United States District Court, N.D. Illinois
Central States, Southeast and Southwest Areas Pension Fund; and Arthur H. Bunte, Jr., as Trustee, Plaintiffs,
Frate Service, Inc., Defendant.
MEMORANDUM OPINION AND ORDER
A. Guzmán Judge
reasons stated below, the Court grants Central States,
Southeast and Southwest Areas Pension Fund and Arthur H.
Bunte's (collectively, the “Fund”) motion for
summary judgment  and denies Frate Service, Inc.'s
(“Frate”) motion for summary judgment . The
Fund is directed to file a proposed draft judgment order
within 7 days of the date of entry of this order. Frate may
file any objections to the draft order within 7 days
thereafter; however, the parties are strongly encouraged to
resolve any disputes between themselves without further Court
This is an action for collection of withdrawal liability,
interest, and penalties incurred by an employer as a result
of a withdrawal from a multiemployer pension plan.
(Def.'s Resp. Pls.' Stmt. Facts, Dkt. # 38, ¶
1.) The Fund determined that on or about March 9, 2014, Frate
permanently ceased to have an obligation to contribute to the
Fund and/or permanently ceased all covered operations,
thereby effecting a “complete withdrawal, ” as
defined in 29 U.S.C. § 1383. (Id. ¶ 7.) As
a result of the complete withdrawal, the Fund determined that
Frate incurred withdrawal liability to the Fund in the
principal amount of $571, 732.39, as determined under 29
U.S.C. § 1381(b) (“Withdrawal Liability”).
(Id. ¶ 8.) By November 2014, Frate was unable
to pay its debts as they became due, had ceased substantially
all of its operations and had liquidated substantially all of
its assets. (Id. ¶¶ 10-12.) On or about
November 18, 2014, Frate received a notice and demand for
payment of the Withdrawal Liability (the “Notice and
Demand”) from the Fund. (Id. ¶ 13.) In
the Notice and Demand, the Fund notified Frate that the
balance owed at that time on the Withdrawal Liability was
$571, 732.39, and demanded full payment of the entire amount
of the Withdrawal Liability by December 1, 2014, pursuant to
29 U.S.C. § 1399(c)(5)(B) and Appendix E, § 5(e)(2)
of the Fund's Pension Plan. (Id. ¶ 14.) At
the time the Notice and Demand was issued to Frate, the Fund
had determined that there was a substantial likelihood that
Frate would be unable to pay its Withdrawal Liability
because: (1) Frate had failed to remit approximately $11, 000
in contributions to the Fund; and (2) Frate admitted that it
had completely shut down and ceased operations. (Id.
letter dated February 12, 2015, Frate requested a review of
the Fund's withdrawal liability assessment
“pursuant to ERISA § 4219 (29 U.S.C. §
1399).” (Id. ¶ 17.) Frate initiated an
arbitration before the American Arbitration Association
(“AAA”), intending to challenge the Fund's
Withdrawal Liability Notice and Demand in accordance with the
mandatory arbitration provision set forth in 29 U.S.C. §
1401. (Id. ¶ 18.) Along with its notice of
arbitration, Frate submitted $650.00 to the AAA as a filing
fee, but was subsequently notified by the AAA in July 2015
that the initial administrative arbitration fee was $6,
200.00. (Id. ¶ 19.) The July AAA Letter advised
Frate that no answering statement or counterclaim was due at
that time “because the filing requirements [had] not
been met, ” and that if the filing fee balance of $5,
550.00 was not received by August 5, 2015, the arbitration
could be administratively closed. (Id. ¶ 20.)
Frate was again notified by the AAA via email dated February
16, 2016 that the arbitration was unable to be processed
until the filing fee was paid in full, and again requested
that Frate remit the filing fee balance of $5, 550.00.
(Id. ¶ 21.) The February email stated that the
arbitration would be administratively closed for failure to
cure a filing deficiency if the filing fee balance of $5,
550.00 was not received by March 1, 2016. (Id.
did not pay the balance of the filing fee, and the AAA
administratively closed the matter on March 1, 2016.
(Id. ¶ 23.) Frate currently has no assets and
has not made any Withdrawal Liability payments to the Fund.
(Id. ¶ 25.) The Fund filed a claim under the
Employee Retirement Income Security Act of 1974
(“ERISA”), as amended by the Mulitemployer
Pension Plan Amendments Act of 1980 (“MPPAA”), 29
U.S.C. § 1001 et seq., to collect Frate's
Fund moves for summary judgment on its claim to collect the
Withdrawal Liability while Frate also moves for judgment in
its favor, asserting that the Notice and Demand it received
from the Fund was defective, and Frate is therefore not
responsible for paying its withdrawal liability.
1974, Congress enacted ERISA, 29 U.S.C. § 1001 et
seq., to regulate private pension and health plans.
Multiemployer plans are pensions “to which more than
one employer is required to contribute” and that
“[are] maintained pursuant to one or more collective
bargaining agreements between one or more employee
organizations and more than one employer.” 29 U.S.C.
§ 1002(37)(A). “These plans allow workers to
change jobs while retaining their pension benefits, which are
not tied to one particular employer.” Laborers'
Pension Fund v. W.R. Weis Co. Inc., 180 F.Supp.3d 540,
548 (N.D. Ill. 2016). The MPPAA provides that an employer
executes a complete withdrawal from a plan when it “(1)
permanently ceases to have an obligation to contribute under
the plan, or (2) permanently ceases all covered operations
under the plan.” 29 U.S.C. § 1383(b)(1). When an
employer experiences a complete withdrawal from the Fund,
withdrawal liability may be assessed against the employer
based on unfunded vested benefits. 29 U.S.C. § 1381;
see Trustees of the Michiana Area Elec. Workers Pension
Fund v. La Place's Elec. Co., No. 14 C 244,
2017 WL 633847, at *3 (N.D. Ind. Feb. 15, 2017)
(“Without withdrawal liability, Congress believed that
the ‘added burdens upon employers who remained as
participants in plans might induce more of them to remove
themselves from multiemployer plans. This process could
discourage the entry of new participants and precipitate the
financial failure of less stable plans.'”)
allows an employer to request a review of any assessment of
withdrawal liability, see 29 U.S.C. § 1399(b)(2), but
requires parties to resolve their withdrawal liability
disputes through arbitration. See 29 U.S.C. §
1401(a)(1) (“Any dispute between an employer and the
plan sponsor of a multiemployer plan concerning a
determination made under sections 1381 through 1399 of this
title shall be resolved through arbitration.”).
“If arbitration [is] not sought within the time period
required by 29 U.S.C. § 1401(a)(1), the amount demanded
by the pension plan sponsor is due and owing.” Trs.
of Chi. Truck Drivers Pension Fund v. Cent. Transp.,
Inc., 888 F.2d 1161-64 (7th Cir. 1989). Because it is
undisputed that Frate did not pay the full AAA filing fee and
thus failed to complete the arbitration process, the
Withdrawal Liability is due and owing.
contends, however, that its duty to arbitrate was never
triggered because it did not receive a proper notice and
demand for its withdrawal liability from the Fund.
Specifically, Frate asserts that ERISA requires that the
notice include a schedule of payments, and because the
Fund's Notice and Demand did not contain a schedule of
installment payments, it had no duty to initiate arbitration.
However, if Frate “took issue with the adequacy of the
notice it received it was required to demand
arbitration.” Amalgamated Lithographers of Am. v.
Unz & Co. Inc., 670 F.Supp.2d 214, 225 (S.D.N.Y.
2009). Moreover, Frate concedes that the Fund was entitled to
accelerate the full amount of the withdrawal liability, and
that it received the Fund's Notice and Demand for Payment
of Withdrawal Liability, which stated that the “total
amount of [Frate's] withdrawal liability is $571,
732.39" and “demand[ed] immediate payment of the
entire amount due by December 1, 2014.” The notice
therefore provides all that is required. See Cent.
States, Se. & Sw. Areas Pension Fund v. O'Neill Bros.
Transfer & Storage Co., No. 07 C 5220, 2009 WL
1470011, at *2 (N.D. Ill. May 27, 2009) (“[N]othing
requires a ‘schedule' to consist of multiple
payments, a single payment is possible in several instances,
and a single payment is consistent with the provisions of 29
U.S.C. § 1399.”), aff'd, 620 F.3d 766
(7th Cir. 2010).
the Court notes that upon receipt of the notice, Frate sent a
letter to the Fund dated February 12, 2015 and captioned
“Request for Review, ” which stated that
“pursuant to . . . § 1399, Frate requests that the
Fund review its withdrawal liability determination.”
(Dkt. # 34-1.) Frate also submitted a notice of arbitration
to the AAA with what it believed to be the proper filing fee.
Given these actions, Frate's contention that notice was
deficient is not well taken. In any event, as the Seventh
Circuit has stated, “actual notice trumps any
deficiencies in it as a statutory notice, ” and thus
“[a]nyone who suspects that he might be . . . subjected
to withdrawal liability would be well advised to commence
arbitration, so that if a court holds that he is . . .
subject to such liability he won't have waived the issues
that are reserved for arbitration.” Chi. Truck
Drivers v. El Paso Co., 525 F.3d 591, 600-01 (7th Cir.
2008) (internal quotation marks and citation omitted). Frate
abandoned the arbitration process at its own peril.
Frate's argument that the amount demanded exceeds the
20-year cap described in § 1399(c)(1)(B) availing given
that Frate failed to pay the full AAA filing fee and complete
the arbitration process, thus waiving this argument.
Trustees of Chi. Truck Drivers, Helpers & Warehouse
Workers Union (Indep.) Pension Fund v. Cent. Transp.,
Inc.,935 F.2d 114, 118 (7th Cir. 1991) ...