Ceco Concrete Constr., LLC v. Centennial State Carpenters Pension Trust

• Decision Date: 03 May 2016
• Docket Number: 15–1190.,Nos. 15–1021,s. 15–1021
• Citation: 821 F.3d 1250
• Parties: CECO CONCRETE CONSTRUCTION, LLC, Plaintiff Counter Defendant–Appellee/Cross–Appellant, v. CENTENNIAL STATE CARPENTERS PENSION TRUST, Defendant Counterclaimant–Appellant/Cross–Appellee, and Board of Trustees of the Centennial State Carpenters Pension Trust, Counterclaimant–Appellant/Cross–Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

821 F.3d 1250

CECO CONCRETE CONSTRUCTION, LLC, Plaintiff Counter Defendant–Appellee/Cross–Appellant

v.CENTENNIAL STATE CARPENTERS PENSION TRUST, Defendant Counterclaimant–Appellant/Cross–AppelleeandBoard of Trustees of the Centennial State Carpenters Pension Trust, Counterclaimant–Appellant/Cross–Appellee.

Nos. 15–1021

15–1190.

United States Court of Appeals, Tenth Circuit.

May 3, 2016.

Michael P. Monaco, Song Mondress PLLC, Seattle, WA, appearing for Appellants/Cross–Appellees.

Richard L. Samson, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Chicago, IL, appearing for Appellee/Cross–Appellant.

Before KELLY, MATHESON, and MORITZ, Circuit Judges.

MATHESON

, Circuit Judge.

This appeal concerns whether a construction company that stopped contributing to its employees' pension plan must pay withdrawal liability under the Multiemployer Pension Plan Amendment Act (“MPPAA”). Ceco Concrete Construction, LLC (“Ceco”) was a party to a collective bargaining agreement (“CBA”) that required it to contribute to the Centennial State Carpenters Pension Trust (“Trust”), a multiemployer pension plan. After Ceco stopped contributing, the Trust assessed MPPAA withdrawal liability, which is a payment that withdrawing employers must make to pension plans.

Ceco disputed the withdrawal liability and initiated arbitration. The arbitrator sided with Ceco, concluding withdrawal liability was improper. Ceco then sued in federal district court to affirm the arbitrator's decision. The Trust and its Board of Trustees (jointly, “the Plan”) counterclaimed, asking the district court to vacate the arbitrator's award. The district court granted summary judgment in Ceco's favor, granted Ceco's request for costs, and denied Ceco's request for attorney fees.

The Plan appealed the grant of summary judgment; Ceco appealed the denial of attorney fees. Exercising jurisdiction under 28 U.S.C. § 1291

, we reverse the district court's grant of summary judgment and remand with instructions to vacate the award of costs to Ceco.

I. BACKGROUND

A. Statutory and Federal Common Law Background

The Plan argues withdrawal liability is warranted based on (1) 29 U.S.C. § 1383(b)

, an MPPAA provision governing withdrawal liability, and (2) the single-employer and alter ego doctrines under federal common law. We describe the relevant statutory provisions and federal common law in turn.

1. The MPPAA

a. The MPPAA's enactment

The Employee Retirement Income Security Act of 1974 (“ERISA”) regulates private pension plans. Connolly v. PBGC, 475 U.S. 211, 214, 106 S.Ct. 1018, 89 L.Ed.2d 166 (1986)

. The statute “ensure[s] that employees and their beneficiaries would not be deprived of anticipated retirement benefits by the termination of pension plans before sufficient funds have been accumulated in the plans.” PBGC v. R.A. Gray & Co., 467 U.S. 717, 720, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984). ERISA created the Pension Benefit Guarantee Corporation (“PBGC”), a government corporation that insures covered employees against fund insolvency and premature termination. Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for S. Cal., 508 U.S. 602, 607, 113 S.Ct. 2264, 124 L.Ed.2d 539 (1993).

ERISA's broad reach includes regulation of multiemployer pension plans that receive contributions from two or more employers. Shortly after ERISA's enactment, the PBGC reported to Congress that employers had an incentive to withdraw from financially weak multiemployer plans to avoid paying for any shortfalls if the plan ended. Id. at 608, 113 S.Ct. 2264

. Employer withdrawals diminished a plan's contribution base, which increased the contribution rate for remaining contributing employers. See

R.A. Gray, 467 U.S. at 722 n. 2, 104 S.Ct. 2709. If a plan terminated with insufficient funding, the remaining contributing employers were left to pay for the shortfall. See id.

To ameliorate this problem, Congress passed the MPPAA, an amendment to ERISA codified at 29 U.S.C. §§ 1381

–1461. The MPPAA imposes “withdrawal liability” on an “employer” that has an “obligation to contribute” to a plan but withdraws from the plan. See 29 U.S.C. § 1381(a) (describing “withdrawal liability”); 29 U.S.C. § 1392 (defining “obligation to contribute”).

In this case, the obligation to contribute arises out of Ceco's CBA with the carpenters' union. See 29 U.S.C. § 1392

(stating an obligation to contribute arises out of a CBA). Withdrawal liability is a required payment a withdrawing employer must make that “is the employer's proportionate share of the plan's ‘unfunded vested benefits,’ calculated as the difference between the present value of vested benefits and the current value of the plan's assets.” R.A.

Gray, 467 U.S. at 725, 104 S.Ct. 2709 (quoting 29 U.S.C. § 1391 ). Withdrawal liability discourages withdrawal and compensates pension plans when it occurs.

b. “Employer” in the MPPAA

The term “employer” is used throughout the MPPAA, including in § 1383

. Defined in 29 U.S.C. § 1301(b)(1), an “employer” means “trades or businesses” under “common control” (i.e., a common-control group). “[A]ll businesses under common control are treated as a single employer for purposes of collecting withdrawal liability, and each is liable for the withdrawal liability of another.” Corbett v. MacDonald Moving Servs., Inc., 124 F.3d 82, 86 (2d Cir.1997). “Employer” is synonymous with common-control group.

c. Construction-industry complete withdrawal under 29 U.S.C. § 1383(b)(2)

An employer (i.e., a common-control group) incurs liability if it withdraws from a pension plan. 29 U.S.C. § 1381(a)

. The statute defines different types of withdrawals. For most employers, § 1383(a) provides that a “complete withdrawal” occurs when one of them “(1) permanently ceases to have an obligation to contribute under the plan, or (2) permanently ceases all covered operations under the plan.” For construction employers, § 1383(b)(2) provides a narrower definition of “complete withdrawal”: when (1) “an employer ceases to have an obligation to contribute under the plan,” and (2) either (a) “continues to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required” or (b) “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.”¹

In other words, § 1383(a)

withdrawal liability arises when the employer stops its duty to contribute or ceases covered operations, but a construction employer has to do more to incur liability under § 1383(b)(2)

after halting its contribution obligation. It must also continue covered operations or resume them within five years to be liable. In short, construction employers are treated more generously than most other employers under the MPPAA.

This generous treatment under § 1383(b)(2)

accounts for the temporary nature of construction projects and allows construction employers to stop contributing to pension plans in certain circumstances without incurring withdrawal liability. See

Carpenters Pension Trust Fund for N. Cal. v. Underground Const. Co., 31 F.3d 776, 778 (9th Cir.1994) (“[I]n enacting the MPPAA Congress recognized the transitory nature of contracts and employment in the building and construction industry with a specific exception.”).

d. Calculation of withdrawal liability

Section 1391

instructs a plan to calculate the amount of liability based on the employer's contributions as of the last day of the calendar year that preceded the date of complete withdrawal. See 29 U.S.C. §§ 1391(b)(2)(A)(ii), (b)(2)(E)(i), (c)(3)(A), (c)(4)(A) ; see also

Milwaukee Brewery Workers' Pension Plan v. Joseph Schlitz Brewing Co., 513 U.S. 414, 418–19, 115 S.Ct. 981, 130 L.Ed.2d 932 (1995). Section 1383(e) defines “date of complete withdrawal” as “the date of the cessation of the obligation to contribute or the cessation of covered operations.” The “date of complete withdrawal” under § 1383(e) is therefore the starting point for calculating liability.

2. The Single–Employer Doctrine Under Federal Labor Law

In addition to the statutory definition of “employer” to mean a common-control group, courts may also treat separate entities as a single employer under two tests developed through federal common law: the single-employer test and the alter ego test. These tests are a product of National Labor Relations Board adjudicative decisions and federal common law—they are distinct from the § 1301(b)(1)

common-control analysis and § 1383(b)(2) withdrawal liability.²

The single-employer test consists of four factors: “(1) interrelation of operations; (2) centralized control over labor relations; (3) common management; and (4) common ownership or financial control. All four factors, however, are not necessary for single-employer status. Rather, the heart of the inquiry is whether there is an absence of an arm's-length relationship among the companies.” Knowlton v. Teltrust Phones, Inc., 189 F.3d 1177, 1184 (10th Cir.1999)

(citation omitted).

The alter ego test focuses on whether there is “a disguised continuance of the same business or an attempt to avoid the obligations of a collective bargaining agreement through a sham transaction or a technical change in operations.” A. Dariano & Sons, Inc. v. District Council of Painters No. 33, 869 F.2d 514, 518 (9th Cir.1989)

; see also

Howard Johnson Co. v. Detroit Local Joint Executive Board, Hotel & Restaurant Employees & Bartenders International Union, 417 U.S. 249, 261 n. 5, 94 S.Ct. 2236, 41 L.Ed.2d 46 (1974) (stating an “alter ego ... is merely a disguised continuance of the old employer” (quotations omitted)).

B. Factual History

1. The Parties

The Plan is a multiemployer pension plan that covers union employees in the building and construction industry, particularly carpenters in Colorado.

Ceco is a national construction company that erects concrete forms. It participated in the Plan as a signatory to a CBA with the...