Third Circuit Revives Pension Fund’s Claim Against Related Employers After Settlement with Borden Dairy

In Cent. States, Se. & Sw. Areas Pension Fund v. Laguna Dairy, S. De R.L. De C.V., No. 23-3206, __F.4th__, 2025 WL 923761 (3d Cir. Mar. 27, 2025), the Third Circuit Court of Appeals reversed a lower court’s dismissal of a lawsuit by the Central States, Southeast and Southwest Areas Pension Fund (“the Fund”) against companies related to the now-bankrupt Borden Dairy Company of Ohio, LLC, and Borden Transport Company of Ohio, LLC (collectively, “the Borden Ohio entities”). The appellate court ruled that the Fund could sue to collect withdrawal liability payments from other companies under common control with Borden, despite the original settlement agreement reached with Borden during arbitration.

The case centers around the Multiemployer Pension Plan Amendments Act (MPPAA), which mandates that employers withdrawing from a multiemployer pension plan cover any resultant liabilities. In 2015, the Fund notified the Borden Ohio entities of their withdrawal liability—initially assessed at approximately $41.6 million. Arbitration ensued over a disputed computational error, which was resolved when both parties entered into a settlement agreement in 2016, reducing the monthly payments. Following the Borden Ohio entities’ bankruptcy filing in 2020 and subsequent cessation of payments, the Fund sought to recover the outstanding liability from related companies under common control with Borden, as allowed by the MPPAA.

The primary issue on appeal was whether the Fund could pursue these related companies for payments based on the revised liability terms from the settlement agreement. The Fund argued that this agreement effectively revised the withdrawal liability assessment, thus allowing them to seek payments from the related entities. The Third Circuit agreed, emphasizing the MPPAA’s intent to protect the solvency of multiemployer pension plans. The court found that the settlement agreement constituted a legitimate revision of the withdrawal liability assessment. Consequently, since the related employers did not seek arbitration of this revised assessment, the Fund retained a cause of action under the MPPAA.

Addressing the procedural requirements, the court determined that the Fund satisfied the MPPAA’s notice and demand prerequisites for the revised liability. The settlement agreement itself contained sufficient details on the liability amount and payment schedule, aligning with the statutory requirements under 29 U.S.C. § 1399(b)(1).

In addressing the dissenting opinion, the majority took issue with its strict reliance on statutory text, emphasizing that such a literal interpretation risks undermining the overarching purpose of the MPPAA. The dissent argued that once arbitration was initiated, the statute did not allow for a claim without an arbitral award. However, the majority contended that this view would transform settlements into unenforceable agreements, contrary to Congress’s intent to protect pension plans’ solvency. The majority stressed that its interpretation was consistent with the statute’s goals and was aligned with precedents from sister circuits, which have also emphasized the flexible application of the MPPAA to safeguard multiemployer pension plans. The majority cautioned that the dissent’s approach could discourage settlements and create unnecessary barriers to the timely recovery of withdrawal liabilities.

The dissenting opinion, authored by Circuit Judge Bibas, focused on the statutory text, arguing that the clear language of the MPPAA does not support the majority’s decision. Judge Bibas contended that once arbitration is initiated, as it was in this case, the statute requires a completed arbitration award for a claim to proceed, and does not provide for a separate path via settlement enforcement without such an award. He cautioned that the majority’s interpretation effectively creates a loophole that allows funds to reset withdrawal liability assessments at will, which could undermine the statutory framework’s intent to provide certainty and finality. The dissent also highlighted that the parties could have avoided this issue by having the arbitrator enter the settlement as an award, thereby complying with the statutory requirements and allowing for enforcement under federal law.