Bay Area Laundry & Dry Cleaning Pension Trust Fund v. Ferbar Corporation of California, Inc.

PETITIONER: Bay Area Laundry & Dry Cleaning Pension Trust Fund
RESPONDENT: Ferbar Corporation of California, Inc.
LOCATION: United States Department of State

DOCKET NO.: 96-370
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 522 US 192 (1997)
ARGUED: Nov 10, 1997
DECIDED: Dec 15, 1997

Edward C. DuMont - on behalf of the United States, as amicus curiae, supporting the petitioner
Marsha S. Berzon - on behalf of the Petitioner
William F. Terheyden - on behalf of the Respondents

Facts of the case

The Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) requires employers who withdraw from underfunded multiemployer pension plans to pay a "withdrawal liability," which is dischargeable with an arranged series of periodic payments. The Bay Area Laundry and Dry Cleaning Pension Trust Fund (Fund) is a multiemployer pension plan for laundry workers. The Ferbar Corporation contributed to the Fund, but ultimately ceased doing so. Subsequently, the Fund's trustees demanded payment of Ferbar's withdrawal liability. The trustees decided to allow Ferbar to satisfy its obligation by making monthly payments. However, Ferbar never made a payment. Ultimately, the District Court granted Ferbar summary judgment on statute of limitations grounds. The court noted that the trustees had filed suit eight days too late. This was the date Ferbar was to make its first payment. In affirming, the Court of Appeals held that the six-year period began to run on the date Ferbar withdrew from the Fund, in March 1985. Under this view, the trustees commenced suit nearly two years too late.


Does the Multiemployer Pension Plan Amendments Act of 1980's six-year statute of limitations begin to run on a pension fund's action to collect unpaid withdrawal liability on the date the employer withdraws from the plan?

Media for Bay Area Laundry & Dry Cleaning Pension Trust Fund v. Ferbar Corporation of California, Inc.

Audio Transcription for Oral Argument - November 10, 1997 in Bay Area Laundry & Dry Cleaning Pension Trust Fund v. Ferbar Corporation of California, Inc.

William H. Rehnquist:

We'll hear argument now in Number 96-370, the Bay Area Laundry and Dry Cleaning Pension Trust Fund v. Ferbar Corporation of California.

Ms. Berzon.

Marsha S. Berzon:

Mr. Chief Justice, and may it please the Court:

The 1980 ERISA amendments set up a complicated, complex scheme for assuring the long-run stability of multiemployer plans, pension plans, when employers for many perfectly valid reasons, legal reasons, cease making contributions to the plans.

That scheme requires that some but not all withdrawing employers make withdrawal liability payments in amounts that are dictated by the statute under a periodic payment scheme that can extend for as long as 20 years, and that is also largely dictated by the statute.

The question before the Court in this case is when a cause of action to collect one or more of those unpaid withdrawal liability payments accrues under the 1980 act.

The answer to that question in our view is rather simple and straightforward, and it depends on two fundamental principles of statute of limitations law.

The first, and on this point I don't think there's any dispute among the parties, is that ordinarily a limitations period runs from when a cause of action accrues, and in this statute that's made quite explicit by 1451(a), and that means when the plaintiff can first file a lawsuit, not before.

The statute here so states in 1451(a) that the... there's a cause of action... in 1451(f), I'm sorry, that the limitations period runs from when the cause of action arose.

The second principle, and here the consensus among the parties I think somewhat collapses, is that a plaintiff's right to file suit ordinarily is triggered by some breach of duty by the potential defendant as defined by the relevant legal rules.

Here that's the 1980 act, and the rules that it sets up for determining when the defendant, potential defendant, the employer in this case, is required to make payments, so unless one knows when the employer has breached a legal obligation one really can't make a sensible decision about when the statute of limitations starts to run.

That is, there has to be a situation in which a court could issue a corrective order in favor of the plaintiff and against the defendant in order for a cause of action to accrue, so the limitations decision is really the flip side of a set of understandings about what obligations, duties, and rights the statute sets up to begin with and can't be looked at in isolation.

Anthony M. Kennedy:

Does interest run on withdrawal liability?

Marsha S. Berzon:

Interest runs on withdrawal liability payments, but in an odd way that was described by this Court in Schlitz.

That is, once the demand has been made, once there has been an assessment and a demand and a stated period in which the payments have to be made, then interest runs on payments--

Anthony M. Kennedy:

So interest would not run from the date of withdrawal.

Marsha S. Berzon:

--It doesn't run from the date of withdrawal, and if the fund does not assess the withdrawal for some period of time it runs only, as described by this court in Schlitz, as if the payment was made on the first day of the date following withdrawal no matter when they're actually made, even if it the demand isn't to make them until sometime later.

So to apply these general principles to this case, there are really three factors that are the most important.

The first is that the withdrawal itself is not a violation of any legal obligation, ceasing to make contributions is not the violation of any legal obligation, and that the date of withdrawal is often determined after the fact by a set of events that occur after what is later decided to be the date of withdrawal.

So the date of withdrawal is really a datum in a bunch of calculations, and not a date on which an employer is supposed to do anything, and what that means for purposes of the limitations inquiry here is that if the fund had tried to sue the employer on the date of withdrawal they would have been summarily dismissed from their lawsuit because no demand had been made for payment and the employer had no obligation to pay anything.

The second critical factor is that the employer does violate the statute once it fails to pay any withdrawal liability payment on the schedule that is set by the fund in the demand letter, again largely prescribed by the statute.

That is the schedule and the amount both.

So what we have here is sort of like a... any bill, like a telephone or a credit card or a legal bill or a hospital bill in which there is a liability that is incurred regarding facts that occur on a certain date, but until you get a bill that requires you to make a payment there's no obligation to pay, no obligation that has been breached, and no potential lawsuit until that date.

And this rule is a rule that, although the employer in this case seems to take issue with it, is one that has been understood by hundreds of courts over hundreds of years, including this Court in a series of cases including Rawlings v. Ray and others.

That is that ordinarily when you're dealing with a debt a cause of action accrues on a date that there is an obligation to pay the debt, and--

Sandra Day O'Connor:

So under your view, I mean, there would be a separate cause of action for each instalment payment.

Marsha S. Berzon:

--Well, that's correct as well, although it was the third point that I was going to make, and--

Sandra Day O'Connor:

And that means that in theory it could continue on for 26 years or so.

Marsha S. Berzon:

--There are two things to be said about that.

One is that the reason, of course, why it is possible that there could be suits for failure to pay, make payments for a long period, is because Congress allowed a long period in which these payments to be made.