Local No. 499, Bd. of Trs. of the Shopmen's Pension Plan v. Art Iron, Inc.

• Decision Date: 22 January 2021
• Docket Number: CASE NO. 3:19 CV 2174
• Court: U.S. District Court — Northern District of Ohio
• Parties: LOCAL NO. 499, BOARD OF TRUSTEES OF THE SHOPMEN'S PENSION PLAN, Plaintiff, v. ART IRON, INC., et al., Defendants.

LOCAL NO. 499, BOARD OF TRUSTEES OF THE SHOPMEN'S PENSION PLAN, Plaintiff, v. ART IRON, INC., et al., Defendants.

CASE NO. 3:19 CV 2174

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OHIO WESTERN DIVISION

January 22, 2021

JUDGE JAMES R. KNEPP II

MEMORANDUM OPINION AND ORDER

INTRODUCTION

Plaintiff, the Board of Trustees ("Board") of the Shopmen's Local 499 Pension Plan ("the Plan"), brought suit, seeking to recover an assessment of withdrawal liability under the Employee Retirement Income Security Act of 1974 ("ERISA"). Currently pending before the Court are the parties' briefs regarding the notice provision of 29 U.S.C. § 1399(b) (Docs. 36, 37) and Joint Stipulations of Uncontested Facts (Doc. 35).¹ For the reasons discussed below, the Court finds the notice provided satisfies the statute and therefore DENIES Defendants' Motion to Dismiss or to Compel Proper Notice. (Doc. 36).

FACTUAL BACKGROUND

The Plan is a multi-employer pension plan under ERISA and the members of the Board are fiduciaries of the Plan. (Doc. 35, at ¶1). Art Iron, Inc. was one contributor to the Plan, under acollective bargaining agreement effective September 11, 2015. Id. at ¶6. Art Iron did not execute a new collective bargaining agreement, and ceased to be obligated to contribute to the Plan as of December 1, 2017. Id. at ¶7-8.

On January 24 and 25, 2018, Art Iron liquidated the majority of its operational assets. Id. at ¶9.

On July 30, 2018, a federal tax lien was filed against property located at 860 Curtis Street, Toledo, Ohio. Id. at ¶10. This property was Art Iron's principal place of business; it was owned by AI Real Estate, an Ohio LLC. Id. at ¶2-3. Defendant Robert Schlatter is the sole shareholder of Art Iron, Inc, and the sole member of AI Real Estate. Id. at ¶4. AI Real Estate was dissolved on November 6, 2019. Id. at ¶3.

Two events occurred on October 10, 2018. The Plan sent a letter to Art Iron, AI Real Estate, and Schlatter demanding payment of withdrawal liability in its entire amount by November 15, 2018. Id. at ¶12; see also Doc. 25-3 (letter). That same day, the Board adopted an amendment to the Plan regarding Employer Withdrawal Liability, which added a section entitled Article III, Employer Withdrawal Liability, and Section 1305(d), Default. Id. at ¶11.

On January 3, 2019, Art Iron requested review of certain issues related to the withdrawal liability and the demand letter. Id. at ¶13.

On September 19, 2019, the Plan instituted the instant action on the withdrawal liability. See Doc. 1.

STATUTORY BACKGROUND

Withdrawal Liability Generally

"Withdrawal liability is a product of the MPPAA [Multiemployer Pension Plan Amendments Act], 29 U.S.C. §§ 1381-1453, which amended ERISA to increase the financialliability of employers who withdraw from underfunded plans." CPT Holdings, Inc. v. Indus. & Allied Employees Union Pension Plan, Local 73, 162 F.3d 405, 407 (6th Cir. 1998); see also Pension Ben. Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 725 (1984) ("[T]he Act requires that an employer withdrawing from a multiemployer pension plan pay a fixed and certain debt to the pension plan."). "An employer's withdrawal liability is its proportionate share of the plan's unfunded vested benefits, that is, the difference between the present value of vested benefits (benefits that are currently being paid to retirees and that will be paid in the future to covered employees who have already completed some specified period of service, 29 U.S.C. § 1053) and the current value of the plan's assets." Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Tr., 508 U.S. 602, 609 (1993).

Prerequisites to Suit

To begin, a provision of the MPPAA, entitled "Resolution of Disputes", requires certain disputes be resolved through arbitration:

(a) Arbitration proceedings; matters subject to arbitration, procedures applicable, etc.

(1) Any dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination made under sections 1381 through 1399 of this title shall be resolved through arbitration. Either party may initiate the arbitration proceeding within a 60-day period after the earlier of--

(A) the date of notification to the employer under section 1399(b)(2)(B) of this title, or

(B) 120 days after the date of the employer's request under section 1399(b)(2)(A) of this title.

29 U.S.C. § 1401(a). If no such arbitration proceeding is initiated, "the amounts demanded by the plan sponsor under section 1399(b)(1) of this title shall be due and owing on the schedule setforth by the plan sponsor" and "[t]he plan sponsor may bring an action in a State or Federal court of competent jurisdiction for collection." 29 U.S.C. § 1401(b)(1).

The relevant statutes required a plan to, inter alia, provide notice to the employer of the assessed withdrawal liability and a demand for payment:

(b) Notification, demand for payment, and review upon complete or partial withdrawal by employer

(1) As soon as practicable after an employer's complete or partial withdrawal, the plan sponsor shall--

(A) notify the employer of--

(i) the amount of the liability, and

(ii) the schedule for liability payments, and

(B) demand payment in accordance with the schedule.

29 U.S.C. § 1399(b)(1).

The statute continues, providing a procedure for the employer to request review after receiving that notice:

(2)(A) No later than 90 days after the employer receives the notice described in paragraph (1), the employer—

(i) may ask the plan sponsor to review any specific matter relating to the determination of the employer's liability and the schedule of payments,

(ii) may identify any inaccuracy in the determination of the amount of the unfunded vested benefits allocable to the employer, and

(iii) may furnish any additional relevant information to the plan sponsor.

(B) After a reasonable review of any matter raised, the plan sponsor shall notify the employer of—

(i) the plan sponsor's decision,

(ii) the basis for the decision, and(iii) the reason for any change in the determination of the employer's liability or schedule of liability payments.

29 U.S.C. § 1399(b)(2).

Finally relevant here is 29 U.S.C. § 1399(c)(5), which provides:

(c) Payment requirements; amount, etc.

* * *

(5) In the event of a default, a plan sponsor may require immediate payment of the outstanding amount of an employer's withdrawal liability, plus accrued interest on the total outstanding liability from the due date of the first payment which was not timely made. For purposes of this section, the term "default" means--

(A) the failure of an employer to make, when due, any payment under this section, if the failure is not cured within 60 days after the employer receives written notification from the plan sponsor of such failure, and

(B) any other event defined in rules adopted by the plan which indicates a substantial likelihood that an employer will be unable to pay its withdrawal liability.

29 U.S.C. § 1399(c)(5). As the Seventh Circuit described, this section provides two types of default - a "missed payment default" (subsection (A)) and an "insecurity default" (subsection (B)). Cent. States Se. & Sw. Areas Pension Fund v. O'Neill Bros. Transfer & Storage Co., 620 F.3d 766, 770-71 (7th Cir. 2010). As set forth below, the "insecurity default" described by subsection (B) is at issue here.

DISCUSSION

The gist of the present dispute is whether the Plan's October 10, 2018 letter satisfies the "notice" requirement of 29 U.S.C. § 1399(b). For the reasons discussed below, the Court finds the Plan provided proper notice.

On October 10, 2018, the Plan wrote Art Iron "pursuant to Section 4219 of [ERISA] . . . to issue a demand to Art Iron, Inc. of its employer withdrawal liability in the amount of$1,185,785.00." (Doc. 25-3). The Plan demanded the entire amount by November 15, 2018 - citing 29 U.S.C. § 1399(c)(5)(B)² - and its belief there was a substantial likelihood Art Iron would be unable to pay the withdrawal liability in light of Art Iron's shutdown, liquidation of assets, and federal tax lien filed on the 860 Curtis Street property. Id. In response, Defendant Robert Schlatter sent a letter on behalf of Art Iron "request[ing] Review of the Plan Sponsor's Determinations." Id. Schlatter said Art Iron requested review and additional information "to corroborate or dispute [the Plan's] assertions." Id. Schlatter's letter listed five items for review, and requested specific documents; it did not challenge the sufficiency of the Plan's notice, the lack of a payment schedule, or the Plan's determination that Art Iron was in default. See id. The Plan did not respond.

The present dispute is whether the Plan's letter satisfied the notice provisions of § 1399(b), and thus triggered the timeframes in § 1401(a)(1) for requesting arbitration. Defendants contend it cannot, focusing on the words "schedule for liability payments" in § 1399(b)(1)(A). They assert the Plan's demand for the full amount of withdrawal liability - which cited § 1399(c)(5) - does not constitute the "notice" required by § 1399(b)(1) because it contained no schedule and demanded a single lump sum payment, rather than multiple payments. Therefore, Defendants argue, no timeframe for arbitration has yet been triggered. The Plan, on the other hand, asserts the letter satisfies the plain language of the statute, it was entitled - pursuant to § 1399(c)(5) - to request the full amount, and the time to arbitrate set forth in § 1401(a)(1) has expired.

Other courts have found an initial demand for a single lump sum payment of withdrawal liability is appropriate. See Cent. States, Se. & Sw. Areas Pension Fund v. Dworkin, Inc., 2020WL 5365968, at *2 (N.D. Ill.) (explaining that a "default[] under 29 U.S.C. § 1399(c)(5) . . . provid[es] the Pension Fund with the legal authority to demand full and immediate payment of the withdrawal liability instead of having to resort to a 20-year installment schedule"); Cent. States, Se. & Sw. Areas Pension Fund v. George Jones...