On Appeal from the United States District Court for the District of New Jersey. (D.C. Civ. No. 83-2012-D).
Before HUNTER, BECKER, Circuit Judges, and HUYETT, District Judge.*fn*
This case presents the question of whether, under the multiemployer Pension Plan Amendments Act ("MPPAA"), 29 U.S.C. § 1381 et seq., an employer-member of an ERISA pension plan may be assessed withdrawal liability when it sells all of its stock to another employer that assumes the operations of the corporate seller and employs most of its employees, and, by virtue of its independent collective bargaining agreement with the same pension plan, continues to make the payments formerly made by the first employer. In the unusual circumstances of this case, we hold that no liability-creating withdrawal took place, and that the assessment of withdrawal liability was improper. We therefore affirm the district court's judgment declaring that no withdrawal took place and enjoining the pension plan from taking action to collect withdrawal liability payments.
I. FACTS AND PROCEDURAL HISTORY
Co-appellee Dorn's Transportation, Inc. ("Dorn's"), a motor freight carrier, was a contributing member of appellant Teamsters Pension Trust Fund of Philadelphia and Vicinity ("the Plan"), a pension plan governed by the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., as amended by the Multiemployer Pension Plan Amendments Act (MPPAA), 29 U.S.C. § 1381 et seq. (1982). On March 2, 1981, Dorn's shut down its terminal in Pennsauken, New Jersey. That day, co-appellee Oneida Motor Freight entered into a contract (subject to ICC approval) with Dorn's Chief Executive Officer and principal stockholder, Walter Dorn, to purchase all of Dorn's outstanding stock. The transaction involved the assumption of Dorn's operating rights by Oneida and the de facto dissolution of Dorn's.
Oneida offered employment to all twelve of the former Dorn's employees at the Pennsauken facility.*fn1 Ten accepted and were moved to Oneida's Pennsauken facility. All ten were union members on behalf of whom Dorn's, by virtue of a collective bargaining agreement, had been making weekly contributions to the Plan. For a number of years, as the result of an independent agreement with the Plan virtually identical to Dorn's agreement with the Plan, Oneida had also made payments to the Plan on behalf of its employees who were union members. Thus, Oneida continued to make payments to the Plan on behalf of the former Dorn's employees who accepted employment with Oneida. These employees were dovetailed with the other Oneida employees in Oneida's seniority roster.
Shortly after receiving the Dorn's stock, Oneida learned that Dorn's faced potential withdrawal liability to the Plan for which Oneida, as a "commonly controlled" company, might be jointly liable under 29 U.S.C. § 1301.*fn2 Oneida refused to pay Dorn's the purchase price of Dorn's stock, alleging that Dorn's had breached the contract by failing to disclose the potential withdrawal liability. Walter Dorn took the matter to arbitration, where he prevailed. When Oneida refused to comply with the arbitrator's decision, Walter Dorn brought suit in United States District court for the Southern District of New York to confirm and enter judgment upon the arbitration award. The court, however, dismissed the case for lack of jurisdiction. Dorn v. Dorn's Transportation and Oneida Motor Freight, 562 F. Supp. 822 (S.D.N.Y. 1983). The record does not reveal exactly what accommodation was reached, but we do know that the sale of stock was consummated.
On February 4, 1983, the Plan notified Dorn's that its trustees had assessed a total of over $315,000 in withdrawal liability against Dorn's (for which, as noted, Oneida might be jointly liable). On June 1, 1983, Dorn's and Oneida filed a complaint in the district court for the District of New Jersey seeking a declaratory judgment that various provisions of MPPAA are unconstitutional. On March 12, 1984, the district court issued an order permitting appellees to file an amended complaint that added a statutory argument to its constitutional argument. The statutory argument is that under 29 U.S.C. § 1301, see supra note 2, and also under § 1398 which provides a safe haven in the event of certain changes in corporate structure, no withdrawal took place and therefore no withdrawal liability is owing.*fn3
On September 14, 1984, Dorn's and Oneida moved for summary judgment. In its opposition to this motion, the Plan sought discovery pursuant to Fed. R. Civ. P. 56(f). The items it sought were depositions of two individuals involved in the Dorn's/Oneida transaction -- Walker Dorn and Oneida agent Paul McGoldrick. In its affidavit, and in a hearing before the district court on September 14, 1984, the Plan explained that these depositions were relevant because unless the Dorn's/Oneida transaction was bona fide and arms length, it could not come within the safe harbor of § 1398. On October 25, 1984, the district court denied the motion for additional discovery and issued an order granting summary judgment for Dorn's and Oneida. The district court made findings that the Dorn's/Oneida transaction was indeed bona fide and arms length, but gave no indication as to exactly how that factual finding affected its holding. Id. at 354.
II. STATUTORY SCHEME; PARTIES' CONTENTIONS
Under ERISA, as amended by MPPAA, employers contribute to a pension plan on behalf of each of their employees who is a member of a participating union. The amount of the payments is determined by a collective bargaining agreement between each employer and its employees. The plan is administered by trustees, half of whom are chosen by contributing employers and half by the union. 29 U.S.C. § 185(c)(5)(B).
When an employer withdraws from a pension plan, it incurs "withdrawal liability," the amount of which is determined by the plan trustees. 29 U.S.C. § ...