Resilient Floor Covering Pension Trust Fund Bd. of Trs. v. Michael's Floor Covering, Inc.
| Decision Date | 28 September 2016 |
| Docket Number | Case No. 11-cv-05200-JSC |
| Parties | RESILIENT FLOOR COVERING PENSION TRUST FUND BOARD OF TRUSTEES, et al., Plaintiffs, v. MICHAEL'S FLOOR COVERING, INC., Defendant. |
| Court | U.S. District Court — Northern District of California |
Plaintiffs, a multi-employer pension fund and its board of trustees, seek a declaration that Defendant Michael's Floor Covering, Inc. is responsible for withdrawal liability under the Employee Retirement Income Security Act of 1974 ("ERISA") as a successor to a now-closed flooring company. Following a bench trial, the Court found that that Michael's is not a successor employer and entered judgment for Michael's. The Ninth Circuit reversed and remanded and Michael's now moves for summary judgment. (Dkt. No. 161.) Having considered the parties' briefs and having had the benefit of oral argument on July 7, 2016, and supplemental briefing following the hearing, the Court GRANTS Michael's motion for summary judgment. Because the record does not support an inference that Michael's had notice of the predecessor flooring company's potential withdrawal liability it is not liable as a successor employer.
Studer's Floor Covering, Inc. ("Studer's") performed sales and installation of residential and commercial flooring products in and around the Vancouver, Washington and Portland, Oregon market from 1960 to 2009. (Dkt. No. 19 ¶¶ 5, 7.) Studer's shareholders dissolved the corporation in December 2009. (Dkt. No. 19 ¶ 8.) Prior to its dissolution, Studer's was a party to a collective bargaining agreement ("CBA") with the Linoleum, Carpet and Soft Tile Applicators Local Union No. 1236, which is affiliated with District Council No. 5 of the International Union of Painters and Allied Trades, AFL-CIO ("IUPAT" or "Union"). (Dkt. No. 19 ¶ 6.) Pursuant to the CBA, Studer's made contributions for all Studer's employees performing work covered under the CBA. (Dkt. No. 19 ¶ 7.) On or about January 6, 2010, Studer's sent formal notice of its dissolution to Plaintiffs, enclosing its final pension contribution under the CBA and advising that Studer's was no longer a contributing employer. (Dkt. Nos. 19 ¶ 12; 19-2 at 7.1)
In October 2009, shortly before Studer's liquidation, Michael Haasl, who had been a salesman at Studer's for 19 years, incorporated Michael's Floor Covering, Inc. (Dkt. No. 18 ¶ 20.) The day after Studer's closed, on January 1, 2010, Haasl opened Michael's in the location previously occupied by Studer's.
Approximately eight months later, on August 4, 2011, Plantiffs sent notices to Studer's and Michael's, as Studer's successor, claiming withdrawal liability in the amount of $2,291,014. (Dkt. No. 19-1.) Studer's and Michael's separately requested review of the assessment of withdrawal liability. (Dkt. Nos. 159-1; 160-1.) Studer's and Plaintiffs entered into a tolling agreement for Studer's deadline to request arbitration and an assessment of any interim payments to allow Plaintiffs time to review and respond to Studer's review request. (Dkt. No. 160-1 at 1.)
Shortly thereafter, Plaintiffs sued Michael's asserting two claims for relief: (1) for withdrawal liability, and (2) for unpaid contributions. (Dkt. No. 1.) Plaintiffs and Michael's then entered into a tolling agreement tolling Michael's deadline to initiate arbitration until 90 days after entry of a final non-appealable order and judgment in this action. (Dkt. No. 159-1 at 1.) Sixmonths later, Plaintiffs amended the complaint to include a claim for declaratory relief seeking a judicial determination that Michael's was a substantial continuation of Studer's such that it is liable as a successor employer for Studer's withdrawal liability or unpaid contributions under the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA").2 (Dkt. No. 32.)
The parties thereafter filed cross-motions for summary judgment. (Dkt. Nos. 67 & 71.) At the hearing on these motions, the parties stipulated to the Court converting the motions into a bench trial and making findings of fact. (Dkt. No. 100.) The Court found that Michael's was not a successor to Studer's because its business was not a substantial continuation of Studer's and thus Michael's was not liable for either withdrawal liability or unpaid contributions. (Dkt. No. 107.) Plaintiffs appealed and the Ninth Circuit Court of Appeals reversed and remanded. See Resilient Floor Covering Pension Trust Fund Bd. of Trustees v. Michael's Floor Covering, Inc., 801 F.3d 1079 (9th Cir. 2015) ("Resilient"), cert. denied sub nom. Michael's Floor Covering, Inc. v. Resilient Floor Covering Pension Fund, No. 15-1118, 2016 WL 866494 .
Following remand, Plaintiffs filed a federal action against Studer's seeking interim withdrawal liability payments. Resilient Floor Covering Pension Trust Fund Board of Trustees et al v. Studer's Floor Covering, Inc. ("Studer's), No. 16-2468 JSC, Dkt. No. 1. The Studer's action was related to this case and Studer's has since answered and counterclaimed. Studer's, No. 16-2468, Dkt. Nos. 6, 18.
Michael's also filed the now pending motion for summary judgment in this action. (Dkt. No. 161.) The only new evidence offered with the motion is two supplemental declarations: a second supplemental declaration from Scott Studer (Dkt. No. 160) and a fifth supplemental declaration from Michael Haasl (Dkt. No. 159). At oral argument, the Court ordered the parties to submit supplemental briefing on the issue of notice, which they have since done. (Dkt. Nos. 170,171, 173.)
Michael's moves for summary judgment on all of Plaintiffs' claims for relief: declaratory relief, withdrawal liability, and unpaid contributions. At oral argument, Plaintiffs clarified that their primary claim is for declaratory relief—Plaintiffs seek a declaration that Michael's is a successor employer to Studer's and thus liable for Studer's withdrawal liability. Plaintiffs agreed that their withdrawal liability claim could only be adjudicated if Michael's waived arbitration, which it has yet to do, and they have abandoned their claim for unpaid contributions.3 Therefore, the question for the Court is whether a reasonable trier of fact could find that Michael's is a substantial continuation of Studer's and had notice of the potential withdrawal liability such that the Court could declare that Michael's is a successor to Studer's and thus liable for Studer's withdrawal liability.
Michael's contends that Plaintiffs' declaratory relief claim fails because Plaintiffs must establish Studer's withdrawal liability as a condition precedent to declaring Michael's successor liability. The liability has not been established because Plaintiffs and Studer's entered into a tolling agreement following Studer's challenge to Plaintiffs' assessment. And this Court cannot establish that liability since disputes regarding ERISA withdrawal liability must be arbitrated. See 29 U.S.C. § 1401(a)(1); Tsareff v. ManWeb Servs., Inc., 794 F.3d 841, 850 (7th Cir. 2015); Teamsters Pension Trust Fund-Bd. of Trustees of W. Conference v. Allyn Transp. Co., 832 F.2d 502, 504 (9th Cir. 1987) (citing Section 1401(a)(1)). At oral argument, Michael's reframed this argument as an attack on this Court's subject matter jurisdiction contending that there is no "case or controversy" without Studer's liability having first been established. The Court construes theargument as one regarding ripeness.
The Declaratory Judgment Act provides that: "[i]n a case of actual controversy within its jurisdiction ... any court of the United States ... may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a). "[T]he phrase a case of actual controversy refers to the type of 'Cases' and 'Controversies' that are justiciable under Article III." MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007). "The constitutional ripeness of a declaratory judgment action depends upon whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." In re Coleman, 560 F.3d 1000, 1005 (9th Cir. 2009) (internal quotation marks omitted).
There is a substantial controversy between the parties here, and they have adverse legal interests. Plaintiffs assessed Studer's withdrawal liability in the August 4, 2011 letter. Under ERISA, such withdrawal liability is "presumed correct." See 29 U.S.C. § 1401(3)(A). Further, under ERISA's "pay now, dispute later" provisions, upon the employee benefit fund's assessment, an employer must pay the assessed withdrawal liability pending a final decision by an arbitrator. See 29 U.S.C. §§ 1399(c)(2), 1401(d); see also Lads Trucking Co. v. Bd. of Trustees of W. Conference of Teamsters Pension Trust Fund, 777 F.2d 1371, 1375 (9th Cir. 1985) (); see also LEE T. POLK, 3 ERISA PRACTICE AND LITIGATION § 12:7 (April 2016 Update) ("under the unforgiving 'pay now, dispute later' rule, the entire process of challenging a withdrawal liability assessment on the merits is separate from the employer's obligation to begin immediate payments to the fund—or risk default."). This understanding is consistent with the language of both Michael's and Studer's Tolling Agreements with Plaintiffs: the recitals in both state that (Dkt. Nos. 159-1 at 1; 160-1 at 1.) Plaintiffs now seek a...
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