ERISA § 4203 - American Conference Institute · Cir. 2012) – sale-of-assets exemption found not to apply because purchaser was not obligated to contribute for substantially same

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©2014 Ulmer & Berne LLP

SELECTED TOPICS PERTAINING TO

MULTIEMPLOYER PENSION PLAN WITHDRAWAL LIABILITY

(As Supplement to ACI ERISA Litigation forum presentation of October 27, 2014)

By Ronald L. Kahn

Partner, Ulmer & Berne LLP

1660 West 2nd

Street, Suite 1100

Cleveland, OH 44113-1448

Tel: (216) 583-7018 Email: [email protected]

Complete Withdrawal – ERISA § 4203

Occurs when employer:

permanently ceases to have an obligation to contribute under plan, or

See: Gastronomical Workers Union Local 610 v. La Mallorquina

Inc., 597 F. Supp. 2d 265 (D.P.R. 2009) – withdrawal liability

attaches to a complete withdrawal regardless of whether or not

employer voluntarily withdrew.

See also: Central States, Southeast and Southwest Areas Pension

Fund v. Sherwin-Williams Company, 71 F.3d 1338 (7th Cir. 1995)

– as long as any member of a controlled group continues

contributions to a multiemployer pension plan, there can be no

complete withdrawal by any employer in the group from the plan.

See further: Borntrager v. Central States, Southeast and Southwest

Areas Pension Fund, 625 F. Supp. 2d 685 (N.D. Iowa 2008), aff’d,

2 ©2014 Ulmer & Berne LLP

577 F.3d 913 (8th Cir. 2009) – pension fund was entitled to expel a

contributing employer from the fund, for violation of the fund’s

adverse selection policy where departing employees were replaced

with independent contractors, thereby triggering complete

withdrawal liability.

permanently ceases all covered operations under plan.

Industry and Transaction Exceptions

Building and Construction Industry (ERISA § 4203(b)) – if substantially all

employees for whom employer has obligation to contribute to plan perform work

in building and construction industry and plan primarily covers employees in such

industry, then withdrawal occurs if:

employer ceases to have an obligation to contribute under plan, and

employer either:

continues to perform work in jurisdiction of CBA of type for

which contributions previously required, or

resumes such work within 5 years after date obligation to

contribute ceased without renewal of obligation (3 years, in case of

a plan termination by mass withdrawal).

See: Oregon-Washington Carpenters-Employers Pension Trust Fund v.

BQC Construction, Inc. Hardware Service, 485 F. Supp. 2d 1206 (D. Or.


2007) – Court held that installation work that employer subcontracted for

after closing its installation operations was no different from work

previously performed directly by employer’s in-house employees.

See also: Warner & Sons Inc. v. Central States, Southeast and Southwest

Areas Pension Fund, 2009 WL 5178376, 48 Emp. Ben. Cas. (BNA) 2371

(N.D. Ill. Dec. 29, 2009) – After noting that the Seventh Circuit has

defined term “substantially all” as “85% or more” and that employers who

manufacture construction materials that are installed by others at the

construction site are not in the building and construction industry, Court

held that transportation of material to and from construction site, and

loading and unloading, did not constitute work in building and

construction industry.

Entertainment Industry (ERISA § 4203(c)) – where employer has obligation to

contribute primarily on a temporary or project basis for work performed in

entertainment industry and plan primarily covers employees in such industry,

same limitation as for building and construction industry, except reference to

CBA changes to plan.

Long and Short Haul Trucking Industry – (ERISA § 4203(d)) – if substantially all

contributions under plan are made by employers primarily engage in long and

short haul trucking industry, household goods moving industry or public

warehouse industry, withdrawal occurs if:


employer does not continue to perform work within jurisdiction of the

plan, and

employer permanently ceases to have obligation to contribute under plan

or permanently ceases all covered operations under the plan, and

either PBGC determines that plan has suffered substantial damage to its

contribution base by such cessation, or employer fails to furnish required

bond or escrow in amount of 50% of withdrawal liability (to be paid to

plan if PBGC subsequently determines within 5 years of such cessation

that plan’s contribution base suffered substantial damage).

Sale of Assets (ERISA § 4204; see also: PBGC Op. Ltr. 92-4 (Jun. 18, 1992))

No complete or partial withdrawal by employer solely because of bona

fide, arm’s-length sale of assets to unrelated purchaser, if:

purchaser has obligation to contribute to plan with respect to such

operations for substantially same number of contribution base units

(CBUs) for which seller had obligation.

purchaser provides plan a bond or escrow for 5-year period equal

to greater of average annual contribution for 3 prior years or

annual contribution required in prior year.


sale contract provides if purchaser incurs complete or partial

withdrawal within 5 years, seller is secondarily liable for

withdrawal liability it would have had.

if seller distributes substantially all assets or liquidates before end

of 5-year period, required to provide bond or escrow equal to

present value of withdrawal liability it would have had.

Purchaser’s liability determined as if required to contribute to plan in year

of sale and 4 prior plan years the amount seller was required to contribute.

Variances permitted to bond/escrow requirements and to sale-contract

requirements for de minimis transactions or if specified net income or net

tangible asset tests are satisfied per ERISA § 4204(c) and PBGC Reg.

§§ 4204.11-4204.13.

See: HOP Energy L.L.C. v. Local 553 Pension Fund, 678 F.3d 158 (2d

Cir. 2012) – sale-of-assets exemption found not to apply because

purchaser was not obligated to contribute for substantially same number of

hours of employee pay to the fund post-sale as selling employer

contributed before the sale.

See also: Central States, Southeast and Southwest Areas Pension Fund v.

Georgia-Pacific LLC, 2010 WL 431674, 48 Emp. Ben. Cas. (BNA) 1997

(N.D. Ill. Feb. 2, 2010), aff’d, 639 F.3d 757 (7th Cir. 2011) – Court

applied facts and circumstances test in determining that a 1994


outsourcing and 1995 closure should not be considered along with 2004

asset sale in concluding that asset sale was sole cause of withdrawal.

See also: PBGC Op. Ltr. 85-15 (May 31, 1985) – purpose of Congress in

providing Section 4204 was to allow an employer to avoid liability if a

sales transaction meets the statutory conditions, such that application of

Section 4204 to a sales transaction does not by itself violate ERISA

§ 4212(c), which disregards transactions that have evasion or avoidance of

withdrawal liability as a principal purpose.

Change in Business Form or Suspension of Contributions During Labor Dispute

(ERISA § 4218) – Employer not considered to have withdrawn from plan solely

because:

ceases to exist by reason of change in corporate structure described in

ERISA § 4069(b) (i.e., reorganization involving mere change in identity,

form or place of organization; liquidation into parent corporation; or

merger, consolidation, or division), or change to an unincorporated form

of business, if no interruption in contributions or obligations under plan, or

See: CenTra, Inc. v. Central States, Southeast and Southwest

Areas Pension Fund, 578 F.3d 592 (7th Cir. 2009) – while ERISA

does not define it, “division” generally refers to a sale of stock, not

to a transfer of certain assets and liabilities.


See, also: PBGC Op. Ltr. 82-4 (Feb. 10, 1982) and PBGC Op. Ltr.

84-7 (Dec. 20, 1984), citing legislative history referencing ERISA

Section 4218(1)(A).

suspends contributions during labor dispute involving employees.

But, see: Marvin Hayes Lines, Inc. v. Central States, Southeast

and Southwest Areas Pension Fund, 814 F.2d 297 (6th Cir. 1987) –

although employer had suspended payments due to a labor dispute,

upon decertification of the union the employer’s obligation to

contribute permanently ceased and a partial withdrawal took place.

Successor or parent corporation or other resulting entity considered original

employer.

Partial Withdrawals – ERISA § 4205 – occurs on last day of plan year if for such year:

there is 70% contribution decline – occurs if during each year of 3-year testing

period (i.e., the plan year and two immediately prior years) CBUs do not exceed

30% of CBUs for high base year (i.e., average CBUs for highest 2 years within 5

years immediately prior to 3-year testing period); or

there is partial cessation of contribution obligation – occurs if employer

permanently ceases to have obligation to contribute:

under one or more but fewer than all CBAs under which obligated to

contribute to plan but continues to perform work in jurisdiction of CBA of

the type for which contributions were previously required or transfers such


work to another location, or to an entity or entities owned or controlled by

employer, or

under the plan with respect to work performed at one or more but fewer

than all of its facilities, but continues to perform work at the facility of the

type for which obligation to contribute ceased.

special rule for Retail Food Industry.

Adjustments and Limitations to Withdrawal Liability

Reduction of partial withdrawal liability (ERISA § 4208) – special rules for

reduction or elimination of partial withdrawal liability incurred under 70%

contribution decline depending upon improved level of employer’s contributions

in subsequent plan years.

Reduction or waiver of complete withdrawal liability (ERISA § 4207) – if

employer that has experienced complete withdrawal resumes covered operations

or renews obligation to contribute, it may apply to plan for abatement of its

complete withdrawal liability. See PBGC Reg. § 4207.1 – 4207.10.

Free Look Rule (ERISA § 4210) – no withdrawal liability if complete or partial

withdrawal within lesser of 6 years or years required for vesting under plan;

provided plan so provides, employer was required to make contributions each

year equal to less than 2% of all employer contributions, and ratio of plan assets

for year prior to first year of employer’s contributions to benefit payments made

in such year was at least 8 to 1.


De Minimis Rule (ERISA § 4209) – provides for reduction in withdrawal liability

by smaller ¾ of 1% of plan’s unfunded vested obligations or $50,000, phased out

by employer’s share of unfunded vested benefits over $100,000 (which thresholds

may be increased by plan amendment to $100,000 reduction and $150,000 phase-

out).

20-year Limitation of Annual Payments (ERISA § 4219(c)(1)(B)) – where

amortization period for payment of withdrawal liability exceeds 20 years,

employer’s liability capped at 20 years.

ERISA § 4225 Limitations:

Sale of substantially all employer’s assets in bona fide, arm’s-length

transaction to unrelated party – unfunded vested benefits allocable to

employer are limited based upon liquidation or dissolution value of

employer.

unfunded vested benefits allocable to insolvent employer undergoing

liquidation or dissolution not to exceed 50% of such unfunded vested

benefits plus that portion of 50% of unfunded vested benefits allocated to

employer which does not exceed employer’s liquidation or dissolution

value (reduced by such initial 50%).

Property exempt under Section 522 of title 11 is not subject to

enforcement of withdrawal liability against an individual.


Withdrawal liabilities incurred by employer to multiple plans attributable

to same sale, liquidation or dissolution are proportioned.

Mass Withdrawal – ERISA § 4219 (c)(1)(D)

Distinguish types of multiemployer plan terminations (ERISA § 4041A)

amendment to cease benefit accruals for future service or to convert to

individual account plan – employers have continuing obligation to

contribute to plan at highest rate of last 5 years.

withdrawal of every employer from plan or cessation of obligation of all

employers to contribute under plan – benefits are reduced or suspended

pursuant to ERISA § 4281.

Three types of mass withdrawal (ERISA § 4001.2)

termination by withdrawal of every employer from plan.

cessation of the obligation of all employers to contribute under plan.

withdrawal by substantially all employers by agreement or arrangement.

Impact of mass withdrawal (PBGC Reg. § 4219.12; see also PBGC Op. Ltr. 94-3

(Aug. 2, 1994)).

redetermination liability, as limited by ERISA § 4225 (PBGC Reg.

§§ 4219.13, 4219.14 & 4219.18).


liability for de minimis amounts if initial withdrawal liability

reduced pursuant to ERISA § 4209(a) or (b).

liability for 20-year limitation amounts if initial withdrawal

liability was limited by ERISA § 4219(c)(1)(B).

reallocation liability whereby total unfunded vested benefits of plan are

fully allocated among all those employers which:

withdrew pursuant to an agreement or arrangement to withdraw

from multiemployer plan from which substantially all employers

withdrew pursuant to an agreement or arrangement to withdraw, or

withdrew after beginning of second full plan year preceding

termination date from plan that terminated by withdrawal of every

employer;

provided, as of relocation date, employer not liquidated or dissolved, not

subject of case or proceeding under insolvency laws (unless plan sponsor

determines that employer is reasonably expected to be able to pay its

initial and redetermination liability), and plan sponsor has not determined

that employer’s initial withdrawal liability or redetermination liability is

limited by ERISA § 4225.

Employer not liable for initial withdrawal liability under Free-look Rule

not liable for redetermination liability, but is liable for reallocation

liability. PBGC Reg. § 4219.12(e).


Employer that withdrew during period of 3 consecutive plan years within

which substantially all employers withdrew presumed to be by agreement

or arrangement unless employer proves otherwise by preponderance of the

evidence. ERISA § 4219(c))1)(D) & PBGC Reg. § 4219.12(g).

Employer’s initial allocable share of reallocation liability determined by

reference to its average CBUs during 3 years preceding its withdrawal as

compared to all employers liable for reallocation liability. PBGC Reg.

§ 4219.15(c)(1).

Reallocation liability computed by plan sponsor as of mass withdrawal

valuation date to be adjusted (PBGC Reg. § 4219.15):

exclude from plan assets value of plan’s claims for unpaid initial

withdrawal liability and unpaid redetermination liability deemed

uncollectible.

include portion of unfunded vested benefits that is unassessable as

to an employer due to Section 4225 limitations with respect to

reallocation liability of other liable employers.

but no employer liable for unfunded vested benefits allocated to

another employer that are determined to be unassessable or

uncollectible subsequent to plan sponsor’s demand for payment of

reallocation liability. See also: PBGC Op. Ltr. 88-5 (Apr. 1,

1988).


Employer’s payment of total initial withdrawal liability, whether by

prepayment or otherwise, for a withdrawal later determined to be part of a

mass withdrawal does not exclude employer from or otherwise limit

employer’s mass withdrawal liability. PBGC Reg. § 4219.12(f).

Transactions to Evade or Avoid Liability – ERISA § 4212(c).

If a principal purpose of any transaction is to evade or avoid withdrawal liability,

then liability is determined and collected without regard to such transaction.

SUPERVALU, Inc. v. Bd. of Trustees of Southwestern Pennsylvania and

Western Maryland Area Teamsters and Employers Pension Fund, 500

F.3d 334 (3d Cir. 2007) – where employer offered enhanced severance

benefits and wages to union employees as consideration for union’s

agreement to renegotiate its collective bargaining agreement and execute a

termination agreement to effectuate employer’s early withdrawal from

pension plan less than a month before facility closing which enabled it to

avoid significant withdrawal liability due to changed funding status of the

plan, such transaction was undertaken with a principal purpose to evade or

avoid withdrawal liability even if involved bona fide collective bargaining

agreements negotiated at arm’s length, such that the termination

agreement is disregarded in determining when employer ceased all

covered operations and withdrew.

Cuyamaca Meats, Inc. v. San Diego and Imperial Counties Butchers’ and

Food Employers’ Pension Trust Fund, 827 F.2d 491 (9th Cir. 1987) –


employer proposals made during negotiations toward a collective

bargaining agreement, and motivated, at least in part, by a desire to

minimize withdrawal liability, are not transactions entered into in order to

evade or avoid withdrawal liability.

Trustees of the Utah Carpenters’ and Cement Masons’ Pension Trust v.

Loveridge, 2012 WL 2522596 (D. Utah Jun. 28, 2012), aff’d, 567 Fed.

Appx. 659, 58 Emp. Ben. Cas. (BNA) 2246 (10th Cir. Jun. 10, 2014) –

Court agreed with arbitrator that employer’s agreement to renew

obligation to contribute to Plan by making token plan contributions

constituted a transaction with a principal purpose of evading or avoiding


Teamsters Joint Council No. 83 of Virginia Pension Fund v. Empire Beef

Co., Inc., 2011 WL 201492, 50 Emp. Ben. Cas. (BNA) 1824 (E.D. Va.

Jan. 20, 2011) – where evading withdrawal liability was merely a

“collateral purpose” and not a “principal purpose” of an asset restructuring

agreement entered into to protect owner’s father from threatened litigation

of other company creditors, such agreement would not be disregarded.

CIC-TOC Pension Plan v. Weyerhaeuser Co., 911 F. Supp. 2d 1088 (D.

Or. 2012) – employer’s decision accelerating closure of a facility was a

unilateral act and not a “transaction” entered into to evade or avoid



Special rules – if plan sponsor determines that transaction to evade or avoid

liability occurred:

before January 1, 1999 and at least 5 years before date of complete or

partial withdrawal, plan sponsor must prove by preponderance of the

evidence that a principal purpose was to evade or avoid withdrawal

liability. ERISA § 4221(e).

after December 31, 1998 and at least 5 years before date of complete or

partial withdrawal (2 years in the case of smaller employer having on

average for calendar year of transaction and 3 preceding years not more

than 500 employees and required to contribute to the plan for not more

than 250 employees), employer contesting assessment in manner

permitted by law (e.g., arbitration or court action) may elect to postpone

payments until a final decision upholds plan sponsor’s determination,

subject to special bond or escrow requirements if decision not rendered

within 12 months of notice of election. ERISA § 4221(f).

Effect of Bankruptcy or Insolvency of Employer

Limitation on allocation of unfunded vested benefits to insolvent employer

undergoing liquidation or dissolution per ERISA § 4225(b)

employer is insolvent if liabilities, including unreduced withdrawal

liability under plan exceed employer’s assets, and


liquidation or dissolution value is determined without regard to such

withdrawal liability. ERISA § 4225(d).

Liability of individual company owners

to extent withdrawal liability is attributable to individual’s obligation to

contribute to plan as sole proprietor or partner, property exempt from

estate under Section 522 of Bankruptcy Code or similar state law is not

subject to such liability. ERISA § 4225(c).

dischargeability in personal bankruptcy – courts have distinguished

between unpaid contributions (contractual obligation) and withdrawal

liability (statutory obligation):

withdrawal liability discharageable – Carpenters Pension Trust

Fund v. Moxley, 734 F.3d 864 (9th Cir. 2013).

liability for contributions not dischargeable if constitutes

defalcation for mishandling plan assets under Section 523(a)(4) of

Bankruptcy Code – Raso v. Fahey (In re Fahey), 494 B.R. 16

(Bankr. D. Mass. 2013).

Joint and several liability of solvent controlled group members

common control and controlled group rules apply in identifying employer

– ERISA § 4001(b)(1) and PBGC Reg. §§ 4001.2 & 4001.3


Central States Southeast & Southwest Areas Pension Fund v. SCOFBP,

LLC, 668 F.3d 873 (7th Cir. 2011).

Portion of withdrawal liability attributable to post-bankruptcy petition time period

as regarded as administrative expense entitled to priority:

not entitled to priority where plan failed to establish that claim “directly

and substantially” benefited the debtor company’s estate – In re HNRC

Dissolution Co., 396 B.R. 461 (B.A.P. 6th Cir. 2008). See also Bakery,

Confectionery & Tobacco Workers v. Hostess Brands, Inc. (In re Hostess

Brands, Inc.), 499 B.R. 406 (S.D.N.Y. 2013).

entitled to priority – In re Marcal Paper Mills, Inc., 650 F.3d 311 (3rd Cir.

2011) (affirming Trucking Employees Of North Jersey Welfare Fund, Inc.

Pension Fund v. Marcal Paper Mills, Inc., 2009 WL 3681897, 48 Emp.

Ben. Cas. (BNA) 2002 (D.N.J. Nov. 02, 2009)), wherein district court

disagreed with Sixth Circuit in HNRC case).

Other Emerging Issues

Reliance on broad reach of ERISA § 4301(a)(1) as to persons entitled to maintain

actions – a plan fiduciary, employer, plan participant, or beneficiary, who is

adversely affected by the act or omission of any party under Subtitle E of Title IV

of ERISA with respect to a multiemployer plan, or an employee organization

which represents such a plan participant or beneficiary for purposes of collective

bargaining, may bring an action for appropriate legal or equitable relief, or both.


Employer fiduciary claims

DiGeronimo Aggregates, LLC v. Zemla, 763 F.3d 506 (6th Cir. 2014) –

Sixth Circuit refused to recognize a federal common law claim for

negligence brought by a contributing employer alleging that trustees

mismanaged multiemployer plan’s assets, holding that such an action

could only be brought by a participant and beneficiary in the plan.

Grand Union Company v. Food Employers Labor Relations Association,

808 F.2d 66 (D.C. Cir. 1987) – employer’s claims against certain trustees

for breach of fiduciary duty under ERISA Section 404(a)(1)(D) were

based upon Title I of ERISA, under Section 502(a) of which only certain

enumerated persons are empowered to bring a civil action, which list,

unlike ERISA Section 4301(a)(1), does not include employers.

Sysco Food Services of Metro New York, LLC v. Tramontana, 2007 WL

4165349, 43 Emp. Ben. Cas. (BNA) 1176 (D.N.J. Nov. 20, 2007) – Court

dismissed employer’s claim that plan trustees fraudulently induced it to

remain in the fund by misrepresenting and concealing underfunded status

of fund as not meeting heightened fraud pleading standards.

Employer claims against other employers

Knall Beverage, Inc. v. Teamsters Local Union No. 293 Pension Plan, 744

F.3d 419 (6th Cir. 2014) – Court held that federal court action by prior

contributing employers, who were assessed reallocation liability pursuant


to mass withdrawal claw-back provisions, could not be maintained against

the fund and remaining contributing employers on basis that mass

withdrawal was a sham entered into to evade or avoid a portion of the

remaining employers’ liability, since such claims were subject to

mandatory arbitration.

How to Litigate

Experts

Challenging Actuarial Assumptions

Withdrawal liability to be determined by each plan on basis of

actuarial assumptions and methods either prescribed by PBGC

regulations or which, in the aggregate, are reasonable and which,

in combination, offer the actuary’s best estimate of anticipated

experience under the plan. ERISA § 4213(a).

Determination of plan’s unfunded vested benefits is presumed

correct unless employer can show by a preponderance of evidence

that:

actuarial assumptions and methods used were, in the

aggregate, unreasonable (taking into account plan’s

experience and reasonable expectations), or


plan’s actuary made a significant error in applying the

actuarial assumptions and methods. ERISA § 4221(a)(3)(B).

Chicago Truck Drivers Helpers and Warehouse Workers Union

(Independent) Pension Fund v. CPC Logistics, Inc., 698 F.3d 346

(7th Cir. 2012) – plan failed to satisfy ERISA § 4213(b)(1),

requiring use of actuary’s best estimate when calculating


Board of Trustees of IBT Local 863 Pension Fund v. C&S

Wholesale Grocers, Inc./Woodbridge Logistics LLC, 2014 WL

1687141, 58 Emp. Ben. Cas. (BNA) 1840 (D.N.J. Mar. 19, 2014) –

actuary erred in including 10% surcharge, imposed by Pension

Protection Act of 2006 because plan was in “critical status,” in

computing highest contribution rate when determining an

employer’s withdrawal liability.

Requests for Review and Arbitration Demands

Strict timing requirements

Request for Review by employer – no later than 90 days after

employer receives withdrawal liability assessment – ERISA

§ 4219(b)(2)(A).

Retirement Plan of the National Retirement Fund v.

Lackmann Culinary Services Inc., 2011 WL 3366354, 52


Emp. Ben. Cas. (BNA) 1786 (S.D.N.Y. Jul. 29, 2011) –

notice from plan that set forth estimated amount of

withdrawal liability substantially complied with Section

4219’s notice requirements and employer did not request

review within 90 days of receipt or demand arbitration to

contest adequacy of notice or amount.

Trucking Employees of North Jersey Welfare Fund Inc. –

Pension Fund v. James Constr. Co., Inc., 2014 WL

3891363, 200 L.R.R.M. (BNA) 3396 (D.N.J. Aug. 5, 2014)

– although employer filed arbitration request, it “jumped

the gun” by not first requesting review by plan, thereby

waiving right to arbitration.

Disputes under ERISA §§ 4201-4219 to be resolved through

initiation of arbitration within 60-day period after earlier of:

date of plan’s notification of employer under ERISA

§ 4219(b)(2)(B), or

120 days after date of employer’s request for review,

except parties may jointly initiate arbitration within 180

days of plan’s demand. ERISA § 4221(a)(1).

Central States, Southeast & Southwest Areas Pension Fund

v. C.&V. Leasing, Inc., 2010 WL 3024923, 49 Emp. Ben.


Cas. (BNA) 1886 (N.D.Ill. Jul. 30, 2010) – arbitration

demand made one day late dooms appeal of assessment

even where fund participated in selection of arbitrators

while reserving objection to arbitrator’s authority.

Trucking Employees of North Jersey Welfare Fund Inc. –

Pension Fund v. Parsippany Construction Co. Inc., 2009

WL 1076201 (D.N.J. Apr. 21, 2009) – employer that

withdrew from fund after it went out of business waived its

right to defense that building and construction industry

exception applied by not initiating arbitration to challenge

fund’s withdrawal liability assessment.

Courts are split as to scope of exceptions to hear challenge to withdrawal

liability when there has not first been arbitration.

Trustees of the Utah Carpenters’ and Cement Masons’ Pension

Trust v. New Star/Culp LLC, 2009 WL 321573, 46 Emp. Ben.

Cas. (BNA) 1147 (D. Utah Feb. 9, 2009) – employer’s argument

that court should ignore “harsh remedy” for failure to arbitrate

because it was covered by building and construction industry

exception was not within only standard of “exceptional

circumstances” establish by Tenth Circuit for excusing failure to

arbitrate.


Trustees of the Soft Drink Industry – Local Union No. 744

Pension Fund v. Royal Crown Bottling Co., 2009 WL 310896, 46

Emp. Ben. Cas. (BNA) 1010 (N.D. Ill. Feb. 9, 2009) – district

court observed that Seventh Circuit recognizes only one exception

allowing equitable tolling of time limitation for filing arbitration

where employer files legitimate defense in federal court before

filing arbitration.

EUSA – Allied Acquisition Corp. v. Teamsters Pension Trust Fund

of Philadelphia & Vicinity, 2012 WL 1033012, 53 Emp. Ben. Cas.

(BNA) 2532 (D.N.J. Mar. 26, 2012) – employer argued that free-

look agreement allowed it to withdraw without incurring

withdrawal liability and claimed fraudulent inducement and

intentional misrepresentation against union which claim the court

held was one that fell within exception to mandatory arbitration but

that withdrawal liability claim must first be arbitrated.

Operating Engineers’ Pension Trust Fund v. Clark’s Welding and

Machine, 2009 WL 1324049, 47 Emp. Ben. Cas. (BNA) 1700

(N.D. Cal. May 8, 2009) – court determined that issue whether

prior settlement agreement, in which fund allegedly agreed to

waive all claims in exchange for employer’s payment of delinquent

contributions to the fund, barred pension fund from seeking

withdrawal liability was not an issue subject to mandatory

arbitration.


Findlay Truck Line, Inc. v. Central States, Southeast & Southwest

Areas Pension Fund, 726 F.3d 738 (6th Cir. 2013) – Sixth Circuit

noted that it has recognized three exceptions to mandatory

arbitration of withdrawal liability disputes:

an employer’s “facial constitutional attack”;

an employer’s verifiable claim that arbitration would lead

to irreparable injury;

the determination of whether a company is an “employer”

within the meaning of MPPAA.

Applicable Arbitration Rules

Arbitration proceedings under ERISA § 4221 are to be conducted:

in accordance with fair and equitable procedures promulgated by

PBGC. ERISA § 4221(a)(2).

in the same manner, subject to the same limitations, carried out

with the same powers (including subpoena power) and enforced in

United States courts as an arbitration proceeding carried out under

title 9, United States Code. ERISA § 4221(b)(3).

with presumption that any determination made by a plan sponsor

under ERISA §§ 4201-4219 and 4225 is correct unless contesting

party shows by a preponderance of evidence that such


determination was unreasonable or clearly erroneous. ERISA

§ 4221(a)(3)(A).

PBGC has promulgated Regulations §§ 4221.1-4221.14; PBGC Reg.

§ 4221.14 provides that in lieu of these procedures, arbitration may be

conducted in accordance with an alternative procedure approved by the

PBGC in accordance with its prescribed rules and conditions.

Central States, Southeast & Southwest Areas Pension Fund v. Allega

Concrete Corp., 2014 WL 444206, 57 Emp. Ben. Cas. (BNA) 2894

(N.D.Ill., Jan. 28, 2014) – timeliness of an arbitration demand was

question for courts to decide and since fund had specifically adopted the

arbitration rules of the American Arbitration Association (AAA), which

required parties initiating arbitration to submit a demand notice directly to

AAA, even though employer had sent arbitration demand to the fund

within the 60-day window, its arbitration demand was untimely.

Query whether fund can compel employer to utilize AAA rules or

payment of filing fee in order to initiate arbitration?

Query whether fund can mandate venue of arbitration hearing?

Query whether fund can mandate reimbursement of attorneys’ fees and

expenses if fund prevails in arbitration of its assessment?


RONALD L. KAHN is a Partner at Ulmer & Berne LLP in Cleveland, Ohio. Mr. Kahn

graduated from The University of Michigan Law School in 1973 and was admitted to the Ohio

State Bar in 1973. Mr. Kahn advises businesses of all sizes on the design and maintenance of

employee pension and welfare benefit programs, including ESOPs and executive and incentive

compensation plans. Mr. Kahn provides guidance regarding fiduciary responsibility, prohibited

transactions and unrelated business income tax (UBIT) issues and represents clients in

connection with IRS and DOL exams. Mr. Kahn also represents clients in ERISA litigation

(including MPPAA withdrawal liability assessments and reallocation liability assessments) and

has argued cases before the Federal Courts of Appeal for the Second, Sixth and Seventh Circuits,

and he has served as an expert witness regarding issues of fiduciary responsibility and prohibited

transactions. Recently, Mr. Kahn was named “2014 ERISA Litigation Lawyer of the Year” for

Cleveland by Best Lawyers in America®. Mr. Kahn is a member of The ESOP Association, The

National Center for Employee Ownership, and Worldwide Employee Benefits Network (WEB).

Mr. Kahn is a frequent speaker at seminars and conferences on ERISA topics.

Documents

ERISA § 4203 - American Conference Institute · Cir. 2012) – sale-of-assets exemption found not to apply because purchaser was not obligated to contribute for substantially same