GCIU-Emp'r Ret. Fund v. MNG Enters., Inc.

51 F.4th 1092

GCIU-EMPLOYER RETIREMENT FUND; Board of Trustees of the GCIU-Employer Retirement Fund, Plaintiffs-Appellants/Cross-Appellees,

v.MNG ENTERPRISES, INC., dba Digital First Media, Defendant-Appellee/Cross-Appellant.

Nos. 21-55864

21-55923

United States Court of Appeals, Ninth Circuit.

Argued and Submitted August 29, 2022 Pasadena, California

FILED OCTOBER 28, 2022

Michael J. Korda (argued), George M. Kraw, Katherine A. McDonough, Kraw Law Group, Mountain View, California; Valentina Mindirgasova, Kraw Law Group, Escondido, California; for Plaintiffs-Appellants.

James E. Tysse (argued) and Eric D. Field, Akin Gump Strauss Hauer & Feld LLP, Washington, D.C.; Michael J. Weisbuch, Akin Gump Strauss Hauer & Feld LLP, San Francisco, California; for Defendant-Appellee.

Before: Milan D. Smith, Jr. and Ryan D. Nelson, Circuit Judges, and Gershwin A. Drain,^* District Judge.

OPINION

R. NELSON, Circuit Judge:

The Multiemployer Pension Plan Amendments Act of 1980 imposes liability on employers who withdraw—partially or completely—from multiemployer pension funds. That liability assessment is based on "the actuary's best estimate of anticipated experience under the plan." 29 U.S.C. § 1393(a)(1). After a complete withdrawal, GCIU-Employer Retirement Fund's (GCIU) actuary calculated MNG Enterprise's (MNG) withdrawal liability using an interest rate published by the Pension Benefit Guaranty Corporation. The actuary also accounted for the contribution histories of two newspapers that MNG had acquired several years before its complete withdrawal.

On MNG's challenge, an arbitrator found (1) that MNG could not be assessed partial withdrawal liability following a complete withdrawal, (2) that it had shown the interest rate used was not the best estimate of the plan's experience, and (3) that GCIU properly included the newspapers' contribution histories. The district court affirmed the arbitrator's award, vacating and correcting only a typographical error on the interest rate. We partially affirm, partially vacate, and remand for the district court to decide whether successor liability would apply to MNG at the time of the asset sales.

I

A

Congress enacted the Employee Retirement Income Security Act of 1974 (ERISA) to ensure that pensions maintain sufficient funding to pay pensioners' benefits. 29 U.S.C. § 1001(a). ERISA's minimum funding standards require employers to contribute enough assets to pension plans to cover future liabilities. See 26 U.S.C. § 412(a). ERISA also provides for withdrawal liability. See 29 U.S.C. § 1364. Under the old rules, that liability did not kick in until the plan became insolvent—once it was insolvent, ERISA imposed liability on "any employer who had withdrawn from the plan during the previous five years" for their "fair share of the plan's underfunding." Milwaukee Brewery Workers' Pension Plan v. Joseph Schlitz Brewing Co. , 513 U.S. 414, 416, 115 S.Ct. 981, 130 L.Ed.2d 932 (1995).

Before the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), multiemployer pension plans faced special problems. For instance, employers participating in a multiemployer plan could withdraw without triggering the liability provisions. See United Mine Workers of Am. 1974 Pension Plan v. Energy W. Mining Co. , 39 F.4th 730, 734 (D.C. Cir. 2022). As employers withdrew, the fund's assets shrank; in turn, the remaining employers had to contribute more to meet the minimum funding standards. Id. at 734–35. This created a vicious cycle: as soon as a plan was at risk for underfunding, employers would withdraw and risk the possibility of later liability rather than take on the certainty of increased contributions in the meantime. Milwaukee Brewery , 513 U.S. at 416–17, 115 S.Ct. 981.

The MPPAA aimed to solve these problems by imposing withdrawal liability on employers when they withdrew from the plan rather than up to five years down the road. 29 U.S.C. § 1381(a). And that liability would cover "the employer's proportionate share of the plan's ‘unfunded vested benefits,’ calculated as the difference between the present value of the vested benefits and the current value of the plan's assets." Connolly v. Pension Benefit Guar. Corp. , 475 U.S. 211, 217, 106 S.Ct. 1018, 89 L.Ed.2d 166 (1986) ; see also 29 U.S.C. §§ 1381(b), 1391. Both complete and partial withdrawals trigger withdrawal liability. See 29 U.S.C. § 1381(a), 1383, 1385.

Pension plans now have rules explaining "how to determine a plan's total underfunding" and "how to determine an employer's fair share" of that underfunding. Milwaukee Brewery , 513 U.S. at 417–18, 115 S.Ct. 981. The MPPAA gives the plan sponsor initial responsibility to determine an employer's withdrawal liability. 29 U.S.C. § 1382(1). The plan actuary must use "actuarial assumptions and methods which, in the aggregate, are reasonable (taking into account the experience of the plan and reasonable expectations) and which, in combination, offer the actuary's best estimate of anticipated experience under the plan." § 1393(a)(1). After determining the amount of liability, the plan must notify the employer "[a]s soon as practicable" and then collect the amount. §§ 1382(2) – (3), 1399(b)(1).

When an employer sells its assets and withdraws from the pension plan, it ordinarily incurs liability for a complete withdrawal. See §§ 1381(a), 1383(a), 1384(a). The obligation to pay that liability usually remains with the selling employer. Heavenly Hana LLC v. Hotel Union & Hotel Indus. of Haw. Pension Plan , 891 F.3d 839, 842 (9th Cir. 2018). Under common law, courts have equitable discretion to hold the purchaser responsible for that liability. See Resilient Floor Covering Pension Tr. Fund Bd. of Trs. v. Michael's Floor Covering, Inc. , 801 F.3d 1079, 1084 (9th Cir. 2015). The common-law rule creating successor liability applies when the purchaser is (1) a successor and (2) has notice of the liability. Heavenly Hana , 891 F.3d at 843 (citation omitted). Even so, as "the origins of successor liability are equitable," courts apply successor liability only "when it is fair to do so[.]" Id. at 847 (internal quotation marks omitted) (quoting Resilient Floor , 801 F.3d at 1091 ).

If a dispute arises as to the amount of withdrawal liability, ERISA and the MPPAA mandate arbitration. 29 U.S.C. § 1401(a). Any party may then appeal the arbitrator's award to the proper United States district court. § 1401(b)(2).

B

MNG, the named party in this appeal, includes two smaller controlled groups, MediaNews Group and California Newspaper Partnership Controlled Group. In 2013, California Newspaper completely withdrew from GCIU. In 2014, MediaNews did the same, ending MNG's contributions to GCIU. In 2018, GCIU assessed against MediaNews a 2014 complete withdrawal and two subsequent partial withdrawals for 2014 and 2015.¹ The 2014 partial withdrawal liability totaled $8,650,737 and the 2015 partial withdrawal, $4,229,840.

Previously in 2006, MediaNews acquired the assets of the Torrance Daily Breeze. Meanwhile, in 2007, California Newspaper acquired the assets of the Santa Cruz Sentinel. Both newspapers previously participated in GCIU and stopped contributing before MNG acquired them. Nothing in the record suggests that GCIU assessed withdrawal liability against the Daily Breeze or the Sentinel when they withdrew.

In calculating MNG's withdrawal liability, the plan actuary used the Pension Benefit Guaranty Corporation's (PBGC) published rate, which was around 4%. The actuary testified that the PBGC rate is based on a settlement-type obligation and does not account for the future experience of the plan. Generally, using the PBGC rate results in a higher amount of withdrawal liability because it assumes a lower rate of growth. The actuary also included the contribution histories of the Daily Breeze and the Sentinel in calculating liability.

MNG contested the 2014 and 2015 partial withdrawals, the use of the PBGC interest rate, and the inclusion of the newspapers' contribution histories. The parties proceeded to arbitration.

The arbitrator first found that MNG could not be liable for the partial withdrawals that occurred after it completely withdrew from GCIU. He reasoned that no partial withdrawals could occur following a complete withdrawal and that MNG had completely withdrawn by the reported dates of the partial withdrawals. Next, the arbitrator found that MNG had shown that the actuary relied on unreasonable assumptions in deciding the interest rate for the withdrawal liability because the PBGC rate disregarded the experience of the plan and the expected returns on assets. He instead directed GCIU to recalculate liability with a 7% interest rate. Finally, the arbitrator held that GCIU properly included the contribution histories of the newspapers acquired by MNG because MNG was a successor that had notice of the liabilities.

Both parties sought judicial review. The district court affirmed the award, except with respect to the interest rate. Instead of the arbitrator's 7% interest rate, the district court ordered an 8% interest rate because it believed the arbitrator made a typographical error. On appeal, GCIU contends that the district court erred in affirming the arbitrator's award as to partial-withdrawal liability and the PBGC interest rate. MNG would have us affirm the district court on those issues but asks us to reverse the inclusion of the newspapers' contribution histories.

II

Title 29, section 1401(b)(2) authorizes judicial review to "enforce, vacate, or modify the arbitrator's award" in an MPPAA dispute. See Trs. of Amalgamated Ins. Fund v. Geltman Indus., Inc. , 784 F.2d 926, 928 (9th Cir. 1986). We presume that "findings of fact made by the arbitrator were correct," unless rebutted "by a clear preponderance of the evidence." § 1401(c). We review conclusions of law de novo, Geltman Indus. , 784 F.2d at 928–29, and applications of equitable relief for abuse of discretion, Metal Jeans, Inc. v. Metal Sport, Inc. , 987 F.3d 1242, 1244...