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Central States v. National Concrete Products Co.

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

August 16, 2016

Central States, Southeast and Southwest Areas Pension Fund and Arthur H. Bunte, Jr., as Trustee, Plaintiffs,
National Concrete Products Company, Defendant.


          Manish S. Shah United States District Judge

         Plaintiff Central States, Southeast and Southwest Areas Pension Fund is a multiemployer pension plan to which defendant National Concrete Products Company made regular contributions on behalf of its unionized employees. When National Concrete reduced its contribution rate, Central States assessed its withdrawal liability under the Employee Retirement Income Security Act, as amended by the Multiemployer Pension Plan Amendments Act of 1980, and determined that National Concrete was subject to $2, 589, 136.36 in partial withdrawal liability, payable in monthly installments. After National Concrete closed its doors and stopped contributing entirely, Central States assessed a complete withdrawal liability of $1, 874, 717.93. It also declared an event of default and demanded payment of this amount in full. National Concrete disputes both of these assessments and, as required by the applicable statute, seeks resolution in arbitration. Central States and its trustee, Arthur H. Bunte, Jr., filed an action to collect payment while that arbitration is pending, and they now move for summary judgment. For the following reasons, the motion is granted.

         I. Legal Standards

         Summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Spurling v. C & M Fine Pack, Inc., 739 F.3d 1055, 1060 (7th Cir. 2014); Fed.R.Civ.P. 56(a). A genuine dispute as to any material fact exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party seeking summary judgment has the burden of establishing that there is no genuine dispute as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A court must “construe all facts and reasonable inferences in the light most favorable to the non-moving party.” Apex Digital, Inc. v. Sears, Roebuck, & Co., 735 F.3d 962, 965 (7th Cir. 2013).

         II. Facts

         As required by a collective bargaining agreement, defendant National Concrete Products Company made pension contributions on behalf of some of its employees to plaintiff Central States Southeast and Southwest Areas Pension Fund, a multiemployer pension plan. [26] ¶ 6.[1] National Concrete started making these contributions in 1971, but its contributions declined by at least 70% by the end of 2011. [26] ¶¶ 6-7. Around September 19, 2014, Central States notified National Concrete that the contribution decline constituted a “partial withdrawal” from the plan, subjecting National Concrete to partial withdrawal liability in the amount of $2, 589, 136.36. [26] ¶¶ 7-9. It also demanded payment in full by October 1, 2014, or in monthly installments of $18, 486.21, beginning on that day and continuing until September 1, 2034. [26] ¶ 9. When National Concrete failed to meet the October 1 payment deadline, Central States sent another notice of its payment obligations. [26] ¶ 10. As of the filing of this motion, National Concrete had not made any of its partial withdrawal liability payments. [26] ¶ 14. But on January 19, 2016, the day on which National Concrete filed its response brief, it made a payment in the amount of $18, 486.21.[2] [29] ¶ 2; [34-1] ¶ 3.

         Around November 2, 2014, National Concrete ceased operations, ending its contribution obligation entirely-a “complete withdrawal” from the pension plan.[3][26] ¶ 15; [34] at 4. On January 15, 2015, Central States notified National Concrete that its complete withdrawal subjected it to an additional $1, 874, 717.93 in withdrawal liability. [26] ¶¶ 16-17; see also [28] at 2. The notice also demanded full and immediate payment of that amount by February 1, 2015. Id. National Concrete has not made any payments related to its complete withdrawal liability. [26] ¶ 21.

         National Concrete disputes both withdrawal liability assessments. It requested that Central States review the partial withdrawal liability assessment on December 17, 2014, and on May 14, 2015, after Central States upheld its determination, National Concrete initiated arbitration proceedings. [26] ¶¶ 11-13. Its April 15, 2015 request for review of the complete withdrawal liability assessment did not fare any better, and National Concrete initiated arbitration to challenge that assessment on August 5, 2015. [26] ¶¶ 18-20. The two matters were consolidated, and the arbitration is currently pending. [26] ¶ 20.

         III. Analysis

         When employers stop participating in, or substantially reduce their participation in, multiemployer pension plans, they incur withdrawal liability. See 29 U.S.C. § 1381. If an employer partially withdraws from the plan (e.g., if its contributions drop by 70% within a specified time period), it incurs partial withdrawal liability. Id. § 1385. If it stops participating in the plan entirely, it incurs complete withdrawal liability. Id. § 1383. The amount of the liability is related to the employer’s share of the plan’s “unfunded vested benefits.” Id. § 1381(b)(1). Imposing this liability prevents funding deficiencies, ensures that the remaining employer participants do not have to pay disproportionate shares of the plan benefits when one of them withdraws, and avoids deterring new employers from joining the plan. Tsareff v. ManWeb Services, Inc., 794 F.3d 841, 846 (7th Cir. 2015).

         To collect withdrawal liability from an employer, a plan must first calculate the amount of the liability and an appropriate payment schedule, and send the employer a notice and demand for payment. 29 U.S.C. §§ 1382, 1399(b)(1), 1399(c); Cent. States, Se. & Sw. Areas Pension Fund v. Bomar Nat., Inc., 253 F.3d 1011, 1015 (7th Cir. 2001). “The employer may seek review of these calculations and then challenge the plan’s determination in arbitration, but it must pay even while the review and arbitration are pending.” Cent. States Se. & Sw. Areas Pension Fund v. O'Neill Bros. Transfer & Storage Co., 620 F.3d 766, 768 (7th Cir. 2010) (citing 29 U.S.C. §§ 1399(c)(2), 1401(d)). Of course, “if the employer prevails on its challenge, it will get its money back.” Id. at 772. The imposition of those interim payments creates a “pay now, dispute later” rule, which “serves the dual purpose of reducing the risk that an employer will not pay and of encouraging speedy adjudication by requiring immediate arbitration before the courts become involved in the merits of the dispute.” Bomar, 253 F.3d at 1015.

         “To further ensure the financial stability of the plan, . . . in the event of a default, the pension plan may demand immediate payment of the outstanding amount of withdrawal liability.” O'Neill, 620 F.3d at 768 (citing 29 U.S.C. § 1399(c)(5)). Consistent with the rest of the statutory scheme, if a plan sponsor declares a default and makes such a demand, the entire amount of the withdrawal payment is immediately payable, even if arbitration is pending. Id. at 775.

         A. Partial Withdrawal Liability

         With respect to the $2, 589, 136.35 partial withdrawal liability assessment, National Concrete concedes that it is required to make monthly payments to the fund in accordance with the fund’s preferred payment schedule, even while the arbitration is pending. National Concrete also admits that it failed to make any payments in the first fifteen months of the payment schedule. It does not oppose Central States’s arguments relating to those past-due payments, “[s]ubject to an appropriate affidavit to prove up the amounts owed.” [24] at 1. Central States seeks (1) all past-due interim payments; (2) interest on those payments; (3) the greater of the interest on the delinquent payments or 20% of the unpaid principal amount; (4) attorney’s fees; and (5) costs-all of which are available under 29 U.S.C. § 1132(g). And it requests three weeks to file affidavits ...

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