Trs. of the Utah Carpenters' & Cement Masons' Pension Trust v. Loveridge
| Decision Date | 27 June 2012 |
| Docket Number | Case No. 2:10-cv-00809-DS |
| Parties | TRUSTEES OF THE UTAH CARPENTERS' AND CEMENT MASONS' PENSION TRUST and UTAH CARPENTERS' AND CEMENT MASON'S PENSION TRUST, Plaintiffs, v. ELIZABETH LOVERIDGE, TRUSTEE FOR PERRY OLSEN DRYWALL, INC.; OKLAND CONSTRUCTION COMPANY, INC., a Utah Corporation; NEW STAR GENERAL CONTRACTORS, INC., a Utah Corporation; and CULP CONSTRUCTION COMPANY, a Utah Corporation, Defendants. |
| Court | U.S. District Court — District of Utah |
The parties in the above-captioned matter have filed cross-motions for summary judgment in this claim brought under the Employee Retirement Income Security Act of 1974. For the reasons set forth below, the Court grants the Plaintiffs' motion in all respects, but reserves the question of whether the Arbitrator erred in failing to credit payments Defendants made toward its withdrawal liability until the Court receives additional information from the parties.
Plaintiffs Trustees of the Utah Carpenters' and Cement Masons' Pension Trust ("Trustees") and Utah Carpenters' and Cement Masons' Pension Trust ("Plan") bring suit against Defendants under the Employee Retirement Income Security Act of 1974 (ERISA). Defendants in this action are Okland Construction Company, Inc., New Star General Contractors, Inc., and Culp Construction Company (sometimes referred to collectively as "ONC"), all Utah corporations with their principal places of business in Utah. Also a defendant in this action is Elizabeth Loveridge, trustee for Perry Olsen Drywall, Inc. ("POD"), formerly an Idaho corporation with its principal place of business in Salt Lake City, Utah (together, "Employers"). The Employers (with the exception of POD post-bankruptcy) are general contractors in the building and construction industry, and each until 2003 had separate labor contracts with the Rocky Mountain Regional Council of Carpenters (later subsumed by the Southwest Regional Council of Carpenters), affiliated with the United Brotherhood of Carpenters and Joiners of America ("Union") to provide for contributions to the Plan for employee pension benefits.
The following facts were found during arbitration proceedings, and are materially undisputed. The Plan is a Taft-Hartley trust fund established in 1963 with a joint labor-management board of trustees formed in accordance with 29 U.S.C. 186(c)(5). (POD's Mem. in Supp. of Mot. for S.J., Ex. 1, at 4, Dec. 28, 2011, ECF No. 57-1.) Accordingly, two employees, one from Okland and the other from New Star, sat as Trustees of the Plan. (POD's Mem. in Supp. of Mot. for S.J., Ex. 1, at 4.) The Plan further adheres to ERISA's prohibited transaction rules and collection policies, under which all delinquent employers must pay, in addition to the delinquent contributions, interest, attorney fees, and liquidated damages on late contributions. (POD's Mem. in Supp. of Mot. for S.J., Ex. 1, at 5.)
The 2002 Winter Olympic Games held in Salt Lake City caused an upswing in the local construction business and a corresponding increase in the number of participants enrolled in the Plan. (POD's Mem. in Supp. of Mot. for S.J., Ex. 1, at 5.) A short time later, a decrease in that construction and stagnant interest rates on investments caused the Plan's unfunded vested benefit ("UVB") liability to skyrocket to approximately $7.4 million. (POD's Mem. in Supp. of Mot. for S.J., Ex. 1, at 5.) At a Plan meeting on July 11, 2003, Okland, in response to the new UVB liability information, discussed withdrawal liability and wished to know whether the Utah Plancould be merged with the Southwest Regional Council of Carpenters ("SWRCC") Plan.1 The Trustee Secretary (recently appointed to the board by SWRCC) informed Okland that the Utah Plan's UVB liability rendered a merger unlikely. (POD's Mem. in Supp. of Mot. for S.J., Ex. 1, at 6.) To facilitate the merger, SWRCC in December 2003 proposed that the Employers divert the majority of their contributions to the SWRCC Plan and continue making a token contribution of $.10 per employee hour worked "to the Utah fund to prevent a termination of the Plan and a triggering of unfunded liability." (POD's Mem. in Supp. of Mot. for S.J., Ex. 1, at 7-8.)
At another meeting on February 4, 2004, the Trustees received an actuarial report that found the hourly contributions needed to amortize the Plan's UB liability over 15 years would be $.52 per hour. (POD's Mem. in Supp. of Mot. for S.J., Ex. 1, at 8.) At the same meeting, Okland's representative said that the $.10 payments would likely cause the Employers to incur withdrawal liability under the "evade and avoid" provision of ERISA, 29 U.S.C. § 1392(c), but that the Employers could alternatively pay $.52 per hour "to avoid withdrawal liability." (POD's Mem. in Supp. of Mot. for S.J., Ex. 1, at 8.) Thus, in place of the $.10 agreements, the Employers and Trustees added section 3.02(e) ("Amendment 5") to the Plan to allow the Employers to pay contributions to the Plan of $.52 per hour—not to accrue employee benefits, but solely for the purpose of reducing the Plan's UVB liability.2 Notably, the largest employers at the time of the adoption of Amendment 5 were the Employers in this case; they also were the participating employers who would have incurred the most substantial withdrawal liability without the adoption of Amendment 5. (POD's Mem. in Supp. of Mot. for S.J., Ex. 1, at 8.)
Thereafter, tension continued to mount between the Plan and the Employers. This tension culminated in, among other events, Okland and New Star forming labor agreements with and offering support for a newly-formed United Carpenters Association labor union ("UCA"), NewStar forming labor agreements with a non-Plan painters' union, SWRCC filing suit against the UCA before the NLRB, the resignation of the Plan's counsel and accountants, and the Department of Labor launching a formal investigation into the matter in late 2005 or early 2006, which investigation remains open. (POD's Mem. in Supp. of Mot. for S.J., Ex. 1, at 9-13.) During plans to increase the minimum required hourly contribution from $.52 to $.97 per hour during February 2006, the Plan directed its new counsel to investigate the Employers' actions and pursue withdrawal liability. The Plan, through its new counsel, issued initial withdrawal liability assessments to New Star and Okland on June 28, 2006, and to POD and Culp on July 3, 2006, contending that all four Employers had withdrawn from the Plan after adopting Amendment 5 in 2004. (POD's Mem. in Supp. of Mot. for S.J., Ex. 1, at 13.)
The Employers requested arbitration soon thereafter, and Arbitrator Norman Brand ("Arbitrator") bifurcated the proceedings into two phases, the first for liability, and the second to determine damages. (POD's Mem. in Supp. of Mot. for S.J., Ex. 1, at 25.) From those proceedings came five interim awards and one final award. Of relevance is the First Interim Award, in which the Arbitrator determined that (1) the Employers' agreements to pay a minimum contribution of $.52 per hour "ha[d] a principal purpose to evade or avoid withdrawal liability" under 29 U.S.C. § 1392(c); (2) the Employers' contributions were "installment payment[s] of withdrawal liability and did not create an 'obligation to contribute'" within the meaning of § 1392; (3) the Plan was entitled to disregard those payments under § 1392(c); and (4) that the Plan was entitled to attorney's fees and costs. (See POD's Mem. in Supp. of Mot. for S.J., Ex. 1.) Also relevant is the Fourth Interim Award, in which the Arbitrator ruled that the Employers were not entitled to a refund of the $.52 per hour contributions, nor were those payments creditable against the amount of withdrawal liability owed. (See POD's Mem. in Supp. of Mot. for S.J., Ex. 4, at 39-40, Dec. 28, 2011, ECF No. 57-4.) Lastly, in his Final Award, the Arbitrator incorporated the five interim awards and awarded the Plan attorneys' fees, costs, and arbitration expenses, payable equally by the four Employers. (See POD's Mem. in Supp. of Mot. for S.J., Ex. 5, at 4-5, Dec. 28, 2011, ECF No. 57-5.)
The Plan, POD, and ONC have all filed cross-motions for summary judgment. ONC's and POD's respective motions overlap to a large degree, and they move the Court to find that the Arbitrator erred as a matter of law by (1) determining that the Employers had withdrawn fromthe plan by making payments with a principal purpose to "evade or avoid" withdrawal liability as described in 29 U.S.C. § 1392(c); (2) attributing the behavior of the Trustees to the Employers themselves; and (3) in the alternative, by refusing to credit the Employers' $.52 per hour contributions against their withdrawal liability and by awarding attorney's fees. POD also seeks an award of its own attorney's fees and costs. The Plan's motion asks that this Court uphold all of the Arbitrator's findings as legally and factually accurate. The Court grants the Plan's motion for summary judgment and denies the Employers' motions in all respects, but withholds a ruling on whether the Arbitrator erred in failing to credit the Employers for payment of withdrawal liability.
This Court has jurisdiction over this matter pursuant to 29 U.S.C. § 1451(c) and 28 U.S.C. § 1331. Venue is proper as the suit is "brought in the district where the plan is administered or where a defendant resides or does business." Id. § 1451(d).
Pursuant to the Federal Rules of Civil Procedure, "[t]he court shall grant summary judgment if the 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(c). In considering the summary judgment motions, the Court must examine "the record and all reasonable inferences that might be drawn from it in the light most favorable to the non-moving party." Berry & Murphy, P.C. v. Carolina Cas. Ins. Co., 586 F.3d 803, 808 (10th Cir. 2009)...
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