Woodward Sand Co., Inc. v. Western Conference of Teamsters Pension Trust Fund

• Decision Date: 05 May 1986
• Docket Number: No. 85-5677,85-5677
• Citation: 789 F.2d 691
• Parties: 7 Employee Benefits Ca 1585 WOODWARD SAND COMPANY, INC., and Sorrento Sand Company, Inc., Plaintiffs- Appellees, v. The WESTERN CONFERENCE OF TEAMSTERS PENSION TRUST FUND, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 691

789 F.2d 691

7 Employee Benefits Ca 1585

WOODWARD SAND COMPANY, INC., and Sorrento Sand Company, Inc., Plaintiffs- Appellees, v. The WESTERN CONFERENCE OF TEAMSTERS PENSION TRUST FUND,

Defendants-Appellants.

No. 85-5677.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 6, 1985.

Decided May 5, 1986.

Albert T. Harutunian III, Luce, Forward, Hamilton & Scripps, San Diego, Cal., for plaintiffs-appellees.

Kirke M. Hasson, Pillsbury, Madison & Sutro, San Francisco, Cal., for defendants-appellants.

Appeal from the United States District Court for the Southern District of California.

Before WALLACE, ANDERSON, and NORRIS, Circuit Judges.

J. Blaine ANDERSON, Circuit Judge:

The Western Conference of Teamsters Pension Trust Fund (the Fund) appeals from the district court's denial of its summary judgment motion and from the district court's granting of Woodward Sand Company's (Woodward) motion for summary judgment. Specifically, the Fund contends that Woodward is obligated to pay the employer withdrawal liability assessment levied by the Fund in accordance with the requirements of the Employee Retirement Income Security Act (ERISA), as amended by the Multiemployer Pension Plan Amendments Act of 1980 (the MPPAA). Because the district court failed to rule on the dispositive issues and failed to apply the appropriate standard of review to the Arbitrator's findings, we reverse and remand this case to the district court for further consideration.

I. FACTS

On August 16, 1977, Woodward and other members of the San Diego County Rock Producers Association entered into a collective bargaining agreement with Building Material and Dump Truck Drivers, Local No. 36 (hereinafter "Union" or "Local 36"). In this agreement Woodward recognized Local 36 as the collective bargaining agent for its employees. Woodward also agreed to make pension contributions to the Fund on behalf of its employees and to be bound by the Fund's Agreement and Declaration of Trust. On August 15, 1980, the collective bargaining agreement between Woodward and Local 36 expired without the parties reaching agreement on the terms of a new contract. The following day the Union went out on strike. Woodward responded by permanently replacing the striking employees.

As a result of negotiations held on September 23, 1980, representatives of the Union and Woodward believed that they had reached oral agreement on the terms of a new contract. The employee members approved a written version of the new agreement on September 25, 1980.

Woodward did not receive the written agreement until after October 1, 1980. On or about September 29, 1980, a point of dispute had arisen: the Union asked Woodward to arbitrate the issue of rehiring the permanently replaced striking employees. Woodward refused to sign the written agreement, contending that it did not accurately reflect the terms orally agreed upon.

For the next eight months, Woodward and the Union continued to deal with each other in order to determine whether they had, in fact, reached a new collective bargaining agreement. During this interim period, Woodward rehired two of the former strikers to fill vacancies in its workforce.

During the time between the expiration of the collective bargaining agreement in August 1980 and May 1981, Woodward continued making pension contributions to the Fund for its employees. Woodward's contributions to the plan were made at a higher hourly rate than that provided for in the prior expired agreement in accordance with Woodward's rate agreed to orally on September 23, 1980.

Woodward and Local 36 were unable to negotiate a new agreement. Woodward stopped making its pension contributions to the Fund in June 1981. An election was subsequently held and the Union was decertified as the bargaining representative of Woodward's employees.

After Woodward withdrew, the Fund assessed it $132,086.04 in employer withdrawal liability in accordance with the MPPAA. The Fund found that Woodward had not withdrawn from the Fund prior to September 26, 1980 (the effective date of the MPPAA) and was therefore subject to withdrawal liability assessments. The Fund established a monthly payment schedule of $4,194.40 for Woodward commencing on February 11, 1983. Woodward did not make this first payment when due or any of the subsequent monthly payments.

On March 2, 1983, pursuant to statutory procedure (29 U.S.C. Sec. 1399), Woodward asked the Fund to reconsider several matters relating to the Fund's assessment. The Fund issued its final decision reaffirming the correctness of its previous determination.

On June 8, 1983, Woodward initiated arbitration to challenge the Fund's assessment. Both parties agreed to waive a hearing and to submit the issues and contentions to arbitration on the briefs and evidentiary exhibits. The Arbitrator found that the determination made by the Fund that Woodward had not withdrawn from the plan prior to September 26, 1980, was neither unreasonable nor clearly erroneous. The Arbitrator found that no impasse had been reached before that time and held that "on the contrary, as I understand the meaning of the word 'impasse' it would appear that this did not occur at least until sometime in 1981[.]"

After the Arbitrator issued his decision, Woodward sought an order vacating the arbitration award. The Fund counterclaimed seeking enforcement of the award. The matter was brought before the district court for hearing on cross-motions for summary judgment.

The district court denied the Fund's motion and granted summary judgment for Woodward. The district court ruled that Woodward's withdrawal from the Fund occurred prior to September 26, 1980, the date the MPPAA was enacted, thereby resulting in no withdrawal liability. The determination was based on a ruling that Woodward had no obligation as a matter of law to make contributions to the Fund on behalf of the strike replacements or the two strikers rehired months after MPPAA was enacted. Although the issue was presented below, the district court failed to rule whether Woodward was estopped to deny its obligation to contribute under MPPAA. The district court entered judgment vacating the Arbitrator's award and setting aside the Fund's assessment against Woodward.

II. DISCUSSION

A. Statutory Background

The Fund is a "multiemployer pension fund" which administers a "multiemployer pension plan" regulated under the provisions of ERISA (29 U.S.C. Sec. 1001, et seq.). It accepts and manages pension contributions paid by participating employers and pays pension benefits to these employers' employees.

In a "defined benefit" pension plan, such as the one administered by this Fund, an employee's pension is not calculated directly on the basis of the contributions made for him by his employer. See Connolly v. Pension Benefit Guaranty Corporation, 581 F.2d 729, 733 (9th Cir.1978), cert. denied, 440 U.S. 935, 99 S.Ct. 1278, 59 L.Ed.2d 492 (1979). For example, an increase in an employee's hourly rate may elevate the level of his or her benefit entitlements for prior years, even though those years were compensated at lower rates. Thus, an employer's hourly contributions (e.g., 70cents per hour) do not necessarily cover the vested benefit cost. As a result, defined benefit plans can have a significant "unfunded vested benefit liability"--the shortfall between the assets of the pension fund (the hourly contributions paid by employers, plus earnings thereon) and the actuarial value of vested pension rights of the employees. Id.

Prior to the enactment of the MPPAA, employers could withdraw from pension plans without paying their share of the plans' unfunded vested benefit liability. See Bd. of Trustees of the Western Conf. of Teamsters Pens. Trust Fund v. Thompson Building Materials, Inc., 749 F.2d 1396, 1401-02 (9th Cir.1984), cert. denied, --- U.S. ---, 105 S.Ct. 2116, 85 L.Ed.2d 481 (1985). The employers could simply cease making pension contributions (e.g., by ceasing covered business) and avoid any responsibility for the actual, but unfunded, liabilities of the plans. The other employers remaining in the plan were forced either to assume these additional liabilities or to withdraw, resulting in unfairness to the remaining employers or insolvency of the plan. Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 722, n. 2, 104 S.Ct. 2709, 2714, n. 2, 81 L.Ed.2d 601, 606-07, n. 2 (1984).

To alleviate these problems, Congress established a system for computing and assessing the liability of employers who withdraw from pension plans. 29 U.S.C. Sec. 1361, et seq. This system is designed to make employers pay their share of the real cost of pensions, by paying a share of the difference between the assets already contributed and the vested benefit liability. R.A. Gray & Co., 467 U.S. at 723, 104 S.Ct. at 2714-15, 81 L.Ed.2d at 607. When an employer withdraws from a multiemployer pension plan, such as the one administered by the Fund, ERISA requires a withdrawing employer to compensate a pension plan for benefits that have already vested with the employees at the time of the employer's withdrawal. Id. 467 U.S. at 724, 104 S.Ct. at 2715, 81 L.Ed.2d at 608. This "withdrawal liability" is assessed against the employer to "ensure that employees and their beneficiaries [are not] deprived of anticipated retirement benefits by the termination of pension plans before sufficient funds have been accumulated in the plans." Id. 467 U.S. at 720, 104 S.Ct. at 2713, 81 L.Ed.2d at 605.

However, because of the enactment of the Deficit Reduction Act of 1984, Pub.L. 98-369, Sec. 558, 98 Stat. 494, 899 (1984), into law, any employer who withdrew from a multiemployer pension plan prior to September 26, 1980 (the date the MPPAA was enacted) could not be assessed withdrawal liability.

Employer challenges to withdrawal liability assessments are committed to a complex statutory procedure requiring review by the Fund followed...