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WASHINGTON-The U.S. Supreme Court has agreed to decide how much time multiemployer pension plans have in which to sue employers that withdraw from underfunded plans and fail to pay withdrawal liability claims.
At issue is when the clock starts to tick on a statute of limitations provision in the Multiemployer Pension Plan Amendments Act, the 1980 law that requires employers leaving underfunded plans to pay a share of a plan's promised but unfunded benefits.
The statute of limitations provision says actions must be brought within six years "after the date on which the cause of action arose" or three years after the earliest point at which the plaintiff either knew or should have known that a cause of action existed.
The Supreme Court, in a case involving a San Francisco laundry that withdrew from the Bay Area Laundry and Dry Cleaning Pension Trust Fund, will decide the application of the law's statute of limitations.
The case goes back to March 1985, when Ferbar Corp. withdrew from the multiemployer plan and ceased making pension contributions.
On Dec. 12, 1986, the pension plan informed Ferbar that it owed $45,580 in withdrawal liability. The laundry had the option of meeting its obligation by making a lump-sum payment or through 240 monthly installments of $345.50, the first of which would become due Feb. 1, 1987.
The pension plan told the laundry that it would be held in default if payment were not received within 60 days from the date the first payment was due. On April 14, 1987, plan trustees told the laundry the first payment was overdue. Trustees gave the laundry 60 days to begin payment or be considered in default. Ferbar requested that the plan review the withdrawal liability assessment and requested arbitration, though no proceedings were held.
Ferbar did not make any withdrawal liability payments and on Feb. 9, 1993, the plan's trustees sued Ferbar to collect the money. The suit was filed six years and eight days after the first withdrawal liability payment was due, but within six years of the time Ferbar became delinquent.
The 9th U.S. Circuit Court of Appeals said the multiemployer plan filed too late. The six-year statute of limitations, the appeals court said, started to run when Ferbar withdrew from the pension plan, with the result that time ran out to file suit in March 1991.
The multiemployer plan trustees asked the Supreme Court to decide if the statute of limitations goes back to: when the employer withdrew from the plan; the date payment was not received; the date the payments were delinquent; or another date.
The trustees said various courts have defined differently when the statute of limitations in the law kicks in. "The various interpretations of the statutory limitations period adopted by the circuits yield widely different results on the same facts," the trustees wrote in papers filed with the Supreme Court.
Federal pension regulators say they welcome a Supreme Court resolution on when the statute of limitations begins.
"We are pleased that the Supreme Court has agreed to hear this important issue for multiemployer pension plans. Resolving the conflict between the 9th Circuit Court of Appeals and three other circuit courts will clarify the obligation of plan trustees in withdrawal liability situations," said James Keightley, general counsel of the Pension Benefit Guaranty Corp.
About 2,000 multiemployer pension plans, with about 8.7 million participants, now operate. Most of the plans are fully funded, according to surveys by The Segal Co., a New York-based benefit consulting firm.
Board of Trustees, Bay Area Laundry and Dry Cleaning Pension Trust Fund vs. Ferbar Corp. of California Inc., U.S. Supreme Court, No. 96-370.