Trustees of the Sheet Metal Worker v. W.G. Heating

Decision Date14 May 2008
Docket NumberNo. 07-15268.,07-15268.
Citation555 F.Supp.2d 838
CourtU.S. District Court — Eastern District of Michigan

Hope L. Calati, Patricia J. Tarini, Sachs Waldman, Detroit, MI, for Plaintiff.

Steven A. Wright, Shelby Township, MI, for Defendant.


DAVID M. LAWSON, District Judge.

This matter is before the Court on three motions filed by the plaintiff in this action to collect payments allegedly owed by the defendant for "withdrawal liability" under the Multiemployer Pension Plan Amendments Act (MPPAA), 29 U.S.C. § § 1381-1453, which amended portions of the Employee Retirement Income Security Act of 1974 (ERISA) to increase the financial liability of employers who withdraw from underfunded employee benefit, plans. The defendant entered into a collective bargaining agreement (CBA) with Sheet Metal Workers International Association, Local 80 in 1982, pursuant to which the defendant assumed the obligation to remit fringe benefit contributions. In April 2006, the defendant's employees voted to decertify Local 80 as their exclusive bargaining representative, and therefore W.G. Heating ceased to be a signatory to a CBA with the union. In its complaint, the plaintiff alleges that the defendant is subject to withdrawal liability under ERISA section 4201(a), 29 U.S.C. § 1381, because its employees continue to perform work of the type for which contributions to the fund were required previously. The defendant has filed a counterclaim contending that the plaintiff breached its fiduciary duties in managing the fund by committing waste and misrepresenting the possibility of withdrawal liability. The defendant also filed a third-party complaint against Local 80 alleging fraud and misrepresentation on the theory that the union represented a certain amount of fringe benefit contributions would be required, but said nothing about the possibility of withdrawal liability in the event the fringe benefit funds were determined to be underfunded.

The plaintiff now moves for dismissal of the counterclaim and third-party complaint, as well as for summary judgment on its complaint. The plaintiff contends the Court lacks subject-matter jurisdiction over the defendant's claims, and the defendant has not presented viable defenses to the plaintiffs claims, to which there is no factual dispute. The defendant vigorously contests each of these points in its response brief. The Court has reviewed the submissions of the parties and finds that the relevant law and facts have been set forth in the motion papers and that oral argument will not aid in the disposition of the motion. Accordingly, it is ORDERED that the motion be decided on the papers submitted. See E.D. Mich. LR 7.1(e)(2). The Court finds that it has no subject matter jurisdiction to entertain the counterclaim; the third-party claim is a proper action for indemnity under Federal Rule of Civil Procedure 14(a) over which the Court has jurisdiction; and the defendant's failure to demand arbitration of the claim for withdrawal liability payments or otherwise to plead a viable defense justifies judgment in the plaintiff's favor as a matter of law. Therefore, the Court will grant the plaintiff's motion to dismiss the counterclaim, deny the plaintiff's motion to strike the third-party complaint, and grant the plaintiff's motion for summary judgment.


The plaintiff filed its complaint on December 11, 2007 under ERISA to collect employer withdrawal liability payments. "Withdrawal liability" is a creature of statute, and it can arise when an employer participates in and then withdraws from a multi-employer benefit plan through a collective bargaining agreement. "An employer's withdrawal liability is its proportionate share of the plan's unfunded vested benefits, that is, the difference between the present value of vested benefits (benefits that are currently being paid to retirees and that will be paid in the future to covered employees who have already completed some specified period of service, 29 U.S.C. § 1053) and the current value of the plan's assets." Concrete Pipe and Prods. of California, Inc. v. Construction Laborers, 508 U.S. 602, 609, 113 S.Ct. 2264, 124 L.Ed.2d 539 (1993) (citing 29 U.S.C. §§ 1381, 1391) (internal quotations omitted).

As soon as practicable after an employer withdraws from a multi-employer plan by, say discontinuing participation in a CBA, the ERISA plan trustees must notify the employer of its withdrawal liability and the schedule for payment. 29 U.S.C. § 1399(b)(1). If the trustees do not satisfy these requirements, collection is precluded. Canario v. Lidelco., Inc., 782 F.Supp. 749 (E.D.N.Y.1992). Disputes over the amount of withdrawal liability are generally subject to arbitration. 29 U.S.C. § 1401(a)(1). If an employer does not satisfy its withdrawal liability, the trustees may bring suit to collect the deficiency in federal court, just as they may for collection of a delinquent fringe benefit contribution. See 29 U.S.C. §§ 1451(a)(1), (b) ("In any action under this section to compel an employer to pay withdrawal liability, any failure of the employer to make any withdrawal liability payment within the time prescribed shall be treated in the same manner as a delinquent contribution.").

The basic facts that give rise to the plaintiffs claim for withdrawal liability in this case generally are not disputed. In 1982, W.G. Heating entered into a collective bargaining agreement with Local 80 pursuant to the Labor-Management Relations Act of 1947. Under the CBA, W.G. Heating paid fringe benefit contributions to a multi-employer fund managed by the plaintiff in this case. W.G. Heating's relationship with Local 80 continued to April 28, 2006, when W.G. Heating's employees voted to discontinue the company's status as a signatory to the CBA. On February 8, 2007, the defendant completed a "Withdrawal Liability Questionnaire" at the plaintiffs request. Among other things, the questionnaire asked the defendant to describe its business operations. The defendant indicated that its primary service was installation of heating and cooling systems in residential construction projects. This response, according to the plaintiff, shows that the defendant's employees continue to perform work that previously was covered by the CBA with Local 80. Therefore, the plaintiff reasons, a "withdrawal" occurred within the meaning of ERISA, subjecting the defendant to withdrawal liability.

On May 2, 2007, the plaintiff sent the defendant a "Notice of Assessment of Employer Withdrawal Liability." As it turns out, the information contained in that notice was erroneous, which all parties concede. The Notice recited a total liability of $32,579; it demanded quarterly installment payments of $8,288 with the first installment due 60 days after receipt of the notice. The defendant received the notice on May 3, 2007.

Because of the error, the plaintiff sent a revised notice on June 29, 2007. Although the revised notice specified a lesser total liability ($30,598), it called for the same periodic installment payments of $8,288 "with the first assessment due 60 days after receipt of the Notice dated May 2, 2007." Martin Aff. at ¶ 5 (emphasis added). The defendant received the revised notice on July 2, 2007, the date which the plaintiff says was the final day for payment of the first installment. Thereafter, on July 6, 2007, the plaintiff sent the defendant a "Notice of Overdue Payment." The notice informed the defendant that interest would begin to accrue and demanded immediate payment.

The defendant first inquired about the basis for the withdrawal liability in a letter dated July 20, 2007 sent by its attorney, Steven A. Wright. Wright objected to the assessment on the grounds that the plaintiff had "not provided sufficient information to W.G. Heating for it to determine the accuracy of the Fund's determination of withdrawal liability." Br. in Supp., Ex. B, Wright Letter at 1. Wright requested "that the plan sponsor review and explain precisely how W.G. Heating's liability was determined," ibid., in accordance with 29 U.S.C. § 1399(b)(2)(A)(I). He further stated that W.G. Heating wished to audit the fund's records "to determine (1) the actuarial present value of vested benefit obligations, (2) the value of the plan's assets, (3) the value of the plan's vested but unfunded benefits, and (4) W.G. Heating's proportionate share of unfunded vested benefits." Ibid.

The plaintiff responded by letter dated August 10, 2007, enclosing the following documents: (1) the relevant pension plans and amendments; (2) a portion of the "Actuarial Valuation Report for the Plan Year Commencing June 1, 2005"; and (3) the "Allocation of Unfunded Vested Benefits for W.G. Heating & Cooling Inc." Br. in Supp., Ex. C, Pl.'s August 10, 2007 Response at 1-2. The plaintiff refused to furnish records concerning other employers who withdrew.

Defense counsel was not satisfied, and on August 27, 2007, Wright wrote the plaintiff requesting additional information. Counsel requested the entire Actuarial Valuation Report for 2005 (only one page had been sent); the underlying documents used to create the single-page summary styled "Allocation of Unfunded Vested Benefits for W.G. Heating & Cooling Inc"; and information relating to withdrawal liability of other employers. Wright deemed this information necessary to calculate W.G. Heating's liability. Counsel warned, "If we do not resolve these matters to our satisfaction by October 1, 2007, we will institute arbitration and/or seek injunctive relief in federal court." Br. in Supp., Ex. D, Wright Letter dated August 27, 2007 at 2.

The plaintiff...

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