On Appeal from the United States District Court for the District of New Jersey. (D.C. Civil No. 93-cv-04285).
Before: Sloviter, Chief Judge, Mansmann and Alarcon*fn* , Circuit Judges
The Board of Trustees of the District No. 15 Machinists' Pension Fund (Fund or Pension Fund) appeals the dismissal of their action to collect an assessment of withdrawal liability filed against Kahle Engineering Corp. under the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), Pub. L. No. 96-364, 94 Stat. 1208 (1980) (codified as amended at 29 U.S.C. §§ 1001a, 1381-1453 (1988 & Supp. V 1993)), which amended the Employee Retirement Income Security Act of 1974 (ERISA), Pub. L. No. 93-406, 88 Stat. 832 (codified as amended at 29 U.S.C. §§ 1001-1461 (1988 & Supp. V 1993)). The district court entered summary judgment against the Fund on the basis of the statute of limitations.
This appeal requires us to determine whether the district court correctly held that the six-year statute of limitations in the MPPAA began to run for the entire liability when the employer first missed an installment payment, even though the payout period was more than nine years. Apparently, no federal appellate court has addressed this precise issue of statutory interpretation under the MPPAA although two other courts of appeals have decided cases which suggest possible, and conflicting, interpretations.
The MPPAA was enacted by Congress in 1980 as an amendment to ERISA to insure the financial stability of multiemployer pension plans by imposing mandatory liability on employers withdrawing from a pension plan. See Laborers Health and Welfare Trust Fund v. Advanced Lightweight Concrete Co., 484 U.S. 539, 545, 98 L. Ed. 2d 936, 108 S. Ct. 830 (1987). In IUE AFL-CIO Pension Fund v. Barker & Williamson, 788 F.2d 118 (3d Cir. 1986), we identified two goals for the MPPAA: "'to protect the interests of participants and beneficiaries in financially distressed multiemployer plans, and . . . to ensure benefit security to plan participants.'" Id. at 127 (quoting H.R. Rep. No. 869, 96th Cong., 2d Sess. 71, reprinted in 1980 U.S.C.C.A.N. 2918, 2939). The principal manner in which these goals are effectuated by the act is by the imposition of withdrawal liability on an employer who withdraws from a multiemployer pension plan in the proportionate share of the plan's unfunded vested benefits. Crown Cork & Seal v. Central States Pension Fund, 982 F.2d 857, 861 (3d Cir. 1992), cert. denied, 125 L. Ed. 2d 662, 113 S. Ct. 2961 (1993); see also Concrete Pipe and Prods. v. Construction Laborers Pension Trust for S. Cal., 124 L. Ed. 2d 539, 113 S. Ct. 2264, 2272 (1993).
The statute sets forth an intricate scheme for the calculation and collection of the withdrawal liability and resolution of disputes with respect thereto.*fn1 When an employer withdraws from a multiemployer plan, the plan sponsor must determine the amount of withdrawal liability, and "as soon as practicable" notify the employer of the amount of liability and the schedule for repayments and demand payment in accordance with that schedule. See 29 U.S.C. §§ 1382, 1399(b)(1). The plan sponsor must set up a schedule for withdrawal payments which may impose liability to a maximum of twenty years. Id. §§ 1399(b)(1)(A)(ii), 1399(c)(1). The first installment payment on the schedule is due within sixty days of the plan sponsor's demand. Id. § 1399(c)(2). Under an exception for labor-disputes, the employer shall not be considered to have withdrawn from a plan solely because an employer suspends contributions during a labor dispute involving its employees. Id. § 1398.
No later than ninety days after the employer receives notice from the plan sponsor of the determination of withdrawal liability, the employer may ask the plan sponsor to review any specific matter and to reassess the schedule of payments; "may identify any inaccuracy in the determination of the amount of the unfunded vested benefits allocable to the employer;" and may furnish any additional relevant information to the plan sponsor. Id. § 1399(b)(2)(A). The plan sponsor must conduct a reasonable review of any matter raised by the employer, and notify the employer of its decision, the basis for its decision, and any changes made as a result of the review. Id. § 1399(b)(2)(B).
An employer who wishes to contest the fact of its liability or the amount must initiate arbitration. If it does not, it waives the right to contest the assessment and the amounts demanded by the plan sponsor become "due and owing" as set forth on the payment schedule, and the employer may be sued for collection in state or federal court. Id. § 1401(b)(1).
Under the acceleration provision of the statute available in the event of a default, the "plan sponsor may require immediate payment of the outstanding amount of the employer's withdrawal liability, plus accrued interest on the total outstanding liability from the due date of the first payment which was not timely made." Id. § 1399(c)(5); see also 29 C.F.R. § 2644.2(b)(2). For purposes of this section, default is defined as "the failure of an employer to make, when due, any payment if not cured within sixty days after the employer receives written notification from the plan sponsor of such failure." 29 U.S.C. § 1399(c)(5)(A). A default can also be "any other event defined by the plan rules which indicates a substantial likelihood that an employer will be unable to pay its withdrawal liability." Id. § 1399(c)(5)(B).
A PBGC regulation prohibits a declaration of default for failure to make timely payments during the period, and for sixty days thereafter, that an arbitration is pending or that the plan sponsor is conducting the employer's requested review. See 29 C.F.R. § 2644.2(c)(1). However, the statute provides that payments in accordance with the schedule set forth by the plan sponsor must be made "notwithstanding any request for review or appeal of determinations of the amount of such liability or of the schedule." 29 U.S.C. § 1399(c)(2). If an employer misses a scheduled payment, the fund may seek to collect by filing a collection action but it may not accelerate the balance during that protected arbitration period. See United Retail and Wholesale Employees Pension Plan v. Yahn & McDonald, 787 F.2d 128, 131 (3d Cir. 1986), aff'd per curiam by an equally divided court sub nom., PBGC v. Yahn & McDonald, 481 U.S. 735 (1987) (hereinafter Yahn).
An action for liability under the MPPAA may be brought by a plan fiduciary, employer, plan participant, beneficiary or an employee organization which represents such a plan participant or beneficiary "adversely affected by the act or omission of any party" under the statute or by an employee organization. 29 U.S.C. § 1451(a)(1). That action must be filed within six years after the date on which "the cause of action" arose. Id. § 1451(f)(1).*fn2
With the statutory scheme in mind, we turn to the facts of this case. Our task is to determine when the Pension Fund's "cause of action" that is the subject of this suit arose.
Facts and Procedural History
Kahle was a contributing employer to the Pension Fund pursuant to the collective bargaining agreements it entered into with its union. Following a labor dispute in 1981, Kahle suspended contributions to the Pension Fund. On April 23, 1984, in accordance with 29 U.S.C. §§ 1382, 1399(b)(1), the Fund notified Kahle in writing that it had determined that Kahle had withdrawn from the Fund and requested payment of withdrawal liability in the amount of $271,746, payable in thirty-eight quarterly installment payments of $9,467 each, beginning on July 1, 1984, with a final thirty-ninth payment of $6,459, payable in January, 1994.*fn3 The April 23 letter also notified Kahle of its statutory right to request review from the Fund, to identify any inaccuracies, and to furnish any additional relevant information. In response, on July 2, l984 Kahle wrote that it "has not withdrawn from the Fund," that the cessation of contributions was caused solely by a strike which commenced on June 22, 1981 and continued in 1982, and that the company remains ready and willing to negotiate with the Union. The letter stated it constituted an official request under section 4219(b)(2) of ERISA [29 U.S.C. § 1399(b)(2)] for review of the Fund's determination that the company had withdrawn, that withdrawal occurred on June 22, 1981 and of the figures used to calculate the withdrawal liability. Kahle enclosed a first installment payment of $9,467 with the letter. App. at 26-27.
On August 2, 1984, the Fund's counsel advised Kahle by letter that he would raise the request for review of the withdrawal liability determination at the next meeting of the Fund Trustees and would speak to the union about Kahle's claims of continued negotiation and representation. Counsel also posed questions to Kahle about its claim of continuing negotiation with the union. App. at 59-60.
Kahle's response dated September 13, 1984 made clear there were no negotiations to end the strike and that picketing continued until April 1982, but that "both parties remained at the call of the Federal Mediator." In the last sentence of that letter, Kahle stated that "pursuant to 29 C.F.R. § 2644.2(c) the Company will discontinue quarterly payments."*fn4 App. at 28-29. In fact, the referenced PBGC regulation did not authorize Kahle to withhold the scheduled payments but merely prohibited the Fund from declaring default during the pendency of arbitration. See 29 C.F.R. § 2644.2.
Kahle sent the Fund's counsel a letter on December 20, 1984, demanding arbitration.*fn5 Before the Fund's counsel had received the December 20, 1984, letter, he wrote to Kahle's counsel on December 21, 1984, stating that the Trustees saw no reason to change their determination that Kahle had withdrawn from the Plan. App. at 30. The December 21 letter also stated, "Please be . . . advised that your client is now in default in its payments. Unless it cures this default by the 1st of January 1985, our client will have no alternative but to declare your client 'in default' and seek all remedies available to it . . . under appropriate federal legislation." App. at 30.
On December 28, 1984, the Fund noted receipt of Kahle's letter of December 20, 1984, enclosed another copy of the Fund's actuarial calculations, and stated again that the Fund saw no reason to alter its determination of the fact of or date of withdrawal, but indicated a willingness to review its calculations if Kahle provided more specifics. The Fund acknowledged Kahle's demand for arbitration and suggested that the parties "proceed in accordance with the rules of the American Arbitration Association for all purposes," reserving any objections including timeliness for the arbitrators. The Fund also offered to discuss "these matters on a less formal basis." App. at 61-62.
There is no evidence of further communications, negotiations, or arbitration proceedings after December 1984. Kahle did not make any further payments. Almost four years later, on August 9, 1988, the Fund notified Kahle "that the company is in default in its withdrawal liability payments," demanded all past due payments plus interest, and stated that if Kahle did not make such payments within sixty days the Fund would require "immediate payment of the total withdrawal liability, plus interest accruing from the date the first payment was due." The Fund also demanded that Kahle post a bond for $271,746, the full amount of withdrawal liability. App. at 63-64. The record contains no evidence of further communications until the filing of this suit.
The Pension Fund filed the complaint in the United States District Court for the District of New Jersey on September 28, 1993. The parties filed cross-motions for summary judgment. Following a hearing on February 28, 1994, the district court granted Kahle's Motion for Summary Judgment and dismissed the case as time-barred under the MPPAA's six-year statute of limitations. See 29 U.S.C. § 1451(f)(1).
The district court had jurisdiction under 29 U.S.C. §§ 1132(e)(1) and 1451(c) and we have appellate jurisdiction pursuant to 28 U.S.C. § 1291. A district court's grant of summary judgment is subject to our plenary review. Mitchell v. Commission on Adult Entertainment Est., 10 F.3d 123, 129 (3d Cir. 1993). Our review of the statute of limitations under the MPPAA is similarly plenary. Doherty v. Teamsters Pension Trust Fund, 16 F.3d 1386, 1389 (3d Cir. 1994).
On the date this lawsuit was filed, September 28, l993, Kahle was still within the payout period established by the Pension Fund pursuant to the MPPAA for Kahle to complete payment of its withdrawal liability. That period was not scheduled to expire until January 1994. Although the six-year statute of limitations precludes the Fund's recovery of any payments due more than six years before the filing of its complaint, and the Pension Fund apparently so concedes, we fail to see any persuasive reason why the Fund should not be entitled to recover the payments due during the six years preceding the filing of its lawsuit.
The district court reasoned that the Fund's cause of action arose when Kahle missed its first payment in October 1984 and, at the latest, December 21, 1984.*fn6 Under the district court's theory, and that accepted by the Dissent in this case, the failure of the Fund to file its suit within six years from that date meant that the Fund's action was untimely, even though it was filed while there were still payments to be made.
We believe that the district court erred when it failed to recognize that the employer's obligation to make the scheduled payments is akin to the obligation to make installment payments. In an installment contract, a new cause of action arises from the date each payment is missed. See 4 A. Corbin, Corbin on Contracts § 951 (1951).
The principles applying the statute of limitations to installment payments are well established:
In the case of an obligation payable by instalments, the statute of limitations runs against each instalment from the time it becomes due, that is, from the time when an action might be brought to recover it.
The rule that the statute of limitations begins to run against each instalment of an obligation payable by instalments only from the time the instalment becomes due applies although the debtor has the option to pay the entire indebtedness at any time. On the other hand, where there is an acceleration clause giving the creditor the right upon certain contingencies to declare the whole sum due, the statute begins to run, only with respect to each instalment, at the time the instalment becomes due, unless the creditor exercises his option to declare the whole indebtedness due, in which case the statute begins to run from the date of the exercise of his option.
51 Am. Jur. 2d: Limitation of Actions § 133.
As Corbin explains, unless there is a repudiation (analogous to a default and acceleration under the MPPAA), the plaintiff may only sue for each breach as it occurs, and the statute of limitations begins to run from that time. See Corbin supra, § 989; see also United States v. La France, 728 F. Supp. 1116, 1119-20 (D. Del. 1990) (holding that the cause of action for collection of installment payments under a Small Business Administration loan accrues on each installment from the date it falls due in the absence of acceleration).
The analogy of scheduled payments under the MPPAA to installment payments was adopted by the Eleventh Circuit when it held that interest accrues on overdue withdrawal liability from the due date of each missed payment rather than from the due date of the first installment. See Carriers Container Council v. Mobile S.S. Ass'n, 948 F.2d 1219, 1222-24 (11th Cir. 1991). The court reasoned that accruing interest from the date of the first installment would amount to an improper retroactive acceleration of interest. Id. at 1223. But cf. New York Teamsters Conference Pension & Retirement Fund v. McNicholas Transp. Co., 658 F. Supp. 1469, 1476 (N.D.N.Y. 1987) (ordering interest from first date of missed payment under schedule), aff'd, 848 F.2d 20 (2d Cir. 1988). Although the context of Carriers Container was different than the case before us, that court's treatment of each installment as a separate amount due is in line with the theory proffered by the Pension Fund.
The Fund also refers us to Ludington News Co. and Michigan UFCW/Drug Employers Pension Fund Workers Union and Drug and Mercantile Employers Joint Pension Fund, 9 Employee Benefits Cas. (BNA) 1913 (1988), an arbitrator's decision viewing the withdrawal liability as an installment contract obligation under which "the statute does not begin to run with respect to a particular installment until that installment falls due." Id. at 1916. Although we recognize that Ludington is without precedential effect, it was cited as relevant by another circuit. See Joyce v. Clyde Sandoz Masonry, 276 U.S. App. D.C. 379, 871 F.2d 1119, 1124 (D.C. Cir.), cert. denied, 493 U.S. 918, 107 L. Ed. 2d 260, 110 S. Ct. 280 (1989). We also note that Ludington relied on Jackson v. American Can Co., 485 F. Supp. 370 (W.D. Mich. 1980), a case that does provide a meaningful analogy. In Jackson, the court declined to apply the statute of limitations as a basis to summarily dismiss an action by a retiree who had been told in l963 of the decision to give him reduced pension benefits when they became due in 1973. Id. at 374-75. The court noted that the pension plan may qualify as an installment contract, under which claims do not accrue until each payment comes due. Id. at 374.
The strongest authority in support of the holding of the district court and the arguments of Kahle is the decision of the Seventh Circuit in Central States, Southeast and Southwest Areas Pension Fund v. Navco, 3 F.3d 167 (7th Cir. 1993), cert. denied, 127 L. Ed. 2d 382, 114 S. Ct. 1062 (1994), which, although it arose in another context, rejected the position of the pension funds in that ...