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Penn Elastic Co. v. United Retail and Wholesale Employees Union

May 30, 1986


On Appeal from the United States District Court for the Eastern District of Pennsylvania, (D.C. Civ. No. 82-0777)

Author: Higginbotham


Before: SEITZ and HIGGINBOTHAM, Circuit Judges, and WEBER, District Judge.*fn*



This case, like Warner-Lambert Co. v. United Retail and Wholesale Employee's Teamster Local No. 115 Pension Plan, Nos. 83-1676 and 83-1682, also decided this day, involves challenges to the constitutionality of the Multiemployer Pension Plan Amendments Act of 1980, Pub. L. 364, 94 Stat. ยง 208 ("MPPAA"). The relevant provisions of MPPAA are fully discussed in Warner-Lambert. In No. 83-1788, an appeal from the dismissal of Penn Elastic's complaint, we must take the following well-pleaded facts as true: In 1972, Penn Elastic Company's hourly rate employees elected Local 115 of the United Retail and Wholesale Employees Union (the "Union") as their collective bargaining representative. As part of its first collective bargaining agreement with the Union, Penn Elastic agreed to discontinue its own single-employer benefit pension plan, and to participate in the Union's joint pension fund (the "Fund"), the defendant below.

In furtherance of this agreement, Penn Elastic transferred $337,993.31 from its single-employer pension plan to the Fund, and entered into a Trust Agreement with the Union. This Trust Agreement embodied, inter alia, Penn Elastic's agreement to contribute to the Fund such amounts as might be determined by Penn Elastic's collective bargaining agreements with the Union. This agreement was Penn Elastic's sole undertaking to contribute to the fund, and Pen Elastic at all times until August 10, 1981 made all agreed-upon contributions to the Fund.

On August 10, 1981, Penn Elastic ceased operations at its West Point, Pennsylvania facility, and, by so doing, withdrew from participation in the Fund. Prior to this time, the MPPAA had been enacted and had come into effect,*fn1 and, on November 13, 1981, the Trustees of the Fund notified Penn Elastic that the Fund was asserting a claim against Penn Elastic under the MPPAA for "withdrawal liability" in the amount of $894,130.00. The notification advised Penn elastic that withdrawal liability had been calculated pursuant to the "presumptive method" provided for under the MPPAA, and demanded that Penn Elastic commence payment of such withdrawal liability within 60 days.

On February 19, 1982, Penn Elastic brought this action for declaratory and injunctive relief, contending that the MPPAA deprived it of property without due process of law, effected a taking of Penn Elastic's property for a public purpose without just compensation in violation of the Fifth Amendment, and deprived Penn Elastic of its right to a jury trial guaranteed by the Seventh Amendment. Penn Elastic attacked not only the MPPAA's substance, but also the procedures it contained which prescribed the exclusive methods by which an employer could challenge the assessment of withdrawal liability.

The Fund filed an Answer and Counterclaim in which it denied certain of Penn Elastic's factual allegations, raised a number of affirmative defenses, and sought entry of judgment against Penn Elastic in the amount of the claimed "withdrawal liability" together with "all interest, costs, counsel fees, penalties and liquidated damages as may be allowed by MPPAA and other applicable law."

Thereafter, on September 28, 1983, the district court determined, based upon its interpretation of Republic Industries, Inc. v. Central Pennsylvania Teamsters Pension Fund, 693 F.2d 290 (3d Cir. 1982), that it should consider only challenges to the facial constitutionality of the MPPAA proper to the parties' engaging in arbitration pursuant to the MPPAA, and that challenges to the constitutionality of the MPPAA as applied should await the development of a factual record through arbitration. Penn Elastic does not challenge this aspect of the district court's determination. The district court, consistent with its disposition of Warner-Lambert, upheld the facial constitutionality of MPPAA. It also entered summary judgment for the Fund on its counterclaim for the amount of withdrawal liability claimed, without prejudice to Penn Elastic's right to pursue arbitration. The court, however, denied an award of attorney's fees. These cross-appeals followed. On November 25, 1983, this Court stayed consideration of this case pending the Supreme Court's decision in Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 81 L. Ed. 2d 601, 104 S. Ct. 2709 (1984), which was decided June 18, 1984. After oral arguments, we again ordered this case held under advisement pending Supreme Court disposition of Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 106 S. Ct. 1018, 89 L. Ed. 2d 166 (1986). That case was decided February 26, 1986. This matter is now ripe for decision.


Penn Elastic, in light of the legal developments discussed fully in Warner-Lambert, presses only one of its constitutional challenges on appeal: its contention that the procedures used to determine the amount of an employer's withdrawal liability violate due process because of the inherent bias of the trustees and the presumption of correctness accorded their calculation. In United Retail and Wholesale Employees Teamsters Union Local No. 115 Pension Plan v. Yahn & McDonnell, Inc., 787 F.2d 128 (3d Cir. 1986), this Court sustained this position, requiring that we now reverse the judgment of the district court insofar as it declares that the presumption of correctness accorded the Trustees' calculation in the course of arbitration is facially constitutional.*fn2 For the reasons stated in Warner-Lambert, however, we will stay our mandate in No. 83-1788 pending possible Supreme Court review of Yahn & McDonnell.

Pen Elastic contends that we must also vacate that part of the district court's judgment ordering it to begin paying its withdrawal liability to the Fund. They argue that the district court really intended to defer such payments pending arbitration, but "simply expressed that intention imprecisely." We have no reason to believe that the district court's order was inadvertent. Indeed, we have recently held specifically that MPPAA creates a cause of action to collect withdrawal liability payments pending arbitration. Yahn & McDonnell, slip op. at 9-12. Nor does our partial reversal of the district court's declaratory judgment on the facial constitutionality of ...

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