Bay Area Laundry & Dry Cleaning Pension Trust Fund v. Ferbar Corp. of California, Inc.
Headline: Court holds time limit to sue over employer withdrawals starts when a scheduled pension payment is missed, letting plans recover later missed installments while very old missed payments may be lost.
Holding: The Court held that the six-year limitations period for collecting withdrawal liability begins when an employer misses a scheduled payment, and each missed payment creates its own six-year claim.
- Allows pension funds to sue for each missed installment within six years.
- Bars recovery of payments missed more than six years before suit.
- Reinforces the law’s "pay now, dispute later" payment rule.
Summary
Background
A multiemployer pension fund for laundry workers sued a laundry company that stopped contributing to the fund after it closed three facilities. The fund’s trustees calculated a $45,570.80 withdrawal debt and set a payment plan of $345.50 per month starting February 1, 1987. The company requested review and arbitration but made no payments. The fund filed suit on February 9, 1993, more than six years after the first missed payment but within six years of later missed payments.
Reasoning
The Court considered when the six-year limit to sue begins under the pension law. It rejected the view that the clock starts on the date the employer withdrew. The Court explained that a plan cannot sue until trustees calculate the debt, set a schedule, and the employer actually misses a scheduled payment. The Court applied ordinary rules for installment obligations and held each missed payment creates a separate cause of action with its own six-year period.
Real world impact
Under this ruling, pension plans can bring claims for any installment missed within six years before filing. Payments that first fell due more than six years before suit are typically unrecoverable. In this case, the fund may not recover the first $345.50 payment but may pursue later installments that came due within six years.
Dissents or concurrances
The Court resolved a split among federal appeals courts: it sided with the courts that treated each missed payment as a separate claim, rejecting the circuits that treated the first missed payment as the trigger for the entire debt.
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