S. City Motors, Inc. v. Auto. Indus. Pension Trust Fund

• Decision Date: 25 May 2018
• Docket Number: Case No. 17-cv-04475-JST
• Court: U.S. District Court — Northern District of California
• Parties: SOUTH CITY MOTORS, INC., et al., Plaintiffs, v. AUTOMOTIVE INDUSTRIES PENSION TRUST FUND, et al., Defendants.

SOUTH CITY MOTORS, INC., et al., Plaintiffs, v. AUTOMOTIVE INDUSTRIES PENSION TRUST FUND, et al., Defendants.

Case No. 17-cv-04475-JST

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

May 25, 2018

ORDER DENYING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANTS' CROSS-MOTION FOR SUMMARY JUDGMENT

Re: ECF No. 22, 23

Before the Court is Plaintiffs' motion for summary judgment, ECF No. 22, and Defendants' cross-motion for summary judgment, ECF No. 23.¹ The Court will deny Plaintiffs' motion and grant Defendants' motion.

I. BACKGROUND

Plaintiffs, South City Motors, Inc., Capital Expressway Ford, Inc., and Sunnyvale/Peninsula Ford of Sunnyvale, are motor dealerships associated with Plaintiff, Ford Motor Company. ECF No. 22-1 at 6. Plaintiffs contributed to Defendant Automotive Industries Pension Trust Fund ("the Trust Fund") at various times. ECF No. 20 at 390. The Trust Fund is a multiemployer pension plan established under the Employee Retirement Income Security Act of 1974 ("ERISA") as amended by the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"). ECF No. 20 at 213; ECF No. 23 at 8.

In 2005, South City Motors and Capitol Expressway entered into collective bargaining agreements that required each to make contributions to the Fund. ECF No. 20 at 361. South City Motors signed a Pension Agreement with the Trust Fund agreeing to be bound by the provisionsof the Trust Agreement in September 2005. Id. at 360-61. Capitol Expressway signed a Pension Agreement effective on August 27, 2005. Id. at 361.

The dispute in this case concerns Plaintiffs' withdrawal liability to the Trust Fund. Under ERISA, pension plans may "impose proportional liability on withdrawing employers for the unfunded vested benefit obligations of multiemployer plans." Carpenters Pension Trust Fund for N. California v. Underground Const. Co., Inc., 31 F.3d 776, 778 (9th Cir. 1994). "Where a withdrawing employer's past contributions are insufficient to fund pension plan obligations that have already vested at the time of withdrawal, the MPPAA amendments enable plans 'to make withdrawing employers pay their proportionate share of the deficit such that remaining employers [will] not be unfairly saddled with increased payments.'" Auto. Indus. Pension Tr. Fund v. Tractor Equip. Sales, Inc., 73 F. Supp. 3d 1173, 1179 (N.D. Cal. 2014), aff'd, 672 F. App'x 685 (9th Cir. 2016) (quoting Carpenters Pension, 31 F.3d at 778).

This "withdrawal liability" is assessed against the withdrawing employer, and 29 U.S.C. § 1301(b)(1) defines "employer" to include not only the entity obligated to contribute to the pension plan, but also all "trades or businesses" that are under "common control" with that entity. See 29 U.S.C. § 1301(b)(1). Congress enacted section 1301(b)(1) "to prevent businesses from shirking their ERISA obligations by fractionalizing operations into many separate entities." Teamsters Pension Trust Fund-Bd. of Trustees of W. Conference v. Allyn Transp. Co., 832 F.2d 502, 507 (9th Cir.1987); see also, Bd. of Trustees of W. Conference of Teamsters Pension Trust Fund v. Lafrenz, 837 F.2d 892, 894 (9th Cir.1988) ("The point of section 1301(b)(1) is simply to prevent the controlling group . . . from avoiding withdrawal liability by shifting corporate assets into other business ventures under its control.").

Id. at 1179-80.

However, ERISA also permits a multiemployer plan to adopt a walk-away provision that allows employers to participate in that plan for a limited period of time without incurring pension withdrawal liability upon withdrawal from the plan. See ERISA § 4201; 29 U.S.C. § 1390(a). Such a term is called a "free look provision." The free look provision exempts an employer from withdrawal liability if the employer had an obligation to contribute to the plan after March 1, 2005 and meets certain conditions. See U.S.C. § 1390.

Around March 1, 2005, the Trust Fund amended its Trust Agreement to adopt a free look provision. ECF No. 20 at 360. This provision allowed an employer participant to withdraw from the plan if the employer had been participating for less than five years. Id. South City Motors and Capitol Expressway withdrew from the Plan after contributing for fewer than five years. Id. at 361. The Trust Fund issued a withdrawal assessment against South City Motors and "and all commonly controlled trades or businesses ('the Ford Control Group')." ECF No. 29 at 221. This assessment calculated "withdrawal liability on the basis of South City Motor's membership in a controlled group of contributing employers that were at least 80% owned by Ford, including the Dealerships." ECF No. 1 ¶ 33.

South City Motors, Ford Motor Company, and the Ford control group requested a review of the Trust Fund's 2012 withdrawal liability assessment. Id. at 390-91. On or about October 19, 2012, the Trust Fund rejected all of Plaintiffs' grounds for review. Id. On December 17, 2012, South City Motors, Capitol Expressway, Ford Motor Company, and the Ford control group demanded arbitration of the Trust Fund's withdrawal liability assessments. Id. at 391. On February 24, 2017, the Arbitrator issued an award in favor of the Trust Fund. See id. at 11-23. On May 22, 2017, the Arbitrator issued an order approving the Trust Fund's request for attorney's fees. See id. at 10. The Arbitrator issued a final award on July 8, 2017. See id. at 7. Plaintiffs filed an action seeking to modify or vacate the award on August 7, 2017. See ECF No. 1. Defendants filed an action seeking to enforce the award on the same day. See Automotive Industries Pension Trust Fund et al v. South City Motors, Inc., et al, No 17-cv-4491 JST, ECF No. 1.

II. LEGAL STANDARD

A. Summary Judgment

Summary judgment is proper when a "movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Where the party moving for summary judgment would bear the burden of proof at trial, that party "has the initial burden of establishing the absence of a genuine issue of fact on each issue material to its case." C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir.2000). Where the party moving for summary judgment would not bear the burden of proof at trial, that party "must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial." Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000). If the moving party satisfies its initial burden of production, the nonmoving party must produce admissible evidence to show that a genuine issue of material fact exists. Id. at 1102-03. If the nonmoving party fails to make this showing, the moving party is entitled to summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

B. Review of Arbitration Proceedings

"Upon completion of the arbitration proceedings in favor of one of the parties, any party thereto may bring an action, no later than 30 days after the issuance of an arbitrator's award, in an appropriate United States district court in accordance with section 1451 of this title to enforce, vacate, or modify the arbitrator's award." 29 U.S.C. § 1401(b)(2). "In any proceeding under subsection (b), there shall be a presumption, rebuttable only by a clear preponderance of the evidence, that the findings of fact made by the arbitrator were correct." 29 U.S.C. § 1401(c). "The arbitrator's conclusions of law are reviewed de novo. Whether a withdrawal within the meaning of the statute has occurred presents a mixed question of law and fact." Penn Cent. Corp. v. W. Conference of Teamsters Pension Tr. Fund, 75 F.3d 529, 533 (9th Cir. 1996) (internal quotation marks and citations omitted).

An arbitrator's award of attorney fees is reviewed for an abuse of discretion. GCIU-Employer Ret. Fund v. Quad/Graphics, Inc., 250 F. Supp. 3d 551, 558 (C.D. Cal. 2017) (citing Penn Cent. Corp. v. W. Conference of Teamsters Pension Trust Fund, 75 F.3d 529, 533 (9th Cir. 1996); see also Trs. of Utah Carpenters' & Cement Masons' Pension Trust v. Loveridge, 567 Fed.Appx. 659, 662 (10th Cir. 2014).

III. DISCUSSION

Parties have submitted a joint stipulated record in support of their motion for summary judgment. See ECF No. 20. Plaintiffs argue that (1) the Arbitrator erred by denying plaintiffs anevidentiary hearing and issuing an award on the Trust Fund's summary judgment motion; (2) the Arbitrator misapplied the law by failing to apply statutory withdrawal liability exemptions applicable to control group members; (3) the Arbitrator improperly interpreted the parties' 2007 settlement and permitted the Trust Fund to assess liability based on contribution histories pre-dating the settlement; and (4) the Trust Fund is not entitled to attorney's fees. ECF No. 22-1 at 2. Defendants argue that the Arbitrator did not err. ECF No. 23 at 3. Defendants seek "an order enforcing the Award and determining that the Trust Fund is entitled to recover reasonable attorney's fees and costs in these related cases." ECF No. 23 at 2.

The Court addresses Plaintiffs' arguments in turn.

A. The Arbitrator Did Not Err By Issuing An Award On Summary Judgment

Plaintiffs' first complaint is that the arbitrator entered summary judgment after briefing and oral argument, but without conducting a full evidentiary hearing. Plaintiffs contend the arbitrator lacked the authority to resolve the case in this fashion.

Arbitration proceedings to resolve disputes between an employer and the plan "shall be conducted in accordance with fair and equitable procedures to be promulgated by the corporation [Pension Benefit Guarantee Corporation or "PBGC"]." 29 U.S.C. § 1401(a)(2). The PBGC regulations establish "procedures, pursuant to section 4221 of ERISA, of withdrawal liability disputes." 29 C.F.R....