June L. Green, U.S. District Judge
Plaintiffs brought this action to collect withdrawal liability payments from defendant pursuant to the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. §§ 1381-1405, 1451 (1982). Defendant counterclaimed asserting that plaintiffs' assessment of liability rests on an invalid interpretation of the governing statute, section 4204 of the MPPAA, 29 U.S.C. § 1384 ("section 1384"). Both parties have moved for summary judgment.
Pursuant to the Court's order of June 28, 1985, ruling that the legal claims asserted by defendant could be addressed by this Court, the parties submitted additional memoranda addressing the interpretation of section 1384. For the reasons set forth below, the Court grants defendant's motion for summary judgment and denies plaintiffs' motion.
Plaintiff I.A.M. National Pension Fund ("the Fund"), Benefit Plan A ("the Plan") is a multiemployer pension plan within the meaning of 29 U.S.C. § 1002(37). Plaintiffs Eugene Glover and Lester F. Gettle, Jr. are co-chairmen of the Board of Trustees of the Plan and are fiduciaries within the meaning of 29 U.S.C. § 1132(a)(3). Plaintiff Board of Trustees of the Fund is the administrator of the Plan within the meaning of 29 U.S.C. § 1002(16).
Defendant Cooper Industries, Inc. ("Cooper") is an "employer" within the meaning of 29 U.S.C. § 1002(5). Cooper, through one or more of its subdivisions contributed, under the terms of various collective bargaining agreements, to the Plan from 1967 until May 25, 1984.
Effective December 10, 1981, Cooper sold the assets of one of its divisions, Cooper Airmotive, to Aviall, Inc. ("Aviall"). Cooper and Aviall structured the transaction and obtained the necessary bonding to comply with the MPPAA sale of assets provision, section 1384. That section provides an exception to the rule that an employer incurs withdrawal liability when it sells covered operations. At all times material, Aviall has continued to operate the former Cooper division and has continued to make contributions to the Plan in accordance with the collective bargaining agreement.
In May 1984, Cooper closed another division, Crescent Tool. Contributions were being made to the Plan on behalf of Crescent employees; therefore, the closing of this division constituted a withdrawal within the meaning of 29 U.S.C. § 1383(a)(2).
Thereafter, the Plan notified Cooper pursuant to 29 U.S.C. § 1399 that it owed plaintiffs $624,343 in withdrawal payments, to be paid in three installments. The first payment of $262,188 was due by September 25, 1984.
When Cooper failed to make the initial payment, plaintiffs filed suit demanding judgment against Cooper in the amount of the first installment, plus interest from the September 25 payment date. In its answer, Cooper claimed that the requested payment was unlawful under section 1384 because it sought to impose liability for the division sold to Aviall over two years prior to Cooper's complete withdrawal from the Plan. Cooper also counterclaimed for an injunction against the enforcement of plaintiffs' withdrawal liability demand.
On June 25, 1985, the Court entered an order requiring Cooper to pay the overdue first installment of withdrawal liability to the Fund, with interest, pending resolution of its counterclaim. The issue now ready for decision is the meaning of section 1384 raised by Cooper.
A. Section 1384
Section 1384 provides an exception to the rule that an employer incurs withdrawal liability when it sells operations covered by MPPAA funding requirements. No withdrawal occurs "as a result of a bona-fide, arm's-length sale of assets to an unrelated party" if (1) the purchaser assumes "an obligation to contribute to the plan . . . for substantially the same number of contribution base units"
as the seller contributed for the operations; (2) the purchaser posts the required bond or places the required amount in escrow for five plan years; and (3) the seller agrees to remain secondarily liable in the event of the purchaser's subsequent withdrawal. Section 1384(a)(1)(A), (B), (C).
In compliance with section 1384, Aviall agreed to contribute to the Plan with respect to the Cooper Airmotive operations for substantially the same number of contribution base units for which Cooper had an obligation to contribute to the Plan. Effective December 17, 1981, Aviall posted a two-year renewable bond for $220,000, the appropriate statutory amount, payable to the Plan in the event that Aviall withdrew from or failed to make contributions to the Plan. In addition, Cooper agreed to be secondarily liable if Aviall completely or partially withdrew during the first five plan years and failed to pay the resulting withdrawal liability. Defendant's Exhibits A, B.
A separate letter agreement dated December 18, 1981, contained provisions by which Aviall agreed to secure its remaining three-year obligation under section 1384(a)(1)(B). The Pension Benefit Guaranty Corporation ("PBGC")
rendered a favorable opinion on the propriety of the bonding arrangement. Defendant's Exhibits G, H.
While it appears to the Court that Cooper complied with the various requirements of section 1384 in the Cooper Airmotive sale, plaintiffs contend that section 1384 is operative only when a complete or partial withdrawal has occurred under 29 U.S.C. § 1383 or § 1385. Since no withdrawal occurred in 1981, plaintiffs assert that section 1384 did not apply to Cooper's sale of its Cooper Airmotive division.
Defendant argues that its compliance with section 1384 in the 1981 Cooper Airmotive transaction shields it from withdrawal liability for that division when it subsequently withdrew from the Plan in 1984. The Court agrees, finding defendant's interpretation of section 1384 the only plausible one.
The express terms of section 1384 provide the starting point for interpreting that statute. Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108, 64 L. Ed. 2d 766, 100 S. Ct. 2051 (1980). The three central provisions of section 1384(a)(1), here applicable, indicate a primary concern with maintaining plan funding after the sale of a covered operation to another entity not a party to the collective bargaining agreement. Supra slip op. at 4. The Court finds nothing in the statute to support plaintiffs' contention that section 1384 is operative only when a contemporaneous complete or partial withdrawal occurs.
Indeed, plaintiffs' interpretation would defeat the purpose of section 1384 by assigning to Cooper a liability assumed properly by Aviall. See Plaintiffs' Additional Memorandum at 6. Because Aviall continues to make contributions on behalf of employees in the covered operations, plaintiffs' interpretation would permit a double recovery, in contravention of the statutory scheme. Plaintiffs' theory essentially reads section 1384 out of the statute by permanently saddling a seller with potential liability. Moreover, unless an employer was considering a sale of assets that would by itself constitute a withdrawal within the meaning of 29 U.S.C. § 1383 or § 1385, the position advocated by plaintiffs would eliminate any incentive for the seller to find a purchaser willing to continue contributing to the pension plan.
The MPPAA was enacted to protect multiemployer pension funds and the PBGC from employers withdrawing and leaving the funds without the financial resources to provide benefits to covered employees. H.R. Rep. No. 869(I), 96th Cong., 2d Sess. 65, 67, 73 (1980); H.R. Rep. No. 869(II), 96th Cong., 2d Sess. 4 (1980), reprinted in 1980 U.S. Code Cong. & Ad. News 2918, 2933, 2935, 2941, 2995; T.I.M.E. - DC, Inc. v. Management-Labor Welfare & Pension Funds, 756 F.2d 939, 943-44 (2d Cir. 1985). Commensurate with the well-stated purpose of the MPPAA, section 1384 is designed to ensure substantial protection of the pension plan where an employer structures a normal business transaction - - a sale of assets.
Congress intended withdrawal liability to be imposed as necessary to compensate plans for the cessation of contributions - - not as a penalty in addition to contributions. E.g., 1980 U.S. Code Cong. & Ad. News at 2922-23, 2928-29, 3004; Peick v. Pension Benefit Guaranty Corp., 724 F.2d 1247 (7th Cir. 1983); see generally Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 197, 42 L. Ed. 2d 378, 95 S. Ct. 392 (1974) (congressional intent is to be derived from the statutory language read in light of its purposes and legislative history). The employer should not be subject to withdrawal liability with respect to operations sold to a purchaser willing to continue contributing to the plan.
This reading of section 1384 receives further support from PBGC Opinion Letter No. 83-10 (May 12, 1983). In that letter, the PBGC concluded that where a sale of assets complies with section 1384 but there is no withdrawal at the time, the seller should receive a credit in any subsequent withdrawal liability calculations:
If the sale under section 1384 is with respect to only a portion of the operations for which the employer has an obligation to contribute, the question is raised whether future liability calculations should take into account all the operations, including those sold under section 4204 [ 29 U.S.C. § 1384], or whether there should be a credit for the sale in light of the purchaser's assumption of the contribution history for the sold operations.