Carpenters Pension Trust Fund for Northern California v. Underground Const. Co., Inc.

• Decision Date: 22 July 1994
• Docket Number: No. 92-15649,92-15649
• Parties: CARPENTERS PENSION TRUST FUND FOR NORTHERN CALIFORNIA, Plaintiff-Appellant, v. UNDERGROUND CONSTRUCTION COMPANY, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 776

31 F.3d 776

CARPENTERS PENSION TRUST FUND FOR NORTHERN CALIFORNIA Plaintiff-Appellant, v. UNDERGROUND CONSTRUCTION COMPANY, INC., Defendant-Appellee.

No. 92-15649.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Oct. 6, 1993.

Decided July 22, 1994.

Robert M. Hirsch, Van Bourg, Weinberg, Roger & Rosenfeld, San Francisco, CA, for plaintiff-appellant.

John T. Hayden and Gregory R. Meyer, Littler, Mendelson, Fastiff & Tichy, San Francisco, CA, for defendant-appellee.

Appeal from the United States District Court for the Northern District of California.

Before: HUG, FARRIS, and BRUNETTI, Circuit Judges.

BRUNETTI, Circuit Judge:

Appellant Carpenters Pension Trust Fund for Northern California ("the Fund") is a multiemployer pension plan for the carpenters who are represented by Carpenters 46 Northern California Counties Conference Board of the United Brotherhood of Carpenters and Joiners of America (AFL-CIO). The trustees of the Fund administer the plan pursuant to a Trust Agreement. Appellee Underground Construction Co., Inc. ("Underground") was for many years a signatory to the Trust Agreement and the relevant collective bargaining agreement, the Carpenters Master Agreement ("the CBA").

During that period, Underground participated in two joint ventures ("JV"s), each formed to build a specific project. In each case, Underground had one JV partner; Underground owned 60 percent of the first JV and 55 percent of the second. The business operations of the JVs were entirely separate from those of Underground and its JV partners. Moreover, each JV was itself a signatory to the CBA, and each contributed to the Fund under its own account number and kept its own financial records.

In June 1986, Underground withdrew from the CBA and thereby terminated its obligation to make continued contributions to the Fund, while the firm continued to work in the area covered by the CBA. The present dispute concerns the amount of Underground's resulting "withdrawal liability" to the Fund for its proportionate share of the Fund's unfunded vested liabilities. The Fund included the JVs' contribution history in its calculation of Underground's liability. Underground, supported by the rulings of an arbitrator as well as the district court, contends that it was not liable for the additional contribution history.

For the reasons stated below, we hold that the district court did not err in ruling that including the JVs' history in the calculation of Underground's withdrawal liability requires an arbitrary interpretation of the Trust Agreement. The Fund concedes here that federal law provides no independent source of liability. As the parties had stipulated to the principal facts, there remained no disputed issues. We thus affirm the district court's grant of summary judgment for Underground.

The Statutory Scheme

As a general matter, pension plans are federally regulated pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. Secs. 1001 et seq. (1988). The Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. Secs. 1381-1453 (1988), amended ERISA to allow plans to impose proportional liability on withdrawing employers for the unfunded vested benefit obligations of multiemployer plans. For a summary of the legislative history, see Pension Benefit Guarantee Corp. v. R.A. Gray & Co., 467 U.S. 717, 720-25, 104 S.Ct. 2709, 2713-16, 81 L.Ed.2d 601 (1984). To the extent that past contributions did not suffice to fund obligations that had vested at the time of withdrawal, the MPPAA sought to make withdrawing employers pay their proportionate share of the deficit such that remaining employers would not be unfairly saddled with increased payments.

Ordinarily, "withdrawal" triggering this liability occurs when an employer permanently terminates its obligation to contribute or ceases all operations covered by the plan. 29 U.S.C. Sec. 1383(a). However, in enacting the MPPAA Congress recognized the transitory nature of contracts and employment in the building and construction industry with a specific exception. Individuals in construction trades routinely work for many employers during their careers, and employers come and go; as long as the base of construction projects in the area covered by the plan is funding the plan's obligations, the plan is not threatened. H.R.Rep. No. 869, 96th Cong., 2d Sess. 75-76 (1980), reprinted in 1980 U.S.C.C.A.N. 2918, 2943-44. As a result, "withdrawal" triggering an MPPAA withdrawal liability assessment upon a construction industry employer occurs only if:

(A) an employer ceases to have an obligation to contribute under the plan, and

(B) the employer--

(i) continues to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required, or

(ii) resumes such work within 5 years after the date on which the obligation to contribute under the plan ceases, and does not renew the obligation at the time of the resumption.

29 U.S.C. Sec. 1383(b)(2) (1988). This provision aims to extract withdrawal contributions only from those employers who may threaten the plan by reducing the plan's contribution base. When disputes arise as to the amount of liability, the MPPAA mandates arbitration. 29 U.S.C. Sec. 1401(b)(1).

Standard of Review

On review, the arbitrator's factual findings are presumed correct, rebuttable only by a clear preponderance of the evidence. 29 U.S.C. Sec. 1401(c). Both the district court and this court review de novo all conclusions of law. CMSH Co. v. Carpenters Trust Fund, 963 F.2d 238, 240 (9th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 185, 121 L.Ed.2d 130 (1992); Board of Trustees v. Thompson Bldg. Materials, 749 F.2d 1396, 1405-06 (9th Cir.1984), cert. denied, 471 U.S. 1054, 105 S.Ct. 2116, 85 L.Ed.2d 481 (1985). Whether contract language is ambiguous is a question of law, Aetna Casualty & Sur. Co. v. Pintlar Corp., 948 F.2d 1507, 1511 (9th Cir.1991), and principles of contract interpretation applied to the facts are also reviewed de novo, L.K. Comstock & Co., Inc. v. United Engineers & Constructors, Inc., 880 F.2d 219, 221 (9th Cir.1989). But cf. Jos. Schlitz Brewing Co. v. Milwaukee Brewery Workers' Pension Plan, 3 F.3d 994, 999 (7th Cir.1993) (MPPAA arbitrator's decision on mixed question of law and fact such as contract interpretation reviewable only for clear error), cert. granted in part, --- U.S. ----, 114 S.Ct. 2736, 129 L.Ed.2d 858 (1994).

Discussion

ERISA contains a provision specifically aimed at preventing avoidance of withdrawal assessment liabilities through the device of multilayered corporate groups under common ultimate control. See 29 U.S.C. Sec. 1301(b)(1) (1988). The Fund concedes here that Underground and its JVs do not come under the ERISA common control provision and its chain of associated regulations, and that Underground is under no statutory obligation to pay a withdrawal assessment based upon any alleged common control of the JVs. ¹ While it is true that the ERISA common control provision, in conjunction with the MPPAA construction industry exception for employers who completely cease operations, operates to provide an avenue of escape from withdrawal liability where a contractor adopts the JV approach as a general practice, only Congress can close this gap.

The Fund is left with a claim that, under the CBA and Trust Agreement to which Underground was a party, Underground was contractually liable for plan contributions for the JVs. Under this reasoning, the JVs' contribution history was an integral part of Underground's, and the Fund now merely pursues its right under ERISA to collect a withdrawal assessment based upon Underground's total contribution history from all its operations (independent and joint venture).

The Fund cites two Ninth Circuit cases as authority for this proposition. The first, Board of Trustees v. H.F. Johnson, Inc., 830 F.2d 1009 (9th Cir.1987), addressed a situation where two individuals held 99 percent of two entities: the H.F. Johnson corporation and Lockwood Leasing, a joint venture. Johnson withdrew from a pension plan, and the plan attempted to impose personal liability on the owners through their interest in Lockwood. The owners conceded that the two entities met the ERISA common control test, id. at 1012, but argued that they could not be held personally liable for the withdrawal liability assessed against the joint venture. The court held that joint ventures were properly regarded as partnerships and that ordinary partnership liability principles rendered the individuals personally liable for assessments against the joint venture. Id. at 1015.

The Fund mischaracterizes Johnson in attempting to draw out of its holding a general principle that joint venture participants are individually liable for pension contribution history attributable to joint venture enterprises. The joint venture participants in Johnson were derivatively liable for withdrawal assessments, but not because of anything related to the withdrawal assessment context. Rather, ordinary partnership liability principles rendered the individuals liable for what they conceded was a valid withdrawal assessment against the joint venture. Johnson merely stands for the proposition that Underground could be liable for a valid withdrawal assessment debt of the JVs themselves. Since the JVs here completely ceased operations, however, they were not subject to a withdrawal assessment in the first place. 29 U.S.C. Sec. 1383(b)(2).

The second Ninth Circuit case upon which the Fund relies, H.C. Elliott, Inc. v. Carpenters Pension Trust Fund, 859 F.2d 808 (9th Cir.1988), cert. denied, 490 U.S. 1036, 109 S.Ct. 1934, 104 L.Ed.2d 406 (1989), is similarly inapposite. In Elliott, a case involving the appellant, the corporation withdrew from the Fund and began subcontracting its carpentry work. The Fund imposed a withdrawal assessment and Elliott sued. The...