In Central States, Se. & W. Areas Pension Fund v. Laguna Dairy, S. de R.L. de C.V., No. 23-3206 (3d Cir. 2025 Mar. 27, 2025), the United States Court of Appeals for the Third Circuit (“Third Circuit”) reversed the district court’s dismissal of a pension fund’s withdrawal liability suit against certain employers that were commonly controlled with the withdrawing employers.
The Central States, Southeast and Southwest Areas Pension Fund (the “Fund”) initially sought payment from two withdrawing employers, Borden Dairy Company of Ohio, LLC and Borden Transport Company of Ohio, LLC (the “Borden Ohio entities”). Pursuant to 29 U.S.C. § 1401(a)(1), the Borden Ohio entities sought arbitration of the Fund’s assessment of the monthly withdrawal liability payment. Before the arbitration process concluded, the Fund and the Borden Ohio entities entered into a settlement agreement that reduced the monthly withdrawal liability payments. The Borden Ohio entities agreed to waive any right to request review or to initiate arbitration and agreed to dismiss the existing arbitration with prejudice.
The Borden Ohio entities made monthly payments to the Fund pursuant to the settlement agreement until they filed for bankruptcy. After the conclusion of the bankruptcy proceedings, the Fund sent past-due notices to the non-bankrupt entities under common control with the Borden Ohio entities (the “Related Employers”) who did not make any withdrawal liability payments. The Related Employers failed to make any payments, and the Fund brought an action in district court against them pursuant to 29 U.S.C. § 1401(b). However, under Section 1401(b), a fund can only initiate a federal lawsuit when an arbitration has not been initiated or when an arbitration has been completed. Here, neither was present because an arbitration was initiated, and the arbitration was not completed. Therefore, the issue was whether the fund asserted a cause of action that could overcome a motion to dismiss.
The Third Circuit addressed whether the settlement agreement was a revision of the withdrawal liability assessment, meaning the Fund would have a cause of action under 29 U.S.C. § 1401(b).
The Fund contended that the settlement agreement constituted a revised withdrawal liability assessment and that the Related Employers did not seek to arbitrate that assessment. The Third Circuit discussed National Shopmen Pension Fund v. DISA Industries, Inc., 653 F.3d 573 (7th Cir. 2011); and Masters, Mates & Pilots Pension Plan v. USX Corp., 900 F.2d 727 (4th Cir. 1990), and ultimately agreed with the Fund holding that the settlement agreement was a revised withdrawal liability assessment. Thus, the Fund had asserted a cause of action under 29 U.S.C. § 1401(b)(1) because the Related Employers did not file for arbitration regarding that revised assessment. The Third Circuit went on to note that its conclusion does not give funds free rein to revise withdrawal liability assessments whenever they please. Rather, funds may revise liability assessments so long as the employer is (1) not prejudiced; and (2) the revision was made in good faith. In short, the settlement agreement was properly understood under the Multiemployer Pension Plan Amendments Act (“MPPAA”) as a revision to the withdrawal liability assessment and because no employer sought arbitration with respect to that revised assessment, the Fund had a cause of action under 29 U.S.C. § 1401(b).
Additionally, the Third Circuit stated that case law establishes that a document need not be a formal notice-and-demand letter to suffice under that section. In sum, the Third Circuit held that Section 1399(b)(1) applied, and that the Fund met its requirements under it. The Third Circuit’s precedential opinion reinforced the duty of each controlled group member to fully address and follow all withdrawal liability assessments to their conclusions.
