The Nat'l Ret. Fund v. The Ruprecht Co.
| Docket Number | 21-CV-4987 (CS) |
| Decision Date | 21 June 2023 |
| Parties | THE NATIONAL RETIREMENT FUND and the BOARD OF TRUSTEES OF THE NATIONAL RETIREMENT FUND, each on behalf of the Legacy Plan of the National Retirement Fund, Plaintiffs, v. THE RUPRECHT COMPANY, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Ronald E. Richman
Andrew Lowy
Schulte Roth & Zabel LLP
Counsel for Plaintiffs
Tulencik Law Firm LLC
Counsel for Defendant
Before the Court is the motion for summary judgment of Plaintiffs The National Retirement Fund and the Board of Trustees of the National Retirement Fund, each on behalf of the Legacy Plan of the National Retirement Fund (together, “Plaintiffs” or the “Fund”), (ECF No. 39), and the cross-motion for summary judgment of Defendant The Ruprecht Company (“Defendant” or “Ruprecht”), (ECF No. 43). For the following reasons, the Fund's motion is GRANTED and Ruprecht's cross-motion is DENIED.
A, Facts
The following facts are based on the parties' Local Civil Rule (“LR”) 56.1 Statements, (ECF No. 42 (“Fund 56.1 Stmt.”); ECF No. 46 (“Ruprecht 56.1 Stmt.”); ECF No. 49 (“Ruprecht 56.1 Resp.”); ECF No. 51 (“Fund 56.1 Resp.”)), and the evidentiary materials submitted by the parties, and are undisputed unless otherwise noted.[1]
The Fund is a Taft-Hartley trust fund that sponsors and administers the Legacy Plan of the National Retirement Fund (the “Plan”), a multi-employer pension plan, through its Trustees.
(Ruprecht 56.1 Resp. ¶¶ 1-3.) Prior to 2014, Ruprecht was obligated to contribute to the Fund on behalf of certain of its employees, pursuant to a collective bargaining agreement (“CBA”). (Id. ¶ 4.) On November 1, 2014, Ruprecht withdrew from the Fund. (Id. ¶ 5.)
Any such withdrawal triggers liability for the withdrawing party, and that withdrawal liability is calculated by the Fund. 29 U.S.C. § 1382. Before its withdrawal, Ruprecht requested that the Fund provide it with estimates for its withdrawal liability for the 2012 and 2013 plan years, which the Fund did. (Ruprecht 56.1 Stmt. ¶¶ 6-9.) Those estimates were calculated using an interest rate of 7.25% to determine the present value of vested benefits and employer annual contribution obligations. (Id. ¶ 10.) Shortly thereafter, the Fund sent Ruprecht a “Notice of Critical Status” indicating that the Fund was projected to have accumulated a funding deficiency during the next 10 plan years. (Id. ¶¶ 11-13; see ECF No. 44-6.) In September 2014, Ruprecht prepared internal withdrawal liability calculations in anticipation of a possible 2014 withdrawal, using information contained in the aforementioned estimates the Fund had provided for the 2012 and 2013 plan years. (Ruprecht 56.1 Stmt. ¶¶ 14-17.)
In December 2014, as part of negotiations for the sale of Ruprecht stock, Ruprecht and the buyer executed an agreement establishing an escrow account from which to pay Ruprecht's withdrawal liability. (See Id. ¶¶ 18-21; Ruprecht 56.1 Resp. ¶ 6; ECF No. 41-1 (“Escrow Agreement”).) The Escrow Agreement set aside $2,500,000 “to pay the assessed withdrawal liability to the . . . Fund” and contemplated that any such payment would be a lump sum, i.e., that “the Escrow Agent shall release from the . . . Escrow Account to the . . . Fund the amount of the Withdrawal Liability Notice, and the . . . Escrow Amount shall be reduced to the extent thereof ....” (Escrow Agreement at 1, 5.) It also contemplated that if Ruprecht contested the withdrawal liability, it would pay the undisputed amount while the disputed amount remained in escrow. (See id. at 3-4.)
Sometime in 2013, the Fund replaced its longtime actuary Buck Consultants with Horizon Actuarial Services LLC (“Horizon”). (Ruprecht 56.1 Stmt. ¶¶ 29-30.) In June 2014, unbeknownst to Ruprecht, Horizon adjusted the interest rates used to determine both withdrawal liability and the Fund's minimum funding requirements. (Id. ¶ 34.) As to the former, it reduced the interest rate used to calculate withdrawal liability from 7.25% to 3.00-3.31%, and as to the latter it raised the interest rate used to calculate minimum funding requirements from 7.25% to 8.00%. (Id. ¶ 35.) Horizon also decided to apply these interest rate changes retroactively to December 31, 2013, the measurement date the Fund was legally obligated to use to calculate Ruprecht's withdrawal liability. (Id. ¶ 37.) That retroactive application increased Ruprecht's withdrawal liability by over $5.5 million. (Id. ¶ 38.)
In January 2015, the Fund assessed Ruprecht with withdrawal liability in the amount of $7,641,914, to be paid in eighty quarterly installments of $99,323.52 each (the “Original Assessment”). (Ruprecht 56.1 Resp. ¶ 8.) Approximately one month later, Ruprecht amended the Escrow Agreement to provide for quarterly disbursements, i.e., “periodic payments from the Pension Escrow Account.” (ECF No. 41-2 (“Escrow Agreement Amendment”) at 1; Ruprecht 56.1 Resp. ¶ 10.) Pursuant to that amendment, Ruprecht instructed its escrow agent to make payments to Plaintiffs on a quarterly basis. (Ruprecht 56.1 Resp. ¶ 10.) Because it was paying in installments rather than in full, interest accrued on the outstanding amount. (See Ruprecht 56.1 Stmt. ¶¶ 26, 54.)
On November 24, 2015, Ruprecht filed for arbitration challenging its withdrawal liability under the Original Assessment. (Ruprecht 56.1 Resp. ¶ 11; see ECF No. 48-1.) Around or about the same time, the Fund was engaged in arbitration with Metz Culinary Management, Inc., (“Metz”), another employer that also withdrew from the Fund in 2014, over Metz's withdrawal liability. (Ruprecht 56.1 Resp. ¶¶ 12-13.) Metz argued that the Fund could not use the lower interest rate assumption chosen by Horizon in 2014 for calculating withdrawal liability for employers that withdrew during that year. (Id. ¶ 13.) The arbitrator ruled in favor of Metz, and the Fund filed a lawsuit in this Court to vacate the arbitral award, (id. ¶ 15), which resulted in the arbitrator being reversed and the interest rate selected by Horizon to calculate Metz's withdrawal liability being upheld, (id. ¶ 16). Specifically, District Judge Valerie Caproni determined that ERISA does not “prohibit a plan's actuary from selecting the withdrawal liability interest rate assumption after the Measurement Date.” Nat'l Ret. Fund. v. Metz Culinary Mgmt., Inc. (Metz I), No. 16-CV-2408, 2017 WL 1157156, at *5 (S.D.N.Y. Mar. 27, 2017), vacated and remanded, 946 F.3d 146 (2d Cir. 2020).[2] Metz appealed that decision to the Second Circuit, (Ruprecht 56.1 Resp. ¶ 17), which reversed Judge Caproni and determined that “the assumptions and methods used to calculate the interest rate assumption for purposes of withdrawal liability must be those in effect as of the Measurement Date,” Nat'l Ret. Fund v. Metz Culinary Mgmt., Inc. (Metz II), 946 F.3d 146, 151 (2d Cir. 2020).
In January 2020, following the Second Circuit's decision in Metz II, Ruprecht pursued the Metz issue - i.e., the propriety of the interest rate used to calculate its withdrawal liability -in its arbitration with the Fund. (Ruprecht 56.1 Resp. ¶ 20.) The Fund contended that the arbitrator should not address the issue pending its petition for certiorari with the United States Supreme Court. (Ruprecht 56.1 Stmt. ¶ 44.) After that petition was denied on October 5, 2020, (id. ¶ 47), the Fund issued a revised assessment to Ruprecht (the “Revised Assessment”) using the interest rate that the Second Circuit in Metz II held was proper. (Ruprecht 56.1 Resp. ¶ 21.) The Revised Assessment reduced Ruprecht's withdrawal liability from $7,641,914, (id. ¶ 8), to $2,160,216, (id. ¶ 22). That sum resulted in an updated payment schedule of twenty-seven quarterly payments that totaled $2,664,072.91, $503,856.92 of which was interest. (Ruprecht 56.1 Stmt. ¶ 52.) The Fund calculated that under the Revised Assessment, Ruprecht owed it four additional liability payments of $99,323.52 each, due on December 1, 2020, March 1, 2021, June 1, 2021, and September 1, 2021. (Ruprecht 56.1 Resp. ¶¶ 23-24.) At the time the Revised Assessment was issued, Ruprecht had already paid the Fund a total of $2,284,440.96, well in excess of the $2,160,216 in principal called for by the Revised Assessment. (Ruprecht 56.1 Stmt. ¶¶ 51, 53.)
Apparently in the belief that it should not have to pay anything further because it had been prepared back in 2015 to pay a lump sum that would have covered its liability had the Fund correctly calculated it, (id. ¶¶ 54-56; Ruprecht 56.1 Resp. ¶ 34), Ruprecht did not make the first quarterly payment due on December 1, 2020, (Ruprecht 56.1 Resp. ¶ 25). The Fund sent Ruprecht a letter dated February 3, 2021, noting that it had not received the December payment and that the outstanding amount would accumulate interest on a daily basis until the Fund received payment. (Id. ¶ 26.) Ruprecht responded on February 18, 2021, stating that it would not furnish the missed payment and alleging that the Fund owed Ruprecht money for the interest the Fund had collected to date on the quarterly installments that Ruprecht had previously paid pursuant to the Original Assessment. (Id. ¶ 27.) The Fund responded on March 26, 2021, maintaining that any challenge to the Revised Assessment had to be handled through the ongoing arbitration, and that Ruprecht had an obligation to pay the quarterly withdrawal liability payments to the Fund even while challenging the Revised Assessment. (Id. ¶ 28.) The Fund also noted that as of March 26, it had not received the outstanding December 1, 2020 quarterly payment or the next payment that had been due on March 1, 2021. (Id. ¶ 29.) In that same letter, the Fund advised Ruprecht that it would file an action in federal court to collect...
To continue reading
Request your trial