Casey v. Tyree Serv. Corp.

KEVIN CASEY and DANA GATHARD,as Trustees of the I.B.E.W. Local No. 25 Pension Fund, Plaintiffs, v. TYREE SERVICE CORP., AMINCOR, INC.,ADVANCED WASTE & WATER TECHNOLOGY, INC.,AMINCOR CONTRACT ADMINISTRATORS, INC., AMINCOR OTHER ASSETS, INC.,BAKER'S PRIDE, INC., CAPSTONE BUSINESS FUNDING, LLC, CAPSTONE CAPITAL GROUP, LLC,CAPSTONE CAPITAL MANAGEMENT, INC.,CAPSTONE CAYMAN SPECIAL LIQUIDITY FUND, LP, CAPSTONE CREDIT, LLC,CAPSTONE SPECIAL LIQUIDITY FUND LP, a/k/a Capstone Special Purpose Fund LP,ENVIRONMENTAL HOLDING CORP., a/k/a, Environmental Holdings Corp.,METRO ENVIRONMENTAL SERVICES, LLC,a/k/a Environmental Quality Services, T-ENVIRONMENTAL, INC.,TYREE ENVIRONMENTAL CORP., TYREE EQUIPMENT CORP.,and TYREE HOLDINGS CORP., Defendants.

2:18-cv-2421 (DRH)(GRB)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

May 15, 2019

MEMORANDUM AND ORDER

APPEARANCES

ARCHER, BYINGTON, GLENNON & LEVINE LLP

Attorneys for Plaintiff

1 Huntington Quadrangle, Suite 4C10

Melville, NY 11747

By: Matthew F. Hromadka, Esq.

John H. Byington, III, Esq.

BRODY O'CONNOR & O'CONNOR

Attorney for Defendants

111 John Street, Suite 900

New York, NY 10038

By: Scott A. Brody, Esq.

HURLEY, Senior District Judge:

INTRODUCTION

Plaintiffs Kevin Casey and Dana Gathard ("Plaintiffs"), as Trustees of the I.B.E.W. Local No. 25 Pension Fund ("Fund"), brought this action against Defendants Tyree Service Corp. ("Tyree Service"), Amincor, Inc., Advanced Waste & Water Technology, Inc., Amincor Contract Administrators, Inc., Amincor Other Assets, Inc., Baker's Pride, Inc., Capstone Business Funding, LLC, Capstone Capital Group, LLC, Capstone Capital Management, Inc., Capstone Cayman Special Liquidity Fund, LP, Capstone Credit, LLC, Capstone Special Liquidity Fund LP, a/k/a Environmental Quality Services, T-Environmental, Inc., Tyree Environmental Corp., Tyree Equipment Corp., and Tyree Holdings Corp. (collectively, "Defendants") to recover unpaid withdrawal liability pursuant to the Employee Retirement Income Security Act ("ERISA") of 1974, as amended, 29 U.S.C. § 1381 et seq.

Presently before the Court is Defendants' motion to stay pending arbitration. For the reasons explained below, Defendants' motion is granted, this matter is hereby stayed, and the Parties are directed to proceed with arbitration.

BACKGROUND

The following relevant facts are taken from the Complaint and the Parties' motion papers.

Defendant Tyree Service executed a collective bargaining agreement ("CBA") with I.B.E.W. Local Union No. 25. (Compl. [ECF No. 1] ¶ 29.) Defendants allege that the CBA was in effect from May 1, 2009 to April 30, 2012, with an extension through October 31, 2012.(Scott A. Brody Aff. [ECF No. 27-1] (hereinafter "Brody Aff.") ¶ 4.) Pursuant to the CBA, Tyree Service agreed to pay pension contributions to the Fund on behalf of its employees who were covered by the CBA. (Compl. ¶ 30.) Under the CBA, Tyree Service was also subject to a Trust Agreement that provided, inter alia, that if a contributing employer withdraws from the Fund, it is required to pay withdrawal liability in accordance with ERISA. (Id. ¶ 31.)

On or about October 31, 2012, Tyree Service permanently ceased to have an obligation to contribute to the Fund pursuant to ERISA § 4203(b)(2)(A). (Id. ¶ 32.) On April 24, 2015, Plaintiffs served notice on Defendant Tyree Service of the Fund's claim for withdrawal liability. (Brody Aff. ¶ 5.) On August 25, 2015, Defendant Tyree Service's counsel wrote to Plaintiffs in the context of settlement negotiations related to a separate claim. (Id.) In the letter, Defendants' counsel told Plaintiffs that Defendant Tyree Service "has agreed to exclude [the Fund's] claim for withdrawal liability from the settlement, [and that] Tyree Service Corp. is of the position that no withdrawal liability is due and owing from it." (P.'s Mem. in Opp. [ECF No. 28-5] at 4.) Defendants' counsel did not receive any response from Plaintiffs to its letter, or any other communication regarding withdrawal liability. (Id.) Plaintiffs seem to concede that Defendant Tyree Service's withdrawal liability was discussed during the settlement negotiation, but remained unresolved when the Parties settled their separate claim. (See id.)

The issue of withdrawal liability remained dormant until December 11, 2017, when Plaintiffs wrote a letter regarding the same to Defendant Tyree Service directly, without copying Defendants' counsel. (Compl. ¶ 6.) Plaintiffs knew that Defendant Tyree Service was no longer an operating entity by December 2017 and that it was represented by counsel. (Id.) Plaintiffs sent another letter to Defendant Tyree Service concerning withdrawal liability on February 22, 2018. (Id.) Another one of the Defendants passed this second letter on to Defendants' counsel.(Id.) On April 18, 2018, Defendants' counsel wrote Plaintiffs' counsel asking the Fund to re-evaluate its withdrawal liability claim and advised Plaintiffs that Defendant Tyree Service had ceased operations. (Id. ¶ 7.) Plaintiffs' counsel claims that it did not receive this letter, and commenced the instant action on April 24, 2018. (Id.) Plaintiffs later clarified in their Memorandum in Opposition that they received the letter on April 26, 2018. (Mem. in Opp. at 6.) Defendants initiated arbitration by serving a demand for arbitration on Plaintiffs on or before August 2, 2018. (Id.) By letter dated August 8, 2018, Plaintiffs notified the American Arbitration Association that it did not consent to arbitration. (Id.) On September 14, 2018, Defendants moved to stay this action and compel arbitration.

DISCUSSION

I. The Parties' Arguments

In their motion for a stay, Defendants argue that Plaintiffs' failure to respond to counsel's letters requesting that the Fund reevaluate the withdrawal liability means that the time to file for arbitration was never triggered. (Def.'s Mem. in Supp. [ECF No. 27-13] at 3.) Plaintiffs aver in their opposition that Defendants failure to timely request review of the Fund's first demand for withdrawal liability means that Defendants waived any right to arbitrate. (Mem. in Opp. at 1.)

II. Arbitration Under ERISA

ERISA § 4219(b)(2)(A) provides in relevant part that:

No later than 90 days after the employer receives the notice [regarding withdrawal liability], the employer—

(i) may ask the plan sponsor to review any specific matter relating to the determination of the employer's liability and the schedule of payments,

(ii) may identify any inaccuracy in the determination of the amount of the unfunded vested benefits allocable to the employer, and

(iii) may furnish any additional relevant information to the plan sponsor.

29 U.S.C. § 1399(b)(2)(A). Once the plan sponsor has received the employer's request to review its determination,

the plan sponsor shall notify the employer of—

(i) the plan sponsor's decision,

(ii) the basis for the decision, and

(iii) the reason for any change in the determination of the employer's liability or schedule of liability payments.

Id. § 1399(b)(2)(B). ERISA does not provide a time limit for the plan sponsor to respond to the employer.

ERISA further provides that "[a]ny dispute between an employer and the plan sponsor . . . concerning a determination made under sections 1381 and 1399 of this title shall be resolved through arbitration." Id. § 1401(a)(1). Either party may initiate the arbitration within sixty days of the earlier of: (A) the notification to the employer under § 1399(b)(2)(B), or (B) 120 days after the date of the employer's request under § 1399(b)(2)(A). Id.

"Section 1401(a)(1)(B) specifically contemplates a plan sponsor's failure to respond and enables the employer to initiate arbitration, without providing any other form of relief[.]" PACE Industry Union-Management Pension Fund v. Troy Rubber Engraving Co., 805 F. Supp. 2d 451, 460 (M.D. Tenn. 2011). As quoted above, § 1401 allows an employer to initiate arbitration 180 days following the request for review, even if the plan sponsor does not respond to the request. This provision permits the employer to initiate arbitration irrespective of the Fund's actions or failure to act, or the Fund's reasons for such actions. Rao v. Prest Metals, 149 F. Supp. 2d 1, 10 (E.D.N.Y. 2001) ("even accepting [the employer's] contention that the Fund's letter . . . was not a proper response to its request for review, [§1401(a)(1)] subsection (B) would then apply")). Therefore, an employer's time to initiate arbitration begins to run when it sends the request for review, and a sponsor's failure to respond does not toll the employer's 180 days to do so.

Finally, the Second Circuit has explained that "there is a strong presumption in favor of arbitration[, and] waiver of the right to arbitration is not to be lightly inferred." Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102, 104-05 (2d Cir. 2002) (alterations in original); Schreiber v. Friedman, 2017 WL 5564114 at *7 (E.D.N.Y. March 31, 2017) (quoting the same). This preference for arbitration "[has] led to its corollary that any doubts concerning whether there has been a waiver are resolved in favor of arbitration." Trustees of Local 531 Pension Fund v. Al Turi Landfill, Inc., 2010 WL 11627389, at *3 (E.D.N.Y. Sept. 20, 2010) (citing PPG Industries, Inc. v. Webster Auto Parts, Inc., 128 F.3d 103, 107 (2d Cir. 1997)).

III. Defendants' Motion to Stay is Granted

Defendant Tyree Service asserts that Plaintiffs' failure to respond to its August 25, 2015 letter requesting review means that the time to initiate arbitration was never triggered. As explained above, this reasoning has been rejected by judges in the Eastern District of New York and in other district courts. As such, the Court is unpersuaded by this argument, and the Court need not settle the Parties' dispute over whether the August 25, 2015 letter actually contained a request to review.

On the other hand, this case is complicated by the conceded fact that Defendant Tyree Service's withdrawal liability was discussed pursuant to...