be entertained and decided by the court and need not be submitted to arbitration. Trustees of Colorado Pipe Industry Pension Trust v. Howard Elec. & Mechanical Inc., 909 F.2d 1379, 1386 (10th Cir. 1990); Mason and Dixon Tank Lines, Inc. v. Central States, Southeast and Southwest Areas Pension Fund, 852 F.2d 156, 164-165 (6th Cir. 1988); New York State Teamsters Conference Pension & Retirement Fund v. McNicholas Transp. Co., 848 F.2d 20, 22 (2nd Cir. 1988); Republic Industries, Inc. v. Teamsters Joint Council No. 83 of Virginia Pension Fund, 718 F.2d 628, 635 (4th Cir. 1983); Shelter Framing Corp. v. Pension Ben. Guar. Corp., 705 F.2d 1502, 1509 (9th Cir. 1983); Republic Industries, Inc. v. Central Pennsylvania Teamsters Pension Fund, 693 F.2d 290, 297 (3rd Cir. 1982).
It has also been stated as an exception to the arbitration requirement of section 1401(a)(1) that a plaintiff may skip arbitration and proceed directly to court if the arbitration process will cause the plaintiff irreparable harm. "If forcing a plaintiff to follow a designated administrative procedure would cause the plaintiff irreparable harm, then that plaintiff may bypass those procedures and seek judicial relief directly." Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia, 830 F.2d 1241, 1252-1253 (3rd Cir. 1987). "Parties may resort to the courts without exhaustion... when irreparable injury is likely to result absent immediate judicial review." Central States Southeast and Southwest Areas Pension Fund v. T.I.M.E.-DC, Inc., 826 F.2d 320, 329 (5th Cir. 1987) (quoting Lewis v. Reagan, 660 F.2d 124, 127 (5th Cir. 1981)). While the general rule is, "that courts must not entertain the merits of a dispute under the MPPAA prior to arbitration ... the rule may not apply if the employer were `... making a verifiable claim of irreparable injury.'" Mason and Dixon Tank Lines, Inc. v. Central States, Southeast and Southwest Areas Pension Fund, 852 F.2d 156, 164-165 (6th Cir. 1988) (quoting Marvin Hayes v. Central States, Southeast and Southwest Areas Pension Fund, 814 F.2d 297, 300 (6th Cir. 1987)). This exception almost universally arises within the following context: a employer, without instituting arbitration, files suit to contest the withdrawal liability assessed by a pension fund contending that (a) arbitration is not required because (b) it will suffer irreparable harm if arbitration is instituted because (c) the pension fund will invariably file suit against it to compel interim payments on its withdrawal liability debt pending completion of arbitration pursuant to 29 U.S.C. §§ 1399(c)(1)(A)(i) and 1401(d).
The Courts of Appeal have universally rejected this argument on the following basis. Because section 1401(d) is not self-enforcing, a fund must file suit in district court to compel the employer to make payments pending the conclusion of arbitration, and in that suit, the district court may, upon a showing by the employer that it will be irreparably harmed if required to make those payments, deny the relief sought by the fund, i.e., refuse to compel the employer to make the payments. "[Employer] also argues that, if it is forced to arbitrate its claim, the plans will demand interim payments pursuant to MPPAA section 1401(d) ... however, section 1401(d) is not self-enforcing ... [so] [e]ven if the plans succeed in winning an arbitrator's judgment, they would still have to obtain a court order to compel payments from [employer].... [a]t [which] point in time, [employer] could present evidence that it faced irreparable injury." Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia, 830 F.2d 1241, 1253 (3rd Cir. 1987) (citations omitted)(parentheticals added). "Further, the mere possibility of such a court decision concerning interim payments has no independent legal effect on the question whether Tiger's dispute is to be arbitrated; the possibility that a court may in the future deny a fund's request to compel payments, based upon an employer's demonstration of irreparable injury and the court's preliminary review of the merits, does not determine whether the underlying dispute must, by law, be arbitrated." Id. "[B]ecause submission of the case to arbitration does not necessarily entail the ordering of interim withdrawal liability payments, there is no basis for believing that arbitration would have any direct impact upon [employer]'s financial state." Central States Southeast and Southwest Areas Pension Fund v. T.I.M.E.-DC, Inc., 826 F.2d 320, 330 (5th Cir. 1987). "[T]he possibility that a court might enjoin interim payments based on a verifiable claim of irreparable harm has no `independent legal effect' on whether the underlying dispute must be submitted to arbitration." Mason and Dixon Tank Lines, Inc. v. Central States, Southeast and Southwest Areas Pension Fund, 852 F.2d 156, 165 (6th Cir. 1988) (quoting Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia, 830 F.2d 1241, 1253 (3rd Cir. 1987)).
Trustees of Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent) Pension Fund v. Central Transport, Inc., 935 F.2d 114 (7th Cir. 1991) involved a suit brought by a fund to compel an employer to make interim payments pending arbitration. On appeal, the employer presented the court with three reasons why it believed that the Fund's computation of its withdrawal liability was erroneous. The court would not consider the employer's argument stating: "They are neither here nor there, and we do not discuss them. Whether the Fund has computed the withdrawal liability correctly is the question for the arbitrator." Id. at 118.
Carriers Container Council, Inc. v. Mobile S.S. Ass'n Inc.-Intern. Longshoreman's Ass'n, AFL-CIO Pension Plan and Trust, 896 F.2d 1330 (11th Cir. 1990) involved a suit filed by a plaintiff, against whom withdrawal liability had been assessed by a pension fund, seeking a declaration that it was not in fact an "employer" subject to withdrawal liability under the MPPAA. The pension fund filed a counterclaim for an order holding the plaintiff responsible for and directing it to pay the outstanding withdrawal liability. The action was filed prior to the plaintiff's deadline for instituting arbitration proceedings. The district court determined that the plaintiff was in fact an "employer" and directed the parties to arbitrate the amount of the withdrawal liability. On appeal, the Eleventh Circuit Court of Appeals affirmed the district court's determination that the plaintiff was an "employer," as well as its reference of the issue of the amount of withdrawal liability to arbitration. "Once the court had determined that CCC was an employer within the meaning of 29 U.S.C.A. § 1381(a), the issue of whether CCC had withdrawal liability was in effect decided.... Accordingly, the district court did not err in noting that the only remaining issue was the amount of CCC's liability and remanding that issue to the arbitrator. See Central States Pension Fund v. 888 Corp., 813 F.2d 760, 767 (6th Cir. 1987) (where parties dispute the proper amount of employer's withdrawal liability, the issue should be remanded to an arbitrator)."
