Central States, Southeast v. Georgia-Pacific LLC

In the
United States Court of Appeals
For the Seventh Circuit
No. 10-2489
CENTRAL STATES, SOUTHEAST AND
SOUTHWEST AREAS PENSION FUND, and
HOWARD MCDOUGALL, Trustee,
Plaintiffs-Appellants,
v.
GEORGIA-PACIFIC LLC,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 09 C 1445—Rebecca R. Pallmeyer, Judge.
ARGUED FEBRUARY 9, 2011—DECIDED MARCH 29, 2011
Before EASTERBROOK, Chief Judge, and FLAUM and
RIPPLE, Circuit Judges.
EASTERBROOK, Chief Judge. Georgia-Pacific sold its
building-products division to BlueLinx Corp. in 2004.
After that sale, Georgia-Pacific no longer had any em-
ployees participating in the multiemployer Central
States, Southeast and Southwest Areas Pension Fund

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2 No. 10-2489
(“the Plan”). Withdrawal from a multiemployer fund
requires a payment if the fund does not have enough
assets to meet all of its obligations. (If employers could
withdraw freely from underfunded plans, everyone
would have an incentive to do so and saddle remaining
firms with the burden of meeting the pension promises.
The result would be an unraveling of multiemployer
plans.) The Plan is underfunded, but Georgia-Pacific
contended that it does not owe withdrawal liability. It
relied on 29 U.S.C. §1384(a)(1), which provides that the
employer need not pay if “solely because, as a result of
a bona fide, arm’s-length sale of assets to an unrelated
party . . . , the seller ceases covered operations or ceases
to have an obligation to contribute for such operations”
and the purchaser not only assumes liability for the
contributions but also posts a bond to ensure payment.
The seller is secondarily liable for the first five years of
the buyer’s payments. 29 U.S.C. §1384(a)(1)(B). BlueLinx
began contributing to the Plan and posted the bond;
Georgia-Pacific stood behind its obligations.
The Plan maintains that Georgia-Pacific neverthe-
less owes about $5 million. When an employer and a
multiemployer pension plan disagree about withdrawal
liability, the dispute is referred to what the statute
calls “arbitration.” 29 U.S.C. §1401. (The usage may
strike readers as irregular, because arbitration normally
depends on contract. See First Options of Chicago, Inc. v.
Kaplan, 514 U.S. 938, 943 (1995). There is nothing con-
tractual or voluntary about §1401.) The arbitrator con-
cluded that Georgia-Pacific does not owe withdrawal
liability; on review under 29 U.S.C. §§ 1401(b)(2), 1451,

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No. 10-2489 3
the district court enforced that award. 2010 U.S. Dist.
LEXIS 8773 (N.D. Ill. Feb. 2, 2010).
The Plan contends that the sale to BlueLinx is not
“solely” responsible for the fact that Georgia-Pacific no
longer contributes. At the beginning of 1994 three
divisions within Georgia-Pacific had employees on
whose behalf the firm contributed to the Plan. During
1994 and 1995 Georgia-Pacific outsourced tasks that had
been performed by workers in its wood-pulp division;
it laid off workers in that division. This did not meet
the statutory definition of partial withdrawal. 29 U.S.C.
§1385. In 1997 Georgia-Pacific closed some facilities
within its building division and laid off workers. This
step did result in partial withdrawal, and Georgia-Pacific
paid the Plan $81,585.62. Seven years later, Georgia-Pacific
sold the building-products division to BlueLinx. As
the Plan sees things, the end of Georgia-Pacific’s con-
tributions is attributable to the closures during the 1990s
as well as to the sale in 2004, so that complete withdrawal
did not occur “solely because . . . [of an] arm’s-length
sale of assets to an unrelated party”.
Georgia-Pacific contends that the sale is “solely” respon-
sible for withdrawal in the sense that, if it had not sold
the division and everything else had remained the same,
it would still be a contributing employer and would not
owe the Plan anything. Section 1384 avoids windfalls to
pension plans: If plans would not recover anything in
the absence of a sale, and don’t lose contributions
because of the sale, then there is no reason why the
Plan should receive a lump-sum payment. If, as the

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4 No. 10-2489
Plan contends, the word “solely” in §1384(a) looks to
events that precede the sale, why stop with the
layoffs in 1994? The Plan could equally well contend that
Georgia-Pacific would not have sold the division had
not increased competition made the division less profit-
able. Or that Georgia-Pacific would not have sold the
division in the absence of a decision by its board of direc-
tors to pare off operations that did not suit its business
model. Yet it would not make sense to say that, because
competition played a role in a decision to divest, the
sale was not the “sole” cause of the fact that Georgia-
Pacific no longer makes contributions. One might as well
say that the withdrawal can be traced to the General
Agreement on Trade and Tariffs, which facilitates inter-
national trade and thus the sort of competitive pres-
sure that led Georgia-Pacific to divest its building-
products operations. But if the United States’ decision
to join the GATT means that a sale is not the “sole”
cause of the withdrawal, then §1384 is drained of
meaning; nothing ever is a “sole” cause in the sense that
it is the only event in the causal chain.
Suppose that Georgia-Pacific had not laid off any
workers from 1994 through 1997, and had sold those
divisions to BlueLinx in 2004 along with the building-
products division. Suppose further than in 2001 one of
the truck drivers in the building-products division
had transferred to a division not involved in the sale and
had retired in 2003. As the Plan understands §1384, it
would not be possible to call the sale in 2004 the “sole”
cause of Georgia-Pacific’s complete withdrawal, because
one additional cause was the single worker’s retirement

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No. 10-2489 5
in 2003. But for that person’s decision, Georgia-Pacific
would have had one worker still in the Plan after the
sale. Yet this would be an exceedingly implausible under-
standing of the role that the word “solely” plays in
§1384(a). This example shows the problem of thinking
about “cause” as an all-or-none matter. Every event has
a chain of causes stretching back to the Big Bang. We
treat “cause” in law as serving a function by separating
one kind of input from another; the Plan’s approach,
by contrast, treats all potential causes alike.
Consider another example. Suppose that Georgia-Pacific,
instead of closing two divisions in 1994–95 and 1997, had
sold each of them to another firm that continued the
contributions. The sale in 2004 to BlueLinx then would
be the third. The Plan’s income and number of covered
employees would be the same. Yet none of the sales
would qualify under the Plan’s reading of §1384(a),
because none would be “solely” responsible for Georgia-
Pacific’s complete withdrawal. Each of the three sales
would be responsible in part, and therefore none would
be exempt from withdrawal liability. That would
produce a windfall to the Plan, the very thing §1384
is supposed to prevent.
Things could get even more complex if the sale to
BlueLinx had come first. The building-products division
was the largest of the three, and closing it without a
sale would have led to liability for a partial withdrawal.
As a result of §1384, there would not be withdrawal
liability had Georgia-Pacific sold the building-products
division to BlueLinx in 1994. But if, a decade later, Georgia-

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6 No. 10-2489
Pacific then laid off the participating employees of the
other two divisions, the sale to BlueLinx in 1994 would
play a part in Georgia-Pacific’s complete withdrawal
in 2004. That would defeat the “solely because . . .” condi-
tion in §1384(a) and lead to a retroactive assessment of
partial withdrawal liability because of the 1994 sale.
The Plan denies that a closure in 2004 could lead to
liability for a sale in 1994; but if that’s so, why should
a closure in 1994 lead to liability for a sale in 2004?
As far as we can determine, this is the first appellate
decision that has required interpretation of the phrase
“solely because” in §1384. (Almost all of the decisions
under §1384 have come from this circuit, perhaps
because the Central States Plan has been a uniquely
aggressive seeker of withdrawal payments.) We think
that the best understanding of this phrase is one that
concentrates on the transaction at issue: If the sale had
not occurred, everything else had remained the same,
and no withdrawal liability would have accrued, then
the sale to a buyer that continues the pension contribu-
tions does not entail withdrawal liability. That’s a
working definition of “solely,” because it separates the
role of the sale from the role of everything else.
We can imagine a proviso to this understanding: If
the employer crafts a plan to withdraw by stages, and
uses a sale only for the last stage, then all transactions
may be consolidated and withdrawal liability assessed
for the plan as a whole. Tax law uses this step-trans-
action doctrine to put a multi-stage plan back together
and treat it as one event. See CIR v. Clark, 489 U.S. 726,

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No. 10-2489 7
738 (1989). Opinion Letter 92-1 by the General Counsel of
the Pension Benefit Guaranty Corporation, which has
extensive duties in dealing with underfunded plans,
discusses the possibility of consolidating multiple trans-
actions if an employer uses a series of partial with-
drawals plus a terminal sale in an effort to avoid with-
drawal liability. The arbitrator considered whether
the transactions of 1994–95, 1997, and 2004 should be
consolidated under this approach and treated as one
withdrawal. The arbitrator gave a negative answer
after finding that Georgia-Pacific had not formed a
plan to withdraw in stages; instead, the arbitrator con-
cluded, each of the three closures was independent of
the others and responded to distinct economic conditions.
Whether Georgia-Pacific had one plan that underlay
all three closures is a question of fact, and an arbitrator’s
decision on factual disputes stands unless “a clear pre-
ponderance of the evidence” undermines it. 29 U.S.C.
§1401(c). The district court concluded that the arbitrator’s
finding is adequately supported by the evidence. We
agree with that conclusion. And as the arbitrator did not
make a legal error, the decision must be enforced.
The Plan contends that the standards in Opinion Letter
92-1 are erroneous. To the extent this reflects the Plan’s
belief that every withdrawal must have multiple causes,
it is the Plan that commits the legal error. Because the
arbitrator concluded that Georgia-Pacific did not set out
in 1994 to withdraw by stages, we need not decide
whether all of the analysis in the PBGC’s 1992 letter is
sound. It is enough to say that, when a sale transfers an

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8 No. 10-2489
ongoing business to a new firm that is willing and able
to make all pension contributions, and when this sale
is not part of a plan to withdraw by stages, §1384
shields the selling employer from withdrawal liability.
AFFIRMED
3-29-11

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