United States District Court, N.D. Illinois, Eastern Division
November 15, 2004.
CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREA PENSION FUND; and HOWARD McDOUGALL, Trustee, Plaintiffs/Counter-Defendants,
SCHILLI CORPORATION, a Missouri corporation, Defendant/Counter-Plaintiff.
The opinion of the court was delivered by: JOHN W. DARRAH, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff, Central States, Southeast and Southwest Area Pension
Fund, a multiemployer pension plan, pursuant to §§ 3(37) and
4001(a)(3) of ERISA, 29 U.S.C. §§ 1002(37) and 1301(a)(3), filed
suit against Defendant, Schilli Corporation, parent of a
wholly-owned subsidiary corporation employer who contributed to
the plan. The Multiemployer Pension Plan Amendments Act provides
that when an employer withdraws from a multiemployer pension
plan, it must pay a "withdrawal liability" in an amount
approximately equal to the employer's proportionate share of the
pension plan's unfunded vested benefits. 29 U.S.C. § 1381. A
pension plan's unfunded vested benefits are computed by taking
the difference between the present value of a pension plan's
assets and the present value of the benefits the pension plan
will be obligated to pay in the future. 29 U.S.C. § 1391.
A withdrawal can occur in one of two ways. An employer can
effect a complete withdrawal from a pension plan by completely
ceasing to make contributions to the plan on behalf of their employees. 29 U.S.C. § 1383. An employer can make
a partial withdrawal by reducing their obligations to their plan.
29 U.S.C. § 1385.
After an employer is assessed withdrawal liability by a pension
plan, the employer may ask the plan to review the assessment.
29 U.S.C. § 1399(b)(2). If the employer is not satisfied with the
review, it may initiate arbitration challenging the withdrawal
liability assessment. 29 U.S.C. § 1401(a)(1). After the
arbitration proceedings, any party can seek to enforce, vacate,
or modify the arbitrator's decision by filing an action in
federal court. 29 U.S.C. § 1401(b)(2).
In this case, an arbitrator found that Defendant had not
incurred a partial withdrawal from Plaintiffs' pension fund in
1997 and that Defendant should have only been assessed fees for a
complete withdrawal in 1998. Thereafter, Plaintiffs filed suit,
seeking to vacate the arbitrator's decision. Defendant filed a
counterclaim, seeking to modify the arbitrator's award by
correcting the omission of principal and interest owed to
Defendant. Presently before the Court are cross-motions for
Summary judgment is appropriate when no genuine issue of
material fact exists and the moving party is entitled to judgment
as a matter of law. Fed.R.Civ.P. 56(c); Cincinnati Ins. Co. v.
Flanders Elec. Motor Serv., Inc., 40 F.3d 146, 150 (7th Cir.
1994). "One of the principal purposes of the summary judgment
rule is to isolate and dispose of factually unsupported claims or
defenses. . . ." Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). Thus, although the moving party on a motion for summary
judgment is responsible for demonstrating to the court why there
is no genuine issue of material fact, the non-moving party must
go beyond the face of the pleadings, affidavits, depositions,
answers to interrogatories, and admissions on file to
demonstrate, through specific evidence, that a genuine issue of
material fact exists and to show that a rational jury could return a verdict in the non-moving
party's favor. Celotex, 477 U.S. at 322-27; Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 254-56 (1986); Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87
(1986); Waldridge v. American Hoechst Corp., 24 F.3d 918, 923
(7th Cir. 1994).
Disputed facts are material when they might affect the outcome
of the suit. First Ind. Bank v. Baker, 957 F.2d 506, 507-08
(7th Cir. 1992). When reviewing a motion for summary judgment, a
court must view all inferences to be drawn from the facts in the
light most favorable to the opposing party. Anderson,
477 U.S. at 247-48; Popovits v. Circuit City Stores, Inc., 185 F.3d 726,
731 (7th Cir. 1999).
An arbitrator's legal conclusions are reviewed de novo.
Central States, S.E. & S.W. Areas Pension Fund v. Midwest Motor
Express, Inc., 181 F.3d 799, 805 (7th Cir. 1999) (Midwest
Motor). An arbitrator's factual findings and application of law
to fact are reviewed under the clearly erroneous standard.
Midwest Motor, 181 F.3d at 804-05.
The undisputed facts, for the purposes of these motions, are
taken from the parties' Local Rule 56.1(a) & (b) statements of
material facts and exhibits ("Pl.'s 56.1" and "Def's 56.1.").
Plaintiffs are a multiemployer pension fund, within the meaning
of the Employee Retirement Income Security Act, which is funded
by contributions from participating employers. Def.'s 56.1 ¶¶ 1,
6. Defendant owns a number of subsidiaries, including the
employer, Truck Transport, Inc., which is obligated to contribute
to the pension fund. Def.'s 56.1 ¶ 8.
The employer and a union were parties to a collective
bargaining agreement. Pl.'s 56.1 ¶ 14. Thereafter, the employer
and the union entered into a Participation Agreement that
required Truck Transport to make pension contributions on behalf of
certain employees. Pl.'s 56.1 ¶ 15; Def.'s 56.1 ¶ 15. The
Participation Agreement provided:
This Agreement shall continue in full force and
effect until such time as the Employer notifies the
Fund(s) by certified mail (with a copy to the Local
Union) that the Employer is no longer under a legal
duty to make contributions to the Fund(s). The
Employer shall set forth in the required written
notice to the Fund(s) the specific basis upon which
the Employer is relying in terminating its obligation
to make contributions to the Fund(s). The Employer
expressly agrees and hereby acknowledges by signing
this Agreement that its obligation to make
contributions to the Fund(s) shall continue until the
above-mentioned written notice is received by the
Fund(s) and the Trustees acknowledge the Employer's
termination in writing.
Pl.'s 56.1 ¶ 17.
Plaintiffs became bound by the Participation Agreement after
Plaintiffs' trustees approved and accepted the agreement's terms
in writing on January 18-19, 1988. Def.'s Attachment C, Ex. B, ¶
15; Def.'s Attachment E, Ex. 8. Plaintiffs communicated its
acceptance of Defendant's participation in the pension fund by
way of letter. Def.'s Attachment E, Ex. 8.
On November 21, 1997, the employees represented by the union
voted to decertify the union as the employees' bargaining
representative. Pl.'s 56.1 ¶ 25. After the decertification, the
employer continued to submit contributions to the pension fund
for approximately two more months, until 1998. Pl.'s 56.1 ¶¶ 28,
33. The employer, though, did not inform Plaintiffs of the
decertification until approximately two years after the
decertification vote. Pl.'s 56.1 ¶¶ 26-27.
Plaintiffs initially determined that the employer partially
withdrew from the pension plan in 1998, when the employer stopped
paying into the pension fund, and assessed a partial withdrawal.
Pl.'s 56.1 ¶ 38. Plaintiffs also determined that Defendant
completely withdrew from the pension fund in 1999, when none of
Defendant's companies were still paying into the pension fund, and assessed a "complete withdrawal." Pl.'s 56.1 ¶
38. Defendant made these required payments in three monthly
installments in 1999. Def's Attachment B, Ex. B. In total,
Defendant paid $183,022.88. Def's Attachment B, Ex. B.
In September 2002, after Defendant initiated the arbitration,
Plaintiff revised its estimates and concluded that Defendants
were only liable for a withdrawal in 1997, the year of the union
decertification. Pl.'s 56.1 ¶¶ 39, 41. However, because this
assessment was greater than what Defendant had previously paid,
Defendant paid an additional amount. Def.'s 56.1 ¶¶ 37, 38, 45.
Defendant then filed a demand for arbitration of the withdrawal
liability assessment. Pl.'s 56.1 ¶ 44. The arbitrator concluded
that Defendant did not withdraw from the pension plan when the
union was decertified and determined that Defendant should have
been assessed a substantially lesser withdrawal fee of
$97,202.32, based only upon a complete withdrawal in 1998. Pl.'s
56.1 ¶¶ 46-47.
The arbitrator concluded that Defendant could be assessed fees
for making its withdrawal payments in monthly installments, in
the amount of $492.83. Def's Attachment B, Ex. B. Because
Defendant overpaid its withdrawal amount, the arbitrator also
determined that Defendant was entitled to interest only for the
amount Defendant actually overpaid in its 1999 installment
payments $85,327.73*fn1 as opposed to the total amount
Defendant paid in 1999. Def.'s 56.1 ¶ 55; Def's Attachment B, Ex.
B. The parties do not dispute the calculations, the applicable interest rates, or whether Defendant is owed interest
on the additional amount it paid in 2000. Def's Attachment B, Ex.
B. Defendant contests other issues regarding the arbitrator's
At issue is whether a union decertification automatically
withdraws an employer from participation in a pension plan and
subjects the employer to withdrawal liability from the time of
decertification, even if the union and the employer have a
separate agreement requiring the employer to participate in the
pension plan until notice of cancellation is provided. If so, as
Plaintiffs argue, then the arbitrator's decision must be reversed
and Defendant should be assessed withdrawal liability based on
the union's decertification in 1997. If not, then the
arbitrator's decision should be affirmed, subject to certain
assessment modifications sought by Defendant. This issue is a
legal determination that is reviewed de novo.
The expiration of a collective bargaining agreement does not
always end an employer's obligation to fund a pension plan.
Instead, a separate participation agreement may require the
employer to fund the pension plan until certain conditions in the
participation agreement are met, such as providing notice to the
pension fund that the employer is no longer under a legal duty to
make contributions. E.g., Central States, S.E. & S.W. Areas
Pension Fund v. Marine Contracting Corp., 878 F. Supp. 1176,
1179 (N.D. Ill. 1995) (Marine Contracting); see also Central
States, S.E. & S.W. Areas Pension Fund v. Gerber Truck Serv.,
Inc., 870 F.2d 1148, 1153-54 (7th Cir. 1989) (Gerber Truck
Serv.) (stating that an employer must still contribute to a
pension plan despite the absence of a valid collective bargaining
agreement). Based on the above, Defendant argues that the employer may
still contribute to the pension fund even though a valid
collective bargaining agreement was no longer in effect and that
the Participation Agreement continued in effect until Defendant
notified Plaintiffs of termination pursuant to the terms of the
According to Plaintiffs, Defendant's cases are all
distinguishable and a union decertification terminates all
employer-union agreements; therefore, withdrawal liability should
be assessed from the time of decertification.
A union decertification terminates a collective bargaining
agreement. Retail Clerks International Ass'n v. Montgomery Ward
& Co., 316 F.2d 754, 757 (7th Cir. 1963). Moreover, although
Congress enacted 29 U.S.C. § 1145 to ensure that multiemployer
benefit plans could rely on employers' promises to pay into a
pension plan because the plan is obligated to pay pensions
regardless of whether an employer actually made a contribution,
an employer is also relieved of its statutory duties under
29 U.S.C. § 1145 to pay a pension fund under a collective bargaining
agreement when a union is decertified. Midwest Motor,
181 F.3d at 803 ("The decertification also ended [the employer's]
obligation to contribute to [the pension fund]."); Louisiana
Bricklayers & Trowel Trades Pension Fund v. Alfred Miller Gen.
Masonry Contracting Co., 157 F.3d 404, 408 (5th Cir. 1998);
Sheet Metal Workers Int'l Ass'n v. W. Coast Sheet Metal Co.,
954 F.2d 1506, 1509-10 (9th Cir. 1992) (Sheet Metal).
However, Plaintiffs' cases do not address the issue as to a
separate participation agreement which obligates the employer to
continue pension payments after decertification. Rather, the
cases only consider the collective bargaining agreements. In Marine Contracting, the collective bargaining agreement
expired and the union was no longer the bargaining representative
for the employees. Marine Contracting, 878 F. Supp. at 1177.
However, there was a separate participation agreement between the
employer and the pension fund. The participation agreement
contained substantially the same termination language as in the
Participation Agreement between the parties in this case as set
out above. Marine Contracting, 878 F. Supp. at 1177. In Marine
Contracting, as here, payments to the pension fund were required
until a notice of cancellation was provided; this notice was not
provided until after the union was no longer the bargaining
representative for the employees. Marine Contracting,
878 F.Supp. at 1177. The court held that although the union was no
longer the bargaining representative for any employees, the
participation agreement obligated the employer to continue to
make payments until the cancellation notice was provided. Marine
Contracting, 878 F. Supp. at 1177-78. Moreover, the court found
that there was nothing in the participation agreement "that makes
its requirements contingent on the existence of the collective
bargaining agreement. It is an independent obligation." Marine
Contracting, 878 F.Supp. at 1178. There is no such requirement
in the Participation Agreement between the parties in this case.
The Marine Contracting court also cited § 515 of ERISA,
29 U.S.C. § 1145, which provides: "Every employer who is obligated
to make contributions to a multiemployer plan under the terms of
the plan or under the terms of a collectively bargained
agreement shall, to the extent not inconsistent with law, make
such contributions in accordance with the terms and conditions of
such plan or such agreement." Marine Contracting,
878 F. Supp. at 1178 (emphasis in Marine Contracting). Marine argued, as
does Plaintiffs here, "that the obligations imposed by Section 515 require the existence of a collective bargaining agreement,
and that after a collective bargaining agreement expires,
jurisdiction under ERISA vanishes." Marine Contracting,
878 F. Supp. at 1178. However, the Marine Contracting court held that
the pension plan was seeking to enforce a "contractual obligation
to contribute under the Participation Agreement. Where an action
for post-contract contributions arises from an independent
contractual promise, jurisdiction under ERISA exists." Marine
Contracting, 878 F. Supp. at 1179. Thus, that court concluded
that "the language that Marine quotes does not make its
obligations under the Participation Agreement dependent on the
existence of a collective bargaining agreement." Marine
Contracting, 878 F. Supp. at 1179. Likewise here, the
termination language of the Participation Agreement binding on
the parties does not depend on union representation pursuant to a
collective bargaining agreement.
The holding in Marine Contracting is further supported by the
policy which supports assessing multiemployer pension funds
withdrawal liability. Multiemployer Taft-Hartley pension funds
established under §§ 3(37) and 4001(a)(3) of ERISA, such as the
Central States, Southeast, and Southwest Area Pension Fund,
obtain contributions from multiple employers. As such, each
contributing employer not only pays benefits for its employees
but also pays benefits to employees of other contributing
employers. ERISA was enacted to ensure that employees that are
entitled to vested benefits will actually receive their benefits.
Midwest Motor, 181 F.3d at 803. In particular, § 1145
guarantees that pension plans will receive contributions from
participating employers; otherwise, the pension fund would have
to pay benefits to covered employees regardless of whether an
employer actually made its contribution. Gerber Truck Serv.,
870 F.2d at 1153-54. Participation agreements entered into
between the pension fund and the employer guarantee employees' benefits will not be adversely
affected by an event which may invalidate a collective bargaining
Payments by Defendant to the pension fund despite the
decertification of the union were in accord with the applicable
terms of the Participation Agreement. Accordingly, withdrawal
liability should have been assessed from the time the
cancellation notice was provided. Defendant is only liable for a
withdrawal assessment of $97,202.32.
Defendant disputes: (1) the amount of interest it is owed and
(2) whether it can be assessed fees for the monthly installment
As to the amount of interest owed, neither party disputes that
once it is found that Defendant overpaid its withdrawal liability
payments, Defendant is entitled to interest for the amount
Defendant actually overpaid. As discussed above, the parties do
not dispute the calculations, the applicable interest rates, or
whether Defendant is owed interest on the additional amount it
paid in 2000.
However, the parties dispute what amounts are subject to the
interest payments. According to Defendant, the first assessment
Plaintiffs issued was inaccurate because it was later re-assessed
in 2000; therefore, Defendant should receive interest on the full
$183,022.88 it paid in 1999. According to Plaintiffs, the two
withdrawal assessments are related, and Defendant is only
entitled to the difference between the amount it overpaid in 1999
and the amount Defendant actually owes; this results in interest
Defendant argues that a change in the withdrawal liability
assessment should be governed by the same standard as used in
Federal Rule of Civil Procedure 15(c)(2), which allows amendments in pleadings to relate back if the amendment "arose
out of the conduct, transaction, or occurrence" set forth in the
original pleading. Defendant cites no authority for this
The overarching goal of computing an employer's proportional
share of a pension fund's unfunded benefit, to relieve the burden
placed on remaining employers, encourages accurate withdrawal
liability assessments. Masters, Mates, & Pilots Pension Plan v.
USX Corp., 900 F.2d 727, 735-36 (4th Cir. 1990) (USX Corp.).
Moreover, "[a]bsent prejudice to the opposing party, the mere
fact that a revision is offered late in the arbitration process
is not enough to bar it." USX Corp., 900 F.2d at 736.
Defendant argues USX Corp. is distinguishable because it did
not involve assessments issued under different legal theories.
However, nothing in USX Corp. holds that assessments issued
under different legal theories are new assessments, as opposed to
Under 29 U.S.C. § 1401(d), 29 C.F.R. § 4221.8(a)(2), and
29 C.F.R. § 4219.31(d), a pension plan is required to repay any
overpayments and interest to an employer. Specifically, §
4219.31(d) provides that "[t]he plan sponsor shall credit
interest on the overpayment from the date of the overpayment to
the date on which the overpayment is refunded to the employer at
the same rate as the rate for overdue withdrawal liability
payments." The overpayment in this case occurred when the first
withdrawal liability payment was assessed, in 1999. Therefore,
Defendant is owed interest on $85,327.73.
With regard to whether Defendant can be assessed fees for
paying in monthly installments, Pension Benefit Guaranty
Corporation Opinion Letters 85-1 (Jan. 4, 1985) and 85-18 (July
24, 1985) authorize such monthly installment charges. Defendant
offers nothing to the contrary and, instead, claims that no installment payments were
made because the new assessments were issued. This argument has
been rejected above concerning the interest payments.
Accordingly, Plaintiff were permitted to recover $492.83 in
monthly installment charges.
For the foregoing reasons, Plaintiffs' Motion for Summary
Judgment is granted in part and denied in part; and Defendant's
Motion for Summary Judgment is granted in part and denied in
part. The arbitrator's decision is affirmed.