N.Y. Times Co. v. Newspaper & Mail Deliverers'—Publishers' Pension Fund

303 F.Supp.3d 236

The NEW YORK TIMES COMPANY, Plaintiff,

v.NEWSPAPER AND MAIL DELIVERERS'—PUBLISHERS' PENSION FUND, Defendant.

Newspaper and Mail Deliverers'—Publishers' Pension Fund and the Board of Trustees of the Newspaper and Mail Deliverers'—Publishers' Pension Fund, Plaintiffs,

v.The New York Times Company, Defendant.

17 Civ. 6178, 17 Civ. 6290

United States District Court, S.D. New York.

Signed March 26, 2018

Attorneys for The New York Times Company, JONES DAY, 51 Louisiana Avenue, N.W, Washington, D.C. 20001, By: Evan Miller, Esq., Yaakov M. Roth, Esq., Mark C. Savignac, Esq.

Attorneys for Newspaper and Mail Deliverers'–Publishers' Pension Fund and its Board of Trustees, SCHULTE ROTH & ZABEL LLP, 919 Third Avenue, New York, NY 10022, By: Ronald E. Richman, Esq., Max Garfield, Esq., Adam B. Gartner, Esq.

OPINION and ORDER

Sweet, D.J.

In these consolidated actions, The New York Times Company (the "Times") and the Newspaper and Mail Deliverers'–Publishers' Pension Fund and Board of Trustees of the Newspaper and Mail Deliverers'–Publishers' Pension Fund (together, the "Fund") have cross-moved for summary judgment under Federal Rule of Civil Procedure 56 on their respective requests to modify or vacate the arbitration award (the "Award") issued by assigned arbitrator Mark L. Irvings (the "Arbitrator") in American Arbitration Association ("AAA") Case No. 01–14–1433 on July 19, 2017, pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq. ,as amended by the Multiemployer Pension Plan Amendment Act of 1980 ("MPPAA"), 29 U.S.C. § 1381, et seq.

The dispute arises out of a carefully-negotiated multiemployer collective bargaining agreement ("CBA") that governs certain aspects of the Newspaper and Mail Deliverers'–Publishers' Pension Fund applicable to many newspapers in New York City. The instant motions present a veritable Augean Stables of issues to be resolved, a cavalcade of sharp disputes that have been distilled down by the parties and their skilled counsel to four principal issues. Put simply, these issues are: (1) whether the Times incurred liability by partially withdrawing from the Fund for plan years ending May 31, 2012, and May 31, 2013; (2) whether the discount rate used by the Fund when assessing the Times' withdrawal liability was appropriate; (3) whether the Fund applied the proper statutory procedure to calculate liability for the second partial withdrawal; and (4) whether and to what extent the Times is entitled to interest on the repayment of overpaid withdrawal liability.

Based on the conclusions set forth below, the motions are determined as follows. First, the Times incurred withdrawal liability, and the Arbitrator's finding that the CBA's contribution base unit under 29 U.S.C. § 1301(a)(11) ("CBU") was shifts has not been rebutted. Second, the Fund's use of the Segal Blend rate when assessing the Times' withdrawal liability was, in this instance, improper, and the Arbitrator's finding to the contrary is reversed. Third, the Fund's calculation of the Times' second partial liability was improper. Lastly, the Arbitrator correctly determined that the Times was entitled to interest on overpaid withdrawal liability, and his conclusion as to the applicable interest rate has not been rebutted.

I. Statutory Background and Facts

a. Statutory Background

Before delving into the facts, a brief overview of ERISA's statutory framework is appropriate.

"ERISA is a comprehensive statutory scheme regulating employee retirement plans." Trs. of Local 138 Pension Tr. Fund v. F.W. Honerkamp Co. Inc., 692 F.3d 127, 128 (2d Cir. 2012) (citing 29 U.S.C. § 1001, et seq. ). Part of ERISA's purpose is "to ensure that employees and their beneficiaries would not be deprived of anticipated retirement benefits by the termination of pension plans before sufficient funds have been accumulated in the plans." Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 214, 106 S.Ct. 1018, 89 L.Ed.2d 166 (1986) (internal quotation marks omitted). CBAs create employer retirement plans and employer obligations to contribute to such plans. See 29 U.S.C. §§ 1002(37)(A), 1392(a). In addition, Congress created the Pension Benefit Guaranty Corporation ("PBGC"), "a wholly owned Government corporation, to administer an insurance program for participants in both single-employer and multiemployer pension plans." Id. (citation omitted); see 29 U.S.C. § 1306.

Multiemployer pension plans, like the one at issue here, are where "multiple employers pool contributions into a single fund that pays benefits to covered retirees who spent a certain amount of time working for one or more of the contributing employers." Trs. of Local 138 Pension Tr. Fund, 692 F.3d at 129. Such plans are useful in "certain unionized industries" where companies often go "into and out of business, and ... employees transfer[ ] among employers." Id. Looking to such plans, Congress passed the MPPAA to amend ERISA and "adequately protect plans from the adverse consequences that resulted when individual employers terminate their participation in, or withdraw from, multiemployer plans." Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 722, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984).

The MPPAA implemented "new rules under which a withdrawing employer would be required to pay whatever share of the plan's unfunded vested liabilities was attributable to that employer's participation." Pension Benefit Guar. Corp., 467 U.S. at 723, 104 S.Ct. 2709 (citation omitted). "This withdrawal 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." Id. at 725, 104 S.Ct. 2709 (quoting 29 U.S.C. §§ 1381, 1391 ). "[C]omplete withdrawal from a plan occurs when an employer (1) permanently ceases to have an obligation to contribute to a plan arising (a) under one or more collective bargaining or related agreements or (b) as a result of a duty under applicable labor-management relations law; or (2) permanently ceases all covered operations under a plan. Withdrawal liability may also be imposed for partial withdrawals." ILGWU Nat'l Ret. Fund v. Levy Bros. Frocks, 846 F.2d 879, 881 (2d Cir. 1988) (citing 29 U.S.C. §§ 1381, 1383, 1385, 1392 ). The MPPAA defines a "partial withdrawal" if, in any plan year, there is a "70 percent contribution decline." 29 U.S.C. § 1385(a)(1).¹ Employers pay withdrawal liability in annual installments, calculated based on an employer's historical contribution amount. See 29 U.S.C. §§ 1391(c), 1399(c).

Congress later authorized the PBGC to promulgate regulations to "provide for proper adjustments ... so that the liability for any complete or partial withdrawal in any subsequent year ... properly reflects the employer's share of liability with respect to the plan." 29 U.S.C. § 1386(b)(2). The PBGC obliged, creating a credit applicable to subsequent withdrawal liability based on payments already made, such that the "credit phases out over time, thereby roughly capturing the change in the composition of the liability pool and allocating withdrawal liability accordingly." Cent. States, Se. & Sw. Areas Pension Fund v. Safeway, Inc., 229 F.3d 605, 612 (7th Cir. 2000) (citing 29 C.F.R. § 4206.1, et seq. ); see also 26 C.F.R. § 4206.1(a) ("The purpose of the [statutory] credit is to protect a withdrawing employer from being charged twice for the same unfunded vested benefits.").

After an employer withdraws from a plan, the plan sponsor is vested with the authority to determine the amount of withdrawal liability. See 29 U.S.C. §§ 1382, 1391. The plan sponsor then informs the withdrawing employer of the liability, sets a payment schedule, and demands payment. Id. §§ 1382(2), 1399(b)(1). Within 90 days of receiving the notice, the employer may request a review of the sponsor's determination of liability or the payment schedule. Id. § 1399(b)(2)(A). Either side may thereafter initiate arbitration proceedings within 60 days of the earlier of: (1) the date on which the employer was notified of the sponsor's withdrawal liability determination and demand for payment, or (2) 120 days after the date of the employer's request for review. Id. § 1401(a)(1). If the employer fails to request arbitration within the statutory time periods, the amount of withdrawal liability assessed by the plan sponsor in the notice becomes "due and owing." Id. § 1401(b). Regardless of whether an employer requests review or initiates an arbitration, the employer needs to pay the assessed withdrawal liability payments in accordance with the payment schedule set forth in the notice. Id. § 1399(c)(2).

Arbitral decisions over ERISA disputes are subject to judicial review by federal courts. 29 U.S.C. § 1401(b)(2).

b. The CBA and its Provisions

The following facts are drawn from the parties' declarations, attached exhibits, and Rule 56.1 Statements submitted in connection with the instant cross-motions for summary judgment. See Fund's 56.1 Statement ("Fund's 56.1"), No. 17 Civ. 6178, Dkt. No. 26; the Times' 56.1 Statement ("Times' 56.1"), Dkt. No. 20; the Fund's Rule 56.1 Response ("Fund's 56.1 Response"), Dkt. No. 27; the Times' Rule 56.1 Response ("Times' 56.1 Response"), Dkt. No. 29; the Times' Rule 56.1 Reply ("Times' 56.1 Reply"), Dkt. No. 29; Declaration of Jacob M. Roth dated September 15, 2017 ("Roth Decl."), Dkt. No. 19; Declaration of Max Garfield dated October 20, 2017 ("Garfield Decl."), Dkt. No. 28. Unless otherwise noted, the facts are undisputed.

In 1981, the Newspaper and Mail Deliverers' Union of New York and Vicinity (the "NMDU") and the Times entered into a CBA. See Garfield Decl. Ex. 4 (the CBA). Of relevance here, the CBA contained provisions that required the Times to make contributions to the Fund, a multiemployer pension plan. While amended over the years, the CBA's provisions concerning pension contributions...