Niagara of Wisconsin Paper Corp. v. PAPER INDUSTRY

• Decision Date: 12 December 1984
• Docket Number: Civ. No. 4-83-454.
• Parties: NIAGARA OF WISCONSIN PAPER CORPORATION, Plaintiff, v. The PAPER INDUSTRY UNION-MANAGEMENT PENSION FUND; Wayne E. Glenn, Joe J. Bradshaw, James Dassaro, John E. Price, Irving Rolnick, Robert Sherry, Arnold Nemiro, and M.L. Talmadge, Trustees of the Paper Industry Union Management Pension Fund, Defendants.
• Court: U.S. District Court — District of Minnesota

603 F. Supp. 1423

NIAGARA OF WISCONSIN PAPER CORPORATION, Plaintiff, v. The PAPER INDUSTRY UNION-MANAGEMENT PENSION FUND; Wayne E. Glenn, Joe J. Bradshaw, James Dassaro, John E. Price, Irving Rolnick, Robert Sherry, Arnold Nemiro, and M.L. Talmadge, Trustees of the Paper Industry Union Management Pension Fund, Defendants.

Civ. No. 4-83-454.

United States District Court, D. Minnesota, Fourth Division.

December 12, 1984.

COPYRIGHT MATERIAL OMITTED

Stuart Williams, Henson & Efron, Minneapolis, Minn., for plaintiff.

Michael J. Dell, Kramer, Levin, Nessenn, Kamin & Frankel, New York City, Byron E. Starns, Leondard, Street & Deinard, Minneapolis, Minn., for defendants.

MEMORANDUM OPINION AND ORDER

DIANA E. MURPHY, District Judge.

Plaintiff, Niagara of Wisconsin Paper Corporation (Niagara), brought this action for damages and injunctive relief against defendants, the Paper Industry Union-Management Pension Fund and its Trustees (collectively "the Fund"), alleging that the Fund arbitrarily and capriciously cancelled past service credits of Niagara's employees, refused to participate in arbitration demanded by Niagara to which Niagara has a statutory right, and caused Niagara to pay monies in excess of its properly calculated withdrawal liability. Jurisdiction is based on 28 U.S.C. §§ 1331 and 1337, and 29 U.S.C. §§ 186(e), 1132, and 1451(c). The Fund filed a counterclaim seeking $18,880.41 in interest and penalties arising from Niagara's alleged failure to pay its January 1981 contribution to the Fund in a timely manner. Jurisdiction is alleged under 29 U.S.C. § 1132(e)(1).

I.

This matter originally came before the court on Niagara's motion for a preliminary injunction barring the Fund from collecting Niagara's outstanding withdrawal liability. That motion was denied by order of this court dated August 11, 1983. The Fund subsequently moved for summary judgment. By order dated December 23, 1983, the court granted the Fund's motion on Counts I and III which sought to compel arbitration of its statutory withdrawal liability to the Fund. With respect to Counts II and IV, which are based on both the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., and the Labor Management Relations Act (LMRA), 29 U.S.C. § 141 et seq., the court granted the Fund's motion for summary judgment insofar as those counts are based on ERISA. The court held that it did not have subject matter jurisdiction over the ERISA claims and that Niagara did not have an implied cause of action under ERISA. The court held that it could have jurisdiction over LMRA claims and denied the motion to dismiss the portions of Counts II and IV based on the LMRA.

Both parties then moved for summary judgment on the remaining LMRA counts. In a Memorandum Opinion and Order dated August 8, 1984, 603 F.Supp. 1420, the court found as a matter of law that no violation of the LMRA had occurred, granted the Fund's motion, and dismissed Niagara's complaint.¹

This matter is now before the court on Niagara's motions, pursuant to Fed.R. Civ.P. 54(b) and 56(f), for reconsideration of the Memorandum Opinion and Order dated August 8, 1984; for further discovery; and for leave to amend to plead a breach of contract claim under § 301 of the LMRA, 29 U.S.C. § 185. The Fund's motion for attorney's fees pursuant to 29 U.S.C. §§ 1132(g)(1), 1132(g)(2) and 1451(e) is also under consideration.² The parties have submitted memoranda, affidavits, and exhibits in support of their positions, all of which were received by October 11, 1984. The court has carefully reviewed these materials, as well as the earlier record.

II.

A. Niagara's LMRA § 302 Claim

Niagara urges, pursuant to Fed.R.Civ.P. 56(f) and 54(b), that the court allow more discovery and reconsider Niagara's § 302 claim. It argues that United Mine Workers v. Robinson, 455 U.S. 562, 102 S.Ct. 1226, 71 L.Ed.2d 419 (1982), does not preclude judicial inquiry into the trustees' conduct under § 302 of the LMRA, 29 U.S.C. § 186, for the trustees did not act pursuant to a collective bargaining agreement when they reduced benefits, but did so unilaterally by amending Article VI of the Fund's Rules and Regulations. Niagara asserts that further discovery is necessary to test the actuarial advice received by the Fund, the reasonableness of the Fund's response to that advice, and the Fund's communications with the Internal Revenue Service (IRS). Niagara claims that this information is in the sole hands of the Fund and that the Fund willfully withheld discovery before the court's decision of August 8, 1984.

In addition, Niagara argues that even if no additional discovery is granted, issues of material fact remain as to the amount of unfunded liability caused by Niagara's withdrawal;³ whether the size of that liability threatened the Fund's financial integrity; whether the Fund cancelled funded past service credits; and the extent of disclosures made to the IRS to obtain its approval of the March 4, 1981 amendment to Article VI, section 2 of the Rules and Regulations.

The court has carefully considered the parties' submissions and finds that Niagara has not presented any new materials which warrant reconsideration of the August 8 Memorandum Opinion and Order or further discovery.

Niagara's belated attempt to distinguish United Mine Workers v. Robinson, 455 U.S. 562, 102 S.Ct. 1226, 71 L.Ed.2d 419 (1982), is unavailing, for the Standard Agreement and the Trust Agreement, which authorize the trustees to determine the amount of benefits, are contracts between a labor organization and an employer. These agreements govern Niagara's relationship with the Fund concerning past service credits and provide that the benefits paid by the Fund to Niagara's employees should be related to Niagara's contributions for those employees.⁴ Evidence shows that Niagara believed these agreements granted the Fund the right to cancel unfunded past service credits upon Niagara's 1981 withdrawal. It is also undisputed that Niagara told its employees that following its withdrawal from the Fund, it would be responsible for all benefits of all active employees eligible to retire from Niagara. These facts, which are not in the Fund's sole possession, entitle the Fund to summary judgment under United Mine Workers v. Robinson, 455 U.S. 562, 102 S.Ct. 1226, 71 L.Ed.2d 419 (1982), and Torimino v. United Food and Commercial Workers International Union-Industry Pension Fund, 548 F.Supp. 1012 (E.D.Mo.1982), aff'd, 712 F.2d 882 (8th Cir.1983).⁵

Robinson and Torimino permit judicial inquiry into the actions of trustees primarily to prevent misallocation of Fund assets for criminal purposes. Section 302 does not allow a court to subject the trustees' actions to a reasonableness requirement. Rather the trustees are held to a standard not to act arbitrarily or capriciously on questions of coverage or eligibility. Here, the trustees cancelled benefits as authorized by the Standard and Trust Agreements to avoid the dumping of unfunded liability. This court's review under § 302 is to determine whether it was arbitrary and capricious for the trustees to have acted on the basis of the Martin E. Segal Company's (the Segal Company) $3.3 million deficit calculation. This court's role is not to consider the merits of the independent actuarial calculation itself. Niagara has not shown that it should prevail on its motion for reconsideration.⁶

B. Leave to Amend

Niagara seeks leave to amend its complaint to include several breach of contract claims if the court finds its § 301 claim, 29 U.S.C. § 185(a), was not properly pled.

Niagara first charges that the Fund failed to comply with an Internal Revenue Code provision, 26 U.S.C. § 412(c)(8), when it adopted the March 4, 1981 amendment to Article VI, § 2 of the Rules and Regulations.⁷ This Code provision is identical to ERISA § 302(c)(8), 29 U.S.C. § 1082(c)(8). It provides in pertinent part:

No amendment described in this paragraph which reduces the accrued benefits of any participant shall take effect unless the plan administrator files a notice with the Secretary of Labor notifying him of such amendment and the Secretary has approved such amendment or, within 90 days after the date on which such notice was filed, failed to disapprove such amendment. No amendment described in this subsection shall be approved by the Secretary of Labor unless he determines that such amendment is necessary because of a substantial business hardship (as determined under subsection (d)(2)) and that waiver under subsection (d)(1) is unavailable or inadequate.

Niagara claims that adherence to this provision is a necessary prerequisite to the Fund's maintaining its status as a tax qualified plan. Niagara contends that the Fund breached contractual obligations in the Standard Form Agreements and Declaration of Trust by failing to comply with the Code's requirement for a qualified plan.

Secondly, Niagara argues that the Fund was contractually obligated not to reduce accrued benefits by amendment without complying with Article VI, § 4, of the Fund's Rules and Regulations.⁸ The Fund's failure to comply with this provision is a breach of a contractual obligation owed to Niagara's employees, but Niagara asserts that it has standing to challenge it because the collective bargaining agreement requires it to reimburse its employees for loss of benefits.

While Niagara did refer to § 301 of the LMRA for jurisdictional purposes in one footnote of its previous papers, the court finds that the contract claims were not properly presented to it before. Fed.R. Civ.P. 15 authorizes a court to permit amendments even following dismissal of a complaint. United Steel Workers v. Mesker Bros. Industries, Inc. 457 F.2d 91 (8th Cir.1972). Such amendment is within the discretion of the court, however, and need not be granted where it would be futile. Forman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). United Steel Workers v. Mesker Bros....