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Pittsburgh Mack Sales & Service, Inc. v. International Union of Operating Engineers

September 4, 2009

PITTSBURGH MACK SALES & SERVICE, INC., DOING BUSINESS AS PITTSBURGH TRUCK CENTER, APPELLANT
v.
INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL UNION NO. 66



On Appeal From the United States District Court for the Western District of Pennsylvania. (Civil No. 07-cv-00092). District Judge: Honorable Gary L. Lancaster.

The opinion of the court was delivered by: Chagares, Circuit Judge

PRECEDENTIAL

Argued September 29, 2008

Before: FISHER, CHAGARES, and HARDIMAN, Circuit Judges.

OPINION OF THE COURT

This case requires us to determine whether an agreement by a union to purportedly indemnify or hold harmless an employer for the employer's withdrawal liability to a pension plan under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 ("ERISA"), and the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. §§ 1381-1461 ("MPPAA"), is unenforceable because it violates public policy. We hold that it is not. As a result, we will vacate the District Court's judgment to the contrary and will remand this matter to the District Court.

I.

Pittsburgh Mack Sales & Service, Inc. ("Pittsburgh Mack") serviced and sold Mack Trucks.*fn1 At issue are two Collective Bargaining Agreements ("CBAs") between Pittsburgh Mack and the International Union of Operating Engineers Local Union No. 66 (the "Union"). The CBAs were effective January 13, 2004 through January 12, 2007, and applied to certain groups of employees at Pittsburgh Mack's Pittsburgh, Pennsylvania, facility. The CBAs provided, inter alia, that Pittsburgh Mack would make specific contributions to the Operating Engineer Construction Industry and Miscellaneous Pension Fund (the "Fund") -- a multiemployer pension fund covered by ERISA and the MPPAA -- and that the Union would hold Pittsburgh Mack harmless for liability to the Fund in excess of its specified contribution. Specifically, the relevant section of the CBAs (hereinafter "Section 1 of the CBAs") provided:

During the term of this Agreement, the employer agrees to contribute to [the Fund] for each man hour paid [] to the Employees covered by this Agreement . . . $1.65.

The Union will hold [Pittsburgh Mack] harmless for any liability to the Fund for any amounts claimed over and above this hourly contribution.

Appendix (App.) 66, App. 104.*fn2 Pittsburgh Mack made all of the hourly contributions to the Fund required under Section 1 of the CBAs. The CBAs also contained a "successor clause," which provided that the contract would be binding on a new owner if Pittsburgh Mack was purchased by an outside third party.

On October 5, 2005, during the period that the CBAs were in effect, Pittsburgh Mack executed a letter of intent to sell substantially all of its assets to Allentown Mack. During the following two weeks, "the Union voluntarily negotiated a new labor agreement and/or agreements with Allentown Mack to govern the wages, hours and other conditions of employment for the bargaining unit employees of Allentown Mack after it purchased the assets of Pittsburgh Mack." App. 37 (Complaint ¶ 11). A product of the Union's bargaining with Allentown Mack was that "the Union eliminated agreement provisions requiring hourly contributions to the Fund on behalf of the bargaining unit employees." Id. (Complaint ¶ 12). Pittsburgh Mack had no involvement in the negotiations between the Union and Allentown Mack.

Pittsburgh Mack and Allentown Mack entered into an Asset Purchase Agreement on December 19, 2005. In a letter dated November 20, 2006, the Fund notified Pittsburgh Mack of its determination that Pittsburgh Mack had "incurred a complete withdrawal from the Plan on December 31, 2005," and made a demand on Pittsburgh Mack for the resulting withdrawal liability in the amount of $413,389 plus interest.

In a letter dated November 29, 2006, Pittsburgh Mack advised the Union of the Fund's demand and, in turn, demanded that the Union indemnify or otherwise hold it harmless for the withdrawal liability. Pittsburgh Mack, in support of its demand on the Union, cited Section 1 of the CBAs and argued that because "the alleged withdrawal liability to the Plan is in addition to, and in excess of, Pittsburgh Mack's required hourly contribution, [the Union] is responsible for this withdrawal liability to the Plan." App. 125. The Union has refused to indemnify or hold harmless Pittsburgh Mack for the withdrawal liability to the Fund.

Pittsburgh Mack brought a declaratory judgment action seeking a determination that pursuant to Section 1 of the CBAs, the Union is obligated to indemnify it or hold it harmless against claims for withdrawal liability by the Fund. The Union moved to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), arguing, inter alia: (1) the District Court lacked jurisdiction; (2) Pittsburgh Mack's claims were not ripe; and (3) Section 1 of the CBAs was unenforceable because it was contrary to public policy.

After considering a Magistrate Judge's Report and Recommendation ("R&R"), the District Court granted the Union's motion to dismiss and adopted the R&R. The District Court determined that Section 1 of the CBAs was "unenforceable as contrary to the public policy manifested in ERISA and the MPPAA." Pittsburgh Mack Sales & Serv., Inc. v. International Union of Operating Engineers, No. 07-00092, 2007 WL 2907950, at *8 (W.D. Pa. Sept. 30, 2007). In support of its determination, the District Court noted that the "controlling principle" of the case "is that Congress' intent that withdrawal liability under the MPPAA be born by the ...


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