In the
United States Court of Appeals
For the Seventh Circuit
No. 10-1827
N ATIONAL S HOPMEN P ENSION F UND, et al.,
Plaintiffs-Appellants.
v.
DISA INDUSTRIES, INC.,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 09 C 6983—Virginia M. Kendall, Judge.
A RGUED S EPTEMBER 29, 2010—D ECIDED A UGUST 8, 2011
Before B AUER, W OOD , and W ILLIAMS, Circuit Judges.
W OOD , Circuit Judge. DISA Industries, Inc., is an Illinois
corporation engaged principally in the foundry equip-
ment business. In 2000 and 2001, DISA contributed to
the National Shopmen Pension Fund, a multiemployer
pension plan established pursuant to a collective bar-
gaining agreement with the Shopmen’s Local Union
No. 508. After only two years of contributing to the
2 No. 10-1827
Fund, DISA closed the facility covered by the labor con-
tract, triggering withdrawal liability under federal law.
On June 21, 2006, National Shopmen notified DISA of
its liability under the statute and set a 20-year payment
schedule requiring the company to pay $652 per month.
National Shopmen then sent another letter several
months later saying that it had miscalculated the
amount due each month, but not the underlying with-
drawal liability, and advised DISA to increase its
monthly payments from $652 to $978. DISA has been
paying the original amount requested in a timely man-
ner, but it has refused to pay the revised monthly
sum of $978. DISA contends that National Shopmen
increased the asserted amount due through an interpreta-
tion of the applicable law that is plainly mistaken;
under the correct reading of the law, DISA believes, it
has no obligation to pay the higher amount.
National Shopmen then upped the ante by filing suit
in the Northern District of Illinois asserting that DISA is
in default for failure to pay the full amount requested,
see 29 U.S.C. § 1399(c)(5)(A), and that DISA’s failure to
resolve the dispute through mandatory arbitration pro-
ceedings counts as a forfeiture of any right to challenge
the Fund’s interpretation of the statute. The district
court concluded that DISA’s failure to exhaust its admin-
istrative remedies was immaterial because the Fund
also failed to seek arbitration when it revised DISA’s
withdrawal liability. The court then dismissed the com-
plaint based on a finding that National Shopmen’s inter-
pretation of the statute, on which it relied in demanding
the increased sum from DISA, was plainly incorrect, and
No. 10-1827 3
so DISA was not in default. We think that DISA’s
failure to exhaust its administrative remedies is
dispositive and therefore we reverse the judgment of
the district court.
I
This case arises under the Employment Retirement
Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001, et
seq., as amended by the Multiemployer Pension Plan
Amendments Act of 1980, (MPPAA), see 29 U.S.C.
§§ 1301-1461. Congress enacted the MPPAA to address
the risk of insolvency that arises when an employer
withdraws from a pension plan. When that happens, the
plan must ensure that it is adequately funded to provide
benefits to workers as promised. See Central States, Se.
and Sw. Areas Pension Fund v. O’Neill Bros. Transfer and
Storage Co., 620 F.3d 766, 767-68 (7th Cir. 2010). The
MPPAA discourages withdrawal and protects the
solvency of multiemployer pension plans by making an
employer that withdraws from the plan “liable for an
amount of money designed to cover the employees’ share
of the vested, but unfunded, benefits.” Robbins v. Lady
Baltimore Foods, Inc., 868 F.2d 258, 261 (7th Cir. 1989); see
also 29 U.S.C. §§ 1381, 1391. In essence, the MPPAA is
designed to change the “strategic considerations” for
an employer contemplating withdrawal from a multi-
employer pension plan, ensuring that employers cannot
use withdrawal as a way of avoiding their full liability
to participants whose benefits have vested. See Mil-
waukee Brewery Workers’ Pension Plan v. Joseph Schlitz
4 No. 10-1827
Brewing Co., 513 U.S. 414, 417 (1995) (providing detailed
analysis of the purpose and operation of the MPPAA).
There is no doubt that DISA completely withdrew
from the Fund in 2002, see § 1383, triggering withdrawal
liability under the MPPAA. For reasons that are not
relevant to this action, National Shopmen waited until
June 21, 2006, to notify DISA of its withdrawal liability,
which it pegged at $372,472. The Fund then established
a 20-year schedule that required DISA to pay $652
per month. (The district court’s opinion stated that this
led to a total payment of $127,761. We do not under-
stand that, since $652 x 20 x 12 equals $156,480. The
difference, however, is immaterial to our disposition of
the case, and so we do not need to resolve the inconsis-
tency.) The discrepancy between the calculated with-
drawal liability of $372,472 and DISA’s projected total
payment due is a product of the formula used to
calculate an employer’s annual liability paid over a
period of years necessary to amortize the liability, see
29 U.S.C. § 1399(c)(1)(A), and the provision that limits
the employer’s liability to 20 years, see § 1399(c)(1)(B).
See also Milwaukee Brewery, 513 U.S. at 418-19. DISA
began paying $652 per month and pursued the proper
channels of review as set forth in the statute.
For six months, matters progressed exactly as envisioned
by the MPPAA’s “pay now, fight later” regime. As we
have said time and again, an employer is almost
always required to make payments while it seeks review
of a fund’s calculation of withdrawal liability, see
§ 1399(b)(2)(A), or pursues arbitration, see § 1401(a)(1).
No. 10-1827 5
Central States, Se. and Sw. Areas Pension Fund v. Hunt Truck
Lines, Inc., 272 F.3d 1000, 1002-03 (7th Cir. 2001). This is
to ensure that the pension plan remains solvent while
the parties resolve their dispute—a process that can
take many years. To this end, the MPPAA requires an
employer to make interim payments “in accordance
with the schedule set forth by the plan sponsor . . . not-
withstanding any request for review or appeal of deter-
minations of the amount of such liability or of the sched-
ule.” § 1399(c)(2). If the employer defaults by failing
to make the appropriate payments, see § 1399(c)(5)(A),
matters progress in one of two ways. Assuming that
the employer refuses to make “interim” liability pay-
ments, meaning while arbitration is pending, the plan
may file suit to collect only the interim payments, not
the entire amount. See Chicago Truck Drivers, Helpers
and Warehouse United (Independent) Pension Fund v.
Century Motor Freight, Inc., 125 F.3d 526, 533 (7th Cir.
1997) (“The better reading of § 1401 is that it conditions
the accelerating of withdrawal liability on an employer
not seeking arbitration.”). But if the employer fails to
make the demanded payments and fails to seek arbitra-
tion, the plan may immediately file suit to seek
accelerated payments. See §§ 1401(b)(1) (“If no arbitration
proceeding has been initiated . . . the amounts demanded
by the plan sponsor . . . shall be due and owing . . .”) and
1399(c)(5) (“In the event of default, a plan sponsor
may require immediate payment of the outstanding
amount of an employer’s withdrawal liability . . .”).
DISA complied with these provisions following its
receipt of the original assessment of liability. It began
6 No. 10-1827
paying $652 each month, asked the Fund to review the
liability assessment, and submitted a letter stating its
intent to seek arbitration. Things changed, however,
when National Shopmen notified DISA on January 24,
2007, that it had made an error in calculating DISA’s
monthly payments. Initially, National Shopmen was
reticent in explaining what kind of error caused the
miscalculation, yet it demanded that DISA begin
paying $978 per month and remit an additional $1,956
to cover what it owed for the prior six months based on
the revision. As the Fund provided more information
concerning the supposed error in a letter dated Feb-
ruary 15, 2007, however, it became clear that at issue
was the interpretation of the statute governing the cal-
culation of each annual liability payment, which
naturally determines how much is due each month.
To provide context for this dispute, we must now
turn to 29 U.S.C. § 1399(c)(1)(C)(i), which provides:
Except as provided in subparagraph (E), the amount
of each annual payment shall be the product of--
(I) the average annual number of contribution
base units for the period of 3 consecutive plan years,
during the period of 10 consecutive plan years
ending before the plan year in which the with-
drawal occurs, in which the number of contribu-
tion base units for which the employer had an
obligation to contribute under the plan is the
highest, and
(II) the highest contribution rate at which the
employer had an obligation to contribute under
No. 10-1827 7
the plan during the 10 plan years ending with the
plan year in which the withdrawal occurs.
(emphasis added). Recall that DISA participated in Na-
tional Shopmen’s pension plan for only two years before
closing its covered facility, raising the question of how
to calculate the average for “3 consecutive plan years.”
When National Shopmen first calculated the 20-year
payment schedule, it averaged the annual number
of contribution base units for the two years that DISA
contributed to the plan with a zero for the third year.
That calculation required DISA to pay $652 each
month. The Fund then altered its interpretation of the
statute, concluding that only years “for which the em-
ployer had an obligation to contribute under the plan,”
see § 1399(c)(1)(C)(i)(I), should be included in the cal-
culation. This led it to calculate an average based solely
on the two years that DISA contributed to the plan, re-
sulting in monthly payments from DISA of $978 instead
of $652.
Unsurprisingly, DISA disagreed with National Shop-
men’s revised assessment. The company filed a demand
for arbitration in March 2007, but refused to pay the
higher amount in the interim. In response, on January 23,
2008, National Shopmen filed suit in the District of Colum-
bia seeking interim payments in the amount of $978
per month while arbitration was pending. Before the
district court, DISA defended by arguing that it
remained in compliance with the MPPAA by paying
the original amount requested, and it further contended
that National Shopmen’s revised calculation based on
8 No. 10-1827
only two years’ experience was in conflict with the
statute. The district court expressed serious doubt that
National Shopmen’s revised calculation of withdrawal
liability was correct, but it concluded that the question
should be resolved by the arbitrator. See National
Shopmen Pension Fund v. DISA, 583 F. Supp. 2d 95, 101
(D.D.C. 2008) (Shopmen I). As for the interim pay-
ments, Shopmen I acknowledged the general applicability
of the “pay-now-arbitrate-later” rule, but thought that
to apply the rule to revised assessments would permit
pension plans “to subject employers to a pattern of op-
pressive behavior” by increasing liability payments
capriciously. Id. at 102-03. Thus, the court concluded
that DISA was not required to pay the higher amount
while arbitration was pending, and it dismissed National
Shopmen’s complaint.
With this triumph in hand, DISA withdrew its arbitra-
tion demand on March 23, 2009. National Shopmen
did not oppose that move, nor did it initiate arbitration
on its own. Instead, by a letter dated April 8, 2009,
National Shopmen notified DISA that since arbitration
was no longer pending, monthly payments of $978 were
immediately due. The letter took the position that DISA’s
failure to pay $978 per month and remit the difference
between $978 and $652 for all prior months (with inter-
est) within 60 days would constitute default under the
statute. DISA rejected the demand, although it continued
to pay $652 per month. On November 11, 2009, after
the 60-day deadline had long passed, National Shopmen
again filed suit, this time in the Northern District of
Illinois, alleging that DISA had failed to cure its delin-
No. 10-1827 9
quency in a timely manner and was therefore in
default under 29 U.S.C. § 1399(c)(5), making DISA’s entire
withdrawal liability due and owning, see § 1401(b)(1).
National Shopmen further contended that since DISA
failed to exhaust its administrative remedies, it for-
feited the right to assert any defense on the merits.
The district court was not persuaded. See National
Shopmen Pension Fund v. DISA Industries, Inc., No. 09 C
6983, 2010 WL 1251446 (N.D. Ill. March 24, 2010) (Shopmen
II). Shopmen II rejected the Fund’s contention that
DISA forfeited all defenses to the calculation of with-
drawal liability by failing to arbitrate the matter. The
court opined that for National Shopmen “[t]o now argue
that DISA is foreclosed from opposing the Fund’s reas-
sessment would also seem to imply that the Fund
should be foreclosed from re-seeking the increased
monthly payments after failing to pursue them in ar-
bitration.” Id. at *4. The court rejected that proposition,
concluding instead that the MPPAA’s exhaustion re-
quirements apply to pension funds and employers alike.
Since National Shopmen failed to object to DISA’s with-
drawal from arbitration or to seek arbitration in its
own right, the court concluded that DISA’s failure to
seek arbitration would not preclude it from defending
on the merits in federal court. The district court
then held that National Shopmen’s use of a two-year
average conflicted with the plain language of the
statute requiring an average of three years. Based on that,
the court found that DISA was not in default and dis-
missed the complaint for failure to state a claim. This
appeal followed.
10 No. 10-1827
II
National Shopmen argues that the district court made
two errors that require reversal. First, the Fund contends
that the court erred by allowing DISA to challenge
its calculation of monthly liability payments without
pursuing arbitration first. Second, it argues that its in-
terpretation of the statute requiring DISA to pay $978
each month is correct. After oral argument, we invited
the Pension Benefit Guarantee Corporation (PBGC) to
provide its views on the issues presented, and we ap-
preciate the agency’s submission of its amicus brief.
We review the district court’s decision to dismiss the
plaintiff’s complaint, along with issues of statutory inter-
pretation, de novo. See Tamayo v. Blagojevich, 526 F.3d 1074,
1081 (7th Cir. 2008) (motion to dismiss) and Manning v.
United States, 546 F.3d 430, 432 (7th Cir. 2008) (statutory
interpretation).
We begin with the district court’s conclusion that
DISA’s failure to exhaust was beside the point since
National Shopmen also failed to seek arbitration. This
view presumes that the exhaustion requirements apply
equally, at least here, to the Fund and the employer. As
we understand it, the court’s analysis on this issue
was based on the atypical facts of this case, where the
Fund revised DISA’s monthly payment schedule based
on a questionable interpretation of the statute after
DISA had been making payments according to the
original assessment. These circumstances, according to
the court, gave rise to an obligation for National
Shopmen to seek arbitration when it revised the assess-
No. 10-1827 11
ment. From there, the court leapt to the conclusion that
National Shopmen’s failure to seek arbitration absolved
DISA of its statutory duty to arbitrate any dispute
relating to the calculation of withdrawal liability.
This line of reasoning is problematic. It is true that
§ 1401(a) says that “[e]ither party may initiate the ar-
bitration proceeding,” suggesting a symmetry in the
burdens placed on the employer and the pension plan
to arbitrate. But the next subsection, § 1401(b)(1),
disposes of the contention that the parties evenly bear
the burden of seeking arbitration. This is because
§ 1401(b)(1) says that “[i]f no arbitration proceeding
has been initiated pursuant to subsection (a) of this
section, the amounts demanded by the plan sponsor . . .
shall be due and owning on the schedule set forth by
the plan sponsor.” Not only that, the plan can then im-
mediately file suit to collect the entire amount of with-
drawal liability, and in that proceeding the employer
will have forfeited any defenses it could have presented
to the arbitrator, see Robbins v. Chipman Trucking, Inc.,
866 F.2d 899, 902 (7th Cir. 1988) (observing that an em-
ployer “cannot bypass arbitration and litigate a defense
to a withdrawal liability claim”). The upshot is that
either party may seek arbitration, but only the em-
ployer suffers a consequence for failing to do so. So
National Shopmen’s failure to arbitrate has no bearing
on the resolution of this case. In particular, the Fund’s
inaction does not, as the district court concluded,
insulate DISA from the consequences of § 1401(b)(1).
Is there any reason to think that the MPPAA’s exhaus-
tion requirements are inapplicable when a pension
12 No. 10-1827
plan notifies an employer of a revised, as opposed to an
original, assessment? DISA thinks so, because in its view
National Shopmen lacked the authority to revise the
assessment at all, meaning that DISA was under no
obligation to pay the revised amount or submit the
dispute to an arbitrator. According to DISA, the MPPAA
provides only three methods by which a pension plan
may revise its original assessment: (1) under § 1399(b)(2),
the assessment may be altered after an employer chal-
lenges the calculation of withdrawal liability; (2) under
§ 1401(a), the assessment may be revised through ar-
bitration proceedings requested by either party; and
(3) under § 1401(b)(2), after arbitration proceedings
have been completed, either party may file suit in
federal court to “enforce, vacate, or modify the arbitra-
tor’s award.” In DISA’s view, because National Shopmen
failed to pursue any of those paths, it lacks the authority
to revise the original assessment and the revision is
a “nullity.”
We do not read the statute so rigidly. As a preliminary
matter, only the second option identified by DISA is
relevant in this context: National Shopmen could have
initiated arbitration pursuant to § 1401(a) to resolve the
dispute. Section 1399(b)(2) is inapplicable because
it explains how an employer can challenge the plan’s
assessment of withdrawal liability, and § 1401(b)(2) is
relevant only after arbitration proceedings have been
completed. So in fact DISA’s argument is that, pursuant
to § 1401(a), a plan must seek arbitration if it wants to
revise an employer’s liability. This is a slightly dif-
ferent argument from the one we disposed of above,
No. 10-1827 13
because it focuses on the plan’s authority to revise
rather than on the operation of the exhaustion require-
ments. That distinction, however, is telling because
it reveals that DISA’s argument is based on a misunder-
standing of § 1401(a)(1). As we have just explained, that
provision establishes that arbitration is mandatory
for all disputes concerning the plan’s determination of
withdrawal liability, and it also sets forth time
limits governing when either party may initiate the pro-
ceedings. There is no reason to think that the exhaus-
tion provision governs the substantive authority of a
pension plan to revise an assessment of withdrawal
liability.
Indeed, the MPPAA is silent with regard to a plan’s
authority to revise an assessment of withdrawal liabil-
ity. But we are not left without any guidance on this issue,
since the PBGC has long held the view that a plan may
revise an assessment if it discovers an error in the calcula-
tion of liability while the assessment is still subject to
arbitration or litigation. See PBGC Opinion Letter 90-2
(April 20, 1990); PBGC Amicus Br. at 6. According to the
PBGC, “[i]f the employer contests the plan’s right to
revise its original assessment or issue a second assess-
ment, this dispute, like other disputes involving with-
drawal liability, must be resolved first through arbitra-
tion and then, if necessary, through the courts.” Opinion
Letter 90-2. Although we owe no deference to the posi-
tion taken by the agency in an opinion letter, see CenTra,
Inc. v. Central States, Se. and Sw. Areas Pension Fund, 578
F.3d 592, 601 (7th Cir. 2009) (adopting PBGC’s position
in an opinion letter), we find the agency’s views persua-
14 No. 10-1827
sive. Given the strong preference the MPPAA establishes
for the collection of withdrawal liability in a manner
that protects the solvency of multiemployer plans, a
fund must be able to revise an assessment of withdrawal
liability, within a reasonable period of time, if it discovers
that it has undercharged an employer.
The Fourth Circuit adopted exactly this position in
Masters, Mates & Pilots Pension Plan v. UXB Corp., 900 F.2d
727 (4th Cir. 1990). There, a pension fund revised its
withdrawal liability assessment after realizing that it
had mistakenly used the wrong date to calculate. The
revision came over a year after the Fund made its
initial assessment and after arbitration had been sched-
uled. The arbitrator, however, refused to consider
the revised calculation because he thought the Fund
waited too long to make the revision. The Fourth
Circuit disagreed, observing that the purpose of the
MPPAA was to ensure the “accurate collection of liabili-
ties,” and this goal could be achieved only if the fund
was permitted to correct its miscalculation. Id. at 735. As
long as the employer is not prejudiced by the revised
assessment, Masters concluded, a plan may amend when
necessary. Id.
DISA attempts to distinguish Masters by arguing that
it merely established that a plan has the authority to
correct undisputed errors in the calculation of withdrawal
liability. While it is true that the “correctness of the revi-
sion and the error of the original” were not in dispute
in Masters, see id., that point cannot be dispositive. As
the opposing arguments in this case illustrate, it may
No. 10-1827 15
be difficult to know ex ante whether a revision will lead
to a more accurate assessment. A recalcitrant employer
can make any asserted error disputed simply by
disputing it. Even in the best of circumstances, the
parties may genuinely disagree about the interpretation
of the statute, which sets forth an intricate series of formu-
las that are not always straightforward to apply. E.g.,
Central States, Se. and Sw. Areas Pension Fund v. Safeway, Inc.,
229 F.3d 605, 611 (7th Cir. 2000) (“The statutory and
regulatory apparatus . . . are not models of clarity . . .”).
Thus in our view whether a revision is disputed does
not determine whether a plan has the authority to
amend an assessment. Rather, we agree with our col-
leagues on the Fourth Circuit that a plan is entitled to
correct what it believes to be errors in the calculation of
withdrawal liability and revise an assessment as long
as the employer is not prejudiced. At that point, the
familiar “pay now, arbitrate later” rule kicks in and the
exhaustion provisions of the MPPAA apply to the
revised assessment as they would to the original. We
note, finally, that when a plan issues a revised notice of
withdrawal liability, the revision resets the statutory
time limitations governing when an employer may chal-
lenge the assessment. See §§ 1399(b)(2)(A) and 1401(a).
Only after the revision might the employer believe itself
to be aggrieved and thus interested in arbitrating the
dispute.
We recognize that Shopmen I and Shopmen II expressed
concern that under our reading of the statute a pension
plan could arbitrarily jack up an employer’s payments
after assessing a lower, perhaps uncontroversial, amount.
16 No. 10-1827
But we do not share this apprehension. As long as
an employer is able to seek the full panoply of admin-
istrative and judicial remedies set forth in the MPPAA,
there is little reason to think that a pension plan would
be any more inclined to revise an assessment of with-
drawal liability gratuitously than it is to make an
arbitrary assessment in the first instance. If a plan’s
revised assessment is patently ridiculous, the arbitrator
should promptly reject the revision. And if that avenue
fails, the courts are available to vacate or modify the
award—but only after the completion of arbitration pro-
ceedings. See § 1401(b)(2). Moreover, ERISA’s fee-shifting
provision, § 1132(g), combined with the fact that the
plan would naturally have to return any payments to
which it was not entitled, is sufficient to prevent
arbitrary revisions. True, the employer is stuck with the
higher bill in the interim, and that may be a cost it
would rather not bear. But as we have explained, there
are good reasons for the MPPAA’s “pay now, fight
later” rule, and Congress has decided to assign that cost
to the withdrawing employer. Yet if the employer is
nevertheless confident that the revision is indisputably
incorrect, we have recognized limited situations where
it is not obligated to make interim liability payments
while seeking arbitration. See Hunt Truck Lines, Inc., 272
F.3d at 1003 (recognizing one exception to the rule). The
key, however, is that any dispute relating to the calcula-
tion of withdrawal liability must be resolved through
arbitration.
The arbitration requirement could have been satisfied
in this case if the parties had followed through with the
No. 10-1827 17
proceedings that were underway when the Fund filed
suit in Shopmen I. If they had done so, we presume that
Shopmen I, which held that DISA was not obligated to
pay the revised amount while arbitration proceedings
were pending, would have provided DISA with cover
to pay only $652 per month until the dispute was re-
solved. National Shopmen did not appeal that decision
to the D.C. Circuit, and of course we do not review
it here. As we understand the statute, when a plan
revises its assessment of withdrawal liability, the MPPAA
compels the employer to comply with the revised assess-
ment as if it were an original assessment and follow the
standard statutory procedures for review. Nevertheless,
we express no view on whether Shopmen I was correctly
decided because it has no applicability where, as here,
arbitration proceedings are not pending. As far as we
are concerned, when DISA withdrew its request for
arbitration on March 23, 2009, it lost the right to use
Shopmen I as a shield from the Fund’s demands for
the revised amount. We note as well that nothing pre-
vented DISA from filing a second request for arbitra-
tion after it received the January 24, 2007, notice from
the Fund demanding $978 per month. Perhaps the ar-
bitrator would have consolidated the new proceeding
with the pending one; perhaps he would have handled
them separately. There is no point in speculating
further about this, because it did not happen.
By terminating the arbitration proceedings, DISA
backed itself into a corner. When National Shopmen sent
the April 8, 2009, notice—reiterating its demand for $978
per month as stated on January 24, 2007—DISA was left
18 No. 10-1827
with only one option: to comply. DISA’s failure to do so
constitutes default and operates as a forfeiture of its
opportunity to dispute National Shopmen’s calculation
of its withdrawal liability. See 29 U.S.C. § 1401(b)(1).
DISA’s default means that National Shopmen prevails,
and we need not reach the issue of statutory interpreta-
tion at the heart of this lawsuit. We note, however,
that the PBGC takes the position that DISA’s interpreta-
tion of the statute, requiring the Fund to factor in a zero
to obtain a three-year average rather than averaging
only two years, is correct. As always, we appreciate
the agency’s input. For the reasons stated above, we
R EVERSE the judgment of the district court and R EMAND
for proceedings consistent with this opinion.
8-8-11