Laborers' Pension Fund et al v. W.R. Weis Company, Inc.
Filing
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MEMORANDUM Opinion and Order Signed by the Honorable Joan B. Gottschall on 10/30/2014. Mailed notice(ef, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
LABORERS’ PENSION FUND and
JAMES S. JORGENSEN, Administrator
of the Fund,
Plaintiffs,
v.
W.R. WEIS COMPANY, INC., STONE
SYSTEMS, INC., and MICHIGAN
CORP.,
Defendants.
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Case No. 13 C 6698
Judge Joan B. Gottschall
MEMORANDUM OPINION AND ORDER
Plaintiff Laborers’ Pension Fund and its administrator, James Jorgensen (collectively,
“the Fund”), filed this action under the Employee Retirement Income Security Act (“ERISA”),
as amended by the Multiemployer Pension Plan Amendment Acts of 1980 (“MPPAA”). The
Fund seeks to collect liability incurred when defendant W.R. Weis, Inc. (“Weis”) withdrew from
the Fund. The Fund’s motion for summary judgment is before the court. For the following
reasons, the motion is granted.
I. BACKGROUND
A.
Local Rule 56.1
Local Rule 56.1(a)(3) requires a party moving for summary judgment to submit “a
statement of material facts as to which the moving party contends there is no genuine issue and
that entitle the moving party to judgment as a matter of law.” Cracco v. Vitran Express, Inc.,
559 F.3d 625, 632 (7th Cir. 2009) (citing L.R. 56.1(a)(3)). Under Local Rule 56.1(b)(3), the
nonmoving party then must submit a “concise response” to each statement of fact, “including, in
the case of any disagreement, specific references to the affidavits, parts of the record, and other
supporting materials relied upon.” L.R. 56.1(b)(3)(B). The nonmoving party may also present a
separate statement of additional facts that requires the denial of summary judgment. See L.R.
56.1(b)(3)(C); see also Ciomber v. Cooperative Plus, Inc., 527 F.3d 635, 643-44 (7th Cir. 2008).
“When a responding party’s statement fails to dispute the facts set forth in the moving
party’s statement in the manner dictated by [Local Rule 56.1], those facts are deemed admitted
for purposes of the [summary judgment] motion.” Cracco, 559 F.3d at 632. Weis did not
response to the Fund’s Rule 56.1 statement. As the facts in the Fund’s statement are supported
by the record, they are deemed admitted. The court also notes that to the extent that any
additional facts in Weis’ response to the motion for summary judgment differ from facts in the
Fund’s 56.1 statement, it will not consider those facts as Weis did not submit them in the format
required by Local Rule 56.1. This does not affect the result, as Weis concedes that the material
facts as stated by the Fund are undisputed, and it appears that any discrepancies (such as dates)
are merely scrivener’s errors. With that said, the court turns to the facts.
B.
Facts
The Fund is a non-profit, multiemployer pension plan. Plaintiff James Jorgensen is the
Fund’s administrator. Weis was bound by a collective bargaining agreement with the Laborers’
International Union of North America, under which Weis was required to make contributions to
the Fund on behalf of certain of its employees. On or about September 20, 2012, Weis, through
its attorney, terminated its agreement with the Union, effective December 9, 2012. The Fund’s
Trustees determined that Weis effected a “complete withdrawal” from the Fund. See 29 U.S.C.
§ 1383(b). As a result of this withdrawal, Weis incurred withdrawal liability to the Fund. See 29
U.S.C. § 1381(b).
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The Fund sent Weis a letter dated December 18, 2012 (“Initial Notice and Demand”)
asserting that Weis owed withdrawal liability to the Fund and demanding payment. The Initial
Notice and Demand estimated that Weis owed $488,780.33 and advised Weis that it could pay in
a lump sum or in twelve quarterly installments of $43,620.25, with a final quarterly installment
of $19,387.33 and with the first installment due by January 25, 2013. Weis paid two withdrawal
liability installments of $43,620.25 to the Fund on January 25, 2013 and April 25, 2013.
In March 2013, Weis asked the Fund to review its withdrawal liability determination.
The Fund did so and concluded that Weis had withdrawn in the plan year ending May 31, 2010,
rather than the plan year ending May 31, 2013, as the Fund had originally thought. Thus, the
Fund sent Weis a letter dated August 9, 2013 (“Revised Notice and Demand”) with a revised
withdrawal liability determination. The Revised Notice and Demand stated that due to the
adjusted date of Weis’ withdrawal, Weis owed a total of $619,209 in withdrawal liability. The
Revised Notice and Demand also advised Weis that it could pay this amount by making a series
of quarterly installments of $85,780 plus a final installment of $39,456. In addition, it notified
Weis that its third withdrawal liability installment would be due on August 25, 2013, as opposed
to the previously scheduled due date of July 25, 2013.
The Revised Notice and Demand instructed Weis that, by August 25, 2013, it was
required to remit a total payment of $170,099.50. This amount was comprised of the revised
installment payments plus the difference between the two $43,620.25 installments that Weis
previously remitted and the revised installment amount of $85,780. The Revised Notice and
Demand contained the following payment schedule:
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Due Date
Payment Amount
8/25/13
$170,099.50 (representing the unremitted differences in the three
installments due 1/25 - 7/25/2013)
$85,780
$85,780
$85,780
$85,780
$39,456
10/25/13
1/25/14
4/25/14
7/25/14
10/25/14
(Dkt. 30-1, Revised Notice and Demand, at 2.) To date, the only withdrawal liability payments
that Weis has made are the two installments of $43,620.25 submitted in January 2013 and April
2013.
II. LEGAL STANDARD
Summary judgment is appropriate when the movant shows there is no genuine dispute as
to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56;
Smith v. Hope Sch., 560 F.3d 694, 699 (7th Cir. 2009). The court must construe all facts and
make all reasonable inferences in the light most favorable to the nonmoving party. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Summary judgment is appropriate when the
nonmoving party cannot establish an essential element of its case on which it will bear the
burden of proof at trial. Kidwell v. Eisenhauer, 679 F.3d 957, 964 (7th Cir. 2012).
III. ANALYSIS
The Fund asks the court to grant its motion for summary judgment and award damages as
follows: (1) the unpaid withdrawal liability it believes Weis owes; (2) liquidated damages in the
amount of 20% for each unremitted past due installment; (3) interest as detailed in the Fund’s
withdrawal liability procedures (Dkt. 30-1, Ex. 1); and (4) attorney’s fees and costs related to its
efforts to collect the delinquent payments. Weis disputes that it owes the Funds any money. An
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arbitration proceeding is pending regarding this issue, where Weis presumably hopes to obtain a
ruling that the Fund must repay the two installments Weis made pursuant to the first payment
schedule.
Despite the pending arbitration proceedings, “withdrawal liability is ordinarily payable
during the pendency of the arbitration.” Cent. States Se. and Sw. Areas Pension Fund v. O’Neill
Bros. Transfer & Storage Co., 620 F.3d 766, 772 (7th Cir. 2010). As the Seventh Circuit has
explained:
The statutory language requires that the employer pay even while challenging the
plan's determination; if the employer prevails on its challenge, it will get its
money back. Two statutory provisions speak to this procedure, sometimes
referred to as “pay now, dispute later.” Subsection 1399(c)(2), the provision of
the statute that discusses payment, states that:
Withdrawal liability shall be payable in accordance with the
schedule set forth ... notwithstanding any request for review or
appeal of determinations of the amount of such liability or of the
schedule.
29 U.S.C. § 1399(c)(2). Similarly, § 1401(d), which relates specifically to
arbitration, states that:
Payments shall be made by an employer in accordance with the
determinations made under this part until the arbitrator issues a
final decision . . . .
Id.1
Weis does not dispute that it is obligated to make interim installment payments pursuant
to the “pay now, dispute later” rule. Instead, it challenges the Fund’s decision to change the
1
Portions of the parties’ briefs include citations to ERISA, as opposed to the United
States Code. Section 4219 of ERISA, which is prominently featured in Weis’ response to the
motion for summary judgment, is the same as 29 U.S.C. § 1399. In the interests of consistency,
the court will cite to the United States Code.
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installment payment schedule after it made the first two payments pursuant to the original
schedule.
A.
Increased Payment Amount
First, Weis is dissatisfied with the increased payments, which went from $43,620.25 to
$85,780.00 per installment. Weis has not pointed to any authority suggesting that a prospective
increase in the amount of installment payments is outside the ambit of the “pay now, dispute
later” rule, which “make[s] clear that payment must begin immediately and is not suspended
during [a] challenge” to the payments via arbitration. See id.
Moreover, 29 U.S.C. § 1399(b)(2)(B) specifically contemplates changes in the amount of
liability that post-date the initial assessment of liability. That section provides that “[a]fter a
reasonable review of any matter raised, the plan sponsor shall notify the employer of – (i) the
plan sponsor’s decision, (ii) the basis for the decision, and (iii) the reason for any change in the
determination of the employer’s liability or schedule of liability payments.” Thus, the Fund was
authorized to reassess the amount of liability. See Nat’l Shopmen Pension Fund v. DISA Indus.,
Inc., 653 F.3d 573, 580 (7th Cir. 2011) (holding that “a fund must be able to revise an
assessment of withdrawal liability, within a reasonable period of time, if it discovers that it has
undercharged an employer”). Thus, Weis’ challenge to the fact that the Fund revisited its
determination regarding withdrawal liability and increased the amount of each installment
payment is unavailing.
B.
The Allegedly Retroactive Nature of the New Installment Plan
Next, approaching the increase from a different angle, Weis contends that the Fund may
not retroactively change the amount of the first two installment payments by increasing the
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amount due and then “falsely accus[ing Weis] of being in breach of the payment schedule when
it refused to pay a retroactive installment increase.” (Dkt. 33, Def. Resp., at 2.) According to
Weis, even if the increase in the installment payments is permissible, it may only be prospective
(i.e., the increase must post-date the Revised Notice and Demand, as opposed to applying to
already-made payments that pre-date the Revised Notice and Demand). In support, Weis directs
the court’s attention to 29 U.S.C. § 1399(c)(2), which provides that “[w]ithdrawal liability shall
be payable in accordance with the schedule set forth by the plan sponsor under subsection (b)(1)
of this section beginning no later than 60 days after the date of the demand notwithstanding any
request for review or appeal of determinations of the amount of such liability or of the
schedule.”2 According to Weis, this section does not address changes in the amount of liability
assessed by the Fund and thus precludes the Fund from changing the amount of liability.
The problem with this argument is that, as noted above, the Fund may change its
“determination of the employer’s liability or schedule of liability payments.” 29 U.S.C.
§ 1399(b)(2)(B); Nat’l Shopmen, 653 F.3d at 580. Thus, it is clear that the Fund may correct its
calculations if it believes it made an error. If Weis disagrees with those revised calculations, it
must pay and challenge the new calculations in arbitration under the “pay now, dispute later”
rule. See Nat’l Shopmen, 653 F.3d at 580.
Weis disagrees, asserting that the Fund impermissibly required it to make a “catch up”
payment (comprised of the difference between the newly assessed corrected payment amount
2
Subsection (b)(1) provides that “[a]s soon as practicable after an employer's complete
or partial withdrawal, the plan sponsor shall – (A) notify the employer of – (i) the amount of the
liability, and (ii) the schedule for liability payments, and (B) demand payment in accordance
with the schedule.” 29 U.S.C. § 1399(b)(1).
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minus the already-made lower payment amount) at the beginning of the schedule of the newlycalculated installment payments. The Fund defends the catch-up payment, pointing to the
payment calculation methodology in § 1399(c). See O’Neill, 620 F.3d at 768 (ERISA’s
installment payment “mechanism calculates the amount of liability to equal the employer’s
proportionate share of the plan’s unfunded vested benefits; the amount of each annual payment is
roughly equal to the withdrawing employer’s typical past contributions”). According to the
Fund, it was entitled to revise the payment schedule to bring Weis into compliance as quickly as
possible following its reassessment of Weis’ withdrawal liability.
Weis points to § 1399(c)(1)(C)(i), which provides that:
Except as provided in subparagraph (E) [which addresses partial withdrawals],
the amount of each annual payment shall be the product of –
(I) the average annual number of contribution base units for the
period of 3 consecutive plan years, during the period of 10
consecutive plan years ending before the plan year in which the
withdrawal occurs, in which the number of contribution base units
for which the employer had an obligation to contribute under the
plan is the highest, and
(II) the highest contribution rate at which the employer had an
obligation to contribute under the plan during the 10 plan years
ending with the plan year in which the withdrawal occurs . . . .
29 U.S.C. § 1399(c)(1)(C)(I).
Section 1399(c) further provides that:
(2) Withdrawal liability shall be payable in accordance with the schedule set forth
by the plan sponsor under subsection (b)(1) of this section beginning no later than
60 days after the date of the demand notwithstanding any request for review or
appeal of determinations of the amount of such liability or of the schedule.
(3) Each annual payment determined under paragraph (1)(C) shall be payable in 4
equal installments due quarterly, or at other intervals specified by plan rules. If a
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payment is not made when due, interest on the payment shall accrue from the due
date until the date on which the payment is made.
29 U.S.C. § 1399(2) & (3). These sections do not specifically authorize a catch-up payment like
the one at issue in this case. They do, however, suggest that as a general rule, installment
payments should be equal.
The court finds that the present dispute about the catch-up payment is ultimately one of
semantics. Weis characterizes the catch-up payment as improperly retrospective. In a sense, it
is, because it requires Weis to pay more in connection with the two already paid installments that
the Fund now believes were inadequate. However, the payments themselves are prospective, as
the first payment under the revised schedule was due two weeks after the notice of the revised
payment schedule and eight weeks after the Fund made its original demand for withdrawal
liability. See 29 U.S.C. § 1399(c)(2) (“Withdrawal liability shall be payable in accordance with
the schedule set forth by the plan sponsor . . . beginning no later than 60 days after the date of the
demand notwithstanding any request for review”).
Thus, in the end, Weis’ arguments boil down to its disagreement with the Fund’s
calculation of its withdrawal liability and the payment schedule imposed by the Fund. However,
“[a]ny dispute between an employer and a plan sponsor of a multiemployer plan concerning a
determination made under sections 1381 through 1399 of this title shall be resolved through
arbitration.” 29 U.S.C. § 1401(a)(1). Because, as discussed above, “[w]hether the Fund has
computed the withdrawal liability correctly is [a] question for the arbitrator,” Weis must pay
now “notwithstanding contentions that may prevail in the end.” Tr. of Chic. Truck Drivers,
Helpers and Warehouse Workers Union (Independent) Pension Fund v. Ctr. Transp., Inc., 935
F.2d 114, 118 (7th Cir. 1991).
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This is the case even when a plan issues a corrected payment plan that the employer
disputes since “a plan is entitled to correct what it believes to be errors in the calculation of
withdrawal liability and revise an assessment as long as the employer is not prejudiced.” See
National Shopmen, 653 F.3d at 580. An increase in the installment amount that an employer
challenges is not enough to show prejudice because the employer may challenge the increase in
arbitration. Id. As the Seventh Circuit has explained, when a plan decides its initial assessment
of liability was too low, “the employer is stuck with the higher bill in the interim, and that may
be a cost it would rather not bear. But as we have explained, there are good reasons for the
MPPAA’s ‘pay now, fight later’ rule, and Congress has decided to assign that cost to the
withdrawing employer.” Id.
Thus, the court finds that Weis’ sole argument in opposition to the Fund’s motion for
summary judgment – that the catch-up payment was impermissible – is unavailing as Weis must
present its challenges to the revised payment plan to an arbitrator. The rest of the Fund’s motion
for summary judgment is undisputed. As noted by the Fund, Weis stopped making all payments
once the Fund issued the revised installment plan. Weis has not presented any support for its
position that the present dispute absolves it from making any payments. In any event, any such
argument would fail under the “pay first, dispute later” rule. Accordingly, the Fund’s motion for
summary judgment as to liability is granted.
With respect to damages, the Fund states that if the court grants summary judgment in its
favor, it wishes to submit affidavits and a proposed judgment order in support of its calculations.
This request is granted. The parties shall confer and, by November 21, 2014, the Fund shall file
a motion to prove up its damages along with supporting documentation.
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IV. CONCLUSION
The Fund’s motion for summary judgment as to liability [29] is granted. With respect to
damages, the parties shall confer and, by November 21, 2014, the Fund shall file a motion to
prove up its damages along with supporting documentation. Weis may file a response by
December 10, 2014, and the Funds may file a reply by December 17, 2014. The court notes that
defendants Stone Systems, Inc. and Michigan Avenue Corp. were both served on March 31,
2014. They have not answered or appeared, and to date, the Fund has only pursued its claim
against Weis. The Fund has indicated that it intends to “seek[] control group liability” as to
these defendants but “there currently exist disputed issues of fact as to them.” (Dkt. 29, Pl.’s
Mot., p. 1 n.1.) This matter is set for status on November 13, 2014, at 9:30 a.m. in Courtroom
1858.
Date: October 30, 2014
/s/
Joan B. Gottschall
United States District Judge
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