Kenneth J. Bauwens v. Revcon Technology Group, Inc.

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 18-3306
KENNETH J. BAUWENS, et al.,
Plaintiffs-Appellants,
v.
REVCON TECHNOLOGY GROUP, INC., et al.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:18-cv-00707 — Ronald A. Guzmán, Judge.
____________________
ARGUED APRIL 17, 2019 — DECIDED AUGUST 13, 2019
____________________
Before MANION, SYKES, and BRENNAN, Circuit Judges.
BRENNAN, Circuit Judge. Two companies set up a pension
plan for their employees, then withdrew from it. This trig-
gered federal requirements that the companies contribute to
the plan. This withdrawal liability became the subject of a
dance between the companies and the pension plan’s trustees:
defaults and lawsuits, followed by partial payments and dis-
missals of the lawsuits.
2 No. 18-3306
The most recent lawsuit was dismissed as time-barred. On
appeal the trustees ask us to create a federal common law
mechanism which would allow them to decelerate the with-
drawal liability they previously accelerated. This would, in
turn, preserve the timeliness of their claim. We say “create”
because the statute makes no mention of such a deceleration
mechanism. We decline to do so, and agree the plan trustees’
claim is time-barred.
I.
Plaintiffs serve as trustees of a pension plan for unionized
electrical workers governed by the Employment Retirement
Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (ERISA).
Several decades ago, the unions set up the pension plan with
defendants Revcon Technology Group and S & P Electric, two
electrical contractors that share common ownership.1 Revcon
withdrew from the plan completely in 2003; S & P followed a
year later. The Multiemployer Pension Plan Amendments Act
of 1980 (MPPAA), 29 U.S.C. § 1381 et seq., requires employers
who withdraw from underfunded pension plans to pay a
withdrawal liability, either in installments or a lump sum. In
2006, the plan’s trustees notified the companies they owed
$394,788 in withdrawal liability and demanded payment in
eighty quarterly payments of $3,818, starting in October 2006.
In 2008, after Revcon missed several payments, the trus-
tees informed defendants of their defaults and demanded im-
mediate payment. When Revcon still failed to pay after 60
1 Because Revcon and S & P are considered a single employer under
ERISA, and are jointly and severally liable for all withdrawal claims, we
refer to the two companies collectively as “Revcon” unless otherwise in-
dicated.
No. 18-3306 3
days, the trustees accelerated the outstanding liability under
29 U.S.C. § 1399(c)(5) and filed suit in the Northern District of
Illinois for the entire amount plus interest, totaling $521,553.
Before appearing in the case, Revcon offered to cure its de-
faults and resume making quarterly payments in exchange
for the trustees’ dismissal of the lawsuit. The trustees agreed
and voluntarily dismissed the suit under FED. R. CIV. P. 41(a).
Revcon cured its defaults, made three more payments,
then defaulted again in April 2009. The trustees again sued
seeking the defaulted payments and the entire outstanding
balance, now $492,988. Revcon again promised to cure its de-
faults and resume making payments, and the trustees again
voluntarily dismissed the suit under FED. R. CIV. P. 41(a).
The parties repeated this cycle of default, lawsuit, promise
to cure, and voluntary dismissal three more times in 2011,
2013, and 2015. All the complaints were identical, except that
the total withdrawal liability due changed as interest accrued
and Revcon made certain payments. And each complaint re-
ferred to the debt acceleration in 2008, making no claim the
acceleration was ever revoked. Finally, in 2018, after yet an-
other default by Revcon, the trustees filed this case. The 2018
complaint differs from its five predecessors in that, instead of
claiming the entire outstanding withdrawal liability, it claims
only the delinquent payments (plus interest) that Revcon had
missed since the last voluntary dismissal in 2015, $33,239.98.
Rather than repeat this cycle for a sixth time, Revcon
moved to dismiss the case. Revcon argued claim preclusion
applied because the five previous complaints demanded the
entire withdrawal liability, which necessarily includes the de-
faulted payments currently at issue. The “two dismissal rule”
of FED. R. CIV. P. 41(a)(1)(B) therefore barred the trustees from
4 No. 18-3306
raising any claims arising from the withdrawal liability.2 By
the same reasoning, Revcon argued, because the trustees first
sought to collect the entire debt in 2008, the six-year statute of
limitations expired in 2014.
The trustees countered that they revoked the 2008 acceler-
ation of the withdrawal liability when they voluntarily dis-
missed the 2008 Complaint. The trustees argued each of the
subsequent dismissals had the same decelerating effect. The
trustees claimed the two dismissal rule did not apply because
all parties consented to the previous dismissals by stipulation
in spirit (though, admittedly, they were dismissals by notice
in form).
The district court agreed with Revcon that this case was
untimely filed. It noted that the trustees’ 2009, 2011, 2013, and
2015 complaints all stated the withdrawal liability was accel-
erated in 2008, which belied the trustees’ argument that accel-
eration had been revoked. Holding the trustees to their earlier
pleadings, the district court dismissed the case.
II.
The arguments on appeal are the same as in the district
court. We review de novo an order dismissing a case based
on the statute of limitations. Orgone Capital III, LLC v.
Daubenspeck, 912 F.3d 1039, 1043 (7th Cir. 2019).
2 Rule 41(a)(1)(B) states in relevant part: “But if the plaintiff previously
dismissed any federal- or state-court action based on or including the
same claim, a notice of dismissal operates as an adjudication on the mer-
its.”
No. 18-3306 5
Both of the trustees’ arguments hinge on whether they
possessed the ability to revoke the acceleration of, or “decel-
erate,”3 Revcon’s withdrawal liability. We first address
whether pension plans and employers can decelerate acceler-
ated withdrawal liability under the MPPAA. We then resolve
the trustees’ statute of limitations and res judicata arguments.
The MPPAA expressly permits pension plans to accelerate
the entire outstanding withdrawal liability if an employer
defaults on an installment payment. Plan trustees send the
employer a written notification of default and wait 60 days,
during which the employer may cure the default. 29 U.S.C.
§ 1399(c)(5). If the default is not cured, the plan may call the
entire amount due. Id.
But what if the parties agree they want to return to the in-
stallment payment plan? Can they decelerate the previously
accelerated debt? The MPPAA is silent on this question.
Revcon argues this silence means accelerated withdrawal lia-
bilities cannot be decelerated under the MPPAA. The trustees
construe the MPPAA’s silence as a “gap” this court should fill
by creating a deceleration mechanism.
We usually balk at any request to invent statutory mecha-
nisms wholesale with no textual anchor, even where doing so
would seem to make the statute fairer. See Anderson v. Wilson,
289 U.S. 20, 27 (1933) (Cardozo, J.) (“We do not pause to con-
sider whether a statute differently conceived and framed
would yield results more consonant with fairness and reason.
We take the statute as we find it.”).
3 Throughout this litigation, the parties refer to the undoing of the
acceleration as “revoking acceleration,” but in federal court the phenom-
enon is commonly referred to as “deceleration,” so we use that term.
6 No. 18-3306
But as the trustees note, this is an ERISA case. (The
MPPAA amended ERISA). The Supreme Court has instructed
federal courts “to develop a ‘federal common law of rights
and obligations under ERISA-regulated plans.’” Firestone Tire
& Rubber Co. v. Bruch, 489 U.S. 101, 110 (1989) (quoting Pilot
Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987)). Even so, this
does not mean federal courts may rewrite ERISA wholesale.
“[B]ecause ERISA is a highly technical statute[,] our part is to
apply it as precisely as we can, rather than to make adjust-
ments according to a sense of equities in a particular case.”
Johnson v. Georgia-Pacific Corp., 19 F.3d 1184, 1190 (7th Cir.
1994).
Courts vary in their willingness to create ERISA common
law doctrines. Some circuits create them regularly and have
articulated tests for when a common law right or remedy
should be created. See, e.g., Salyers v. Metro. Life Ins. Co., 871
F.3d 934, 939–40 (9th Cir. 2017) (adopting principles of agency
law); Bloemker v. Laborers’ Local 265 Pension Fund, 605 F.3d 436,
440–42 (6th Cir. 2016) (recognizing a federal common law
claim for equitable estoppel); Singer v. Black & Decker Corp.,
964 F.2d 1449, 1452–53 (4th Cir. 1992) (approving of the adop-
tion of state common-law causes of action under ERISA, even
when they were preempted by ERISA).
Our circuit has consistently refused to create federal com-
mon law remedies or implied causes of action under ERISA.
See, e.g., Kolbe & Kolbe Health & Welfare Benefit Plan v. Med. Coll.
of Wis., Inc., 657 F.3d 496, 503–04 (7th Cir. 2011) (implying in
dicta that there is no federal common law remedy for unjust
enrichment under ERISA); Buckley Dement, Inc. v. Travelers
Plan Adm’r of Ill., Inc., 39 F.3d 784, 790 (7th Cir. 1994) (refusing
to create a claim against a nonfiduciary); UIU Severance Pay
No. 18-3306 7
Tr. Fund v. Local Union 18-U, 998 F.2d 509, 512 (7th Cir. 1993)
(“We have been … extremely reluctant to find that ERISA cre-
ates certain causes of action by implication … .”); Pappas v.
Buck Consultants, Inc., 923 F.2d 531, 541 (7th Cir. 1991) (refus-
ing to create federal common law when plaintiff’s argument
“concerned the distinct question of whether ERISA creates a
remedy against parties … for violations of these ‘rights and
obligations’”).
Our research uncovers only a few examples where this
circuit has created ERISA federal common law. One con-
cerned equitable estoppel. See Trustmark Life Ins. Co. v. Univ.
of Chicago Hosp., 207 F.3d 876, 882–84 (7th Cir. 2000). Our ra-
tionale was simple: “estoppel principles generally apply to all
legal actions.” Black v. TIC Inv. Corp., 900 F.2d 112, 115 (7th
Cir. 1990) (emphasis added). Even so, we apply equitable es-
toppel principles narrowly. Buckley Dement, 39 F.3d at 790. A
second example, the right of a spouse to waive rights to
ERISA insurance benefits in a divorce settlement, was even-
tually abrogated by the Supreme Court. See Fox Valley &
Vicinity Const. Workers Pension Fund v. Brown, 897 F.2d 275 (7th
Cir. 1990) (en banc), abrogated by Kennedy v. Plan Adm’r for
DuPont Sav. and Inv. Plan, 555 U.S. 285 (2009). See also Metro-
politan Life Ins. Co. v. Johnson, 297 F.3d 558, 566-67 (7th Cir.
2002) (creating common law rule of substantial compliance
for change-of-beneficiary forms for ERISA-governed life in-
surance plans).
Against that backdrop, we return to deceleration. The
Supreme Court instructs that withdrawal liability under the
MPPAA is subject to “general principles governing install-
ment obligations.” Bay Area Laundry & Dry Cleaning Pension
Tr. Fund v. Ferbar Corp. of Cal., Inc., 522 U.S. 192, 195 (1997).
8 No. 18-3306
The trustees insist that deceleration is one such general prin-
ciple: that much like equitable estoppel, deceleration is al-
ways available when debt is accelerated. As such, they argue,
we should adopt a federal common law mechanism to decel-
erate withdrawal liability under the MPPAA.
It is true that the most common forms of accelerated
debt—foreclosed mortgages and bankruptcy debt—can be
decelerated under certain circumstances. Yet the trustees omit
a key detail: such debts can be decelerated only when a con-
tract or statute expressly authorizes deceleration. Mortgages
typically include such a clause, permitting the parties to de-
celerate home debt following foreclosure if certain contractual
requirements are met. See, e.g., Bartram v. U.S. Bank Nat. Ass’n,
211 So. 3d 1009, 1013–14 (Fla. 2016) (discussing the mort-
gagor’s right to decelerate under the “Right to Reinstate After
Acceleration” in his mortgage note). Likewise, the Bank-
ruptcy Code makes a point to expressly authorize decelera-
tion in particular scenarios. See 11 U.S.C. § 1322(b); see also
Anderson v. Hancock, 820 F.3d 670, 673–76 (4th Cir. 2016) (de-
termining whether a loan accelerated in bankruptcy could be
decelerated based on the text of § 1322(b)). Absent some con-
tractual or statutory foundation, there is no free-floating “gen-
eral principle of contract law” that allows any accelerated
debt to be decelerated. The trustees’ characterization of decel-
eration as a “general principle[] governing installment obliga-
tions” is without foundation.
Even were we inclined to create an MPPAA deceleration
mechanism, we could not define its contours. With no textual
anchor, nothing would guide courts in deciding when a
deceleration had occurred. The trustees point us to a
No. 18-3306 9
hodgepodge of foreclosure cases, claiming we can discern re-
quirements for a deceleration test from among them. Those
authorities are little help: nearly every state’s law applies dif-
ferent requirements and different presumptions for decelera-
tion.
There is a reason for this confusion: deceleration of fore-
closed mortgages is a matter of contract interpretation, col-
ored by principles of property law. Each mortgage note can
have different requirements for deceleration, and every state
has its own mortgage laws. None of them are relevant to the
MPPAA. Cf. Fox Valley, 897 F.2d at 284 (Ripple, J., dissenting)
(“The ultimate objective [of ERISA] is not to fulfill policy ob-
jectives of state law but to fulfill the congressional command
embodied in the language and structure of the federal stat-
ute.”).
Finally, if Congress had wanted to include a right to de-
celerate in the MPPAA, it could have done so. The concept of
deceleration is not novel to Congress. Just two years before
Congress passed the MPPAA, it enacted the original Bank-
ruptcy Code, which included a provision detailing the right
to decelerate debt. See An Act to establish a uniform Law on
the Subject of Bankruptcies, Pub. L. No. 95-598, § 1322(b), 92
Stat. 2549, 2648 (1978). If Congress wants to amend the
MPPAA to add a deceleration mechanism, it is free to do so.
But here Congress did not, Congress has not, and we will not
step in where Congress has chosen not to act.
There is no “general principle” that any accelerated debt
can be decelerated. Nor is there a statute authorizing deceler-
ation of accelerated withdrawal liability under the MPPAA.
So the trustees cannot decelerate Revcon’s withdrawal liabil-
ity.
10 No. 18-3306
III.
Without deceleration, the trustees’ claim is time-barred.
The MPPAA mandates that claims for unpaid withdrawal li-
ability “may not be brought after the later of (1) 6 years after
the date on which the cause of action arose, or (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 … .” 29 U.S.C. § 1451(f). If the withdrawn employer
is on an installment plan, no cause of action arises until the
employer defaults on an installment. Bay Area Laundry, 522
U.S. at 202. As the plan has no right to sue to collect install-
ment payments before they are due, a new cause of action
arises each time the employer defaults on another installment,
and with each default a new statute of limitations clock begins
to toll. Id. at 206–10.
If the plan accelerates the withdrawal liability, however,
the statute of limitations for the entire liability begins to run
on the date of acceleration, as at that time the plan has the
right to sue for the entire accelerated amount. Id. at 209 n.5;
Central States, Se. and Sw. Areas Pension Fund v. Basic Am.
Indus., Inc., 252 F.3d 911, 918 (7th Cir. 2001) (“The Supreme
Court made clear in Bay Area that the statutory requirement
does not prevent the fund from accelerating all future pay-
ments upon default, … thus making all the installments due
at once.”) (citation omitted).
The trustees do not dispute that they accelerated the with-
drawal liability in 2008. Their only argument below and on
appeal is that they decelerated the debt, so the statute of lim-
itations clock did not begin to run until later defaults. We
have already rejected that argument. The trustees’ complaint
results in the statute of limitations beginning to run in 2008,
No. 18-3306 11
when the withdrawal liability was accelerated. Both parties
agree that the six-year statute of limitations applies. Thus, the
trustees’ claim for the accelerated debt expired in 2014. Be-
cause Revcon’s statute of limitations defense was established
on the face of the trustees’ complaint, the district court
properly dismissed the complaint. See Orgone Capital, 912 F.3d
at 1043–44.
Other avenues of redress may be open for the trustees.
Each time they filed a claim against Revcon, Revcon agreed in
writing to pay them in exchange for dismissing the suit. These
negotiations appear to have given rise to a series of successive
settlement agreements. But such issues are not before us, as
the trustees did not plead breach of contract. Such a claim
may still be available in state court. Their ERISA claim, how-
ever, is time-barred.
IV.
The trustees’ ERISA claim expired five years ago. Any fur-
ther claims for relief must be sought under a different theory
in a court of proper jurisdiction. For these reasons we AFFIRM
the district court’s judgment.