Bakery & Confectionery Union & Indus. Int'l Pension Fund v. Zaro Bake Shop, Inc.

Decision Date08 June 2021
Docket Number20-cv-9894 (LJL)
CourtU.S. District Court — Southern District of New York

LEWIS J. LIMAN, United States District Judge:

Defendants Zaro Bake Shop, Inc. ("Zaro"), Anjost Corp. ("Anjost"), and 138 Bruckner Blvd. Associates, LLC ("Bruckner," and collectively, "Defendants") move to compel arbitration of this action brought by Plaintiffs Bakery and Confectionery Union and Industry International Pension Fund ("Fund") and Trustees of the Bakery and Confectionery Union and Industry International Pension Fund ("Trustees," and together, with the "Fund," "Plaintiffs").

For the following reasons, the motion to compel arbitration is denied.

I. The Parties

The Fund is a pension fund established and maintained pursuant to Section 302(c)(5) of the Labor Management Relations Act of 1947 ("LMRA"), as amended, 29 U.S.C. § 186(c)(5). Dkt. No. 1 ("Compl.") ¶ 4. It is an employee benefit plan within the meaning of Sections 3(2) and 3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1002(2)-(3), and it "is maintained for the purpose of providing retirement and related benefits to eligible employees of participating employers." Id. The Fund is also a multiemployer pension plan within the meaning of Sections 3(37)(A) and 4001(a)(3) of ERISA, 29 U.S.C. §§ 1002(37)(A) and 1301(a)(3). Id. It was established and is maintained pursuant to an Agreement and Declaration of Trust, most recently amended through June 30, 2009 ("Trust Agreement"). Id.

The Trustees are fiduciaries within the meaning of Section 3(21)(a) of ERISA, 29 U.S.C. § 1002(21)(A), and are the plan sponsors of the Fund within the meaning of Section 3(16)(B) of ERISA, 29 U.S.C. § 1002(16)(B). Id. ¶ 5.

Defendants Zaro and Anjost are businesses engaged in the production of baked goods. Id. ¶¶ 8, 11. Both are employers in an industry affecting commerce within the meaning of Sections 3(5), 3(11), 3(12), and 4(a)(1) of ERISA, 29 U.S.C. §§ 1002(5), (11), (12), and 1003(a)(1). Id. Defendant Bruckner is a limited liability company that maintains a parking lot adjacent to Zaro and Anjost's principal business location for the use of Zaro and Anjost; it also leases parking spaces to unrelated commercial entities. Id. ¶ 14. Plaintiffs allege that Zaro, Anjost, and Bruckner were trades or businesses under common control with each other as of November 25, 2017 within the meaning of Section 4001(b) of ERISA, 29 U.S.C. § 1301(b)(1), and therefore constitute a single employer for purposes of the obligation to pay withdrawal liability to the Fund. Id. ¶¶ 18-19.

Zaro and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, Local 53 ("Local 53") are parties to a collective bargaining agreement (the "Zaro CBA"). Id. ¶ 20. Anjost is also party to a collective bargaining agreement with Local 53 (the "AnjostCBA," and with the Zaro CBA, the "CBAs").1 Id. ¶¶ 20, 26. Pursuant to the CBAs, Zaro and Anjost are bound by the Trust Agreement. Id. ¶¶ 23, 30. The CBAs require Zaro and Anjost to make contributions to the Fund for the purpose of providing pension benefits to all employees working in the bargaining unit that Local 53 represented. Id.

II. The Multiemployer Pension Plan Amendments Act
A. Enactment

ERISA was enacted in 1974 in an effort "to ensure that employees and their beneficiaries would not be deprived of anticipated benefits from their private retirement pension plans." T.I.M.E.-DC, Inc. v. Mgmt.-Lab. Welfare & Pension Funds, of Loc. 1730 Int'l Longshoremen's Ass'n, 756 F.2d 939, 943 (2d Cir. 1985). ERISA created an agency, the Pension Benefit Guaranty Corporation ("PBGC"), to collect premiums from covered pension plans and to pay out accrued benefits to employees in the event a pension plan had insufficient funds. Trs. of Loc. 138 Pension Tr. Fund v. F.W. Honerkamp Co., 692 F.3d 127, 129 (2d Cir. 2012); see also Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 720 (1984) (describing the PBGC as "collect[ing] insurance premiums from covered pension plans and provid[ing] benefits to participants in those plans if their plan terminates with insufficient assets to support its guaranteed benefits").

One type of covered pension plan was the multiemployer pension plan "in which multiple employers pool contributions into a single fund that pays benefits to covered retirees who spent a certain amount of time working for one or more of the contributing employers." F.W. Honerkamp, 692 F.3d at 129. But multiemployer plans presented a problem of employerwithdrawal. Specifically, under ERISA, "an employer that had paid all required contributions to a multiemployer plan could withdraw from the plan, and if the plan did not terminate within five years after withdrawal, the employer had no further responsibility for the plan's unfunded liabilities." Id. The result was that a plan could be left with sizeable unfunded vested liabilities, which created an "undesirable incentive for employers to withdraw from plans and an unfair burden on the employers who continue[d] to maintain the plans." Id. (quoting H.R. Rep. No. 96-869, Part II, 96th Cong., 2d Sess. 10, reprinted in 1980 U.S. Code Cong. & Ad. News 2918, 2993, 3001); see also F.W. Honerkamp, 692 F.3d at 129 (employer withdrawals "push[] the contribution rates for remaining employers to higher and higher levels in order to fund past service liabilities. . . . The rising costs may encourage—or force—further withdrawal, thereby increasing the inherited liabilities to be funded by an ever-decreasing contribution base") (quoting R.A. Gray & Co., 467 U.S. at 722 n.2). The "potential of widespread termination of pension plans caused by cascading withdrawals" also threatened to impose a heavy burden on the PBGC, which acted as the insurer of protected pension funds and which would be forced to assume obligations in excess of its capacity. See F.W. Honerkamp, F.3d at 130; see also R.A. Gray & Co., 467 U.S. at 717.

To address this issue, Congress adopted the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"). See T.I.M.E.-DC, 756 F.2d at 944. The MPPAA requires an employer that withdraws from a plan to pay its share of the benefits that have accrued to plan participants and for which the plan continues to be liable. See id.; see also 29 U.S.C. § 1391(a) ("[A]n employer [that] withdraws from a multiemployer plan . . . is liable to the plan in the amount determined . . . to be the withdrawal liability.").2 This "withdrawal liability" was intended toprotect the interests of participants and beneficiaries in financially-distressed multiemployer plans and to encourage the growth and maintenance of multiemployer plans. See, e.g., T.I.M.E.-DC, 756 F.2d at 944 ("The objective of [withdrawal liability] is to discourage withdrawals and to provide a financial cushion for the plan.") (quoting Multiemployer Pension Plan Amendments Act of 1980: Hearings on H.R. 3904 Before Subcomm. On Labor-Management Relations of the House Comm. on Education and Labor, 96th Cong., 1st Sess. 362 (1979)).

Withdrawal liability is the withdrawing employer's proportionate share of the plan's unfunded vested benefits. See F.W. Honerkamp, 692 F.3d at 130. A plan's unfunded vested benefits are calculated by finding "the difference between the present value of the pension fund's assets and the present value of its future obligations to employees covered by the pension plan." Chi. Truck Drivers, Helpers and Warehouse Workers Union (Indep.) Pension Fund v. CPC Logistics, Inc., 698 F.3d 346, 347 (7th Cir. 2012) (citing 29 U.S.C. §§ 1381, 1391); see also 29 U.S.C. § 1393(c). Estimation of this value depends critically on estimating the interest rate at which the pension fund's assets are likely to grow—"[t]he higher the estimated rate of growth, the less the employers must put into the fund today to cover the future entitlements of the plan's participants and beneficiaries." CPC Logistics, 698 F.3d at 348.

Under the MPPAA, the plan sponsor's calculation of the liability and schedule for liability payments are considered to be presumptively correct, subject to a limited right of the employer to request review and, if a dispute arises, to demand arbitration. Specifically, thestatute provides: "As soon as practicable after an employer's . . . withdrawal," the plan sponsor must notify the employer of the amount of its liability and the schedule of liability payments. 29 U.S.C. § 1399(b)(1). No later than 90 days after such notice, the employer "may ask the plan sponsor to review any specific matter relating to the determination of the employer's liability and the schedule of payments." Id. § 1399(2)(A). After "a reasonable review of any matters raised," the plan sponsor must notify the employer of the plan sponsor's decision, its basis, and any change in the employer's liability. Id. § 1399(2)(B).

B. Mandatory Arbitration of Withdrawal Liability

The MPPAA provides that "[a]ny dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination made under sections [governing withdrawal liability] shall be resolved through arbitration." Id. § 1401(a)(1). Congress intended the arbitration provision to promote "judicial economy and judicial restraint." Mason and Dixon Tank Lines, Inc. v. Cent. States, Se. and Sw. Areas Pension Fund, 852 F.2d 156, 164 (6th Cir. 1988) (quoting Flying Tiger Line v. Teamsters Pension Tr. Fund, 830 F.2d 1241, 1248 (3d Cir. 1987)). "The arbitrator's decision may dispose of the dispute, pare down the issues for judicial determination, or simply provide a factual record for effective resolution of the issues." Id.

Under the arbitration provision, either party may unilaterally...

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