Machinists Pension Fund, Dist. 15 v. Khale Engineering Corp.

• Court: Court of Appeals for the Third Circuit
• Decided: December 30, 1994
• Docket: 94-5160
• Status: Unknown

Opinion

Opinions of the United 1994 Decisions States Court of Appeals for the Third Circuit

12-30-1994

Machinists Pension Fund, Dist. 15 v. Khale Engineering Corp. Precedential or Non-Precedential:

Docket 94-5160

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Recommended Citation "Machinists Pension Fund, Dist. 15 v. Khale Engineering Corp." (1994). 1994 Decisions. Paper 232. http://digitalcommons.law.villanova.edu/thirdcircuit_1994/232

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova University School of Law Digital Repository. It has been accepted for inclusion in 1994 Decisions by an authorized administrator of Villanova University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu. UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

No. 94-5160

BOARD OF TRUSTEES OF THE DISTRICT NO. 15 MACHINISTS' PENSION FUND, Appellant

v.

KAHLE ENGINEERING CORPORATION, a New Jersey corporation

On Appeal from the United States District Court for the District of New Jersey (D.C. Civil No. 93-cv-04285)

Argued: September 13, 1994

Before: SLOVITER, Chief Judge, MANSMANN and ALARCON*, Circuit Judges

(Filed December 30, 1994)

Elizabeth Roberto (Argued) Eames, Wilcox, Mastej, Bryant, Swift & Riddell Detroit, MI 48226

Attorney for Appellant

*. Hon. Arthur L. Alarcon, United States Circuit Judge for the Ninth Circuit, sitting by designation. Joseph J. Malcolm (Argued) Grotta, Glassman & Hoffman Roseland, NJ 07508

On the Brief: James M. Beach

Attorneys for Appellee

David S. Allen Jacobs, Burns, Sugarman, Orlove & Stanton Chicago, IL 60606

Attorney for Amicus-Appellant Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent) Pension Fund

Diana L.S. Peters Feder & Associates Washington, DC 20036

Attorney for Amicus-Appellant National Coordinating Committee for Multiemployer Plans

OPINION OF THE COURT

SLOVITER, Chief Judge.

The Board of Trustees of the District No. 15

Machinists' Pension Fund (Fund or Pension Fund) appeals the

dismissal of their action to collect an assessment of withdrawal

liability filed against Kahle Engineering Corp. under the

Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), Pub.

L. No. 96-364, 94 Stat. 1208 (1980) (codified as amended at 29

U.S.C. §§ 1001a, 1381-1453 (1988 & Supp. V 1993)), which amended

the Employee Retirement Income Security Act of 1974 (ERISA), Pub.

L. No. 93-406, 88 Stat. 832 (codified as amended at 29 U.S.C. §§ 1001-1461 (1988 & Supp. V 1993)). The district court entered

summary judgment against the Fund on the basis of the statute of

limitations.

This appeal requires us to determine whether the

district court correctly held that the six-year statute of

limitations in the MPPAA began to run for the entire liability

when the employer first missed an installment payment, even

though the payout period was more than nine years. Apparently,

no federal appellate court has addressed this precise issue of

statutory interpretation under the MPPAA although two other

courts of appeals have decided cases which suggest possible, and

conflicting, interpretations.

I. The Statutory Scheme

The MPPAA was enacted by Congress in 1980 as an

amendment to ERISA to insure the financial stability of

multiemployer pension plans by imposing mandatory liability on

employers withdrawing from a pension plan. See Laborers Health

and Welfare Trust Fund v. Advanced Lightweight Concrete Co., 484

U.S. 539, 545 (1987). In IUE AFL-CIO Pension Fund v. Barker &

Williamson, 788 F.2d 118 (3d Cir. 1986), we identified two goals

for the MPPAA: "'to protect the interests of participants and

beneficiaries in financially distressed multiemployer plans, and

. . . to ensure benefit security to plan participants.'" Id. at

127 (quoting H.R. Rep. No. 869, 96th Cong., 2d Sess. 71,

reprinted in 1980 U.S.C.C.A.N. 2918, 2939). The principal manner

in which these goals are effectuated by the act is by the

imposition of withdrawal liability on an employer who withdraws

from a multiemployer pension plan in the proportionate share of

the plan's unfunded vested benefits. Crown Cork & Seal v.

Central States Pension Fund, 982 F.2d 857, 861 (3d Cir. 1992),

cert. denied, 113 S. Ct. 2961 (1993); see also Concrete Pipe and Prods. v. Construction Laborers Pension Trust for S. Cal., 113 S.

Ct. 2264, 2272 (1993).

The statute sets forth an intricate scheme for the

calculation and collection of the withdrawal liability and

resolution of disputes with respect thereto.1 When an employer

1 . The statutory scheme is supplemented by regulations promulgated by the Pension Benefit Guaranty Corporation (PBGC). As enacted in 1974, ERISA created the PBGC within the Department of Labor "to administer and enforce a pension plan termination withdraws from a multiemployer plan, the plan sponsor must

determine the amount of withdrawal liability, and "as soon as

practicable" notify the employer of the amount of liability and

the schedule for repayments and demand payment in accordance with

that schedule. See 29 U.S.C. §§ 1382, 1399(b)(1). The plan

sponsor must set up a schedule for withdrawal payments which may

impose liability to a maximum of twenty years. Id. §§

1399(b)(1)(A)(ii), 1399(c)(1). The first installment payment on

the schedule is due within sixty days of the plan sponsor's

demand. Id. § 1399(c)(2). Under an exception for labor-

disputes, the employer shall not be considered to have withdrawn

from a plan solely because an employer suspends contributions

during a labor dispute involving its employees. Id. § 1398.

No later than ninety days after the employer receives

notice from the plan sponsor of the determination of withdrawal

liability, the employer may ask the plan sponsor to review any

specific matter and to reassess the schedule of payments; "may

identify any inaccuracy in the determination of the amount of the

unfunded vested benefits allocable to the employer;" and may

furnish any additional relevant information to the plan sponsor.

Id. § 1399(b)(2)(A). The plan sponsor must conduct a reasonable

review of any matter raised by the employer, and notify the

(..continued) insurance program" and granted it the statutory authority to promulgate regulations in carrying out the purposes of ERISA. See Concrete Pipe, 113 S. Ct. at 2271 (citing 29 U.S.C. § 1302(a)-(b)). employer of its decision, the basis for its decision, and any

changes made as a result of the review. Id. § 1399(b)(2)(B).

An employer who wishes to contest the fact of its

liability or the amount must initiate arbitration. If it does

not, it waives the right to contest the assessment and the

amounts demanded by the plan sponsor become "due and owing" as

set forth on the payment schedule, and the employer may be sued

for collection in state or federal court. Id. § 1401(b)(1).

Under the acceleration provision of the statute

available in the event of a default, the "plan sponsor may

require immediate payment of the outstanding amount of the

employer's withdrawal liability, plus accrued interest on the

total outstanding liability from the due date of the first

payment which was not timely made." Id. § 1399(c)(5); see also

29 C.F.R. § 2644.2(b)(2). For purposes of this section, default

is defined as "the failure of an employer to make, when due, any

payment if not cured within sixty days after the employer

receives written notification from the plan sponsor of such

failure." 29 U.S.C. § 1399(c)(5)(A). A default can also be "any

other event defined by the plan rules which indicates a

substantial likelihood that an employer will be unable to pay its

withdrawal liability." Id. § 1399(c)(5)(B). A PBGC regulation prohibits a declaration of default

for failure to make timely payments during the period, and for

sixty days thereafter, that an arbitration is pending or that the

plan sponsor is conducting the employer's requested review. See 29 C.F.R. § 2644.2(c)(1). However, the statute provides that payments in accordance with the schedule set forth by the plan

sponsor must be made "notwithstanding any request for review or

appeal of determinations of the amount of such liability or of

the schedule." 29 U.S.C. § 1399(c)(2). If an employer misses a

scheduled payment, the fund may seek to collect by filing a

collection action but it may not accelerate the balance during

that protected arbitration period. See United Retail and

Wholesale Employees Pension Plan v. Yahn & McDonald, 787 F.2d

128, 131 (3d Cir. 1986), aff'd per curiam by an equally divided

court sub nom., PBGC v. Yahn & McDonald, 481 U.S. 735 (1987)

(hereinafter Yahn).

An action for liability under the MPPAA may be brought

by a plan fiduciary, employer, plan participant, beneficiary or

an employee organization which represents such a plan participant

or beneficiary "adversely affected by the act or omission of any

party" under the statute or by an employee organization. 29

U.S.C. § 1451(a)(1). That action must be filed within six years

after the date on which "the cause of action" arose. Id. §

1451(f)(1).2

2 . Under another prong of the statute of limitations provision, not at issue here, the action may also be brought within three years after the plaintiff knew or should have known of the existence of such a cause of action except that in the case of fraud or concealment, this "discovery prong" is extended to six years. The full text of the provision is:

An action under this section may not be brought after the later of -

(1) 6 years after the date on which the cause of action arose, or With the statutory scheme in mind, we turn to the facts

of this case. Our task is to determine when the Pension Fund's

"cause of action" that is the subject of this suit arose.

II.

Facts and Procedural History

Kahle was a contributing employer to the Pension Fund

pursuant to the collective bargaining agreements it entered into

with its union. Following a labor dispute in 1981, Kahle

suspended contributions to the Pension Fund. On April 23, 1984,

in accordance with 29 U.S.C. §§ 1382, 1399(b)(1), the Fund

notified Kahle in writing that it had determined that Kahle had

withdrawn from the Fund and requested payment of withdrawal

liability in the amount of $271,746, payable in thirty-eight

quarterly installment payments of $9,467 each, beginning on July

1, 1984, with a final thirty-ninth payment of $6,459, payable in

January, 1994.3 The April 23 letter also notified Kahle of its

(..continued) (2) 3 years after the earliest date on which the plaintiff acquired or should have acquired actual knowledge of the existence of such cause of action; except that in the case of fraud or concealment, such action may be brought not later than 6 years after the date of discovery of the existence of such cause of action.

See 29 U.S.C. § 1451(f). 3 . We note that the payment figures total $366,205, which the Pension Fund explained in the district court was attributable to interest on the principal amount of $271,746. Kahle objected to the interest, but it is unclear whether it objected to the fact of interest or its computation. We will leave that issue to the district court on remand. statutory right to request review from the Fund, to identify any

inaccuracies, and to furnish any additional relevant information.

In response, on July 2, l984 Kahle wrote that it "has

not withdrawn from the Fund," that the cessation of contributions

was caused solely by a strike which commenced on June 22, 1981

and continued in 1982, and that the company remains ready and

willing to negotiate with the Union. The letter stated it

constituted an official request under section 4219(b)(2) of ERISA

[29 U.S.C. § 1399(b)(2)] for review of the Fund's determination

that the company had withdrawn, that withdrawal occurred on June

22, 1981 and of the figures used to calculate the withdrawal

liability. Kahle enclosed a first installment payment of $9,467

with the letter. App. at 26-27.

On August 2, 1984, the Fund's counsel advised Kahle by

letter that he would raise the request for review of the

withdrawal liability determination at the next meeting of the

Fund Trustees and would speak to the union about Kahle's claims

of continued negotiation and representation. Counsel also posed

questions to Kahle about its claim of continuing negotiation with

the union. App. at 59-60.

Kahle's response dated September 13, 1984 made clear

there were no negotiations to end the strike and that picketing

continued until April 1982, but that "[b]oth parties remained at

the call of the Federal Mediator." In the last sentence of that

letter, Kahle stated that "pursuant to 29 C.F.R. § 2644.2(c) the Company will discontinue quarterly payments."4 App. at 28-29. In

fact, the referenced PBGC regulation did not authorize Kahle to

withhold the scheduled payments but merely prohibited the Fund

from declaring default during the pendency of arbitration. See

29 C.F.R. § 2644.2.

Kahle sent the Fund's counsel a letter on December 20,

1984, demanding arbitration.5 Before the Fund's counsel had

received the December 20, 1984, letter, he wrote to Kahle's

counsel on December 21, 1984, stating that the Trustees saw no

reason to change their determination that Kahle had withdrawn

from the Plan. App. at 30. The December 21 letter also stated,

"Please be . . . advised that your client is now in default in

its payments. Unless it cures this default by the 1st of January

1985, our client will have no alternative but to declare your

client 'in default' and seek all remedies available to it . . .

under appropriate federal legislation." App. at 30.

4 . The September 13 letter was never received by Fund counsel although the Fund does not contest its contents, and there are later letters that referred to it. The Fund appears to have suggested in the district court that the September 13 letter constituted a demand for arbitration that tolled the accrual of its cause of action and the consequent statute of limitations, but the district court gave that argument short shrift because it is undisputed that neither party took any steps to invoke the arbitration procedure. In the view we take of the statute of limitations issue, we need not decide whether the allusion to arbitration by the employer would have stopped the accrual of the cause of action for any length of time. 5 . The contents of this letter, and particularly the demand for arbitration, are referred to in the Fund counsel's subsequent letter of December 28, 1984. App. at 61-62. On December 28, 1984, the Fund noted receipt of Kahle's

letter of December 20, 1984, enclosed another copy of the Fund's

actuarial calculations, and stated again that the Fund saw no

reason to alter its determination of the fact of or date of

withdrawal, but indicated a willingness to review its

calculations if Kahle provided more specifics. The Fund

acknowledged Kahle's demand for arbitration and suggested that

the parties "proceed in accordance with the rules of the American

Arbitration Association for all purposes," reserving any

objections including timeliness for the arbitrators. The Fund

also offered to discuss "these matters on a less formal basis."

App. at 61-62.

There is no evidence of further communications,

negotiations, or arbitration proceedings after December 1984.

Kahle did not make any further payments. Almost four years

later, on August 9, 1988, the Fund notified Kahle "that the

company is in default in its withdrawal liability payments,"

demanded all past due payments plus interest, and stated that if

Kahle did not make such payments within sixty days the Fund would

require "immediate payment of the total withdrawal liability,

plus interest accruing from the date the first payment was due."

The Fund also demanded that Kahle post a bond for $271,746, the

full amount of withdrawal liability. App. at 63-64. The record

contains no evidence of further communications until the filing

of this suit.

The Pension Fund filed the complaint in the United

States District Court for the District of New Jersey on September 28, 1993. The parties filed cross-motions for summary judgment.

Following a hearing on February 28, 1994, the district court

granted Kahle's Motion for Summary Judgment and dismissed the

case as time-barred under the MPPAA's six-year statute of

limitations. See 29 U.S.C. § 1451(f)(1).

The district court had jurisdiction under 29 U.S.C. §§

1132(e)(1) and 1451(c) and we have appellate jurisdiction

pursuant to 28 U.S.C. § 1291. A district court's grant of

summary judgment is subject to our plenary review. Mitchell v.

Commission on Adult Entertainment Est., 10 F.3d 123, 129 (3d Cir.

1993). Our review of the statute of limitations under the MPPAA

is similarly plenary. Doherty v. Teamsters Pension Trust Fund,

16 F.3d 1386, 1389 (3d Cir. 1994).

III.

Discussion

On the date this lawsuit was filed, September 28, l993,

Kahle was still within the payout period established by the

Pension Fund pursuant to the MPPAA for Kahle to complete payment

of its withdrawal liability. That period was not scheduled to

expire until January 1994. Although the six-year statute of

limitations precludes the Fund's recovery of any payments due

more than six years before the filing of its complaint, and the

Pension Fund apparently so concedes, we fail to see any

persuasive reason why the Fund should not be entitled to recover

the payments due during the six years preceding the filing of its

lawsuit. The district court reasoned that the Fund's cause of

action arose when Kahle missed its first payment in October 1984

and, at the latest, December 21, 1984.6 Under the district

court's theory, and that accepted by the dissent in this case,

the failure of the Fund to file its suit within six years from

that date meant that the Fund's action was untimely, even though

it was filed while there were still payments to be made.

We believe that the district court erred when it failed

to recognize that the employer's obligation to make the scheduled

payments is akin to the obligation to make installment payments.

In an installment contract, a new cause of action arises from the

date each payment is missed. See 4 A. Corbin, Corbin on

Contracts § 951 (1951).

The principles applying the statute of limitations to

installment payments are well established: In the case of an obligation payable by instalments, the statute of limitations runs against each instalment from the time it becomes due, that is, from the time when an action might be brought to recover it.

....

The rule that the statute of limitations begins to run against each instalment of an obligation payable by instalments only from the time the instalment becomes due applies although the debtor has the option to pay the entire indebtedness at any time. On the other hand, where there is an acceleration clause giving the creditor the right upon certain contingencies to declare the whole sum due, the statute begins to run, only with respect to each instalment, at the time the instalment becomes due, unless the creditor exercises

6 . It is not clear from the record on what basis the district court concluded that the latest date for accrual of the cause of action was December 21, 1984. his option to declare the whole indebtedness due, in which case the statute begins to run from the date of the exercise of his option.

51 Am. Jur. 2d: Limitation of Actions § 133. As Corbin explains, unless there is a repudiation

(analogous to a default and acceleration under the MPPAA), the

plaintiff may only sue for each breach as it occurs, and the

statute of limitations begins to run from that time. See Corbin

supra, § 989; see also United States v. La France, 728 F. Supp.

1116, 1119-20 (D. Del. 1990) (holding that the cause of action

for collection of installment payments under a Small Business

Administration loan accrues on each installment from the date it

falls due in the absence of acceleration).

The analogy of scheduled payments under the MPPAA to

installment payments was adopted by the Eleventh Circuit when it

held that interest accrues on overdue withdrawal liability from

the due date of each missed payment rather than from the due date

of the first installment. See Carriers Container Council v.

Mobile S.S. Ass'n, 948 F.2d 1219, 1222-24 (11th Cir. 1991). The

court reasoned that accruing interest from the date of the first

installment would amount to an improper retroactive acceleration

of interest. Id. at 1223. But cf. New York Teamsters Conference

Pension & Retirement Fund v. McNicholas Transp. Co., 658 F. Supp.

1469, 1476 (N.D.N.Y. 1987) (ordering interest from first date of

missed payment under schedule), aff'd, 848 F.2d 20 (2d Cir.

1988). Although the context of Carriers Container was different

than the case before us, that court's treatment of each installment as a separate amount due is in line with the theory

proffered by the Pension Fund.

The Fund also refers us to Ludington News Co. and

Michigan UFCW/Drug Employers Pension Fund Workers Union and Drug

and Mercantile Employers Joint Pension Fund, 9 Employee Benefits

Cas. (BNA) 1913 (1988), an arbitrator's decision viewing the

withdrawal liability as an installment contract obligation under

which "the statute does not begin to run with respect to a

particular installment until that installment falls due." Id. at

1916. Although we recognize that Ludington is without

precedential effect, it was cited as relevant by another circuit.

See Joyce v. Clyde Sandoz Masonry, 871 F.2d 1119, 1124 (D.C.

Cir.), cert. denied, 493 U.S. 918 (1989). We also note that

Ludington relied on Jackson v. American Can Co., 485 F. Supp. 370

(W.D. Mich. 1980), a case that does provide a meaningful analogy.

In Jackson, the court declined to apply the statute of

limitations as a basis to summarily dismiss an action by a

retiree who had been told in l963 of the decision to give him

reduced pension benefits when they became due in l973. Id. at

374-75. The court noted that the pension plan may qualify as an

installment contract, under which claims do not accrue until each

payment comes due. Id. at 374. The strongest authority in support of the holding of

the district court and the arguments of Kahle is the decision of

the Seventh Circuit in Central States, Southeast and Southwest Areas Pension Fund v. Navco, 3 F.3d 167 (7th Cir. 1993), cert.

denied, 114 S. Ct. 1062 (1994), which, although it arose in another context, rejected the position of the pension funds in

that case that a new cause of action arose when the employer

failed to make each scheduled payment when due.

In Navco, the pension funds sought to recover the

unpaid withdrawal liability from Navco, a partnership which was

part of a corporate group with two firms which withdrew from a

pension plan. The pension funds relied on the MPPAA provision

that all members of a group under "common control" are liable for

each other's withdrawal liability. Id. at 169 (citing 29 U.S.C.

§ 1301(b)(1)). Suit against Navco was filed more than six years

after the first payment by its affiliated corporations was due.

Id. at 170. The district court dismissed the suit as untimely,

rejecting the claim of the pension funds that they had six years

from their discovery of the existence of Navco to file suit. The

court of appeals affirmed, agreeing that the statute of

limitations ran from the accrual of the cause of action rather

than from the discovery of the identity of additional responsible

persons, id. at 172, an issue not before us.

Because suit was filed more than six years after the

first scheduled payment was due (but within six years of the last

scheduled payment), the court also had to consider when the cause

of action accrued. It agreed with the district court that the

whole claim comes due when the first payment is missed, phrasing

its analysis as follows: The pension fund has only one claim against the employer (and, derivatively, against the controlling persons): the amount of withdrawal liability. Although a fund may permit an employer to amortize this sum over 20 years, 29 U.S.C. § 1399(c)(1)(B), the whole amount is presumptively due at the outset. Section 1391 calls on the pension plan to determine an amount that is owed; the financing options under § 1399(c) do not break this single debt into little pieces with their own statutes of limitations.

Id. at 172.

Even before turning to the policy behind the MPPAA, we

find the Navco decision unpersuasive. Consider, for example, a

mortgage with a twenty-year payout in a jurisdiction with a six-

year statute of limitations. If, for some reason, the mortgage

company fails to sue the mortgagor for more than six years after

the mortgagor fails to pay the first and succeeding payments,

would it be seriously argued that the mortgage company is

precluded thereafter from suing for those payments due within the

six years preceding the lawsuit or from exercising the

acceleration clause as to the remaining fourteen years?

Moreover, we believe that the reasoning of the Seventh

Circuit is not supported by the statutory language nor the

purposes behind the statutory scheme of the MPPAA. The position

of Kahle and Navco that the whole sum becomes due and the whole claim accrues when the first payment is missed in effect imposes

a compulsory acceleration clause. This reads out of the statute

the relevant statutory provision with respect to acceleration

codified in 29 U.S.C. § 1399(c)(5), which makes acceleration

discretionary. That provision states: (5) In the event of a default, a plan sponsormay require immediate payment of the outstanding amount of an employer's withdrawal liability, plus accrued interest on the total outstanding liability from the due date of the first payment which was not timely made. 29 U.S.C. § 1399(c)(5) (emphasis added).

One must assume that when Congress provided that in the

event of a default "a plan sponsor may require immediate payment

of the outstanding amount of an employer's withdrawal liability,"

Congress also intended that the plan sponsor could decide not to

accelerate the outstanding balance. That option is nugatory if

Kahle is correct, because the claim would accrue automatically

upon default.

We cannot overlook that the statute endorses setting a

schedule of periodic payments lasting up to twenty years. See 29

U.S.C. § 1399(c)(1)(B). If, after making timely payments for the

first year, the employer ran into financial difficulty and missed

two quarterly payments, under the literal language of the Navco

opinion the claim for the remainder of the unpaid liability would

have accrued at that time. Suppose, however, that the employer

regains some financial stability, pays the past due claims, and

resumes making timely payments for six years. Thereafter, it

ceases all payments. Is the pension fund's claim for the

remaining thirteen years of payments now barred because it failed

to file suit within six years of the first missed payment? We

see nothing in the statutory language that requires the patently

inequitable result of permitting an employer to escape much of

the twenty years of scheduled withdrawal payments because an

action to collect the entire balance is not brought within six

years after any one missed payment.

Indeed, such a result would, if accepted, set up

perverse incentives. Automatic default on the entire balance from the date of the first missed payment discourages amicable

resolution of disputes and discourages reentry into the fund as a

contributing employer. If an employer is late on one payment or

misses a payment, must the plan sponsor refuse to accept a late

payment and press for the entire balance, even if this pushes the

company into insolvency? Forcing the plan sponsor into a

position where it must pursue zealous collection efforts at the

expense of facilitating negotiations over reentry or waiting for

a collective bargaining agreement between the employer and the

union undercuts the need for flexibility to ensure solvency.7

Although there is no evidence in the record as to

industry practice in these circumstances, there appears to be

some merit to the argument made in the brief of the Amicus Curiae

National Coordinating Committee for Multiemployer Plans in

support of the Pension Fund that presumptive default, as adopted

by the Seventh Circuit in Navco, will force trustees to

accelerate and sue, even though this action may not be in the

7 . There is support in the legislative history that Congress intended to grant some discretion to plan sponsors. Specifically, the House Education and Labor Report notes that the MPPAA purposefully gave plan fiduciaries "a great deal of flexibility to strike a balance among the competing considerations of encouraging new entrants, discouraging withdrawals, easing administrative burdens, and protecting the financial soundness of a fund." H.R. Rep. No. 96-869, 96th Cong., 2nd Sess. 67 reprinted in 1980 U.S.C.C.A.N. 2918, 2935. Furthermore, even if the plan sponsor chooses rules that "would eliminate or reduce liability, the choice of such a rule is not per se a violation of a fiduciary standards [sic]; the determination must be made as to whether the fiduciary has acted reasonably . . . and in accordance with the fiduciary standards." Id. best interests of plan participants and beneficiaries. See

Amicus NCCMP Brief at 6.

The Pension Fund's position receives support from the

decision of the D.C. Circuit in Clyde Sandoz. 871 F.2d at 1120.

The court reversed the dismissal of an action brought by the

pension fund to recover the assessed withdrawal liability from

the employer because the district court had erroneously measured

the six-year period from the employer's withdrawal from the fund.

In its opinion, the D.C. Circuit held that the cause of action

arose from the date upon which the employer failed to make a

payment on its withdrawal liability demanded by the plan sponsor.

The court reasoned that the action that "adversely affected" the

plan was the failure to make the scheduled payment, and that

therefore the cause of action accrued at that time. The court's

discussion of the effect of an employer's failure to make a

payment that is "due and owing," 29 U.S.C § 1401(b)(1), according

to an amortized schedule lends some support to the Pension Fund's

argument that the cause of action for individual payments does

not accrue until the payment date has passed, because only then

is the payment "due and owing" within the statute. Id. at 1123-

24.

The Clyde Sandoz court also referred to the purpose of

the MPPAA in its interpretation of the statute, noting that that

purpose was to ensure fund solvency by continuing payments under

an amortized withdrawal liability schedule of payments. The

court observed that Congress's overriding purpose of ensuring

plan solvency was followed by a more general goal of facilitating collection and a narrower goal of ensuring prompt collection.

Id. at 1126.

We are not unaware of the argument that Congress

signalled its interest in prompt resolution of withdrawal

liability by requiring the plan sponsor to send the withdrawing

employer a notice and demand for payment "as soon as practicable"

after the withdrawal, see 29 U.S.C. § 1399(b)(1), and that

spreading the time to file a complaint for missed payments under

the "installment contract" theory of liability would run counter

to this intent. But as the Clyde Sandoz court noted and the

Congressional history demonstrates, Congress was interested in

establishing a balance between different goals. When Congress

deems time of the essence, it establishes a statute of

limitations considerably shorter than the six-year statute in the

MPPAA, see 29 U.S.C. § 1451(f)(1), among the longest in federal

statutes. Congress's express authorization to the plan sponsor

to establish a lengthy twenty-year period for the schedule of

payments, see 29 U.S.C. § 1399(c)(1)(B), provides strong evidence

that Congress wanted to give the employer an extended period of

time to be able to accrue the funds to pay the withdrawal

liability. It is unlikely Congress would have done so had it

believed that the beneficiaries of multi-employer funds would

suffer drastically if the plan sponsors select payout periods

that give the employer up to a twenty-year period to pay out the

entire amount due. We find apt the language used in Clyde Sandoz in

rejecting a similar argument that focused on the need for prompt

collection of withdrawal liability. The court stated: Sandoz's reading of the purposes and policies animating the MPPAA is curiously one-dimensional. To be sure, Congress has indicated that promptly collecting outstanding sums is desirable. . . . The employer's reading of the statute would elevate one narrow statutory policy (favoring prompt collection) over the more general goal (collection) and overriding purpose (solvency) which animate and generate that narrow preference. There is no indication that the Act requires, as Sandoz would have it, either prompt collection or no collection at all.

871 F.2d at 1126.

Kahle overstates its case when it argues that the

installment analysis would give the Fund "limitless time to file

a complaint," Appellee's Brief at 15, an argument echoed by the

dissent. The Fund is still subject to the six-year statute of

limitations. Thus, a plan sponsor which had established a twenty

year payout and chose to wait twenty years to pursue its cause of

action would only be able to collect the last six years of

installments and would necessarily forego the remainder, a result

which should provide adequate disincentive to unnecessary delay.

The plan sponsor remains subject to the fiduciary duties placed

on it by ERISA and the MPPAA, and it is therefore unlikely that

the running of the statute of limitations will be at the plan

sponsor's "whim," as the dissent suggests.8

8 . We find curious the dissent's concern that under this opinion Kahle will escape payment of over $150,000 (presumably the amount In light of the statutory language, we reject the

district court's holding that the cause of action for all of the

unpaid withdrawal liability accrues when the first installment 9 payment is missed.

IV.

CONCLUSION (..continued) the dissent calculates was due under the twelve payments from October 1984 through July 1987), dissent typescript op. at 18, when under the dissent's view Kahle would escape payment for the remaining 26 payments, which a rough calculation shows would be more than $250,000, assuming interest as computed by the Fund. 9 . The dissent appears to suggest that the notice of default sent by the Pension Fund to Kahle on April 23, l984 could be viewed as the acceleration notice authorized under 29 U.S.C. § 1399(c)(5). Kahle has not so argued nor did the district court so view it. Nothing in the language of the April 23, l984 letter suggested acceleration. The Pension Fund argues that there is a distinction between the mandatory notice that sets the amount of withdrawal liability and the schedule for repayments, required under 29 U.S.C. §§ 1382, 1399(b)(1), and the discretionary notice of acceleration authorized under 29 U.S.C. § 1399(c)(5), which it contends it sent on August 9, l988. There is some statutory support for the distinction, as the two notices are in separate provisions, and the acceleration provision would have no significance if the mandatory notice of the amount of withdrawal liability were also to be viewed as a notice of acceleration.

In this case, we need not decide whether the plan sponsor would retain the right to accelerate and sue for the total amount due had it previously brought an action to recover a delinquent payment, because that is not what happened here. The Fund did not bring any earlier suit. Furthermore, because all of the payments accelerated as of the August 9, l988 notice (from August 9, l988 to the final payment due January, l994) are covered by the six-year period before the filing of the complaint (which would sweep back to September 28, l987), we need not consider the effect of the August 9, l988 notice. Presumably, the one or two quarterly payments due after the filing of the complaint will be covered by supplement or amendment to the complaint. We conclude that under the statutory scheme established

by the MPPAA, a plan sponsor has six years from the date a

payment is due to sue for its recovery. Absent a decision by the

Fund to accelerate, the cause of action for payments not yet due

does not begin to run when the first such payment is missed. In

this case, it is undisputed that the great bulk of the unpaid

installments were due by Kahle within six years of the filing of

the complaint by the Pension Fund. It follows that the Fund was

not time-barred from bringing suit for the total of the quarterly

payments which fell due within the six years prior to the filing

of this suit.10

For the reasons set forth above, we will reverse the

grant of summary judgment dismissing the complaint and remand for

further proceedings.

10 . Because of the view we take of the dispositive facts, any disputes between the parties as to the effect of the letters sent in l984 are irrelevant to our disposition. For the same reason, we need not consider equitable arguments raised by the Pension Fund. Board of Trustees of the District No. 15 Machinists' Pension Fund v. Kahle Engineering Corporation, No. 94-5160

ALARCÓN, Circuit Judge, dissenting:

In this matter, we must decide when a cause of action arises

under the MPPAA for the unpaid balance of an employer's liability

after the employer has withdrawn from a pension fund. The

district court concluded that the clock begins to run from the

date an employer first fails to make a scheduled payment.

Because the current action for the unpaid balance was filed nine

years after the first missed payment, the district court

dismissed this matter as barred by the six-year statute of

The Board of Trustees of District No. 15 Machinists Pension

Fund ("Fund") contends that its time for filing an action for the

unpaid balance runs six years from the date of the last scheduled

payment set forth in the Fund's formal demand letter.

Unfortunately, the majority has been persuaded by this argument.

The majority holds today that a cause of action for the unpaid

balance of an employer's liability to a pension fund is not

barred by the statute of limitations if it is filed within six

years of the last scheduled payment even if the employer failed

to make any quarterly payments for twenty years. Majority

opinion at 22. Because it is my view that the majority's

decision finds no support in the text of the MPPAA, and is

contrary to the law of the Third Circuit regarding the application of statutes of limitations, I must respectfully

dissent.

In the MPPAA, Congress provided two straightforward options

to a pension fund when an employer fails to make a scheduled

payment on the liability flowing from a withdrawal. The pension

fund may bring an action for the missed payment within six years.

The pension fund may choose, instead, to bring an action for the

entire unpaid balance within six years of the first missed

payment.

The majority has created a third option for the pension

fund. Under this option, the Fund may elect not to bring an

action either for the first missed payment, or for the unpaid

balance, within six years of the default. Instead, the pension

fund may "cho[o]se to wait twenty years to pursue its cause of

action" for the unpaid balance, and would be able "to collect the

last six years of installments." Majority opinion at 22.

Contrary to the majority's view, the MPPAA does not place

the fixing of the date that the cause of action accrues for the

unpaid balance in the exclusive and unreviewable control of the

pension fund, regardless of the prejudice to the defendant caused

by delay in prosecuting the claim. The MPPAA provides that an

action must be filed within six years after the employer

defaults. Because this action was filed more than six years

after the employer missed its first scheduled payment, I would

affirm the district court's order dismissing this action. I.

Before explaining the rationale that motivates my dissent, I

will set forth the facts pertinent to this appeal. Kahle was a

member of a multiemployer pension plan sponsored by the Fund. In

1981, Kahle was involved in a labor dispute with its employees.

As a result, the company suspended its contributions to the Fund.

On April 23, 1984, the Fund determined that the labor dispute had

terminated Kahle's obligation to continue making payments. The

Fund concluded that Kahle had effected a complete withdrawal from

the pension plan. Accordingly, the Fund sent Kahle a notice of

its assessment obligation of $271,746 along with a schedule of

quarterly payments and a demand for payment of the initial

quarterly obligation of $9,467. The payment schedule required

that Kahle make thirty-eight additional payments of $9,467, and a

final payment of $6,459. The Fund also notified Kahle that the

failure to begin payment as required would entitle the Fund to

seek immediate payment of the full amount of withdrawal

liability.11

11 . The relevant portion of the demand letter is as follows:

We have determined that your company has effected a withdrawal from the Fund. In accordance with the Multi- Employer Pension Plan Amendments Act of 1980 (the Act), we hereby make request for payment of withdrawal liability in accordance with the schedule described below.

According to our records, complete withdrawal occurred on June 22, 1981. Based on the method chosen by the Trustees in accordance with the Act, we have computed your company's liability to the Fund to be $271,746. Kahle made its initial quarterly payment on July 2, 1984.

That same day, Kahle informed the Fund that it had not withdrawn.

Kahle also requested a review of the Fund's determination that it

had completely withdrawn.

On August 2, 1984, the Fund requested that Kahle provide

additional information concerning the labor dispute in order that

the Fund could investigate Kahle's claim that it did not

withdraw. On September 13, 1984, Kahle responded to the Fund's

request for additional information and also informed the Fund

that it would discontinue making quarterly payments.

On December 20, 1984, Kahle sent the Fund a letter which

included a demand to arbitrate the pension dispute. The next

day, the Fund sent a letter to Kahle in which it explained that

it had found no basis for altering its prior decision that Kahle

had completely withdrawn. The Fund also warned Kahle that it had

defaulted on its payments and that, if not cured by January 1,

(..continued) You are required to pay this amount in quarterly payments, each in the amount of $9,467 (except for the last payment which will be in the amount of $6,459).

Payments must begin no later than 60 days after receipt of this notice, notwithstanding any request for review or appeal. Accordingly, your company's first quarterly installment is due on July 1, 1984.

Failure to begin payment of withdrawal liability as required may constitute a default, which will entitle the Fund to require immediate payment of the full amount of the withdrawal liability owed. 1985, the Fund would declare a default and "seek all remedies

available to it" against Kahle.12

On December 28, 1984, the Fund's attorney notified Kahle

that Kahle's "letter of December 20, 1984, . . . must have

crossed in the mails with mine of December 21, 1984." The Fund's

December 28 letter reiterated its position that there was no

basis for reversing its conclusion that Kahle had withdrawn from

the plan. The Fund again advised Kahle that it was in default in

its payment and stated further that unless the missed payment was

made, the Fund would "seek all remedies available to it."

Kahle did not make any further payments nor did it initiate

arbitration proceedings. As the Fund candidly admitted in

12 . The Fund's letter dated December 21, 1984, states:

Since our . . . letter to you of August 2, 1984, the Trustees of the District No. 15 Machinists' Pension Fund have met and considered your letter of July 2, 1984.

Please be advised that at this time and in part as a result of your failure to respond to our earlier letter, the Trustees can see no reason for changing their determination that your client has withdrawn from the Plan. Thus, your client continues to be obligated to pay its withdrawal liability.

Please be further advised that your client is now in default in its payments. Unless it cures this default by the 1st of January 1985, our client will have no alternative but to declare your client "in default" and seek all remedies available to it [sic] client under appropriate federal legislation. argument before the district court, it took no further action

against Kahle until 1988.13

On August 9, 1988, the Fund sent Kahle a letter which

stated: This letter is to inform you that the company is in default in its withdrawal liability payments. We hereby demand, on behalf of the Fund, that the company immediately make all the past due payments, plus interest. The interest shall be equal to the current prime rate, accruing from the date each such payment was due. If you do not make such payments, including interest, within sixty (60) days from the date you received this letter, the Fund will require, in accordance with the Multiemployer Pension Plan Amendments Act of 1980, immediate payment of the total withdrawal liability, plus interest accruing from the date the first payment was due. If necessary, the Fund will file an action in the United States District Court to enforce the company's obligation to pay.

Kahle did not make any payments in response to this second

notification of its default. Over five years later, and nearly

13 . The following colloquy occurred between the district court and the Fund's counsel, Ms. Roberto: THE COURT: What happened in 1985, '86, '87? Zero. MS. ROBERTO: Well, the Fund was waiting for--to see what was going to happen with the arbitration with the labor dispute. THE COURT: Waiting for what? In '85, in '86, in '87? Have you got any papers you want to show me that arbitration was commencing, people were looking for arbitrators and reviewing? Nothing happened. I think candor on the part of your client is, Nothing happened in '85, '86, '87, so we sent the default in '88. MS. ROBERTO: I don't dispute that. I have nothing to show you otherwise. nine years after Kahle missed its first payment, on September 28,

1993, the Fund filed this action seeking payment of the unpaid

balance of Kahle's withdrawal liability. The district court

granted Kahle's motion for summary judgment on the basis that the

Fund's action was barred by the six year statute of limitations

period in 29 U.S.C. § 1451(f)(1).

The Fund contends that this action is not barred by the

six-year statute of limitations. It argues that its claim for the

unpaid balance did not accrue until it gave Kahle notice on August

9, 1988 that if all past-due payments were not made within 60

days, it would file an action for the total well-drained

liability. According to the Fund, there are two (2) types of accrual dates for collection of withdrawal liability assessment. One occurs when an installment payment is omitted. At that point the pension fund has the right to bring suit for that one (1) payment. The second is when the pension fund exercises its option to accelerate the outstanding balance after the employers failure to cure a default. If the employer does not meet the pension fund's demand for the entire outstanding balance, a cause of action accrues for the total amount.

Appellant's Opening Br. at 21.

The Fund asserts that the district court erred by failing to distinguish between the accrual of a cause of action for one installment payment and for the total outstanding amount of the assessment. Although the district court stated that it was following Sandoz when it held that the Pension Fund's cause of action triggering the commencement of the MPPAA's six-year statute of limitations accrued in October 1984 or December 1984, it actually followed the Court of Appeals for the Seventh Circuit's decision in Central States Pension Fund v. Navco, 3 F.3d 167 (7th Cir. 1993), cert. denied, 114 S. Ct. 1062 (1994).

Appellant's Opening Br. at 23-24.

The Fund's reliance on Joyce v. Clyde Sandoz Masonry, 871

F.2d 1119 (D.C. Cir.), cert. denied, 493 U.S. 918 (1989), is

misplaced. There is no intercircuit conflict on the issue

presented in this case. A careful reading of the Navco and Sandoz

decisions demonstrates that these cases do not support the Fund's

and the majority's interpretation of the applicable statutes.

In Navco, two pension funds, the Central States, Southeast and Southwest Areas Pension Fund ("Teamsters Fund") and the

Chicago Truck Drivers, Helpers and Warehouse Workers Union Pension

Fund ("Independent Fund"), filed actions against Navco for

withdrawal liability payments. Navco, 3 F.3d at 169. The

employers had completely withdrawn from their multiemployer

pension funds in January 1984. Id.

On April 6, 1984, the Teamsters Fund sent a formal notice of

withdrawal liability and a demand for payment to the employers.

Id. at 170. The employers were given sixty days to make the

demanded payment. Id. No payments were made in response to the

demand. Id. More than seven years after its demand, on May 1,

1991, the Teamsters Fund filed its cause of action. Id.

The district court granted the defendants' motion for

summary judgment. Id. The court held that the action was barred by the six-year statute of limitations, which began to accrue on

June 5, 1984, when the demanded payment became delinquent. Id.

On appeal, the Teamsters Fund argued that the district court erred

when it held that the claim began to accrue when the payment

became overdue. Id.

On June 19, 1984, the Independent Fund sent the employers a

notice, payment schedule, and demand for payment as a result of

their withdrawal from the pension fund. Id. Pursuant to the

schedule, quarterly payments were to begin on July 1, 1984, and

continue until July 1, 1986. Id. The employers never made any

payments. Id. Nearly eight years after its demand, on March 13,

1992, the Independent Fund filed its cause of action. Id.

The district court granted the employers' motion for summary

judgment. Id. The court held that the Independent Fund's action

was barred by the statute of limitations because the claim began

to accrue on July 1, 1984. Id. The district court rejected the

Independent Fund's argument that a claim accrues for the unpaid

balance each time the employer fails to make a scheduled quarterly

payment. Id. On appeal, the Independent Fund asserted that the

cause of action began to accrue when it learned the identity of

persons within the control group who had the ability to pay the

withdrawal liability, as opposed to when the payment became

overdue. Id. The Independent Fund also reiterated its argument

that a cause of action accrued each time the employer failed to

make a required quarterly payment. Id. at 172. The Seventh Circuit in Navco consolidated the appeals of the

Teamsters Fund and the Independent Fund. Id. at 170. The Navco

court affirmed the grant of summary judgment by both of the

district courts. The Seventh Circuit held that "the claim [for an

employer's withdrawal liability] accrues as soon as payment

becomes overdue." Id. at 172. Because the funds filed their

actions more than six years from the date when the employers

failed to make their scheduled payments, the Seventh Circuit held

that the actions were barred by the statute of limitations. Id.

Additionally, the Navco court rejected the Independent Fund's

contention that a claim begins to accrue each time an employer

fails to make a scheduled payment. Id. The court held that the

"pension fund had only one claim against the employer . . . : the

amount of withdrawal liability. . . . [T]he whole amount [of

withdrawal liability] is presumptively due at the outset." Id.

In Sandoz, the trustee of the Bricklayers and Trowel Trades

International Pension Fund filed an action to collect the

accelerated balance of the employer's pension withdrawal

liability. Sandoz, 871 F.2d at 1121. Between 1977 and June 30,

1981, Sandoz made payments to the pension fund. Id. On July 16,

1981, a new collective bargaining agreement was reached between

Sandoz and its employees. Id. The agreement did not include an

obligation by Sandoz to continue making payments to the pension

fund. Id. Sandoz made a pension fund payment for work performed by its employees from July 1 until July 15, 1981. Id. Sandoz

made no further payments. Id.

On July 13, 1987, the fund sent Sandoz a notice of

withdrawal liability along with a payment schedule. Id. On the

same day, the fund filed its action. Id. On October 8, 1987, the

fund notified Sandoz that it failed to make its scheduled payment

and would be in default unless it paid within sixty days. Id.

Sandoz did not make any payments in response to the fund's letter.

Id.

The district court dismissed the fund's action because it

was not filed within the six year statute of limitations period.

Id. The district court ruled that the cause of action began to

accrue when the employer completely withdrew from the plan on June

30, 1981. Id. On appeal, the fund asserted that the cause of

action began to accrue when the employer failed to make a

scheduled payment after receiving a demand. Id. at 1122.

The D.C. Circuit in Sandoz vacated the judgment of the

district court. Id. at 1127. The court held that the [pension] plan is "adversely affected" (and thus that a "cause of action" arises) when the plan has not received payments which are due and owing. The language of the statute points firmly in the direction of the conclusion that Sandoz's uncured failure to pay the sum demanded adversely affected the plan giving rise to a cause of action.

Id. at 1122. The D.C. Circuit rejected the district court's

determination that the cause of action begins to accrue on the day the employer completely withdraws from the fund. Id. at

1123.

Thus, both the Seventh Circuit in Navco and the D.C. Circuit

in Sandoz each concluded that a cause of action for withdrawal

liability payments under the MPPAA begins to accrue when an

employer fails to make a scheduled payment. Contrary to the

Fund's position in this matter, there is no conflict between the

Seventh Circuit and the D.C. Circuit regarding the determination

as to when a cause of action begins to accrue. The difference

between Navco and Sandoz is that the Navco court expressly

rejected an argument which is also raised by the Fund in this

case, namely, that a cause of action accrues each time an

employer fails to make a scheduled payment after receiving a

demand. Navco, 3 F.3d at 172. This issue was not presented to

the D.C. Circuit in Sandoz. Neither Navco nor Sandoz support the

Fund's argument in this matter that the statute of limitations

does not begin to run until six years after the last scheduled

payment is due.

Under the MPPAA, after an employer withdraws from a fund,

"(1) [a]s soon as practicable after an employer's complete or

partial withdrawal, the plan sponsor shall--(A) notify the

employer of--(i) the amount of the liability, and (ii) the

schedule for liability payments, and (B) demand payment in

accordance with the schedule." 29 U.S.C. § 1399(b)(1). The

statute further provides: In the event of a default [of a scheduled payment], a plan sponsor may require immediate payment of the outstanding amount of an employer's withdrawal liability, plus accrued interest on the total outstanding liability from the due date of the first payment which was not timely made. For

purposes of this section, the term "default" means-- (A) the failure of an employer to make, when due, any payment under this section, if the failure is not cured within 60 days after the employer receives written notification from the plan sponsor of such failure, and (B) any other event defined in rules adopted by the plan which indicates a substantial likelihood that an employer will be unable to pay its withdrawal liability.

29 U.S.C. § 1399(c)(5).

An action under the MPPAA may not be brought more than "6

years after the date on which the cause of action arose." 29

U.S.C. § 1451(f)(1). Pursuant to section 1399(c)(5), the cause of

action for the outstanding amount of an employer's liability

arises upon the employer's failure to make a scheduled payment.

See Navco, 3 F.3d at 172 (claim begins to accrue when a scheduled

payment is overdue); Sandoz, 871 F.2d at 1122 (same). However, a

pension fund is not permitted to file its action for withdrawal

liability payment(s) until it has sent an employer the notice

described in section 1399(c)(5). The notice represents a

condition precedent which must be satisfied by a fund before it

may file its cause of action.

The MPPAA makes clear that a multiemployer pension fund has

the option after notifying an employer of a default of (1) filing an action for a missed payment in accordance with the schedule

prepared by the fund after an employer has withdrawn, or (2)

filing an action for the total amount that is owing in accordance

with the schedule. A fund has only one claim against an employer.

It must decide whether to file an action for the missed payment or

the total withdrawal liability. Navco, 3 F.3d at 172. The fund

is required to file its action for payment of an employer's

withdrawal liability within six years of the date when the cause

of action arose, i.e., the date of the first missed payment. Id.

This statutory requirement avoids the problem of "improperly

plac[ing] the running of the limitations period in the control of

the plaintiff." Board of Trustees of the Constr. Laborers Pension

Trust v. Thibodo, 34 F.3d 914 (9th Cir. 1994).

In Thibodo, the defendant, a construction company, made

payments to a pension fund until June 15, 1983. Id. at 916. In

early 1984, the pension fund determined that the company had

withdrawn from the fund. Id. The fund sent the company an

assessment along with a payment schedule. Id. However, the

company believed that the fund had erroneously determined that it

had withdrawn, and the fund ultimately agreed. Id. By the spring of 1985, the company had rehired numerous

construction workers. The pension fund subsequently reinstated

the company's withdrawal liability assessment. Id. The company

did not make any pension fund payments. Id. In April 1986, the

fund sent the company a written notification indicating that the company had sixty days to begin making payments. Id. The company

never made any payments in response to the fund's notification.

Id. On June 20, 1989, the fund filed an action for withdrawal

liability payments. Id.

The district court stayed the proceedings while the parties

submitted the matter to an arbitrator. Id. The arbitrator

determined that the company had withdrawn from the pension plan on

June 15, 1983 and that Thibodo, the company's sole shareholder,

was personally liable for the company's withdrawal liability. Id.

Thibodo argued before the district court that the fund had filed

its action more than six years after the cause of action accrued

and was therefore barred by the statute of limitations. Id. The

district court agreed with Thibodo and dismissed the fund's

action. Id.

The Ninth Circuit reversed the judgment of the district

court. Id. at 918. The court held that the statute of

limitations under section 1451(f)(1) begins to accrue "from the

date on which the conditions for complete withdrawal specified in

§ 1383(b)(2) have been met." Id. at 917. The Ninth Circuit

recognized that its holding differed from that of the D.C. Circuit

in Sandoz, which held that the statute of limitations begins to accrue when the employer fails to make a scheduled payment after

receiving a demand from the fund. Id. The Ninth Circuit's

decision in Thibodo, however, was concerned with discrete

statutory language used by Congress with reference to withdrawals involving the construction industry. Id. Its conclusion that a

pension fund cannot manipulate the date when a claim begins to

accrue under the MPPAA, however, is consistent with the holding in

Navco on this issue.

In this matter, the Fund's cause of action for the balance

of the withdrawal liability arose on October 1, 1984, when Kahle

missed a payment after receiving a payment schedule and a

corresponding demand. See Navco, 3 F.3d at 172 (cause of action

begins to accrue when a scheduled payment is missed); Sandoz, 871

F.2d at 1123 ("[T]he failure to pay gives rise to a cause of

action."). The Fund had six years from October 1, 1984 to

exercise its option to file an action for the missed payment or

the total unpaid balance of the employer's withdrawal liability.

29 U.S.C. § 1451(f)(1).

At oral argument, the Fund argued that it was authorized

under section 1451(f)(1) to file its action six years after the

employer had failed to make the penultimate payment due on October

1, 1993. The final payment in this matter was due on January 1,

1994. The Fund's interpretation of section 1451(f)(1) would

permit it to wait until the year 2000, approximately sixteen years

after the first payment was missed, to file its action for the

unpaid balance. This result would award a pension fund additional

time to file its action merely because it was dilatory in pursuing

its claim. See Navco, 3 F.3d at 172 (extending a six year statute of limitations under Multiemployer Pension Plan Amendments Act of

1980 to twenty-six years "is a job best left to magicians").

Such a result is clearly inconsistent with the public policy

served by statutes of limitations. These statutes are designed

"to spare the courts from litigation of stale claims, and the

citizen from being put to his defense after memories have faded,

witnesses have died or disappeared, and evidence has been lost,"

to put potential defendants "on notice of adverse claims," and "to

prevent plaintiffs from sleeping on their rights." Sperling v.

Hoffman-La Roche, Inc., 24 F.3d 463, 471-72 (3d Cir. 1994)

(internal quotation omitted); see also Navco, 3 F.3d at 172

("Statutes of limitations serve vital social interests--the usual

ones of preventing stale claims that may be hard to prove, and

protecting the interest of potential defendants in knowing their

liabilities, and in the MPPAA the unusual one of protecting the

beneficiaries of the fund."). Additionally, permitting a fund to

choose the triggering date which begins the running of the statute

of limitations essentially makes the fund's dilatory decision

unreviewable by a court.

The majority has failed to point to any language in the

MPPAA that supports its conclusion that Congress intended to place

the running of the statute of limitations in the hands of the

pension fund. I agree with the majority that the MPPAA gives a

pension fund the option to file an action for a missed payment or

an action for the unpaid balance of the employer's liability after a default. The fact that Congress gave the pension fund a choice

as to the remedy it may follow if a payment is missed, however,

does not affect the six-year statute of limitations.

The harm that can flow from delay in filing an action is

illustrated by the record in this case. The majority states that

"[t]here is no evidence of further communications, negotiations,

or arbitration proceedings after December 1984." Majority opinion

at 11. The explanation for the absence of a record of the actions

taken by the parties following the Fund's December 21, 1984 notice

of default is found in the Appellant's Opening Brief. Counsel

explains throughout his brief that correspondence between the

parties concerning the employer's withdrawal liability was "not

available from the Pension Fund's or Fund counsel's files,"

Appellant's Opening Br. at 6 n.2, that "[t]here is no information

in the Pension Fund's files to indicate course of events before

default notice," id. at 10 n.3, and further the "Fund's counsel

did not receive the September 13, 1984 letter." Id. at 5.

The Fund's dilatory tactics in this matter have affected its

own ability to prepare for trial. Moreover, Kahle will now be

forced to trial more than ten years after the facts that the Fund

alleges make it liable. Kahle's corporate records, counsel's

files, and witnesses' memories are subject to the same loss

already experienced by the Fund.

IV. This court has explained that the goals of the MPPAA are "to

protect the interests of participants and beneficiaries in

financially distressed multiemployer plans and . . . to ensure

benefit security to plan participants." IUE AFL-CIO Pension Fund

v. Barker & Williamson, 788 F.2d 118, 127 (3rd Cir. 1986)

(internal quotation omitted). The majority's interpretation of

section 1399(c)(5) seriously frustrates Congressional intent.

Congress' concern that a pension fund act promptly in

protecting the integrity of the pension plan is reflected in the

requirement that the demand for payment of the employer's

liability after a withdrawal be made "as soon as practicable." 29

U.S.C. § 1399(b)(1). The majority's conclusion that a fund may

delay filing an action for the total amount of the outstanding

liability for up to twenty years is contrary to the expressed

concern of Congress that a pension fund take timely action to

resolve a dispute concerning an employer's liability.

In construing section 1399(c)(5) to place the running of the

statute of limitations in the hands of the pension plan, the

majority would apparently approve of the loss of fourteen years of

payments owed by the employee to the Fund. The majority's

construction of the MPPAA is clearly inconsistent with the

congressional goal of safeguarding the financial integrity of the

multiemployer plan. The Seventh Circuit's interpretation of

section 1399(c)(5) in Navco ensures that an employer who misses a

payment must make up that payment within sixty days of the scheduled date, or be subject to an action for the total unpaid

balance of its withdrawal liability. Had the Fund filed its

action within six years of the first missed payment in this

matter, Kahle would have been liable to pay over $270,000. Under

the majority's view, Kahle will escape payment of over $150,000.

This will unfairly force the other participants to increase their

contribution to protect the beneficiaries of the Fund.

Traditional canons of construction require us to construe a

statute to avoid a result that defeats congressional intent.

Adoption of the reasoning in Navco would fully protect the

interests of the beneficiaries of a pension plan.

The notice requirement in section 1399(c)(5) is solely

applicable to a cause of action for the total unpaid balance of an

employer's withdrawal liability. Thus, the Fund's December 21,

1984 threat to "seek all remedies available to it" could only

refer to an action for the total unpaid balance. As conceded by

the Fund, the MPPAA does not require service of a notice of

default where the pension plan elects to bring an action for a

misconduct. Appellants Opening Br. at 21.

The Fund attempts to escape the consequences of its failure

to file this action within the six-year limitation period by

arguing that the notice of default it sent to Kahle dated December

21, 1984 was "defective," and therefore did not trigger the

running of the statute of limitations. Appellant's Opening Br. at 29. This argument is frivolous. To accelerate payment of the

outstanding withdrawal liability pursuant to section 1399(c)(5),

the plan sponsor must give the employer written notification of

its failure to make any payment when due. The Fund's December 21,

1984 letter informed Kahle's counsel "that your client is now in

default in its payments." The letter further advised Kahle that

unless the default was cured, the Fund would "seek all remedies

available to it." The December 21, 1984 letter substantially

complied with the notice of default requirements of section

1399(c)(5). The running of the statute of limitations for the

total unpaid balance was therefore triggered by the December 21,

1984 notice of default.

VI.

The majority finds support for its conclusion that the

statute of limitations for the total unpaid balance begins to run

anew from the date of each scheduled payment in the common law of

contracts. The Seventh Circuit rejected a similar argument in

Navco: The schedule under § 1399(c) . . . is not contractual; the employer did not assent to a longer period for payment and suit. We have not seen any case extending the contractual approach to the MPPAA, and like the district court we believe it would be imprudent to adopt a rule that relieves pressure on trustees of pension funds to act with dispatch. Six years is quite sufficient; the trustees may not award themselves more.

Navco, 3 F.3d 167-68. I would not borrow from the law of contracts to negate the

intent of Congress that pension funds must act promptly to avoid

compromising the financial integrity of the pension fund and

requiring other participants to shoulder the responsibility of

employers who withdraw. The majority's reliance on the

arbitrator's decision in Ludington News Co. and Michigan UFCW/Drug

Employers Pension Fund Workers Union and Drug and Mercantile

Employee Joint Pension Fund, 9 Employee Benefits Cas. (BNA) 1913

(1988), to support its contractual theory is questionable. The

majority states "[a]lthough we recognize that Ludington is without

precedential effect, it was cited as relevant by another circuit.

Cir.), cert. denied, 493 U.S. 918 (1989)." Majority opinion at

14-15. A careful reading of Sandoz, however, reveals that

Ludington was not "cited as relevant" for the proposition that a

new cause of action for the unpaid balance accrues when each

scheduled payment is due. That issue was not discussed by the

court in Sandoz. Instead, Ludington was cited because it, too,

concluded that no cause of action arises until the employer

refuses to meet the demand of the fund. Sandoz, 871 F.2d at 1124. As noted above, the analogy to the law of contracts adopted by the

majority in this matter was expressly rejected by the Seventh

Circuit. Navco, 3 F.3d at 172-73.

CONCLUSION Contrary to the majority's resolution of the issue before

this court, the MPPAA does not permit a pension fund to file a

cause of action for the unpaid balance of an employer's withdrawal

liability six years after the last payment is due, even if no

payments have been made for up to twenty years. Regrettably, the

majority has subjected the running of the statute of limitations

to the whim of the Fund. I find nothing in the law of the Third

Circuit or any other jurisdiction that supports this extraordinary

result. Accordingly, I cannot join in the majority's opinion. I

would affirm the well reasoned judgment of the district court.