Labor & Employment Law Daily Wrap Up, PENSION AND BENEFIT PLANS—3d Cir.: Pension fund can pursue withdrawal liability from related companies under ‘common control’, (Mar 28, 2025)

By Ronald Miller, J.D.

The appeals court held that the settlement agreement was properly understood as a revision of the withdrawal liability assessment.

The Third Circuit, in a 2-1 decision, reversed a district court’s dismissal of a pension fund’s suit seeking to withdrawal liability payments from related companies under common control with two Borden entities. After the Borden companies disputed the amount of the withdrawal liability, the parties entered a settlement agreement. The appeals court concluded that the settlement agreement was properly understood as a revision of the fund’s withdrawal liability assessment. Because no employer sought arbitration regarding that revised assessment, the fund had a cause of action under Section 1401(b)(1). Here, the appeals court determined that the fund met the procedural requirements for notice and demand outlined in 29 U.S.C. § 1399(b)(2). Judge Bibas filed a separate dissenting opinion (Central States, Southeast and Southwest Areas Pension Fund v. Laguna Dairy, S. de R.L. de C.V., No. 23-3206 (3d Cir. Mar. 27, 2025)).

The Multiemployer Pension Plan Amendments Act (MPPAA) requires employers that withdraw from a multiemployer pension plan to cover the liability, interest, and penalties incurred by the withdrawal. The fund is a multiemployer pension plan. In 2014, the Borden entities withdrew from the fund.

After the Borden entities withdrew, the fund sent them a notice and demand for payment of withdrawal liability in January 2015 for approximately $41.6 million, or 240 monthly payments of $199,647.14.

Settlement agreement. In March 2015, the Borden entities sought review by the fund of its assessment of the monthly withdrawal liability payment, contesting an alleged computational error. Thereafter, the Borden entities sought arbitration. Before the arbitration process finished, the parties entered a settlement agreement in August 2016. It reduced the monthly payment to $183,225.00. The Borden entities waived any right to request review or to initiate arbitration and agreed to dismiss the existing arbitration with prejudice.

The Borden entities made the agreed monthly payments until they petitioned for bankruptcy. Thereafter, they ceased making withdrawal liability payments. During the bankruptcy proceedings, the fund explicitly reserved its rights to seek payment for the withdrawal liability from non-bankrupt related employers. Companies under common control can be held jointly and severally liable for withdrawal payments under the MPPAA.

Common control. The fund received $128,576.22 toward the withdrawal liability from the bankruptcy distributions. It then sent past-due notices to related employers under common control with the Borden entities. In August 2022, the fund filed suit seeking to collect payments from the related employers that were commonly controlled with the Borden entities.

In November 2023, the district court granted the related employers’ motion to dismiss. It ruled that “the MPPAA does not provide a statutory cause of action to enforce a private settlement agreement.” The district court also concluded that the fund failed to meet the procedural requirements for notice and demand outlined in 29 U.S.C. § 1399(b)(2).

Settlement agreement as revision of assessment. 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 found that this framing was correct, such that the fund could sue under § 1401(b)(1), which applies when no arbitration has been filed. It emphasizes that the dispute-resolution process outlined in the MPPAA was meant to benefit pensions by preserving their resources, not to impose hurdles to pension-initiated revisions.

The text of the settlement agreement also supported this interpretation. It explicitly characterizes the agreement as “revis[ing]” the “2014 Withdrawal Liability” assessment that the fund first put forward. The agreement contained several references to sections of the MPPAA, supporting the fund’s position that this revision did not take the dispute outside the statutory scheme.

The related employers here contended that they were not bound by the settlement agreement between the fund and the Borden entities, thus leaving them free to seek arbitration as to the settlement agreement. While the appeals court agreed that they could have done so, they did not. Because the related employers slept on their rights, they cannot overcome that failure by asking the appeals court to decide what should have been decided by an arbitrator in the first instance.

Procedural requirements. The district court ruled that the settlement agreement did not meet the notice-and-demand criteria of § 1399(b)(2)(B). Here, the appeals court agreed that the district court correctly ruled that the settlement agreement did not meet the notice-and-demand requirements of § 1399(b)(2)(B). The settlement agreement does not explain the basis for the fund’s decision or the reason for the change in the liability. But that did not answer the broader question whether the fund complied with the requirements in § 1399(b).

The settlement agreement outlined an amount owed, a payment schedule, and a demand for payment, thus satisfying all the requirements of Section 1399(b)(1). And case law established that a document need not be a formal notice-and-demand letter to suffice under that section.

The appeals court rejected the related employers’ contention that the settlement agreement did not “reference the general notice provision of [§] 1399(b)(1)” and that the agreement disclaimed the statute’s dispute-resolution process, removing the dispute from the statutory scheme. Section 1399(b)(1) does not call for a specific invocation of the statute; it simply requires listing an amount owed, a payment schedule, and a demand for payment, which were all present in the settlement agreement. Further, the settlement agreement frequently referenced the MPPAA and thereby put the related employers on notice that the parties still considered the dispute to fall within the statutory scheme.

Accordingly, the appeals court reversed the district court’s order dismissing the funds suit.

Dissent. In a dissenting opinion, Judge Bibas argued that the majority misread the text of ERISA to reach its decision. According to the dissent, the majority looked to the purpose of ERISA, and bypassed ERISA’s text to get the fund its funding. Thus, the dissent concluded that the district court was correct in ruling that the fund did not have a cause of action under ERISA because it had started an arbitration but did not complete it.

The case is No. 23-3206.

Judge: Ambro, T.

Attorneys: Andrew J. Herink, Central States Law Department, and William A. Hazeltine (Sullivan Hazeltine Allinson) for Central States, Southeast and Southwest Areas Pension Fund. Andrew J. Finn (Sullivan & Cromwell) and Rudolf Koch (Richards, Layton & Finger) for Laguna Dairy.

Companies: Central States, Southeast and Southwest Areas Pension Fund; Laguna Dairy

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