Shelter Distrib., Inc. v. Gen. Drivers, Warehousemen & Helpers Local Union No. 89

• Decision Date: 16 March 2012
• Docket Number: No. 11–5450.,11–5450.
• Citation: 162 Lab.Cas. P 10462,674 F.3d 608,192 L.R.R.M. (BNA) 3166,52 Employee Benefits Cas. 2217
• Parties: SHELTER DISTRIBUTION, INC., Plaintiff–Appellee, v. GENERAL DRIVERS, WAREHOUSEMEN & HELPERS LOCAL UNION NO. 89, Defendant–Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

162 Lab.Cas. P 10,462

192 L.R.R.M. (BNA) 3166

52 Employee Benefits Cas. 2217

674 F.3d 608

SHELTER DISTRIBUTION, INC., Plaintiff–Appellee,

v.GENERAL DRIVERS, WAREHOUSEMEN & HELPERS LOCAL UNION NO. 89, Defendant–Appellant.

No. 11–5450.

United States Court of Appeals, Sixth Circuit.

March 16, 2012.

ON BRIEF: Scott D. Soldon, Kyle A. McCoy, Soldon Law Firm, LLC, Shorewood, Wisconsin, for Appellant. Griffin Terry Sumner, C. Laurence Woods, Frost Brown Todd LLC, Louisville, Kentucky, for Appellee.Before: KEITH, MARTIN, and GIBBONS, Circuit Judges.

OPINION

BOYCE F. MARTIN, JR., Circuit Judge.

Shelter Distribution, Inc. filed this action with the district court seeking to enforce a provision of the collective bargaining agreement between Shelter and General Drivers, Warehousemen and Helpers Local Union No. 89. The provision in question obligates the Union to indemnify Shelter for any contingent liability Shelter may incur as a result of its participation in the pension plan. Under this provision, Shelter claims that the Union is obligated to indemnify Shelter for “withdrawal liability,” a liability imposed upon Shelter by 29 U.S.C. § 1399(b). The Union argues that it is a violation of public policy for a union to indemnify an employer for any contingent liability to a pension plan established under the Employee Retirement Income Security Act of 1974, commonly referred to as ERISA, as amended by the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. §§ 1381–1461. The district court determined that the provision did not violate public policy and enforced the provision. This is an issue of first impression. We hold that such a provision does not violate public policy and we AFFIRM the decision of the district court.

I.

The facts are undisputed. The collective bargaining agreement between Shelter and the Union was scheduled to expire in November 2001. Pursuant to the agreement, the Union notified Shelter that it intended to negotiate the agreement. During negotiations, and prior to agreeing to a new contract, the Union disclaimed its representation of Shelter's employees and terminated the collective bargaining process with Shelter.

Because of the termination of the collective bargaining process, Shelter withdrew from the multiemployer plan. The Central States, Southeast and Southwest Areas Health and Welfare and Pension Fund imposed withdrawal liability against Shelter, and assessed Shelter $57,291.50 for withdrawing from the plan. See 29 U.S.C. §§ 1383, 1399(b). Shelter demanded indemnification for this amount from the Union pursuant to Section 8(m) of the collective bargaining agreement. The Union refused and Shelter filed this action in the district court seeking to enforce the indemnification provision.

Section 8(m) of the agreement provides:

The Employer shall continue to contribute to the Central States, Southeast and Southwest Areas Teamsters Pension Fund, the sum of $49.00 per week per covered employee for the year beginning December 1, 1998, $55.00 per week for the year beginning December 1, 1999, and $61.00 per week for the year beginning December 1, 2000. The Union and the members of the Bargaining Unit have agreed that only the liability of the Company to the Pension Benefit Plan of the Central States, Southeast and Southwest areas [sic] Pension Fund are, have been and shall be limited to the actual contributions it makes during the course of the past, present and future Contracts, and the Company shall not be liable for any other obligation or contingent obligation of any kind or nature whatsoever. The Union shall indemnify the Company for any contingent liability which may be imposed under the Multi-Employer Pension Plan Amendments Act of 1980.

(emphasis added).

The Union opposed the enforcement of the indemnification provision, arguing that the expiration of the agreement rendered the provision void. In the alternative, the Union asserted that the dispute must be submitted to binding arbitration pursuant to a provision in the collective bargaining agreement providing for arbitration in the event of a contractual dispute. After reviewing cross-motions for summary judgment, the district court concluded that the arbitration provision of the agreement was enforceable. The district court stayed the federal proceedings and ordered the parties into arbitration.

During arbitration, the Union argued that Section 8(m) was unenforceable because it violated public policy. The Union asserted that the Multiemployer Pension Plan Amendments Act established a public policy prohibiting employers and unions from shifting withdrawal liability through a negotiated collective bargaining agreement because such a shift defeats the purpose of the statute.

The arbitrator rejected the Union's public policy argument. The arbitrator noted that “there is as of yet no law from the Sixth Circuit” on the issue but the Third Circuit had ruled on the issue. In Pittsburgh Mack Sales & Service, Inc. v. International Union of Operating Engineers, Local Union No. 66, 580 F.3d 185 (3d Cir.2009), the Third Circuit determined that ERISA and the Multiemployer Pension Plan Amendments Act did not establish a public policy preventing enforcement of a collectively bargained indemnity provision between a union and an employer. Based on Pittsburgh Mack, the arbitrator found Section 8(m) enforceable, required the Union to indemnify Shelter, and ordered the Union to pay Shelter $57,291.50. Following the arbitrator's decision, Shelter moved to dissolve the district court's stay and requested that the district court enforce the arbitrator's award. The Union opposed Shelter's motion, seeking to set aside the arbitrator's award and again arguing that the indemnity provision violated public policy. The district court rejected the argument and upheld the arbitrator's award, also relying on Pittsburgh Mack. The Union appeals.

II.

“We review de novo a district court's grant of summary judgment in an arbitrated labor dispute.” Int'l Union, United Auto., Aerospace & Agric. Implement Workers v. Dana Corp., 278 F.3d 548, 554 (6th Cir.2002) (citation omitted). The scope of that review is extremely limited. Id. “As long as the arbitrator's award draws its essence from the collective bargaining agreement, and is not merely his own brand of industrial justice, the award is legitimate.” United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 36, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987) (citation and internal quotation marks omitted). However, “a court may not enforce a collective-bargaining agreement that is contrary to public policy, and ... the question of public policy is ultimately one for resolution by the courts.” Id. at 43, 108 S.Ct. 364 (quoting W.R. Grace & Co. v. Local Union 759, Int'l Union of United Rubber, Cork, Linoleum & Plastic Workers, 461 U.S. 757, 766, 103 S.Ct. 2177, 76 L.Ed.2d 298 (1983) (internal quotation marks omitted)). The public policy must be explicit, well-defined, and dominant. Id. (citing W.R. Grace & Co., 461 U.S. at 766, 103 S.Ct. 2177). The relevant public policy is derived “by reference to the laws and legal precedents and not from general considerations of supposed public interests.” MidMichigan Reg'l Med. Ctr. v. Prof'l Emps. Div. of Local 79, 183 F.3d 497, 504 (6th Cir.1999) (citation and internal quotation marks omitted).

III.

In 1974, Congress enacted ERISA, which protects the retirement benefits of employees. Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 213–14, 106 S.Ct. 1018, 89 L.Ed.2d 166 (1986); Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359, 374–75, 100 S.Ct. 1723, 64 L.Ed.2d 354 (1980). ERISA does not address the consequences of an employer's withdrawal from a multiemployer pension plan. As the Supreme Court noted in Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 722 n. 2, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984) (citation and internal quotation marks omitted):

A key problem of ongoing multiemployer plans, especially in declining industries, is the problem of employer withdrawal. Employer withdrawals reduce a plan's contribution base. This pushes the contribution rate for remaining employers to higher and higher levels in order to fund past service liabilities, including liabilities generated by employers no longer participating in the plan, so-called inherited liabilities. The rising costs may encourage—or force—further withdrawals, thereby increasing the inherited liabilities to be funded by an ever-decreasing contribution base. This vicious downward spiral may continue until it is no longer reasonable or possible for the pension plan to continue. Employer withdrawals also jeopardize the solvency of the Pension Benefit Guaranty Corporation, which was created to provide benefits to plan participants in the event that a pension plan was terminated without sufficient assets to support guaranteed benefits. Id. at 720–21, 104 S.Ct. 2709.

In response to these problems, Congress amended ERISA by enacting the Multiemployer Pension Plan Amendments Act. The Multiemployer Pension Plan Amendments Act created withdrawal liability, requiring employers who partially or completely withdraw from a multiemployer pension plan to contribute to the plan a proportionate share of the “unfunded vested benefits.” Id. at 725, 104 S.Ct. 2709 (citation and internal quotation marks omitted).

The Multiemployer Pension Plan Amendments Act provides that once a plan sponsor...