Gustav A. Adams Andrew F. Dopkins and Robert Malcolm, Deceased, by His Lillian Malcolm v. Trustees of the New Jersey Brewery Employees' Pension Trust Fund Local Union 843, International Brotherhood of Teamsters Falstaff Brewing Corporation and Joseph M. Byrne Co., a Corporation of the State of New Jersey (Newark New Jersey District Civil No. 76-01931) Bruno Michota Walter Lemke Abraham Gellman Lawrence Balback Bolly Bonk William Dunne Bernard Kosciewicz Siegfried Milchram Howard Sears Stephen Gardzinski Harry Wolf Bruno Dziedzic William Riedel Salvatore Guarneri Samuel Monto Fermin Loma Vincent Sadowski Stanley Kiesnowski Anthony Bellina Frank Pavolonis William Roesch Michael Duda Edward Strittmatter Frederick Hubner Peter Rudy Harold Wanthouse Joseph Duffy Joseph Coyle Grace Green, Widow of Harold Green, Deceased v. Anheuser-Busch, Incorporated, (Budweiser) P. Ballantine & Sons Pabst Brewing Company Falstaff Brewing Corporation Investors Funding Corporation Rheingold Breweries, Inc. The New Jersey Brewery Em
Docket: 93-5480
Court: Court of Appeals for the Third Circuit; July 15, 1994; Federal Appellate Court
The Pension Benefit Guaranty Corporation (PBGC) sought to reopen a case against Pabst Brewing Co. and Anheuser-Busch, Inc. regarding unfunded benefits from a terminated pension fund after a four-and-a-half-year delay. The district court dismissed the case for lack of prosecution under Rule 41(b) and denied the PBGC's motion for reconsideration as untimely. The PBGC appealed, arguing that the dismissal constituted an abuse of discretion and that it was entitled to due process, which included notice and a hearing before dismissal. The appellate court upheld the dismissal of the motion for reconsideration as untimely and confirmed that the PBGC had received adequate notice. However, it ruled that while the PBGC's negligence justified some sanction, dismissal with prejudice was excessively harsh. Consequently, the court remanded the case for reinstatement and consideration of lesser sanctions. The background included a 1956 agreement among breweries to establish the New Jersey Brewery Workers Trust Fund to provide retirement pensions, which faced significant unfunded liabilities exceeding $50 million by 1970 due to declining employment in the brewing industry. The fund's trustees had implemented a Partial Termination Clause to limit benefits for participants from employers that had withdrawn from the fund.
In 1973, Pabst and Anheuser-Busch, along with other breweries, withdrew from a pension fund and established separate funds for their employees. The pension fund was terminated in 1978, leading to the appointment of the PBGC as statutory trustee under ERISA. Subsequently, 29 employees filed a lawsuit against multiple parties, including the Breweries and the PBGC, for pension benefits. The PBGC was later substituted as a defendant and the employees claimed that the PBGC was required to guarantee certain nonforfeitable pension rights.
The PBGC sought indemnification from the Breweries for any benefits it might be obligated to pay the employees. The Breweries counterclaimed to reduce their liability to the PBGC due to their prior contributions to both the Fund and their individual plans. Multiple summary judgment motions were filed. In 1980, the district court granted summary judgment for the employees against the PBGC on one count, invalidating the Partial Termination Clause, but dismissed all other claims against the Breweries.
On appeal in 1982, the court reversed the decision regarding the Partial Termination Clause, stating it was not void and remanded for a determination of proper notification to the employees. Following further discovery, the district court ruled in 1983 that the employees had not received adequate notice of the clause, granting summary judgment to the employees on that count, while denying the Breweries' motions.
A second appeal led to a reversal of the employees' summary judgment, determining they had received adequate constructive notice of the clause. The case was remanded for a final determination of the employer's liability regarding the PBGC's cross-claims. In 1986, the district court dismissed the Breweries' cross-claims against the PBGC for liability reduction related to their pension plan payments and denied reconsideration of their due process objection.
In January 1987, after the case was reassigned, the Employees renewed their claims for guaranteed benefits from the PBGC. The court ruled that prior decisions had definitively established that the Partial Termination Clause nullified those claims, granting summary judgment to the PBGC. This ruling was affirmed in October 1988. After this affirmation, only the PBGC's cross-claims for employer indemnification against the Breweries remained. Between October 1988 and March 1993, there was no communication regarding the case, although the PBGC conducted limited informal discovery with third parties.
In December 1992, the PBGC learned the case was administratively closed and subsequently moved to reopen it in March 1993, seeking summary judgment against the Breweries. The PBGC did not address the four-and-a-half-year pause in its actions and argued that the remaining issue was merely the calculation of the Breweries' liability. Anheuser-Busch countered that the case should be dismissed under Rule 41(b) for lack of prosecution, while Pabst submitted a request for dismissal with prejudice.
The PBGC argued that the administrative closure was a clerical error warranting reopening under Rule 60(a) and disputed claims regarding its compliance with procedural rules. On June 7, 1993, the district court dismissed the PBGC's claims under Rule 41(b) due to the lack of explanation for the delay, treating the motions from the defendants as a request for dismissal. The court evaluated the case using six factors and determined that all but one favored dismissal.
Subsequently, the PBGC filed a motion on June 24, 1993, under Rule 59(e) to amend the dismissal order, providing an explanation for the delay and documenting minimal informal discovery. The court denied this motion as untimely, citing a jurisdictional ten-day limit, and indicated that even if considered timely, it would have upheld the dismissal. The PBGC then filed a timely notice of appeal. The district court had jurisdiction over the PBGC’s ERISA claim against the Breweries, and its dismissal and denial of reconsideration are considered final orders. The appellate court has jurisdiction under 28 U.S.C. § 1291.
The motion for reconsideration was denied due to the expiration of a jurisdictional time limit. The court conducted a plenary review of the district court's application of tolling principles and jurisdictional decisions, as well as the due process implications of dismissals. Dismissals under Rule 41(b) are reviewed for abuse of discretion, with the understanding that dismissals with prejudice are extreme sanctions and should be applied cautiously, favoring decisions on the merits.
Rule 59(e) mandates that motions for reconsideration must be served within ten days of judgment entry, and Rule 6(a) clarifies how to calculate this period, excluding certain days. The PBGC's motion to alter the judgment was served on June 24, exceeding the ten-day limit calculated from the judgment date, as June 21 was the deadline. The PBGC argued that Rule 6(e) provided a three-day extension due to service by mail, but the court found this rule inapplicable because Rule 59(e) starts the time limit from the judgment's entry rather than when the judgment was served.
A ruling from the Sonnenblick-Goldman Corp. v. Nowalk case establishes that a Rule 59(e) motion's filing is not contingent on notice of judgment entry, rendering Rule 6(e) inapplicable. The PBGC contends that the dismissal violated due process due to a lack of formal notice or hearing; however, it was determined that the PBGC had sufficient notice of the dismissal and did not respond. The Supreme Court's decision in Link v. Wabash R.R. clarifies that a court can dismiss a case sua sponte under Rule 41(b) without prior notice or hearing, as long as the circumstances indicate that a party should be aware of the potential for dismissal. Key factors in Link included three years of inactivity, a court order to show cause, and the plaintiff's attorney missing a pretrial conference, which collectively suggested that advance notice was unnecessary. Additionally, the availability of relief under Rule 60(b) for mistakes or neglect mitigates the lack of prior notice, as it allows for the reopening of cases that were improperly closed.
Dismissal with prejudice typically requires advance notice, but the PBGC had sufficient opportunity to defend against such dismissal without formal notice. Unlike the Link plaintiff, the PBGC did not engage in problematic behavior, had complied with discovery requests, and missed no court appointments. However, it was warned of potential dismissal through Anheuser-Busch's arguments for dismissal under Rule 41(b) and Pabst's inclusion of a draft dismissal order. The opportunity to file a Rule 59(e) motion to alter or amend the dismissal judgment further indicated the PBGC's awareness of the situation. The PBGC's failure to utilize this option negated any claims of due process violations or claims that the court abused its discretion.
The PBGC sought to extend the protections outlined in Dunbar v. Triangle Lumber, which provides safeguards for clients whose attorneys exhibit dilatory behavior. However, the court disagreed, noting that Dunbar specifically protects parties with outside counsel and that parties with in-house counsel, like the PBGC, are expected to be aware of their case's status. In previous rulings, notice and hearings were deemed unnecessary when the client had knowledge of the attorney's misconduct. Ultimately, the PBGC, represented by in-house counsel, is assumed to have knowledge of its case and requires no additional notice beyond that established in Link.
The PBGC's affidavits and documents submitted for reconsideration will not be considered due to its prior failure to adequately present excuses for the delay. However, the court will address the legal arguments against dismissal raised by the PBGC on appeal, as it is not required to present these arguments during a Rule 59(e) motion at the district court level. The court evaluates whether the district court abused its discretion in dismissing the case with prejudice by considering six factors established in Poulis: (1) personal responsibility of the party, (2) prejudice to the adversary, (3) history of dilatoriness, (4) willfulness or bad faith of the party or attorney, (5) effectiveness of alternative sanctions, and (6) the merit of the claim or defense.
The district court found that all factors, except for meritoriousness, supported dismissal. The PBGC was held personally responsible for the delay caused by its in-house counsel, with the court rejecting the argument that it should consider the lack of personal responsibility of participating employers in the pension program. The court emphasized that the personal responsibility criterion is focused on the party's own actions and not on the potential impact of dismissal on third parties. Consequently, since the PBGC itself failed to prosecute the case, the effects of dismissal on innocent parties do not outweigh its responsibility.
Evidence of prejudice to an adversary significantly supports dismissal or default judgment, with examples including loss of evidence, fading witness memories, and burdens from non-cooperation in discovery. The court stated that prejudice does not require irreparable harm that cannot be fixed by reopening discovery and delaying the trial. In this case, the district court initially believed defendants would face prejudice due to accruing interest on liability exceeding the liability itself and challenges in defending after a long delay. However, the argument that interest represents a loss of possession value rather than true prejudice was accepted, suggesting that if the defendants were found not entitled to the money, they should not benefit from the interest accrued during litigation.
Furthermore, the claim of prejudice due to delayed defense was deemed unconvincing, as the determination of liability relies on computational evidence from records rather than witness recollection. The Breweries, while intending to present expert and fact witnesses regarding the Pension Fund's status and investments, did not claim any records were lost or that discovery was incomplete. The issues central to their case relate to statutory and constitutional interpretations of ERISA, which remain valid regardless of timing. Although some minor prejudice could arise from additional costs or lost information due to the delay, there was no substantial evidence to support this, and any such issues could be addressed with lesser sanctions than dismissal.
Extensive or repeated delay in legal proceedings, characterized by consistent non-responsiveness to interrogatories or tardiness in complying with court orders, constitutes a "history of dilatoriness." However, isolated incidents, such as an attorney's "sloppiness" during a move resulting in a few late responses, do not amount to deliberate dilatory actions. Evaluations of a party's conduct must consider the entire case's timeline; for instance, a dismissal for want of prosecution was overturned despite significant missteps, as there was no earlier pattern of delay.
In this case, the district court noted that a failure to prosecute for over four years constituted a history of dilatoriness. Such a significant delay could justify dismissal under Rule 41(b). The failure to prosecute does not require active steps to hinder trial progression; inaction is sufficient. While the history of dilatoriness is a factor favoring dismissal, it is not mandatory. The four-and-a-half-year delay, although considerable, is less severe than in cases like Bendix, where a case was dormant for 11 years, and lacks the strategic delays seen in Bedwell. The PBGC's compliance with deadlines during litigation somewhat mitigates the lengthy delay.
The evaluation of whether the attorney's conduct was willful or in bad faith focuses on "flagrant bad faith." Previous rulings have upheld dismissals in cases where plaintiffs repeatedly failed to comply with court orders despite multiple extensions, indicating that severe and persistent non-compliance justifies dismissal.
Willfulness is characterized by intentional or self-serving actions. In the case of Donnelly, the plaintiff's delay in securing New Jersey counsel after transferring his case from Texas was deemed a failure to comply promptly, not an inability to do so; therefore, it did not demonstrate willfulness. Although the Texas lawyer had made timely efforts to find local counsel, the record reflected no willful misconduct. Similarly, in Scarborough, the tardiness of an attorney in filing documents was not regarded as willful or contemptuous. In contrast, the conduct in Bedwell, where both the plaintiff and attorney disregarded court orders without plausible excuses, was deemed willful.
The district court observed a four-and-a-half-year delay by the PBGC without any explanation or indication of good faith efforts to prosecute the case, leading to the inference of willfulness. However, the PBGC contended that the court's presumption of willfulness was inappropriate. Although there was a lack of good faith, this did not equate to willfulness as previously defined. The PBGC's situation mirrored Donnelly's, indicating a failure to act with the expected urgency rather than strategic delay. The court characterized the PBGC’s conduct as negligent rather than willful.
Before imposing a dismissal with prejudice, district courts must consider alternative sanctions. In Titus v. Mercedes Benz, the court emphasized that plaintiffs should not be deprived of their right to have claims adjudicated on the merits without exploring other sanctions. The court mandated that findings regarding the consideration of alternative sanctions be documented. Prior cases have supported remanding for the exploration of alternative sanctions while barring dismissals.
The district court rejected alternative sanctions against the PBGC, determining that charging it for the Breweries' costs would not sufficiently compensate for the prejudice caused or uphold the efficient administration of justice. Despite acknowledging the PBGC's irresponsibility, the court found that the Breweries' case had not been seriously compromised and that the delay had not resulted in significant prejudice to the defendants. Alternative sanctions, such as favorable evidentiary treatment for defendants or payment of the Breweries' attorneys' fees, were deemed appropriate. The court emphasized that less severe sanctions would be more effective than outright dismissal, which would deny the Breweries the right to have their claim adjudicated on its merits.
In assessing the meritoriousness of the PBGC's claims, the district court found them facially meritorious, with Pabst conceding this point while maintaining statutory and constitutional arguments against ERISA applicability. The court rejected the Breweries' defenses and granted summary judgment to the PBGC on their cross-claims, remanding for a determination of the remaining unfunded liabilities of the Brewery Pension Fund.
Ultimately, the court concluded that the totality of the six Poulis factors weighed against dismissal with prejudice, indicating that the decision to dismiss did not represent a sound exercise of discretion. The lack of significant prejudice to the Breweries, the absence of willfulness or bad faith by the PBGC, and the availability of alternative sanctions, alongside the meritoriousness of the claims, led the court to favor a resolution on the merits rather than dismissal.
Dismissal of a case should be a last resort, with lesser sanctions preferred. The district court's order is vacated, and the case is remanded for reinstatement of the PBGC’s claims, with the imposition of appropriate sanctions other than dismissal, and each party is to bear its own costs. The PBGC is guaranteed payment of nonforfeitable benefits under a single-employer plan upon its termination, as outlined in 29 U.S.C. § 1322(a). This includes plans supported by multiple employers under individual collective bargaining agreements. Liability for unfunded benefits upon plan termination is assigned to all contributing employers based on their contributions over the last five years, per § 1364. The district court mistakenly calculated the deadline for the PBGC's motion based on the docketing date instead of the service date, but this error was harmless as both dates fell outside the time limit. A motion filed outside the jurisdictional time limit is effectively invalid. The evaluation of Rule 41(b) dismissals considers any prejudice to the other party. The strength of the PBGC's case has been debated in relation to dismissal, referencing prior cases where dismissals were reversed due to the existence of owed amounts under contract.
Defendants acknowledged the validity of the plaintiff's claims for services rendered after February 1964 but denied all other claims. Following a year of litigation and three years of inactivity from the plaintiff, the court dismissed the case in 1969. The appellate court affirmed this dismissal without finding an abuse of discretion, while allowing the plaintiff to pursue the undisputed claim for the 1964 services. It differentiated this case from previous cases, Glo Co. and Spering, noting that the defendants here did not admit liability. The court emphasized that existing precedents should not undermine the necessity of considering all six factors outlined in Poulis for dismissals. The PBGC argued against dismissal without prior warning for a meritorious statutory claim of the federal government, citing Fed. R. Civ. P. 55(e), which relates to default judgments. The court countered that Rule 55 does not apply to dismissals under Rule 41(b), which has been upheld in cases involving government agencies. Precedents were cited where dismissals under Rule 41(b) were reversed due to a lack of prejudice to the plaintiff, the presence of a meritorious defense, and the absence of willful misconduct by the defendant.
