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520 S. Michigan Avenue Associates, Ltd. v. Unite Here National Retirement Fund

September 17, 2010

520 S. MICHIGAN AVENUE ASSOCIATES, LTD. D/B/A THE CONGRESS PLAZA HOTEL & CONVENTION CENTER, PLAINTIFF,
v.
UNITE HERE NATIONAL RETIREMENT FUND, DEFENDANT.



The opinion of the court was delivered by: Matthew F. Kennelly United States District Judge

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge

520 South Michigan Avenue Associates, Ltd., d/b/a The Congress Plaza Hotel & Convention Center (Congress Plaza), was a party to a collective bargaining agreement that obligated it to make payments into a pension fund on behalf of bargaining unit employees. The pension fund is managed by Unite Here National Retirement Fund (NRF).

In 2002, the last collective bargaining agreement between the hotel and the union representing bargaining unit employees expired. Employees in the bargaining unit have been on strike at Congress Plaza since 2003. Congress Plaza has not made contributions to the pension fund on behalf of striking employees.

In 2007, NRF assessed partial withdrawal liability against Congress Plaza under the Employee Retirement Income Security Act (ERISA) due to the reduction in its contributions to the pension fund. Congress Plaza argued that NRF could not impose withdrawal liability because it had suspended payments to the pension fund as a result of a labor dispute. Congress Plaza contended this brought it within the "labor dispute" exception to withdrawal liability contained in 29 U.S.C. § 1398. The dispute was litigated before an arbitrator, who ruled that Congress Plaza's actions fell within ERISA's labor dispute exception to withdrawal liability.

Congress Plaza has sued NRF to enforce the decision rendered by an arbitrator on February 27, 2010. Congress Plaza has moved for summary judgment, and NRF has cross-moved for summary judgment, arguing that the arbitrator made an error of law when he determined that NRF could not assess partial withdrawal liability on Congress Plaza. For the reasons stated below, the Court grants summary judgment in favor of Congress Plaza.

Background

Prior to 2003, Congress Plaza was a party to a collective bargaining agreement with HEREIU, Local 1 (a predecessor to NRF). Under the terms of the agreement, Congress Plaza was required to make contributions to a pension fund on behalf of its employees that were part of the bargaining unit. That employment agreement expired in December 2002. Since June 2003, Congress Plaza and the union have been involved in a labor dispute, and the hotel's union employees have been on strike. Congress Plaza has not hired workers to permanently replace the striking workers. Instead, it has relied on temporary employees provided by staffing companies. Congress Plaza has not made pension contributions on behalf of the striking workers or the temporary replacement workers. This has resulted in a substantial reduction in its contributions to the pension fund.

In January 2004, the pension fund informed Congress Plaza that it was assessing more than two million dollars in liability for Congress Plaza's complete withdrawal from the pension plan, due to its failure to provide an acceptable collective bargaining agreement within twelve months of the expiration of the old one. The fund invoked the plan's so-called "twelve month" rule. Congress Plaza disputed the assessment of withdrawal liability, and the dispute went to arbitration. On May 20, 2005, an arbitrator ruled that the pension fund could not impose complete withdrawal liability on Congress Plaza because its actions fell under ERISA's labor dispute exception, which prohibits the assessment of withdrawal liability if "an employer suspends contributions under the plan during a labor dispute involving its employees." 29 U.S.C. §1398(2).

In 2007, the HEREIU Local 1 pension fund merged into the NRF. In February 2009, the NRF's manager notified Congress Plaza that it had determined that the hotel's contributions to the fund during had decreased by more than seventy percent and that NRF was therefore assessing partial withdrawal liability under 29 U.S.C. § 1385(a)(1). Congress Plaza disputed the assessment, and the matter went to arbitration. On February 27, 2010, the arbitrator, Mark Irvings, ruled that the assessment of withdrawal liability was improper because the reduction in payments fell within the ERISA labor dispute exception. The arbitrator's award directed the NRF to refund with interest all withdrawal liability payments Congress Plaza had made while the dispute was pending.

On March 2, 2010, Congress Plaza filed this action, seeking to enforce Arbitrator Irvings' award. On May 18, 2010, in response to a turnover motion filed by Congress Plaza, the Court ordered NRF to deposit into an interest-bearing escrow account $421,187.76 that Congress Plaza had made in interim withdrawal liability payments.

Congress Plaza has moved for summary judgment on its claim to enforce the arbitration award. NRF has cross-moved for summary judgment, arguing that the arbitrator made a mistake of law when he determined that Congress Plaza had suspended its contributions as a result of a labor dispute. For the reasons stated below, the Court grants Congress Plaza's motion and denies NRF's.

Discussion

A. Review of the Arbitrator's ...


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