Sofco Erectors, Inc. v. Trs. of the Ohio Operating Eng'rs Pension Fund

Decision Date28 September 2021
Docket NumberNos. 20-3639/3671,s. 20-3639/3671
Citation15 F.4th 407
Parties SOFCO ERECTORS, INC., Plaintiff-Appellee/Cross-Appellant, v. TRUSTEES OF the OHIO OPERATING ENGINEERS PENSION FUND; Ohio Operating Engineers Pension Fund, Defendants-Appellants/Cross-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit

ARGUED: Daniel J. Clark, VORYS, SATER, SEYMOUR AND PEASE LLP, Columbus, Ohio, for Appellants/Cross-Appellees. Gary L. Greenberg, JACKSON LEWIS P.C., Cincinnati, Ohio, for Appellee/Cross-Appellant. Michael J. Prame, GROOM LAW GROUP, CHARTERED, Washington, D.C., Yaakov M. Roth, JONES DAY, Washington D.C., for Amici Curiae. ON BRIEF: Daniel J. Clark, Allen S. Kinzer, Daniel E. Shuey, VORYS, SATER, SEYMOUR AND PEASE LLP, Columbus, Ohio, for Appellants/Cross-Appellees. Gary L. Greenberg, Mark B. Gerano, JACKSON LEWIS P.C., Cincinnati, Ohio, for Appellee/Cross-Appellant. Michael J. Prame, GROOM LAW GROUP, CHARTERED, Washington, D.C., Yaakov M. Roth, JONES DAY, Washington D.C., Adam G. Unikowsky, JENNER & BLOCK LLP, Washington, D.C., Andrew M. Johnstone, US FOODS, INC., Rosemont, Illinois, Thomas W.H. Barlow, KOSTOPOULOS RODRIGUEZ, PLLC, Birmingham, Michigan, Gregory J. Ossi, FAEGRE DRINKER BIDDLE & REATH LLP, Washington, D.C., Kathleen Keller, BREDHOFF & KAISER, P.L.L.C., Washington, D.C., Ronald L. Mason, Aaron T. Tulencik, MASON LAW FIRM CO., LPA, Dublin, Ohio, Brendan Collins, GKG LAW, P.C., Washington, D.C., Paul A. Green, MOONEY, GREEN, SAINDON, MURPHY & WELCH P.C., Washington, D.C., for Amici Curiae.

Before: COOK, GRIFFIN, and LARSEN, Circuit Judges.*

LARSEN, J., delivered the opinion of the court in which COOK, J., joined, and GRIFFIN, J., joined in all but Part IV. GRIFFIN, J. (pp. 434-35), delivered a separate opinion concurring in part and dissenting in part.

LARSEN, Circuit Judge.

Sofco Erectors, Inc. terminated its collective bargaining agreement with a local union. The Ohio Operating Engineers Pension Fund then assessed almost a million dollars in withdrawal liability against Sofco under the Employee Retirement Income Security Act (ERISA). Sofco challenged the assessment on several grounds in ERISA-mandated arbitration. The arbitrator upheld the assessment, but the district court affirmed in part and reversed in part. The Fund appealed, and Sofco cross-appealed. For the reasons that follow, we AFFIRM in part, REVERSE in part, VACATE in part, and REMAND for further proceedings.

I. Background
A. Legal Background

Through ERISA, Congress created a comprehensive statutory scheme to regulate private pension plans. Nachman Corp. v. PBGC , 446 U.S. 359, 361–62, 100 S.Ct. 1723, 64 L.Ed.2d 354 (1980) (citing 29 U.S.C. § 1001(a) ). Informed by nearly a decade of research, id . at 361, 100 S.Ct. 1723, ERISA established reporting and disclosure requirements, 29 U.S.C. § 1021 ; minimum funding standards, id. § 1082; fiduciary duties, id. § 1104; and plan termination insurance, id. §§ 1322, 1322a. It also established the Pension Benefit Guaranty Corporation (PBGC), an administrative agency under the Department of Labor that manages the plan termination insurance program. See id. § 1302; PBGC v. LTV Corp. , 496 U.S. 633, 637, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990).

ERISA differentiates between single-employer and multiemployer pension plans. See 29 U.S.C. § 1002(41). Multiemployer plans are "maintained pursuant to one or more collective bargaining agreements," "to which more than one employer is required to contribute." Id. § 1002(37)(A)(i), (ii). These plans provide benefits for union members who work for employers in the same industry. See PBGC, Introduction to Multiemployer Plans , https://www.pbgc.gov/prac/multiemployer/introduction-to-multiemployer-plans (Sept. 13, 2021). Employees do not sacrifice pension benefits by working for multiple employers because service for any contributing employer is credited by the plan. Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Tr. for S. Cal. , 508 U.S. 602, 605–06, 113 S.Ct. 2264, 124 L.Ed.2d 539 (1993). A board of trustees administers these plans. Participating unions select half of the board's members; contributing employers select the other half. Connolly v. PBGC , 475 U.S. 211, 232, 106 S.Ct. 1018, 89 L.Ed.2d 166 (1986) (O'Connor, J., concurring).

ERISA requires that multiemployer pension funds prepare annual financial reports and actuarial valuations. E.g. , 26 U.S.C. § 6059 ; 29 U.S.C. § 1023. The funds must also meet minimum-funding standards. 26 U.S.C. §§ 412, 431 ; 29 U.S.C. §§ 1082, 1084. If they do not, contributing employers are subject to a tax. 26 U.S.C. § 4971. In addition, funds become subject to certain rehabilitation requirements if their funding levels are too low. See id. § 432.

In the late 1970s, Congress directed the PBGC to report on the challenges of insuring multiemployer pension plans and to propose legislative solutions. PBGC v. R.A. Gray & Co. , 467 U.S. 717, 721, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984) ; S. Rep. No. 95-570, at 7 (1977). The PBGC found that ERISA did not adequately protect multiemployer plans from individual employer withdrawals. R.A. Gray , 467 U.S. at 722, 104 S.Ct. 2709 ; PBGC, Multiemployer Study Required by P.L. 95–214, at 95 (1978). As the Supreme Court noted:

A key problem of ongoing multiemployer plans, especially in declining industries, is the problem of employer withdrawal. Employer withdrawals reduce a plan's contribution base. This pushes the contribution rate for remaining employers to higher and higher levels in order to fund past service liabilities, including liabilities generated by employers no longer participating in the plan, so-called inherited liabilities. The rising costs may encourage—or force—further withdrawals, thereby increasing the inherited liabilities to be funded by an ever decreasing contribution base. This vicious downward spiral may continue until it is no longer reasonable or possible for the pension plan to continue.

Connolly , 475 U.S. at 216, 106 S.Ct. 1018 (quoting Pension Plan Termination Insurance Issues: Hearings before the Subcomm. on Oversight of the H. Comm. on Ways and Means , 95th Cong., at 22 (1978) (statement of Matthew M. Lind)). Thus, the PBGC recommended imposing withdrawal liability on employers leaving multiemployer plans, requiring them to pay for their "fair share of the plan's unfunded liabilities." R.A. Gray , 467 U.S. at 723 & n.3, 104 S.Ct. 2709 (quoting Lind at 23). This would both discourage withdrawals and protect plans from their negative financial effects. Connolly , 475 U.S. at 217, 106 S.Ct. 1018. Congress incorporated these recommendations into the Multiemployer Pension Plan Amendments Act (MPPAA), Pub. L. 96-364, 94 Stat 1208, 29 U.S.C. §§ 1381 – 1461, which became law on September 26, 1980. Concrete Pipe , 508 U.S. at 609, 113 S.Ct. 2264.

The MPPAA imposes liability for complete and partial withdrawals from multiemployer pension plans. See 29 U.S.C. §§ 1383, 1385. But Congress designed special rules for the construction industry because its work often fluctuates and is done on a project-by-project basis. See id. §§ 1383(b), 1388(d) ; see also Definition of "Building and Construction Industry," 47 Fed. Reg. 42588-02, 1982 WL 132214 (proposed Sept. 28, 1982). When a construction employer stops contributing to a plan (for example, because its project is over), the plan's contribution base does not necessarily decline in response; the workers employed by the withdrawing construction firm are often hired for other projects by other contributing employers. H.C. Elliott, Inc. v. Carpenters Pension Tr. Fund for N. Cal. , 859 F.2d 808, 811 (9th Cir. 1988). The plan is not threatened as long as contributions continue to be made for work done in that area. Id. at 812. Thus, the construction industry rules focus on whether the employer, though no longer contributing to the plan, continues to perform work for which contributions were previously required. Id. Only then is withdrawal liability imposed. See id. ; 29 U.S.C. § 1383(b)(2).

Lastly, through ERISA and the MPPAA, Congress has established a comprehensive scheme for assessing and challenging an assessment to withdrawal liability. Concrete Pipe , 508 U.S. at 609, 113 S.Ct. 2264. When an employer withdraws from a multiemployer plan, the plan sponsor is responsible for assessing withdrawal liability and sending the employer a demand for payment. 29 U.S.C. §§ 1382, 1399. The plan sponsor is the organization that establishes and maintains the plan. Id. § 1002(16)(B). Here, the sponsor is the Ohio Operating Engineers Pension Fund (the Fund). Withdrawal liability is calculated by professional actuaries who must use "actuarial assumptions and methods which, in the aggregate, are reasonable (taking into account the experience of the plan and reasonable expectations) and which, in combination, offer the actuary's best estimate of anticipated experience under the plan." Id. § 1393(a)(1). If the employer disagrees with the assessment, it can request that the plan review it. Id. § 1399(b)(2)(A).

ERISA prohibits employers from challenging a plan's assessment directly in federal court; the plan and the employer must arbitrate their disputes first and then appeal the arbitrator's decision. Id. § 1401(a)(1), (b)(2). The arbitrator must presume that the plan sponsor's factual determinations are correct unless the employer disproves a determination by a preponderance of the evidence. Id. § 1401(a)(3)(A); Sherwin-Williams Co. v. N.Y. State Teamsters Conf. Pension & Ret. Fund , 158 F.3d 387, 392 (6th Cir. 1998) (citing Concrete Pipe , 508 U.S. at 629, 113 S.Ct. 2264 ). To challenge an actuary's calculation of withdrawal liability, the employer must show "that the actuarial assumptions and methods used in the determination were, in the aggregate, unreasonable (taking into account the experience of the plan and reasonable expectations), or the plan's actuary made a significant error in applying the...

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