EUSA-ALLIED ACQUISITION CORP. v. TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA & VICINITY et al
Filing
73
MEMORANDUM OPINION. Signed by Chief Judge Jerome B. Simandle on 7/29/2013. (tf, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
EUSA-ALLIED AQUISITION CORP.,
Plaintiff,
HON. JEROME B. SIMANDLE
Civil No. 11-3181 (JBS/AMD)
v.
MEMORANDUM OPINION
TEAMSTERS PENSION TRUST FUND
OF PHILADELPHIA & VICINITY, et
al.,
Defendants.
SIMANDLE, Chief Judge:
Before the Court is a motion to vacate an arbitration award
brought by Defendant Teamsters Pension Trust Fund of Philadelphia
& Vicinity (“the Fund” or “Defendant”). [Docket Item 65.] The
dispute concerns the meaning of the phrase “the number of years
required for vesting under the plan” in the Multiemployer Pension
Plan Amendment Act (“MPPAA”), 29 U.S.C. §§ 1390(a)(2). In this
case, an arbitrator ruled that the Fund, a jointly administered
multiemployer defined benefit pension plan, could not demand a
withdrawal penalty from Plaintiff EUSA-Allied Acquisition Corp.
(“EUSA”) under the MPPAA when EUSA withdrew from the Fund after
four years and 11 months of making contributions. The “free-look”
provision of the MPPAA permits employers to withdraw from a
pension plan without liability if withdrawal is made before “the
number of years required for vesting under the plan,” or six
consecutive plan years, whichever comes first.1 In this case, the
arbitrator found that “the number of years required for vesting”
meant “a specific number of consecutive 12 month periods,” and
because the Teamsters Pension Plan of Philadelphia & Vicinity
(“the Plan”) requires five years of vesting service, EUSA was
protected by the “free-look” provision of the MPPAA, as it only
had contributed to the Plan for four years and 11 months -- less
than the five years of service required for vesting. (Award &
Opinion [Docket Item 65-2] at 9-10.)
Defendant argues that the arbitrator erred as a matter of
law, and moves for the Court to “rescind the assessment, and
grant the Fund the appropriate remedies under MPPAA.” (Def. Mot.
Br. at 2.) For the reasons explained below, the Court agrees with
the reasoning set forth in the arbitrator’s award and will deny
Defendant’s motion to vacate the arbitrator’s award.
1. The Court has recited the facts of the underlying dispute
in three previous opinions, which are incorporated here by
1
29 U.S.C. § 1390(a)(2). The MPPAA, which amended the
Employment Retirement Income Security Act (“ERISA”), 29 U.S.C. §
1001, et seq., provides:
An employer who withdraws from a plan in complete or
partial withdrawal is not liable to the plan if the
employer . . . had an obligation to contribute to the
plan for no more than the lesser of -- (A) 6 consecutive
plan years preceding the date on which the employer
withdraws, or (B) the number of years required for
vesting under the plan[.]
29 U.S.C. § 1390(a)(2).
2
reference. See EUSA-Allied Acquisition Corp. v. Teamsters Pension
Trust Fund of Philadelphia & Vicinity, No. 11-3181, 2011 WL
2457695, at *1-*2 (D.N.J. June 16, 2011); EUSA-Allied Acquisition
Corp. v. Teamsters Pension Trust Fund of Philadelphia & Vicinity,
2011 WL 3651315, at *1-*2 (D.N.J. Aug. 18, 2011); EUSA-Allied
Acquisition Corp. v. Teamsters Pension Trust Fund of Philadelphia
& Vicinity, 2012 WL 1033012, at *1-*3 (D.N.J. Mar. 26, 2012).2
2. The facts relevant to this motion are not in dispute.
Pursuant to a collective bargaining agreement, EUSA had an
obligation to contribute to the Fund from February 8, 2006, to
December 31, 2010, a period of approximately four years and 11
months. (Def. Mot. Br. at 3.) According to the Plan, to be
eligible for a pension benefit, the employee “must be ‘vested’ -that is, you must either retire from Covered Employment after
attaining Normal Retirement Age or satisfy the Plan’s minimum
service requirement of five (5) years of Vesting Service . . . .”
(Summary Plan Description (“SPD”) [Docket Item 65-3] at 10 §
III.) A participant employee earns “a year of Vesting Service” if
he or she is “credited with at least 750 Hours of Service” during
“a calendar year.” (Id. at 14 § IV(A)(2).) On August 7, 2006,
several months after EUSA began contributing to the Fund, EUSA
hired Karl Williams, who earned enough hours of credited service
to become fully vested in Fund benefits by June 1, 2010, after
2
These opinions appear as Docket Items 22, 51 & 60.
3
just three years and 10 months of employment and before EUSA
withdrew from the Plan.3 (Def. Mot. Br. at 3-5.)
3. The Fund assessed EUSA a withdrawal penalty of
$679,325.13, after EUSA stopped contributing to the Fund in 2010.
EUSA brought this action to prevent the Fund from collecting the
penalty. The case was referred to arbitration. The arbitrator
Norman Brand, in San Francisco, Calif., defined the issue before
him as follows:
Does the [phrase] ‘the number of years required for
vesting under the plan’ mean the number of years of
Vesting Service required for an employee to be entitled
to a non-forfeitable benefit, or the actual period of
time in which any employee of the employer accrues
sufficient credited hours to become entitled to a nonforfeitable benefit?
(Award & Opinion at 2.)
4. The arbitrator ruled that “[t]he plain language of the
statute” supports a reading that “the number of years required
for vesting” means “a specific number of consecutive 12 month
periods” -- in this case, the number of years of required vesting
service or five years. (Id. at 4-6, 9.) He advanced four
rationales. First, citing Black’s Law Dictionary, he stated that
“the ordinary unmodified meaning of ‘year’ is a 12 consecutive
month period.” (Id.) Noting the language variations in §
1390(a)(2)(A) (“6 consecutive plan years”) and subsection
3
Williams earned 836.88 hours of credited service in 2006,
1,216 hours in 2007, 1,607.04 hours in 2008, 2,034.96 hours in
2009, and 1,929.84 hours in 2010. (Def. Mot. Br. at 5.)
4
(a)(2)(B) (“the number of years required for vesting”) (emphasis
added), the arbitrator found that although the two phrases have
distinct meanings -- a “plan year” means either a “calendar,
policy, or fiscal year,” under 29 C.F.R. § 4001.2 -- “those
meanings share a common element: the 12 consecutive month
period.” (Id. at 7.) Second, the arbitrator cited Department of
Labor regulations, which permit a plan to “designate any 12consecutive-month period as the vesting computation period.” (Id.
at 7-8) (citing 29 C.F.R. § 2530.203-2(a)). Because the Plan
requires five years of vesting service and uses calendar years as
its vesting period, the “‘number of years required for vesting’
refers to the number of 12 month periods the Fund uses to
determine when benefits are nonforfeitable.” (Id. at 8.) Third,
the arbitrator reasoned that the Fund’s position “implicitly
relies on substituting new language -- the period of time
required for vesting under the plan -- for the statutory language
‘the number of years required for vesting under the plan.’” (Id.)
(emphasis in original). The Fund’s interpretation “would create a
Free Look period that is unknowable at the time an employer
becomes obligated to contribute” because it would be
determined by future needs of workers, individual hire
dates, and individual availability to work. If Congress
had wanted to make the exception contingent on the date
any employee earned enough credited hours to qualify for
non-forfeitable benefits it could have done so. But it
did not. Instead, it chose to measure the length of the
Free Look exception by ‘the number of years required for
vesting.’
5
(Id.) Finally, the arbitrator rejected the Fund’s argument that
“number of years” was ambiguous. “Giving the phrase its ordinary
meaning leaves no ambiguity to be resolved so as to protect the
participants and beneficiaries.” (Id. at 9) The arbitrator added
that if there were ambiguity, “it is not clear that protecting
participants is the same as simply deciding for the Fund whenever
it argues it is entitled to withdrawal liability.” (Id. at 9
n.8.) The arbitrator’s reading of the statute “construes the
exception” to withdrawal liability “narrowly,” limiting “the
meaning of ‘the number of years required for vesting’ to the
number of years specified in the Plan.” (Id.) The arbitrator
ruled that the Fund is “not entitled to demand withdrawal
liability form [sic] EUSA. It is required to return the
withdrawal liability payments EUSA had made, together with
statutory interest.” (Id. at 10.)
5. A district court reviews an arbitrator’s legal
conclusions de novo. See SUPERVALU, Inc. v. Bd. of Trustees of
Sw. Pa. & W. Md. Area Teamsters & Employers Pension Fund, 500
F.3d 334, 340 (3d Cir. 2007) (“An arbitrator’s findings of fact
are subject to clear error review, but his or her legal
conclusions are subject to de novo review.”). The Court of
Appeals thus recognized that an arbitrator’s conclusion as to
withdrawal liability is a legal conclusion subject to de novo
review. Id. For the reasons set forth in the arbitrator’s award
6
and opinion, and those set forth below, the Court will deny
Defendant’s motion to vacate.
6. Defendant argues that the text of statute favors its
interpretation. According to Defendant, because Mr. Williams
actually vested in three years and 10 months of employment, “the
number of years required for vesting” can be no greater than the
amount of time that was required for Mr. Williams to vest, and
EUSA is therefore liable because its obligation to contribute to
the Fund exceeded that period of time by a year and a month.
(Def. Mot. Br. at 8-9.) Defendant further argues that the
different formulations in the statute -- “6 consecutive plan
years” versus “number of years required for vesting” -- evince a
distinction drawn by Congress. (Id. at 9-10.) Defendant concludes
that “while ‘plan years’ in Subsection (a)(2)(A) means 12-month
periods, ‘years’ in Subsection (a)(2)(B) must include fractions
of years.” (Id. at 10.) Plaintiff responds that the plain
meaning, as determined by the arbitrator, of a “twelve-month
consecutive period,” is the ordinary meaning of the word “year.”
(Pl. Opp’n at 11.)4
7. The plain meaning of the word “year” in Subsection
4
In a letter to the Court in further support of its motion,
the Fund suggests that if Congress had meant the “number” of
years to mean whole numbers, it would have stated so, or used the
word “integer.” (Def. Letter [Docket Item 71] at 2-3.] The Court
considers the additional arguments made in Defendant’s letter
about statutory construction, but they do not alter the
conclusions reached herein.
7
(a)(2)(B) is a 12-month period. Likewise, the plain meaning of
“number of years” is the number of 12-month periods. If Congress
had meant something else, Congress could have drafted the
subsection to read “the amount of time sufficient to enable an
employee to vest,” or Congress could have prohibited employers
from withdrawing without liability after an employee, whose
service commenced after the employer began contributing to the
fund, actually vested under the Plan. As the arbitrator noted,
Congress did not draft the statute this way. The number of years
required “for vesting under the Plan” is and has always been
five, even for Mr. Williams, whose service spanned five calendar
years. The fact that the Plan here permits employees to earn a
year’s worth of vesting service in less than a year should not
affect the statute or its interpretation, nor does it change the
requirements of the Plan.
8. Section 1390(a)(2)(A) expressly refers to the Plan itself
(“years required for vesting under the plan”) (emphasis added).
The Plan requires employees to accrue sufficient hours of vesting
service within five calendar years. The plan does not “require”
employees to achieve vesting service in less time, although it so
permits. The Plan makes no references to fractions of years, no
references to three years and 10 months; it only references the
number five when discussing the number of years required for
vesting.
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9. Defendant would prefer that Congress had written: “the
number of plan years required for vesting under the plan” or “the
whole number of calendar years,” or “the number of years
expressed as an integer,” or “the minimum window of time,
expressed as a fraction of calendar years, within which an
employee may accrue a sufficient number of hours of vesting
service to fully vest under the plan.” These formulations might
be more precise, but the excess verbiage is hardly necessary to
convey the meaning already expressed when according the words
their ordinary meaning. The Court agrees with the arbitrator’s
sensible explanation to distinguish the language of the two
subsections of the provision as having two meanings, even if they
both require the word “year” to carry its ordinary meaning of 12
months.
10. Defendant argues that the arbitrator misreads the
Department of Labor regulations and conflates the concepts of a
“computation period,” which the Plan defines as the calendar year
during which an employee can earn a year of vesting service, and
a “year of vesting service” itself. (Def. Mot. Br. at 11-13.)
Defendant suggests that the regulations draw a “sharp
distinction” between a computation period and a year of vesting
service, and that “[n]othing in these regulations supports the
Arbitrator’s finding that ‘the number of years required for
vesting under the plan’ amounts to 5 periods of 12 months each.”
9
(Id. at 13.) Plaintiff responds that the arbitrator was correct
to harmonize the definitions of vesting compensation periods,
“years of service,” and “years required for vesting.” (Pl. Opp’n
at 12).
11. These regulations do not help Defendant. The regulations
do distinguish between a computation period and a year of vesting
service, which can be achieved in less than a calendar year. But
the regulations do not change the fact that number of years of
service required for vesting is five. If the computation period
for vesting service is a 12-month period, and employees are
required to achieve the requisite hours of service in five
computation periods, the most logical reading of the “number of
years required for vesting under the plan” is five years, which,
given the computation period of 12 months, is a total of 60
months.
12. Defendant further argues that its interpretation of the
statute would not lead to an “unknowable” free-look period, as
the arbitrator stated, because “the employer could readily
determine the timeframe for the free look by simply reading the
Pension and the applicable collective bargaining agreement.”
(Def. Mot. Br. at 13-14.) This argument is not responsive to the
arbitrator’s point, which aptly observes that Defendant’s
interpretation of the statutory language renders unpredictable
exactly when the employer could withdraw without incurring
10
liability. To argue, as Defendant does, that the employer could
simply identify the number of hours sufficient to be credited
with a year of service is to ignore the fact that the employer
has no way to predict when such vesting service could, or would,
be achieved.
13. It is telling that Defendant cannot say with certainty
what the “number of years required for vesting” is under its
interpretation of the statute. Although Mr. Williams fully vested
within a span of three years and 10 months, he worked 836.88
hours in 2006 and 1,929.84 hours in 2010. To earn a year of
vesting service he need only have worked 750 hours in each of
those years. Therefore, Mr. Williams likely achieved the 750 hour
threshold in less than three years and 10 months. But even now,
Defendant cannot say how long it took for Mr. Williams to vest,
and other workers could have vested in even less time. It is
unlikely Congress intended to create this confusion and
uncertainty by using the language it did.
14. Defendant next argues that the arbitrator improperly
conducted this analysis in the first place. Defendant contends
that “the plain language of the statute trumps the Arbitrator’s
views about the possible consequences of complying with that
statute.” (Def. Mot. Br. at 15.) Having concluded that
Defendant’s interpretation conflicts with the plain language of
the statute, Defendant’s argument loses its force. But even if
11
the language were ambiguous, Courts frequently look at the
purpose or legislative history of a statute to confirm or rule
out an interpretation of the text. See, e.g., Univ. of Texas Sw.
Med. Ctr. v. Nassar, 133 S. Ct. 2517, 2532 (2013) (“That result
would be inconsistent with both the text and purpose of Title
VII.”); Muscarello v. United States, 524 U.S. 125, 132 (1998)
(“We conclude that neither the statute’s basic purpose nor its
legislative history support” the position advocated by the
appellant). Here, the purpose of the MPPAA was “to encourage new
employers to join” multiemployer funds “by providing various
incentives, including the ‘free look’ provision and the rule
limiting any new employer’s liability for unfunded vested
benefits to those obligations created after the enactment of the
MPPAA.” Textile Workers Pension Fund v. Standard Dye & Finishing
Co., Inc., 725 F.2d 843, 856-57 (2d Cir. 1984). The legislative
history of the MPPAA shows that the act “was designed to foster
plan continuation and growth because [such] provide participants
and beneficiaries [with the] greatest security against benefit
loss.” Id. at 856 (citing H.R. Rep. No. 869, 96th Cong., 2d Sess.
51, reprinted in 1980 U.S. Code Cong. & Ad. News at 2919).
Defining with predictability conduct that would incur liability
is consistent with the purpose of encouraging employers to
participate in funds. At the same time, forcing employers to pay
penalties to help ensure funding of vested employees is
12
consistent with the scheme of the MPPAA and ERISA as a whole, as
well. The Court’s reading of the text certainly can be said to be
consistent with the purposes of the Act, and it is not improper
to consider whether a strained reading of the text would yield an
absurd or impractical result. See Molzof v. United States, 502
U.S. 301, 309 (1992) (“The Government’s interpretation of
‘punitive damages’ would be difficult and impractical to
apply.”).
15. Defendant invokes two canons of statutory construction
which it says must be applied here. First, Defendant argues the
Court must construe the MPPAA liberally in order to protect plan
participants and beneficiaries. (Def. Mot. Br. at 17.) Second,
Defendant argues that the Court should construe the free-look
defense narrowly as an exception to the general statutory scheme
established by the MPPAA. (Id. at 20.) Canons of construction are
of limited use in a case such as this, where the language of the
statute is clear, where giving the words their ordinary meaning
aligns with the purpose of the statutory scheme, and where the
proffered alternative interpretation relies on a strained reading
of the text and would lead to impractical results. See J.E.
Faltin Motor Transp., Inc. v. Eazor Exp., Inc., 273 F.2d 444, 445
n.6 (3d Cir. 1959) (citing Karl N. Llewellyn, Remarks On the
Theory of Appellate Decision & The Rules or Canons About How
Statutes Are to Be Construed, 3 VAND. L. REV. 395, 401-404 (1950),
13
which highlights the “thrust” and “parry” of contradictory canons
of construction).
16. Finally, the arbitrator’s award is consistent with the
Fund’s own interpretation of the period for an employer’s “free
look” and withdrawal. According to Article IX, Section G, of the
Plan, as amended and restated as of January 1, 2005, “an employer
who withdraws from the Plan in a complete or partial withdrawal
is not liable to the Plan if the employer . . . (b) had an
obligation to contribute to the Plan for no more than five
consecutive plan years preceding the date on which the employer
withdraws . . . .” (Certification of James P. Anelli, Esq., Ex.
A. [Docket Item 69-1] at 47) (emphasis added). This reading was
confirmed in a “Free Look Agreement” between EUSA and the Fund in
February 2006:
EUSA shall be treated as a new Covered Employer under the
Pension Plan for all purposes including, without
limitation, Article IX, Section G of the Pension Plan,
which provides new Covered Employers with an opportunity
or ‘free look’ under the Pension Plan to contribute to
the Plan for no more than five consecutive plan years
with no potential for withdrawal liability.
(Id. Ex G ¶ 2) (emphasis added). The governing free-look
provision was adopted by the board of trustees for the Fund in
1999, at which time William Einhorn, the Fund’s current
administrator, explained that a five-year free look provision was
necessary in light of the Congressionally mandated five-year
vesting schedule, which became effective on January 1, 1999. (Id.
14
Ex. E. ¶ 12; see also Einhorn Decl. 31:19-32:20 (recounting the
amendments of the free-look and vesting periods to five years).)
These references to five years -- not fractions of years, not the
amount of time required to accumulate sufficient vesting service
-- confirm the Court’s textual analysis of the statute and the
conclusion that the language refer to five 12-month periods.
17. Plaintiff seeks an award of attorneys’ fees under 29
U.S.C. § 1132(g)(1), as did Defendant in filing this motion to
vacate the arbitration award. The Court does not decide whether
Defendant is entitled to recover attorneys’ fees, but the Court
sets a briefing schedule for Plaintiff to file its motion within
fourteen (14) days of the entry of the accompanying Order.
18. Defendant’s motion to vacate is denied. An accompanying
Order will be entered.
July 29, 2013
Date
s/ Jerome B. Simandle
JEROME B. SIMANDLE
Chief U.S. District Judge
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