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NESTLE HOLDINGS, INC v. CENTRAL STATES

May 23, 2002

NESTLE HOLDINGS, INC. AND NESTLE TRANSPORTATION COMPANY, PLAINTIFFS,
V.
CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, DEFENDANT.



The opinion of the court was delivered by: Elaine E. Zucklo, United States District Judge:

MEMORANDUM OPINION AND ORDER

The arbitrator made the following determinations of fact, which I must accept unless clearly erroneous. Nestle moves its products in part by truck, about 80% by common carrier and 20% through the Nestle Transportation Company, which in mid-1995 had roughly 275 owner operator drivers and slightly over 200 employee drivers, some of whom were represented by the Teamsters. Local Union 460 represented eight drivers at the Nestle Terminal in St. Joseph, Missouri, and Local Union 695 represented three drivers at the Nestle terminal in Oconomowoc, Wisconsin. Both contracts required that Nestle make pension contributions to the Fund. Three of these St. Joseph and two of the Oconomowoc union drivers drove "local lanes," and the other union drivers drove "over-the-road" lanes. In practice, the local lanes were operated exclusively by covered union drivers, and the over-the-road lanes were shared with nonunion drivers who were not covered. All classes of drivers drove over the road lanes on a randomly selected basis depending on factors such as the availability or location of the driver or his hours driven under government regulations.

In June and September of 1995, these two terminals were closed and the union contracts terminated pursuant to an agreement with the Teamsters. The drivers affected were let go. Afterwards, the local runs were performed by common carriers, owner operators, or Nestle employee drivers, all nonunion. The assignments to these lanes were made on the same randomly selected basis that the assignments to the over the road lanes had been before the union contracts were terminated and the terminals closed. The only difference was that there were no union drivers in the pool. Nestle's records showed that covered union drivers drove the Oconcmowoc to Waverly, Iowa, lane in the second quarter of 1995, but noncovered nonunion drivers drove this lane during the first quarter of 1996, and that covered union drivers drove the St. Joseph-DeKalb, Illinois route in the second quarter of 1995; 55% of the drivers on that route in that period required Fund contributions; in the preceding quarter, it was 69%. The figures for Oconomowoc-DeKalb were similar. After September 1995, of course, no union drivers made these runs.

Nestle filled out a form sent to it by the Fund answering "yes" to the question whether "bargaining unit work was transferred." Apparently Nestle expected withdrawal liability, but in the amount of perhaps $300,000. When the Fund assessed $1,257,598.41 in March 1997, Nestle submitted a "request for review," asserting that "the short haul operations" out of Oconomowoc and St. Joseph "effectively ceased upon the terminals' closings." Nestle said that some of the long haul work was "retained," and although it stated that this work was not the "same" as the work formerly handled from the closed terminals, Nestle's DeKalb manager admitted at the hearing that there was no difference. Nestle submitted a revised statement stating that "upon further review of the facts," the work had not been transferred.

The MPPAA requires that a company that withdraws from a multiemployer pension plan covered by ERISA must pay "withdrawal liability," which is intended to cover that company's share of the unfunded vested benefits that exists when it withdraws. 29 U.S.C. § 1381, 1385, 1391. Withdrawal liability is "intended to assure that departing employers bear their fair share of pension payments, and do not leave others holding the bag," Central States, Southeast and Southwest Areas Pension Fund v. Nitehawk Exp., Inc., 223 F.3d 483, 487 (7th Cir. 2000), and in particular to avoid "a domino effect that, `much like a bank run,' could leave the [Fund] unable to pay its vested obligations," Central States, Southeast and Southwest Areas Pension Fund v. Hunt Truck Lines, Inc., 204 F.3d 736, 739 (7th Cir. 2000). Withdrawal liability may be assessed if the employer makes a complete withdrawal from an ERISA plan, 29 U.S.C. § 1383, or if there is a partial withdrawal, § 1385. This is a partial withdrawal case. The relevant provision at issue here is § 1385(b)(2)(A)(i), which states that withdrawal liability arises when the employer "transfers . . . to another location" work that was performed under a collective bargaining agreement that has been, so far as the transferred work goes, terminated.*fn1 The question in this case is whether the covered unionized work that Teamster drivers formerly did for Nestle out of St. Joseph and Oconomowoc has been "transferred" within the meaning of § 1385.

The parties debate, among other things, the standard of review. Under ERISA, my review of an arbitrator's conclusions of law is de novo. Central States, Southeast and Southwest Areas Pension Fund v. Midwest Motor Exp., Inc., 181 F.3d 799, 804 (7th Cir. 1999); Trustees of Iron Workers Local 473 Pension Trust v. Allied Products Corp., 872 F.2d 208, 212 (7th Cir. 1989) (Courts may "fully review an arbitrator's legal determinations."). By statute, my review of an arbitrator's factual findings is highly deferential: "there shall be a presumption, rebuttable only by a clear preponderance of the evidence, that the findings of fact made by the arbitrator were correct." 29 U.S.C. § 1401(c); Chicago Truck Drivers, Helpers and Warehouse Workers Union (Indep.) Pension Fund v. Louis Zahn Drug Co., 890 F.2d 1405, 1409 7th Cir. 1989). Mixed questions of law and fact I review for clear error. Nitehawk Exp., 223 F.3d at 488. The Seventh Circuit has acknowledged the "practical truth that the decision to label an issue a `question of law,' a `question of fact,' or a `mixed question of law and fact' . . . [may] turn[] on a determination that, as a matter of the sound administration of justice, one judicial actor is better positioned than another to decide the issue in question." Louis Zahn Drug Co., 890 F.2d at 1410. It holds that "when the issue is one that requires either fact-finding expertise or where the arbitrator's special expertise in the area of pension law can contribute significantly to the decision, substantial deference ought to be given to the decision of the arbitrator." Id. at 1411.

Here, Nestle does not dispute that if "transfer" means what the Fund says it does, then the arbitrator would have correctly applied the law to the facts. Nestle argues instead that the arbitrator erred in understanding the meaning of the term "transfer" in the statute, while the Fund argues that he got it right. We do not, therefore, have a mixed question of fact and law, concerning the application of undisputed law to a set of facts, id. at 1409 (quoting Pullman-Standard v. Swint, 456 U.S. 273, 289 n. 19 (1982) ("[M]ixed questions of law and fact [are] questions in which the historical facts are admitted or established, the rule of law is undisputed, and the issue is whether the facts satisfy the statutory standard, or to put it another way, whether the rule of law as applied to the established facts is or is not violated.") We have a pure question of law to be reviewed de novo. I bear in mind that the arbitrator has special expertise in the area of pension law, but I am as well able to interpret statutory language as he, and I do so using plenary review.

I address two preliminary matters. First, Nestle asks that I find the arbitrator erred in refusing to strike certain evidence as irrelevant. To the extent that certain testimony might have been irrelevant but was not relied upon, the arbitrator did not err in admitting it to the record. Insofar as the arbitrator relied (or I rely) on any of this evidence, notably that concerning whom Nestle assigned to which lanes after the closures, this was because it was thought to be relevant, as explained in the appropriate place.

Second, the Fund argues that I should treat certain of Nestle's earlier statements as admissions that the work was transferred within the meaning of the statute. In particular the Fund argues that the arbitrator treated the notes of John Holloway, Vice President for Labor Relations, made in May 1995, as "conclusive" on this question. But the arbitrator wrote that the notes in question "conclusively show that [Nestle] knew that the over-the-road work of the [affected union] drivers would go to common carriers, independent operators, and other company drivers." Whether that constitutes a transfer within the meaning of the law is a further question.

The Fund also contends that it was an admission that the work was transferred when Nestler's in-house counsel checked the "yes" box in answer to the question whether the work had been transferred in its Statements of Business Affairs in 1996, Def. Ex. B at 6. The arbitrator did not in fact treat this statement as an admission, although he did imply, without expressly so finding, that the facts suggested that Nestle changed its tune on whether the changes in work involved a transfer when it learned that this would mean almost a million dollars more in withdrawal liability than it had originally anticipated. The Fund argues that there is law suggesting that contemporaneous statements may be more reliable than post hoc explanations when there is a motive to misrepresent, see Mutual Life Ins. Co. v. Hillmon, 145 U.S. 285, 295 (1892), but this case is not apposite, even though Nestle points to no relevant factual discoveries that induced it to change its mind. Nestle is right that this is a legal question. One can admit a legal fact, but if the law plainly indicated that no liability existed, it would be unjust to hold Nestle to its initial word. Besides, the Fund would not want employers to routinely deny that they ever transfer work. Therefore I decline to find that Nestle has admitted that there was a transfer.

Nestle's central argument is as follows. First, a PBCG Opinion Letter 87-17 (Aug. 13, 1986), Def. Ex. 3, says that work formerly done by pension fund covered employees but taken up by third parties is not "transfer[red] . . . to another location within the meaning of [§ 1385(b)(2)(A)(i)]," because the law covers situations where "work of the same type is continued by the employer but for which contributions to a plan . . . are no longer required." The PBGC understood "work of the same type" to mean in part work done "at another of its own locations." Therefore I am to consider only the Nestle employee drivers and not the independent owner operators. I agree with the PBGC's construction.

Second, "transfer" is a transitive verb that takes an object: someone transfers something. It means "to convey [something] from one person, place, or situation to another." Webster's Ninth New Collegiate Dictionary 1253 (1990). Here, Nestle says, there was no identifiable object. This is because the work "in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required," in the language of the statute, was defined by the domicile of the drivers doing the work. With regard to the long distance lanes, there was no way to identify any work in those jurisdictions once the St. Joseph and Oconomowoc terminals were closed. Moreover, Nestle says, nothing was conveyed. After the closures, the local lanes were no longer driven by any Nestle employees, and that work was being done by third party outsiders, and so, under the PBGC ...


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