Since MPPAA barred exception to “pay now, dispute later” rule, district court lacked authority to ban interim payments

A district court did not have the authority to issue an injunction to enjoin a multiemployer pension fund from collecting withdrawal liability payments, pursuant to the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) interim payments requirement, before an arbitrator resolved a labor dispute between an employer and the multiemployer pension fund, according to the U.S. Court of Appeals in Cincinnati (CA-6). The plain language of the MPPAA divested courts of the power to create an equitable exception to the “pay now, dispute later” rule.

After a union initiated a strike against an employer, the employer stopped making contributions to a multiemployer pension plan. About three months later, the fund that administered the plan sent a notice to the employer, stating that the employer had withdrawn from the plan. The employer responded that it had not withdrawn from the plan and that it would resume contributions as soon as the strike ended. A couple of days after the fund sent the notice, the union notified the employer that it “disclaimed” interest in the union-represented employees of the employer. In response to the union’s disclaimer of interest, the fund determined that the employer’s obligation to make pension contributions under the collective bargaining agreement had ceased and that, therefore, the employer had withdrawn from the fund. The fund issued a notice and demand for payment of withdrawal liability for more than $10 million, pursuant to ERISA §4201.

The employer filed suit in federal district court, alleging, among other things, that the employer was not required to make interim payments, despite the provisions of the MPPAA, because the payments would cause irreparable harm, and that arbitration pursuant to the MPPAA was not necessary because the district court could determine all of the issues involved. The fund filed a motion to dismiss. The fund argued, among other things, that the case should be dismissed because the employer’s claims regarding withdrawal liability were subject to mandatory arbitration under the MPPAA. The employer filed a response, contending that the case should not be arbitrated because the arbitration would subject the employer to irreparable harm and that, because the company’s withdrawal was “union-mandated,” the case presented issues over which arbitrators would not have special expertise.

In its decision, the district court dismissed the employer’s suit because the dispute should have been arbitrated under the MPPAA before bringing it to federal court. The district court acknowledged that there were exceptions to the arbitration requirement, but determined that none applied to the employer’s suit. However, the district court also issued an injunction under Federal Rule of Civil Procedure 65, which enjoined the fund from collecting any withdrawal liability payments from the employer until the matter was resolved through arbitration. The district court acknowledged the rule of “pay now, dispute later” under the MPPAA, but ultimately found that there was an exception to the rule when interim payments caused irreparable harm to the employer.

The fund appealed the district court’s injunction, arguing that the injunction violated the statutory language of the MPPAA in ERISA §4219(c)(2) and ERISA §4221(d). In particular, the fund contended that, although federal courts generally have equitable authority to issue injunctions under Federal Rule of Civil Procedure 65, the statutory language of the MPPAA divested federal courts of the power to enjoin interim payments, and that even a finding of irreparable harm could not override the statute’s language. The employer cross-appealed the district court’s dismissal of the case.

The two issues before the appellate court were: (1) whether the district court had the authority to issue the injunction under the MPPAA and the Federal Rules of Civil Procedure, and (2) whether the district court erred in dismissing the case and ordering it to arbitration.

Equitable power to issue injunction

The court explained that the specific issue here was whether the equitable power to issue an injunction was abrogated by the statutory language of the MPPAA, which mandates that interim payments be made. The court explained that both parties had claimed that the court had already resolved the issue in prior cases. However, the court determined that both parties had exaggerated the definitiveness of the cases they each relief upon, and that neither case was dispositive of the equitable exceptions to the “pay now, dispute later” rule.

The appellate court looked next to other circuit courts for their positions on the existence of equitable exceptions to the “pay now, dispute later” rule. The court found that three circuit courts (Second, Fifth, and Seventh Circuits) have held that injunctions negating the “pay now, dispute later” rule could be issued under certain conditions and that three other circuit courts (First, Third, and Fourth Circuits) have suggested that an equitable exception might exist, but have declined to find one or outline precise requirements. The five remaining circuit courts and the Supreme Court have not addressed the issue, according to the appellate court.

The appellate court explained that it would look at the plain text of the MPPAA and noted that ERISA §4219(c)(2) and ERISA §4221(d) clearly state that withdrawal liability must be paid during the pendency of any dispute. The appellate court ruled that it would follow the plain language of ERISA §4219(c)(2) and ERISA §4221(d) because clearly worded statutes can divest courts of their equity powers and because, in statutory interpretation, a specific provision takes precedence over a more general provision. The MPPAA divested the court of the jurisdiction to bar interim payments, according to the court. The court found that the Judiciary Act of 1789 and Rule 65 of the Federal Rules of Civil Procedure, which gave district courts equitable powers and provided a mechanism through which district courts could exercise the equitable power to issue injunctions, were general provisions. The court further found that ERISA §4219(c)(2) and ERISA §4221(d) were specific provisions governing withdrawal liability disputes under the MPPAA. Thus, according to the court, ERISA §4219(c)(2) and ERISA §4221(d) took precedence over the court’s equitable powers under the Judiciary Act and Rule 65.

Dismissal and order to arbitrate

As to the employer’s cross-appeal of the district court’s decision to dismiss the employer’s claim and to order the case to proceed to arbitration, the appellate court held that the district court did not err by dismissing the case and ordering arbitration. Since the employer’s claim did not come under any of the three exceptions to arbitration that the court had previously established, the court determined that the employer’s dispute should be addressed by an arbitrator. Therefore, the appellate court reversed the district court’s injunctive order, but affirmed the district court’s dismissal of the case.

Source: Findlay Truck Line, Inc. v. Central States, Southeast & Southwest Areas Pension Fund (CA-6).

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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