Court Rejects Equitable Exception to MPPAA’s ‘Pay Now, Dispute Later’ Regime
A withdrawing employer must make withdrawal liability installment payments during the pendency of an arbitration proceeding contesting the existence of withdrawal liability, a federal court has affirmed, rejecting the employer’s attempt to recognize an equitable exception to the general “pay now, dispute later” requirement. Boilermaker-Blacksmith National Pension Trust v. PSF Industries, No. 18-2467-JWL (D. Kan. Nov. 27, 2019).
Under the Multiemployer Pension Plan Amendments Act (MPPAA), an employer that withdraws from a multiemployer pension plan must make withdrawal liability installment payments in an amount determined under the statute. Under MPPAA, disputes between a fund and an employer must be resolved by arbitration. It also requires the employer to continue to make payments until an arbitrator has finally resolved the dispute. This last requirement is referred to as MPPAA’s “pay now, dispute later” provision.
In this case, the employer permanently ceased making contributions in 2017. The fund demanded withdrawal liability in excess of $16 million. The employer disputed the existence and amount of withdrawal liability by demanding arbitration. While arbitration is still pending, the employer made one installment payment and then failed to make subsequent payments.
When the fund sued to collect the delinquent payments, the employer’s sole defense was that the court should recognize an equitable exception to the pay now, dispute later provision. The employer claimed that entitlement to this exception should be based on its likelihood of success in the underlying arbitration (which was ongoing) and the irreparable harm that would result from having to make these payments.
The court reviewed other Circuit court precedent on point, citing with approval the Sixth Circuit’s holding in Findlay Truck Line, Inc. v. Central States, Southeast and Southwest Areas Pension Fund, 726 F.3d 738 (6th Cir. 2013) in holding that the employer must make the installment payments.
The court noted that the plain language of the statute (“withdrawal liability shall be payable … notwithstanding any request for review or appeal”) requires employers to make withdrawal liability payments without exception. It also found that its holding comported with the Congressional intent in protecting funds from “undercapitalized or financially precarious employers.”
The court then looked to other Circuit courts that had recognized an equitable exception, finding that those courts (the Fifth and Seventh Circuits) had conditioned the exception on an affirmative showing by the employer “that the pension fund lacks a colorable claim” for withdrawal liability. Absent any allegation that the fund’s claim was frivolous, the court denied the employer’s request for an equitable exception to the pay now, dispute later requirement.
MPPAA is a highly detailed and complex statute, and counsel experienced with the statute is essential to the defense of any claim for withdrawal liability. PSF Industries is another example of the statute’s inherent pro-fund bias and the reluctance of most courts to diverge from these parameters.