ILA Prssa Pension Fund v. ILA Local 1740, ALF-CIO

Decision Date27 November 2019
Docket NumberCivil No. 18-1598 (FAB)
Citation419 F.Supp.3d 314
Parties ILA PRSSA PENSION FUND, Plaintiff, v. ILA LOCAL 1740, ALF-CIO, Defendant.
CourtU.S. District Court — District of Puerto Rico

Clarissa A. Kang, Trucker Huss, APC, San Francisco, CA, Enrique J. Mendoza-Mendez, Mendoza Law Office, San Juan, PR, for Plaintiff.

Carlos R. Paula, Labor Counsels LLC, Jaime E. Pico-Rodriguez, San Juan, PR, for Defendant.


BESOSA, District Judge.

Plaintiffs Mark Blankenship, Dale MacGillivray, Francisco González-Rios, and Ángel Febres-Alméstica, in their capacity as the Board of Trustees for the ILA PRSSA Pension Fund (hereinafter, "Board of Trustees") commenced a civil action pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq. , as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. §§ 1381 et seq. (Docket No. 1.) Defendant ILA Local 1740, AFL-CIO ("Local 1740") moves for summary judgment pursuant to Federal Rule of Civil Procedure 56 (" Rule 56"). (Docket No. 43 at p. 32.) For the reasons set forth below, Local 1740's motion for summary judgment is DENIED .

I. Introduction

ILA Local 1575 ("Local 1575") and Local 1740 are labor unions. (Docket No. 1 at p. 2.) Both organizations are affiliated with the International Longshoremen's Association, AFL-CIO ("ILA"). Id. The Board of Trustees administers the ILA PRSSA Pension Fund ("Pension Fund") for Local 1575, a multiemployer employee benefit plan pursuant to ERISA. (Docket No. 38 at p. 2.)1

This litigation stems from the closure of Horizon Lines, "a major stevedoring company" in the Port of San Juan. Unión de Empleados de Muelles de Puerto Rico, Inc. v. Int'l, Longshoremen's Ass'n, AFL-CIO, 884 F.3d 48, 53 (1st Cir. 2018). Before terminating operations in Puerto Rico, Horizon Lines employed union members from Local 1575 pursuant to a collective bargaining agreement ("CBA"). (Docket No. 50, Ex. 1.)2 Local 1575 served as the exclusive "representative of [Horizon Lines] employees ... in all the ports on the Island of Puerto Rico engaged in the handling of cargo." Id. at p. 6.3 Horizon Lines contributed to the Pension Fund on behalf of Local 1575 members according to hours of employment. Id. at p. 40—46 ("[Horizon Lines] agrees to contribute to the Welfare Fund, Life Insurance Fund, and Pension Plan.").

A. The Agreement and Declaration of Trust

The Agreement and Declaration of Trust ("Trust Agreement") predates the CBA, establishing the Pension Fund, setting forth the fiduciary duties of the Board of Trustees and other pertinent provisions. (Docket No. 52, Ex. 1.) The Pension Fund is an irrevocable trust, formed by the ILA and Local 1575 to "receive and invest periodic contributions from Contributing Companies" for "pension, retirement or related benefits" to union employees. Id. at pp. 5 and 13. Pursuant to the Trust Agreement, a "contributing" company is:

any corporation, company, partnership, government agency or individual with whom the Union now has or shall have a collective bargaining agreement or a supplement thereto with the Union requiring such company's participation in the periodic contributions to the ILA-PRSSA Pension Fund.

(Docket No. 52, Ex. 1 at p. 7.) A "contribution" is the "payment[ ] required to be made to the Fund by Contributing Companies." Id. at p. 10.

Local 1575 employed union officers and other personnel. See Roger Hartley, The Framework of Democracy in Union Government, 32 CATH. U.L. REV. 13, 83 (1982) (noting that local unions "are governed by elected officials, usually a president, vice president, secretary-treasurer and an executive board," generally earning salaries "equivalent to the members' earnings"). For instance, in 2014 the following individuals received salaries from Local 1575: (1) president Efraín Robles ("Robles") ($60,943.00), (2) former president Francisco Díaz ($74,790.00); (3) vice president Francisco González ("González") ($13,276), (4) treasurer Ángel López-Negrón ("López") ($1,300.00), and (5) secretary Mayra Rivera ($40,095.00). (Docket No. 54, Ex. 11 at pp. 15—16.)4 Horizon Lines granted "unlimited leaves of absence, without pay, to employees who work in salaried positions with [Local 1575]." (Docket No. 50, Ex. 1 at p. 34.) Although Local 1575 is a "union," it also qualifies as a "Contributing Company" pursuant to the Trust Agreement "solely and exclusively for the purpose of permitting [it], if it so elects, to contribute to the Trust on behalf of [its] Employees and to permit [union] Employees to become Participants of the Fund." Id. By contributing to the Pension Fund, Local 1575 agreed to "cover each of its own employees ... on the same basis as are made by the Contributing Companies." Id. at p. 12.

The Board of Trustees terminated the Pension Fund after Horizon Lines ceased operations in Puerto Rico. (Docket No. 38 at p. 5.)5 On March 4, 2015, the Board of Trustees informed Local 1575 that:

[the union had] elected to become a participating or contributing Employer to the [Pension Fund] to provide benefits to the eligible Union officials and employees.... Once the cessation of Horizon is final, the Fund will commence the process to collect withdrawal liability from the contributing employers and participating entities as established by the Employee Income Retirement Security Act, as amended.

(Docket No. 57, Ex. 3 at p. 2.) The Board of Trustees seeks to collect $668,807.00 from Local 1740 as the purported successor of Local 1575 pursuant to ERISA and the MPPAA. (Docket No. 1 at pp. 9—10.)

B. The Merger Agreement

Horizon Lines sold its assets to a competitor, Luis Ayala-Colón ("Ayala"). Unión de Empleados de Muelles de Puerto Rico, Inc., 884 F.3d at 53 ; Docket No. 1 at p. 4. Local 1740 and Local 1902 "had existing CBAs with Ayala and believed that they, not Local 1575, were entitled to work for Ayala in Horizon Line's former terminals." Id. at 53. Article 28 of the CBA between Horizon Lines and Local 1575 provides, however, that the "Agreement shall be binding upon the parties hereto, their successors, administrators, executors and assigns." (Docket No 51, Ex. 1 at p. 43.) Consequently, Local 1575 argued that the CBA with Horizon Lines applied to Ayala. Unión de Empleados de Muelles de Puerto Rico, Inc., 884 F.3d at 53.

On March 30, 2015, the San Juan unions entered into a Work Sharing Agreement to "resolve any disputes among the different unions." (Docket No. 43, Ex. 4.) Competition among the unions persisted, however, prompting the ILA to intervene. (Docket No. 43, Ex. 1 at p. 1.)6 The ILA recommended that the San Juan unions merge. Id. According to the ILA, unified finances and membership "would be stronger than four, separate, smaller memberships and treasuries." Id.

The San Juan unions entered into a Merger Agreement on July 13, 2015, four months after Local 1575 received notice that the Board of Trustees intended to collect withdrawal liability from contributing employers. (Docket No. 43, Ex. 8; Docket No. 57, Ex. 3 at p. 2.) The Merger Agreement required Local 1575, Local 1901 and Local 1902 to "merge into and become an integral part of Local 1740." Id. at p. 2. Local 1740 "assumed[ed] all obligations" of Local 1575. Id. at p. 3. Local 1575 represented that it:

had no contractual or contingent liabilities except as reported to the U.S. Department of Labor on the 2014 LM reports , no material change has been made to the financial conditions of either of the local unions, and they have incurred no liabilities and have made no expenditures without the consent of Local 1740, except for necessary, routine, ordinary business expenses in connection with their functions.

Id. (emphasis added).7 Local 1575 president Efraín Robles signed and submitted the 2014 LM-2 form four months before the Merger Agreement. (Docket No. 57, Ex. 12.) Questions 16 and 17 asked whether union assets were "pledged as security or encumbered in any way," and whether Local 1575 had "any contingent liabilities at the end of the reporting period." Id. at p. 3. Local 1575 answered "No" to both questions. Id.

The Merger Agreement required Local 1575 to assign all assets "including but not limited to accounts receivable and union monetary obligations due from members" to Local 1740. (Docket No. 43, Ex. 8 at p. 3.) López served as the Secretary-Treasurer for Local 1575. (Docket No. 63, Ex. 1 at p. 1.) López asserts that as of October 2015, Local 1575 possessed the following property: $8,000,000.00 in accounts receivable regarding a real estate transaction, funds in accounts held at Banco Popular, artwork worth thousands of dollars, a vehicle, computers, equipment and supplies. Id. at p. 3. Local 1575 president Francisco González purportedly instructed López to "worry [about the transfer to Local 1740] later." Id. at p. 2. According to López, "Local 1575 neither transferred its assets nor its financial records to Local 1740." Id. González alleges, however, that Local 1575 has "no records, assets, financial accounts, or charter." (Docket No. 41 at p. 3.)

The Board of Trustees asserts two causes of action. (Docket No. 1 at pp. 7—10.)8 First, the Board of Trustees alleges that Local 1575 failed to contribute $7,040.00 to the Pension Fund in violation of ERISA, 29 U.S.C. § 1145 ("ERISA cause of action"). Id. at p. 9. Second, the Board of Trustees purports that Local 1575 accrued $661,767.00 in withdrawal liability pursuant to the MPPAA, 29 U.S.C. § 1381 ("MPPAA cause of action"). (Docket No. 1 at pp. 8—9.) Essentially, the Board of Trustees contends that Local 1740 is liable for Local 1575's Pension Fund obligations. (Docket No. 1 at p. 2.)

Local 1740 moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (Docket No. 43 at p. 32.) The motion to dismiss sets forth two arguments: that (1) "Local 1575 never actually merged with any other San Juan Local" and that (2) Local 1740 "does not comply with the applicable legal requirements to be considered an...

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