Dairy v. Dairy Emps. Union Local No. 17 Christian Labor Ass'n of the U.S. Pension Trust

• Decision Date: 23 December 2015
• Docket Number: Case No. 1:13-cv-01112-MJS
• Citation: 153 F.Supp.3d 1217
• Court: U.S. District Court — Eastern District of California
• Parties: Irigaray Dairy, Charles Van Der Kooi Dairy, Henry Jongsma & Son Dairy, and Cow–West North Star Dairy, Plaintiffs, v. Dairy Employees Union Local No. 17 Christian Labor Association of the United States of America Pension Trust, and Board of Trustees of the Dairy Employees Union Local No. 17 Christian Labor Association of the United States of America Pension Trust, Defendants.

153 F.Supp.3d 1217

Irigaray Dairy, Charles Van Der Kooi Dairy, Henry Jongsma & Son Dairy, and Cow–West North Star Dairy, Plaintiffs,

v.Dairy Employees Union Local No. 17 Christian Labor Association of the United States of America Pension Trust, and Board of Trustees of the Dairy Employees Union Local No. 17 Christian Labor Association of the United States of America Pension Trust, Defendants.

Case No. 1:13-cv-01112-MJS

United States District Court, E.D. California.

Signed December 23, 2015

Howard A. Sagaser, Ian Blade Wieland, Sagaser, Watkins & Wieland, PC, Fresno, CA, for Plaintiffs.

Donna L. Kirchner, George M. Kraw, Kraw & Kraw Law Group, Mountain View, CA, for Defendants.

ORDER REGARDING DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT AND A PROTECTIVE ORDER

(ECF Nos. 87, 88)

Michael J. Seng, UNITED STATES MAGISTRATE JUDGE

I. INTRODUCTION

Plaintiffs Irigaray Dairy (“Irigaray”), Charles Van Der Kooi Dairy (“Van Der Kooi”), Henry Jongsma & Son Dairy (“Jongsma”), and Cow-West North Star Dairy (“Cow-West”) (collectively “Plaintiffs”) are four family-owned cattle dairies. Each participated in an employee pension plan made available through Defendant Dairy Employees Union Local No. 17 Christian Labor Association of the United States of America Pension Trust. When Plaintiffs withdrew from participation in the plan, Defendants undertook to assess against them “withdrawal liability,” the portion of the Pension Fund's unfunded vested benefits resulting from Plaintiffs' withdrawal from the plan. Plaintiffs brought this declaratory relief action asking the Court to determine whether the above Defendant and Defendant Board of Trustees of the Dairy Employees Union Local No. 17 Christian Labor Association of the United States of America Pension Trust (the “Board”) (jointly, the “Pension Fund”) should be allowed to assess that withdrawal liability.

Plaintiffs seek a judgment declaring that they are not liable under the Employees Retirement Income Security Act (“ERISA”) for withdrawal liability under 29 U.S.C. § 1381. They make two primary contentions why they are not liable: (1) the Christian Labor Association (“CLA”) Union was not certified pursuant to an Agricultural Labor Relations Board (“ALRB”) election as required under California law, and (2) the alleged misconduct and mismanagement of the Pension Fund precludes liability.

More specifically, Plaintiffs seek a declaration that (1) “Plaintiffs have no legal obligation to make withdrawal liability payments to Defendants;” (2) “ that Plaintiffs are not legally bound by Defendants' unconscionable Trust Agreement arbitration clause;” and (3) for restitution of “the monies Plaintiffs paid directly to Plaintiffs' employees, instead of allowing Defendants to use the money for illegal union activities and pension fund mismanagement.” (Third Amended Complaint [“TAC”], ECF No. 71 at 14.) In addition to the declaratory relief claim, Plaintiffs present two additional claims for restitution and for Unfair Business Practices under California Law. See Cal. Bus. & Prof. Code § 17200. (Id. )

Plaintiffs filed the initial complaint in this action on July 18, 2013. (ECF No. 1.) Defendants moved to dismiss the complaint on August 19, 2013. (ECF No. 6.) On February 10, 2014, the Court granted the motion to dismiss but provided Plaintiffs leave to amend. (ECF No. 14.) The Court noted that the deficiency in the complaint warranting dismissal was “primarily one of failure to allege a sufficient factual context to allow a determination of rights.” (Id. at 9.) Plaintiffs filed a first amended complaint, and Defendants again sought to dismiss the complaint. (ECF Nos. 15-16.) During the pendency of the motion to dismiss, Plaintiffs moved to file a second amended complaint. (ECF No. 26.) On September 2, 2014, the Court granted the second motion to dismiss finding both the first amended and proposed second amended complaint insufficient, but provided leave to amend to file another complaint. (ECF No. 57.) The Court noted in the motion to dismiss:

Again, Plaintiffs' [Second Amended Complaint] falls far short of alleging facts to make the required legal and equitable showings. Given Plaintiffs' reticence to add the specific facts to their [First Amended Complaint] that the court stated were missing from the original complaint, the court has reason to doubt that Plaintiffs are able to state a sufficient case for being freed from liability for withdrawal payments under ERISA. Nonetheless, in an abundance of caution the court will grant one additional opportunity for Plaintiffs to file a sufficient complaint.

(Id. at 17.) Plaintiffs filed its second amended complaint on September 22, 2014.¹ (ECF No. 59.) Defendants filed a third motion to dismiss on October 6, 2014. (ECF No. 60.) On March 4, 2015, the Court granted the third motion to dismiss. (ECF No. 69.) The Court explained that it appeared that the matter was not capable of resolution by way of a motion to dismiss:

The court is of the opinion that Plaintiffs are not going to allege facts that allow for adequate analysis of their claims in any future complaints because they have not done so to date. ... It is this court's opinion that the only way there will be sufficient information before this court to permit any dispositive analysis of the Parties' rights and obligations will be if the court is free to consider competent evidence outside the [Second Amended Complaint] or any further amendment thereof and Defendants are similarly free to raise any and all relevant defenses to Plaintiffs' claims. The court, it is anticipated, will also cease unnecessarily expending time and resources on ambiguously pled claims and insufficient motions to dismiss.

(Id. at 9-10.)

On March 11, 2015, Plaintiffs filed the TAC—the operative complaint in this matter. Defendants filed an answer and counterclaim on March 25, 2015. (ECF No. 75.) At that time, the parties consented to Magistrate Judge jurisdiction, and the matter was reassigned to the undersigned, United States Magistrate Judge Michael Seng, on April 16, 2015. (ECF No. 79.)

Defendants filed the instant motion for summary judgment on July 17, 2015. (Mot. for Summ. J. [“MSJ”], ECF No. 88.) Plaintiffs filed an opposition to the MSJ on July 31, 2015, and Defendants filed a reply on August 7, 2015. (Opp'n, ECF No. 93; Reply, ECF No. 100.)

Defendants also filed motion for a protective order to prevent Plaintiffs from engaging in further discovery. (Mot. for Protective Order, ECF No. 87.) Plaintiffs filed an opposition to the motion on July 31, 2015, and Defendants filed a reply on August 7, 2015. (Opp'n, ECF No. 92; Reply, ECF No. 102.) The Court deemed the matters submitted without oral argument on August 10, 2015. (ECF No. 104) The motions stand ready for adjudication.

II. LEGAL FRAMEWORK OF CLAIMS AND FACTUAL BACKGROUND

A. MPPAA and Withdrawal Liability

The core issue in this case is whether Plaintiffs are liable for withdrawal liability under the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”).² In order to establish whether withdrawal liability may be owed, the MPPAA provides that:

“an employer [that] withdraws from a multiemployer plan in a complete withdrawal or a partial withdrawal...is liable to the plan in the amount determined under this part to be the withdrawal liability.” 29 U.S.C. § 1381(a). A complete withdrawal occurs when an employer “permanently ceases to have an obligation to contribute under the plan, or ...permanently ceases all covered operations under the plan.”

29 U.S.C. § 1383.

“Congress enacted the MPPAA to protect the financial solvency of multiemployer pension plans.” Bay Area Laundry & Dry Cleaning Pension Trust Fund v. Ferbar Corp. , 522 U.S. 192, 196, 118 S.Ct. 542, 139 L.Ed.2d 553 (1997). The following overview of withdrawal liability under the MPPAA is provided as a framework for evaluation of the competing claims in this case:

MPPAA helps solve a problem that became apparent after Congress enacted the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, 29 U.S.C. § 1001 et seq. ERISA helped assure private-sector workers that they would receive the pensions that their employers had promised them. See, e. g. , Concrete Pipe & Products of Cal., Inc. v. Construction Laborers Pension Trust for Southern Cal. , 508 U.S. 602, 605–609, 113 S.Ct. 2264, 124 L.Ed.2d 539 (1993). To do so, among other things, ERISA required employers to make contributions that would produce pension plan assets sufficient to meet future vested pension liabilities; it mandated termination insurance to protect workers against a plan's bankruptcy; and, if a plan became insolvent, it held any employer who had withdrawn from the plan during the previous five years liable for a fair share of the plan's underfunding. See 26 U.S.C. § 412 (minimum funding standards); 29 U.S.C. § 1082 (same) ; 29 U.S.C. § 1301 et seq. (termination insurance); 29 U.S.C. § 1364 (withdrawal liability).

Unfortunately, this scheme encouraged an employer to withdraw from a financially shaky plan and risk paying its share if the plan later became insolvent, rather than to remain and (if others withdrew) risk having to bear alone the entire cost of keeping the shaky plan afloat. Consequently, a plan's financial troubles could trigger a stampede for the exit doors, thereby ensuring the plan's demise. See Connolly v. Pension Benefit Guaranty Corporation , 475 U.S. 211, 216, 106 S.Ct. 1018, 89 L.Ed.2d 166 (1986) ; Pension Benefit Guaranty Corporation v. R.A. Gray & Co. , 467 U.S. 717, 722–723, n. 2, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984) ; see also 29 U.S.C. § 1001a(a)(4) ; H. R. Rep. No. 96-869, pt. 1, pp. 54-55 (1980); D. McGill & D. Grubbs, Fundamentals of Private Pensions 618-619 (6th ed. 1989). MPPAA helped eliminate this problem by changing the strategic considerations. It transformed what was only a risk (that a withdrawing employer would have to pay a fair share of underfunding) into a certainty. That is to say, it imposed a withdrawal

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