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BRACH'S CONFECTIONS, INC. v. McDOUGALL

August 13, 2004.

BRACH'S CONFECTIONS, INC., Plaintiff,
v.
HOWARD McDOUGALL, as trustee of CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, and CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, Defendants.



The opinion of the court was delivered by: MORTON DENLOW, Magistrate Judge

MEMORANDUM OPINION AND ORDER

The parties in this case are before this Court on Phase II of a two-phase trial on the papers, involving an issue that has arisen on the meaning of the phrase "general information necessary for the employer to compute its withdrawal liability with respect to the plan" under 29 U.S.C. § 1401(e). This controversy began after Plaintiff Brach's Confections, Inc., ("Brach's" or "Plaintiff") withdrew from the defendant Central States, Southeast and Soutwest Areas Pension Fund ("the Plan"), which is managed by the defendant trustee Howard McDougall (collectively "Defendants"). Prior to exercising its right to review its withdrawal liability assessment, Brach's sought information to which it claimed entitlement under 29 U.S.C. § 1401(e) of the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. §§ 1381-1461. Defendants provided some information to Brach's but further refused the request on the grounds that Brach's was not entitled to any information under § 1401(e) because it already had withdrawn from the plan. Defendants alternatively asserted that if § 1401(e) indeed applied, then the information they already provided to Brach's is sufficient to satisfy their obligation under § 1401(e).

The parties agreed to resolve this litigation with a two-phase trial on the papers. In Phase I, Brach's Confections, Inc. v. McDougall, No. 04 C 3116, 2004 WL 1244036 (N.D. Ill. June 3, 2004), this Court considered only whether Brach's, an employer that already had withdrawn from a plan, was entitled to any information under 29 U.S.C. § 1401(e). This Court held that § 1401(e) did apply, entitling Brach's to "general information necessary for an employer to compute its withdrawal liability."

  What constitutes "general information necessary for an employer to compute its withdrawal liability" was reserved for Phase II. This Court urged the parties to reach an agreement about the scope and the type of documents necessary to be produced under the statute. Having failed to agree about what constitutes "general information necessary to compute withdrawal liability," the parties now seek a decision from this Court, and have submitted briefs and supporting exhibits, which constitute the record in this second phase of the trial on the papers.

  The following constitute the Court's findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure. To the extent certain findings of fact may be deemed to be conclusions of law, they also shall be considered conclusions of law. Similarly, to the extent matters contained in the conclusions of law may be deemed findings of fact, they also shall be considered findings of fact.

  I. FINDINGS OF FACT

  The underlying findings of fact in this case have been recited in great detail in this Court's opinion in Brach's Confections, Inc., 2004 WL 1244036. Therefore, what follows are the facts materially pertinent to the issue now before this Court.

  A. INFORMATION SUPPLIED BY THE PLAN

  1. In addition to the withdrawal liability assessment that Defendants supplied to Brach's pursuant to 29 U.S.C. § 1399(b), Defendants have supplied Brach's with actuarial assumptions used by, and financial information concerning, the Plan. The material provides information relevant to plan years 1993 through 2002, the plan years upon which Brach's withdrawal liability assessment depends. Specifically, Defendants have supplied booklets that include the following data for each plan year: the Plan's Annual Return/Report of Employee Benefit Plan (Form 5500), along with excerpts from the Plan's actuarial report; a calculation of the Plan's net change value for the year end; and the post-1979 pool denominator. Harry E. Keil ("Keil") Aff., Exs. 2-11. In addition, the Defendants have supplied to Plaintiff a copy of the Trust Agreement for the Plan, the Plan's rules and regulations pertaining to employer withdrawal liability, and mathematical formulas for the Plan's unfunded vested benefits and withdrawal liability. Keil Aff., Exs. 12-15. 2. The information from the actuarial reports provided for each year includes information about the Plan's assets and liabilities. Each report includes a worksheet that accounts for the change in unfunded vested benefit liability from the prior year. Keil Aff., Ex. 11 pt. 2, at 2. The report also includes an analysis of the change in unfunded vested benefit liability, id. at 16, and an analysis of the market value of plan assets, id. at 21, as well as a written explanation of the change in net liability from the prior year, id. at 9. Appendix A of each actuarial report provides information concerning actuarial procedures and assumptions. Actuarial assumptions are provided relevant to participant retirement, disability, mortality, and marriage rates, along with basic information concerning procedures for missing or incomplete items within the data. See, e.g., Keil Aff., Ex. 2 pt. 4, App. A, at 26-34.

  3. The calculations of the Plan's net change value and formula denominator are supplied, along with a brief explanation of how the calculations were made. To calculate the net change value, the Plan subtracted the total withdrawal liability it deemed collectable from the total unfunded vested benefits listed in the actuarial report. Keil Aff., Ex. 11 pt. 3. To calculate the withdrawal liability denominator, the Plan listed and added the value of all employer contributions listed in each Form 5500 for each of the previous ten plan years. Next, it subtracted the total contributions made by employers who were coded as having completely withdrawn prior to the end of the current plan year. Keil Aff., Ex. 11 pt. 4. 4. The formula for the computation of withdrawal liability selected by Defendants is set out in 29 U.S.C. § 1391(c)(2)(C). As permitted by statute, the Plan has chosen to calculate withdrawal liability using the Modified Presumptive (Basic) Method. Keil Aff. ¶ 22. The statutory equation as presented by the Plan is as follows:

  (The plan's unfunded vested benefits as of the end of the plan year preceding the plan year of withdrawal (MINUS) (the value as of such date of all outstanding claims for withdrawal liability which can reasonably be expected to be collected, with respect to employers withdrawing before such plan year (PLUS) that portion of the amount determined under § 1391(c)(2)(B)(i) which is allocable to employers who have an obligation to contribute under the plan in the plan year preceding the plan year in which the employer withdraws and who also had an obligation to contribute under the plan for the first plan year ending after September 25, 1980.))

 
(The total amount required to be contributed under the plan by the employer for the last 5 plan years ending before the date on which the employer withdraws.)
X (The total amount contributed under the plan by all employers for the last 5 plan years ending before the date on which the employer withdraws, increased by the amount of any employer contributions owed with respect to earlier periods which were collected in those plan years, and decreased by any amount contributed by an employer who withdrew from the plan under this part during those plan years.)
Keil Aff., Ex. 15; see also 29 U.S.C. § 1391(c)(2)(C). Although the statutory equation mandates the use of five plan years, the Plan's calculation actually uses ten plan years, a modification permitted by 29 U.S.C. § 1391(c)(5)(A). Section 1391(c)(2)(B)(i), to which the multiplicand refers, computes the following variable: "the plan's unfunded vested benefits as of the end of the last plan year ending before September 26, 1980, reduced as if those obligations were being fully amortized in level annual installments over 15 years beginning with the first plan year ending on or after such date." 29 U.S.C. § 1391(c)(2)(B)(i).

  5. Using the modified statutory equation, the Plan's computation of Brach's withdrawal liability is as follows:

  ($9,793,000,000 — ($78,721,343 $0)) × ($28,333,299/$8,674,502,320) = $31,729,493.13. Keil Aff., Ex. 15. B. INFORMATION REQUESTED BY BRACH'S

  6. Brach's continues to assert that Defendants have refused to produce ten items of information it requested from the Plan. Jonathan B. Waite ("Waite") Decl. ¶ 4; Waite Supp. Decl. ¶ 2. These requests are contained in subparagraphs "a" through "k" of paragraph 2 of the Waite declaration. These requests can be divided into five categories. In the first category, Brach's requests information underlying the Plan's actuarial assumptions in requests "a" through "d." Waite Decl. ¶ 2.a-d. For example, request "a" states:
a. Copies of the results of the experience studies and the studies themselves (including all data analyzed) upon which the changes effective 12/31/02 in the retirement and termination assumptions were based. Additionally, provide minutes of the Board of Trustees meeting addressing the changes in the assumptions. Data provided should include participant identifier such as Social Security Number, date of birth, date of hire, Benefit Class, service, contributory service, self-contributory service, contribution rates, date of termination or retirement, and any other information used to complete the study;
Id. ¶ 2.a. Brach's also requests the same information relevant to the mortality and disability assumptions (request "b") and to the marriage and surviving spouse assumptions (request "c"). Id. ¶ 2.b-c. Request "d" also pertains to the information underlying the Plan's actuarial assumptions:
d. A summary of missing participant data and the methods used to estimate the data missing for purposes of computing the 12/31/02 vested benefits liability. Include information regarding the number of individuals missing each type of data and the present value of vested benefits attributable to these people. For the December 31, 2002 vested benefit valuation, provide data for all participants including participant identifier such as Social Security Number, date of birth, date of hire, Benefit Class, service, contributory service, self-contributory service, contribution rates, date of termination or retirement, benefit option elected, date of death, date of disability, date of birth of spouse or surviving spouse, benefit amount (actual for terminated and retired participants and Accrued Benefit for active participants), and any other information used to complete this analysis. For each participant missing any data item, indicate the data item missing and the assumed data used in its place;
Id. ¶ 2.d.
  7. In the second category, Brach's requests information in requests "e" and "g" about funds that employers have not paid and withdrawal liability that is not collectable, requesting:
e. A description of any periods of time granted by or negotiated with the Fund for any employers for which contributions were not made for participants. Indicate the employer, the length of the period of time for which contributions were not made, and the amount of contribution that would have been collected by the Fund if contributions had been made during each of these periods (based on actual contribution base units and the contribution rates in effect at the time);
Id. ¶ 2.e. Additionally:
g. Identify the amount of withdrawal liability deemed uncollectible for purposes of computing the net change value as of ...

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