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Arbitration as Way to Dispute Withdrawal Liability under ERISA – Glass & Goldberg | Financing, Property & Bankruptcy Law
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Arbitration as Way to Dispute Withdrawal Liability under ERISA

Atty mtgPension plans, regulated by the federal statutory scheme known as ERISA (“Employment Retirement Income Security Act of 1974”), can invoke “withdrawal liability” against employers who withdraw from participating in and contributing to such pension plans. The MPPAA (“Multiemployer Pension Plan Amendments Act of 1980”), 29 U.S.C. §§ 1381-1453, amended ERISA “to allow plans to impose proportional liability on withdrawing employers for the unfunded vested benefit obligations of multiemployer plans.” Carpenters Pension Trust Fund v. Underground Constr. Co., Inc., 31 F.3d 776, 778 (9th Cir. 1994). A recent decision from the United District Court for the Northern District of California demonstrates the perils of employers who fail to seek arbitration of any disputes relating to the issue of withdrawal liability.

In Carpenter Pension Trust Fund v. Keith Walker, et. al., Case No. 12-cv-01447-WHO, (US. Dist. Ct. N.D. Calif. 22014), the pension fund sued Walker and several entities controlled by Walker after one of his companies had filed for Chapter 11 bankruptcy and terminated its collective bargaining agreements with the Pension Fund ceasing to make contributions after June 30, 2008, the effective date of its termination. Before suing, the pension fund had written to RFI, the terminating employer, that it was assessing withdrawal liability in the amount of $1,726,467. The governing statute, 29 U.S.C. § 1399, sets forth the procedure regarding the calculation and notification of a withdrawing employer’s withdrawal liability. The employer is entitled, within ninety days of such notice, to ask the sponsor to review any specific matter relating to the determination of the employer’s withdrawal liability. Any dispute, according to 29 U.S.C. § 1401(a)(1) shall be resolved through arbitration.

In this situation, Walker claimed RFI had no liability because, by ceasing to do business in 2006, it falls under the “building and construction industry exception” to withdrawal liability under 29 U.S.C. 1383(b). But the District Court found that, in order to assert applicability of that exception to the situation at hand, Walker needed to submit that claim to arbitration. Because he did not do so, the Pension Fund is entitled to summary judgment in its favor for (1) unpaid contributions; (2) interest on the unpaid contributions; (3) liquidated damages as provided by the plan (not to exceed 20% of the unpaid contributions); and (4) reasonable attorney’s fees and costs according to 29 U.S.C. § 1132(g)(2).

In addition, the Pension Fund is entitled to a judgment for joint and several liability against several companies found to be under Walker’s control. The Court found that each fits within the scope of the statutory definition of “control group” as that term is set forth in 26 C.F.R. 1.414(c)-2 and 1.414(c)-4. Accordingly, each of the Defendants in the case bears liability for the total amount of the judgment until the Pension Fund’s judgment is satisfied.

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