Quad Graphics, Inc. v. GCIU- Employer Retirement Fund

Filing 22

ORDER AFFIRMING IN PART AND VACATING IN PART ARBITRATION AWARD by Judge Otis D. Wright, II. The Court concludes as follows: (1) The Court VACATES the arbitrator's decision that Quads Versailles facility withdrew from the Fund in 2011; (2) The C ourt DISMISSES AS MOOT the Fund's challenge to the arbitrator's decision that the Fund assess only a 2011 complete withdrawal; (3) The Court AFFIRMS the arbitrator's decision that the Fund correctly applied that the partial withdrawal credit before the 20-year payment cap; (4) The Court VACATES the arbitrator's decision that Quad was not entitled to an award of attorneys' fees and costs under 29 C.F.R. § 4221.10(c); and (5) The Court AFFIRMS the arbitrator's de cision not to delay issuance of the final arbitration award based on Quad's "unclean hands." (6) Except as to the issues on which the Court has affirmed the arbitration award, the Court REMANDS the case to the arbitrator for proceedings not inconsistent with this opinion. The Court further ORDERS the parties to submit a joint proposed judgment to the Court no later than May 1, 2017. See document for details. (smo)

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United States District Court
Central District of California

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GCIU-EMPLOYER RETIREMENT
FUND,

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v.

Plaintiff,

Case № 2:16-cv-03391-ODW (AFMx)
[Consol. w/ Case No. 2:16-cv-3418ODW (AFMx)]
ORDER AFFIRMING IN PART AND
VACATING IN PART
ARBITRATION AWARD [22, 23]

QUAD/GRAPHICS, INC.,
Defendant.

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I.

INTRODUCTION

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This case concerns withdrawal liability under the Employee Retirement Income

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Security Act of 1974 (“ERISA”) and the Multiemployer Pension Plan Amendments

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Act of 1980 (“MPPAA”). Quad/Graphics, Inc. (“Quad”) ceased contributing to a

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multiemployer pension plan called GCIU-Employer Retirement Fund (“Fund”). The

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MPPAA imposes liability on employers that withdraw from multiemployer pension

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plans, and thus the Fund calculated Quad’s withdrawal liability and demanded

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payment. Quad disputed the Fund’s calculation on several grounds, prompting the

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parties to submit the matter to arbitration. See 29 U.S.C. §1401(a)(1). The arbitration

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recently concluded, and both parties now petition this Court to affirm and vacate

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opposing portions of the arbitration award. (ECF Nos. 22, 23.) For the reasons

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discussed below, the Court AFFIRMS IN PART and VACATES IN PART the

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arbitrator’s final award, and DISMISSES AS MOOT the Fund’s challenge to portions

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of the arbitrator’s final award.

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II.
A.

BACKGROUND

Statutory Background

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Collective bargaining agreements (“CBAs”) between an employer and an

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employee-union often require the employer to provide pension benefits to its

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employees. To ensure that these employees actually receive their promised benefits,

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ERISA requires the employer to contribute to a pension plan in an amount sufficient

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to cover those benefits.

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opposed to a single-employer plan), the MPPAA requires withdrawing employers to

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pay their share of the plan’s unfunded vested benefits. This ensures that employer

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withdrawals do not bankrupt the plan. See generally Milwaukee Brewery Workers’

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Pension Plan v. Joseph Schlitz Brewing Co., 513 U.S. 414, 416 (1995).

Moreover, where the plan is a multiemployer plan (as

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A withdrawal is either partial or complete. 29 U.S.C. § 1381(a). A withdrawal

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is partial when the employer’s obligation to contribute to the plan ceases under some,

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but not all, of the CBAs by which it is bound. Id. § 1385(a)(2), (b)(2)(A). A

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withdrawal is complete when the employer’s obligation to contribute to the plan

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ceases under all CBAs by which it is bound. Id. § 1383(a)(1).1 Moreover, withdrawal

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liability is assessed based on the “plan year” in which the employer withdraws, see id.

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§ 1391, and the extent of the employer’s liability can change substantially based on

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the particular plan year in which the withdrawal occurs.

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B.

Factual Background

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Quad is an employer in the commercial printing business. (Arbitration Record

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(“AR”) at 9, ¶ 2.) Quad maintains facilities at multiple locations within the United

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While there are other situations in which an employer partially or completely withdraws from a
pension plan, see 29 U.S.C. §§ 1383, 1385, they are not relevant to this dispute.

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States, and is bound by separate CBAs at each of those facilities. (Id. at 9, ¶ 4.) One

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of Quad’s facilities is located in Versailles, Kentucky. (Id. at 9, ¶ 5.) In 2007, Graphic

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Communications Conference, International Brotherhood of Teamsters, Local 826-C

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(“Local 826-C”) was the exclusive bargaining representative for the Versailles

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employees. (See id. at 349.) That year, Local 826-C entered into a CBA with Quad’s

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predecessor, World Color (USA), formerly known as Quebecor World (USA), Inc.

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(“Quebecor”). (Id. at 349–411.) Quad acquired Quebecor in 2010, and the parties

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appear agree that Quad assumed Quebecor’s obligations under the CBA. (Id. at 9,

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¶ 3.)

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The Versailles CBA contained two provisions relevant to the parties’ dispute.

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The first concerned the manner in which employee vacation time accrued and was

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used. Under the CBA, employees received their yearly allotment of vacation time in a

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“bank” at the beginning of the year. (Id. at 12, ¶ 28.) Employees could use their

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vacation time at any time throughout the year, up until the end of the day on

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December 31. (Id. at 10, ¶ 8; id. at 12, ¶¶ 29–31.) Any unused vacation time left in

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the banks thereafter must be paid out to the employee by January 31. (Id. at 10, ¶ 9.)

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Thus, for example, if John Doe accrued 20 hours of vacation time over the course of

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2008, Quad would credit 20 hours of vacation time in John’s bank at the beginning of

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2009. John could use this vacation time at any point up to December 31, 2009. Any

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unused vacation time left in the bank at the end of this period must be paid out to John

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on or before January 31, 2010.

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The other relevant CBA provision concerned the timing of pension benefit

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payments. Under the CBA, Quad was required to make monthly contributions to the

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Fund.

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contribution obligation based on, inter alia, the hours worked by the employee that

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month and vacation time taken by (or paid out to) the employee that month. (Id.)

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Thus, the January payout of the previous year’s unused vacation time triggered Quad’s

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obligation to contribute to the Fund.

(Id. at 9–10, ¶ 7.)

The CBA required Quad to calculate its monthly

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In December 2010, the Versailles employees voted to decertify Local 826-C as

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their exclusive bargaining representative. (Id. at 10, ¶ 11.)

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Relations Board (“NLRB”) certified the results of the election on December 27, 2010.

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(Id.) As of January 1, 2011, there were over 5,000 hours of total unused vacation time

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in the banks of Versailles employees. (Id. at 12, ¶ 33.) Quad paid out this vacation

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time to the Versailles employees on January 21, 2011, in the total amount of

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$84,953.62. (Id. at 13, ¶ 38.) On January 11, 2011, Quad submitted its contribution

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payment to the Fund for its Versailles employees in the amount of $48,445.20. This

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payment was for work performed and contributions due in December 2010. (Id. at 10,

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The National Labor

¶ 14; id. at 13, ¶ 36.)

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Because the decertification voided the CBA—and therefore cut off Quad’s

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obligation thereunder to contribute to the Fund—Quad notified the Fund of the

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decertification. (Id. at 10, ¶ 13.) While calculating Quad’s withdrawal liability, the

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Fund concluded that Quad’s contribution obligation under the Versailles CBA ceased

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in 2010.2 (Id. at 11–12, ¶ 27; id. at 14, ¶¶ 45–46.) The Fund also concluded that

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Quad’s contribution obligation under the CBAs governing Quad’s other facilities

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ceased in 2011 (except for the Memphis facility, which previously withdrew in 2009).

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(Id. at 11–12, ¶ 27.) As a result, the Fund assessed liability for a 2010 partial

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withdrawal (for the Versailles facility), and a 2011 complete withdrawal. (Id. at 10,

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¶ 15; id. at 11, ¶ 17.)

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Versailles CBA ceased in 2010, and thus argued that the Fund should not have

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assessed liability for a 2010 partial withdrawal. (See id. at 11, ¶ 18.) The allegedly

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erroneous assessment increased Quad’s total withdrawal liability by approximately

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Quad disputed that its obligation to contribute under the

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An assistant administrator at the Fund originally concluded that none of Quad’s facilities
withdrew in 2010. (AR at 13, ¶ 40.) Concerned that not assessing liability for a 2010 partial
withdrawal would lead to a substantial loss of revenue, a Fund actuary instructed the administrator to
find that at least one of Quad’s facilities withdrew in 2010 rather than 2011. (Id. at 13–14, ¶¶ 41,
44.) The administrator obliged, finding that Quad’s Versailles facility withdrew in 2010. (Id. at 14,
¶ 45.) While this might suggest impure motives on the part of the Fund, neither the arbitrator nor
Quad made any argument that these communications have any effect on the date of Quad’s actual
withdrawal.

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$20 million. (Id. at 13, ¶ 42.) Finally, in assessing Quad’s liability for the 2011

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complete withdrawal, the Fund applied a partial withdrawal credit (for the 2009

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Memphis partial withdrawal) before applying the MPPAA’s 20-year payment cap on

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withdrawal liability. (Id. at 15, ¶¶ 55–56.) Quad contends that the Fund should have

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applied the 20-year cap before the partial withdrawal credit, and that the Fund’s failure

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to do so increased its 2011 withdrawal liability by approximately $14 million. (Id. at

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1639.)

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C.

Arbitration Proceedings

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The parties presented three issues to the arbitrator for decision. The two issues

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pertinent to this action are: (1) whether Quad’s obligation under the Versailles CBA to

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contribute to the Fund ceased in 2010 or 2011; and (2) in calculating Quad’s

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withdrawal liability, whether the Fund properly applied the partial withdrawal credit

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before applying the 20-year cap. (Id. at 4–5.)3

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On the first issue, the arbitrator concluded that Quad’s obligation under the

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Versailles CBA to contribute to the Fund ceased in 2011. The arbitrator reasoned that:

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(1) the Versailles CBA required Quad to pay out all unused vacation and personal time

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to its employees from 2010; (2) vacation days could be used up until midnight on

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January 1, 2011; (3) Quad therefore could not calculate (and thus could not pay out)

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any unused vacation time to its employees until thereafter; and thus (4) Quad’s

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obligation to contribute to the Fund based on those payments did not cease until 2011.

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(See id. at 12–13, ¶¶ 31, 34, 35, 39; id. at 18–21.) On the second issue, the arbitrator

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concluded that the wording and structure of the various statutes under the MPPAA

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supported the Fund’s decision to apply the partial withdrawal credit before applying

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the 20-year payment cap. (Id. at 21–23, ¶¶ 8–15.)

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At the conclusion of the arbitration proceeding, both Quad and the Fund moved

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for an award of attorneys’ fees based on the other’s bad faith conduct during the

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The arbitrator declined to adjudicate the third issue. (AR at 5.) The parties do not challenge
that decision here.

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proceedings. (Id. at 24–25, ¶¶ 22.) Quad argued that: (1) the Fund lacked a good faith

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basis for seeking an additional evidentiary hearing on the second issue put before the

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arbitrator; and (2) the Fund lacked a good faith basis for attempting to submit several

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revised withdrawal assessments that were purposely inconsistent with the arbitrator’s

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rulings. (Id.) The Fund, in turn, argued that Quad lacked a reasonable basis on which

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to assert the second issue regarding the sequence of withdrawal liability adjustments.

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(Id.) The arbitrator concluded (without explanation) that neither Quad nor the Fund

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had engaged in bad faith conduct, and thus denied their respective requests for fees

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and costs. (Id. at 25, ¶ 24.) Finally, the arbitrator also denied the Fund’s motion to

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delay issuance of the final arbitration award based on Quad’s “unclean hands.” (Id. at

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24, ¶ 21.)

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D.

Civil Action

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On May 17, 2016, the arbitrator issued his final award addressing all issues

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raised in the arbitration. (Id. at 2.) Both parties immediately filed separate civil

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actions to affirm and/or vacate the arbitrator’s decision, which the Court consolidated

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into one action. (ECF No. 19.) On August 17, 2016, both parties timely moved to

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affirm and/or vacate the arbitrator’s decision. (ECF Nos. 22, 23.) On November 21,

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2016, the Court heard oral argument from the parties on their respective Motions, after

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which the Court took the Motions under submission. (ECF No. 34.) Those Motions

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are now before the Court for decision.

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III.

ISSUES PRESENTED

The parties seek to affirm and/or vacate various portions of the arbitrator’s final
award. The Court rules on each issue as follows:
(1)

Quad asks this Court to affirm, and the Fund asks this Court to vacate,

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the arbitrator’s decision that Quad’s Versailles facility withdrew from the Fund in

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2011 rather than 2010. The Court VACATES the arbitrator’s decision.

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(2)

The Fund asks this Court to vacate the arbitrator’s decision that the Fund

prepare only a revised 2011 complete withdrawal liability assessment. The Court

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DISMISSES AS MOOT the Fund’s challenge to the arbitrator’s decision.
(3)

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Quad asks this Court to vacate, and the Fund asks this Court to affirm,

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the arbitrator’s decision that the Fund properly applied the partial withdrawal credit

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before applying the 20-year payment cap to the 2011 complete withdrawal

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assessment. The Court AFFIRMS the arbitrator’s decision.
(4)

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Quad asks this Court to vacate the arbitrator’s decision denying Quad’s

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request for an award of attorneys’ fees and costs against the Fund.

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VACATES the arbitrator’s decision.
(5)

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The Court

Quad asks this Court to affirm the arbitrator’s decision denying the

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Fund’s request for a delay in issuing the final arbitration award based on Quad’s

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“unclean hands.” The Court AFFIRMS the arbitrator’s decision.

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IV.

STANDARD OF REVIEW

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An arbitrator’s conclusions of law are reviewed de novo. Penn Cent. Corp. v.

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W. Conference of Teamsters Pension Trust Fund, 75 F.3d 529, 533 (9th Cir. 1996).

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An arbitrator’s factual findings, however, are presumed correct, “rebuttable only by a

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clear preponderance of the evidence.” 29 U.S.C. § 1401(c). While the question

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“[w]hether a withdrawal within the meaning of the statute has occurred presents a

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mixed question of law and fact,” Penn Cent. Corp., 75 F.3d at 533, “[t]he construction

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of the CBA is a question of law that [is] review[ed] de novo.” Nw. Adm’rs, Inc. v. San

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Bruno Garbage Co., 312 F. App’x 916, 918 (9th Cir. 2009) (citing Santa Monica

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Culinary Welfare Fund v. Miramar Hotel Corp., 920 F.2d 1491, 1493 (9th Cir.

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1990)); see also Nw. Adm’rs, Inc. v. B.V. & B.R., Inc., 813 F.2d 223, 225 (9th Cir.

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1987) (interpretation of the written terms of a CBA is a question of law to the extent

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that the language is not ambiguous). Finally, “an award of attorneys’ fees is reviewed

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for an abuse of discretion.” Penn Cent. Corp., 75 F.3d at 535; see also Trs. of Utah

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Carpenters’ & Cement Masons’ Pension Trust v. Loveridge, 567 F. App’x 659, 662

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(10th Cir. 2014).

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V.
A.

DISCUSSION

Issue 1: Quad’s Withdrawal Under the Versailles CBA

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The Fund argues that the arbitrator erred in concluding that Quad’s obligation

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to contribute to the Fund survived the decertification of Local 826-C. The Fund

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argues for a bright line rule that any obligation under a CBA to contribute to a pension

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plan ceases immediately upon NLRB confirmation of the decertification vote. Any

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other rule, the Fund contends, would create uncertainty and litigation in an area of law

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that emphasizes administrative uniformity and simplicity. Quad, on the other hand,

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argues that whether an employer’s obligation to contribute to a pension plan survives

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decertification depends on the terms of the specific CBA at issue. Here, because

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Versailles employees could take vacation any time up until January 1, 2011, it was

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impossible to determine before that date the amount of unused vacation time Quad

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would need to pay out. Moreover, because the CBA required Quad to contribute to

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the Fund based on the payment of unused vacation time, Quad argues that its

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obligation to contribute to the Fund did not cease until at least January 1, 2011. For

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the reasons discussed below, the Court concludes that Quad’s obligation to contribute

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to the Fund under the Versailles CBA ceased immediately upon NLRB confirmation

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of the decertification vote.

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An employer partially withdraws from a pension plan during a particular plan

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year “if, during such year, the employer permanently ceases to have an obligation to

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contribute under one or more but fewer than all collective bargaining agreements

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under which the employer has been obligated to contribute under the plan.” 29 U.S.C.

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§ 1385(b)(2)(A)(ii). Because the Fund’s plan year ran from January 1 to December

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31, the key issue is whether Quad “permanently cease[d] to have an obligation to

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contribute” to the Fund under the Versailles CBA during the 2010 calendar year or the

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2011 calendar year.

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The Ninth Circuit has held that decertification of an employee union

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prospectively voids any CBA between that union and the employer, and thus cuts off

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any obligation under the CBA to contribute to a pension plan. Sheet Metal Workers’

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Int’l Ass’n, Local 206 of Sheet Metal Workers’ Int’l Ass’n, AFL-CIO v. W. Coast

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Sheet Metal Co., 954 F.2d 1506, 1509–10 (9th Cir. 1992) (citing Sheet Metal Workers

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Int’l Ass’n, Local No. 162 v. Jason Mfg., Inc., 900 F.2d 1392, 1400 (9th Cir. 1990));

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see also MacKillop v. Lowe’s Mkt., Inc., 58 F.3d 1441, 1446 (9th Cir. 1995) (“Sheet

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Metal Workers’ holds that the voluntary decertification of a union by its employees

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ends the collective bargaining agreement, and employer obligations to the ERISA

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plans cease upon that event.”); Laborers Health & Welfare Trust Fund for N. Cal. v.

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Westlake Dev., 53 F.3d 979, 984 (9th Cir. 1995) (“The obligation to contribute to the

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Trust Funds depends upon the existence of employment covered by the CBA. Once

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the CBA was lawfully repudiated, there was no longer any covered employment and

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thus there was no duty on Westlake’s part to contribute to the Trust Funds.”);

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Laborers Health & Welfare Trust Fund For N. Cal. v. Advanced Lightweight

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Concrete Co., 484 U.S. 539, 553 (1988) (noting in dicta that absent a statutory

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obligation to the contrary, there “would [be] no basis whatsoever for claiming that an

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employer had any duty to continue making contributions to a fund after the expiration

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of its contractual commitment to do so”).4 The court reasoned that “[a] contract to

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contribute to a trust fund of a [u]nion with which [the employer] has no ongoing

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collective bargaining relationship makes no sense,” because “trust fund provisions

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have no legal effect when the [u]nion is no longer the certified representative of [the]

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employees.” W. Coast Sheet Metal Co., 954 F.2d at 1509; see also id. (“[B]ecause the

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collective bargaining agreement became inoperative prospectively, it thereafter had no

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force or legal effect. Legal obligations have their source either in authority acting

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within its proper jurisdiction or in contract properly executed and currently effective.

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It is unclear why both parties assume that the CBA becomes void upon NLRB confirmation of
the decertification vote rather than when the decertification vote itself occurs; West Coast Sheet
Metal appears to hold that the agreement is void upon the decertification vote, and never even
mentions NLRB confirmation of the vote. 954 F.2d at 1509–10. Nevertheless, because the
difference would not affect the outcome here (both the decertification vote and NLRB confirmation
occurred in December 2010), the Court declines to definitively resolve the issue.

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Here neither source exists.”).

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employer to contribute to the pension plan of a union that no longer represents its

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employees, for such contributions could benefit only the employees of other

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employers. Id. at 1510. Similarly, the Fifth Circuit, relying on West Coast Sheet

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Metal, has held that decertification prospectively voids a CBA. Pioneer Nat. Res.

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USA, Inc. v. Paper, Allied Indus., Chem. And Energy Workers Int’l Union Local 4-

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487, 338 F.3d 440, 441 (5th Cir. 2003).5 The Fifth Circuit further held that one

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consequence of decertification is that “employees los[e] all job protection under the

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CBA. With no promise of continued employment, they c[an] be discharged as at-will

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The court also noted that it is unfair to force an

employees.” Id.

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Quad points to dicta in West Coast Sheet Metal suggesting that a contribution

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obligation under a CBA might survive decertification if the CBA specifically provided

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for such survival. 954 F.2d at 1509 (“We find nothing in the language of the renewal

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contract that obligates West Coast to continue to contribute to the Trust Funds after

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the Union’s decertification.”). Quad argues that this is in line with cases from the

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Supreme Court and other circuit courts holding more generally that CBA provisions

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can survive expiration of the CBA in certain circumstances. For example, in Litton

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Fin. Printing Div. v. N.L.R.B., the Supreme Court held that while “an expired contract

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has by its own terms released all its parties from their respective contractual

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obligations,” there are “[e]xceptions [that] are determined by contract interpretation.”

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501 U.S. 190, 206 (1991). Such exceptions include “[r]ights which accrued or vested

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under the agreement,” and rights that the parties clearly intend to survive termination

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of the CBA. Id. The Court went on to hold that a provision in a CBA specifying the

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The Third Circuit has also noted in dicta the potential for a decertification defense. Agathos v.
Starlite Motel, 977 F.2d 1500, 1505 (3d Cir. 1992). The Seventh Circuit, on the other hand, has held
that decertification does not void a CBA, reasoning that the lack of majority support for a union
(which is the basis of a decertification defense) is generally not a defense to a contribution action.
See Cent. States, Se. & Sw. Areas Pension Fund v. Schilli Corp., 420 F.3d 663, 671 (7th Cir. 2005).
Curiously, the Ninth Circuit has similarly held that lack of majority support for a union is not a
defense to a contribution action, yet retains the rule that decertification cuts off the obligation to
contribute to a pension plan under a CBA. MacKillop, 58 F.3d at 1444.

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framework employers must use to lay off employees was not intended to survive

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termination of the agreement, because the framework was based on factors that could

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not possibly remain constant following the termination. Id. at 209–10. Similarly, the

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First Circuit has held that earned vacation time survives termination of a CBA because

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those benefits accrue to the employee during the life of the CBA. United Parcel Serv.,

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Inc. v. Union De Tronquistas De Puerto Rico, Local 901, 426 F.3d 470, 473–74 (1st

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Cir. 2005) (“Vacation time strikes us as the classic example of a benefit that—barring

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explicit provision to the contrary—accrues during the term of the agreement under

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which it is earned.”).

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The Court declines to decide whether decertification always and immediately

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terminates any contribution obligation under a CBA, because even if it does not,

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nothing in the Versailles CBA specifically extended Quad’s obligation to contribute to

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the Fund into 2011. The three relevant provisions under the Versailles CBA are: (1)

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employees may take vacation time at any time between January 1 to December 31; (2)

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any unused vacation time remaining after this period will be paid out by January 31 of

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the following year; and (3) contributions to the Fund must be made based on such

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end-of-year vacation time payouts. However, the CBA does not explicitly provide

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that any of these obligations continue past expiration or termination of the CBA.

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Moreover, there is nothing implicit in the nature of these obligations that compels

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such a conclusion. The mere fact that the CBA imposes an obligation to occur at

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some point in the future does not mean that the obligation will survive if the CBA

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terminates before then; any other rule would create significant line-drawing issues.

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Indeed, CBAs by their very nature contemplate performance of all obligations

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thereunder for a defined period of time (e.g., payment of wages, regulation of working

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conditions, etc.), yet no one suggests that all of those obligations must remain in effect

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if the CBA terminates early.6 Cf. Pioneer Nat. Res. USA, 338 F.3d at 441 (“When the

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The Court also notes that the period in which one must use their vacation time (as opposed to
the right to the vacation time itself) is not a right that accrued or vested during the lifetime of the
CBA, and Quad does not appear to argue to the contrary.

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Union was decertified, [its] employees lost all job protection under the CBA.”). In

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short, there is nothing to distinguish these obligations from the myriad other

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obligations under the CBA that clearly did not survive decertification.

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Thus, the fact that the CBA provides that employees can take vacation at any

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time before the end of 2010 does not mean that they may still do so if the CBA

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terminates before the end of the year. Instead, once the agreement terminates, this

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provision ceases to exist and is no longer enforceable. As a result, any vacation time

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remaining in the employees’ banks upon decertification constitutes the total unused

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vacation time that Quad owes its employees—at least as far as the CBA is concerned.

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Because of this, the CBA no longer imposed an obligation to contribute to the Fund

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that Quad could fulfill only after January 1, 2011; Quad could fulfill its obligation to

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contribute to the Fund based on unused vacation time in December 2010. And

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because there is no dispute that the obligation to contribute under the Versailles CBA

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ceased when the unused vacation time payouts could be paid rather than when they

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were actually paid, Quad’s Versailles facility partially withdrew from the Fund during

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the 2010 plan year.7

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Both Quad and the arbitrator rely on the Supreme Court’s opinion in Nolde

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Bros., Inc. v. Local No. 358, Bakery & Confectionery Workers Union, AFL-CIO, 430

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U.S. 243 (1977), but that case does not require a different result. There, the Supreme

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Court held that certain types of arbitration provisions in a CBA are presumed to

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survive its expiration unless the CBA specifically provides otherwise. Id. at 254. The

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Court reasoned that the liberal federal policy favoring arbitration generally and

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arbitration of collective bargaining disputes in particular warranted such a

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presumption.

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arbitration.

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survivability is reversed: such provisions do not survive expiration of the CBA unless

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Id.

The CBA provisions at issue here, however, do not involve

For provisions not relating to arbitration, the presumption regarding

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The arbitrator’s conclusion to the contrary is based solely on the written terms of the Versailles
CBA. Because the interpretation of unambiguous plan terms is a legal question, the arbitrator’s
conclusion not entitled to any deference. Nw. Adm’rs, 813 F.2d at 225.

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a recognized exception applies. See Litton, 501 U.S. at 206. Quad also does not point

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to any comparable policy favoring survival of the disputed provisions—indeed, Quad

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spends much of its briefing arguing that policy concerns should not change the

4

outcome here. Thus, the Court finds Nolde Brothers unpersuasive.
For these reasons, the arbitrator erred in concluding that Quad’s Versailles

5
6

facility withdrew from the Fund in 2011 rather than 2010.

7

B.

Issue 2: The 2011 Complete Withdrawal Assessment

8

Following the arbitrator’s interim decision that Quad’s Versailles facility

9

withdrew in 2011 rather than 2010, the Fund requested that the arbitrator adjudicate

10

the date of withdrawal for all of Quad’s other facilities. The Fund argued that the

11

arbitrator’s decision created a new “rule” that would change the dates of withdrawal at

12

Quad’s other facilities, which in turn would significantly affect Quad’s total

13

withdrawal liability. The arbitrator declined to do so because (1) the Fund had

14

previously stipulated that Quad’s other facilities (except the Memphis facility)

15

withdrew in 2011, and (2) it was too late in the proceedings to raise new issues. Thus,

16

the arbitrator ordered the Fund to rescind the 2010 partial withdrawal assessment and

17

submit a revised 2011 complete withdrawal assessment. The Fund now argues that

18

the arbitrator erred in declining to adjudicate the withdrawal date of Quad’s other

19

facilities.

20

Because the Court vacates the arbitrator’s decision that the Versailles facility

21

withdrew in 2010, this issue is now moot. As such, the Court expresses no opinion on

22

(1) whether the Court’s analysis regarding the contribution obligation applies to the

23

other CBAs under which Quad was bound, or (2) whether the arbitrator properly

24

declined to consider those issues based on the Fund’s failure to timely preserve them

25

for adjudication.

26

C.

Issue 3: Application of the Partial Withdrawal Credit

27

In assessing Quad’s 2011 complete withdrawal liability, the Fund applied two

28

adjustments: the partial withdrawal credit, 29 U.S.C. § 1386(b)(1), and the 20-year

13

1

payment cap, 29 U.S.C. § 1399(c)(1)(B). Under the partial withdrawal credit, the

2

Fund offset Quad’s 2011 complete withdrawal liability by the amount assessed for the

3

2009 Memphis partial withdrawal. See 29 C.F.R. § 4206.1(a) (“The purpose of the

4

credit is to protect a withdrawing employer from being charged twice for the same

5

unfunded vested benefits of the plan.”). Under the 20-year payment cap, the Fund

6

limited Quad’s 2011 withdrawal liability to the first 20 years of amortized payments.

7

The Fund applied the partial withdrawal credit before applying the 20-year payment

8

cap; Quad argues that the Fund should have applied the 20-year payment cap before

9

the partial withdrawal credit. The arbitrator concluded that the Fund applied the credit

10

and the payment cap in the correct sequence. For the reasons discussed below, the

11

Court affirms the arbitrator’s holding.

12

1.

13

Quad’s argument implicates the interaction between three sections of the

14
15

Relevant Statutes

MPPAA: 29 U.S.C. §§ 1381, 1386, and 1399.
i.

29 U.S.C. § 1381

16

Under § 1381(a), “[i]f an employer withdraws from a multiemployer plan in a

17

complete withdrawal or a partial withdrawal, then the employer is liable to the plan in

18

the amount determined under [29 U.S.C. §§ 1381–1405].” 29 U.S.C. § 1381(a).

19

Subsection (b)(1), in turn, lays out a roadmap for determining an employer’s

20

withdrawal liability (whether partial or complete):

21
22
23
24
25
26
27
28

For purposes of subsection (a) of this section-(1) The withdrawal liability of an employer to a plan is the amount
determined under section 1391 of this title to be the allocable amount of
unfunded vested benefits, adjusted-(A) first, by any de minimis reduction applicable under section 1389
of this title,
(B) next, in the case of a partial withdrawal, in accordance with
section 1386 of this title,
(C) then, to the extent necessary to reflect the limitation on annual
payments under section 1399(c)(1)(B) of this title, and
(D) finally, in accordance with section 1405 of this title.

14

1

29 U.S.C. § 1381(b) (emphasis added). While subsections (b)(1)(B) and (b)(1)(C) are

2

the most directly relevant portions of this statute, the overall structure of this entire

3

section is also relevant.

4

ii.

29 U.S.C. § 1386

5

This statute concerns withdrawal liability calculations in the event of a partial

6

withdrawal. The two relevant subsections under this statute are subsections (a) and

7

(b)(1).

8

employer’s liability for a partial withdrawal, before the application of sections

9

1399(c)(1) and 1405 of this title.” 29 U.S.C. § 1386(a). Subsection (b)(1), which is

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Subsection (a) provides a formula for determining “[t]he amount of an

the partial withdrawal credit, reads as follows:
In the case of an employer that has withdrawal liability for a partial
withdrawal from a plan, any withdrawal liability of that employer for a
partial or complete withdrawal from that plan in a subsequent plan year
shall be reduced by the amount of any partial withdrawal liability
(reduced by any abatement or reduction of such liability) of the employer
with respect to the plan for a previous plan year.
29 U.S.C. § 1386(b)(1).
iii.

29 U.S.C. § 1399

Finally, this statute concerns the 20-year payment cap on withdrawal liability.
The relevant language reads as follows:
(A)(i) Except as provided in subparagraphs (B) and (D) of this
paragraph . . . , an employer shall pay the amount determined under
section 1391 of this title, adjusted if appropriate first under section 1389
of this title and then under section 1386 of this title over the period of
years necessary to amortize the amount in level annual payments
determined under subparagraph (C) . . . .
...
(B) In any case in which the amortization period described in
subparagraph (A) exceeds 20 years, the employer’s liability shall be
limited to the first 20 annual payments determined under subparagraph
(C).
29 U.S.C. § 1399(c)(1).

15

1
2

2.

Analysis
i.

Statutory Analysis

3

The Court agrees with the arbitrator’s conclusion that the partial withdrawal

4

credit is applied before the 20-year payment cap. Section 1381’s calculation sequence

5

makes clear that this is the appropriate order. There is no dispute that the adjustments

6

under § 1381(b)(1)(B) come before the 20-year payment cap adjustment under

7

§ 1381(b)(1)(C); thus, the question becomes whether the partial withdrawal credit falls

8

under subsection (b)(1)(B).

9

withdrawal,” that the Fund adjust the employer’s liability “in accordance with section

10

1386 of this title.” Here, even though the Fund was calculating Quad’s 2010 complete

11

withdrawal, the entire matter was nevertheless a “case of partial withdrawal” because

12

Quad partially withdrew from the Fund in 2009. In other words, the word “case”

13

refers not just to the particular assessment being calculated (as Quad contends), but

14

more broadly to any situation where a withdrawal assessment is affected by the

15

existence of a partial withdrawal. Thus, under § 1381(b)(1)(B), the Court must apply

16

all adjustments found in § 1386. There are two adjustments found in § 1386: the

17

formula for determining partial withdrawal liability under subsection (a), and the

18

partial withdrawal credit in subsection (b). Because the Fund was calculating Quad’s

19

2011 complete withdrawal, subsection (a) was inapplicable. However, because the

20

Fund assessed liability for a partial withdrawal in 2009, Quad was entitled to the

21

partial withdrawal credit from subsection (b). As a result, the Fund correctly applied

22

this credit under § 1381(b)(1)(B) before applying the 20-year payment cap under

23

§ 1381(b)(1)(C).

That subsection requires, “in the case of a partial

24

Quad argues that the partial withdrawal credit does not fall under

25

§ 1381(b)(1)(B) because this does not concern a “case” of partial withdrawal—rather,

26

it concerns a “case” of complete withdrawal to which one applies the partial

27

withdrawal credit. The Court finds this unconvincing for multiple reasons. First, the

28

partial withdrawal credit applies to withdrawal liability assessed in subsequent years

16

1

regardless whether the withdrawal in those subsequent years is partial or complete.

2

§ 1386(b)(1). Under Quad’s reasoning, however, § 1381(b)(1)(B) would refer to the

3

partial withdrawal credit if the subsequent years were a partial withdrawal—but not if

4

they were complete withdrawals. This makes no sense. Quad gives no reason why

5

the sequence in which the partial withdrawal credit is applied should differ based on

6

whether the withdrawal in the subsequent year is partial or complete.

7

Second, § 1381(b)(1)(B) broadly refers to adjustments to be made “in

8

accordance with section 1386 of this title”; thus, by its very terms, it is not limited to

9

adjustments only under certain subsections of § 1386. If Congress intended such a

10

limitation, it could clearly have provided for such. Indeed, the very next subsection of

11

the same statute (i.e., § 1381(b)(1)(C)) specifically identifies the particular subsection

12

of the statute to which it is referring (i.e., § 1399(c)(1)(B)), thus making clear that

13

Congress’ failure to do so under § 1381(b)(1)(B) was not simply an oversight. See

14

Russello v. United States, 464 U.S. 16, 23 (1983) (“[W]here Congress includes

15

particular language in one section of a statute but omits it in another section of the

16

same Act, it is generally presumed that Congress acts intentionally and purposely in

17

the disparate inclusion or exclusion.” (citations and internal quotation marks

18

omitted)). Alternatively, Congress could have placed the partial withdrawal credit in

19

another section of the statute entirely, which again would have made clear that

20

§ 1381(b)(1)(B) does not refer to the partial withdrawal credit.

21

Third, the congruity in the language between § 1381(b)(1)(B) and § 1386(b)(1)

22

convinces the Court that Congress affirmatively intended for the former to refer to the

23

latter. Section 1381(b)(1)(B) applies “in the case of a partial withdrawal.” Section

24

1386(b)(1), in turn, states that the partial withdrawal credit applies “[i]n the case of an

25

employer that has withdrawal liability for a partial withdrawal from a plan.” This

26

similarity in language substantially undermines Quad’s argument that the phrase “case

27

of partial withdrawal” in § 1381(b)(1)(B) refers only to the specific withdrawal

28

assessment being calculated rather than to any situation where a partial withdrawal

17

1

may impact the assessment being calculated.

2

Fourth, § 1381(b)(1) quite clearly lays out an all-inclusive sequence of

3

adjustments to apply in determining withdrawal liability. In fact, an argument could

4

be made that § 1381(b)(1) is not just a roadmap for calculating withdrawal liability,

5

but actually defines “withdrawal liability” for the purposes of that part of the MPPAA.

6

§ 1381(b)(1) (“The withdrawal liability of an employer to a plan is the amount

7

determined under section 1391 . . . adjusted [f]irst . . . next . . . then . . . finally . . . .”

8

(emphasis added)). Quad’s argument that the partial withdrawal credit is applied

9

outside this sequence of calculations cannot be reconciled with the all-encompassing

10

nature of § 1381(b)(1). Indeed, § 1381(b)(1)(D) describes the “first” and “final[]”

11

adjustments to be made to the § 1391 amount, yet those adjustments would clearly not

12

be the “first” and “final[]” adjustments if—as Quad contends—there is yet a further

13

adjustment to be made to account for the partial withdrawal credit.

14

Finally, the language of § 1399 also makes clear that the payment cap is applied

15

only after the partial withdrawal credit is applied. Under § 1399(c)(1)(B), withdrawal

16

liability is capped where the “amortization period described in subparagraph (A)

17

exceeds 20 years.” Subparagraph (A), in turn, requires the amortization of withdrawal

18

liability that has been calculated under “section 1391 of this title, adjusted if

19

appropriate first under section 1389 of this title and then under section 1386.” (This

20

sequence mirrors portions of the sequence set out in § 1381(b)(1).) And, again, there

21

is nothing in subparagraph (A) that limits the adjustments to be made under § 1386.

22

Thus, the withdrawal liability calculation in subparagraph (A) must include any partial

23

withdrawal credit.

24

withdrawal liability calculated under subparagraph (A), the cap necessarily comes

25

after the credit.

26

ii.

And because the 20-year payment cap applies only to the

PBGC Opinion Letter

27

Quad argues that the Court should defer to an opinion letter written by the

28

Pension Benefit Guaranty Corporation (PBGC) that concluded that the 20-year

18

1

payment cap should be applied before the partial withdrawal credit. In that letter, the

2

PBGC opined as follows:
Section [1386(b)(1)] itself makes clear that [the partial withdrawal credit]
is not an adjustment under Section [1381(b)(1)]. Section [1386(b)(1)]
states that “any withdrawal liability of that employer for a partial or
complete withdrawal from that plan in a subsequent year shall be
reduced.” [First], it is an adjustment to withdrawal liability, i.e. a further
adjustment to the Section [1381(b)(1)] amount. Second, it applies to
either a partial or complete withdrawal while Section [1381(b)(1)(B)]
applies only to a partial withdrawal. Thus, Section [1386(b)(1)] is not an
adjustment under Section [1381(b)(1)] at all . . . .

3
4
5
6
7
8
9
10

(AR at 626–27.)8

11

The PBGC is “the federal agency responsible for interpreting ERISA,” Penn

12

Cent. Corp., 75 F.3d at 534, and thus the Court owes deference to the PBGC’s

13

interpretation of ERISA and MPPAA if required under Chevron and Skidmore. See,

14

e.g., Pension Ben. Guar. Corp. v. LTV Corp., 496 U.S. 633, 648 (1990); Mead Corp.

15

v. Tilley, 490 U.S. 714, 722 (1989); Beck v. PACE Int’l Union, 551 U.S. 96, 104

16

(2007). Under Chevron, the Court applies a two-part test to determine whether to

17

defer to an agency’s construction of a statute. “First, applying the ordinary tools of

18

statutory construction, the court must determine ‘whether Congress has directly

19

spoken to the precise question at issue. If the intent of Congress is clear, that is the

20

end of the matter; for the court, as well as the agency, must give effect to the

21

unambiguously expressed intent of Congress.’” City of Arlington, Tex. v. F.C.C., 133

22

S. Ct. 1863, 1868 (2013) (citations omitted).

23

ambiguous with respect to the specific issue, the question for the court is whether the

“But ‘if the statute is silent or

24
25
26
27
28

8

PBGC staff reached the same conclusion in March 2016 during an informal question-andanswer session with representatives of the Enrolled Actuaries Program Committee. See Questions to
the
PBGC
and
Summary
of
Their
Responses
at
33,
http://www.pbgc.gov/documents/2016bluebook.pdf (last visited Apr. 16, 2017). However, the
PBGC cautioned that those conclusions “are merely the current views of the individual[ PBGC staff
members] and do not represent the positions of the Pension Benefit Guaranty Corporation or of any
other governmental agency and cannot be relied upon by any person for any purpose.” Id. at 2.

19

1

agency’s answer is based on a permissible construction of the statute.’” Id. (citations

2

omitted).

3

“Where Chevron is inapplicable, reasonable agency interpretations may still

4

carry ‘at least some added persuasive force.’” Price v. Stevedoring Servs. of Am., Inc.,

5

697 F.3d 820, 826 (9th Cir. 2012) (en banc) (quoting Metro. Stevedore Co. v. Rambo,

6

521 U.S. 121, 136 (1997)). Under Skidmore, “an agency’s interpretation may merit

7

some deference whatever its form, given the ‘specialized experience and broader

8

investigations and information’ available to the agency, and given the value of

9

uniformity in its administrative and judicial understandings of what a national law

10

requires.” Mead Corp., 533 U.S. at 234 (quoting Skidmore v. Swift & Co., 323 U.S.

11

134 (1944)). “Under this level of review, [the court] look[s] to the process the agency

12

used to arrive at its decision. Among the factors [the court] consider[s] are the

13

interpretation’s thoroughness, rational validity, consistency with prior and subsequent

14

pronouncements, the logic and expertness of an agency decision, the care used in

15

reaching the decision, as well as the formality of the process used.” Tablada v.

16

Thomas, 533 F.3d 800, 806 (9th Cir. 2008) (citations, internal quotation marks, and

17

brackets omitted).

18

The Court concludes that the PBGC’s opinion does not warrant Chevron-style

19

deference for two reasons. First, agency opinion letters do not warrant Chevron

20

deference.

21

(“Interpretations such as those in opinion letters . . . do not warrant Chevron-style

22

deference.”); CenTra, Inc. v. Cent. States, Se. And Sw. Areas Pension Fund, 578 F.3d

23

592, 601 (7th Cir. 2009) (holding that PBGC opinion letters are not entitled to

24

Chevron deference but may be entitled to Skidmore deference).9 Second, the Court in

25

any event concludes that there is no ambiguity under the MPPAA as to whether the

26

20-year payment cap should be applied before the partial withdrawal credit. While the

27
28

See, e.g., Christensen v. Harris Cty., 529 U.S. 576, 587 (2000)

9

To the extent the Ninth Circuit’s pre-Christensen cases hold otherwise, see, e.g., Penn Cent.
Corp., 75 F.3d at 534; H.C. Elliott, Inc. v. Carpenters Pension Trust Fund for N. Cal., 859 F.2d 808,
813 (9th Cir. 1988), they are no longer good law.

20

1

phrase “in the case of a partial withdrawal,” § 1381(b)(1)(B), could have been more

2

clearly worded, the remaining language and structure of this and other sections of the

3

MPPAA concerning the calculation of withdrawal liability leaves no doubt that the

4

partial withdrawal credit comes before the 20-year payment cap.

5

contrary conclusion cannot supersede unambiguous statutory language.

6

Arlington, 133 S. Ct. at 1868. Finally, the Court concludes that the opinion letter

7

carries little or no added persuasive force under Skidmore. The PBGC’s opinion does

8

not address the myriad arguments that cut strongly against its interpretation, and the

9

PBGC does not appear to rely on any specialized knowledge or expertise in reaching

10

its conclusion. Rather, the agency appears simply to interpret (in a very curt fashion)

11

the plain language of the statute—something that an Article III court is at least as well

12

equipped to do as the PBGC. For these reasons, the PBGC’s opinion letter does not

13

warrant a different outcome.

14

D.

The PBGC’s
City of

Issue 4: Attorneys’ Fees and Costs

15

Quad argues that the arbitrator erred in concluding that the Fund did not act in

16

bad faith during the arbitration process. Specifically, Quad argues that the Fund

17

improperly attempted to submit revised assessments that it knew was contrary to the

18

arbitrator’s findings and orders.

19

multiplied the proceedings by seeking a further evidentiary hearing on the sequencing

20

of adjustments, even though it had no new relevant evidence to present.

Quad also argues that the Fund unnecessarily

21

In an arbitration concerning withdrawal liability under ERISA, “[t]he arbitrator

22

may require a party that initiates or contests an arbitration in bad faith or engages in

23

dilatory, harassing, or other improper conduct during the course of the arbitration to

24

pay reasonable attorneys’ fees of other parties.”

25

previously noted, the decision whether to award discretionary attorneys’ fees is

26

reviewed for abuse of discretion. See Van Gerwen v. Guar. Mut. Life Co., 214 F.3d

27

1041, 1045 (9th Cir. 2000); McCabe v. Arave, 827 F.2d 634, 640 (9th Cir. 1987);

28

Loveridge, 567 F. App’x at 662 (applying abuse of discretion standard to the question

21

29 C.F.R. § 4221.10(c). As

1

whether or not a party acted in bad faith within the meaning of § 4221.10(c)). The

2

Ninth Circuit has held that the failure to explain the basis of a fee award constitutes an

3

abuse of discretion. See Stanger v. China Elec. Motor, Inc., 812 F.3d 734, 737 (9th

4

Cir. 2016); McCown v. City of Fontana, 565 F.3d 1097, 1102 (9th Cir. 2009) (the

5

district court “must explain how it arrived at its determination with sufficient

6

specificity to permit an appellate court to determine whether the district court abused

7

its discretion in the way the analysis was undertaken”); Chalmers v. City of Los

8

Angeles, 796 F.2d 1205, 1213 (9th Cir. 1986).

9

While the arbitrator’s decision here did not concern the method for calculating

10

an amount of attorneys’ fees, the Court nonetheless concludes that the question

11

whether a party acted in bad faith for the purposes of awarding attorneys’ fees involve

12

the same kind of fact-intensive inquiries that are best suited for determination by the

13

arbitrator in the first instance. See Trs. of Utah Carpenters’ & Cement Masons’

14

Pension Trust v. Loveridge, No. 2:10-CV-00809-DS, 2012 WL 2522596, at *8 (D.

15

Utah June 28, 2012) (“When an arbitrator engages in fact-intensive inquiry, such as

16

deciding whether a party has engaged in improper conduct, the Court refrains

17

overturning findings except for clear error, as the arbitrator ‘is by far best-situated to

18

assess these myriad [facts] and determine whether’ such an event occurred.” (citations

19

omitted)); Dague v. City of Burlington, 976 F.2d 801, 804 (2d Cir. 1991) (“[W]hen

20

questions are presented such as the amount of recovery, the extent to which a plaintiff

21

is a prevailing party, and what if any adjustment is to be given for delay in payment,

22

determination of a reasonable attorney’s fee under the fee-shifting statutes should

23

normally be decided by the district court in the first instance. . . . We allocate this task

24

to the district court because it is ‘intimately familiar with the nuances of the case, and

25

is in a far better position to make certain decisions than is an appellate court.’ An

26

appellate panel is simply not equipped to give proper consideration to the many-

27

faceted factual disputes that may affect a claim for attorney’s fees. The types of

28

evidence presented on an application such as the one in this case can normally be best

22

1

reviewed and analyzed by a district court judge.” (citations and internal quotation

2

marks omitted)). Moreover, it is impossible for this Court to meaningfully review the

3

arbitrator’s decision without any explanation as to how he arrived at that decision.

4

McCown, 565 F.3d at 1102; see Montour v. Hartford Life & Acc. Ins. Co., 588 F.3d

5

623, 637 (9th Cir. 2009) (“[F]ailure to explain [its conclusion] is yet another factor to

6

consider in reviewing the administrator’s decision for abuse of discretion.”). The

7

Court therefore concludes that the arbitrator abused his discretion by failing to explain

8

why the Fund’s conduct was not improper and did not constitute bad faith. Id.;

9

Stanger, 812 F.3d at 737.

On remand, the arbitrator should provide such an

10

explanation to permit adequate review by this Court.

11

E.

Issue 5: Unclean Hands

12

Finally, Quad asks this Court to affirm the arbitrator’s order denying the Fund’s

13

request to a delay issuing the final arbitration award based on Quad’s “unclean

14

hands.” The Fund does not respond to this argument, and thus concedes it. See, e.g.,

15

Scognamillo v. Credit Suisse First Boston LLC, No. C03-2061 TEH, 2005 WL

16

2045807, at *7 (N.D. Cal. Aug. 25, 2005), aff’d, 254 F. App’x 669 (9th Cir. 2007).

17

The Court therefore affirms the arbitrator’s ruling in this respect.

18

VI.

CONCLUSION

19

For the reasons discussed above, the Court concludes as follows:

20

(1)

21
22
23
24
25
26
27
28

The Court VACATES the arbitrator’s decision that Quad’s Versailles

facility withdrew from the Fund in 2011;
(2)

The Court DISMISSES AS MOOT the Fund’s challenge to the

arbitrator’s decision that the Fund assess only a 2011 complete withdrawal;
(3)

The Court AFFIRMS the arbitrator’s decision that the Fund correctly

applied that the partial withdrawal credit before the 20-year payment cap;
(4)

The Court VACATES the arbitrator’s decision that Quad was not

entitled to an award of attorneys’ fees and costs under 29 C.F.R. § 4221.10(c); and
(5)

The Court AFFIRMS the arbitrator’s decision not to delay issuance of

23

1
2

the final arbitration award based on Quad’s “unclean hands.”
(6)

Except as to the issues on which the Court has affirmed the arbitration

3

award, the Court REMANDS the case to the arbitrator for proceedings not

4

inconsistent with this opinion.

5

The Court further ORDERS the parties to submit a joint proposed judgment to

6

the Court no later than May 1, 2017. If the parties are unable to agree on the form of

7

a judgment, they each may submit a proposed judgment. In that event, objections to

8

the other party’s judgment shall be filed no later than May 4, 2017, and shall not

9

exceed five pages.

10
11

IT IS SO ORDERED.

12
13

April 19, 2017

14
15
16
17

____________________________________
OTIS D. WRIGHT, II
UNITED STATES DISTRICT JUDGE

18
19
20
21
22
23
24
25
26
27
28

24