SIMANDLE, Chief Judge:
This matter comes before the Court on Plaintiff William J. Einhorn's motion for summary judgment.
The primary issues presented are whether withdrawal liability under ERISA is properly discharged under a Chapter 11 bankruptcy filed seven years before an employer withdraws completely from the fund, and whether an employer's failure to challenge the amount or existence of withdrawal liability through arbitration precludes the employer from arguing in a civil action to collect withdrawal liability that a portion of that liability was discharged through bankruptcy.
For the reasons discussed below, the Court will grant Plaintiff's motion for summary judgment.
The following facts are undisputed. At all relevant times, Plaintiff William J. Einhorn has been the Administrator of the Teamsters Pension Trust Fund of Philadelphia and Vicinity ("the Fund"). (Pl. Statement of Material Facts ("SMF") [Docket Item 19-2] ¶ 1.) The Fund is a multiemployer pension plan and an employee pension benefit plan maintained to
In a letter dated May 28, 2009, the Fund notified Defendant of its determination that Defendant had "effected a complete withdrawal" from the Fund, as defined in 29 U.S.C. § 1383(a), on or about December 15, 2008, and demanded payment for withdrawal liability in the amount of $147,930.84. (Id. ¶ 9; see also Certification of Richard Dubin ("Dubin Cert."), Ex. B [Docket Item 27-3.]) Defendant subsequently failed to make its required withdrawal liability payments to the Fund. (Id. ¶ 10.) As a result, on October 6, 2010, the Trustees of the Fund filed a complaint in the United District Court for the District of New Jersey to collect Defendant's withdrawal liability payments. (Id. ¶ 11; see also Trustees of the Teamsters Pension Trust Fund of Philadelphia and Vicinity v. Dubin Bros. Lumber Co., Civ. 10-5149, ECF No. 1.) On May 18, 2011, the parties entered a Settlement Agreement, which provided in pertinent part:
(Settlement Agreement dated May 18, 2011 ("Settlement Agreement"), Einhorn Cert., Ex. B [Docket Item 19-3] ¶¶ 1-5.) The dollar amount of the retroactive pension contributions due pursuant to the Settlement Agreement was $9,218.97. (SMF ¶ 13.) These retroactive payments were simply the overdue contributions on behalf of covered employees, and they were not payments toward any withdrawal liability, since the parties agreed that Dubin would continue to contribute to the Fund as required by the collective bargaining agreement. On May 18, 2011, the Trustees of the Fund filed a notice of voluntary dismissal and the civil action against Defendant was terminated. (Id. ¶ 14; see also Civ. 10-5149, ECF No. 8.) Defendant paid a total of $5,000 toward the amount owed to the Fund for retroactive contributions through consistent payments of $1,000 per month from November, 2011 through March, 2012, leaving $4,218.97 due under the Settlement Agreement. (SMF ¶¶ 15-16.) No subsequent payments toward these retroactive contributions have been made. (Dubin Cert. [Docket Item 27-2] ¶ 9.)
In a letter dated April 18, 2012, the Fund notified Defendant of its determination that Defendant "effected a complete withdrawal" from the Fund "during the 2011 Plan Year" and demanded payment of $209,956.78 (covering the years from 1979 to 2010) in quarterly installments beginning July 17, 2012. (Id. ¶ 19; see also Einhorn Cert., Ex. D [Docket Item 19-3.]) Having not received any payment from Defendant, on June 20, 2012, the Fund sent a second letter demanding that Defendant make its required payment within 60 days. (SMF ¶ 20; see also Einhorn Cert., Ex. E [Docket Item 19-3.]) Defendant admits that it made no further payments to the Fund. (SMF ¶ 21.) By letter dated August 21, 2012, the Fund advised Defendant that its failure to make timely withdrawal liability payments resulted in a default and demanded immediate payment with interest. (Id. ¶ 22; see also Einhorn Cert., Ex. F [Docket Item 19-3.]) Defendant admits that it never requested review of the Fund's determination and assessment of withdrawal liability. (SMF ¶ 23.) Defendant also admits that it never filed a demand for arbitration within the timeframe established under 29 U.S.C. § 1401. (Id. ¶ 24.)
Defendant made its last prospective hourly contribution to the Fund in early 2009 and did not contribute anything but retroactive payments to the fund under the Settlement Agreement. (Dubin Cert. ¶ 10.) Defendant has not employed a member of the Union since 2009. (Def.'s Resp. to Pl. SMF ("Def. SMF") [Docket Item 27-1] ¶¶ 18-20.) However, in May, 2011, around the time of the settlement agreement, Dubin represented that it had one covered employee, Steven Brees. The parties agreed at oral argument that Defendant employed Brees as a truck driver from January 1, 2010 to September 23, 2011. Brees ultimately declined to join the Union. Brees was thus a covered employee under the Plan, for whom Defendant was obligated to make pension contributions under the collective bargaining agreement. (Einhorn Cert., Ex. A at Art. 61.)
Finally, going back a decade, on April 23, 2002, Defendant filed a voluntary Chapter 11 petition in the United States Bankruptcy Court for the District of New Jersey. (In re Dubin Bros Lumber Co., Inc., Bankr.No. 02-14096(JHW), ECF No. 1.) The Bankruptcy Court entered an Order Confirming Chapter 11 Plan on February 5, 2004, stating that the "Debtor shall
On November 2, 2012, Plaintiff filed a Complaint seeking to collect amounts due pursuant to Sections 502(g)(2) and 4301(e) of ERISA for withdrawal liability in a total of $209,956.78, as well as amounts due pursuant to the May 18, 2011 Settlement Agreement. [Docket Item 1.] Pursuant to an Amended Scheduling Order entered July 16, 2013, Judge Schneider extended pretrial factual discovery to September 30, 2013. Consistent with the Amended Scheduling Order, Plaintiff filed the instant motion for summary judgment [Docket Item 19], Defendant filed opposition [Docket Item 27], and Plaintiff filed a reply [Docket Item 28]. The Court heard oral argument on June 18, 2014.
Summary judgment is appropriate "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(a). A dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is "material" only if it might affect the outcome of the suit under the applicable rule of law. Id. Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment. Id. The Court will view any evidence in favor of the nonmoving party, here the defendant, and extend any reasonable favorable inferences to be drawn from that evidence to that party. Scott v. Harris, 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007).
Plaintiff seeks summary judgment on the first count of the Complaint for breach of the Settlement Agreement and on the second count of the Complaint for withdrawal liability. Plaintiff also seeks interest, liquidated damages, and attorney's fees and costs. Defendant responds with three arguments: (1) Defendant's 2004 Chapter 11 bankruptcy discharged any pre-confirmation withdrawal liability; (2) Plaintiff's recovery is limited to the terms of the 2011 settlement agreement; and (3) Plaintiff's claim for withdrawal liability is barred by the doctrine of laches.
Plaintiff argues that the Fund is entitled to summary judgment on his claim against Defendant for withdrawal liability because Defendant was properly notified of the withdrawal liability assessment and Defendant failed to timely request review or invoke the mandatory arbitration procedure established by the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. § 1381 et seq. ("MPPAA"). Defendant does not dispute that it received proper notification of the withdrawal liability assessment and failed to administratively challenge the amount of liability for the years covered by the second assessment (1979 to 2010). Defendant only argues that its Chapter 11 bankruptcy discharged its pre-confirmation withdrawal liability and such a defense was not waived by its failure to pursue arbitration.
The MPPAA amended ERISA and was enacted "out of a concern that ERISA did not adequately protect multiemployer pension
The Court must first address whether Defendant, by failing to invoke the mandatory arbitration procedures under the MPPAA, waived its right to argue that withdrawal liability was discharged through its 2004 bankruptcy. Under the MPPAA, "[a]ny dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination made under sections 1381 through 1399... shall be resolved through arbitration." 29 U.S.C. § 1401(a)(1). "If no arbitration proceeding has been initiated pursuant to [section 1401(a)(1) ], the amounts demanded by the plan sponsor under section 1399(b)(1) ... shall be due and owing ... [and the plan sponsor] may bring an action... for collection." 29 U.S.C. § 1401(b)(1). "[S]ections 1381 through 1399 are technical provisions, describing how and when withdrawal liability is to be assessed." Carl Colteryahn Dairy, Inc. v. W. Pennsylvania Teamsters & Employers Pension Fund, 847 F.2d 113, 118 (3d Cir.1988). In the Third Circuit, "even pure issues of statutory interpretation are subject to MPPAA's arbitration requirements if they involve sections 1381-1399." Einhorn v. Kaleck Bros., Inc., 713 F.Supp.2d 417, 421-22 (D.N.J.2010) (quoting Crown Cork & Seal Co., Inc. v. Central States Southeast and Southwest Areas Pension Fund, 881 F.2d 11, 18 (3d Cir.1989)); see also Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia, 830 F.2d 1241, 1255 (3d Cir.1987) (rejecting argument that only factual matters are appropriate for arbitration).
However, the Third Circuit has recognized a distinction between disputes regarding MPPAA sections 1381 through 1399 and disputes not implicating these sections. Flying Tiger, 830 F.2d at 1250. Similarly, courts outside this circuit have explained that "the only defenses which are waived by a failure to timely initiate arbitration are those which go to the merits of the liability assessment itself." In re Centric Corp., 901 F.2d 1514, 1518 (10th Cir.1990). Where, as here, the defendant does not dispute the amount or existence of the withdrawal liability, but invokes the provisions of the Bankruptcy Code to discharge the then-existing obligations, the case is governed by the provisions of the Bankruptcy Code. Carpenters Pension Trust Fund for N. California v. Moxley, 734 F.3d 864, 870-71 (9th Cir.2013). As such, the defendant does not waive its right to a discharge of withdrawal liability under the Bankruptcy Code because it failed to challenge the amount or existence of the liability in arbitration. Id. at 870.
The Court next considers whether Defendant's withdrawal liability or some portion thereof was discharged in Defendant's 2004 bankruptcy prior to Defendant's actual withdrawal from the fund. The Court concludes that it was not.
Although there is no Third Circuit precedent directly on point, the Court of Appeals' treatment of ERISA withdrawal liability under the Bankruptcy Code in different contexts sheds light on the Court's analysis here. In In re Marcal Paper Mills, Inc., 650 F.3d 311 (3d Cir. 2011), the Third Circuit considered whether the portion of withdrawal liability incurred after an employer filed a Chapter 11 petition constituted an administrative expense entitled to priority under the Code. Marcal, 650 F.3d at 313. The Court held that withdrawal liability may be apportioned between pre and post-petition periods and the post-petition amount may be considered an administrative expense under the Code. Id. at 317. The Court of Appeals explained that "[u]nfunded vested benefits from which withdrawal liability is calculated are benefits which are promised and earned but not yet funded as of the calculation day. The liability for unfunded vested benefits represents a pre-existing obligation on the employer's part, and is not simply incurred as of the date of withdrawal. In other words, the unfunded vested benefit calculation represents an employer's share of the amount needed for a fund to break even as of the calculation date." Id. at 318 (quoting Huber v. Casablanca Indus., Inc., 916 F.2d 85, 96 (3d Cir.1990) (internal punctuation and quotations omitted)). The Marcal Court concluded that "by permitting the post-petition portion of the withdrawal liability to be classified as an administrative expense, Congress' objectives in passing the MPPAA are fulfilled. If withdrawal liability in its entirety were automatically classified as a general unsecured claim, it would greatly undercut the purpose of the MPPAA to secure the finances of pension funds and prevent an employer's withdrawal from negatively affecting the plan and its employee beneficiaries." Id. at 321.
In an earlier Third Circuit decision, Bd. of Trustees of Teamsters Local 863 Pension Fund v. Foodtown, Inc., 296 F.3d 164 (3d Cir.2002), the board of trustees of a pension fund sought to recover withdrawal liability from several corporations and individuals on an alter ego theory. The Court of Appeals held that the board of trustees
Defendant relies on In re Art Shirt Ltd., Inc., 93 B.R. 333 (E.D.Pa.1988), in which the court found that withdrawal liability under the MPPAA is "a debt which should be considered in determining insolvency under the Code" because withdrawal liability satisfies the relevant definitions of "debt" and "claim" in the bankruptcy context. Art Shirt, 93 B.R. at 338. However, the court in Matter of United Merchants & Mfrs., Inc., 166 B.R. 234, 241 (Bankr. D.Del.1994) expressly rejected the court's reasoning in Art Shirt. In United Merchants, the court considered whether liability for future contributions or withdrawal was discharged as part of a Chapter 11 bankruptcy proceeding filed before the employer withdrew from the fund. United Merchants, 166 B.R. at 236-37. The court began its analysis by noting that the "Third Circuit Court of Appeals has held in analyzing the issue of when a claim arises [under the Bankruptcy Code], there must exist a legal relationship that gives rise to the asserted right to payment." Id. at 237 (citing In re Remington Rand Corp., 836 F.2d 825 (3d Cir.1988)). The court rejected the employer's argument that "the legal relationship Remington requires arose when [the employer] became obligated to contribute to the Fund in 1985" because this argument "ignores the statutory origins of the withdrawal liability action." Id. at 238-39. The court found the reasoning in Art Shirt pertinent to single employer plans, but inapplicable to a contributing employer in a multiemployer plan which has satisfied its minimum funding obligations. Id. at 240. After noting that Congress enacted the MPPAA provisions regarding withdrawal liability to relieve the burden on remaining employers and eliminate the incentive to withdraw from the fund, the court concluded that "the Fund did not possess a bankruptcy claim for withdrawal liability pre-confirmation" because "[i]t is ... withdrawal that first creates the legal relationship which gives rise to the asserted right to payment." Id. at 241. Thus, where a contributing employer in a multiemployer plan has satisfied its minimum funding obligations and there has been no withdrawal prior to bankruptcy, the fund had no "claim" for withdrawal liability that would be discharged in bankruptcy.
The Court recognizes that courts outside the Third Circuit are divided as to the treatment of withdrawal liability under the Bankruptcy Code. See In re Bayly Corp., 163 F.3d 1205, 1209 (10th Cir.1998) ("Courts have uniformly concluded that withdrawal liability based on benefits earned as a result of employees' pre-petition labor, even if incurred post-petition, is a pre-petition contingent liability under bankruptcy law."); Trustees of Amalgamated Ins. Fund v. McFarlin's, Inc., 789 F.2d 98, 103-04 (2d Cir.1986) ("Since withdrawal liability is based on the withdrawing employer's contributions to the Plan prior to the year before the employer withdraws,
Defendant again relies on Carpenters Pension Trust Fund for N. California v. Moxley, 734 F.3d 864 (9th Cir.2013), in which the Ninth Circuit found withdrawal liability to be dischargeable in a bankruptcy filed after the employer withdrew from the fund. Moxley, 734 F.3d at 870. The Ninth Circuit distinguished unpaid fund contributions from withdrawal liability and held that the debtor-employer was not a fiduciary of the fund because the unpaid withdrawal liability, which does not arise until the employer ceases to have an obligation to contribute under the plan, could not be considered an asset of the fund. Id. at 868-70. However, as Plaintiff notes, the fund filed suit in the District Court for the Northern District of California, but soon thereafter, the proceedings were stayed when the employer filed for bankruptcy. The present case is distinguishable because Defendant seeks to invoke a bankruptcy filed seven years prior to the assessment of withdrawal liability and which was silent as to any liability of the Defendant to the Fund.
Moreover, the cases which suggest that withdrawal liability is dischargeable in a bankruptcy proceeding filed prior to the date of withdrawal from the fund are nonbinding and inconsistent with Third Circuit precedent. First, only CD Realty Partners squarely addressed the issue in the present case. See In re Bayly Corp., 163 F.3d 1205, 1211 (10th Cir.1998) (determining whether funds' claim for withdrawal liability was entitled to administrative priority); Trustees of Amalgamated Ins. Fund v. McFarlin's, Inc., 789 F.2d 98, 103-04 (2d Cir.1986) (same). Second, the reasoning of these courts conflicts with the Third Circuit's holding in Foodtown that where an employer does not cease operations and continues to make contributions after filing a bankruptcy petition, the claim for withdrawal liability does not arise until after the filing of the bankruptcy petition.
Further, Marcal does not support Defendant's position. As this Court has previously explained,
Einhorn v. Twentieth Century Refuse Removal Co., Civ. 11-1451 (JBS/AMD), 2011 WL 6779760, at *8 (D.N.J. Dec. 22, 2011). In the present case, the Court is not asked to consider any portion of Defendant's withdrawal liability as an administrative expense, and no issue of liability to the Fund was ever identified before the Bankruptcy Court in 2004. At the time of the certification of Dubin's plan in 2004, Dubin's payments to the Fund were up to date, its employees were covered by the Plan, and no event of "withdrawal" would occur until years later. Quite clearly, Defendant listed no liability to the Fund in its 2004 confirmation plan because it too understood that it had none at the time. Indeed, this is not a bankruptcy appeal and such treatment would be nonsensical at this late juncture to deem some portion of withdrawal liability as an administrative expense.
Accordingly, the Court finds that the Fund did not possess a bankruptcy claim for the pre-confirmation portion of its withdrawal liability because it is actual withdrawal from the fund that first creates the legal relationship which gives rise to the asserted right to payment of withdrawal liability for the purposes of the Bankruptcy Code. Therefore, the Court rejects Defendant's argument that its pre-confirmation withdrawal liability was discharged through a bankruptcy proceeding seven years before its withdrawal liability became due.
In light of the foregoing and Defendant's concession that it waived its right to challenge the amount or existence of its withdrawal liability as assessed in the letter dated April 18, 2012, Plaintiff is entitled to the full amount assessed by the Fund for Defendant's 2011 withdrawal liability: $209,956.78.
In Count I of the Complaint, Plaintiff seeks recovery for breach of the May 18,
"Under New Jersey law, a settlement agreement is a form of contract, and courts must look to the general rules of contract law to resolve disputes over a settlement agreement." Mortellite v. Novartis Crop Prot., Inc., 460 F.3d 483, 492 (3d Cir.2006). It is undisputed that on or about May 28, 2009, the Fund determined that Defendant had failed to make the periodic contributions to the Fund on behalf of covered employees, and thereby had withdrawn from the Fund on December 15, 2008. As a result of Defendant's failure to make required withdrawal liability payments, the Fund filed a Complaint in the United States District Court for the District of New Jersey. The parties then entered a settlement agreement on May 18, 2011 which provided for Defendant's continued participation in the Fund (that is, Defendant's non-withdrawal), as well as retroactive delinquent contribution payments. The amount of the settlement was exactly the amount of delinquent contributions. The parties agree that the May 18, 2011 Settlement Agreement was a valid, enforceable contract.
Paragraph 5 of the Agreement clearly provides that Defendant's withdrawal liability will be forgiven so long as Defendant satisfies the terms of the Agreement. The Agreement also makes clear that Defendant would be liable for any future withdrawal liability. Paragraph 5 provides:
(Settlement Agreement ¶ 5) (emphasis added).
It is clear that the release of liability for the "December 2008 withdrawal" was contingent upon Defendant making future contributions and retroactive contribution payments. There is no question that Defendant breached the Agreement when it stopped making retroactive payments. Defendant's argument that Plaintiff somehow breached the Agreement by issuing a second assessment for withdrawal liability is meritless because future withdrawal liability was not foreclosed by the Agreement.
Plaintiff is permitted to recover the $4,218.97 remaining due under the Agreement for delinquent retroactive contributions. This indebtedness under the breach of the Settlement Agreement simply reflects the amount due under that agreement to recover the unpaid contributions to the Fund. The obligation to make contributions to the Fund is a liability that is separate from the obligation to pay withdrawal liability when the employer ceases its participation under the Plan. Therefore, the Court finds that Defendant breached the Agreement upon failing to make the requisite retroactive payments and Plaintiff is entitled to judgment for the unpaid delinquent contributions in the amount of $4,218.97.
Defendant also argues that the Fund's claim for withdrawal liability fails under the doctrine of laches because the Fund notified Defendant of the second assessment in May, 2012 despite Defendant's failure to make prospective contributions to the Fund since 2009. Defendant thus contends that it withdrew from the Fund in 2009 and it was inequitable for the Fund to wait until 2012 to assert a second claim for withdrawal liability. Plaintiff responds that Defendant has waived its laches defense because Defendant failed to raise the issue in arbitration and that the Fund immediately fulfilled its obligations under the MPPAA upon learning in 2011 that Defendant ceased to have an obligation to contribute to the Fund.
The Court need not determine whether Defendant waived its laches argument by failing to pursue arbitration because Defendant's argument is meritless. The Fund clearly satisfied its statutory obligations and to find otherwise would be inequitable to Plaintiff. Once the Fund determined that Defendant ceased to have an obligation to contribute to the Fund as a result of no longer employing any covered employees,
Plaintiff asserts that the Fund is entitled to interest, liquidated damages, and attorney's fees and costs. Defendant makes no argument in opposition.
Under the MPPAA, an action to compel an employer to pay withdrawal liability is "treated in the same manner as a delinquent contribution" as defined in 29 U.S.C. § 1451. See 29 U.S.C. § 1451(b); Trustees of Amalgamated Ins. Fund v. Sheldon Hall Clothing, Inc., 862 F.2d 1020, 1023 (3d Cir.1988). As such, if the fund prevails in an action to collect withdrawal liability, the fund must be awarded the withdrawal liability amount, interest on the unpaid amount, liquidated damages, and attorney's fees and costs. See § 1132(g)(2);
Plaintiff seeks interest calculated from the date of default, August 21, 2012 through January 6, 2014, the return date of the instant motion, at a rate of 3.25 percent for a total of $11,941.30. Plaintiff explained at oral argument that his calculation is based on 29 C.F.R. § 4219.32.
For the reasons discussed above, the Court will grant Plaintiff's motion for summary judgment. Plaintiff's motion is granted to the extent it seeks from Defendant the withdrawal liability as assessed in the letter dated April 18, 2012 in the amount of $209,956.78 and to the extent it seeks unpaid retroactive payments under the Settlement Agreement, in the amount of $4,218.97. The Court will also award Plaintiff $12,415.15 in interest on Defendant's 2011 withdrawal liability and liquidated damages in the amount of $41,991.36, plus reasonable attorney's fees and costs to which Plaintiff is entitled under 29 U.S.C. § 1132(g)(2). An accompanying Order will be entered.
For purposes of this paragraph, interest on unpaid contributions shall be determined by using the rate provided under the plan, or, if none, the rate prescribed under section 6621 of Title 26.
