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COMBS v. SUN-UP COAL CO.

June 25, 1985

HARRISON COMBS, et al., Plaintiffs,
v.
SUN-UP COAL COMPANY, INC., et al., Defendants


Harold H. Greene, United States District Judge.


The opinion of the court was delivered by: GREENE

HAROLD H. GREENE, UNITED STATES DISTRICT JUDGE

 Plaintiffs, the trustees of the United Mine Workers of America 1950 and 1974 Pension Plans, brought this action pursuant to the Employee Retirement Income Security Act (ERISA), as amended by the Multi-employer Pension Plan Act Amendments (MPPAA), 29 U.S.C. §§ 1001 et seq., to collect withdrawal liability. Defendant Sun-Up Coal Company, an Alabama corporation which was engaged in the coal mining business, was a party to the National Bituminous Coal Wage Agreements of 1974 and 1978. Under these agreements, Sun-Up was obligated to make contributions to the Plans on behalf of its employees covered under the Agreements. Sun-Up, in fact, made contributions to the Plans until March 26, 1981, at which time it ceased to be a participating employer and withdrew completely from the Plans. Thereafter, plaintiffs notified Sun-Up of its withdrawal liability to the Plans. When their efforts to collect the amount of withdrawal liability from Sun-Up proved unsuccessful, plaintiffs filed the instant action against Sun-Up and three individuals--Murry Webb, Clement Webb, Jr., and Harry J. Aldridge, the officers and sole shareholders of Sun-Up -- to collect $163,660.91, the amount of unpaid contributions due under the 1950 and 1974 Plans, as well as interest on such unpaid contributions, liquidated damages, attorneys' fees and costs.

 The three individual defendants have filed a motion to quash service of process and to dismiss the complaint against them for lack of personal jurisdiction. *fn1" In support of their motion, defendants argue that, in the absence of any claim that the corporate identity of Sun-Up should be disregarded, they cannot be considered employers for purposes of assessing withdrawal liability under subchapter III of ERISA, and that they are therefore not subject to the Court's jurisdiction. Plaintiffs maintain that these defendants are employers within the meaning of section 3(5) of ERISA, 29 U.S.C. § 1002(5), because as officers and the sole shareholders of Sun-Up, they acted directly or indirectly in the interest of that company in relation to the Plans, and are therefore jointly and severally liable for the withdrawal liability of Sun-Up pursuant to section 4201(a), 29 U.S.C. § 1381(a).

 The crux of this matter is who, in addition to the signatory company, can be considered an "employer" for purposes of assessing withdrawal liability. Title IV of the ERISA, which governs an employer's withdrawal liability, *fn2" does not define the term employer. However, this term is defined in section 3(5) of Title I of ERISA, 29 U.S.C. § 1002(5), to mean

 
any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employee in such capacity.

 It is this definition upon which plaintiffs rely to support their claim that defendants, as officers and sole shareholders of Sun-Up, are employers because they "acted directly or indirectly in the interest of Sun-Up Coal." Opposition Brief at 3, 9-10.

 As plaintiffs themselves concede, however, the definition of "employer" set forth in section 3(5) is limited by the introductory phrase to section 3 "For purposes of this subchapter . . . ." Thus, the definition quoted above applies only to subchapter I of the ERISA, and not to subchapter III--the subchapter at issue here, and the cases cited by plaintiffs which construe the term "employer" in the context of actions to collect delinquent contributions under collective bargaining agreements and under Title I of the ERISA are arguably inapposite. *fn3"

 Indeed, in one of the cases cited by plaintiffs where the personal liability of a dominant corporate officer and shareholder was at issue, the court expressly distinguished between actions to collect delinquent contributions under a collective bargaining agreement and under Title I and actions to collect withdrawal liability under Title IV. See Massachusetts State Carpenters Pension Fund v. Atlantic Diving Co., 635 F. Supp. 9 (D. Mass. 1984). In that case, the court permitted plaintiffs to amend their complaint to add three individual officers as defendants. In doing so, however, it specifically reserved judgment on whether these individuals could be held personally liable as "employers" under Title I of ERISA or under section 301 of the Labor Management Relations Act for delinquent contributions. The court, upon noting defendants' concern that its decision could be a precedent for imposing personal liability for withdrawal liability, explicitly stated that withdrawal liability was not an issue in the case. It then referred to an opinion letter drafted by the Pension Benefit Guarantee Corporation (PBGC), the corporation created under ERISA to administer Title IV, *fn4" concerning personal liability of officers and shareholders for withdrawal liability. In that letter, the PBGC stated that ". . . ERISA has no special rules regarding shareholder or officer liability . . . [Rather], this issue is usually determined by state law which generally provides that shareholders are not liable for the debts of a corporation. You should, however, be aware that the laws of every state contain exceptions to this general principle." Massachusetts State Carpenters Pension Fund v. Atlantic Diving Co., C.A. No. 83-2872-MA (D. Mass. Oct. 12, 1984), slip op. at 12 n.3, quoting PBGC opinion letter 82-038 (Dec. 14, 1982). The court concluded that this opinion letter was "[not] a compelling reason to foreclose the opportunity for individual liability under ERISA in its entirety." Id. (emphasis supplied).

 It should be noted that in a subsequent opinion letter supplied by plaintiffs in this action, the PBGC, while noting that "Title IV does not define 'employer' for purposes of assessing withdrawal liability," stated that it viewed the definition contained in section 3(5) of Title I as "an appropriate definition for determining whether a business is liable under Title IV under the circumstances [described in the request for PBGC's opinion]." *fn5" Opinion letter by Henry Rose, General Counsel for PBGC dated December 27, 1984 (emphasis supplied). The PBGC explained its reasoning in a footnote as follows:

 
Title I definitions are limited "for purposes of this title"; thus, they are not necessarily applicable to Title IV. See Nachman v. PBGC, 446 U.S. 359, 370 and n.14 [100 S. Ct. 1723, 64 L. Ed. 2d 354] (1980). However, in the absence of an express Title IV definition or regulatory guidance by PBGC, guidance may be sought in Title I where it does not conflict with the purposes of Title IV.

 Id.

 Defendants suggest that applying the broad definition of "employer" in section 3(5) to Title IV may, in fact, be inconsistent with the purposes of that Title. Withdrawal liability, they allege, is governed not only by different statutory language but also by different policy considerations than those underlying the pension contributions provisions of Title I. Unlike the actions brought to collect delinquent pension contributions or unpaid wages, withdrawal liability situations often occur in the absence of any nonfeasance or misfeasance by any individual with fiduciary responsibilities. Accordingly, the rationale for holding individuals personally liable as employers for unpaid wages or pension contributions is often inapplicable.

 In further support of their argument that section 3(5)'s definition of "employer" is inapplicable, defendants cite to section 4225 of ERISA, 29 U.S.C. § 1405, which provides for limitations on the withdrawal liability of an employer that sells its assets or that becomes insolvent. The Court too finds it puzzling that if Congress had intended shareholders and officers to be personally responsible for unpaid benefits, it would have included provisions limiting the withdrawal liability of an employer to a portion of its liquidation or dissolution value. ...


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