Ass'n Servs. of Wash., Inc. v. W. Metal Indus. Pension Fund

Decision Date24 September 2021
Docket NumberCASE NO. C21-0427JLR
Citation563 F.Supp.3d 1140
Parties ASSOCIATION SERVICES OF WASHINGTON, INC., Plaintiff, v. WESTERN METAL INDUSTRY PENSION FUND, et al., Defendants.
CourtU.S. District Court — Western District of Washington

Jeremy E. Roller, Arete Law Group PLLC, Seattle, WA, for Plaintiff.

Douglas M. Lash, Leslie M. Coughran, Barlow Coughran Morales & Josephson PS, Seattle, WA, for Defendants.

ORDER

JAMES L. ROBART, United States District Judge

I. INTRODUCTION

Before the court are (1) Plaintiff Association Services of Washington, Inc.’s ("ASW") motion for summary judgment (Pl. MSJ (Dkt. # 14)); and (2) Defendants the Western Metal Industry Pension Trust (the "Trust") and the Board of Trustees of the Trust's (collectively, "Defendants") cross motion for summary judgment (Defs. MSJ (Dkt. # 12)). Each opposes the other's motion. (See Pl. MSJ Resp. (Dkt. # 16); Defs. MSJ Resp. (Dkt. # 17).) The court has considered the motions, the parties’ submissions in support of and in opposition to the motions, the relevant portions of the record, and the applicable law. Being fully advised,1 the court DENIES ASW's motion and GRANTS Defendants’ motion.

II. BACKGROUND

ASW brings this case under the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. (1988), to vacate an arbitration decision and award issued by Arbitrator Elliot H. Shaller. (Compl. (Dkt. # 1) ¶ 1.) The court first reviews the relevant statutory scheme before summarizing the factual background of this case.

A. Statutory Scheme

Pension plans are federally regulated pursuant to ERISA. See Carpenters Pension Tr. Fund for N. Cal. v. Underground Constr. Co., Inc. , 31 F.3d 776, 778 (9th Cir. 1994). This case additionally concerns several subsequent statutes that have amended portions of ERISA to aid underfunded pension plans. As applicable here, the court reviews the statutes governing withdrawal liability upon an employer's withdrawal from the plan and rehabilitation plans to aid struggling plans.

1. Withdrawal Liability

Congress enacted the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. §§ 1381 - 1453 (1988), to amend ERISA and set forth that employers cannot withdraw from multiemployer pension plans without consequence. See 29 U.S.C. § 1381(a). The MPPAA allows plans to impose liability on withdrawing employers by making them pay their proportionate share of the resulting deficit so that the remaining contributors would not be unfairly saddled with increased payments. See id. ; see also ILGWU Nat'l Ret. Fund v. Levy Bros. Frocks, Inc. , 846 F.2d 879, 880 (2d Cir. 1988) (stating that MPPAA's "primary purpose" is to "protect retirees and workers ... against the loss of their pensions" by setting up withdrawal liability that "relieve[s] the funding burden on remaining employers and ... eliminate[s] the incentive to pull out of a plan").

Withdrawal liability is assessed on an employer who exercises a "complete withdrawal" from a plan. 29 U.S.C. § 1381(a). A "complete withdrawal" occurs when an employer "(1) permanently ceases to have an obligation to contribute under the plan, or (2) permanently ceases all covered operations under the plan." Id. § 1383(a). An "obligation to contribute" is, in turn, defined as one "arising ... (1) under one or more collective bargaining (or related) agreements, or (2) as a result of a duty under applicable labor-management relations law." Id. § 1392(a). When an employer completely withdraws, the plan sponsor must notify the employer of the amount of withdrawal liability due. Id. §§ 1382, 1399(b)(1). In short, the employer incurs its "proportionate share of the plan's ‘unfunded vested benefits,’ " which is calculated "as the difference between the present value of vested benefits and the current value of the plan's assets." Pension Benefit Guar. Corp. v. R.A. Gray & Co. , 467 U.S. 717, 725, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984).

The employer may make a onetime payment to satisfy the entire withdrawal liability, or it may amortize the debt in equal annual payments. See 29 U.S.C. § 1399(c)(1)(A). If the employer elects to amortize the debt, the plan must prepare a schedule for those annual liability payments. Id. §§ 1382, 1399(b)(1). Annual payments are capped at 20 years, or 80 quarterly payments, even if more than 20 annual payments would be required to completely satisfy the withdrawal liability. Id. § 1399(c)(1)(B). The amount of each annual payment is the product of two numbers: (1) the "average annual number of contribution base units"—usually calculated off of payroll—for the highest three-year period during the ten years preceding the withdrawal; and (2) the highest contribution rate ("HCR") that the employer had to contribute at during that ten-year period. See id. § 1399(c)(1)(C)(i).

2. Rehabilitation Plans

Congress amended ERISA again in 2006 by enacting the Pension Protection Act ("PPA"), a "far-reaching" law with "a number of mechanisms aimed at stabilizing pension plans and ensuring that they remain solvent." Trs. Of Local 138 Pension Tr. Fund v. F.W. Honerkamp Co. Inc. , 692 F.3d 127, 130 (2d Cir. 2012). One such mechanism was the designation of plans in danger of not meeting their future pension distribution obligations as in "critical status," which triggers various protections. 29 U.S.C. § 1085(b)(2). Plans in "critical status" must notify the bargaining parties2 and adopt a plan that presents one or more options for rehabilitation, such as reducing benefits or increasing contributions, to enable the plan to emerge from critical status. Id. § 1085(e)(3)(A). A "bargaining party" includes an employer that contributes to a multiemployer plan only with respect to employees who are not covered by a collective bargaining agreement ("CBA"). See id. § 1085(i)(2).

The rehabilitation plan must set forth one or more schedules showing revised benefit structures, revised contribution schedules, or both, that it presents to bargaining parties for them to choose from. Id. § 1085(e) ; see F.W. Honerkamp , 692 F.3d at 131. One of these schedules, designated as the "default schedule," will assume that there are no increases in contributions other than the increases necessary to emerge from critical status. 29 U.S.C. § 1085(e)(1)(B). If the bargaining parties fail to adopt one of the schedules by a designated time, then the plan shall implement the default schedule. Id. § 1085(e)(3)(C). Additionally, the PPA imposes an automatic surcharge, starting from 30 days after the bargaining parties have been notified of the critical status until the adoption of a new contribution agreement in accordance with the rehabilitation plan. Id. § 1085(e)(7)(C)-(D). In the first year, the surcharge is five percent of the contributions, and in subsequent years, the surcharge increases to 10 percent of the contributions. Id. § 1085(e)(7)(A).

In 2014, Congress amended the PPA with the Multiemployer Pension Reform Act ("MPRA"). Pub. L. No. 1130235, Div. O, 128 Stat. 2130, 2773-2822. As relevant here, the MPRA provided that "[a]ny increase in the contribution rate ... that is required or made in order to enable the plan to meet the requirement of the ... rehabilitation plan shall be disregarded in determining ... the [HCR]." 29 U.S.C. § 1085(g)(3)(A). The MPRA provided the same for surcharges, stating that "[a]ny surcharges ... shall be disregarded in determining ... the [HCR]." Id. § 1085(g)(2). This amendment does not affect any increased contribution rate pursuant to a rehabilitation plan or surcharges accrued before December 31, 2014.

B. Factual Background

The court reviews ASW's participation in the Trust; ASW's eventual termination of its contributions and the Trust's liability calculations; and the arbitration proceedings.

1. ASW's Participation in the Trust

The Trust is a multiemployer pension fund subject to ERISA and governed by its Trust Agreement. (Roller Decl. (Dkt. # 15) ¶ 6, Ex. D ("Trust Agreement") at 7-8.)3 The Trust accepts contributions from "participating employer associations," which is defined by the Trust Agreement as "any employer association that is party to a [CBA] with a labor organization." (Id. at 9, 16-18.) The Trust may enter into a "special agreement" with a participating employer association, by which the participating employer association contributes to the Trust in exchange for employee coverage. (Id. at 17.) The Trust Agreement also provides that in the event "a participating employer should withdraw from the Trust Fund, the Board of Trustees shall ... determine the amount of the employer's withdrawal liability (if any)." (Id. at 34.)

On April 15, 2008, ASW, a non-profit association of employers engaged in the metal industry, entered into a "Special Agreement Providing for Coverage of Employees of Employer Associations" (the "2008 Special Agreement") with the Trust. (Roller Decl. ¶ 3, Ex. A-1 ("2008 Special Agreement"); id. ¶ 4, Ex. B ("Arb. Award") at 1.) Although ASW has engaged in collective bargaining on behalf of its members, its employees are not in a collective bargaining relationship. (Arb. Award at 1.) The 2008 Special Agreement recognized the Trust's ability to provide "coverage [for] employees of bonafide employer associations actively engaged in multi-employer collective bargaining negotiations." (2008 Special Agreement at 1.) As such, ASW agreed to "pay pension contributions ... on behalf of all of its regular employees at the rate of 6% of gross compensation" and to "abide by ... the Trust Agreement governing the Trust." (Id. )

In 2010, the Trust's actuary certified to the U.S. Department of the Treasury that the Trust was in critical status, as it was "projected to have a funding deficiency." (Roller Decl. ¶ 1, Ex. A-4 ("Rehab. Plan") at 1.) Because the Trust was in critical status, it developed a rehabilitation plan and offered two schedules for bargaining parties to choose between: a Preferred Schedule and a Default Schedule. (Id. ) The Preferred Schedule...

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