Quality Auto. Servs., LLC v. Pension Benefit Guar. Corp.
| Decision Date | 15 August 2013 |
| Docket Number | Civil Action No. 12–1503 (ESH). |
| Citation | 960 F.Supp.2d 211 |
| Court | U.S. District Court — District of Columbia |
| Parties | QUALITY AUTOMOTIVE SERVICES, LLC, Plaintiff, v. PENSION BENEFIT GUARANTY CORPORATION, Defendant. |
OPINION TEXT STARTS HERE
Mark A. Angelov, Arent Fox LLP, New York, NY, Nancy Snyder Heermans, Emily S. Baver, Carol Connor Cohen, Arent Fox, LLP, Washington, DC, for Plaintiff.
Beth A. Bangert, Pension Benefit Guaranty Corporation, Washington, DC, for Defendant.
Plaintiff Quality Automotive Services, LLC (“QAS”) has sued the Pension Benefit Guaranty Corporation (“PBGC”), challenging its determination of “substantial damage” to the Freight Drivers and Helpers Local No. 557 Pension Fund as arbitrary and capricious. Before the Court are plaintiff's Motion for Summary Judgment (Mar. 13, 2013 [ECF No. 15] (“Pl.'s Mot.”)) and defendant's Cross–Motion for Summary Judgment (Apr. 12, 2013 [ECF No. 17] (“Def.'s Mot.”)). For the reasons set forth below, plaintiff's motion will be denied, and defendant's motion will be granted.
The Employee Retirement Income Security Act (“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., seeks to protect the viability of multiemployer pension plans. It provides that when a contributing employer withdraws from a multiemployer pension plan, that employer owes withdrawal liability in the amount of its share of the plan's unfunded vested benefits. See29 U.S.C. § 1381. However, there are a number of exceptions to that rule, including one for withdrawals from plans that receive contributions primarily from employers engaged in the trucking industry. See id. § 1383(d). Under this “trucking industry exception,” a withdrawal occurs—and withdrawal liability is incurred—only if:
(A) an employer permanently ceases to have an obligation to contribute under the plan or permanently ceases all covered operations under the plan, and
(B) either:
(i) [PBGC] determines that the plan has suffered substantial damage to its contribution base as a result of such cessation, or
(ii) the employer fails to furnish a bond issued by a corporate surety company that is an acceptable surety for purposes of section 1112 of this title, or an amount held in escrow by a bank or similar financial institution satisfactory to the plan, in an amount equal to 50 percent of the withdrawal liability of the employer.
Id. § 1383(d)(3) (emphasis added). The statute goes on to state:
If, after an employer furnishes a bond or escrow to a plan under paragraph (3)(B)(ii), [PBGC] determines that the cessation of the employer's obligation to contribute under the plan (considered together with any cessations by other employers), or cessation of covered operations under the plan, has resulted in substantial damage to the contribution base of the plan, the employer shall be treated as having withdrawn from the plan on the date on which the obligation to contribute or covered operations ceased, and such bond or escrow shall be paid to the plan. [PBGC] shall not make a determination under this paragraph more than 60 months after the date on which such obligation to contribute or covered operations ceased.
Id. § 1383(d)(4) (emphasis added).
CSX Corporation owns an intermodal railroad loading and unloading facility in Jessup, Maryland, called the Annapolis Junction Facility. (Administrative Record [ECF Nos. 6–10, 13] (“AR”) at 1, 1378.) Total Distribution Services, Inc. (“TDI”), a subsidiary of CSX Corporation, hires subcontractors to operate the facility. ( Id. at 1385.) Beginning in August 2005, QAS began operating the facility as a subcontractor for TDI. ( Id. at 1378, 1385.) QAS signed a collective bargaining agreement with Freight Drivers and Helpers Local Union No. 557 (“Local 557”) and employed members of Local 557 at the facility. ( Id. at 1, 1378, 1385.) Pursuant to the terms of the collective bargaining agreement, QAS contributed to the Freight Drivers and Helpers Local No. 557 Pension Fund (“the Fund”) based on the number of hours worked by its union employees. ( Id. at 1, 1378.)
Effective July 31, 2007, TDI replaced QAS with another subcontractor, Annapolis Junction Rail Solutions (“AJRS”). ( Id. at 1378–79, 2084.) At that time, QAS ceased to have any obligation to contribute to the Fund. ( Id. at 6, 1411, 1379.) As QAS had done, AJRS signed the Local 557 collective bargaining agreement, hired members of Local 557, and began contributing to the Fund. ( Id. at 1379, 2084.)
On December 3, 2009, the Fund assessed withdrawal liability against QAS in the amount of $2,045,014. ( Id. at 6, 1438, 2081, 2083.) Thereafter, QAS's parent company, MCS Properties, LLC, deposited 50% of the assessed withdrawal liability in escrow. ( Id. at 6–7 & n. 6, 1379, 1758.)
On September 30, 2011, QAS requested a determination from PBGC that its departure from the Fund had not caused “substantial damage” to the Fund's contribution base. ( Id. at 1378–82.) QAS argued that “its substitution with AJRS did not result in substantial damage to the Fund's contribution base because, inter alia, AJRS continued to contribute to the Fund on behalf of a similar number of employees as QAS did before it.” (Pl.'s Mot. at 9 (citing AR at 1378–82, 2085–143).)
On January 27, 2012, the Fund urged PBGC to reject QAS's position and to concludethat QAS's exit had caused the Fund's contribution base to suffer substantial damage because AJRS's replacement of QAS as a contributing employer was not the relevant inquiry, but rather, PBGC should focus on the decline in the overall financial condition of the Fund since 2000. (AR at 1–25.)
On July 31, 2012, exactly 60 months after QAS ceased its obligation to contribute to the plan, PBGC determined that “[QAS's] cessation of covered operations on July 31, 2007, substantially damaged the contribution base of the Fund.” ( Id. at 2075.) The determination stated that it was based on “the cessation of contributions by both the employer under consideration and all other employers that have ceased contributing to the plan prior to the date PBGC's determination must be made.” ( Id.) The determination also noted that in previous such determinations, PBGC had also considered “the plan's overall financial health and its benefit cost structure.” ( Id.) PBGC based its determination of substantial damage on numerous financial metrics of the Fund's overall health, including the recent decreases in contribution base units, contributing employers, number of active participants, and ratio of inactive to active participants, as well as the increase in employers' annual cost of benefits. ( Id. at 2076).
As correctly recognized by plaintiff, there is only one issue presented by this case: did PBGC correctly determine that QAS's cessation of covered operations “resulted in substantial damage” to the Fund's contribution base? (Pl.'s Mot. at 6 (quoting 29 U.S.C. § 1383(d)(4)).) To decide this issue of statutory interpretation, the Court must decide whether PBGC's determination was arbitrary and capricious and contrary to law under the Administrative Procedure Act (“APA”), 5 U.S.C. § 706(2)(A), because it relied on the cumulative effect of the cessations of all withdrawn employers, as opposed to the effect of the cessation of the exiting employer—QAS. (Pl.'s Mot. at 12–13.)
Normally, a motion for summary judgment under Rule 56 shall be granted if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a), (c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). “In a case involving review of a final agency action under the [APA], however, the standard set forth in Rule 56 [ ] does not apply because of the limited role of a court in reviewing the administrative record.” Sierra Club v. Mainella, 459 F.Supp.2d 76, 89 (D.D.C.2006) (citation omitted). “Under the APA, it is the role of the agency to resolve factual issues to arrive at a decision that is supported by the administrative record, whereas ‘the function of the district court is to determine whether or not as a matter of law the evidence in the administrative record permitted the agency to make the decision it did.’ ” Id. at 90 (quoting Occidental Eng'g Co. v. I.N.S., 753 F.2d 766, 769–70 (9th Cir.1985)).
The APA provides that the reviewing court shall set aside an agency action that is found to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” or “in excess of statutory jurisdiction, authority, or limitations.” 5 U.S.C. § 706. An agency action is “arbitrary and capricious” if “the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.” Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). At its core, “to survive arbitrary and capricious review, an agency action must be the product of reasoned decisionmaking.” Fox v. Clinton, 684 F.3d 67, 74–75 (D.C.Cir.2012). The arbitrary and capricious standard of review is highly deferential; the reviewing court will “defer to the wisdom of the agency, provided its decision is reasoned and rational.” Dillmon v. Nat'l Transp. Safety Bd., 588 F.3d 1085, 1089 (D.C.Cir.2009) (citations and quotation marks omitted); see also Fox, 684 F.3d at 74–75 (...
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