AMERICAN ARBITRATION ASSOCIATION

Multiemployer Pension Plan Withdrawal Liability Arbitration Tribunal

In the Matter of the Arbitration between AAA No. 51-621-0010-88V

HOFFMAN MANAGEMENT
CORPORATION, formerly d/b/a
CHICAGO KANSAS CITY
FREIGHT LINE, INC.

and

CHICAGO TRUCK DRIVERS,

HELPERS AND WAREHOUSE
WORKERS UNION (INDEPENDENT)
PENSION FUND.
__________________________________/

ON MOTION FOR RECONSIDERATION

May 24, 1989

Following Issuance of the Arbitrator’s Opinion on May 15, 1989

For the Company: For the Fund:

GAGE & TUCKER JACOBS, BURNS, SUGARMAN

R.F. Beagle & ORLOVE
Robert J. Harrop Joseph M. Burns
2345 Grand Avenue 201 North Wells Street
P.O. Box 418200 Suite 1900
Kansas City, Missouri 64141 Chicago, Illinois 60606
 On May 15, 1989, the arbitrator issued a 27-page opinion deciding this

matter upon a stipulation of facts and exhibits (“Arb Op”). By letter dated May

19, 1989 (“Fund Letter”), the Fund moves for reconsideration pursuant to 29

CFR §2641.8(a), on the grounds that “[t]he arbitrator has rendered an award

upon a matter not submitted to the arbitrator and the matter affects the merits of

the decision ….” 29 CFR §2641.8(b)(2). For the reasons explained below, the

Fund’s motion must be denied.

It should be noted at the outset that this arbitration is conducted pursuant

to the Multiemployer Pension Plan Arbitration Rules for Withdrawal Liability

Disputes (revised effective September 1, 1986), sponsored by the International

Foundation of Employee Benefit Plans and administered by the American

Arbitration Association (“AAA Rules”), which are reproduced in 2 Pension

Plan Guide (CCH) ¶10,311E. The AAA Rules received PBGC approval on June

20, 1986. See 29 CFR §§2641.13(a), (c), (d); 51 FR 22585.

Section 38 of the AAA Rules, entitled “Scope of Award”, grants the

arbitrator exceedingly broad authority in formulating an award:

The Arbitrator may grant any remedy or relief within the scope of ERISA.
(Emphasis supplied.)

This provision is comparable to F R Civ P 54 (c), which provides in pertinent

part:

[E]very final judgment shall grant the relief to which the party in whose

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 favor it is rendered is entitled, even if the party has not demanded such
relief in the party’s pleadings.

Section 45 of the AAA Rules further provides:

The Arbitrator shall interpret and apply these rules insofar as they relate
to the Arbitrator’s powers and duties.

From these broad grants of authority, it is clear that an arbitrator in a statutory

withdrawal liability arbitration is afforded wide discretion.

The initial ground for denying the Fund’s motion for reconsideration is

that the AAA Rules do not provide for such a motion. Indeed, the Fund does not

even attempt to bring itself within any provision of the AAA Rules; rather, it

cites only 29 CFR §2641.8. That the AAA Rules govern over PBGC regulations

is clear from the regulations themselves:

If an arbitration is conducted in accordance with a PBGC-approved

arbitration procedure, the alternative procedure shall govern all aspects of
the arbitration, with the following exceptions ….

29 CFR §2641.13(b); emphasis supplied. None of the exceptions listed is even

colorably applicable to the Fund’s motion, and the Fund does not urge

application of any exception. Thus, the Fund’s motion must be denied because it

has no basis in the AAA Rules that govern this arbitration.

Because this arbitration is governed by the AAA Rules which contain no

provision for a motion for reconsideration, the parties are cautioned that 29 CFR

§2641.8(a) may not apply. Under 29 USC §1401(b)(2), the parties have 30 days

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after issuance of the arbitrator’s award to bring an action to enforce, vacate, or

modify the award. Under PBGC regulations, the timely filing of a motion for

reconsideration suspends the running of the 30-day period until such time as the

arbitrator rules upon the motion. Here, because PBGC regulations do not apply,

running of the limitation period may not be suspended.

Even if AAA Rules provided for a motion for reconsideration, the Fund

has failed to demonstrate how the scope of the arbitrator’s award exceeded the

authority expressly granted in the AAA Rules; indeed, it is almost inconceivable

that the arbitrator’s award could be outside “the scope of ERISA”. Although the

Fund characterizes the arbitrator’s interpretation of 29 USC §1384 as “radical

and original”, by conceding that the arbitrator merely interpreted and applied the

statute, the Fund thereby concedes that the arbitrator’s award was “within the

scope of ERISA” and thus was authorized by AAA Rules.

The statute itself requires the arbitrator to make “any necessary

adjustments” to the payment schedule prepared by the Fund [29 USC

§1399(d)], and both PBGC regulations [29 CFR §2641.7(a)(2)] and AAA Rules

[Section 37] reflect this requirement. In making the award in this matter, all the

arbitrator did was to provide a method for adjusting the Fund’s schedule of

payments (Arb Op at 21-23), and that is precisely his statutory responsibility.

The District Court seems to have anticipated the arbitrator’s very action, when

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the Court observed:

Specifically, the arbitrator here may need to recalculate the alleged

withdrawal liability and requested interim payment.

Slip Op at 11.

The essence of the Fund’s complaint is that the parties did not submit to

the arbitrator an issue expressly designated “The Amount Owed”. The Fund

writes:

The parties submitted very specific and limited issues to the Arbitrator.
Our stipulation was carefully crafted to reflect the matters that were in
dispute. *** The Fund, and the Employer, did not submit the issue of the
[sic] “The Amount Owed” to the Arbitrator. (Award, p. 18). The parties
accepted the statutory language that the “seller is secondarily liable for
any withdrawal liability it would have had to the plan … but for this
section …”. (Section 4204(a)(1)(C)). The parties accepted that if Manley
did not “make any withdrawal liability payment when due, the seller shall
pay to the plan an amount equal to the payment that would have been due
form the seller but for this section.” It should also be noted that Hoffman
stipulated to the accuracy and validity of the Fund’s actuarial calculations
and assumptions. (¶31)

Fund Letter at 1-2.

Contrary to the Fund’s assertions, the parties did not stipulate as to the

amount owed or jointly “accept” the Fund’s interpretation of the statutory

language, and the Fund is unable to document Hoffman’s alleged acceptance.

See Arb Op at 1-5. Rather, the parties took extreme positions via arguments

presented in their respective briefs. Hoffman took the position that it owed

nothing at all. Co Brief at 51. The Fund took the position that Hoffman owed

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the full amount of withdrawal liability it would have had but for operation of 29

USC §1384. Fund Brief at 37. The parties provided absolutely no guidance

whatsoever as to how the arbitrator should proceed between these two extremes.

Ludington News Co and Michigan UFCW/Drug Employers Pension

Fund, 9 EBC 1913 (Arb, 1988), also was submitted upon stipulated facts and

exhibits. There, however, the parties expressly agreed as to the precise outcome,

depending upon the arbitrator’s resolution of the underlying legal issues:

If the Trustees' claim is not barred by the statute of limitations found in

either ERISA Sec. 4301(f) or MCLA Sec. 600.5813, then the amount of
withdrawal liability determined by the Trustees ($24,169) is due and
owing by Ludington according to the schedule set forth by the Trustees,
less interim payments.

9 EBC at 1915, stipulation # 16. In the matter before me, there is nothing even

remotely resembling a stipulation specifying the proper award, depending upon

my resolution of the underlying legal issues. Unlike Ludington News, here I am

left with only the statutory mandate to make “any necessary adjustments” under

authority to issue any award “within the scope of ERISA.”

A statutory withdrawal liability arbitration differs from a major league

baseball arbitration, in which the player presents his salary figure and the ball

club its own, leaving the arbitrator to choose one or the other. In withdrawal

liability matters, an arbitrator must follow the law:

In reaching his decision, the arbitrator shall follow applicable law, as

embodied in statutes, regulations, court decisions, interpretations of the

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 agencies charged with the enforcement of the Act, and other pertinent
authorities.

29 CFR §2641.4(a)(1). See also ITU Pension Plan and Ft. Worth Star

Telegram, 5 EBC 1193, 1197 (Arb, 1984) [holding that pension plan has no

right to make arbitrary decision, but must follow statute]; statement of Rep.

Frank Thompson, Jr., House debate, August 25, 1980, reproduced in 310 BNA

Pension Rptr (Special Supplement, September 29, 1980), at 42 [“The

committees intend that the role of the arbitrator under this Act will be similar to

that of a judge applying applicable law to the facts presented ….”]. In making

my decision, I adhered to the statute. Arb Op at 18-24.

Although expressing dissatisfaction with the arbitrator’s decision, the

Fund presents no convincing argument that the arbitrator’s interpretation of the

statute is incorrect. In particular, the Fund fails to address the inequitable results

that would follow from mindless application of the statute without regard to the

factual situation to which it is applied. See Arb Op at 18-21. While avoiding the

truly difficult questions raised in the Arbitrator’s Opinion, the Fund asks

rhetorically whether Hoffman could be charged with Manley’s withdrawal

liability if it exceeded Hoffman’s (Fund Letter at 2), the one question which the

statute, and hence the Arbitrator’s Opinion, answers quite clearly. See Arb Op at

20-21. If the Fund really believes that the statute admits of a simple

interpretation, it should try explaining why Congress used the complicated

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concept of “the present value of the withdrawal liability the seller would have

had but for this subsection,” in 29 USC §1384(a)(3)(A). See Ludington News,

supra, 9 EBC at 1917 n 7. Although the Fund offers “to submit case authority to

support the Fund’s view of the statute,” it actually cites not a single case

anywhere in its 2-1/2 page letter. Fund Letter at 3.

While seeming to urge a literal interpretation of 29 USC §1384(a)(2)

[Fund Letter at 2], the Fund fails to analyze the result of a literal reading:

If the purchaser --

(A) withdraws before the last day of the fifth plan year beginning after
the sale, and
(B) fails to make any withdrawal liability payment when due,

then the seller shall pay the plan an amount equal to the payment that
would have been due from the seller but for this section. (Emphasis
supplied.)

It is important to note that this is the only operative provision that actually

compels the seller to pay anything at all, and it literally makes the seller

secondarily liable only on a payment-by-payment basis.

Manley’s payments of $22,279 were due beginning July 1, 1987, and

continuing for 16 calendar quarters, with a final payment of $1,216; Hoffman’s

37 regular payments are only $13,444, with a final one of $11,981. Arb Op at

18, 21-22. Under a literal interpretation of 29 USC §1384(a)(2), Hoffman owes

only $13,444 each time Manley misses a payment. Since Manley will miss at

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most 16 regular and one final payment, Hoffman should be liable for only 17

payments of $13,444, far fewer than the approximately 27 the arbitrator actually

awarded. Arb Op at 23. Such literal interpretations can lead to unreasonable

results, and I decline to reach an unreasonable result.

In attempting to argue that the proper focus should be upon the seller’s

withdrawal liability rather than upon the purchaser’s, the Fund writes:

Yet Section 4204 expressly provides that a complete withdrawal will not
occur if certain tests are met, including the buyer remaining in the Fund
for five years and making its withdrawal liability payments when due.
Once there is a finding that one of the tests has not been met (as you
necessarily found here), the employer is considered to have withdrawn
and withdrawal liability is assessed as if the exemption had never
applied; the buyer’s subsequent withdrawal liability is not an issue. In
fact, Manley has no withdrawal liability if CKC’s contribution history is
not given to Manley because CKC does not merit the Section 4204
exemption.

Fund Letter at 2. The Fund’s argument ignores much pertinent statutory

language.

Manley is in fact given Hoffman’s contribution history for the period

Hoffman owned CKC. 29 USC §1384(b)(1). Hoffman’s liability is only

secondary, 29 USC §1384(a)(1)(C), and comes into play only when Manley

misses a payment, 29 USC §1384(a)(2). That the purchaser’s withdrawal

liability remains an issue is clear from the bond requirement of 29 USC

§1384(a)(4) and the credit due the purchaser under 29 USC §1384(a)(4), upon

the bond’s forfeiture. As was pointed out in the Arbitrator’s Opinion, it would

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make no sense to worry about crediting the purchaser with the amount of a bond

if the superseding debt were the full amount of the seller’s withdrawal liability.

Arb Op at 20-21. All of these seemingly conflicting statutory provisions can be

read consistently and harmoniously by, and only by, interpreting the seller’s

schedule of withdrawal liability as setting outside limits on the seller’s

secondary liability for the purchaser’s non-payment of its own withdrawal

liability. Arb Op at 18-21. See also Amalgamated Ins Fund Trustees v Sheldon

Hall Clothing, Inc, 10 EBC 1585, 1586, 1588 (CA 3, 1988) [resolving

“apparent contradiction between the provisions of this complex statute” by

“common sense” analysis].

The Fund’s suggestion that Hoffman, by stipulating “to the accuracy and

validity of the Fund’s actuarial calculations and assumptions,” necessarily

accepted liability for the full $380,822 claimed by the Fund, is not well taken for

two compelling reasons. First, at issue is the Fund’s interpretation of 29 USC

§1384, a question of law about which no deference is due the Fund. Arb Op at

27. Hoffman’s stipulation as to facts (Arb Op at 4, Stipulation #31) does not

encompass legal issues. As the District Court itself noted, Hoffman vigorously

has contested the Fund’s interpretation of the statute throughout these

proceedings (Arb Op at 6), and Hoffman’s legal position consistently has been

that the Company owes absolutely nothing. Co Brief at 51. By no stretch of the

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imagination can it be said that Hoffman ever agreed to owing $380,822.

Second, no correction of the Fund’s “actuarial calculations and

assumptions” was made in adjusting Hoffman’s payment schedule; quite to the

contrary, the Fund’s unfunded vested benefits calculations, interest assumptions,

etc., were utilized in making the “necessary adjustments”. Arb Op at 22-23.

Webster’s Third New International Dictionary (Unabridged 1971) defines

“actuarial” as “relating to statistical calculation esp. of life expectancy …,” and

the arbitrator’s adjustments were decidedly deterministic (as opposed to

statistical or probabilistic). The arbitrator’s decision in no way contravened the

parties’ Stipulation #31.

In Du Art Film Labs v Motion Picture Local 702 Pension Fund, 10 EBC

1326 (SD NY, 1988), the district court disapproved of the arbitrator’s narrow

rendering of the issue presented and remanded the matter for further

proceedings. There, the parties had stipulated to the following issue:

Did the Fund’s computation of the amortization schedules for

[petitioners’] withdrawal liability payments, which assumed interest
accrued against those Employers beginning one year before their
withdrawal, comply with ERISA statutory requirements?

10 EBC at 1327. The arbitrator ruled that he had no authority to inquire into

possible double payments for the same liability, because of the seemingly

narrow scope of the parties’ stipulation. In reversing the arbitrator on the scope

ruling, the district court observed that, under 29 USC §1401(a)(3)(A), the

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reasonableness of the fund’s determination is always at issue in a withdrawal

liability arbitration. 10 EBC at 1329. The court concluded:

The calculus of reasonableness would seem naturally to include a

determination as to whether or not the accrual of pre-withdrawal interest
creates a double payment, and we think that the parties are entitled to a
finding on this aspect of the larger dispute.

In the matter before me, the Fund would give an unreasonably narrow

construction to the issue of

Whether Hoffman/CKC complied with all of the terms of 29 U.S.C.

§1384 (ERISA Section 4204) regarding the exemption from withdrawal
liability.

Fund Letter at 1; emphasis supplied. The Fund would have me concentrate

solely upon Hoffman’s failure to comply with the statute and to ignore

completely any question of whether the Fund’s application of the statue against

Hoffman was “unreasonable or clearly erroneous”. 29 USC §1401(a)(3)(A)

applies to this arbitration (but see Arb Op at 27), just as it did to the one in Du

Art Film Labs, and the question of the reasonableness of the Fund’s statutory

interpretation fairly is subsumed by the stipulated issue. This conclusion is

buttressed by the parties’ Stipulation #29:

The arbitrator has jurisdiction of all disputes, claims and defenses of and
between the parties.

Arb Op at 4; emphasis supplied.

If all of the foregoing do not suffice, then there is yet another reason why

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the Fund’s complaint about the arbitrator’s interpretation of the issues presented

must be rejected. After receiving the parties’ briefs on April 24, 1989, the

arbitrator wrote counsel on April 26, 1989, stating:

The briefs suggest that the parties have taken a rather broad view of the
issues, and I intend to address all those raised in the briefs and any others
that may be reasonably necessary to a complete resolution of the matter
before me.

The Fund made no reply and its present objections are, therefore, untimely. See

AAA Rules, Section 34; 29 CFR §2641.10.

The Fund raises two other points which I address. First, the Fund “objects

to the Arbitrator’s finding, at p. 16, that Exhibit A (the Sale Agreement) was

drafted ‘in an effort to comply with the statute, not to evade withdrawal

liability.’ The record contains no evidence as to what CKC or Manley intended.

This issue was also not submitted to the Arbitrator.” Fund Letter at 2.

With all due respect, the Sale Agreement contains four full pages of

provisions plainly devoted to compliance with the statute. Indeed, §12.1,

entitled “Compliance with Act”, begins:

Pursuant to Section 4204 of the Multiemployer Pension Plan

Amendments Act of 1980 (the “Act”), Manley and CKC agree as
follows:

The four pages of detailed compliance provisions are then set forth. Here, the

intent seems clear enough to be express: if not, that intent can be inferred from

circumstances is too elementary an evidentiary principle to require discussion.

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29 Am Jur 2d, Evidence §361, at 410. The arbitrator’s finding is compelled by

an examination of the document, and is germane to the issue, discussed at pages

32-34 of the Fund’s Brief, of Hoffman’s compliance with 29 USC

§1384(a)(1)(A). See Arb Op at 15-18.

Finally, the Fund seeks clarification of the phrase “later that”, Arb Op at

11. The correct phrase is, of course, “later than”; I apologize for not catching the

typographical error.

In keeping with the Seventh Circuit’s firm policy of referring virtually all

withdrawal liability disputes to arbitration, e.g., Robbins v Lady Baltimore

Foods, Inc, 868 F2d 258 (CA 7, 1989), the District Court prepared a 17-page

Memorandum Opinion and Order, dated August 5, 1988, in which he

painstakingly recited his many reasons for referring this matter to arbitration.

Among his insightful comments were the following:

Hoffman’s dispute hinges upon the application of Section 1384.

Slip Op at 10.

[T]his case “bristles” with issues within the special knowledge and
expertise of an arbitrator skilled in the areas of labor and pension law.

Id.

[T]he arbitrator will correct any factual and legal errors made by the
Fund. Specifically, the arbitrator here may need to recalculate the
alleged withdrawal liability and requested interim payment. In the court’s
opinion, the judgment of an arbitrator would have special value.

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Id. at 11; emphasis supplied.

In light of the District Court’s extensive comments, it would be a serious

dereliction of duty to return this case to him in anything other than a completed

state, with thorough discussion of all relevant issues. Surely, the Court did not

take the time to write a 17-page Memorandum Opinion, only to have the

arbitrator shirk the issues, a la Du Art Film Labs. I have addressed the issues,

adhered to the statute, made “necessary adjustments”, and reaffirm my opinion.

If the District Court disagrees with my legal conclusions, then his, of course,

will prevail, Trustees of Iron Workers, Local 473 Pension Trust v Allied

Products Corp, No. 87-2108 (CA 7, April 13, 1989), but at least he will have

the benefit of a complete record upon which to base his decision.

Because the Fund’s motion has no basis in the AAA Rules and the Fund

raises no substantive issue not previously addressed in the Arbitrator’s Opinion

of May 15, 1989, the Fund must bear the full additional costs which this motion

entails.

DATED: May 24, 1989 ________________________________

E. Frank Cornelius, Arbitrator

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