Bd. of Trs. of Auto. Machinists Pension Tr. v. Peninsula Truck Lines Inc.

ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

Marsha J. Pechman, United States Senior District Judge.

This matter comes before the Court on the Parties' Cross-Motions for Summary Judgment. (Dkt. Nos. 14, 16.) Having reviewed the Cross-Motions, the Responses (Dkt. Nos. 19, 20), the Supplemental Briefs (Dkt. Nos. 24, 25), and all supporting materials, the Court GRANTS Plaintiff's Motion and DENIES Defendant's Motion. The Court also finds this matter suitable for decision without oral argument, notwithstanding Defendant's request.

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BACKGROUND

Plaintiff Board of Trustees of the Automotive Machinists Pension Trust (“Trustees”) appeals an arbitration decision that it claims incorrectly calculated Defendant Peninsula Trucking Lines, Inc.'s (“Peninsula”) liability for withdrawing from the Automotive Machinists Pension Trust (“Trust”). The Trustees argue that the arbitrator should have used a higher contribution rate to determine Peninsula's withdrawal liability. Peninsula disagrees. The Court reviews the relevant portion of the undisputed factual record and the applicable statutory framework.

The Trustees oversee the Trust, which is a collectively bargained multiemployer pension fund governed by ERISA. Unions rely on the Trust to hold pension benefits payable to their union members. One such union is the Local No. 289 of the International Association of Machinists and Aerospace Workers, AFL-CIO (“Union”), which negotiated a collective bargaining agreement (CBA) with Peninsula, a freight carrier in Federal Way. By at least 2011, Peninsula agreed to make monthly contributions to the Trust under the terms of CBA spanning 2010 to 2011. (See, e.g., Pl. Mot. Ex. D Art. 25 (Dkt. No. 16-1 at 41).) Peninsula negotiated two more CBAs, one covering the period from 2012 to 2015, and the other covering the period from 2015 to May 2018. (Pl. Mot. Exs. E and F (Dkt. No. 16-1 at 49-97).) But in 2018, Peninsula decided to withdraw from the CBA and terminate payments to the Trust.

Peninsula's decision to withdraw from the Trust triggered its “withdrawal liability” under ERISA, 29 U.S.C. § 1381, and the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. § 1399 (“MPPAA”). The MPPAA's imposition of withdrawal liability helps “to mitigate the incentives that employers would otherwise have to withdraw from multiemployer pension plans mired in financial difficulty.” Bd. of Trustees of IBT Loc. 863 Pension Fund v. C & S Wholesale Grocers, Inc.,

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802 F.3d 534, 536-37 (3d Cir. 2015) (citing Concrete Pipe & Prods. of Cal., Inc. v. Contr. Laborers Pension Tr. for S. Cal., 508 U.S. 602, 608-09 (1993)).

After receiving notice of Peninsula's withdrawal, the Trust calculated Peninsula's withdrawal liability to be $3, 858, 988-a figure Peninsula does not dispute. Consistent with ERISA, Peninsula desires to have the debt amortized through quarterly payments. See 29 U.S.C. § 1399(c)(1)(C). Herein lies the dispute. Although the parties agree on the formula to calculate the periodic payments, they disagree on the inputs.

Under ERISA the periodic payment of an employer's withdrawal liability is the product of two numbers. The first number, which is uncontested in this case, is “the average annual No. of contribution base units” as calculated according to various ERISA provisions. 29 U.S.C. § 1399(c)(1)(C)(i)(I). This liability is “the employer's proportionate share of the plan's ‘unfunded vested benefits,' calculated as the difference between the present value of vested benefits and the current value of the plan's assets.” Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 725 (1984) (citing 29 U.S.C. §§ 1381 and 1391). The second number, which is disputed, is “the highest contribution rate at which the employer had an obligation to contribute under the plan during the 10 plan years ending with the plan year in which the withdrawal occurs.” 29 U.S.C. § 1399(c)(1)(C)(i)(II).^[1] The term “obligation to contribute” means “an obligation to contribute arising-(1) under one or more collective bargaining (or related) agreements. . . .” 29 U.S.C. § 1392(a).^[2]

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The parties dispute whether rehabilitation plan payments at rates set forth in the CBAs should be considered “obligation[s] to contribute arising . . . under” the CBA. This requires some understanding of the Trust's adoption of a rehabilitation plan in 2009. At that time, the Trust's actuary certified that the Trust was in “critical status” due to a funding deficiency. (See Ex. A to Pl. Mot. at 3 (Dkt. No. 16-1 at 3).) This meant that under the Pension Protection Act of 2006 (“PPA”), the Trust had to adopt a rehabilitation plan to help ensure it could meet its future pension obligations. (Ex. A-4 to the Declaration of Jeremy Roller (Dkt. No. 15-1 at 75)); see 29 U.S.C. § 1085(b)(2); see also Lehman v. Nelson, 862 F.3d 1203, 1207 (9th Cir. 2017) (noting that the PPA “is designed to help severely underfunded multiemployer pension plans recover”).

Plans in “critical status” must notify the bargaining parties and adopt a plan that presents one or more options for rehabilitation, such as reducing benefits or increasing contributions, to enable the plan to emerge from critical status. 29 U.S.C. § 1085(e)(3)(A). The plan must include “options or a range of options to be proposed to the bargaining parties . . . to enable the plan to cease to be in critical status by the end of the rehabilitation period and may include . . . increases in contributions, if agreed to by the bargaining parties. . . .” 29 U.S.C. § 1085(e)(3)(A)(i). Within 30 days of adoption of the rehabilitation plan, the plan sponsor must present the bargaining parties with one or more schedules showing “revised benefit structures, revised contribution structures, or both, if adopted.” 29 U.S.C. § 1085(e)(1)(B). Among other things, the schedules must “reflect . . . increases in contributions[] that the plan sponsor determines are reasonably necessary to emerge from critical status.” 29 U.S.C. § 1085(e)(1)(B). One of the schedules must be called the “default schedule” which will assume that there are no increases in contributions other than those necessary to emerge from critical status. Id. But the plan may include an

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alternative schedule or schedules. Id. If the bargaining parties fail to adopt one of the schedules or another “consistent with” such schedules, then the “the plan sponsor shall implement the [default] schedule. . . .” Id. § 1085(e)(3)(C).

When the Trust adopted its Rehabilitation Plan in 2009 it established two funding options for employers: a “Preferred Schedule” and a “Default Schedule.” (See Ex. A to Pl. Mot. at 4-5 (Dkt. No. 16-1 at 4-5).) The Preferred Schedule required a 75% increase in contributions over the negotiated rate over a three-year period. (Id. at 4.) And when the Trust amended the Rehabilitation Plan in late 2010, it included a similar “Preferred Schedule” for contributions that placed a 25% increase over the base rate. (See Ex. B to Pl. Mot. at 3-4 (Dkt. No. 16-1 at 18-19).)

As part of the CBA entered into between Peninsula and the Union for May 2010 through October 2011, Peninsula agreed to make contributions at a base rate of $3.95 per hour worked by each bargaining unit employee and an additional “Pension Rehabilitation” rate at $4.94 per hour worked by each bargaining unit employee. (Ex. D. to Pl. Mot. at 16 (Dkt. No. 16-1 at 41).) By agreeing to the “Pension Rehabilitation” rate, Peninsula agreed to the Trust's “Preferred Schedule” rate and not the default schedule rate in the Rehabilitation Plan. (Ex. B to Pl. Mot. at 3-4 (Dkt. 16-1 at 18-19).) In 2013, Peninsula again agreed to the Preferred Schedule rate when it negotiated and agreed to a CBA for a two-and-a-half-year term. (Ex. E to Pl. Mot at 17-18 (Dkt. No. 16-1 at 65-66).) And in 2016, Peninsula signed yet another CBA that included its agreement to the Preferred Schedule rate. (Ex. A-3 to the Declaration Jeremy Roller (Dkt. No. 15-1 at 67).) This CBA was in effect when Peninsula opted to withdraw from the CBA. It set base rate at $3.95 per hour and a “Rehab Plan Supplemental Contribution” that began at a rate of $4.94. (Id.)

Applying the formula set out in 29 U.S.C. § 1399(c)(1)(C)(i)(II), the Trustees calculated the highest contribution rate to be $8.394, which included the base rate and the “Preferred

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Schedule” rate. The Trustees then calculated the quarterly installments to be $30, 120. Peninsula disagreed with the Trustees' determination of the highest contribution rate and initiated an arbitration proceeding as required by ERISA. See 29 U.S.C. § 1401(a)(1). Arbitrator Paul Dubow rejected the Trustees' calculation, finding that the Trustees' inclusion of the “Preferred Schedule” rate “was not authorized by ERISA.” (Roller Decl. Ex. B at 11.) Arbitrator Dubow sided with Peninsula and ordered the Trustees to recalculate Peninsula's annual withdrawal liability payment without consideration of the “Preferred Schedule” rate and to return Peninsula's overpayments. (Id.) Arbitrator Dubow found the quarterly payment should be $14, 174, not $30, 120. The Trustees then initiated this lawsuit to vacate Arbitrator Dubow's order. See 29 U.S.C. § 1401(b)(2); (Complaint ¶ 17 and Prayer for Relief (Dkt. No. 1).)

ANALYSIS

A. Legal Standard

ERISA permits a party to an arbitration to appeal an arbitrator's award to a district court and seek an order to enforce, vacate, or modify the award. See 29 U.S.C. § 1401(b)(2). “Only these factual findings are presumed correct, 29 U.S.C. § 1401(c), and therefore the district court may review de novo all conclusions of law.” Bd. of Trustees of W. Conf. of Teamsters Pension Tr. Fund v. Thompson Bldg. Materials, Inc., ...