Settlement-as-Revision under the MPPAA: Third Circuit Opens § 1401(b)(1) Collection Route After Mid-Arbitration Settlement

Introduction

In Central States, Southeast & Southwest Areas Pension Fund v. Laguna Dairy, S. de R.L. de C.V., the Third Circuit confronted a recurring but under-litigated problem under the Multiemployer Pension Plan Amendments Act (MPPAA): what happens when a pension fund and a withdrawing employer settle withdrawal liability while an arbitration is pending, no arbitral award is issued, and later the employer stops paying? Does the pension fund have a federal statutory cause of action to collect from commonly controlled entities?

The panel (Ambro, J., for the Court; Bibas, J., dissenting) held that a settlement entered during an MPPAA arbitration operates as a revision to the plan sponsor’s withdrawal liability assessment. Because no employer initiated arbitration to contest that revised assessment, the fund may bring a statutory collection action under 29 U.S.C. § 1401(b)(1), and the settlement document itself satisfied the notice-and-demand requirements of § 1399(b)(1). The Court reversed a Rule 12(b)(6) dismissal, squarely rejecting the view that the MPPAA leaves funds remediless in the “gap” between starting an arbitration and obtaining an arbitral award when the parties settle.

The case involves the Central States Pension Fund (the Fund), withdrawing employers Borden Dairy Company of Ohio, LLC and Borden Transport Company of Ohio, LLC (the Borden Ohio entities), and a set of allegedly commonly controlled affiliates (the Related Employers), including Laguna Dairy, S. de R.L. de C.V. and New Laguna, LLC. After the Borden Ohio entities withdrew, contested the initial assessment, started arbitration, and then settled mid-arbitration with a reduced payment schedule, they later filed for bankruptcy and ceased paying. The Fund then sought to collect from non-bankrupt members of the controlled group. The District Court dismissed, but the Third Circuit reinstated the action.

Summary of the Opinion

The Third Circuit establishes a key rule: a settlement agreement reached during an MPPAA dispute is properly understood as a revision to the plan’s withdrawal liability assessment. If no employer initiates arbitration as to that revised assessment within the statutory window, the plan may sue to collect under § 1401(b)(1) “on the schedule set forth” by the plan sponsor. The settlement here, although negotiated, was still a schedule “set forth by the plan sponsor,” and nothing in the statute bars treating it as such.

On procedure, while the settlement did not satisfy § 1399(b)(2)(B)’s “decision/basis/reasons” requirement (which applies when an employer requests review), the Court held § 1399(b)(1) governed because, as to the revised assessment, no employer requested review or initiated arbitration. The settlement agreement itself identified the liability amount, the payment schedule, and demanded payment, which sufficed to meet § 1399(b)(1)’s notice-and-demand elements.

The Court emphasized two limiting principles for plan revisions: (1) revisions must be made in good faith, and (2) they must not prejudice the employer. Here, Related Employers were not prejudiced because they could have initiated arbitration to contest the revised assessment but did not. The Court also reiterated that notice to one member of a commonly controlled group counts as notice to all.

A dissent by Judge Bibas argued that the statutory text offers only two mutually exclusive routes—pre-award arbitration leading to a suit to enforce an award (§ 1401(b)(2)), or, if no arbitration is initiated, a collection suit under § 1401(b)(1)—and that once arbitration is begun, § 1401(b)(1) is foreclosed. He viewed the majority as relying improperly on purpose and non-binding PBGC letters, and recommended that parties who settle simply ask the arbitrator to enter the settlement as an award to preserve a federal cause of action.

Background

The MPPAA requires employers who withdraw from multiemployer pension plans to pay withdrawal liability reflecting their share of unfunded vested benefits, with all trades or businesses under common control jointly and severally liable. The withdrawal-liability process begins with the plan’s notice and demand (§ 1399(b)(1)), permits an employer to request review (§ 1399(b)(2)(A)), requires a plan response stating its decision and reasons (§ 1399(b)(2)(B)), and channels disputes to arbitration (§ 1401(a)(1)). If no arbitration is initiated in time, the plan may sue to collect on its schedule (§ 1401(b)(1)); if arbitration concludes with an award, any party may sue to enforce, vacate, or modify the award (§ 1401(b)(2)).

Here, the Fund assessed roughly $41.6 million in January 2015, the Borden Ohio entities requested review and then initiated arbitration, and in August 2016 the parties settled: the monthly payment was reduced to $183,225, the employers waived further review/arbitration, and the pending arbitration was dismissed with prejudice. The Borden Ohio entities paid until filing bankruptcy in 2020. The Fund then sought to collect from non-bankrupt controlled-group members. The District Court held the MPPAA offered no cause of action to enforce a settlement reached mid-arbitration, and also found the Fund had failed to comply with § 1399(b)(2)(B)’s notice requirements. The Third Circuit reversed.

Analysis

Precedents Cited and Their Influence

National Shopmen Pension Fund v. DISA Industries, Inc., 653 F.3d 573 (7th Cir. 2011): The Seventh Circuit allowed a plan to revise an undercharged withdrawal liability assessment, emphasizing the MPPAA’s strong preference for prompt collection to protect plan solvency. It held employers are not prejudiced if they can pursue the statute’s full array of remedies—including arbitration—against the revised assessment. The Third Circuit drew on DISA both for the policy rationale and for the notion that a later revision (including after an arbitration is initiated and even if voluntarily dismissed) can reset the arbitral opportunity.
Masters, Mates & Pilots Pension Plan v. USX Corp., 900 F.2d 727 (4th Cir. 1990): The Fourth Circuit permitted plan revisions, even late in arbitration, absent prejudice, to vindicate the MPPAA’s purpose of allocating unfunded benefits fairly. The Third Circuit relied on USX for the permissibility of revisions within the statutory scheme and the good-faith/no-prejudice limitations.
Board of Trustees of Trucking Employees of North Jersey Welfare Fund, Inc. – Pension Fund v. Centra, 983 F.2d 495 (3d Cir. 1992) and Anita Foundations, Inc. v. ILGWU National Retirement Fund, 902 F.2d 185 (2d Cir. 1990): Both recognize settlements as a vehicle through which funds may adjust withdrawal liability, reinforcing that negotiated resolutions remain within the MPPAA framework.
Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia, 830 F.2d 1241 (3d Cir. 1987): Establishes that commonly controlled trades or businesses are treated as a single employer; each member is jointly and severally liable.
IUE AFL–CIO Pension Fund v. Barker & Williamson, Inc., 788 F.2d 118 (3d Cir. 1986): Holds that notice to one member of a controlled group constitutes notice to all—critical to the Court’s determination that Related Employers could have arbitrated the revised assessment.
Board of Trustees of Teamsters Local 863 Pension Fund v. Foodtown, Inc., 296 F.3d 164 (3d Cir. 2002): Emphasizes liberal construction of notice provisions to protect retirement benefits; informs the Court’s indulgent approach to the form of notice and demand.
Chicago Truck Drivers v. El Paso Co., 525 F.3d 591 (7th Cir. 2008) and Bowers v. Transportacion Maritima Mexicana, S.A., 901 F.2d 258 (2d Cir. 1990): Support flexibility in the form of notice-and-demand; a complaint or non-formal document may suffice if it communicates amount, schedule, and demand.
Huber v. Casablanca Industries, Inc., 916 F.2d 85 (3d Cir. 1990) (abrogated on other grounds): Affirms the centrality of arbitration for disputes about the validity and calculation of withdrawal liability.
Allied Painting & Decorating, Inc. v. International Painters & Allied Trades Industry Pension Fund, 107 F.4th 190 (3d Cir. 2024): Discusses the “as soon as practicable” standard in § 1399(b)(1)—used here to stress timeliness expectations while acknowledging practical constraints.
PBGC Letters 87-12 and 91-6 and related guidance: Recognize trustees’ authority to compromise and restructure withdrawal liability payment terms consistent with fiduciary duties, including for financially troubled employers. The Court treated these as persuasive evidence that discretionary, negotiated modifications fit within the MPPAA’s framework.

Legal Reasoning

Settlement as a “revision” within the MPPAA scheme: The majority reads the settlement agreement as a revision to the Fund’s withdrawal liability assessment. It does so for textual and structural reasons:
- The settlement document itself repeatedly references the MPPAA and expressly “revises” the 2014 assessment by setting a new monthly amount.
- Revisions that remain within the statutory process are consistent with prior circuit decisions and PBGC guidance, as long as employers retain the ability to invoke arbitration to challenge the revision.
Arbitration opportunities and waiver by inaction: Even if Related Employers were not signatories to the settlement (an ambiguity the Court explicitly notes), they could have initiated arbitration to challenge the revised assessment. They did not. That failure forecloses objections that should have been arbitrated in the first instance.
Bridging the “gap” between initiated and completed arbitration: The Court rejects the District Court’s rigid dichotomy (pre-arbitration § 1401(b)(1) vs. post-award § 1401(b)(2)) as creating a “no-suit zone” for settled cases. Treating the settlement as a revised assessment restores the statute’s arbitral channel: if no one arbitrates the revision, § 1401(b)(1) authorizes collection.
Good faith and no prejudice constraints: To prevent abuse and honor statutory timelines, the Court follows DISA and USX by limiting revisions to those made in good faith and without prejudice to employers. Here, no prejudice existed because Related Employers could have arbitrated; and no bad faith is alleged.
Which notice provision applies? The settlement did not satisfy § 1399(b)(2)(B) (which requires a decision, basis, and reason for change) because that provision is triggered by an employer’s request for review under § 1399(b)(2)(A). As to the revised assessment, no employer invoked § 1399(b)(2)(A), so § 1399(b)(1) applied. The settlement contained the amount, the schedule, and a demand—meeting § 1399(b)(1).
“Schedule set forth by the plan sponsor” includes negotiated schedules: The Court rejects the argument that § 1401(b)(1) excludes schedules formed by settlement. The sponsor still “set” the schedule; excluding negotiated agreements would discourage settlement—contrary to MPPAA’s design to protect solvency through efficient resolution and collection.
Deadlines and timeliness: Recognizing that the Fund could not practically pursue controlled-group members until it became clear the withdrawn employers would not pay (bankruptcy), the Court explains that revising the assessment resets the arbitration/comment clock. Funds remain incentivized to act promptly; the “as soon as practicable” standard still applies.

The Dissent’s Textualist Critique

Judge Bibas would hold that once arbitration is initiated, § 1401(b)(1) is categorically unavailable, and § 1401(b)(2) becomes the only path. Without an arbitral award, there can be no § 1401(b)(2) suit. In his view, the fund and employer “stranded” themselves by settling without asking the arbitrator to enter an award; any gap is for Congress to fix. He also cautions, citing Loper Bright, that non-binding PBGC letters and generalized purpose cannot overcome the statute’s text.

The majority responds that its approach avoids creating a remedial “trap” and aligns with the Fourth and Seventh Circuits. It narrows concerns about open-ended revision by imposing good-faith/no-prejudice limits and by reaffirming the arbitration-first principle when employers timely object. While acknowledging the dissent’s suggestion that parties can ask arbitrators to enter consent awards, the majority declines to make that step a prerequisite where the statute’s own collection provision already fits once the revised assessment goes unarbitrated.

Impact

Encourages settlements without forfeiting statutory remedies: Plans and employers can resolve disputes mid-arbitration without risking a remediless “no-suit zone.” If the settlement revises the assessment and no one arbitrates that revision, plans may sue under § 1401(b)(1).
Clarifies the notice framework post-revision: When no employer requests review of a revised assessment, § 1399(b)(1) governs; the settlement itself can satisfy the amount/schedule/demand requirement. If an employer does request review, § 1399(b)(2)(B)’s more detailed “basis/reasons” notice applies.
Controlled-group exposure and vigilance: Members of a commonly controlled group are on inquiry notice when one member receives notice. They must proactively arbitrate any challenge to a revised assessment or risk waiver.
Guardrails on revisions: The Court’s good-faith/no-prejudice constraints—drawn from sister circuits—check any risk of iterative or strategic “revisions.” Funds that act opportunistically or in ways that deny employers a fair chance to arbitrate may run afoul of these limits.
Strategic practice pointers:
- Funds: If settling mid-arbitration, consider issuing a contemporaneous cover letter that cleanly recites § 1399(b)(1) elements and, if anticipating a potential employer comment, a § 1399(b)(2)(B)-style explanation of basis and reasons to foreclose procedural objections.
- Employers and controlled-group members: Docket the arbitration window anew upon receipt of a settlement-as-revision and file for arbitration timely if you intend to contest the revision.
- Both sides: In circuits skeptical of the settlement-as-revision approach, consider requesting that the arbitrator enter a consent award to preserve an undisputed § 1401(b)(2) enforcement route.
Circuit landscape and potential for further review: The decision aligns the Third Circuit with the Fourth (USX) and Seventh (DISA) in embracing flexible, plan-protective administration of the MPPAA. The dissent tees up a textualist challenge that could attract en banc or Supreme Court interest, especially given post–Loper Bright skepticism of relying on agency views.

Complex Concepts Simplified

Withdrawal liability: When an employer leaves a multiemployer pension plan, it must pay its share of the plan’s unfunded vested benefits so remaining employers are not unfairly burdened.
Commonly controlled group: Separate trades or businesses under common control are treated as a single “employer” and are jointly and severally liable for withdrawal liability. Notice to one is notice to all.
Notice and demand (§ 1399(b)(1)): The plan must tell the employer the amount due and the payment schedule and demand payment “as soon as practicable” after withdrawal. The form is flexible as long as those elements are present.
Request for review and plan response (§ 1399(b)(2)(A)-(B)): The employer has 90 days to ask the plan to review its assessment. The plan must then respond with its decision, the basis for it, and reasons for any change. This track is significant because it triggers arbitration timelines.
Arbitration and collection suits (§ 1401): Disputes “shall be resolved through arbitration.” If no arbitration is initiated, the plan can sue to collect under § 1401(b)(1); if arbitration ends in an award, any party may sue to enforce or challenge the award under § 1401(b)(2).
Settlement-as-revision: When parties settle mid-arbitration, the settlement may operate as a revised assessment. That “resets” the employer’s opportunity to comment/arbitrate the revision. If no one arbitrates the revision, § 1401(b)(1) authorizes a collection suit “on the schedule set forth by the plan sponsor.”

Unresolved Questions and Practical Considerations

Binding effect on non-signatory controlled-group members: The Court flagged but did not resolve whether the settlement’s waiver of arbitration bound Related Employers. It did not matter because either they were bound (no arbitration) or, if not bound, they still failed to initiate arbitration on the revision.
Contours of “good faith” and “prejudice”: The Court endorsed these constraints but left their precise content for case-by-case development. Employers should document any prejudice (e.g., loss of arbitral opportunity or harmful delay) and funds should document rationale and timing for revisions.
Best practices for settlements: While not required under this decision, asking the arbitrator to enter a consent award remains a risk-averse option in jurisdictions that may follow the dissent’s approach.

Conclusion

The Third Circuit’s precedential decision resolves a practical problem in MPPAA litigation by recognizing a settlement reached during arbitration as a revision to the withdrawal liability assessment. That move preserves the statute’s arbitral channel and, when no party arbitrates the revised assessment, restores the plan’s ability to sue under § 1401(b)(1). The Court also clarifies that § 1399(b)(1)—not § 1399(b)(2)(B)—governs notice-and-demand where no review is requested as to the revision, and that the settlement itself can satisfy those elements.

The ruling advances the MPPAA’s core purpose of protecting plan solvency without sacrificing procedural fairness: revisions must be made in good faith and without prejudice, and employers retain the right to arbitrate the revised assessment but must do so timely. For funds, the decision is a green light to settle mid-arbitration without losing federal enforcement tools; for employers and controlled groups, it is a reminder to vigilantly protect arbitral rights when a plan’s assessment is revised—by settlement or otherwise.

Key Takeaways

A settlement reached during an MPPAA arbitration can function as a revised withdrawal liability assessment.
If no employer initiates arbitration to contest the revised assessment, the plan may sue to collect under § 1401(b)(1).
Where no employer requests review of the revision, § 1399(b)(1) governs notice-and-demand; the settlement itself can satisfy its elements (amount, schedule, demand).
Revisions are bounded by good-faith and no-prejudice constraints; employers retain the right to arbitrate and must act within statutory windows.
Notice to one member of a commonly controlled group is notice to all; controlled-group affiliates must be proactive if they intend to challenge a revised assessment.
The dissent’s strict two-path view (pre-arbitration § 1401(b)(1) or post-award § 1401(b)(2) only) underscores the value—where doubt remains—of asking arbitrators to enter consent awards; but under this Third Circuit decision, such a step is not required to preserve a statutory collection route.