Resilient Floor Covering Pension Fund v. M&M Installation, Inc.

• Decision Date: 29 February 2012
• Docket Number: No. C08-5561 BZ,C08-5561 BZ
• Court: U.S. District Court — Northern District of California
• Parties: RESILIENT FLOOR COVERING PENSION FUND, et al., Plaintiff(s), v. M & M INSTALLATION, INC., et al, Defendant(s).

RESILIENT FLOOR COVERING PENSION FUND, et al., Plaintiff(s),
v.
M & M INSTALLATION, INC., et al, Defendant(s).

No. C08-5561 BZ

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

Dated: February 29, 2012

ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

This case is before me on remand from the Ninth Circuit to resolve cross-motions for summary judgment. The Circuit "encouraged" me to consider whether Simas Floor is liable to Plaintiffs under section 1392(c) of the MPPAA for engaging in a transaction, a principal purpose of which was to "evade or avoid" withdrawal liability.¹ Resilient Floor Covering Pension Fund, et al. v. M&M Installation, Inc., 630 F.3d 848, 855 (9th Cir. 2010). The Circuit also instructed me to

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determine whether "sections 1301(b)(1) and 1392(c) [of the MPPAA] are the sole means for recovery of withdrawal liability from companies related to the union signatory" and to "revisit whether a triable issue of fact exists" regarding the second element of the alter ego standard set forth in UA Local 343 v. Nor-Cal Plumbing, Inc., 48 F.3d 1465 (9th Cir. 1994). Id. The parties have raised a few other issues, including veil piercing and successor liability.

The factual background of this case remains undisputed and is set forth in detail in both my prior order (Resilient Floor Covering Pension Fund v. M & M Installation, Inc., 651 F. Supp. 2d 1057 (N.D. Cal. 2009)), as well as in the Ninth Circuit's order (630 F.3d 848), and will not be repeated here. New, material facts introduced by the parties are noted below.²

LIABILITY UNDER SECTION 1392(c)

Section 1392(c) provides that "[i]f a principal purpose of any transaction is to evade or avoid liability under this part, this part shall be applied (and liability shall be determined and collected) without regard to such transaction." 29 U.S.C. § 1392(c). The term "purpose" is not defined in the statute, and the Ninth Circuit has never construed this word as used in this section. The word must therefore be construed in accordance with its ordinary and natural meaning, United States v. Alvarez-Sanchez, 511 U.S. 350, 357 (1994); and "the overall policies and objectives of the statute." Brown v.

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Gardner, 513 U.S. 115, 117-19 (1994).

The noun "purpose" means "something one intends to get or do; intention; aim," and the verb means "[t]o intend, resolve, or plan." Webster's New World Dictionary of the American Language (2d ed. 1972). Other courts that have confronted this issue have determined that section 1392(c) requires knowledge, intent or awareness of the withdrawal liability before liability can be imposed under this section. See, e.g., SUPERVALU, Inc. v. Bd. of Trs. of the Southwestern Pa. & W. Md. Area Teamsters & Emplrs. Pension Fund, 500 F.3d 334, 341 (3d Cir. 2007) (stating that section 1392(c) requires "intent" and that employers are prohibited from acting "in bad faith"); Santa Fe Pac. Corp. v. Central States, Southeast & Southwest Areas Pension Fund, 22 F.3d 725, 727 (7th Cir. 1994) ("The issue is purpose, a state of mind inferred from testimony and other evidence."); I.L.G.W.U. Nat'l Retirement Fund v. Edelman, Case No. 92-4890, 1995 U.S. Dist. LEXIS 742, WL 25912, at *10 (S.D.N.Y. Jan. 23, 1995) ("Without any evidence that the Defendants . . . had access to knowledge about a withdrawal liability, this Court cannot rule that, as a matter of law, a principal purpose of the Defendants' transfers was to avoid or evade withdrawal liability."); Chicago Truck Drivers, Helpers & Warehouse Workers Union Pension Fund v. Zacek Indus., Inc., Case No. 92-2253, 1994 U.S. Dist. LEXIS 6483, WL 201042 (N.D. Ill. May 17, 1994)("ERISA provides that withdrawal liability shall be determined without regard to transactions, which have as a principal purpose the intent to evade or avoid such

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liability.").

Based on the plain language of the statute, and other courts' interpretation of the term "purpose," it appears that there is an intent or knowledge requirement, i.e., that in order to be found liable under this section, an employer must have been aware of its withdrawal liability and must have entered into a transaction, a principal purpose of which was to evade or avoid the liability. Put differently, this section does not seem to apply to situations where an employer engages in a transaction, the effect of which is to evade or avoid withdrawal liability, unless the employer was aware of its liability and factored that into its decision.

Here, there is no evidence that either Simas Floor or M & M had the intent required by the statute. All parties agree that Simas Floor and M & M first became aware of M & M's withdrawal liability in October 2004, when they received the Pension Fund's notice. Since neither Simas Floor nor M & M knew of M & M's withdrawal liability until that time, no transaction committed before then had a specific purpose of evading that liability. Nor have Plaintiffs provided evidence of a transaction after October 2004 that Simas Floor or M & M engaged in, a principal purpose of which was to avoid the withdrawal liability. Instead, as Simas Floor points out, M & M paid the withdrawal liability for three and a half years after it received the Pension's notice before winding up its operations in April 2008.

In light of the undisputed evidence on the record, Plaintiffs have failed to show that Simas Floor or M & M

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engaged in a transaction, a principal purpose of which was to evade or avoid M & M's withdrawal liability. Accordingly, Defendants' motion on Plaintiffs' section 1392(c) claim is GRANTED and Plaintiffs' motion is DENIED.

APPLICATION OF THE ALTER EGO DOCTRINE TO ERISA

I turn next to whether sections 1301(b)(1) and 1392(c) are the sole means for recovery of withdrawal liability from companies related to the union signatory.³ If the answer is yes, Simas Floor cannot be held responsible for M & M's withdrawal liability under an "alter ego" theory.

A statutory remedy is the exclusive remedy for a violation of that statute in two instances: (1) where Congress expressly has stated it is the exclusive remedy; or (2) where Congress has enacted such a comprehensive remedial scheme that it clearly intended there be no other remedy. See Golden State Transit Corp. v. Los Angeles, 493 U.S. 103, 106-7 (1989). The key to the inquiry is the intent of the Legislature. "We look first, of course, to the statutory language, particularly to the provisions made therein for enforcement and relief. Then we review the legislative history and other traditional aids of statutory interpretation

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to determine congressional intent." Middlesex Cty. Sewerage Auth. v. Sea Clammers, 453 U.S. 1, 13 (1981).

Nothing in section 1392(c) explicitly states it is the exclusive remedy, and Defendants do not so contend.⁴ When Congress wants exclusivity, it knows how to draft such a provision, as in section 1341 of ERISA, which states that a plan "may be terminated only" in accordance with specified subsections. 29 U.S.C. § 1341(a)(1), (b)(1). Section 1392(c) does not include such restrictive language.

Nor is there any evidence that Congress intended section 1392(c) to be an exclusive remedy when it enacted the MPPAA. Congress enacted ERISA to protect employees' pension rights. Milwaukee Brewery Workers' Pension Plan v. Jos. Schlitz Brewing Co., 513 U.S. 414, 416 (1995). It repeatedly recognized that it was promulgating "minimum standards" to ensure "the equitable character of such plans and their financial soundness." 29 U.S.C. § 1001 b(c)(3). Finding that ERISA "did not adequately protect plans from the adverse consequences that resulted when individual employers terminated their participation in, or withdrew from, multiemployer plans," Congress then promulgated the MPPAA. Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S.

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717, 722 (1984); Bay Area Laundry & Dry Cleaning Pension Trust Fund v. Ferbar Corp., 522 U.S. 192, 196 (1997). The MPPAA was designed "(1) to protect the interests of participants and beneficiaries in financially distressed multiemployer plans, and (2) . . . to ensure benefit security to plan participants." H.R. Rep. No. 869, 96th Cong., 2d Sess. 71, reprinted in 1980 U.S. Code Cong. & Ad. News 2918, 2939; see also Nat'l Shopmen Pension Fund v. Disa, 583 F.Supp.2d 95, 99 (D.D.C. 2008) ("[T]he withdrawal liability payment requirement generally 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.") (citing Milwaukee Brewery, 513 U.S. at 416; Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 216 (1986); R.A. Gray & Co., 467 U.S. at 722-23).

With these goals in mind, Congress can not have intended section 1392(c) to be the "sole route of redress for evading or avoiding withdrawal liability." Resilient Floor, 630 F.3d at 851. To begin, Congress permitted plan fiduciaries, such as plaintiffs seeking to recover withdrawal liability, to "bring an action for appropriate legal or equitable relief, or both." 29 U.S.C. § 1451. Nothing in this broad remedial section suggests that Congress intended plan fiduciaries to be limited to section 1392(c) as the "sole route of redress" in a situation such as this.

Second, as pointed out by...