Central States Southeast and Southwest Areas Pension Fund et al v. National Concrete Products Company

Filing 36

MEMORANDUM Opinion and Order. Signed by the Honorable Manish S. Shah on 8/16/2016: Central States's motion for summary judgment, 16 , is granted. Central States has leave to file affidavits and a proposed order establishing the judgment amounts by 9/6/16. Notices mailed by Judicial Staff. (psm, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CENTRAL STATES, SOUTHEAST AND
SOUTHWEST AREAS PENSION FUND
and ARTHUR H. BUNTE, JR., as Trustee,
Plaintiffs,

No. 15 CV 3739
Judge Manish S. Shah

v.
NATIONAL CONCRETE PRODUCTS
COMPANY,
Defendant.

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

collect payment while that arbitration is pending, and they now move for summary
judgment. For the following reasons, the motion is granted.
I.

Legal Standards
Summary judgment is appropriate if the movant shows that there is no

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

Facts
As required by a collective bargaining agreement, defendant National

Concrete Products Company made pension contributions on behalf of some of its
employees to plaintiff Central States Southeast and Southwest Areas Pension
Fund, a multiemployer pension plan. [26] ¶ 6.1 National Concrete started making
these contributions in 1971, but its contributions declined by at least 70% by the
end of 2011. [26] ¶¶ 6–7. Around September 19, 2014, Central States notified
Bracketed numbers refer to entries on the district court docket. The facts are largely
taken from National Concrete’s response to Central States’s LR 56.1 statement, [26].
1

2

National Concrete that the contribution decline constituted a “partial withdrawal”
from the plan, subjecting National Concrete to partial withdrawal liability in the
amount of $2,589,136.36. [26] ¶¶ 7–9. It also demanded payment in full by October
1, 2014, or in monthly installments of $18,486.21, beginning on that day and
continuing until September 1, 2034. [26] ¶ 9. When National Concrete failed to meet
the October 1 payment deadline, Central States sent another notice of its payment
obligations. [26] ¶ 10. As of the filing of this motion, National Concrete had not
made any of its partial withdrawal liability payments. [26] ¶ 14. But on January 19,
2016, the day on which National Concrete filed its response brief, it made a
payment in the amount of $18,486.21.2 [29] ¶ 2; [34-1] ¶ 3.
Around November 2, 2014, National Concrete ceased operations, ending its
contribution obligation entirely—a “complete withdrawal” from the pension plan.3
[26] ¶ 15; [34] at 4. On January 15, 2015, Central States notified National Concrete
that its complete withdrawal subjected it to an additional $1,874,717.93 in
withdrawal liability. [26] ¶¶ 16–17; see also [28] at 2. The notice also demanded full
and immediate payment of that amount by February 1, 2015. Id. National Concrete
has not made any payments related to its complete withdrawal liability. [26] ¶ 21.
In its sur-reply, National Concrete attaches an affidavit attesting to a second payment,
dated February 11, 2016, in the same amount, but Central States has not had an
opportunity to acknowledge that payment. [34-1] ¶ 4.
2

In the parties’ LR 56.1 statements, they agree that National Concrete “permanently
ceased to have an obligation to contribute to Central States or permanently ceased all
covered operations,” parroting the conditions of a complete withdrawal listed in 29 U.S.C.
§ 1383(a). [26] ¶ 15. In its reply brief, Central States asserts that National Concrete ceased
all operations—not just those operations covered under the pension plan—and attaches a
letter in support. [27] at 3, 7; [27-2] at 2. Because Central States failed to include this in its
LR 56.1 statement of facts, National Concrete was granted leave to file a sur-reply, in
which it did not dispute that the company shut down completely. See [34] at 4.

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3

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

Analysis
When employers stop participating in, or substantially reduce their

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

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To collect withdrawal liability from an employer, a plan must first calculate
the amount of the liability and an appropriate payment schedule, and send the
employer a notice and demand for payment. 29 U.S.C. §§ 1382, 1399(b)(1), 1399(c);
Cent. States, Se. & Sw. Areas Pension Fund v. Bomar Nat., Inc., 253 F.3d 1011,
1015 (7th Cir. 2001). “The employer may seek review of these calculations and then
challenge the plan’s determination in arbitration, but it must pay even while the
review and arbitration are pending.” Cent. States Se. & Sw. Areas Pension Fund v.
O'Neill Bros. Transfer & Storage Co., 620 F.3d 766, 768 (7th Cir. 2010) (citing 29
U.S.C. §§ 1399(c)(2), 1401(d)). Of course, “if the employer prevails on its challenge,
it will get its money back.” Id. at 772. The imposition of those interim payments
creates a “pay now, dispute later” rule, which “serves the dual purpose of reducing
the risk that an employer will not pay and of encouraging speedy adjudication by
requiring immediate arbitration before the courts become involved in the merits of
the dispute.” Bomar, 253 F.3d at 1015.
“To further ensure the financial stability of the plan, . . . in the event of a
default, the pension plan may demand immediate payment of the outstanding
amount of withdrawal liability.” O'Neill, 620 F.3d at 768 (citing 29 U.S.C.
§ 1399(c)(5)). Consistent with the rest of the statutory scheme, if a plan sponsor
declares a default and makes such a demand, the entire amount of the withdrawal
payment is immediately payable, even if arbitration is pending. Id. at 775.

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A.

Partial Withdrawal Liability

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

Complete Withdrawal Liability

National Concrete does object to Central States’s demand that it pay the
$1,874,717.93 complete withdrawal liability assessment while the arbitration is
pending. It does not challenge in this action Central States’s assessment itself. That
dispute is properly before an arbitrator. See 29 U.S.C. § 1401(a)(1). And it does not
dispute that Central States provided timely notice of the withdrawal liability. It
also does not suggest that the “pay now, dispute later” scheme is limited to partial

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withdrawal

liability

assessments

but

not

complete

withdrawal

liability

assessments. Presumably, it would not oppose the imposition of an interim payment
schedule similar to the one Central States provided with respect to the partial
withdrawal liability assessment. It objects only to Central States’s finding of default
and its demand that National Concrete pay the complete withdrawal liability in
full.
A pension plan may declare an event of default and demand immediate
payment of the outstanding amount of an employer’s withdrawal liability in two
scenarios. Under § 1399(c)(5)(A), an event of default occurs if the employer misses a
payment deadline by over 60 days. But this applies only when the withdrawal
liability is not in dispute, either because arbitration has not been initiated or
because arbitration has concluded. O'Neill, 620 F.3d at 773. In other words, interim
payments that are scheduled while arbitration is pending “cannot serve as the basis
for a missed-payment default” under § 1399(c)(5)(A). Id. Under § 1399(c)(5)(B), an
event of default includes “any other event defined in rules adopted by the plan
which indicates a substantial likelihood that an employer will be unable to pay its
withdrawal liability.” Here, the plan rules, contained within a separate document,
describe several events that constitute default. See [27-1] App. E, § 5(e)(2). Among
them are (1) “the Employer’s failure or inability to pay its debts as they become
due;” (2) “the cessation of all or substantially all of an Employer’s operations;” (3)
“the existence of a delinquency in any amount owed to the Pension Fund including,
without limitation, the payment of contributions or prior withdrawal liability;” and

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(4) “any other event or circumstance which in the judgment of the Trustees
materially impairs the Employer’s credit worthiness or the Employer’s ability to pay
its withdrawal liability when due.” Id. “When these events occur, the plans may
accelerate the entire amount of withdrawal liability.” O'Neill, 620 F.3d at 771.
Central States claims it was justified in declaring default and demanding
payment in full based on each of the scenarios described above, although just one of
them will do. As of January 15, 2015, when Central States sent its notice and
demand for payment of the complete withdrawal liability, National Concrete had
ceased all of its operations and already failed to make its first four scheduled
payments towards its previously assessed partial withdrawal liability. National
Concrete’s shutdown and its four-month delinquency clearly fit the descriptions of
those events defined by the plan rules as events of default, and National Concrete
does not argue otherwise. National Concrete’s primary argument seems to be that
citing the examples of events of default provided in the plan rules is insufficient to
show that National Concrete is not creditworthy or unable to pay its complete
withdrawal liability. It notes that Central States has not examined National
Concrete’s

financial

statements,

deposed

any

employees

or

corporate

representatives, or submitted any evidence relating to its financial condition or
ability to meet its financial obligations. But under § 1399(c)(5)(B), Central States
does not need to show a certainty that National Concrete cannot pay its total
withdrawal liability. It need only show that a substantial likelihood exists, as
indicated by some occurrence identified in the plan rules. Here, the plan rules

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include three different examples of such an occurrence (not including the catch-all
example that relies on Central States’s judgment of National Concrete’s
creditworthiness), each of which resembles the current scenario. That is sufficient to
warrant finding that Central States properly declared default.
National Concrete makes a few other arguments against a judgment ordering
full payment. First, it argues that its failure to make interim payments towards its
partial withdrawal liability cannot be the basis of default under § 1399(c)(5)(B),
because the Seventh Circuit held in O’Neill that a missed interim payment cannot
be a basis of default under § 1399(c)(5)(A). See O’Neill, 620 F.3d at 773. This
argument fails, because National Concrete did not simply miss a payment—it failed
to make any payments for (at the time of the notice) over four months. It also shut
down its operations. Both actions serve as independent bases for declaring default
under § 1399(c)(5)(B) and the plan rules.
Next, National Concrete argues that cessation of operations cannot provide a
basis for default under § 1399(c)(5)(B), even if the plan rules explicitly say so,
because then default may be declared whenever complete withdrawal liability is
incurred under § 1383. It argues that this conflicts with another provision that
allows for a twenty-year-long payment plan. See 29 U.S.C. § 1399(c)(1)(B). But
National Concrete confuses the cessation of “covered operations,” which triggers
complete withdrawal liability under § 1383, with the complete cessation of
operations, which constitutes an event of default under the plan rules. The
cessation of covered operations signifies the end to an employer’s participation in

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the fund, but does not necessarily imply that the employer is now defunct or even
financially insecure. Shutting down the company’s operations entirely may
reasonably indicate a substantial likelihood that the employer will be unable to
meet its obligations. In such a scenario, demanding immediate payment in full is
the wiser course of action, for if a “fund is unable to collect quickly, it likely never
will collect.” O’Neill, 620 F.3d at 774.
Finally, National Concrete says that Central States is unjustified in declaring
default, because National Concrete has now made two interim payments and is
dutifully paying other creditors, as well. But these recent payments are insufficient
to defeat summary judgment. It is undisputed that, in addition to shutting down its
operations, National Concrete failed to make any payments for over fifteen months.
As a result of National Concrete’s conduct, the applicable statutes and the plan
rules allow Central States to declare default and demand immediate payment in
full. National Concrete made its first payment towards its partial withdrawal
liability on the same day that it filed its response brief to this motion, in an attempt
to showcase its creditworthiness and avoid the consequences of the “pay now,
dispute later” rule. Unfortunately, this attempt at repayment was too little, too late.
The declaration of default was justified by National Concrete’s earlier cessation of
all operations and failure to make payments.

10

Therefore, summary judgment is granted with respect to the complete
withdrawal liability.4 Central States has three weeks to submit affidavits and a
proposed judgment order to establish the amounts owed.5
IV.

Conclusion
Central States’s motion for summary judgment, [16], is granted. Central

States has leave to file affidavits and a proposed order establishing the judgment
amounts by 9/6/16.
ENTER:
___________________________
Manish S. Shah
United States District Judge

Date: 8/16/2016

Central States also argues that National Concrete’s affirmative defenses—that the
statutes establishing withdrawal liability violate the due process clause and the takings
clause of the Fifth Amendment—are meritless. National Concrete does not mention these
affirmative defenses in its response brief, so any opposing arguments are waived.
4

In its sur-reply, National Concrete misstates the amount of the complete withdrawal
liability assessment as $2,589,136.36. [34] at 1. This is likely a typographical error, but it is
worth clarifying. The complete withdrawal liability assessment, for which Central States
demanded payment in full, is $1,874,717.93. The partial withdrawal liability assessment is
$2,589,136.36, for which Central States initially requested payment either in full or in
monthly installments (but now seeks payment in monthly installments).
5

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