Cent. States v. St. Joseph Packaging, Inc.
| Decision Date | 22 July 2011 |
| Docket Number | No. 10 C 950,10 C 950 |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, and HOWARD McDOUGALL, Trustee, plaintiffs, v. ST. JOSEPH PACKAGING, INC., a Missouri corporation; CHADBRUCK, INC., a Missouri corporation; and BAGS & BOXES II, INC., a Missouri corporation, Defendants. |
The Honorable William J. Hibbler
Plaintiffs Central States, Southeast and Southwest Areas Pension Fund (the "Pension Fund"), and Howard McDougall, a trustee for the Pension Fund, bring this suit under the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), 29 U.S.C. § 1001 et seq., to recover an interim withdrawal liability payment from Defendants pursuant to Defendant St. Joseph Packaging's withdrawal from the Pension Fund. plaintiffs now move for summary judgment on their claim. For the following reasons, the Court GRANTS plaintiff's motion.
The relevant facts in this case are undisputed. The Pension Fund is a non-profit, multiemployer pension plan. All three Defendants are Missouri corporations. On or about October 31, 2009, Defendant Chadbruck owned at least 80% of the total combined voting power of all classes of outstanding stock entitled to vote or at least 80% of the total value of outstandingshare of all classes of stock of St. Joseph Packaging. Chadbruck also owned at least 80% of the total combined voting power of all classes of outstanding stock entitled to vote or at least 80% of the total value of outstanding shares of all classes of stock of Defendant Bags & Boxes.
During all relevant times prior to October 31, 2009, St. Joseph Packaging was bound by a collective bargaining agreement with a Teamster local, under which the company was required to make pension contributions to the Pension Fund on behalf of certain employees. On October 31, 2009, the company permanently ceased all covered operations under the agreement, and thereby effected a complete withdrawal from the Pension Fund as defined in 29 U.S.C. § 1383.
Since St. Joseph's withdrawal, the Pension Fund has treated all three Defendants as a group of trades or businesses under common control under 29 U.S.C. § 1301(b)(1), and it refers to the group as the "St. Joseph Packaging Controlled Group." As a result of the withdrawal, the Pension Fund made a withdrawal liability determination under 29 U.S.C. § 1381(b) and assessed Defendants joint and several withdrawal liability in the principal amount of $7,805,334.78. On or about January 22, 2010, Defendants, through Chadbruck, received a notice and demand for payment of the withdrawal liability. The Pension Fund demanded full and immediate payment in a single lump sum payment by February 1, 2010 because it determined that there was a substantial likelihood that the St. Joseph Packaging Controlled Group would be unable to pay the withdrawal liability. See 29 U.S.C. § 1399(c)(5)(B) ().
Defendants failed to make any payment on the demand. By letter dated February 17, 2010, Defendants requested that the Pension Fund review its determination pursuant to 29 U.S.C. § 1399(b)(2)(A). In its request, it argued that it was entitled to a reduction of liability pursuant to29 U.S.C. §§ 1405(a) and/or (b), and that it should be allowed to pay off the withdrawal liability in installments. On July 6, 2010, the Board of Trustees of the Pension Fund notified Defendants that it had rejected Defendants' request. The Trustees based their decision on the fact that St. Joseph Packaging had sold its assets and planned to liquidate and dissolve on October 31, 2009, and their subsequent determination that there was a substantial likelihood that Defendants would be unable to pay the withdrawal liability.
On July 13, 2010, the St. Joseph Packaging Controlled Group initiated arbitration seeking to challenge the merits of the withdrawal liability in accordance with 29 U.S.C. § 1301. The arbitration proceeding is currently pending, though the arbitrator did issue a "Preliminary Ruling" on February 16, 2011 subsequent to the filing of this motion. The arbitrator's ruling supports plaintiffs' position and its withdrawal liability determination.
Summary judgment is appropriate when the "pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party bears the initial burden of demonstrating there is no genuine issue of material fact, and judgment as a matter of law should be granted in their favor. Id. Once the moving party has met the initial burden, the non-moving party must offer more than a mere scintilla of evidence to survive summary judgment. Roger Whitmore's Auto. Servs. v. Lake County, Ill, 424 F.3d 659, 667 (7th Cir. 2005). The non-moving party must produce specific facts showing there is a genuine issue of material fact, and that the moving party is not entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 411 U.S. 242, 252, 106 S. Ct. 2505, 91 L. Ed. 2d 202(1986). Finally, all evidence and inferences must be viewed in the light most favorable to the non-moving party. Id. at 255.
The purpose of this action is not to obtain an ultimate determination of Defendants' withdrawal liability. Instead, plaintiffs bring this action to compel Defendants to provide interim payment of that liability while arbitration proceeds. The MPPAA provides that when an employer withdraws from a multiemployer plan, it must pay "withdrawal liability" in an amount approximately equal to the employer's proportionate share of the plan's unfunded vested benefits. Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 217, 106 S. Ct. 1018, 1022, 89 L. Ed. 2d 166 (1986); see also 29 U.S.C. §§ 1381, 1391. In order to collect this liability, the pension fund must determine the amount due and issue a notice and demand to the employer. Cent. States, Se, & Sw. Areas Pension Fund v. Bomar Nat'l, Inc., 253 F.3d 1011, 1015 (7th Cir. 2001). The employer may request a review of the fund's determination, and may dispute the determination in arbitration, as Defendants have done here. Id. However, the MPPAA establishes a "pay now, dispute later" scheme under which an employer must make interim payments in accordance with the schedule set forth by the fund in its demand while the arbitration proceeds. Id. (citing 29 U.S.C. § 1399(c)(2)).
Defendants do not dispute that the MPPAA provides for a "pay now, dispute later" scheme, that they are all jointly and severally liable for the withdrawal liability due to the fact that they are under common control, see 29 U.S.C. § 1301(b), or even that the Pension Fund's initial calculations of withdrawal liability are incorrect. Instead, they argue that certain reductions should be applied to the amount of liability based on their financial circumstances.that they should be able to pay in installments rather than a lump sum, and that an exception to the "pay now, dispute later" scheme applies here.
For support of their claim that an exception exists, Defendants point to Robbins v. McNicholas Transp. Co., 819 F.2d 682, 685-86 (7th Cir. 1987), where the court held that "[u]pon considering the employer's probability of success before the arbitrator, and the gravity of any economic hardship caused by payment of installments while awaiting...
To continue reading
Request your trial