Case Comment on Central States v. Laguna Dairy
Richard Nehrboss
I. Background
Under ERISA, multiple employers can contribute to the same collectively bargained pension plan. These are called, unsurprisingly, “multiemployer plans.”[1] But this arrangement has a lurking problem: Plans can incur significant liabilities as employees earn benefits that must be paid out in the future, and employers could try to withdraw from their plans to avoid being on the hook.[2] To address that, the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) amended ERISA to make a withdrawing employer liable for its portion of the plan’s unfunded obligations.[3] The MPPAA also imposes joint and several liability on other entities that share common control with the withdrawing employer.[4]
Determining that “withdrawal liability” can be difficult.[5] So the MPPAA choreographs steps to arrive at a figure, as codified in 29 U.S.C. §§ 1399, 1401. First, the plan sponsor (referred to as the “fund”) must notify the employer of its liability assessment and demand payment per § 1399(b)(1). Then the employer has ninety days to ask the fund to review that assessment under § 1399(b)(2)(A). After review, the fund must respond with its decision, the basis for that decision, and the reason for any assessment revision under § 1399(b)(2)(B). If they disagree on liability, the parties may also arbitrate under § 1401(a)(1), which contains different timelines for starting arbitration based on where the parties are in the liability-determination process. Finally, the statute provides two routes to enforce the ultimate liability figure: If there is a final arbitration award, either party may bring suit in federal court within thirty days of the award being issued under § 1401(b)(2). But if neither party “initiate[s]” arbitration within an allotted window, “the amounts demanded by the plan sponsor” become due and enforceable in federal court under § 1401(b)(1).[6] Taken together, though, this scheme leaves a potential gap—parties could agree to a settlement after arbitration begins but before the arbitrator enters an award. That would not clearly authorize either of § 1401(b)’s causes of action.
II. The Third Circuit’s Opinion in Central States v. Laguna Dairy
The Third Circuit addressed this gap in Central States, Southeast & Southwest Areas Pension Fund v. Laguna Dairy, S. de R.L. de C.V.[7] In November 2014, two entities, Borden Dairy Company of Ohio, LLC and Borden Transport Company of Ohio, LLC (referred to collectively as “Borden”), withdrew from their multiemployer plan (the “Fund”).[8] The Fund sent Borden a withdrawal liability assessment, and Borden contested the Fund’s assessment under § 1399(b)(2)(A).[9] After failing to come to an agreement, the parties began arbitration.[10] But before the arbitration finished, they entered into a settlement, with Borden agreeing to make reduced monthly payments of $183,225 for twenty years, dismiss the ongoing arbitration, and waive any right of review or future arbitration.[11] Then, after making a few years’ worth of payments, Borden petitioned for bankruptcy.[12] The Fund failed to satisfy the outstanding liability from the bankruptcy and sued for recovery from the other members of Borden’s control group (the “Related Employers”).[13]
The District Court for the District of Delaware granted the Related Employers’ Rule 12(b)(6) motion and dismissed the case.[14]It found that the Fund did not have a statutory cause of action under either § 1401(b)(1) or § 1401(b)(2).[15] Borden had initiated an arbitration proceeding, so § 1401(b)(1)—which allows suit if “no arbitration proceeding has been initiated”—was unavailable.[16]And the parties settled before a final arbitration award was entered, so the proceeding had not “complet[ed] . . . in favor of one of the parties,” as required by § 1401(b)(2).[17] The court also rejected the Fund’s argument that the settlement agreement itself could provide the basis for a suit under § 1401(b)(1).[18] Because the settlement did not include a reason for the new liability assessment, it could not meet § 1399(b)(2)(B)’s formal notice requirement.[19] Without that notice, the court suggested that § 1401(b)(1) was unavailable as it would have been impossible to initiate an arbitration on the assessment.[20]
The Third Circuit reversed.[21] Writing for the panel over a dissent by Judge Bibas, Judge Ambro[22] held that the Fund had a cause of action under § 1401(b)(1).[23] In a nutshell, the opinion contended that the settlement agreement itself qualified as a revision of the liability assessment, and the employers had not filed for arbitration on that assessment.[24] To the majority, those circumstances met § 1401(b)(1)’s requirements to allow suit in federal court.[25] But to reach that result, the opinion had to clear a few hurdles.
The majority first needed to establish that the Fund had the power to revise its assessment through a settlement agreement. As support, the opinion pointed to sister circuit precedent showing that “the purpose of the MPPAA is to ensure the solvency of multiemployer plans.”[26] For instance, the Seventh Circuit in National Shopmen Pension Fund v. DISA Industries, Inc. had rejected the argument that a fund could only revise its liability assessment in response to an employer challenge or via arbitration or court proceedings.[27] DISA emphasized the MPPAA’s “strong preference” for collecting “withdrawal liability in a manner that protects the solvency of multiemployer plans.”[28] The Fourth Circuit in Masters, Mates & Pilots Pension Plan v. USX Corp. used similar reasoning to find that a fund could revise its assessment on its own even after arbitration started.[29] Despite focusing on the statute’s purpose, Judge Ambro also contended that the settlement’s text meant that it revised the assessment within the statutory scheme—the agreement referenced sections of the MPPAA and characterized the settlement as revising the Fund’s first liability assessment.[30]
But what limits are there on a fund’s ability to revise a liability assessment? The majority argued that revision was permissible “so long as the employer is not prejudiced and the revision was made in good faith.”[31] And to justify this broad power, the opinion highlighted the Pension Benefit Guaranty Corporation’s (PBGC’s)[32] statements that “plan fiduciaries have general authority to compromise disputed claims” and that “[r]ules which allow the trustees of a multiemployer pension plan to modify and lower a . . . withdrawal liability payment schedule are consistent with ERISA.”[33] To the majority, this reading still conformed to the MPPAA’s timelines because a revision “starts the clock anew” for when an employer needs to ask for review of the assessment (called a “comment”) or seek arbitration.[34] In this case, the Related Employers were not prejudiced by the settlement agreement because they had a chance to challenge that assessment, and the majority found no evidence the Fund had acted in bad faith.[35]
The opinion then considered whether the settlement agreement had met § 1399(b)’s procedural requirements for liability assessments. While it agreed that the Fund had not complied with § 1399(b)(2)(B)’s more stringent “notice-and-demand criteria,” the opinion argued that provision was inapplicable.[36] Section 1399(b)(1) applied instead, the majority held, because it concerned “liability assessment[s] to which the Related Employers did not object or seek arbitration.”[37] And unlike § 1399(b)(2)(B), this section did not require the Fund to give a reason for the revision, meaning the settlement agreement sufficed.[38] Ultimately, the majority “dr[e]w the line” between those statutory provisions based on whether or not an employer has commented on the assessment: Section 1399(b)(1) “applies when an employer chooses not to comment on an assessment . . . whereas (b)(2)(B) applies when an employer comments on an assessment.”[39] Judge Ambro stressed that such a reading would not make § 1399(b)(2)(B) superfluous because those requirements would still apply following an employer’s comment.[40] Because the settlement met § 1399(b)(1)’s requirements, the majority found it was a valid revision; and because the employers had not started arbitration based on that settlement, it supported a cause of action under § 1401(b)(1).[41]
Finally, the majority rebutted alternative interpretations. If liability settlements could not be enforced in federal court, the majority asserted, they would be unenforceable “traps.”[42] Indeed, the majority argued that would mean parties could not obtain any enforceable relief once they started arbitration unless there was an award.[43] The opinion accordingly rejected potential escapes from those “traps.” Even if the parties could enforce settlements under state law, as suggested by the dissent, “remedies in another court system under another body of law have no bearing” on this inquiry for federal courts.[44] And to the majority, the idea that the arbitrator could enter the settlement as a final award to then allow a § 1401(b)(2) suit was a mere “suggestion of formalism.”[45]Judge Ambro concluded that all this would violate the MPPAA’s purpose of ensuring multiemployer plans remain solvent.[46]
Judge Bibas dissented.[47] He would have granted the motion to dismiss and held that the Fund lacked a cause of action to enforce the settlement.[48] On the dissent’s reading, the statute provided two mutually exclusive paths: (1) arbitrate and enforce a final award or (2) enforce an assessment without arbitration.[49] The parties “went astray” when they attempted to jump from one path to another—by starting arbitration but then settling and suing to enforce that agreement—rather than seeking a final arbitration award.[50] Even if there were a gap, Judge Bibas noted that it would not be a court’s “job to fill it in to build a different statute.”[51]
On the other hand, the dissent highlighted problems with the majority’s interpretation. Allowing unbounded revisions would preclude “certainty and finality” by creating a “potentially infinite loop” where a fund could continually revise its assessment and make the employer restart the liability-determination process.[52] That would also frustrate § 1401(a)(1)’s timelines for when parties can trigger arbitration.[53] In a similar vein, Judge Bibas charged the majority with inventing its good-faith requirement, thereby “inserting words Congress chose to omit.”[54] Instead, the dissent presented the “fixes” discussed above—the parties could rely on state law remedies or simply request that the arbitrator enter the settlement as an award.[55] Those alternatives ensured that settlements remained enforceable, even after arbitration began.
Turning to precedent, Judge Bibas argued that the majority’s cases employed “outdated purposivist reasoning.”[56] The Seventh Circuit in DISA had found the statute “silent” on whether a fund had the power to revise its liability assessment and so relied on the PBGC’s reading of the statute[57]—an approach out of step with Loper Bright.[58] The Fourth Circuit in Masters similarly ignored the statute’s text after finding it “silent” on the revision question.[59] Both cases then fell back on the MPPAA’s “motivating purpose[]” of ensuring employers pay withdrawal liability.[60] To Judge Bibas, such an approach risks realizing Blackstone’s fear of “destroy[ing] all law, and leav[ing] the decision of every question entirely in the breast of the judge.”[61]
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[1] 29 C.F.R. § 2510.3-37 (2025).
[2] See Connors v. Ryan’s Coal Co., 923 F.2d 1461, 1463 (11th Cir. 1991).
[3] Multiemployer Pension Plan Amendments Act of 1980, Pub. L. No. 96-364, 94 Stat. 1208 (codified as amended in scattered sections of the U.S. Code).
[4] See id. § 302(a), 94 Stat. 1291–92 (codified as amended in 29 U.S.C. § 1301(b)(1)). That means, for example, that if a subsidiary company withdraws from its plan but cannot meet its obligations, the parent company and its other subsidiaries are also liable.
[5] See 29 U.S.C. §§ 1381, 1391.
[6] Id. § 1401(b)(1).
[7] 132 F.4th 672 (3d Cir. 2025).
[8] Id. at 675–76. The opinion refers to the plan sponsor and the plan itself interchangeably.
[9] Id. at 676.
[10] Id.
[11] Id.
[12] Id.
[13] Id. at 676–77.
[14] Cent. States, Se. & Sw. Areas Pension Fund v. Laguna Dairy, No. 22-cv-1135, 2023 WL 8005254, at *3 (D. Del. Nov. 17, 2023), rev’d, 132 F.4th 672 (3d Cir. 2025).
[15] Id.
[16] Id. (quoting 29 U.S.C. § 1401(b)(1)).
[17] Id. (quoting 29 U.S.C. § 1401(b)(2)).
[18] Id. at *4.
[19] Id. The district court also found that the settlement did not qualify as a “schedule set forth by the plan sponsor” under § 1401(b)(1) because it was only a private agreement between the Fund and Borden. Id. (quoting 29 U.S.C. § 1401(b)(1)).
[20] Id. Separately, the district court found that the Fund had no cause of action under an entirely different provision, 29 U.S.C. § 1451(a)(1). Id. at *4–6.
[21] Cent. States, Se. & Sw. Areas Pension Fund v. Laguna Dairy, S. de R.L. de C.V., 132 F.4th 672, 675 (3d Cir. 2025).
[22] Judge Krause joined the majority opinion. See id. at 674, 683.
[23] Id. at 675.
[24] Id. at 675, 678.
[25] Id.
[26] Id. at 678.
[27] Id. at 677 (citing Nat’l Shopmen Pension Fund v. DISA Indus., Inc., 653 F.3d 573, 579 (7th Cir. 2011)).
[28] Id. (quoting DISA, 653 F.3d at 580).
[29] Id. at 677–78 (citing Masters, Mates & Pilots Pension Plan v. USX Corp., 900 F.2d 727, 735–36 (4th Cir. 1990)).
[30] Id. at 678.
[31] Id. at 679 (first citing DISA, 653 F.3d at 580; and then citing Masters, 900 F.2d at 736).
[32] The PBGC is a federal government corporation that insures ERISA pension plans. See 29 U.S.C. § 1302; Davis v. Pension Benefit Guar. Corp., 571 F.3d 1288, 1290 (D.C. Cir. 2009).
[33] Cent. States, 132 F.4th at 679–80 (first quoting Pension Benefit Guar. Corp., Letter No. 87-12 (Oct. 27, 1987); and then quoting Pension Benefit Guar. Corp., Letter No. 91-6 (Aug. 19, 1991)).
[34] Id. at 681.
[35] Id. at 678–79 (citing 29 U.S.C. §§ 1399(b)(2), 1401(a)(1)). In contrast to the district court, the majority also held that the settlement met 29 U.S.C. § 1401(b)(1)’s requirement of being “set forth by the plan sponsor” because the plan sponsor was still involved in setting the payment schedule. Compare Cent. States, 132 F.4th at 680, with Cent. States, Se. & Sw. Areas Pension Fund v. Laguna Dairy, No. 22-cv-1135, 2023 WL 8005254, at *4 (D. Del. Nov. 17, 2023), rev’d, 132 F.4th 672 (3d Cir. 2025).
[36] Cent. States, 132 F.4th at 681.
[37] Id.
[38] Id. at 681–82.
[39] Id. at 682.
[40] Id.
[41] Id. at 675, 678–82.
[42] Id. at 682.
[43] Id.
[44] Id. at 683.
[45] Id. Judge Ambro also rejected the Related Employers’ arguments that they were not bound by Borden’s settlement agreement and thus free to pursue arbitration. While the entities were indeed not parties to the arbitration agreement, “[t]hey slept on their rights” by failing to petition for arbitration within the statutorily defined period. Id. at 678–79.
[46] Id. at 682.
[47] Id. at 683 (Bibas, J., dissenting).
[48] Id. at 683–84.
[49] Id. at 684–85.
[50] Id. at 686.
[51] Id. at 687.
[52] Id. at 687–88.
[53] Id. at 687.
[54] Id. at 688 (quoting Lomax v. Ortiz-Marquez, 140 S. Ct. 1721, 1725 (2020)).
[55] Id.
[56] Id.
[57] Id. (quoting Nat’l Shopmen Pension Fund v. DISA Indus., Inc., 653 F.3d 573, 580 (7th Cir. 2011)).
[58] Id. (citing Loper Bright Enters. v. Raimondo, 144 S. Ct. 2244, 2273 (2024)).
[59] Id. (quoting Masters, Mates & Pilots Pension Plan v. USX Corp., 900 F.2d 727, 735 (4th Cir. 1990)).
[60] Id. (first citing DISA, 653 F.3d at 580; and then quoting Masters, 900 F.2d at 735–36).
[61] Id. at 689 (alterations in original) (quoting 1 William Blackstone, Commentaries *62).