Summary
applying same rule even where a member of the group allegedly severed ties prior to notice being sent
Summary of this case from States v. Complete Pers. Solutions, LLCOpinion
92 Civ. 0597 (PKL)
May 15, 2002
Robert B. Stulberg, Esq., Joshua S.C. Parkhurst, Esq., BROACH STULBERG, LLP, New York, New York; Counsel for Plaintiffs.
Nancy Ledy-Gurren, Esq., Deborah Bass, Esq., LEDY-GURREN BLUMENSTOCK, LLP, New York, New York; Counsel for Defendants.
OPINION AND ORDER
Plaintiffs I.L.G.W.U. National Retirement Fund and its trustees (the "Fund") move for summary judgment. Defendants ESI Group, Inc. ("ESI") and Davend Corp. ("Davend") simultaneously move for summary judgment. For the reasons stated below, plaintiffs' motion is granted, and defendants' motion is denied.
I.L.G.W.U., which stands for the International Ladies Garment Workers' Union, is now known as the Union of Needletrades, Industrial and Textile Employees. See Declaration of Sanford S. Stevens, Esq., sworn to on July 11, 2000, at ¶ 10.
BACKGROUND
I. Factual Background
The facts of the underlying dispute have been set forth in greater detail in I.L.G.W.U. Nat'l Retirement Fund v. Meredith Grey, Inc., 986 F. Supp. 816, 818-19 (S.D.N.Y. 1997), with which the Court assumes familiarity. Accept as indicated, the parties do not dispute the factual findings presented below.
The caption in the instant action was changed after plaintiffs' amended complaint eliminated several defendants. See I.L.G.W.U. Nat'l Ret. Fund v. Meredith Grey, Inc., 190 F.R.D 324, 327 (S.D.N.Y. 1999) (Leisure, J.).
The Fund maintains a defined benefit pension plan to provide retirement income to employees of employers who contribute to the Fund, which due to its nature is a multiemployer plan under the Employee Retirement Security Act of 1974 ("ERISA"), 29 United States Code ("U.S.C.")§§ 1001 et seq. The Fund has more than 130,000 beneficiaries, and their benefits average under $85 per month. Marty Gutmacher, Inc. ("Gutmacher") was one of the employers required to contribute to the Fund on behalf of its employees. See Plaintiffs' 56.1 Statement ("Pls' 56.1 S."), July 12, 2000 at ¶¶ 1-2, 7.
The Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. § 1381 et seq. amended ERISA to require an employer who withdraws from a multiemployer defined benefit pension plan to contribute "withdrawal liability" to the plan. This withdrawal liability represents that employer's proportionate share of the plan's unfunded vested benefits. Moreover, ERISA classifies all trades or businesses that are under "common control" as a single employer for purposes of withdrawal liability. See 29 U.S.C. § 1301(b)(1). Thus, each member of a commonly controlled group of trades or businesses is liable for the withdrawal liability of any other member of that group.
Prior to and for part of 1987, Gutmacher was a party, directly or indirectly, to a collective bargaining agreement with the International Ladies Garment Workers' Union. Pursuant to this collective bargaining agreement, Gutmacher was obligated to make contributions to the Fund on behalf of certain of its employees. See Pls' 56.1 S. at ¶ 7.
In 1987, Gutmacher ceased operating, and as a result withdrew from the Fund. See id. at ¶ 8. Plaintiffs then served Gutmacher with a certified letter of Notice and Demand dated February 13, 1987. The Notice and Demand notified Gutmacher that it had incurred withdrawal liability in the amount of $2,055,922 and demanded payment. The Notice and Demand notified Gutmacher that it was entitled, pursuant to Section 4219(b)(2)(A) of ERISA, 29 U.S.C. § 1399 (b)(2)(A), to request a review of the Fund's determination of its withdrawal liability within 90 days of Gutmacher's receipt of the letter. The Notice and Demand further notified Gutmacher that any dispute arising out of plaintiffs' determination and subsequent review must be resolved through arbitration, and advised Gutmacher of the time limits for such arbitration. See id. at ¶¶ 9-11; Notice and Demand, February 13, 1987, attached as Ex. B to Declaration of Sanford S. Stevens. Esq., sworn to on July 11, 2000.
On June 29, 1987, plaintiffs sent Gutmacher a revised Notice and Demand, informing Gutmacher that its withdrawal liability had been adjusted to $2,057,682. See Pls' 56.1 S at ¶ 11.
Gutmacher never requested review of its withdrawal liability and never requested arbitration of any matters in dispute concerning its withdrawal liability. Gutmacher also did not make any of its scheduled withdrawal liability payments. See Pls' 56.1 S. at ¶¶ 12-13.
Plaintiffs allege that Gutmacher, ESI and Davend are part of a commonly controlled group of trades or businesses and therefore are jointly and severally liable for Gutmacher's withdrawal liability. The ownership interests of the relevant parties at least as late as March of 1986 were as follows:
ESI was the sole (100%) owner of Gutmacher. Davend owned a 70% interest in ESI, and DanErica Enterprises ("DanErica") owned a 30% interest in ESI. DanErica, in turn, was equally owned by three shareholders, Jeffrey Endervelt (33.33%), Belle Endervelt (33.33%) and Elizabeth Weintraub (33.33%). The ownership of Davend was divided between the Estate of Alex Slade (28.5%), Burt Fried (4.5%), Belle Endervelt (18.5%), and Jeffrey Endervelt (48.5%). See Defendants' 56.1 Statement at ¶¶ 8-10; Pls' 56.1 S. at ¶¶ 17-27; Affidavit of Nancy Ledy-Gurren, Esq., sworn to on August 25, 2000 at ¶¶ 10-14.
Defendants claim that on March 28, 1986, for due consideration, ESI transferred 5% of Gutmacher to Norman Siegal, and 25% to DanErica. See Defendants' Memorandum of Law in Opposition to Plaintiffs' Summary Judgment Motion ("Defs' Opp.") at 4.
II. Procedural Background
On January 24, 1992, plaintiffs initiated this action to obtain $2,057,682, the amount allegedly owed to the Fund because of Gutmacher's withdrawal. See Defendants' 56.1 Statement, dated July 4, 2000 at ¶ 1; Plaintiffs' 56.1 Statement, dated August 25, 2000 ("Pls' 56.1 S. II") at ¶ 1. This Court entered a default judgment on May 20, 1992, in favor of plaintiffs in the amount of $4,270,811.99, which included interest, liquidated damages, costs, and attorneys' fees. See I.L.G.W.U. Nat. Retirement Fund v. Meredith Grey, Inc., 986 F. Supp. 816, 819 (S.D.N.Y. 1997) (Leisure, J.). The default judgment was vacated by an Opinion and Order dated December 8, 1997. See id. at 825. On December 3, 1999, this Court granted plaintiffs' motion to amend their complaint to add new claims for relief premised on the theory that defendants' alleged March 28, 1986, stock transfers were made to "evade or avoid" withdrawal liability. See I.L.G.W.U. Nat. Retirement Fund v. Meredith Grey, Inc., 190 F.R.D. 324, 326-27 (S.D.N.Y. 1999) (Leisure, J.). Both sides now move for summary judgment, with plaintiffs seeking a judgment directing defendants to pay plaintiffs $2,057,682, as well as liquidated damages pursuant to 29 U.S.C. § 1132 (g)(2)(C) and 1451; interest pursuant toid., §§ 1132(g)(2)(B), 1399(c)(6) and 1451(b); and attorneys fees and costs pursuant to id. §§ 1132(g)(2)(D), and 1451(b); and with defendants seeking dismissal of plaintiffs' amended complaint.
DISCUSSION
I. Summary Judgment Standard
A moving party is entitled to summary judgment if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); See also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Holt v. KMI-Continental Inc., 95 F.3d 123, 128 (2d Cir. 1996). When considering a motion for summary judgment, the Court's responsibility is not "to resolve disputed issues of fact but to assess whether there are any factual issues to be tried."Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986).
In determining whether genuine issues of material fact exist, the Court must resolve all ambiguities and draw all justifiable inferences in favor of the nonmoving party. See Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 255 (1986); Holt, 95 F.3d at 129. The moving party bears the burden of demonstrating that no genuine issue of material fact exists. See Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970); Gallo v. Prudential Residential Serv. L.P., 22 F.3d 1219, 1223-24 (2d Cir. 1994). "[T]he movant's burden will be satisfied if he can point to an absence of evidence to support an essential element of the nonmoving party's claim."Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995). Once the moving party discharges his burden of demonstrating that no genuine issue of material fact exists, the burden shifts to the nonmoving party to offer specific evidence showing that a genuine issue for trial exists. See Celotex, 477 U.S. at 324. The nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). "A `genuine' dispute over a material fact only arises if the evidence would allow a reasonable jury to return a verdict for the nonmoving party." Dister v. Continental Group, 859 F.2d 1108, 1114 (2d Cir. 1988) (quoting Liberty Lobby, 477 U.S. at 248).
In the instant action, there is no dispute regarding any material facts, and thus the case is appropriate for summary adjudication.
II. Withdrawal Liability
The MPPAA requires an employer who is obligated to contribute to a multiemployer pension plan to pay its proportionate share of the plan's unfunded vested benefits upon withdrawal from the plan. See 29 U.S.C. § 1381(a), 1399; Pension Benefit Guar. Corp. v. R.A. Gray Co., 467 U.S. 712, 724-25 (1984). "The purpose of withdrawal liability `is to relieve the Funding burden on remaining employers and to eliminate the incentive to pull out of a plan which would result if liability were imposed only on a mass withdrawal by all employers.'" I.L.G.W.U. Nat'l Retirement Fund v. Levy Bros. Frocks, Inc., 846 F.2d 879, 881 (2d Cir. 1988) (quoting H.R. Rep. No. 96-869, Part I, 96th Cong., 2d Sess. 51 (1980) (reprinted in 1980 U.S. Code Cong. Ad. News 2918, 2935)). Indeed, the MPPAA was designed to "protect the interests of participants and beneficiaries in financially distressed multiemployer plans and to encourage the growth and maintenance of multiemployer plans." T.I.M.E.-DC v. Management-Labor Welfare Pension Funds, 756 F.2d 939, 943 (2d Cir. 1985).
In R.A. Gray Co., the Supreme Court quoted the words of Matthew M. Lind, then director of the Pension Benefit Guaranty Corporation, in order to characterize the importance of enforcing withdrawal liability:
A key problem of ongoing multiemployer plans, especially in declining industries, is the problem of employer withdrawal. Employer withdrawals reduce a plan's contribution base. This pushes the contribution rate for remaining employers to higher and higher levels in order to fund past service liabilities, including liabilities generated by employers no longer participating in the plan, so-called inherited liabilities. The rising costs may encourage — or force — further withdrawals, thereby increasing the inherited liabilities to be funded by an ever-decreasing contribution base. This vicious downward spiral may continue until it is no longer reasonable or possible for the pension plan to continue.467 U.S. at 722.
The MPPAA grants broad authority to pension plan sponsors to collect withdrawal liability. Initially, the plan sponsor must decide whether a withdrawal has occurred, the amount of the employer's withdrawal liability, and the schedule for liability payments to the fund. See 29 U.S.C. § 1381, 1382(1), 1399(b)(1).
In the instant action, because Gutmacher permanently withdrew from the Plan in 1987, Gutmacher incurred withdrawal liability. See 29 U.S.C. § 1381.
III. Arbitration
Once the plan sponsor notifies an employer of liability, the employer has 90 days to seek reconsideration regarding the alleged liability. See 29 U.S.C. § 1399(b). If the parties do not resolve the dispute, either party may initiate arbitration, but they must do so within 60 days after the earlier of either (1) notification by the plan sponsor of the result of the requested reconsideration, or (2) 120 days after the date reconsideration was requested. See 29 U.S.C. § 1401(a)(1); Bowers v. Transportation Maritima Mexicana, S.A., 901 F.2d 258, 261 (2d Cir. 1990). If neither party demands arbitration within the statutorily proscribed time limits, the amounts demanded become "due and owing on the schedule set forth by the plan sponsor," and the employer is estopped from challenging at trial any factual determination of the plan sponsor concerning the assessment of withdrawal liability. 29 U.S.C. § 1401(b)(1); see Levy Bros. Frocks, Inc., 846 F.2d at 886-87; New York State Teamsters Conf. Pension Retirement Fund v. McNicholas Transp. Co., 848 F.2d 20, 23 (2d Cir. 1988).
The MPPAA prescribes arbitration for disputes "between an employer and the plan sponsor." 29 U.S.C. § 1401(a)(1). Thus, all disputed factual issues must be arbitrated. See Board of Trustees of Trucking Employees of North Jersey Welfare Fund, Inc. v. Canny, 900 F. Supp. 583, 590 (N.D.N.Y. 1995) (citing Flying Tiger Line v. Teamsters Pension Trust Fund, 830 F.2d 1241, 1253-55 (3d Cir. 1987)). Indeed, under the broad language of MPPAA, arbitration may only be bypassed in rare situations, such as "where questions of statutory interpretation arising outside the specific statutory sections of the MPPAA are concerned." Canny, 900 F. Supp. at 590; see also Bowers, 901 F.2d at 261 (holding that the MPPAA does not preclude judicial resolution of threshold legal issues).
One such rare situation where arbitration may be bypassed is determination of the threshold legal issue of whether an entity was an employer within the meaning of the MPPAA. See Bowers, 901 F.2d at 261;Canny, 900 F. Supp. at 590. Thus, the issue of whether Davend and ESI were part of a common control group with Gutmacher and therefore "employers" within the meaning of the MPPAA, is an issue for the courts, and not an arbitrator, to decide. See Bowers, 901 F.2d at 261;I.L.G.W.U. Nat. Retirement Fund v. Meredith Grey, Inc., 986 F. Supp. 816, 825 (S.D.N.Y. 1997) (Leisure, J.); Canny, 900 F. Supp. at 590.
The determination of the factual issue of whether defendants had ceased to be an MPPAA employer before the date of withdrawal, however, is an issue for arbitration. See Flying Tiger Line, 830 F.2d at 1255; Canny. 900 F. Supp. at 590. As the Canny court explained:
[T]he Court notes the difference between the statutory issue of whether defendants were ever a MPPAA employer and the factual issue of whether defendants had ceased to be an MPPAA employer before the date of withdrawal. The former is a question for the Court to decide in this case, while the latter is relegated to an arbitrator's jurisdiction.900 F. Supp. at 590 (emphasis in original).
Therefore, this Court properly may determine the status of Davend and ESI as employers within the MPPAA. Determination of whether Davend, ESI and Gutmacher had ceased to be a single employer under the MPPAA prior to the date of Gutmacher's withdrawal from the Fund, however, is an issue for arbitration.
IV. Common Control
Withdrawal liability extends to any trade or business under "common control" with the withdrawing employer. Section 4001(b)(1) of ERISA, 29 U.S.C. § 1301(b)(1) provides in pertinent part: "[A]ll employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer and all such trades and businesses as a single employer." Thus, when withdrawal liability is imposed on an employer, all other commonly controlled trades or businesses are liable as well. See, e.g., I.L.G.W.U. Nat. Retirement Fund v. Gramercy Mills, Inc., No. 90 Civ. 3552, 1994 WL 592226, at *1 (S.D.N Y Oct. 26, 1994); Trustees of the Amalgamated Ins. Fund v. Saltz, 760 F. Supp. 55. 57-58 (S.D.N Y 1991).
For purposes of determining "common control," Section 4001(b) of ERISA, 29 U.S.C. § 1301 (b), refers to the regulations proscribed by the Secretary of Treasury under Section 414(c) of the Internal Revenue Code of 1954. See 26 C.F.R. § 1.414 (c)-2(b). These regulations provide that two or more trades or businesses are under "common control" if they are members of a "parent-subsidiary" or "brother-sister" group of trades or businesses under common control. 26 C.F.R. § 1.414(c)-2(a).
A "parent-subsidiary" group means one or more chains of organizations conducting trades or businesses connected through ownership of a controlling interest with a common parent organization if a controlling interest in each of the organizations, except the common parent organization, is owned by one or more of the other organizations and the common parent organization owns a controlling interest in at least one of the other organizations. See 26 C.F.R. § 1.414 (c)-2(b).
The term "brother-sister" group or trades or businesses is defined as:
(1) In general. The term `brother-sister group of trades or businesses under common control' means two or more organizations conducting trades or businesses if(i) the same five or fewer persons who are individuals, estates, or trusts own (directly and with the application of § 1.414(c)-4) a controlling interest in each organization, and (ii) taking into account the ownership of each such person only to the extent such ownership is identical with respect to each such organization. such persons are in effective control of each organization. The Five or fewer persons whose ownership is considered for purposes of the controlling interest requirement for each organization must be the same persons whose ownership is considered for purposes of the effective control requirement.
26 C.F.R. § 1.414 (c)-2(c).
A "controlling interest" is defined as ownership of stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote of such corporation, or at least 80% of the total value of shares of all classes of stock in such corporation. See 26 C.F.R. § 1.414 (c)-2(b)(2). "Effective control" is defined as ownership of "stock possessing more than 50% of the total combined voting power of all classes of stock entitled to vote or more than 50% of the total value of shares of all classes of stock of such corporation." 26 C.F.R. § 1.414(c)-2(c)(2)(i).
Therefore, a "brother-sister" group of trades or businesses under common control must be controlled by the same five or fewer persons owning at least 80% of the shares of each corporation, with at least 50% of the shareholder's ownership interests in each corporation identical.See 26 C.F.R. § 1.414(c)-2. Also, each shareholder must own shares in each of the corporations. See United States v. Vogel Fertilizer, 455 U.S. 16, 21-22 (1982). Furthermore, in the calculation of ownership interest, direct as well as indirect ownership is included. See 26 C.F.R. § 1.414(c)-4. Thus, an interest owned by one corporation in another corporation is attributed to any person who owns more than a 5% share of the first corporation's stock. For example, if a Shareholder B owns 60% of Corporation P, and Corporation P owns 50% of Corporation S, then Shareholder B owns 30% of Corporation S (60% x 50%). See 26 C.F.R. § 1.414(c)-4(b)(4)(ii) (providing a more detailed example).
In the present case, prior to the contested transaction on March 28, 1986, defendants concede that because ESI wholly owned Gutmacher, those two entities were part of a parent-subsidiary controlled group. See Defs' Opp. at 5. Defendants contest plaintiffs' assertion, however, that prior to March 28, 1986, Davend. ESI and Gutmacher were part of a brother-sister controlled group. See id.
Turning to the ownership interests prior March 28, 1986, plaintiffs are correct that Davend, ESI and Gutmacher were part of a brother-sister controlled group. Analysis of the relevant interests reveals that Belle Endervelt owned 18.5% of Davend, 22.95% of ESI (12.95% through Davend and 10% through DanErica), and 22.95% of Gutmacher (through ESI); Jeffrey Endervelt owned 48.5% of Davend, 43.95% of ESI (33.95% through Davend, 10% through DanErica), and 43.95% of Gutmacher (through ESI); and the Estate of Aleck Slade owned 28.5% of Davend, 19.95% of ESI (through Davend), and 19.95% of Gutmacher (through ESI).
Thus, Belle Endervelt, Jeffrey Endervelt and the Estate of Aleck Slade owned a total of 95.5% of Davend, 86.85% of ESI and 86.85% of Gutmacher, giving these three shareholders a "controlling interest" in Davend, ESI and Gutmacher. Further, the identical ownership interests were 18.5% for Belle Endervelt, 43.95% for Jeffrey Endervelt, and 19.95% for the Estate of Aleck Slade, amounting to 82.4% of identical interest. Therefore, Belle Endervelt, Jeffrey Endervelt and the Estate of Aleck Slade also were also in effective control, making Davend, ESI and Gutmacher a brother-sister controlled group.
Identical ownership interests are calculated by adding the minimal ownership interests identical in each principal. For example, if Shareholder A owns 20% of Corporation X, 20% of Corporation Y, and 10% of Corporation Z, Shareholder A's identical interest is 10%. See 26 C.F.R. ¶ 1.414(c)-2(c)(2)(i).
Defendants argue that because DanErica is used as a vehicle for attribution, it must be a part of the brother-sister control group. See Def's Opp. at 11. Under such analysis, Davend, DanErica, ESI, and Gutmacher do not create a brother-sister controlled group, because no group of 5 or fewer persons have a controlling interest in all four entities. However, defendants offer no regulation or statute supporting their offered rule. Rather, defendants seem to suggest that a finding of "common control" requires more than satisfaction of the relevant regulations. The Court disagrees. See I.L.G.W.U. Nat'l Ret. Fund v. Minotola Indus., Inc., No. 88 Civ. 9131, 1991 WL 79466, at 6 (S.D.N.Y. May 3, 1991) (holding that "common control" requires no more than a finding of common ownership under the regulations). Defendants' argument is contrary to the rule set out in 26 C.F.R. § 1.414 (c)-4(b)(4), which simply explains that ownership interests are attributed proportionately, and makes no mention that an entity through which interest is attributed must be considered as part of a brother-sister controlled group. See also 26 C.F.R. § 1.414 (c)-4(b)(4)(ii) (providing an example of the attribution rule). Indeed, defendants do not cite a single case that adopts their offered rule.
Defendants further argue that by allowing plaintiffs to attribute their ownership interests through DanErica and then not making DanErica part of the control analysis, plaintiffs are making an end run around United States v. Vogel Fertilizer. 455 U.S. 16; see Defs' Opp. at 13-14. This argument is also without merit. The Vogel Court held that for a person to be a part of a control group, the person must own stock in all of the corporations within the control group. See 455 U.S. at 21-22. Vogel simply does not deal with attribution. See id.
Therefore, the Court holds that prior to March 28, 1986, Davend, ESI and Gutmacher were a brother-sister controlled group, and thus at that time Davend, ESI and Gutmacher were a single employer under the relevant ERISA statutes.
V. The Alleged March 28, 1986 Stock Transfers
Defendants argue that even if Davend, ESI and Gutmacher were a brother-sister controlled group, on March 28. 1986, ESI transferred 5% of Gutmacher to Normal Siegal, and 25% to DanErica for consideration, thereby eliminating the brother-sister controlled group. See Defs' Opp. at 5, 15. Plaintiffs concede that if in fact ESI validly made those transfers, then Gutmacher, Davend, and ESI would not constitute a brother-sister controlled group of trades or businesses as of that date.See Plaintiffs' Summary Judgment Memorandum ("Pls' Mem.") at 20. Plaintiffs argue that the transfer was not made, and that if it was, it was designed to evade withdrawal liability and should be ignored under the MPPAA. See id. Indeed, in determining withdrawal liability, the MPPAA expressly provides that any transaction designed to "evade and avoid" withdrawal liability should be ignored. 29 U.S.C. § 1392 (c). Both parties agree, however, that whether or not the March 28, 1986 transfer validly took place and thereby dissolved the common control group is a factual issue, and therefore must be the subject of arbitration. See Plaintiffs' Summary Judgment Memorandum ("Pls' Memo") at 7, 21-22; Defs' Opp. at 16; 29 U.S.C. § 1401(a)(1); Flying Tiger Line, 830 F.2d at 1247 (3d Cir. 1987) ("We conclude that where the party against which withdrawal liability is being asserted was certainly part of the controlled group of an employer subject to the MPPAA at some point in time, and where the issues in dispute fall within the purview of MPPAA provisions that are explicitly designed for arbitration, the Act's dispute resolution procedures must be followed."); Canny, 900 F. Supp. at 590 ("[T]he factual issue of whether defendants undertook their stock transaction with the intent to "evade or avoid" withdrawal liability is also one for an arbitrator to resolve.").
Plaintiffs further argue that because defendants did not seek to arbitrate within 60 days of Gutmacher's notification of withdrawal liability in 1987, defendants waived their right to arbitrate the factual issue of whether ESI and Davend continued to be in common control with Gutmacher after March 28, 1986. See Pls' Mem. at 21. Therefore, plaintiffs argue that defendants owe the withdrawal liability assessed.
Defendants however, assert, that by virtue of the alleged March 28, 1986 stock transfers, ESI and Davend were not part of a brother-sister controlled group with Gutmacher when Gutmacher received notice in 1987.See Defs' Opp. at 19. Thus, they argue, ESI and Davend never received notice or even constructive notice of their withdrawal liability until December of 1999, when plaintiffs amended their complaint to include an assertion that the alleged March 28, 1986 stock transfers should be ignored and that defendants were liable under an "evade and avoid" theory. See id. Because the amended complaint was served on December 21, 1999, defendants posit that they made a proper demand for arbitration on January 26, 2000, well within the 60 day period from the time of notification allowed under the MPPAA. See 29 U.S.C. § 1401(a)(1).
It is well settled that notice to one member of controlled group is notice to all members of the controlled group. See, e.g., NYSA-ILA Pension Trust Fund v. Montague Assocs., Inc., No. 78 Civ. 0911, 1996 WL 480926, at *2 (S.D.N.Y. 1996) (citing McDonald v. Centra, 946 F.2d 1059, 1062 (4th Cir. 1991)); Saltz, 760 F. Supp. at 58. The issue in the present case, however, is whether notice to one member of a controlled group is notice to members who claim to have severed their relationship with the controlled group prior to the time of notice.
Although no court in the Second Circuit has directly addressed the notice issue presented here, the weight of authority in other jurisdictions favors the Fund. See Central States, Southeast and Southwest Areas Pension Fund v. Melody Farms, Inc., 969 F. Supp. 1034, 1044 (E.D. Mich. 1997); Central States, Southeast and Southwest Areas Pension Fund v. Rogers, 843 F. Supp. 1135, 1147 (E.D. Mich. 1992);Teamsters Pension Trust Fund of Philadelphia and Vicinity v. Laidlaw Indus., 745 F. Supp. 1016 (D. Del. 1990). But see Trustees of Chicago Truck Drivers Pension Fund v. Rentar Indus., Inc., No. 88 C 3216, 1989 WL 153559. at *4 (N.D. Ill. Nov. 8, 1989) (holding that owners who sell a business can not be expected to know of withdrawal liability assessments which are served on their successors after control has been transferred).
The Court notes a possible distinction between the instant action and Laidlaw, because in that case the plaintiff pension funds also argued that the defendants had actual notice of withdrawal liability because they were involved in the bankruptcy proceedings for the entity, Boss, that directly incurred withdrawal liability. 745 F. Supp. at 1019. However, the Laidlaw court's holding does not rest on this fact. Furthermore, in the instant action, an involuntary petition for relief under Chapter 7 of the United States Bankruptcy Code was filed against Gutmacher on May 11, 1987. See Pls' 56.1 S ¶¶ at 14-15. Therefore, because defendants retained ownership interests in Gutmacher even after the alleged stock transfer, plaintiffs could argue that defendants may have also been on actual notice of withdrawal liability. See Plaintiffs' Reply Memorandum in Further Support of Plaintiffs' Summary Judgment at 15-16 (arguing that it is not "unfair" to hold that the notice to Gutmacher was notice to defendants, because even if the alleged stock transfers occurred, in practical effect, the interests of the relevant parties did not change dramatically).
In Melody Farms, the Wilson Company had withdrawn from a pension fund in August of 1984. 969 F. Supp. at 1040. The court concluded that a group of defendants referred to as the Melody defendants were in common control with the Wilson Company (and a group of entities referred collectively to as the "Wilson defendants") at one time prior to August of 1984. See id. The Melody defendants claimed that they had severed themselves from the Wilson Company prior to the date of withdrawal in August 1984, and thus should not have to pay a liability assessment. See id. The court held, however, that the Melody defendants had received constructive notice of the liability assessment through notice to the Wilson Company, and that "regardless of whether the Melody Defendants did in fact sever themselves from the Wilson Defendants prior to August 1984, the Defendants waived the severance defense by failing to arbitrate it prior to the expiration of the statutorily-defined time for arbitration." Id.
The decisions in Melody Farms, Rogers and Laidlaw also comport with the purpose of ERISA and the MPPAA. Indeed, because one of Congress' overriding concerns when it enacted ERISA and the MPPAA was to ensure that workers' retirement benefits would actually be available during retirement, the language of ERISA should be construed liberally to provide the maximum amount of protection to workers covered by pension plans. See NYSA-ILA Pension Trust Fund v. Lykes Bros., Inc., No. 96 Civ. 5616, 1997 WL 458777, at *6 (S.D.N.Y. Aug. 11, 1997); Saltz, 760 F. Supp. at 58. Thus, it is appropriate to place the onus regarding withdrawal liability on an employer who is a member of a commonly controlled group, even if the employer claims to have severed its relationship with the controlled group. As the Laidlaw court opined:
The Court is persuaded that the statutory scheme of MPPAA envisions this result. Congress intended to protect the multiemployer pension plans from withdrawals aimed at evading or avoiding an employer's responsibility to such plans. See, e.g., 126 Cong.Rec. H23038 (daily ed. Aug. 25, 1980) (Remarks of Rep. Thompson, Dem., N.J., principal House sponsor of MPPAA). The time for controlled group members to avoid that responsibility is at the time they transact with third parties.
Once an employer is within a controlled group, the responsibility of lawfully avoiding withdrawal liability lies within the power of that entity. This is not to suggest that once in, the entity is forever bound to controlled group status. Obviously, there are legitimate transactions involving sales of assets or sales of controlling stock that will, after contest, not be deemed evade or avoid transactions. The obligation, however, rests not with the Funds but with the employers and members of the controlled group because it cannot be contemplated that contracts between a controlled group member and third parties will negate the obligation Congress deemed necessary to maintain the integrity of multiemployer pension plans. This is an overriding concern that can be carried out only by forcing the member of the controlled group wanting to sell assets or stock to assume the responsibility of shedding that obligation in a lawful way. Part of that is recognizing the threat of continuing liability and then by contract or otherwise providing suitable means to cover the risk. Escrow accounts, surety bonds, notice provisions, purchase price set asides, all of these things and more diminish the risk. But, in the final analysis, liability once assumed cannot be so easily shed as by entering a contract and leaving the scene. The statute contemplates more. It gives notice of such and contracting parties are required to protect against such liability.745 F. Supp. at 1025.
Thus, in the instant action, the Court concludes that defendants were on notice of their withdrawal liability in 1987, and have waived their right to arbitrate the factual issue of whether the alleged March 28, 1986 stock transfers dissolved the common control group of Gutmacher, ESI and Davend.
VI. Equitable Tolling
Defendants have one more string to their bow. Defendants argue that even if they did receive notice before December 21, 1999, their time to initiate arbitration should be equitably tolled until December 21, 1999.See Defs' Opp. at 20-21. Defendants claim that plaintiffs prevented defendants from the opportunity to assert their rights, because the Fund did not serve its initial withdrawal notice on "any entity other than Gutmacher." Id. at 20. The Second Circuit has ruled that equitable tolling would be permitted in a case involving withdrawal liability where the party seeking such tolling establishes "inequitable circumstances warranting an extension of time." Bowers, 901 F.2d at 264 (citing Miller v. International Tel. Tel. Corp., 755 F.2d 20, 24-25 (2d Cir. 1985)).
It is noteworthy that at least one Circuit, the Fourth Circuit Court of Appeals, has ruled that equitable tolling "is inapplicable in MPPAA cases." McDonald, 946 F.2d at 1064-65.
Under the Second Circuit's holding in Bowers, however, defendants' equitable tolling argument may only prevail if the withdrawal liability notice served on Gutmacher in 1987 was ineffective as to defendants. 901 F.2d at 264 ("Equitable tolling is an issue only if the [initial] notice was ineffective and the first notice of withdrawal liability was the complaint in this action. . . .") Because the Court concludes that defendants were put on constructive notice of withdrawal liability by service on Gutmacher in 1987, defendants' argument fails. See supra, Discussion, Parts IV and V. Furthermore, the record does not reflect any inequitable action by plaintiffs preventing defendants from asserting their right to initiate arbitration within the period allowed by statute.
CONCLUSION
For the reasons stated above, plaintiffs' motion for summary judgment is GRANTED in its entirety. Defendants' motion for summary judgment is DENIED. Therefore, defendants must pay plaintiffs $2,057,682; liquidated damages pursuant to 29 U.S.C. § 1132 (g)(2)(C), and 1451; interest pursuant to id. §§ 1132(g)(2)(B), 1399(c)(6) and 1451(b); and attorneys fees and costs pursuant to id. §§ 1132(g)(2)(D), and 1451 (b). The parties shall submit additional papers regarding attorneys fees and costs by June 28, 2002, and a judgment consistent with this Opinion and Order shall be submitted for entry by the Court.