National Shopmen Pension Fund v. Disa

• Decision Date: 17 October 2008
• Docket Number: Civil Action No. 08-0132 (RCL).
• Citation: 583 F.Supp.2d 95
• Parties: NATIONAL SHOPMEN PENSION FUND, et, al., Plaintiffs, v. Georg Fischer DISA d/b/a Disa Industries, Inc., Defendant.
• Court: U.S. District Court — District of Columbia

583 F.Supp.2d 95

NATIONAL SHOPMEN PENSION FUND, et, al., Plaintiffs, v. Georg Fischer DISA d/b/a Disa Industries, Inc., Defendant.

Civil Action No. 08-0132 (RCL).

United States District Court, District of Columbia.

October 17, 2008.

Marc H. Rifkind, Slevin & Hart, P.C., William G. Miossi, Winston & Strawn, LLP, Washington, DC, for Plaintiffs.

William G. Miossi, Winston & Strawn, LLP, Washington, DC, for Defendant.

MEMORANDUM OPINION

ROYCE C. LAMBERTH, Chief Judge.

This matter comes before the Court on plaintiffs' Motion [9] for Summary Judgment and defendant's Cross-Motion [10] for Judgment on the Pleadings. Upon full consideration of the motions, the oppositions and replies thereto, the applicable law, and the entire record herein, the Court finds, for the reasons set forth below, that plaintiffs' motion for summary judgment will be DENIED, defendant's motion for judgment on the pleadings will be GRANTED and plaintiffs' complaint will be dismissed with prejudice.

I. BACKGROUND

A. Statutory Framework

The Employee Retirement Income Security Act of 1974 ("ERISA") Sections 4201-4225, as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), Pub.L. No. 96-364, 94 Stat. 1208, 29 U.S.C. §§ 1381-1461, provides that an employer who withdraws from a multiemployer pension plan must make withdrawal liability payments sufficient to cover that employer's fair share of the plan's unfunded vested liabilities. 29 U.S.C. §§ 1381, 1391. The Act's withdrawal liability payment requirement protects the financial integrity of multiemployer plans, prevents withdrawing employers from shifting their burdens to remaining employers, and eliminates an incentive for employers to flee underfunded pension plans. See Milwaukee Brewery Workers' Pension Plan v. Joseph Schlitz Brewing Co., 513 U.S. 414, 416, 115 S.Ct. 981, 130 L.Ed.2d 932 (1995); Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 216, 106 S.Ct. 1018, 89 L.Ed.2d 166 (1986); Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 722-23, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984).

As a general matter, an employer completely withdraws from a plan when it "(1) permanently ceases to have an obligation to contribute under the plan, or (2) permanently ceases all covered operations under the plan." § 1383(a). The amount of withdrawal liability and the periodic payment schedule for paying that liability are determined as of statutorily-specified dates calculated from the date of complete withdrawal. Schlitz, 513 U.S. at 417-18, 430, 115 S.Ct. 981, citing §§ 1391(b)(2)(A)(ii), (b)(2)(E)(i), (c)(2)(C)(i), (c)(3)(A), and (c)(4)(A).

The statute sets out a series of mandatory steps to be followed in collecting the withdrawal liability. The MPPAA places responsibility for assessing and collecting withdrawal liability on the plan sponsor, usually a joint labor-management board of trustees. § 1382, § 1002(16)(B). Under ERISA Section 4219(b), "as soon as practicable" after an employer's withdrawal from the plan, the plan sponsor must determine the employer's withdrawal liability, if any, prepare a statutorily-mandated schedule for payment of that liability in installments, notify the employer of the amount of the liability and the payment schedule, and "demand payment in accordance with the schedule." §§ 1382, 1399(b)(1).

The plan's actuary determines withdrawal liability through a series of calculations that allocate a portion of the plan's unfunded vested benefits to the withdrawing employer pursuant to one of the methods authorized by ERISA, including the "attributable rule" adopted by the plaintiffs, which is set forth in ERISA Section 4211(c)(4), 29 U.S.C. § 1391(c)(4). See §§ 1388-1391, 1393. Once the actuary has calculated the withdrawal liability, the plan sponsor must prepare a schedule for the payments by determining the "level annual payments" necessary to amortize that liability, using a mandatory statutory formula for determining the amount of each annual payment as follows:

[T]he amount of each annual payment shall be the product of:

(1) the average annual number of contribution base units for the period of 3 consecutive plan years, during the period of 10 consecutive plan years ending before the plan year in which the withdrawal occurs, in which the number of contribution base units for which the employer had an obligation to contribute under the plan is the highest, and

(2) the highest contribution rate at which the employer had an obligation to contribute under the plan during the 10 plan years ending with the plan year in which the withdrawal occurs.

29 U.S.C. § 1399(c) (emphasis added).

If the annual payments would stretch past twenty years, the remaining payments are forgiven. § 1399(c)(1)(B). Finally, these "level annual payments" are made payable in quarterly installments, or other installment intervals specified by plan rules, such as the monthly payment schedule utilized by the plaintiffs. § 1399(c)(3).

Having completed the calculations, the plan sponsor then provides the withdrawing employer with the required notice of its withdrawal liability and installment payment schedule. "Withdrawal liability shall be payable in accordance with the schedule set forth by the plan sponsor" in the § 1399(b)(1) notification and demand for payment "beginning no later than 60 days after the date of the demand notwithstanding any request for review or appeal of determinations of the amount of such liability or of the schedule." § 1399(c)(2) (emphasis added).

The only provision in ERISA Section 4219 providing for changes to the determination of the employer's liability or schedule of liability payments after the statutorily mandated notification and demand for payment has been made requires an employer-initiated request for review. Section 4219(b)(2) states:

(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).

ERISA further provides that "[a]ny dispute between an employer and the plan sponsor ... shall be resolved through arbitration," which either or both parties may initiate within specified time periods. § 1401(a). However, "[p]ayments shall be made by an employer ... until the arbitrator issues a final decision with respect to the determination submitted for arbitration, with any necessary adjustments in subsequent payments for overpayments or underpayments arising out of the decision of the arbitrator with respect to the determination." § 1401(d) (emphasis added).

B. Case Background

Defendant, George Fischer DISA, Inc. d/b/a Disa Industries, Inc. ("defendant"), participated in and contributed to a multi-employer pension plan run by National Shopmen Pension Fund and the individual trustees who serve as fiduciaries with respect to the Fund ("plaintiffs"), during the years of 2000 and 2001 pursuant to DISA's collective bargaining agreement with Shopmen's Local Union No. 508. (Compl. ¶¶ 5-7.) In December 2001, the defendant closed the facility covered by the labor contract, thus potentially affecting a "complete withdrawal" and triggering withdrawal liability under ERISA. (Id. ¶ 10.)

More than five years later, on June 21, 2006, the plaintiffs sent the defendant a letter notifying it of withdrawal liability in the amount of $372,472, and setting forth a monthly payment schedule to begin on July 16, 2006 in the amount of $652 per month for 240 months, resulting in a total payment of $127,761 based on ERISA's 20-year repayment plan limit. (Id. ¶ 14.) The defendant began making monthly payments in the amount of $652 on the specified due date. (Id. ¶ 16.)

By letters dated January 24, 2007 (approximately six months after the defendant began making monthly payments in accordance with the notice and demand letter plaintiffs provided) and February 15, 2007, the plaintiffs notified the defendant of an "error" made in calculating the adjusted monthly payment, and advised defendant to pay $987 per month instead of $652 per month and to make a lump-sum payment in the amount of $1,956 representing underpayments for the prior six months. (Id. ¶ 15.) The letters instructed defendant to increase its monthly payments "in accordance to the statutory payment schedule." (Id.)

Subsequent to receipt of these letters, the defendant has continued to make payments in the $652 per month amount. (Id. ¶ 16.) Defendant made a timely request for arbitration regarding the withdrawal liability assessment, and the issue is before an arbitrator. (Pls.' Opp'n at 2.)

The plaintiffs filed the instant civil action on January 23, 2008 due to the defendant's failure to make increased interim withdrawal liability payments. Pursuant to ERISA Sections 502, 515, 4221(d) and 4301(b) (29 U.S.C. §§ 1132, 1145 and 1401(d), 1451(b)) and the plaintiffs' Rules and Regulations, they have requested a judgment against the defendant for delinquent withdrawal liability payments, accrued interest at the rate prescribed by Section 6621 of the Internal Revenue Code, liquidated damages equal to 20% of the withdrawal liability, plus reasonable attorney's fees and costs and any amounts becoming due and owing prior to the entry of judgment in this case. (Compl. ¶ 18.)

The defendant's motion for judgment on the pleadings argues: (1) the plaintiffs had no authority to change...