Trs. of the IAM Nat'l Pension Fund v. M&K Emp. Sols.

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TRUSTEES of the IAM NATIONAL PENSION FUND, Plaintiff v. M&K EMPLOYEE SOLUTIONS, LLC, et al., Defendants.

No. 1:20-CV-433-RCL

United States District Court, District of Columbia

September 30, 2024

MEMORANDUM OPINION

ROYCE C. LAMBERTH, UNITED STATES DISTRICT JUDGE

I. Introduction

The Trustees of the IAM National Pension Fund (“IAM”), plaintiffs in this long-running ERISA dispute, and their counsel Proskauer Rose LLP (“Proskauer”) have been engaged in a multi-year long battle to extract overdue withdrawal liability delinquent contributions, and other damages from the defendants, entities and natural persons associated with a network of truck dealerships and service stations (collectively, “M&K”). All throughout M&K has tried to hide behind a Potemkin corporate structure in a credulity-straining campaign to convince the court that it is judgment-proof. M&K has also failed on multiple occasions to comply with discovery obligations and express orders of this Court, incurring sanctions as a result.

Over the course of nearly five years, IAM's counsel undertook a herculean effort to overcome M&K's obduracy and unwind its web of legal defenses, eventually culminating in a grant of summary judgment for their clients. They garnered a tremendous recovery of more than $15 million for IAM, and racked up a considerable quantity of billable hours and out-of-pocket costs in the process. Those fees and costs are the subject of this opinion.

Before the Court today is IAM's Motion for Attorneys' Fees and Costs, which M&K vehemently opposes as excessive. M&K's objections are almost entirely unpersuasive. For the reasons contained herein, the Court will GRANT IN PART AND DENY IN PART IAM's motion, and will reduce their proposed fee award by approximately 1%.

II. Factual and Procedural Background

This Court has recounted the factual, procedural, and statutory circumstances underlying this dispute in several previous opinions. See Trs. of IAM Nat'l Pension Fund v. M&K Emp. Sols., LLC (“IAM IV”), 694 F.Supp.3d 54 (D.D.C. 2023); Trs. of IAM Nat'l Pension Fund v. M&K Emp. Sols., LLC (“IAM III”), No. 21-cv-2152-RCL, 2022 WL 4534998 (D.D.C. Sept. 28, 2022); Trs. of IAM Nat'l Pension Fund v. M&K Emp. Sols., LLC (“IAM II”), No. 20-cv-433-RCL, 2022 WL 594539 (D.D.C. Feb. 28, 2022); Trs. of IAM Nat'l Pension Fund v. M&K Emp. Sols., LLC (“IAM I”), No. 20-cv-433-RCL, 2021 WL 1546947 (D.D.C. Apr. 20, 2021). The Court will therefore presume some familiarity with the facts, and restate only the most relevant information.

“To ensure that employees who were promised a pension would actually receive it, Congress enacted the Employee Retirement Income Security Act of 1974 (“ERISA”).” United Mine Workers of Am. 1974 Pension Plan v. Energy W. Mining Co., 39 F.4th 730, 734 (D.C. Cir. 2022). Shortly after ERISA's passage, it became clear that the statute provided inadequate protections for a particular type of pension plan: the multiemployer pension plan (“MPP”), which is “maintained pursuant to a collective bargaining agreement between multiple employers and a union.” Id.; 29 U.S.C. § 1002(37)(A). MPPs are particularly important in “industries where there are hundreds or thousands of small employers going in and out of business and where the nexus of the employment relationship is the union that represents employees who typically work for many of those employers over the course of their career.” United Mine Workers, 39 F.4th at 734 n.1. Under ERISA, employers were generally able to withdraw from MPPs without any financial obligation to continue supporting the plan, even though their employees retained the benefits that they had accrued, putting immense financial pressure on the pension funds. Id. at 734-35 & n.2.

In 1980, Congress enacted the Multiemployer Pension Plan Amendments Act (“MPPAA”), codified at 29 U.S.C. §§ 1381-1461, to “protect the financial solvency of multiemployer pension plans.” Bay Area Laundry and Dry Cleaning Pension Tr. Fund v. Ferbar Corp. of Cal., Inc., 522 U.S. 192, 196 (1997). It does so by “requir[ing] most employers who withdraw from underfunded multiemployer pension plans to pay ‘withdrawal liability.'” Id. (quoting 29 U.S.C. § 1381(a)). Withdrawal liability is assessed as “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, 1391). The MPP's trustees are responsible for calculating an employer's withdrawal liability and setting a payment schedule for the employer to follow, which is meant to “approximate[] the periodic contributions the employer had made before withdrawing from the plan.” Bay Area Laundry, 522 U.S. at 196-97 (citing 29 U.S.C. §§ 1399(b)(1), (c)(1)(C)).

An employer may dispute an assessment of withdrawal liability by first requesting reconsideration by the fund, then submitting the dispute to arbitration. Id. at 197 (citing 29 U.S.C. §§ 1399(b)(2), 1401(a)(1)). However, even if it disputes the amount due, the employer must abide by the payment schedule, a protocol commonly referred to as the “‘pay now, dispute later' collection procedure.” Id. (citing Robbins v. Pepsi-Cola Metro. Bottling Co., 800 F.2d 641, 642 (7th Cir. 1986)). The pay now, dispute later procedure ensures that employers cannot litigate abusively to delay payment of their withdrawal liability until, say, the MPP or the employer becomes insolvent. IAM II, 2022 WL 594539, at *2 (collecting cases). The MPPAA contains built-in enforcement mechanisms to enforce compliance with the pay now, dispute later procedure: if an employer fails to comply, the MPP may accelerate the unpaid withdrawal liability (i.e., abandon the payment schedule and demand payment all at once instead), seek judicial intervention, and force the employer to pay attorneys' fees, liquidated damages, and other costs associated with litigation. Bay Area Laundry, 522 U.S. at 197; see 29 U.S.C. §§ 1399(c)(5), 1451(a)(1), 1451(b), 1451(e). The liquidated damages are owed whether or not the employer's challenge to the plan's withdrawal liability assessment is meritorious: they are a “penalty for refusing to follow” the pay now, dispute later procedure, “separate from the underlying withdrawal liability itself.” IAM II, 2022 WL 594539, at *2 (quoting Cent. States, Se. & Sw. Areas Pension Fund v. Lady Balt. Foods, Inc., 960 F.2d 1339, 1347 (7th Cir. 1992)).

The IAM National Pension Fund is an MPP associated with the International Association of Machinists and Aerospace Workers, AFL-CIO union. Compl. ¶ 17, ECF No. 1. The defendants (collectively, “M&K”) are a collection of truck dealerships and service centers with a complex corporate structure. The business was structured as a group of “sales entities,” which performed the business of selling and servicing trucks and trailers, and corresponding “Employment Solutions entities” (or “ES entities”), which hired employees and leased them to the sales entities. IAM IV, 694 F.Supp.3d at 70-71. Thus, the sales entities formally had no employees; all of their operations were performed by employees leased to them by the ES entities. Id. at 71. The companies were also linked by overlapping ownership and control structures, shared usage of facilities and equipment, mutual contractual obligations, the same legal representation, accounting, and banking services, and a shared registration address. Id. at 72-76.

Three of the M&K ES entities were parties to collective bargaining agreements that required them to remit payment to IAM. Id. at 78. They each withdrew from their collective bargaining agreements between 2017 and 2018. Id. In January 2019, IAM engaged Proskauer to advise them on how to proceed against M&K. See Pl.'s Billing Summ. 1, Mot. for Att'y Fees and Costs Ex. 1, ECF No. 196-2. In June 2019, IAM notified the ES entity located in Alsip, IL (“M&K ES Alsip”) that it would be assessed over $6 million in withdrawal liability, due in quarterly installments beginning in August 2019. IAM IV, 694 F.Supp.3d. at 80. M&K ES Alsip requested a reconsideration of that assessment, which was denied in September 2019. Id. M&K ES Alsip commenced arbitration in November 2019, but did not fulfill either of its first two quarterly payment obligations. Id. This led IAM's trustees to initiate the instant lawsuit in February 2020. Id.; see generally Compl.

The ensuing litigation has been fraught and complicated. Initially, IAM sought and received a preliminary injunction ordering M&K to pay the first two quarterly installment payments that M&K had missed, which totaled about $700,000 before liquidated damages, interest, and attorneys' fees and costs. Order of Mar. 19, 2020, ECF No. 22. M&K responded, asserting that it was “financially unable to make any payment to the Trustees.” IAM IV, 694 F.Supp.3d at 80; M&K Unable to Pay Letter 2, Declaration of Neil V. Shah, Associate at Proskauer Rose, Ex. 2, Pls.' Mot. for Summ. J., ECF No. 160-21. As a result, IAM accelerated M&K's withdrawal liability in September 2020. Faced with a large sum to collect and a defendant claiming inability to pay, IAM amended their complaint several times to join the M&K sales entities as defendants and assert various theories of secondary liability against them, then to join two newly formed employment entities called Laborforce and M&K ESI, and then to join Chad and Jodi Boucher, the owners of M&K ES Alsip. IAMIV, 694 F.Supp.3d at 81-82.

It would be excessive, in view of this Court's numerous other opinions in this dispute, to recount every twist and turn in this dispute. But other select highlights include a second ...