CIC–TOC Pension Plan v. Weyerhaeuser Co.

• Decision Date: 20 November 2012
• Docket Number: Nos. 3:12–cv–00527–ST(LEAD), 3:12–cv–00555–ST(Trailing Case).,s. 3:12–cv–00527–ST(LEAD), 3:12–cv–00555–ST(Trailing Case).
• Citation: 911 F.Supp.2d 1088
• Parties: CIC–TOC PENSION PLAN; Michael Pieti and Rodger Glos, Trustees of the CIC–TOC Pension Fund, Plaintiffs, v. WEYERHAEUSER COMPANY, Defendant. Weyerhaeuser Company, a Washington corporation, Plaintiff, v. CIC–TOC Pension Plan, Defendant.
• Court: U.S. District Court — District of Oregon

911 F.Supp.2d 1088

CIC–TOC PENSION PLAN; Michael Pieti and Rodger Glos, Trustees of the CIC–TOC Pension Fund, Plaintiffs,

v.WEYERHAEUSER COMPANY, Defendant.

Weyerhaeuser Company, a Washington corporation, Plaintiff,

v.CIC–TOC Pension Plan, Defendant.

Nos. 3:12–cv–00527–ST(LEAD), 3:12–cv–00555–ST(Trailing Case).

United States District Court, D. Oregon.

Nov. 20, 2012.

J. Matthew Donohue, Markowitz, Herbold, Glade & Mehlhaf, PC, Portland, OR, Michelle L. Schuller, Robert F. Schwartz, Trucker Huss, San Francisco, CA, for Plaintiffs.

Bruce A. RubinJennifer J. Roof Portland, OR, for Defendant.

OPINION AND ORDER

JANICE M. STEWART, United States Magistrate Judge.

INTRODUCTION

On May 20, 2009, Weyerhaeuser Company (“Weyerhaeuser”) closed a trucking facility in Albany, Oregon (“Albany facility”). This case involves a dispute over whether, as a result of that closure, Weyerhaeuser owes over $5.5 million to the CIC–TOC Pension Plan (“Plan” or “Fund”) under the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”), 29 U.S.C. §§ 1381–1461.

In 1974, Congress enacted the Employee Retirement Income Security Act (“ERISA”), a pension plan termination insurance program through which the Pension Benefit Guaranty Corporation (“PBGC”), a wholly owned Government corporation, “collects insurance premiums from covered pension plans and provides benefits to participants in those plans if their plan terminates with insufficient assets to support its guaranteed benefits.” Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 720, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984). However, the PBGC issued a report 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.” Id. at 722, 104 S.Ct. 2709. Provisions contributing to this problem included those which exonerated employers from liability for unfunded benefits if the plan survived for five years after the employer withdrew. Employers “were withdrawing from multiemployer plans on the gamble that the plan would survive for five years after their departure,” prompting Congress to enact the MPPAA in 1980 amending ERISA and providing special withdrawal liability rules for multiemployer pension plans. Crown Cork & Seal v. Central States Pension Fund, 982 F.2d 857, 861 (3rd Cir.1992).

The MPPAA imposes withdrawal liability on an employer if the employer completely or partially withdraws from a multiemployer pension plan with an unfunded vested benefit liability. 29 U.S.C. § 1381(a). The withdrawal liability of an employer to a plan “is the ... allocable amount of unfunded vested benefits,” adjusted by certain amounts specified in ERISA. 29 U.S.C. § 1381(b)(1). A complexformula determines the amount of withdrawal liability, essentially requiring a withdrawing employer to pay a pro rata share of any outstanding unfunded vested benefit liability at the time of the withdrawal. 29 U.S.C. § 1381(b). However, withdrawal liability is calculated “as of the last day of the plan year preceding the year during which the employer withdrew” rather than “as of the day the employer withdraws.” Milwaukee Brewery Workers' Pension Plan v. Joseph Schlitz Brewing Co., 513 U.S. 414, 417–18, 115 S.Ct. 981, 130 L.Ed.2d 932 (1995), citing 29 U.S.C. § 1391. That statutorily mandated calculation rule—which makes a $5.5 million difference to the parties in these consolidated cases—is apparently one of “administrative convenience” selected because it “permits a plan to base the highly complex calculations upon figures that it must prepare in any event for a report required under ERISA ... thereby avoiding the need to generate new figures tied to the date of actual withdrawal.” Id. at 418.

The MPPAA provides for mandatory arbitration of disputes over withdrawal liability. 29 U.S.C. § 1401(a). Following arbitration, an adversely affected plan fiduciary, employer, plan participant, or beneficiary may bring an action for appropriate legal or equitable relief in the United States District Court in the district where the plan is administered. 29 U.S.C. § 1451(a)-(d).

After Weyerhaeuser closed its Albany facility and was assessed withdrawal liability by the Plan, it initiated arbitration with the Multiemployer Pension Plan Withdrawal Liability Tribunal of the American Arbitration Association (“AAA”). On March 1, 2012, the arbitrator issued a Final Arbitration Award in AAA Case No. 75 621 00020 11 DECR finding that Weyerhaeuser owes withdrawal liability to the Plan of over $5.5 million (“Award”). Complaint, Ex. 1. In these consolidated cases, the parties seek to have that Award either enforced ( CIC–TOC Pension Plan, et al. v. Weyerhaeuser Co., Civil No. 3:12–cv–00527–ST (Lead Case)) or vacated ( Weyerhaeuser Co. v. CIC–TOC Pension Plan, Civil No. 3:12–cv–00555–ST (Trailing Case)) pursuant to ERISA, 29 U.S.C. § 1401(b)(2).

The sole issue involves the applicability of a single statutory provision, ERISA § 4212, 29 U.S.C. § 1392(c), to Weyerhaeuser's closure of the Albany facility. That provision provides that withdrawal liability applies “[i]f a principal purpose of any transaction is to evade or avoid liability.” The Plan contends that Weyerhaeuser's decision to close the Albany facility on May 29, 2009, a mere two days before the end of the June 1, 2008—May 31, 2009 Plan year, constituted a “transaction to evade or avoid” withdrawal liability in violation of that provision. Weyerhaeuser raises a number of arguments which it contends entitles it to have the arbitrator's Award vacated and to be awarded a refund of the payments it has already made toward this disputed withdrawal liability.

This court has jurisdiction under 28 U.S.C. § 1331 and 29 U.S.C. § 1451(c). All parties have consented to allow a Magistrate Judge to enter final orders and judgment in this case in accordance with FRCP 73 and 28 U.S.C. § 636(c). For the reasons that follow, the Award in favor of the Plan is VACATED.

STIPULATED FACTS

The parties stipulated to the following facts during the arbitration proceedings (Schwartz Decl. (docket # 18), Ex. A):

1. Weyerhaeuser is a timberland, pulp, building material manufacturing, and homebuilding company, with international headquarters in Federal Way, Washington.

2. The Plan is a multiemployer, Taft–Hartley trust fund subject to ERISA and other applicable federal law, administered by a joint labor-management Board of Trustees (“Board”). The Fund's administrative offices are in Portland, Oregon, where its Board meets. The Fund's fiscal year runs from June 1 to May 31.

3. Weyerhaeuser became a participating employer in the Fund during the plan year that commenced on June 1, 1999, when it acquired Willamette Industries, which had been a participating employer in the Fund since at least the early 1960's and since 1974 for the Albany Trucking division. Thereafter, Weyerhaeuser made pension contributions to the Fund on its employees' covered hours at various facilities, including the Albany Facility.

4. Weyerhaeuser shut down several facilities in the Pacific Northwest in response to a declining market in wood products beginning in 2007. Those closures included facilities covered by the Plan—namely, facilities located in Bauman, Lebanon, Coburg, and Dallas, Oregon. Because of the number of employees involved, the Bauman, Coburg, and Dallas facility closures were all subject to requirements of the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2101–09 (“WARN Act”).¹ Weyerhaeuser maintained covered operations at both the Dallas and Coburg facilities throughout and, at reduced levels, beyond the 60–day WARN notification period.

5. In or around December of 2008, Weyerhaeuser decided to close down the Albany facility as well.

6. By February 2009, Weyerhaeuser had actively engaged in communications with several potential purchasers for the sale of the Albany facility. By March 17, 2009, Weyerhaeuser had a signed letter of intent for the sale of that facility. Exhibit 1.²

7. By March 31, 2009, Weyerhaeuser prepared what it refers to as a “Gate Memorandum” describing details of the process Weyerhaeuser had used to arrive at the sale of the Albany facility. Exhibit 2.

8. On April 16, 2009, Weyerhaeuser announced to employees that it would be shutting down the Albany facility and anticipated that it would continue to operate it until mid to late June 2009. About 75 employees would be affected by the closure. Weyerhaeuser's Human Resources Manager, Mike Stutzman, sent a letter to Mike Pieti, the Executive Secretary/Treasurer for Carpenters Industrial Council, the union that represented the Albany facility workers (“Union”), regarding the planned shutdown. Exhibit 3; see also Exhibit 4 (internal Weyerhaeuser communications about the April 16 announcement and the closure).

9. Because of the number of employees at the Albany facility, the plant shutdown triggered requirements under the WARN Act. Weyerhaeuser provided affected employees with notice under the WARN Act on April 16, 2009, and sent required notification to the Oregon Department of Community Colleges and Workforce Development. Exhibit 5.

10. The Fund's Board held a regularly scheduled meeting in Portland on April 23, 2009, and the Employer Trustees met on April 22 in preparation for that meeting. Michelle Payne, a Weyerhaeuser employee and trustee, attended these meetings. At those meetings, the Trustees were advised that investment losses in 2008 and 2009 would in all likelihood push the Fund into “critical” status and cause the Fund to have an estimated $30 million in unfunded vested liability as of the end of May 2009. Thus, an employer that withdrew from the Fund during the Plan Year commencing on June 1, 2009, would be assessed withdrawal liability. Exhibit 6 (internal Weyerhaeuser email correspondence concerning these meetings).

11. Until the April 22–23 meetings, Weyerhaeuser was not...