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Republic Industries Inc. v. Central Pennsylvania Teamsters Pension Fund

as amended december 1 1982.: November 19, 1982.



Aldisert and Higginbotham, Circuit Judges, and Sarokin,*fn* District Judge.

Author: Aldisert


ALDISERT, Circuit Judge.

It is a "long settled rule of judicial administration that no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted." Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51, 82 L. Ed. 638, 58 S. Ct. 459 (1938). The question for decision in this appeal is whether the district court erred in applying this rule when it refused to consider a challenge to the constitutionality of the Multiemployer Pension Plan Amendments Act of 1980 because appellant had not exhausted the arbitration procedure mandated by the Act. Appellant contends that the district court was wrong to compel arbitration because the policy justifications which support the exhaustion doctrine would not be furthered by postponing judicial review of its constitutional claims. We agree and accordingly reverse the judgment of the district court.


Appellant, Republic Industries, Inc., is the successor in interest to Johnson Motor Lines, Inc., an employer who contributed to the Central Pennsylvania Teamsters Pension Fund ("the Fund") until August 8, 1980 when it ceased its business operations. On September 26, 1980, seven weeks after that corporate dissolution, the President signed the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), 29 U.S.C. §§ 1381-1461 (1982) (amending the Employer Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1381), which by its terms applies retroactively to April 28, 1980. Id. § 1461(e) (2).

Because this case centers on the provisions of MPPAA, we must examine that statute in detail. The Act provides that when a contributing employer withdraws from a multiemployer pension fund, it must pay a withdrawal liability -- an allocated portion of the fund's unfunded vested benefit liability.*fn1 The duty to compute and collect this liability falls upon the trustees and actuaries of the fund. Id. §§ 1382, 1391, 1393, 1399. The Act provides that disputes over the amount of withdrawal liability shall be resolved through arbitration. Id. § 1401(a) (1). At arbitration, the fund's determination of withdrawal liability is presumed correct unless shown to be "unreasonable" or "clearly erroneous." Id. § 1401(a) (3) (A). If any party is dissatisfied with the outcome of arbitration, it may bring an action in the district court either where the plan is administered or where the defendant resides or does business. Id. § 1451(d). If such action is instituted, the arbitrator's findings of fact may be rebutted only by a preponderance of the evidence. Id. § 1401(b) (2), (c).

On November 18, 1981, in accordance with the Act, the Fund demanded withdrawal liability from Johnson Motor Lines in the amount of $848,494, payable on or before January 17, 1982. On January 12, 1982, Republic brought an action in the district court below seeking to enjoin the Fund from imposing such liability. Republic presented six constitutional challenges to MPPAA, arguing that the Act violates the fifth amendment by (1) imposing retroactive liability; (2) authorizing a prehearing seizure in the form of installment payments which must be paid during arbitration; (3) delegating the determination of liability to private actuaries who have no clear basis on which to compute such an amount; (4) dictating its liability standards in especially vague terms and imposing an excessive burden of proof on withdrawing employers; and (5) authorizing a "taking" without just compensation, i.e., the use of private funds to promote the public purpose of providing pension benefits to workers. Further, Republic contended that the Act denies employers the right to a jury trial for the resolution of their disputes in contravention of the seventh amendment. Republic v. Central Pennsylvania Teamsters Pension Fund, 534 F. Supp. 1340, 1343-44 (E.D. Pa. 1982).

The district court dismissed the complaint for Republic's failure to exhaust the administrative remedies mandated by MPPAA and accordingly denied its request for injunctive relief. Republic appealed. Pension Benefit Guaranty Corporation, a wholly-owned United States Government corporation created by ERISA, 29 U.S.C. § 1302(a), to enforce, inter alia, the withdrawal liability provisions of MPPAA, filed an amicus brief.


In considering Republic's primary contention -- that the policy justifications for requiring exhaustion are absent from this case -- we must consider the purpose of the "long settled rule . . . that no one is entitled to judicial relief . . . until the prescribed administrative remedy has been exhausted." Myers, 303 U.S. at 50-51. The exhaustion doctrine is justified by three policy concerns. First, adherence to the doctrine shows appropriate deference to Congress' decision, embodied in statute, that an independent administrative tribunal, and not the courts, should serve as the initial forum for dispute resolution. Babcock & Wilcox Co. v. Marshall, 610 F.2d 1128, 1137 (3d Cir. 1979); American Federation of Government Employees v. Resor, 442 F.2d 993, 994 (3d Cir. 1971). Were the courts to act prematurely, in disregard of this statutory scheme, the doctrine of separation of powers would be undermined. First Jersey Securities, Inc. v. Bergen, 605 F.2d 690, 695 n.3 (3d Cir. 1979) (citing Resor, 442 F.2d at 994); K. Davis, Administrative Law of the Seventies §§ 20.01-20.08 (1976).

Second, the exhaustion doctrine illustrates respect for administrative autonomy by forbidding unnecessary judicial interruption of the administrative process. This autonomy allows the administrative tribunal to exercise its own discretion, apply its own special expertise, and correct its own errors, thereby promoting administrative responsibility and efficiency and minimizing the frequent and deliberate flouting of administrative processes which could weaken the tribunal's effectiveness. n.2 (FOOTNOTE OMITTED.) McKart v. United States, 395 U.S. 185, 194, 23 L. Ed. 2d 194, 89 S. Ct. 1657 (1968); Bethlehem Steel Corp. v. EPA, 669 F.2d 903, 907 (3d Cir. 1982); First Jersey, 605 F.2d at 695.

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 decisionmaking. McKart, 395 U.S. at 194-95; Bethlehem Steel, 669 F.2d at 907; Babcock, 610 F.2d at 1137; First Jersey, 605 F.2d at 695. These mooting and fact-finding functions may be particularly important in the resolution of cases involving constitutional issues. If the administrative tribunal decides a case on nonconstitutional grounds, the court may find it unnecessary to proceed with constitutional adjudication. In this way, exhaustion furthers the concept of judicial restraint: "constitutional issues should not be decided and legislation should not be invalidated, if a controversy may be resolved on some other ground." Babcock, 610 F.2d at 1137 (citing Ashwander v. TVA, 297 U.S. 288, 347, 80 L. Ed. 688, 56 S. Ct. 466 (1936) (Brandeis, J., concurring)). In addition, even if the court must reach the constitutional issues, the administrative tribunal will have developed the ...

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