Trs. of IAM Nat'l Pension Fund v. M & K Emp. Sols.
| Docket Number | 1:20-cv-433 (RCL) |
| Decision Date | 28 February 2022 |
| Parties | TRUSTEES OF THE IAM NATIONAL PENSION FUND, Plaintiffs, v. M & K EMPLOYEE SOLUTIONS, LLC, et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
This Court has twice now preliminarily enjoined certain defendants in this case-M & K Employee Solutions, LLC; M & K Employee Solutions, LLC-Alsip; M & K Employee Solutions LLC-Illinois Leasing; M & K Employee Solutions LLC-Joliet; M & K Employee Solutions, LLC-Northern Illinois; M & K Employee Solutions, LLC-Summit (collectively the “Employees Entities”), and Laborforce LLC[1]-to pay the Trustees of the IAM National Pension Fund (“the Trustees”) the withdrawal liability assessed by the Fund. ECF Nos. 22 & 70. Both times, defendants declined to do so, paying withdrawal liability to the Fund only after an arbitrator adjusted the withdrawal liability amount assessed. Now, defendants jointly move for summary judgment on all but one claim, arguing that they have paid the Fund the newly recalculated withdrawal liability and there is nothing more for this Court to do. Defs.' Mot. for Summ. J., ECF No. 100. The Court disagrees. Defendants flagrantly violated the well-established “pay now dispute later” rule, as well as this Court's explicit orders. They cannot moot this violation after the fact. The Trustees may be entitled by statute to liquidated damages, attorneys' fees, and costs.
Because this Court will DENY defendants' motion for partial summary judgment, it will address a number of other pending motions. Defendant Laborforce moves to dismiss the claims against them, alleging that the Trustees failed to properly allege successor liability in their Third Amended Complaint. ECF No. 71. The Court will DENY its motion. The Court will further GRANT the Trustees' motion to amend their complaint. ECF No. 91. The Court will DENY defendants' motion for a protective order, ECF No. 89, and GRANT the Trustees' motion to compel, ECF No. 90. Finally, the Trustees move for contempt of court. ECF Nos. 77 & 78. The Court will DENY their motions for civil contempt.
Congress enacted the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”), codified at 29 U.S.C. §§ 1381-1461, to “protect the financial solvency of multiemployer pension plans.” Bay Area Laundry & Dry Cleaning Pension Tr. Fund v. Ferbar Corp. of Cal., 522 U.S. 192, 196 (1997). The MPPAA, which amended the Employee Retirement Income Security Act (“ERISA”), commands employers who withdraw from underfunded multiemployer pension plans to pay “withdrawal liability.” Id. at 195. “Withdrawal liability” is comprised of an employer's share of a multiemployer pension plan's unfunded, unvested benefits. 29 U.S.C. § 1381(b)(1).
The MPPAA calls upon a plan's trustees, not the employer, to propose the amount of withdrawal liability and orders the trustees to set a payment schedule. Bay Area Laundry, 522 U.S. at 197 (citing 29 U.S.C. § 1399(b)(1)). Of course, an employer is not completely bound by the amount of withdrawal liability assessed by a plan's trustees. It may timely initiate a dispute-resolution procedure, first by requesting review from the trustees and later by pursuing arbitration. See 29 U.S.C. §§ 1399(b)(2), 1401(a)(1). Importantly, however, initiating a dispute of the amount of withdrawal liability or the payment plan does not relieve the employer of the duty to pay. “Even if the employer challenges the trustees' withdrawal liability determination . . . it must still pay according to the trustees' schedule in the interim.” Bay Area Laundry, 522 U.S. at 197 (emphasis added). This statutory requirement is colloquially referred to as the “pay now, dispute later” rule:
Withdrawal liability shall be payable in accordance with the schedule set forth by the plan sponsor under subsection (b)(1) of this section beginning no later than 60 days after the date of the demand notwithstanding any request for review or appeal of determinations of the amount of such liability or of the schedule.
29 U.S.C. § 1399(c)(2) (emphasis added); see also Bay Area Laundry, 522 U.S. at 197.
The “pay now, dispute later” rule is crucial to the survival of multiemployer pension funds. It “mitigates the risk that a multiemployer plan will collapse when an employer withdraws and contests the amount of withdrawal liability assessed.” Trs. of IAM Nat'l Pension Fund v. M & K Emp. Sols., LLC, No. 20-cv-433 (RCL), 2021 WL 1546947, at *8 (D.D.C. Apr. 20, 2021), ECF 69. Congress knew that without such a rule, the “purpose of MPPAA would be undermined” because “employers could postpone their debts to pension funds by engaging in protracted litigation over withdrawal liability.” Galgay v. Beaverbrook Coal Co., 105 F.3d 137, 139 (3d Cir. 1997). The rule also alleviates the risk that “during the course of arbitration, an employer will become insolvent, and the fund will not be able to collect in the event of a favorable award.” Findlay Truck Line, Inc. v. Cent. States, Se. & Sw. Areas Pension Fund, 726 F.3d 738, 742 (6th Cir. 2013).
To further emphasize the importance of the “pay now, dispute later” rule, Congress authorized multiple remedies for a plan when an employer violates the rule. A plan may “invoke a statutory acceleration provision” to demand all the unpaid withdrawal liability at once; it may sue to collect the withdrawal liability; and it may seek liquidated damages, attorneys' fees, and other costs. Bay Area Laundry, 522 U.S. at 197; see 29 U.S.C. §§ 1399(c)(5), 1451(a)(1), (b), (e). Liquidated damages are something an employer “must pay as a penalty for refusing to follow the statutory procedure for challenging assessments of withdrawal liability.” Cent. States, Se. & Sw. Areas Pension Fund v. Lady Baltimore Foods, Inc., 960 F.2d 1339, 1347 (7th Cir. 1992). “Liability for liquidated damages is separate from the underlying withdrawal liability itself.” Id.
The background of this case has been laid out in a previous memorandum opinion, Trustees of IAM Nat'l Pension Fund, 2021 WL 1546947 (D.D.C. April 20, 2021), ECF No. 69, but the Court will reiterate the salient facts here. M & K Truck was founded in Michigan as a network of commercial vehicle dealerships and service centers. Id. at *1. In mid-2012, M & K Truck assumed the operation of three existing dealerships in and around Chicago, Illinois. Id. The deal structured those transactions so that one group of LLCs (“the Sales Entities”) purchased the dealerships' assets and another group of LLCs (“the Employees Entities”) re-hired the dealership' employees. Id. The Employees Entities would then lease the rehired employees to the Sales Entities. Id.
The Employees Entities include M & K Employee Solutions, LLC and five Series LLCs created under it: M & K Employee Solutions, LLC-Alsip (“M & K Employees Alsip”); M & K Employee Solutions, LLC-Illinois Leasing (“M & K Employees Illinois Leasing”); M & K Employee Solutions, LLC-Joliet (“M & K Employees Joliet”); M & K Employee Solutions, LLC-Northern Illinois (“M & K Employees Northern Illinois”); and M & K Employee Solutions, LLC-Summit (“M & K Employees Summit”). Id. Rainelle Jansma was the sole member and manager of each of these LLCs when they were established. Id.
M & K Employees Alsip, M & K Employees Joliet, and M & K Employees Summit entered into collective-bargaining agreements with Automobile Mechanics' Local 701, International Association of Machinists and Aerospace Workers, AFL-CIO (“the Union”). Id. at *2. These agreements required M & K Employees Alsip, M & K Employees Joliet, and M & K Employees Summit to pay contributions into the IAM National Pension Fund (“the Fund”), a multiemployer pension plan managed in Washington, D.C. Id.
By December 31, 2018, M & K Employees Alsip, M & K Employees Joliet, and M & K Employees Summit ceased covered operations and thus effectuated a “complete withdrawal” from the Fund. Id. This complete withdrawal triggered a statutory obligation to pay withdrawal liability pursuant to the MPPAA. Id.; see 29 U.S.C. § 1381(a).
In late 2018, Jansma created another company: Laborforce. Third Am. Compl. ¶¶ 8, 45, ECF No. 56. Laborforce hired all the employees of M & K Employees Alsip and M & K Employees Summit. Id. ¶ 8. Laborforce then leased these employees to the corresponding Sales Entities, just as M & K Employees Alsip and M & K Employees Summit had done before. Id. ¶¶ 8, 45. In early 2019, Laborforce entered into a new collective bargaining agreement with the Union- one that no longer required it to contribute to the Fund. Id.
After the Employees Entities' complete withdrawal from the Fund and following the procedures set forth in the MPPAA, the Trustees notified M & K Employees Alsip that its withdrawal liability had been calculated at $6, 158, 482. Trustees of IAM Nat'l Pension Fund, 2021 WL 1546947, at *4. The Trustees also set a payment schedule of twenty installments, with the first payment due by August 13, 2019. Id. But M & K Employees Alsip did not make the required payment on August 13, 2019-instead, it initiated arbitration to contest the amount of withdrawal liability on November 20, 2019. Id.
In February 2020, after multiple missed payments, the Trustees (as fiduciaries of the Fund) initiated this lawsuit against M & K Employees Alsip to recover the assessed withdrawal liability. Compl., ECF No. 1. Their complaint also named M & K Employee Solutions, M & K Employees Illinois Leasing, M & K Employees Joliet, M & K Employees Northern Illinois, and M & K Employees Summit as “trade[s] or business[es] under common control” with M & K Employees...
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