United Food & Commercial Workers Union-Employer Pension Fund v. Rubber Assocs., Inc.

• Decision Date: 04 February 2016
• Docket Number: No. 15–3434.,15–3434.
• Citation: 812 F.3d 521
• Parties: UNITED FOOD AND COMMERCIAL WORKERS UNION–EMPLOYER PENSION FUND; Robert W. Grauvogl; Barbara Caruso ; Carl Ivka; F. Steven Albrecht; John Halkias; Ray Huber, Plaintiffs–Appellees, v. RUBBER ASSOCIATES, INC., Defendant–Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

812 F.3d 521

UNITED FOOD AND COMMERCIAL WORKERS UNION–EMPLOYER PENSION FUND; Robert W. Grauvogl; Barbara Caruso ; Carl Ivka; F. Steven Albrecht; John Halkias; Ray Huber, Plaintiffs–Appellees,

v.RUBBER ASSOCIATES, INC., Defendant–Appellant.

No. 15–3434.

United States Court of Appeals, Sixth Circuit.

Argued: Dec. 2, 2015.

Decided and Filed: Feb. 4, 2016.

ARGUED:James M. Stone, Jackson Lewis P.C., Cleveland, Ohio, for Appellant. Robert M. Wolff, Littler Mendelson, P.C., Cleveland, Ohio, for Appellees. ON BRIEF:James M. Stone, Michelle T. Hackim, Jackson Lewis P.C., Cleveland, Ohio, for Appellant. Robert M. Wolff, Neal B. Wainblat, Inna Shelley, Littler Mendelson, P.C., Cleveland, Ohio, for Appellees.

Before: SILER, MOORE, and GIBBONS, Circuit Judges.

OPINION

JULIA SMITH GIBBONS, Circuit Judge.

Rubber Associates appeals the district court's dismissal of its counterclaim for equitable relief to reduce the withdrawal liability it incurred after the union-mandated withdrawal from the United Food and Commercial Workers Union–Employer Pension Fund (the "Fund")—which is governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 –1461. After the United Food and Commercial Workers Union (the "Union") disclaimed interest in representing the company's employees, Rubber Associates was deemed to have withdrawn from the Fund, pursuant to the Multiemployer Pension Protection Amendments Act of 1980 ("MPPAA"). The Fund calculated Rubber Associates' withdrawal liability obligation to be $1,713,169, which the arbitrator awarded in full to the Fund. The Fund then sued Rubber Associates in the district court to enforce the arbitrator's award. Rubber Associates counterclaimed on the basis that because its withdrawal from the Fund was union-mandated, its withdrawal liability should be calculated by an alternate method, making its liability only $312,000. The district court granted the Fund's motion to dismiss Rubber Associates' counterclaim. For the following reasons, we affirm the district court's decision.

I.

Rubber Associates is an Ohio corporation which manufactures custom rubber parts and whose employees were represented by the Union since 1973. Pursuant to a series of collective bargaining agreements ("CBAs") with the Union, Rubber Associates was a contributing employer to the Fund. The Fund is a multiemployer pension plan with approximately fifty (50) contributing employers and fourteen thousand (14,000) employees or "participants," largely associated with the region's supermarkets and drug stores. Although separate entities, the Union and the Fund are interrelated: The Fund's Board of Trustees is composed of Union and employer trustees, who were named as individual plaintiffs in the complaint. In particular, Barbara Caruso ("Caruso") was employed by the Union at the same time she served as a Fund trustee. The Fund's assets are invested in the stock market and other investments, and after the stock market crash in 2008 and subsequent recession, the Fund's assets declined and its finances "went into critical zone or red zone." DE 23–2, Day Two Arbitration Tr. at 327, Page ID 2856.

In late 2006 or early 2007, Rubber Associates and the Union began negotiations for a new CBA. As was customary, Rubber Associates requested an estimate of withdrawal liability from the Fund, and the Fund estimated $1,518,872 in withdrawal liability in January 2007. During negotiations, Rubber Associates proposed to the Union that it decrease its contribution rate to the Fund from 62 cents per hour to 30 cents per hour. The Fund rejected the 30–cent rate proposal, with the Fund's actuary, Henry Wong, opining that collecting withdrawal liability would result in a better funding status for the Fund than accepting reduced pension contributions. Rubber Associates withdrew its proposal for the 30–cent rate and agreed to maintain its previous contribution rate of 62 cents, which the Union accepted. Thereafter, negotiations resumed without success. In response to the Union's demand for a final offer, Rubber Associates proposed a contract that would have largely maintained the status quo, though it included a two-tier benefit level on holiday pay and vacations. The Union did not recommend the contract and authorized a strike.¹

Negotiations resumed with a mediator in 2008. The Union proposed a $2,000 signing bonus for each employee, increased employer healthcare costs, and a modification of management rights that would allow Union employees to determine the rubber that the company would use. Rubber Associates rejected this proposal, and requested another proposal from the Union more in line with Rubber Associates' pending final offer. The Union responded with its final offer, which included a $1,000 signing bonus and wage increases for some employees. Rubber Associates rejected this proposal and unilaterally imposed its final offer in May 2008.

Thereafter, the Union went on strike. Rubber Associates responded by hiring temporary replacement workers. The strike lasted seventeen (17) months. On October 30, 2009, the Union disclaimed interest in representing any employees of Rubber Associates. The Union acted unilaterally in disclaiming interest without any involvement by Rubber Associates.

The parties do not dispute that the Union's disclaimer of interest caused Rubber Associates' withdrawal from the Fund. The Fund initially calculated Rubber Associates' withdrawal liability as $1,707,116, which was eventually revised upward to $1,713,169, using ERISA's presumptive statutory method of allocating unfunded vested benefits to withdrawing employers. The withdrawal assessment exceeds half of Rubber Associates' annual sales in 2009, 2010, and 2011.

Rubber Associates requested review of the withdrawal liability assessment and offered to resume making contributions to the Fund on November 1, 2010. The Fund's trustees responded that they "had properly relied on the calculation of withdrawal liability made by the actuary for the [Fund]." DE 22–46, Resp., Page ID 2226. Rubber Associates then sought arbitration of its claims pursuant to 29 U.S.C. § 1401(a)(1).

During arbitration, Rubber Associates contended that due to the nature of the union-mandated withdrawal, the calculation of its liability should be in accordance with a proposed alternative calculation. The arbitrator found that although Rubber Associates "was guilty of no unfair labor practices concerning the bargaining process," he was "powerless" to grant the equitable relief sought by Rubber Associates, and he ultimately awarded the Fund the full withdrawal liability in the amount of $1,713,169, as calculated according to the applicable statutory provision. DE 23–8, Arbitrator Op. at 19, Page ID 3119.

The Fund sued in the district court to enforce the arbitration award. Rubber Associates counterclaimed and contended that the district court "should utilize its equitable power to reduce such assessment to the amount required only to pay Rubber Associates' share of withdrawal liability in order to fund the costs of pension benefits for its own employees via the so-called direct attribution method as specified for such situations." DE 5, Answer at 4, Page ID 52. The district court granted the Fund's motion to dismiss Rubber Associates' counterclaim, holding that Rubber Associates failed to state a claim for relief because "[t]he Sixth Circuit has not heretofore recognized a claim under the federal common law of ERISA for equitable relief in the case of union-mandated withdrawals, and this Court finds no basis for doing so." United Food & Commercial Workers Union–Employer Pension Fund v. Rubber Associates, Inc., No. 5:14–cv–183, 2015 WL 778781, at *4 (N.D.Ohio Feb. 24, 2015). Rubber Associates appeals the district court's dismissal of its counterclaim.

II.

When reviewing a district court's dismissal of a cause of action for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), this court employs a de novo standard of review. Jackson v. Sedgwick Claims Mgmt. Servs., Inc., 731 F.3d 556, 562 (6th Cir.2013) (en banc). When considering a motion to dismiss, this court must "accept all well-pleaded factual allegations of the [counterclaim] as true and construe the [counterclaim] in the light most favorable to the [claimant]." Reilly v. Vadlamudi, 680 F.3d 617, 622 (6th Cir.2012) (quoting Dubay v. Wells, 506 F.3d 422, 426 (6th Cir.2007) ). Rubber Associates' counterclaim must "contain either direct or inferential allegations respecting all material elements to sustain a recovery under some viable legal theory." DiGeronimo Aggregates, LLC v. Zemla, 763 F.3d 506, 509 (6th Cir.2014), cert. denied, ––– U.S. ––––, 135 S.Ct. 980, 190 L.Ed.2d 835 (2015) (quoting Handy–Clay v. City of Memphis,

695 F.3d 531, 538 (6th Cir.2012) ).

III.

A.

"Congress enacted ERISA to ensure that ‘if a worker has been promised a defined pension benefit upon retirement—and if he has fulfilled whatever conditions are required to obtain a vested benefit—he actually will receive it.’ " Id. at 509 (quoting Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359, 375, 100 S.Ct. 1723, 64 L.Ed.2d 354 (1980) ). With the enactment of ERISA in 1974, Congress created the Pension Benefit Guaranty Corporation ("PBGC") to administer a plan termination insurance program. 29 U.S.C. § 1302 ; Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 720, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984). The PBGC issued a report in 1978, finding "that ERISA did not adequately protect plans from the adverse consequences that resulted when individual employers terminate their participation in, or withdraw from, multiemployer plans." Gray, 467 U.S. at 722, 104 S.Ct. 2709. The PBGC suggested that Congress establish "new rules under which a withdrawing employer would be required to pay whatever share of the plan's unfunded vested liabilities was attributable to that employer's participation." Id. at 723, 104 S.Ct. 2709. In response, Congress eventually...