EUSA-ALLIED ACQUISITION CORP. v. TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA & VICINITY et al
Filing
51
OPINION. Signed by Judge Jerome B. Simandle on 08/18/2011. (tf, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
EUSA-ALLIED ACQUISITION CORP.,
Plaintiff,
Civil Action
No. 11-3181 (JBS-AMD)
v.
TEAMSTERS PENSION TRUST FUND
OF PHILADELPHIA & VICINITY,
and LOCAL UNION 312
INTERNATIONAL BROTHERHOOD OF
TEAMSTERS,
OPINION
Defendants.
APPEARANCES:
James P. Anelli, Esq.
Joseph P. Paranac, Esq.
Robert M. Pettigrew, Esq.
LECLAIRRYAN
One Riverfront Boulevard
16th Floor
Newark, NJ 07102
Counsel for Plaintiff
Jo Bennett, Esq.
Frank C. Sabatino, Esq.
STEPHENS & LEE
1818 Market Street
29th Floor
Philadelphia, PA 19103
Counsel for Defendant Teamsters Pension Trust Fund of
Philadelphia & Vicinity
Susan A. Murray, Esq.
FREEDMAN & LORRY, PC
1601 Market Street
2nd Floor
Philadelphia, PA 19103
Counsel for Defendant Local Union 312, International
Brotherhood of Teamsters
SIMANDLE, District Judge:
I.
INTRODUCTION
This matter is before the Court on Plaintiff EUSA-Allied
Acquisition Corp.’s motion for a preliminary injunction.
Item 40.]
[Docket
Plaintiff seeks entry of a stay of interim payments
and arbitration being sought by Defendant Teamsters Pension Trust
Fund of Philadelphia and Vicinity (hereafter the “Fund”) under
the Multi-employer Pension Plan Amendments Act (MPPAA) at 29
U.S.C. §§ 1381-1453.
This motion comes after the Court denied
Plaintiff’s prior application for a temporary restraining order
in this matter on June 15, 2011. [Docket Items 22 & 23.]
The
parties have conducted expedited discovery, taken several
depositions, and briefed the issue thoroughly.
The Court again
heard oral argument on the motion at a hearing pursuant to Rule
65(a), Fed. R. Civ. P. on August 3, 2011, and subsequently
accepted supplemental briefing by the parties, as well as a
further telephonic hearing on August 17, 2011.
After considering
the factual material presented by the parties and the arguments
made in support of their positions, the Court concludes that
entry of preliminary relief is not warranted at this time because
Plaintiff has not demonstrated a likelihood of success on the
merits of its claims, nor of irreparable harm.
The following are the Court’s findings pursuant to Rule
52(a)(2), Fed. R. Civ. P.
2
II.
BACKGROUND
This matter arises within the heavily regulated area of
employee pension plans, which, since at least 1974, has been the
subject of comprehensive federal legislation in the form of the
Employee Retirement Income Security Act (ERISA) and its
subsequent amendment, the MPPAA.
These statutes established an
“intricate” dispute resolution scheme and provided only limited
avenues for judicial intervention and review.
I.A.M. Nat’l
Pension Fund, Plan A, A Benefits v. Clinton Engines Corp., 825
F.2d 415, 416 (D.C. Cir. 1987).
See generally Flying Tiger Line
v. Teamsters Pension Trust Fund of Philadelphia, 830 F.2d 1241,
1243-44 (3d Cir. 1987) (describing background and purposes of
ERISA and MPPAA).
The Court is, consequently, mindful of the
preferences expressed by Congress in this area when confronted
with a party seeking preliminary relief from the statutory
dispute resolution structure created by Congress.
Plaintiff EUSA-Allied began contributing to Defendant
Teamsters Pension Trust Fund in February of 2006, after signing
an agreement with Defendant Fund that recognized a “free look”
period under the Pension Trust Fund Plan (hereafter the “Plan”).1
During this free look period, Plaintiff would be free to cease
1
The factual background of this case was previously
recounted by the Court in its June 16, 2011 TRO Opinion. See
EUSA-Allied Acquisition Corp. v. Teamsters Pension Trust Fund of
Philadelphia & Vicinity, Civ. No. 11-3181, 2011 WL 2457695
(D.N.J. June 15, 2011). The Court incorporates the factual
background in that prior Opinion herein.
3
contributing to the Fund without incurring any withdrawal
liability under the MPPAA, a specific provision of ERISA
governing multi-employer pension plans such as Defendant
Teamsters Pension Trust Fund.
Specifically, the Agreement states
that EUSA-Allied would face “no potential for withdrawal
liability” to the Fund under the MPPAA so long as it contributed
to the Fund “for no more than five consecutive plan years.”
Anelli Cert Ex. G. at ¶ 2. Plaintiff claims to have understood
that agreement (and the language of the Trust Fund Pension Plan
on which it was based and which it references) to guarantee that
Plaintiff could withdraw from the Fund up to five calendar years,
as much as 60 months, after its initial contributions in February
of 2006.
Instead, when Plaintiff withdrew on December 31, 2010
(approximately four years and eleven months after beginning
contributions), Defendant Trust Fund concluded that Plaintiff’s
free look period had expired several months earlier and assessed
withdrawal liability of approximately $680,000.
Plaintiff
alleges that Defendants fraudulently misrepresented the period of
time in which Plaintiff could withdraw under the Agreement and
Pension Plan, and did so with the intent of inducing Plaintiff to
enter into a collective bargaining agreement with Defendant
Teamsters Union Local 312 and to begin making contributions to
the Pension Trust Fund.
4
The Court denied Plaintiff’s application for a temporary
restraining order in June for three reasons.
First, Plaintiff
had not made a showing of a likelihood of success on the merits
of its fraudulent inducement claim.
EUSA-Allied Acquisition
Corp. v. Teamsters Pension Trust Fund of Philadelphia & Vicinity,
Civ. No. 11-3181, 2011 WL 2457695 at *3-4 (D.N.J. June 15, 2011).
Second, the Court found that it lacked the authority to stay
interim withdrawal payments under the MPPAA, as the Third Circuit
has recognized no discretion or equitable exception to enter a
stay.
Id. at *5-6.
Third, the Court found that Plaintiff’s
showing of irreparable harm was not sufficiently immediate to
warrant temporary restraints, because the accelerated payment
schedule of default would not be triggered until, at the
earliest, August 17, 2011.2
Id. at *7.
In Plaintiff’s new application for a preliminary injunction,
Plaintiff renews its request to stay the MPPAA statutory
arbitration procedure and the payment of interim withdrawal
liability payments, and also asks the Court to take jurisdiction
of the dispute and schedule briefing for summary judgment motions
on the question of whether the Fund’s assessment of withdrawal
2
Subsequently, the prospect of immediate and irreparable
harm to Plaintiff from the acceleration of its alleged $680,000
withdrawal liability became more remote. On August 17, 2011,
counsel for the Fund informed Plaintiff and the Court that the
Fund cannot require accelerated payment while a demand for MPPAA
arbitration is pending, and that Plaintiff must instead make
quarterly interim payments of $54,000, the first of which has
been paid and the second of which is due in September.
5
liability is proper under the Free Look Agreement and the
statute.
Plaintiff argues that it has shown a likelihood of
success on the question of assessing withdrawal liability under
the Free Look Agreement, and a likelihood of success on the
fraudulent inducement claim as well, in addition to showing the
requisite immediate and irreparable harm it will suffer if not
granted the injunction.
Defendants both point out that this Court has already held
that it lacks the authority to stay the interim withdrawal
payments.
Additionally, Defendants state that the evidence put
forward by Plaintiff does not amount to a showing of likely
success on the fraudulent inducement claim.
As explained below,
the Court will deny Plaintiff’s application for preliminary
injunctive relief.
III. DISCUSSION
A.
Standard of Review
In order to obtain a preliminary injunction, the moving
party must establish that “(1) it has a likelihood of success on
the merits, (2) it will suffer irreparable harm if the injunction
is denied, (3) granting preliminary relief will not result in
even greater harm to the nonmoving party, and (4) the public
interest favors such relief.”
Rogers v. Corbett, 468 F.3d 188,
192 (3d Cir. 2006) (internal quotations and citations omitted).
“All four factors should favor preliminary relief before the
6
injunction will issue.”
S & R Corp. v. Jiffy Lube Intern., Inc.,
968 F.2d 371, 375 (3d Cir. 1992).
As the Court of Appeals has
recognized:
The
grant
of
injunctive
relief
is
an
extraordinary remedy which should be granted
only
in
limited
circumstances.
This
proposition is particularly apt in motions for
preliminary injunctions, when the motion comes
before the facts are developed to a full
extent through the normal course of discovery.
American Tel. and Tel. Co. v. Winback and Conserve Program, Inc.,
42 F.3d 1421, 1426-27 (3d Cir. 1994) (internal quotations and
citations omitted).
In the present action, to be granted the
preliminary injunction Plaintiff seeks, it must demonstrate
likelihood of success on the merits of both its claim that the
Court has authority to enter a stay of MPPAA interim withdrawal
payments and that the Court can take jurisdiction of the case
despite the MPPAA’s normal arbitration regime.
B.
Evidence Produced in Discovery
The parties have engaged in discovery that has produced more
information on, inter alia, how the Pension Fund has applied the
free look provisions of the plan in the past, how the Free Look
Agreement in this case was drafted, and what Plaintiff had been
told about when liability would be assessed prior to the
agreement to becoming a participating employer under the MPPAA in
February of 2006.
Plaintiff engaged in this discovery, after the Court’s
denial of its motion for a temporary restraining order, in an
7
effort to uncover evidence in support of its claim of fraudulent
inducement.
Plaintiff’s position remains that Defendants
misrepresented the length of time Plaintiff would be free to
withdraw without liability with the intent of inducing it to
become a contributing employer and enter into a collective
bargaining agreement with Defendant Local Union 312.
1.
December 2005 Meeting with Union 312 Officers
During the period of negotiation between EUSA and Allied
Propane (the company EUSA acquired in 2006), the issue of the
potential for withdrawal liability arose.
Allied Propane (the
“seller”) had, apparently, previously been a contributing
employer long enough that it would be obligated to pay withdrawal
liability if it were to cease contributions to the fund.
Thus,
at the time of the acquisition, the parties and the seller agreed
that the seller would have to pay its own withdrawal liability
prior to EUSA’s acquisition, and that EUSA would join as a new
contributor under the plan.
Cleaves Dep. at 32:17-20.
In December of 2005, Mark Cleaves, the CEO of EUSA and
Russell Lewis, the vice president of operations for EUSA, met
with representatives of the seller and representatives of
Teamsters Local 312, including Ted Uniatowski, who was then
business agent and president for Local 312.
55:15-56:4.
Cleaves Dep. at
At that meeting, EUSA expressed their concerns about
incurring withdrawal liability if they were to enter into a
collective bargaining agreement with Local 312 that obligated
8
them to contribute to the Pension Fund at all.
54:1-18.
Lewis Dep. at
Cleaves remembered one of the two union representatives
at that meeting reassuring him that under the free look provision
of the Pension Plan, EUSA would have five years to contribute to
the plan without having to pay any withdrawal liability.
Dep. at 78:8-13.
Cleaves
Cleaves understood this reassurance to mean
that EUSA could withdraw from the plan up to 60 months after
beginning contributions without any withdrawal, and claims to
have relied on that assurance by the union representative in
deciding to enter into the collective bargaining agreement at
that time.
Id.
He explained that he believed that the
representations on this point were representative of the
understanding held by the Fund as well.
Id. at 78:23-79:1 (“we
didn’t communicate directly with the Fund.
The Union said that
they are in constant communication with the Fund”).
Ted Uniatowski has no independent recollection of that
meeting, but testified that his general understanding of the
Pension Plan’s free look provision is that a contributing
employer is free to withdraw up to five full years after
contributing to the Plan without incurring any withdrawal
penalties or liability.
Uniatowski Dep. at 19:3-24.
He also
testified, however, that he had no authority to alter the terms
of the Plan.
Id. at 19:17-19.
Additionally, the Defendants
point out that the Pension Plan itself has a disclaimer addressed
9
to employee participants immediately following the table of
contents in the Plan that states:
To
All
Participants:
The
only
person
authorized to advise you of your rights under
this Pension Plan is William Einhorn, the
administrator, or his designee. If you rely
upon the advice of anyone other than these
individuals, you do so at your own risk.
Pension Trust Fund Plan at (i), attached as Ex. H to Plaintiff’s
Brief in Support of Preliminary Injunction.
2.
William Einhorn and the Free Look Agreement
The Pension Fund’s Administrator is William Einhorn, who has
been in that position for more than a decade.
He was
Administrator when the Pension Fund, in 1999, amended the Plan’s
free look provision to change the language of the provision from
a six-year free look provision to a five-year provision.
Dep. at 32:3-12.
Einhorn
He testified that the Plan changed the time
period to track recent changes in the MPPAA, which required that
the maximum employee vesting period be shortened from a ten-year
period to a five-year period.
Id. at 32:15-17.
He further
testified that his understanding in 1999, which has remained
constant since, is that the free look provision, like the rest of
the Plan document, is intended only as a succinct statement of
the obligations imposed by the MPPAA itself, and that when
interpreting the Plan, he relies primarily on the statutory
language.
Id. at 63:1-8.
He said he understood the language of
the five-year free look provision to be a fair representation of
the MPPAA statutory language regarding free looks, which is
10
codified at 29 U.S.C. § 1390.
Id. at 72:5-75:14. When confronted
with any discrepancies between the Plan document and the statute,
however, he stated that he believes that the statute controls,
citing to Article V Section M of the Plan, which states that
It is the intent of the trustees to have the
terms and provisions of the pension plan
conform in all respects with the provisions of
the Employee Retirement Income Security Act of
1974, as amended, 29 U.S.C., Section 1001 et
seq., the regulations promulgated thereunder,
and other applicable provisions of federal
law. In the event that any provision of the
pension plan as set forth herein does not
comply with these laws, that provision is
hereby amended to bring it into compliance.
Einhorn Dep. at 74:15-75:3.
In addition, the Free Look provision
of the Plan also cross references the specific section of the
MPPAA that governs the free look provision, ERISA § 4210,
codified at 29 U.S.C. § 1390.
Einhorn testified that at all times relevant, his
understanding of the meaning of the Plan’s free look provision
and the Free Look Agreement both conveyed the meaning that the
free look period ended prior to the time when an employee could
vest in the Fund, even if that resulted in the free look period
expiring in less than five years.
Einhorn Dep. at 100:20-101:5.
When presented with the argument that the language of the free
look provision of the Plan, and the Free Look Agreement that he
signed, can be interpreted to mean that contributing employers
had, at a minimum, five years in which to withdraw from the Plan
without incurring any withdrawal liability, he stated that, to
11
the extent that the language in the Free Look Agreement and Plan
could be interpreted that way, they had to be interpreted
alongside § 1390, which states that the free look extends only to
“the number of years required for vesting under the plan.”
at 98:15-24.
Id.
Einhorn stated that his only concern in signing the
Free Look Agreement was that the Agreement reference the Plan
itself and that the language of the Agreement track the language
of the Plan document.
Id. at 53:15-21.
Thus, when asked why he
did not seek to amend the Plan’s free look provision to make it
track the statutory language more closely, he stated that he did
not “believe it was necessary” because the Plan already
incorporated the statute.
Id. at 102:8-23.
Einhorn testified that EUSA is the first contributing
employer he has encountered as Administrator to the Plan that has
claimed the right to a free-look withdrawal in the fifth year of
contributions.
Id. at 38:2-12.
Other plans that have withdrawn
within the free-look period did so before entering the fifth
year.
For example, in 2009, a different employer, Twin Oaks of
Pennsylvania LLC, withdrew from the Fund after nearly four years
of contributions (August 2005 to April 2009) without incurring
withdrawal liability because, according to Einhorn, it was still
covered by the free look provision of the Plan and statute.
at 21:3-25:13.
12
Id.
3.
Drafting and Signing the Free Look Agreement
Einhorn testified that the Free Look Agreement was drafted
by EUSA’s attorney, Jeffrey Van Doren.
Id. at 51:20-52:2.
He
testified that Van Doren never inquired into Einhorn’s
interpretation of the free look provision of the Plan, and that
he did not volunteer it because he did not know it was necessary;
he felt that he was negotiating with a sophisticated party
adequately represented by counsel.
Id. at 103:16-20.
Van Doren
presented the Free Look Agreement to Einhorn and asked Einhorn to
confirm certain details of the agreement, such as to confirm that
none of EUSA’s subsidiaries had ever been contributors to the
Fund before.
Id. at 52:12-15.
Einhorn testified that he
believed that EUSA wanted the (to his mind) superflous agreement
merely as an extra precaution (“belt and suspenders”).
52:5-6.
Id. at
The Court interprets this testimony to mean that Einhorn
did not believe the Agreement was an attempt to change the
substantive terms of the Plan or to contract around the
withdrawal liability obligations of MPPAA.
Einhorn also testified that three months after the deal
closed and the Free Look Agreement was originally signed in
February of 2006, Van Doren contacted Einhorn again asking him to
sign a new version of the Free Look Agreement because Van Doren
had discovered that the original version of the agreement
referred to the wrong portion of the Plan.
After proofreading
the revised version (and offering a minor correction to ensure it
13
tracked the language of the Plan, by noting that Van Doren had
omitted the word “more” in the agreement text), Einhorn again
signed the revised agreement in May of 2006.
Einhorn Decl. Ex.
1, 2006 e-mail chain.
4.
Collective Bargaining Agreement
Additionally, discovery also revealed that EUSA’s original
Collective Bargaining Agreement with Local Union 312, signed in
early 2006, obligated EUSA to contribute to the Fund for only two
years.
Lewis Dep. at 56:18-23.
In early 2008, the CBA was
renegotiated again and extended for another three years
(extending until December 31, 2010), without any discussions that
any party can recall governing the Free Look Agreement.
Id. at
57:10-13.
C.
Analysis
1.
Likelihood of Success of Fraudulent Inducement
Claim
Plaintiff is requesting that the Court take jurisdiction of
the dispute rather than require the parties to exhaust the normal
MPPAA statutory arbitration prior to exercising judicial review.3
The Third Circuit has recognized only limited claims that would
3
29 U.S.C. § 1401(a) governs the resolution of disputes
under the MPPAA: “(1) Any dispute between an employer and the
plan sponsor of a multiemployer plan concerning a determination
made under sections 1381 through 1399 of this title shall be
resolved through arbitration.” Plaintiff appears to dispute the
Plan Administrator’s determination of withdrawal liability under
§§ 1381 and 1390 under the MPPAA. Such a dispute is thus subject
to MPPAA arbitration unless, as Plaintiff claims here, the Fund
fraudulently induced the employer to enter into the Plan.
14
permit the Court to set aside the arbitration provision of the
MPPAA and take jurisdiction initially.
In Carl Colteryahn, the
Third Circuit stated that fraudulent inducement was one such
claim that permitted a district court to hear the dispute prior
to arbitration.
Carl Colteryahn Dairy, Inc. v. Western
Pennsylvania Teamsters & Employers Pension Fund, 847 F.2d 113,
115 (3d Cir. 1988).
However, as discussed in greater detail
below, the Third Circuit has elsewhere stated that general
contract or statutory disputes are not necessarily entitled to
circumvent the statutory arbitration process of 29 U.S.C. §
1401(a).
Flying Tiger Line v. Teamsters Pension Trust Fund of
Philadelphia & Vicinity, 830 F.2d 1241, 1255 (3d Cir. 1987).
Thus, to prevail in its preliminary injunction, EUSA must
demonstrate a likelihood of success of its fraudulent inducement
claim.
In the Court’s June 15, 2011 Opinion denying Plaintiff’s
request for a TRO, it held that to demonstrate a likelihood of
success on the merits of a fraudulent inducement claim, Plaintiff
would have to demonstrate an ability to prove
(1) a misrepresentation, (2) a fraudulent
utterance thereof, (3) an intention by the
maker that the recipient will thereby be
induced to act, (4) justifiable reliance by
the recipient upon the misrepresentation, and
(5) damage to the recipient as the proximate
result.
15
Carl Colteryahn Dairy, Inc. v. Western Pennsylvania Teamsters &
Employers Pension Fund, 1993 WL 120457 at * 2 (W.D. Pa. Feb. 9,
1993).
Plaintiff has not satisfied this burden here.
Plaintiff
argues that courts in this District have recognized that, in
addition to affirmative misrepresentations, fraudulent inducement
can be demonstrated when “defendants knowingly omitted material
facts in the execution of the [relevant contract].”
The Mall at
IV Group Properties, LLC v. Roberts, Civ. No. 02-4692, 2005 WL
3338369 at *8 (D.N.J. Dec. 8, 2005).
Thus, Plaintiff argues,
fraudulent inducement can be demonstrated in this case through
(1) the Union representatives’ statements regarding their
understanding of the free look provision of the Plan in December
of 2005; (2) the affirmative “misrepresentation” of the free look
provision of the Plan which states that there was no possibility
for liability prior to five years after Plaintiff’s signing the
Free Look Agreement, and also (3) through Einhorn’s “knowing
omission” of his contrary interpretation of the free look
provision that the free look period ends at the time that an
employee has vested in the Fund and his “knowing omission” of his
intent to impose liability prior to the full five years.
The Court concludes that Plaintiff has failed to demonstrate
a likelihood of success on its fraudulent inducement claim.
The
Court finds that the statements of the Union representatives in
2005 were not misrepresentations by the Fund, as the statements
16
of the Local Union representatives are not attributable to the
Fund.
See Pension Plan Disclaimer at (i); Schneider Moving &
Storage Co. v. Robbins, 466 U.S. 364, 372-74 (1984) (holding that
multiemployer plans are not bound by arbitration provisions
negotiated between unions and employers).
Thus, the statements
cannot be deemed a fraudulent inducement by Defendant Trust Fund
because they are not attributable to the Fund, and they cannot be
fraudulent inducement by Defendant Local Union 312 because there
is no evidence of intent to mislead or justifiable reliance by
Plaintiff in the statement.
Secondly, the Court finds that the free look provision of
the Plan, which was drafted years prior to EUSA’s negotiations in
2006, is not a fraudulent misrepresentation for several reasons.
First, there is no evidence that the trustees believed that the
Plan language was a misstatement of the employer’s rights with
regard to the period in which an employer could withdraw.
Second, there is no evidence that they intended the Plaintiff to
take any act on the basis of the statement.
Third, there would
be no justifiable reliance on the part of EUSA on the specific
wording of the Plan alone, as it explicitly references the more
restrictive language of the statute, which is therefore
incorporated into the Plan.
Indeed, even if Plaintiff were to
prevail on its argument that the Plan’s “five year” language
explicitly conflicted with the shorter period of vesting language
included in § 1390, there would still be no justifiable reliance
17
on the part of EUSA in relying on the Plan over the Statute, as
the parties could not have modified the withdrawal liability
under the MPPAA by private agreement, even if the Plan were to
explicitly state that it did so.
See Concrete Pipe & Products of
California, Inc. v. Construction Laborers Pension Trust for
Southern California, 508 U.S. 602, 641-42 (1993) (enforcing the
MPPAA’s assessment and arbitration provisions even though
employer attempted to limit liability through private
agreements); Connolly v. Pension Benefit Guaranty Corp., 475 U.S.
211, 225-24 (1986) (“Contracts, however express, cannot fetter
the constitutional authority of Congress . . . . Parties cannot
remove their transactions from the reach of dominant
constitutional power by making contracts about them.”).
The same analysis applies to the alleged “omission” by
Einhorn in the course of his signing the Free Look Agreement.
Plaintiff argues that Einhorn’s intent to impose withdrawal
liability prior to the full five years stated in the Agreement
was a material fact that Einhorn withheld from Plaintiff during
the negotiation of the Free Look Agreement.
this argument for several reasons.
The Court rejects
First, the Court finds no
evidence in the record that Einhorn had made a determination
about the precise point that the free look period would end when
he signed the Agreement in 2006.
Thus, any “omission” of this
interpretation of the plan and the MPPAA could not have been
intentional.
Second, the uncontradicted testimony demonstrates
18
that, to the extent that Einhorn had an intent in this area, it
was only to interpret the statute itself.
The statutory
interpretation of one party to a contract negotiation is not a
factual representation or omission.
Third, the Court finds that
even if Einhorn’s failure to offer unsolicited advice on how he
would interpret the free look provision of the plan could
constitute an “omission” in this case, there is no evidence that
he intended to induce any action on the part of EUSA through his
“omission.”
Fourth, Plaintiff has not shown that it would not
have entered into the obligations under the Plan if it had known
that the free look period was limited by statute to four years
plus 750 hours of eligible employment rather than five years.
Finally, even if Plaintiff could demonstrate an intent by
Defendant Fund to induce such action that Plaintiff would not
otherwise have taken, any reliance by EUSA on the omission of
this interpretation would not be justifiable reliance, as it was
represented by counsel and the Plan and Agreement explicitly
reference the specific section of the MPPAA at issue.
Therefore, the Court must conclude that Plaintiff has not
demonstrated a likelihood of success on the merits of its
fraudulent inducement claim and therefore cannot enter a
preliminary injunction staying the statutory arbitration
procedures set out in the MPPAA.
19
2.
Authority to Enter Stay of Interim Payments Under
Galgay v. Beaverbrook Coal Co.
Plaintiff requests that the Court take jurisdiction of the
case and stay the payment of interim withdrawal payments, the
first of which, the parties represented to the Court at a
telephone status conference, was paid on August 17, 2011, in an
amount of $54,000.
This Court previously held that, pursuant to
Galgay v. Beaverbrook Coal Company, 105 F.3d 137, 140 (3d Cir.
1997), the Court has no authority under the MPPAA to enter a stay
of interim liability payments.
at *4-7.
See EUSA-Allied, 2011 WL 2457695
The Court incorporates its analysis and conclusions
regarding the staying of interim payments into this Opinion.
In the new briefing, Plaintiff repeats the arguments made in
its application for a temporary restraining order, that Plaintiff
is entitled to a stay of payment under the exception to mandatory
interim withdrawal liability payments recognized in the Fifth and
Seventh Circuits.
See Trustees of Plumbers and Pipefitters
National Pension Fund v. Mar-Len, Inc., 30 F.3d 621, 626 (5th
Cir.1994); Trustees of the Chicago Truck Drivers Pension Fund v.
Rentar Industries, Inc., 951 F.2d 152, 155 (7th Cir. 1991).
The Plaintiff makes no new arguments regarding why this
exception, never before recognized in this Circuit, should apply
here, despite the Court having rejected it in its Opinion denying
the TRO request.
Judge Linares recently recognized the same
limitations upon the Court’s power to stay interim withdrawal
liability payments in Teamsters Local 945 Pension Fund v. Omni
20
Waste Svcs., Inc., Civ. No. 11-3077, 2011 WL 3329550 at *4
(D.N.J. Aug. 1, 2011) (“absent a contrary directive from the
Court of Appeals for the Third Circuit, the Court declines to
apply an equitable exception to the statutory provisions on
interim payments.”).
Plaintiff simply claims that Defendant
Trust Fund’s insistence on assessing withdrawal liability in
accordance with the statute, despite the “clear and unambiguous”
language of the Free Look Agreement and Pension Plan document, is
frivolous.
Thus, the Court sees no reason to reconsider its
determination that the Third Circuit recognizes no equitable
exceptions to the mandatory interim payments under the statute.
Additionally, even were it to apply the Fifth and Seventh
Circuit’s exception, the Court has already determined that it
interprets the “frivolous” exception to be limited to cases where
the fund seeks to impose liability in explicit conflict with the
provisions of the MPPAA itself and that Defendant Trust Fund’s
arguments for withdrawal liability are not frivolous.
Plaintiff
makes no argument that assessing withdrawal liability in this
situation is in conflict with the terms of the MPPAA or that the
Court’s analysis of the issue was incorrect in its June 16, 2011
Opinion.
Thus, the Court again finds that Plaintiff has not
shown a likelihood of success on the issue of whether the Court
can stay the payment of the interim withdrawal liability payments
during the resolution of this case.
21
3.
Mandatory Arbitration of Withdrawal Liability
Dispute
Absent Plaintiff’s claim of fraudulent inducement, the Court
finds that Plaintiff’s remaining contract disputes and suit for
declaratory injunction must be submitted to the mandatory
arbitration process of 29 U.S.C. § 1401.
Plaintiff cites to
Dorn’s Transportation Inc. v. Teamsters Pension Trust Fund, 787
F.2d 897, 901 (3d Cir. 1986) for the proposition that a dispute
that concerns only a question of statutory interpretation is not
one properly to be subjected to arbitration.
See also Flying
Tiger Line v. Teamsters Pension Trust Fund of Philadelphia, 830
F.2d 1241, 1253 (3d Cir. 1987).
Thus, in the narrow case where
withdrawal liability turns only on the interpretation of a
provision of the MPPAA and involves no disputed material facts or
factual development, the district court should waive the
statutory arbitration requirement.
In Plaintiff’s supplemental
submission, Plaintiff further argues that the dispute primarily
turns on the threshold issue of contractual interpretation rather
than statutory interpretation.
Defendants argue that, with regard to the question of
whether liability is properly assessed in this case under the
free look provision of the Plan and under 29 U.S.C. § 1390, the
narrow exception recognized in Dorn’s and Flying Tiger does not
apply here because there are factual questions necessary to be
developed.
For example, Defendant Fund suggests that there is a
factual dispute over whether and how many employees of EUSA22
Allied actually did vest in the Fund in the period between
February 6, 2006 and December 31, 2010, which (according to their
interpretation of the statute) would determine whether or not
withdrawal liability is properly assessed.
Plaintiffs counter that they do not contest the possibility
that some small number of employees could have vested in that
time, but merely dispute the Fund’s statutory interpretation of
the running of the free look period under 29 U.S.C. § 1390 and
the contractual question of whether the Plan and the Free Look
Agreement obligated Plaintiff to pay any withdrawal liability at
all prior to the expiration of five years.
The Court finds that Plaintiff has not demonstrated a
likelihood of success on this issue.
Any interpretation of the
Free Look Agreement necessarily involves an interpretation of the
referenced portions of the Plan and Statute.
Thus, there is no
threshold issue of contractual interpretation, as Plaintiff
argues.
Secondly, while the primary dispute between the parties
at this point may still be whether withdrawal liability was
properly assessed under the statute, this question is intertwined
with the factual questions of whether any employees did in fact
vest before Plaintiff’s withdrawal, and whether the withdrawal
liability was accurately computed.
As the principal concern of
the MPPAA is to protect multiemployer pension plans like
Defendant Fund from being saddled with paying unfunded vested
benefits to plan participants, see SUPERVALU, Inc. v. Bd. of
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Trustees of Sw. Pa. & W. Md. Area Teamsters & Employers Pension
Fund, 500 F.3d 334, 336 (3d Cir. 2007), the development of facts
such as these are relevant to the dispute.
This outcome recognizes the strong policy in favor of
statutory arbitration expressed in the statute and recognized in
caselaw in this Circuit.
See Flying Tiger, 830 F.2d at 1255
(“Distinctions between questions of fact and law are, after all,
often rather tenuous, and MPPAA’s language and purposes convince
us that any doubt concerning fact/law differentiation as a means
of determining whether arbitration is appropriate should be
resolved in favor of arbitration”).
Consequently, the Court will
not enter a preliminary injunction staying the mandatory
arbitration procedure under 29 U.S.C. 1401 if Plaintiff contests
the withdrawal liability assessed by the Fund.
4.
Irreparable harm
Plaintiff has argued that it faces the possibility,
supported by its financial records, that the imposition of
interim withdrawal payment schedule set forth by the Fund could
potentially cause Plaintiff to fail as a business.
However, in a
telephone status conference in this matter on August 17, 2011,
Plaintiff’s counsel reported to the Court that Plaintiff had paid
the initial interim liability payment earlier that day, and yet
Plaintiff has not yet gone out of business.
Thus, the Court
concludes that the harm potentially faced by Plaintiff through
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the payment of interim liability payments is not, at this time,
irreparable.
Further, counsel for the Fund conceded in the course of the
August 17 status conference, that the Fund cannot accelerate the
withdrawal penalty once MPPAA arbitration has been sought, as in
this case.
Accordingly, Plaintiff faces the prospect of making
only quarterly interim payments of $54,000, rather than an
accelerated lump sum penalty of $680,000, while the arbitration
is ongoing.
Plaintiff appears to have the financial ability to
meet this interim obligation without grave risk of harm.
Despite this conclusion, the possibility of Plaintiff’s
business failing, even if remote, would be detrimental to all
parties concerned, including Local 312's members who would lose
their jobs if Plaintiff were to go out of business.
This is
certainly not a consequence taken lightly by the Court.
Notwithstanding the Court’s concern for and sympathy with
Plaintiff’s situation, however, the Plaintiff’s apparent ability
to make its initial interim withdrawal payment raises doubts
about the immediacy of the harm and whether any such harm would
truly be irreparable.
The Court concludes that Plaintiff has not demonstrated the
likelihood of irreparable harm if this injunction is denied.
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IV.
CONCLUSION
Because Plaintiff has not demonstrated a likelihood of
success on the merits of its fraudulent inducement claim, and has
not provided the Court with any new basis to stay the mandatory
interim withdrawal liability payments, and because Plaintiff has
not demonstrated the likelihood of irreparable harm, the Court
must deny Plaintiff’s application for a preliminary injunction.
The accompanying Order shall be entered.
August 18, 2011
Date
s/ Jerome B. Simandle
JEROME B. SIMANDLE
U.S. District Judge
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