Miller & Son Paving, Inc. v. Teamsters Pension Trust Fund of Phila. & Vicinity

MILLER & SON PAVING, INC., Appellant, v. TEAMSTERS PENSION TRUST FUND OFPHILADELPHIA AND VICINITY, Appellee.

CIVIL ACTION No. 15-4869

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

SEPTEMBER 14, 2016

MCHUGH, J.

MEMORANDUM

This is an ERISA case involving an employer's obligation to fund future liabilities when withdrawing from a pension plan. The employer has appealed an arbitrator's opinion and award, challenging the method of calculating its liability when it withdrew from a multiemployer pension plan. Because I find that the employer's withdrawal liability was calculated under a reasonable interpretation of the plan and its supplementary documents, I affirm the arbitrator's opinion and award.

I. Background on the Parties and Withdrawal Liability

Appellee (the Fund) is a jointly administered multiemployee pension benefit plan within the meaning of the Employee Retirement Income Security Act of 1874 (ERISA), 29 U.S.C. §§ 1001-1461, and the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), id. §§ 1381-1461. Appellant (Miller) is a Pennsylvania corporation that contributed to the Fund pursuant to a number of collective bargaining agreements to which Miller was a party. On or about December 31, 2011, Miller ceased its operations covered by the Fund and effected a "complete withdrawal" from the Fund within the meaning of the MPPAA, id. § 1383(a)(2). The Fund determined that Miller had incurred withdrawal liability¹ of $1,487,097.71. Miller challenged the assessment of liability—claiming it should have been reduced to $601,634—and submitted a Demand for Arbitration. An evidentiary hearing was held before an arbitrator, Mariann Schick, Esq., and she issued an Opinion and Award on July 30, 2015, approving the Fund's calculation of withdrawal liability.

II. The Arbitration

ERISA provides that "[e]very employer benefit plan shall be established and maintained pursuant to a written instrument." 29 U.S.C. § 1102(a)(1). The plan's fiduciary must act "in accordance with the documents and instruments governing the plan insofar as" they are consistent with ERISA. Id. § 1104(a)(1)(D).

This case turns on the Fund's calculation of Miller's withdrawal liability pursuant to Article IX, Section C (Section C) of the Teamsters Pension Plan of Philadelphia and Vicinity (the Plan), which provides in relevant part:

In accordance with the advice of the Trust Fund's enrolled actuary, the actuarial assumptions used in calculating withdrawal liability shall be the same actuarial assumptions used in determining the Trust Fund's minimum funding standards under the Internal Revenue Code.

The record presented to the Arbitrator shows that the Fund calculated the relevant figures as follows. In evaluating the needs of the Plan, during the years 2000 to 2008, the Fund used a 7.5% interest rate, called a "valuation rate," to calculate both minimum funding standards and withdrawal liability. In 2009, however, the Fund began to calculate minimum funding standards using a second interest rate assumption—the "current liability rate"—in combination with the 7.5% valuation rate. The Fund used these two rates in tandem to create a range of values to select from in setting its minimum funding standards. In 2011, the year the Fund calculated Miller's withdrawal liability, the current liability rate was 4.47%.

At the same time, the Fund also began to calculate withdrawal liability differently. The Fund began to use a "blended rate"—a particular application of both the 7.5% valuation rate and the 4.47% current liability rate—to determine the present value of vested benefits for withdrawal liability purposes. Ex. J-1(G) at 40. The Fund valued thefunded portion of the benefits at the valuation rate of 7.5%, and the unfunded portion at the current liability rate of 4.47%. Ex. J-1(G) at 40. The Fund's actuary testified that the Fund began using the blended rate "[b]ecause the plan wasn't healthy, and we decided to use something to increase the liabilities of the plan to protect the plan." Hr'g Tr. (H.T.) 91:18-23.

In the arbitration, Miller argued that use of the blended rate in calculating withdrawal liability violated the plain language of Section C, because although both the 7.5% valuation rate and the 4.47% current liability rate were used individually in calculating minimum funding standards, the blended rate was not. By Miller's reasoning, the "same actuarial assumptions" were not used in calculating both minimum funding standards and withdrawal liability. The Fund, in response, argued that Section C only requires that the same actuarial assumptions be used, and does not require that those assumptions be used in the same way in each calculation. Thus by using the same actuarial assumptions—the 7.5% valuation rate and the 4.47% current liability rate—the Fund complied with Section C.

The Arbitrator agreed with the Fund, concluding that Section C did not prevent the Fund from using the blended rate to calculate withdrawal liability. She first recognized that the Plan gives the Fund's Trustees the authority

[t]o construe, in their sole and exclusive discretion, the terms and provisions of this Declaration of Trust, the Pension Plan, and all other supplementary and amendatory documents, and the construction adopted by the Trustees in good faith shall be binding upon the Employers, the Union, the Employes, and any beneficiaries.

Ex. J-1(F) at 11 (some capitalization omitted). The Arbitrator also noted that "any ambiguity in the language must be construed against Miller." Op. 14 (citing Fleisher v.Standard Ins. Co., 679 F.3d 116, 121 (3d Cir. 2012)). She agreed with the Fund that "the decision of the Trustees regarding the interpretation of their pension plan documents must be followed, unless such interpretation is arbitrary and capricious." Op. 14.

The Arbitrator further reasoned that, in requiring use of the "same actuarial assumptions" to calculate both minimum funding standards and withdrawal liability, Section C did not require that these assumptions "be used in the same way" in making each set of calculations. Op. 22. She thus credited the Fund's actuary's testimony that by treating the valuation rate assumption and the current liability rate assumption individually for minimum funding purposes and blending them for withdrawal liability purposes, the Fund used the same actuarial assumptions in making each set of calculations. Op. 15, 20-23. She ultimately concluded that the Fund's interpretation of Section C complied with its language and was not arbitrary and capricious, and upheld the Fund's calculation of withdrawal liability. Op. 20-23.

Miller subsequently filed this action pursuant to 29 U.S.C. §§ 1401(b)(2) & 1451(c), requesting that this Court vacate that portion of the Arbitrator's Opinion and Award.² The parties have now filed cross-motions for summary judgment.

III. Standard of Review

Motions for summary judgment are governed by the well-established test set forth in Federal Rule of Civil Procedure 56(a), as amplified by Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986), but particular rules apply in this context. In reviewing an arbitrator's decision under ERISA, "the district court presumes that the arbitrator's factual findings are correct unless they are rebutted by a clear preponderance of theevidence," while "[t]he arbitrator's legal conclusions are reviewed de novo." Crown Cork & Seal Co. v. Cent. States Se. & Sw. Areas Pension Fund, 982 F.2d 857, 860 (3d Cir. 1992). A "district court may not vacate an arbitration award merely because it would decide the merits differently. So long as the arbitration award has some support in the record, and the arbitrator has not manifestly disregarded the law, [the district court] will affirm the award." Eichleay Corp. v. Int'l Ass'n of Bridge, Structural, & Ornamental Iron Workers, 944 F.2d 1047, 1057 (3d Cir. 1991) (citation omitted).

Similarly, when a plan's trustees act under their authority to interpret a plan's terms, the district court reviews the trustees' interpretation under the arbitrary and capricious standard, and "the trustees' interpretation 'should be upheld even if the court disagrees with it, so long as the interpretation is rationally related to a valid plan purpose and not contrary to the plain language of the plan.'" Moats v. United Mine Workers of Am. Health & Retirement Funds, 981 F.2d 685, 687-88 (3d Cir. 1992) (Alito, J.) (quoting Gaines v. Amalgamated Ins. Fund, 753 F.2d 288, 289 (3d Cir. 1985)).

IV. Discussion

A. The Arbitration Award

Section C of the plan relevantly provides,

In accordance with the advice of the Trust Fund's enrolled actuary, the actuarial assumptions used in calculating withdrawal liability shall be the same actuarial assumptions used in determining the Trust Fund's minimum funding standards under the Internal Revenue Code.

Miller offers two main arguments on appeal. First, Miller argues that the Arbitrator gave too much deference to the Fund's interpretation of the words "same actuarial assumptions used." Specifically, Miller argues that deference to the Fund's interpretation of the Plan is not warranted if that interpretation is inconsistent withunambiguous Plan language. Br. 10-12. Going further, Miller claims that "same actuarial assumptions used" is unambiguous, and therefore the Arbitrator erred in "ignor[ing]" this threshold question. Br. 10-12.

Second, Miller argues that the Fund's interpretation of "same actuarial assumptions used" is contrary to a plain reading. Miller's argument for why the Fund ran afoul of Section C is appealingly simple: The Fund used the blended rate in calculating withdrawal liability but did not use the blended rate in calculating minimum funding standards. Miller claims that one of two things must be true: either the blended rate is itself an actuarial assumption, or the words "same actuarial assumptions used" require that the two separate actuarial assumptions of the 7.5% valuation rate and...