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Central States v. K & M Equipment, Inc.

United States District Court, N.D. Illinois, Eastern Division

August 15, 2016

K&M EQUIPMENT, INC., an Illinois corporation, and MIDWEST UNDERGROUND, INC., an Illinois corporation, Defendants.


          James B. Zagel United States District Judge

         Before the Court are the parties’ cross-motions for Summary Judgment. Plaintiffs seek a declaration that Defendants K&M Equipment, Inc. (“K&M”) and Midwest Underground, Inc. (“Midwest”) (collectively “Defendants”) have failed to timely initiate arbitration under the Multiemployer Pension Plan Amendments Act (“MPPAA”) and have therefore waived their right to arbitrate this matter. Plaintiffs further seek an injunction compelling Defendants to dismiss the pending arbitration before the American Arbitration Association. For the following reasons, Plaintiffs’ Motion is granted with respect to summary judgment and denied with respect to the injunction. Defendant’s Motion is denied.

         I. BACKGROUND

         Plaintiffs Central States, Southeast and Southwest Areas Pension Fund and its trustee, Arthur H. Bunte, Jr. (collectively “Plaintiffs” or “the Fund”) bring this Employee Retirement Income Security Act of 1974 (“ERISA”) action against Defendants. The Fund is a multiemployer pension plan within the meaning of ERISA. K&M and Midwest (collectively “the Midwest Controlled Group”) are a “group of trades or businesses under common control”-a single employer for purposes of determining and assessing withdrawal liability under ERISA.

         Under the MPPAA, an employer that withdraws from a multiemployer pension plan must pay “withdrawal liability, ” amounting to the “difference between the present value of vested benefits and the current value of the plan’s assets.” Cent. States, Se. & Sw. Areas Pension Fund v. Hunt Truck Lines, Inc., 43 F.Supp.2d 942, 944 (N.D. Ill. 1999); Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 217, 106 S.Ct. 1018, 1022 (1986); 29 U.S.C. §§ 1381, 1391. Withdrawal occurs when an employer stops contributing to the plan on behalf of its employees, or incurs “partial” withdrawal by reducing its contributions. 29 U.S.C. §§ 1383, 1385. Once an employer withdraws, the plan must calculate the amount of withdrawal liability owed and send a notice and demand to the employer. 29 U.S.C. §§ 1382, 1399(b)(1). If the employer intends to challenge the withdrawal assessment, it must request a review within 90 days of receiving the notice and demand. 29 U.S.C. § 1399(b)(2)(A). The MPPAA also provides that any remaining disputes between the employer and the plan sponsor regarding the withdrawal liability assessment must be resolved through arbitration, which must be initiated “within a 60-day period after the earlier of-(A) the date of notification to the employer . . . or (B) 120 days after the date of the employer’s request . . . The parties may jointly initiate arbitration within the 180-day period after the date of the plan sponsor’s demand . . .” 29 U.S.C. § 1401(a)(1). If no arbitration proceeding is initiated by the applicable deadline, arbitration is waived and the withdrawal liability demanded by the plan sponsor becomes due. 29 U.S.C. § 1401(b)(1).

         At all relevant times, Midwest was a member of the Pipe Line Contractors Association (“PLCA”), which negotiates industry-wide labor agreements with unions. PLCA and the International Brotherhood of Teamsters (“IBT”) belong to an industry-wide collective bargaining agreement known as the National Pipe Line Agreement (“NPLA”). As a PLCA member, Midwest is also bound by the NPLA, which, at the relevant time, required employers to contribute to the Fund on behalf of certain employees.

         On November 15, 2011, the PLCA and the IBT entered into an agreement that purported to terminate NPLA employers’ obligation to contribute to the Fund. Along with other PLCA members, Midwest notified the Fund in writing on November 16, 2011 that it believed its obligation to contribute to the Fund had terminated. Between November 28, 2011 and December 31, 2011, the PLCA sent eight follow-up letters to the Fund inquiring whether PLCA’s members (including but not limited to Midwest) needed to take any further action to formally terminate their obligations to the Fund. Despite these inquiries, the Fund wrote the IBT on January 30, 2012 that the PLCA members had not effectively terminated their obligation to contribute to the Fund as of November 25, 2011. Thus on March 5, 2012, Michels Corporation, a PLCA member, sued the Fund. See Michels Corp. v. Central States, Southeast and Southwest Areas Pension Fund, et al., 800 F.3d 411 (7th Cir. 2015). Michels Corporation sought a declaratory judgment establishing the termination of their obligations under the NPLA. PLCA, on behalf of all its members including Midwest, joined the Michels Corp. suit on July 26, 2012.

         On August 1, 2012, the Fund filed counterclaims against 35 PLCA members including Midwest. The Fund sought to collect the contributions it believed PLCA members still owed from work performed under the NPLA after November 15, 2011. The Fund determined that the Midwest Controlled Group specifically had effected partial withdrawal on or about December 31, 2012. Accordingly, the Fund determined that the Midwest Controlled Group had incurred withdrawal liability of $1, 961, 713.07. The Fund issued a notice and demand for payment in that amount on March 14, 2014.

         On September 2, 2015, the Seventh Circuit held in Michels Corp. that the PLCA members’ obligation to contribute to the Fund had ceased on November 15, 2011. Michels Corp., 800 F.3d at 421-22. The Midwest Controlled Group then sent two letters to the Fund on October 30, 2015. The first letter requested review of the $1, 961, 713.07 withdrawal liability calculation, which the Midwest Controlled Group contends was invalidated by the Michels Corp. decision. The second letter initiated arbitration of this issue before the American Arbitration Association. That case has been stayed pending the outcome of this litigation.

         Prior to the Midwest Controlled Group’s arbitration demand, 26 other members of the PLCA, including Michels Corp. itself, had demanded arbitration with the Fund within a 60-day period of the earlier of a) the date of notification to the employer pursuant to ERISA § 4219(b)(2)(B) or b) 120 days after the date of the employer’s request pursuant to ERISA § 4219(b)(2)(A). All 26 PLCA-members were also parties to Michels Corp.

         Plaintiffs filed this lawsuit on December 23, 2015, asserting that Defendants waived their arbitration rights in this matter because they failed to timely arbitrate their claims pursuant to 29 U.S.C. § 1401(a)(1), 29 C.F.R. §§ 4221.3(c), 4221.14, the American Arbitration Association’s (“AAA”) Multiemployer Pension Plan Arbitration Rules for Withdrawal Liability Disputes, and Appendix E of the Fund’s Plan Document. Defendants argue that their participation in the Michels Corp. lawsuit equitably tolled the deadline to initiate the arbitration process. This dispute is the sole legal issue in this case.


         Summary judgment should be granted when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). A genuine issue of triable fact exists only if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Pugh v. City of Attica, Ind., 259 F.3d 619, 625 (7th Cir. 2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).

         Once the moving party has set forth the basis for summary judgment, the burden then shifts to the nonmoving party who must go beyond mere allegations and offer specific facts showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e); see Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). The nonmoving party must offer more than “[c]onclusory allegations, unsupported by specific facts” in order to establish a genuine issue of material fact. Payne v. Pauley, 337 F.3d 767, 773 (7th Cir. 2003) (citing Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 888 (1990)). A party will be successful in opposing ...

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