Trs. of the IAM Nat'l Pension Fund. v. M & K Emp. Sols.
| Docket Number | 1:20-cv-433-RCL |
| Decision Date | 18 September 2023 |
| 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 case began when M&K Employee Solutions, LLC - Alsip (“M&K ES Alsip”) refused to pay withdrawal liability to the Trustees of the IAM National Pension Fund (the “Trustees”) in defiance of the Multiemployer Pension Plan Amendments Act of 1980 (the “MPPAA”). M&K ES Alsip is part of a network of interrelated legal entities operating truck dealerships in the midwestern United States (collectively “M&K”). Several of these entities are named as codefendants in this suit alongside M&K ES Alsip. The Trustees allege that these entities are jointly and severally liable for unpaid withdrawal liability, delinquent contributions, accrued interest, and liquidated damages. On not one, but two occasions, the Court preliminarily enjoined defendants to pay withdrawal liability to the Trustees. Both times, defendants defied the Court's orders and refused to pay. Eventually, defendants paid an amount of money to the Trustees and moved for partial summary judgment. The Court denied that motion. Now, the Court must decide the Trustees' motion for summary judgment and the defendants' cross-motions. The Trustees seek judgment in their favor on their various claims. The defendants seek summary judgment that they are not liable for delinquent contributions and that the methodologies for calculating unpaid withdrawal liability and accrued interest should be construed in their favor.
Before the Court reaches the parties' motions for summary judgment, it will address two other pending motions. Defendants seek leave to amend their responses to the plaintiffs' fourth set of requests for admissions. The Court will GRANT this motion. Defendants also ask the Court to clarify or reconsider its earlier opinion denying the defendants' motion for partial summary judgment. The Court will DENY this motion. As for the summary judgment motions, the Court concludes, based on applicable law and the undisputed factual record, that the M&K entities constituted a functionally integrated enterprise and that the defendant entities named in this suit are jointly and severally liable for unpaid withdrawal liability, delinquent contributions, accrued interest, and liquidated damages. Accordingly, the Court will DENY the defendants' motions for summary judgment. The Court will GRANT the Trustees' motion for summary judgment.
The Court's previous Memorandum Opinions explained much of the background of this case. See Trs. of the IAM Nat'l Pension Fund v. M & K Empl. Solutions LLC, No. 20-CV-433 (RCL), 2021 WL 1546947, at *1-3 (D.D.C. Apr. 20, 2021) (“IAM I”); Trs. of the IAM Nat'l Pension Fund v. M & K Empl. Solutions, LLC, No. 20-cv-433 (RCL), 2022 WL 594539, at *1-5 (D.D.C. Feb. 28, 2022) (“IAM II”); Trs. of the IAM Nat'l Pension Fund v. M & K Empl. Solutions, LLC, No. 21-cv-2152 (RCL), 2022 WL 4534998, at *1-5 (D.D.C. Sept. 28, 2022) (“Arbitration Decision”). Nevertheless, given the significant time that has passed since the Court's most recent decision, and the more detailed record required on summary judgment, the Court will explain afresh the factual and procedural history of the ongoing legal contest between the Trustees and the M&K defendants.
The Court will first discuss ERISA, withdrawal liability, and the “pay now, dispute later” rule. The Court will then recount the factual history of this case, including: (1) the characteristics of the IAM National Pension Fund; (2) the legal structure of the M&K Employee Solutions and M&K Quality Truck Sales entities; (3) the M&K Employee Solutions entities' obligations under collective bargaining agreements; (4) the operational structure of the M&K Employee Solutions and M&K Quality Truck Sales entities; (5) the creation of M&K Employee Solutions, LLC -Northern Illinois; (6) Chad and Jodi Boucher's home flipping operation; (7) the termination of the M&K Employee Solutions entities' collective bargaining agreements; (8) employee transfers from the M&K Employee Solutions entities to M&K Employee Services, Inc., and Laborforce, Inc.; (9) the Fund's withdrawal liability assessments; and (10) events occurring during the course of this litigation. The Court will then recount the case's procedural history and describe the motions presently before the Court.
Congress enacted the 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” comprises 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.” IAM I, 2021 WL 1546947, at *8. 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 IAM National Pension Fund (the “Fund”) is a multiemployer pension plan with assets held in a labor-management trust fund maintained under collective bargaining agreements. Pls.' Statement of Undisputed Material Facts (“PSUMF”), ECF No. 160 ¶¶ 1-2; Defs.' Resp. to PSUMF (“DPSUMF”), ECF No. 170 ¶¶ 1-2.[1]The Fund is administrated pursuant to a trust agreement (the “Trust Agreement”). PSUMF ¶ 3; DPSUMF ¶ 3. The Trustees are fiduciaries of the Fund. PSUMF ¶ 4; DPSUMF ¶ 4. The Trust Agreement contains a provision permitting the Trustees to “establish such procedures, rules, and regulations which they deem appropriate to effectuate the purposes of” the Trust Agreement. Trust Agreement, Creigh Decl., Ex. 2 to Pls.' MSJ, ECF No. 160-3 at 18.[2]The Trust Agreement also contains a provision regarding retroactive amendment by the Trustees:
This Restated Trust Agreement may be amended in any respect from time to time by the Trustees, provided that each amendment shall be duly executed in writing by the Trustees. As to any amendment, the Trustees in their discretion shall have full power to fix the effective date thereof. Any amendment may have retroactive effect if it is so determined by the Trustees.
Employers contribute to the Fund pursuant to collective bargaining agreements. Contributions not paid “on or before the last business day of the month in which the contributions are due” are delinquent under the policy adopted by the Trustees for collecting delinquent contributions (the...
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