NYSA-ILA Pension Trust Fund, by it Trustee, Joseph Curto v. American Stevedoring, Inc. et al

Filing 60

OPINION AND ORDER: The Court DENIES ASI's motion to compel the production of discovery (ECF No. 53) and GRANTS PTF's motion to compel withdrawal liability payments (ECF No. 17). The Clerk of Court is directed to terminate those motions. SO ORDERED.Motions terminated: 53 MOTION to Compel Plaintiffs to Produce. filed by American Stevedoring, Inc., 17 FIRST MOTION to Compel American Stevedoring, Inc. to to make interim withdrawal liability payments. filed by NYSA-ILA Pension Trust Fun d, by it Trustee, Gerald Owens, NYSA-ILA Pension Trust Fund, by it Trustee, William Messina, NYSA-ILA Pension Trust Fund, by it Trustee, Robert Milazzo, NYSA-ILA Pension Trust Fund, by it Trustee, Franki Grossi, NYSA-ILA Pension Trust Fund, by it Tru stee, Rainer Dehe, NYSA-ILA Pension Trust Fund, by it Trustee, Stephen Knott, NYSA-ILA Pension Trust Fund, by it Trustee, Thomas Aldridge, NYSA-ILA Pension Trust Fund, by it Trustee, Louis Pernice, NYSA-ILA Pension Trust Fund, by it Trustee, Michael Radak, NYSA-ILA Pension Trust Fund, by it Trustee, Robert E. Gleason, NYSA-ILA Pension Trust Fund, by it Trustee, Harold Daggett, NYSA-ILA Pension Trust Fund, by it Trustee, Joseph Curto, NYSA-ILA Pension Trust Fund, by it Trustee, Ian Cairns, NYSA-ILA Pension Trust Fund, by it Trustee, James Pelliccio. (Signed by Judge Paul A. Crotty on 3/26/2012) (ama)

USDC SDNY
DOCUMENT
ELECTRONICALLY FILE
DOC #: _________________
DATE FILED: March 26, 2013

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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NYSA-ILA PENSION TRUST FUND, by :
its Trustees, Joseph Curto, et al.,
:
Plaintiffs,
:
-against:
AMERICAN STEVEDORING, INC.,
et al.,
:
Defendants.

12 Civ. 2506 (PAC)
OPINION & ORDER

:

-------------------------------------------------------x
HONORABLE PAUL A. CROTTY, United States District Judge:
Plaintiff NYSA-ILA Pension Trust Fund (“PTF” or “Fund”) sues Defendant American
Stevedoring, Inc. (“ASI”) alleging that ASI ceased making Mandated Contributions under the
parties’ Collective Bargaining Agreement (“CBA”) to the PTF at year-end 2009. Plaintiff asserts
that ASI incurred withdrawal liability under the Multiemployer Pension Plan Amendments Act
of 1980 (“MPPAA”). ASI denies that it ceased making payments, denies that it received the
mandatory notices, maintains that there are other entities with respect to which there exists
common control with ASI; and that PTF has “unclean hands.”
Now before the Court are ASI’s requests to enforce its discovery demands. (ECF No.
53.)1 ASI seeks discovery in part to show that PTF deliberately used an incorrect address to
deprive ASI of the mandatory notice under the MPPAA’s default liability provisions. This is

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Defendant ASI is seeking to compel: (1) the documents requested during the depositions of Barbara North, the
Fund’s executive secretary, (2) documents requested during the deposition of Mr. Gaudioso, the Fund’s treasurer,
and (3) Plaintiff to supplement its document production in response to ASI’s document request and to provide
adequate answers to ASI’s interrogatory. These discovery requests deal with calculations of withdrawal liability,
which ASI has fully withdrawn from PTF, and ASI’s unclean hands defense.

said to be part of the Longshore union’s desire to drive ASI out of the New York harbor―in
other words, to cause the very withdrawal about which PTF now complains.
In response, PTF urges that ASI is not entitled to discovery because the information
sought is obtainable and useful exclusively in arbitration mandated by the MPPAA; but ASI has
waived its right to engage in arbitration by failing to timely respond to the statutory time
schedule mandated for arbitration. The Court denies ASI’s discovery motion. The matter in
which it seeks discovery is available only in arbitration mandated by the MPPAA.
In addition, PTF moves to compel interim withdrawal liability payments. (ECF. No. 17.)
The Court grants PTF’s motion and further finds that ASI is in default on its payments.
Therefore, PTF is entitled to accelerate the entire amount of withdrawal liability.
ERISA AND MPPAA
Congress enacted ERISA to “ensure that employees and their beneficiaries would not be
deprived of anticipated retirement benefits by the termination of pension plans before sufficient
funds have been accumulated in the plans.” Pension Ben. Guaranty Corp. v. R.A. Gray & Co.,
467 U.S. 717, 720 (1984). Congress also discerned that the failure of a pension plan would place
an undue burden on the Pension Benefit Guaranty Corp. because it would have “to assume
obligations in excess of its capacity.” Id. at 721. In protecting the PBGC, Congress found that it
was imposing the burden of withdrawal on the remaining employers. “As enacted, the MPPAA
requires that an employer withdrawing from a multiemployer pension plan pay a fixed and
certain debt to the pension plan. The withdrawal liability is the employer’s proportionate share
of the plan’s ‘unfunded vested benefit’ calculated as the difference between the present value of
vested benefits and the current value of the plan’s assets.” Id. at 725.

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Congress further provided that any disputes “between an employer and the plan sponsor
of a multiemployer plan concerning a determination made under Section 1381 through 1399 . . .
shall be resolved through arbitration.” 29 U.S.C. § 1401. It is indisputably correct that Congress
mandated arbitration with a tight time schedule to mitigate the expense and delay inherent in
litigation, where one party desires avoidance of a liability and the other desires its imposition.
As noted, Congress wanted to protect the employee and the beneficiary, impose the cost of that
protection on the appropriate party in the appropriate amount, and do so fairly, as expeditiously
as possible.
The plan sponsor first provides notice or demand for payment to the employer, and then
the employer has 90 days from receipt to require a review of the Plan’s determination. 29 U.S.C.
§ 1399. Thereafter, “either party may initiate the arbitration proceeding within a 60-day period
after the earlier of:
(A)
the date of notification to the employer under
Section 1399(b)(2)(B) of this title; or
(B)
120 days after the date of the employer’s request under
Section 1399(b)(2)(B) of this title.”
29 U.S.C. § 1401(a)(1)(A)(B). The issues which shall be subject to arbitration are specified in
29 U.S.C. §§ 1381-1399. They include:
(1)

questions of whether there has been a withdrawal are governed by 29 U.S.C.

§ 1383 (employer withdrawals); and § 1385 (partial withdrawals);
(2)

questions of what the withdrawal liability is and how it should be calculated are

addressed in 29 U.S.C. § 1381 (withdrawal liability established); § 1382 (determination and
collection of liability); and § 1391 (method of computing withdrawal liability); and

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(3)

sale of assets or changes in business form are addressed in 29 U.S.C. § 1384 (sale

of assets); and § 1398 (suspension during labor dispute).
The MPPAA mandates that these questions and others like them must be resolved
exclusively by arbitration. “We have made clear . . . that where there is any factual dispute . . .
barring extraordinary circumstances, arbitration of that dispute is required.” New York State
Teamsters Conference Pension & Ret. Fund v. McNicholas Transp. Co., 848 F.2d 20, 22 (2d Cir.
1988).
A. The Amount of Withdrawal Liability Must be Arbitrated
Methods for computing withdrawal liability are governed by 29 U.S.C. 1391, which is
one of the provisions that 29 U.S.C. 1401(a)(1) leaves to arbitrators for resolution (1381 through
1399). “‘[A]ny dispute’ concerning the notice or amount of withdrawal liability ‘shall be
resolved through arbitration.’” Bowers v. Transportacion Maritima Mexicana, S.A., 901 F.2d
258, 262 (2d Cir. 1990) (citing 29 U.S.C. 1401(a)). Here, any disputes concerning how NYSAILA calculated ASI’s withdrawal liability, and “whether plaintiff’s procedure in foreclosing upon
American’s alleged withdrawal liability was proper” must be resolved through arbitration. (D.
Br. 18.) To the extent that the affirmative defense that “[P]laintiff failed to comply with the
necessary judicial and statutory prerequisites for maintaining this action,” (D. Rep. 9), relates to
the sufficiency of Plaintiff’s notices, it too, must be arbitrated. Bowers, 901 F.2d at 262. Since
ASI’s defense that it has “made all requisite payments” is a challenge to the amount due, it must
be arbitrated. (D. Rep. 9.)
Defendants maintain that a 30-year-old decision from the D.C. District Court controls;
but ASI’s reliance on I.A.M. Nat’l Pension Fund Benefit Plan A v. Allied Corp., 97 F.R.D. 34
(D.D.C. 1983), is misplaced. If the employer waives its right to arbitration, it does not gain the

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right to litigate and to get expensive and delay-causing discovery. Further, I.A.M. conflicts with
the plain wording of MPPAA Section 1399(b)(1), which states that a failure to initiate arbitration
fixes the amount of withdrawal liability—there is no opportunity for a post-arbitration judicial
review—and the case has been questioned on that basis. E.g., Local 478 Trucking & Allied
Indus. Pension Fund v. Jayne, 778 F. Supp. 1289, 1323 (D.N.J. 2000).
B. The Question of a Withdrawal Must be Arbitrated
“[D]isputes concerning a determination that a defendant completely withdrew from a
plan is a dispute within the ambit of MPPAA’s arbitration provision.” ILGWU Nat’l Ret. Fund v.
Empire State Mills Corp., 696 F.Supp. 885, 890-91 (S.D.N.Y. 1988)); see also Rao v. Prest
Metals, and Hoffinger Indus., Inc., 149 F.Supp.2d 1, 18-19 (E.D.N.Y. 2001). Defendants must
arbitrate their defense that they had not fully withdrawn, including their affirmative defense that
they did not withdraw because another company assumed their obligations under the CBA.
C. The Allegation of Unclean Hands Must be Arbitrated
In determining the issues suitable for arbitration, courts look to whether the policies
behind arbitration are implicated. These policies include: “(1) the application of the
administrative body’s superior expertise; (2) promotion of judicial economy; and (3) deference to
the statutory scheme Congress created.” T.I.M.E-D.C., 756 F.2d at 945. Arbitrators will have
superior expertise to offer where there are questions of fact involving labor or pension matters or
questions. Id. On the other hand, judicial resolution is warranted where there are constitutional
or statutory interpretation issues. See McNicholas Transp. Co., 848 F.2d at 22.
Defendant’s defense of unclean hands raises neither constitutional issues nor questions of
statutory interpretation. Instead, ASI’s defense of unclean hands requires the resolution of
factual disputes, such as whether Plaintiff’s alleged conduct actually contributed to Defendant’s

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withdrawal and the extent of Plaintiff’s knowledge of Defendant’s mailing address. Cf. id. at 2223 (finding arbitration was required to resolve factual issues regarding the reason for the
employer’s cessation of contributions).
Much of the discovery requested in Defendant’s motion relates to the September 26 and
January 18 notices—specifically whether, by the time of the notices, Plaintiff knew that
Defendant had relocated to a different address. Because Defendant has not specified any reason
for this information other than to support its unclean hands defense (the Plaintiff has conceded
that they do not satisfy MPPAA’s notice requirements), Defendant has no basis for compelling
further discovery on this basis.
PTF’S DEMAND ON ASI FOR INTERIM WITHDRAWAL LIABILITY PAYMENTS
On October 26, 2011, PTF sent a letter to ASI informing it that as of December 31, 2009,
Defendants fully withdrew from the Fund and was subject to withdrawal liability. This notice
contained the Fund’s calculation of withdrawal liability, totaling $206,798.00, with a payment
schedule of 9 quarterly installments of $23,272.25 beginning January 2, 2012 and final payment
of $7,308.75.2 Defendants assert that they never received this notice because they had moved to
a different address on September 26, 2011 and PTF deliberately sent the letter to ASI’s former
address. ASI did not make the scheduled first quarterly installment when it became due. On
January 18, 2012, PTF sent a second letter, again to ASI’s former address, informing ASI that it
missed the first quarterly installment and had 60 days to cure this failure before ASI would fall
into default. As with the initial notice of withdrawal liability, ASI denies receiving this notice.

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Nine quarterly payments of 23,272.25 with a final payment of $7,308.75 equals $216,759, which is more than the
requested $206,798. At the September 13, 2012 conference, Plaintiffs clarified that this should be read as eight
quarterly payments of $23,272.25 with a final payment of 7,308.75, but this, too, is inaccurate because it comes to
$193,486.75. (Tr. 11:10-23.) The schedule for interim payments is now irrelevant in light of ASI’s default. ASI’s
waiver of arbitration also fixes the amount of withdrawal liability, which Plaintiff reports is $206,798. ILGWU
Nat’l Ret. Fund v. Levy Bros. Frocks, Inc., 846 F.2d 879, 881-82, 887 (2d Cir. 1988).

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On April 2, 2012, PTF initiated litigation to recover withdrawal liability. The Complaint
reiterated the contents of its October 26, 2011 notice of withdrawal liability, specifying that the
withdrawal liability obligation was $206,798 to be repaid in nine quarterly installments of
$23,272.25 and one final payment of $7,308.75. The Complaint claimed that PTF sent ASI a
default notice on January 18, 2012 when ASI missed its first quarterly installment. ASI
answered the Complaint on May 14, 2012 with a general denial. By letter on August 9, 2012,
ASI requested PTF to review its calculation of withdrawal liability.
PTF moved for interim withdrawal liability payments on July 20, 2012. (ECF. No. 17.)
PTF also demanded the full and accelerated amount of withdrawal liability along with liquidated
damages, attorney’s fees, and costs because Defendant is in default. The Court finds that ASI
defaulted on the interim payments. Therefore, PTF may accelerate the entire amount of
withdrawal liability, together with liquidated damages, fees and costs.
“Default” is defined as:
(A) the failure of an employer to make, when due, any payment under this section, if
the failure is not cured within 60 days after the employer receives written notification
from the plan sponsor of such failure, and
(B) 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.
29 U.S.C. 1399(c)(5). The failure to make timely withdrawal liability payments constitutes a
delinquency for which the plan sponsor may also demand liquidated damages, capped at 20
percent of the unpaid contributions, reasonable attorneys’ fees, and costs of the action, 29 U.S.C.
1132(g).
First, PTF was entitled to interim payments. PTF has (1) determined that ASI has
withdrawn from the plan (Compl. ¶ 7); (2) calculated the employer’s withdrawal liability in the
amount of $206,798 (id. ¶ 9); (3) through the Complaint, notified the employer of the payment
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schedule by indicating that they are to be paid quarterly installments beginning January 1, 2012
and the amount of each installment (id. ¶¶ 9, 10; Ex. 1, 2); and (4) has demanded payment of the
withdrawal liability amount (id. ¶ 2; Ex. 1.) Whether the notices of October, 2011 or January 12,
2012 were mailed to the correct or deliberately inaccurate address is no longer relevant as it is
conceded that the Complaint was served in April 2012. Complaints are sufficient to give notice
of withdrawal liability. See Bowers, 901 F.2d 258, 263 (2d Cir. 1990). ASI does not deny
receiving notice of the Complaint but contends that the April 2, 2012 Complaint was insufficient
and notice incomplete because the PTF’s Complaint did not attach the October 26 and January
18 letters as exhibits. This hair-splitting, hyper-technical argument has no merit because the
Complaint adequately set forth the amount and payment schedule.
ASI argues that it is not in default because it never received a default notice informing it
that it had missed its first scheduled withdrawal liability payment. It argues that “[e]ven if the
Complaint served as the initial notice by which Plaintiff notified ASI of its alleged withdrawal
liability, there has been no subsequent notice of default.” ASI’s argument is erroneous because it
assumes that the default notice and the notice of withdrawal liability under 29 U.S.C. 1139(b)(1)
must be separate—that is, there must be two notices before ASI can be in default. The statute
does not require this and there is no sound reason why the default notice cannot also be the initial
notice of withdrawal liability under 29 U.S.C. 1399(b)(1), as long as it informs the employer of
the missed and delinquent scheduled payment. The Complaint in this case complies with 29
U.S.C. 1399(c)(5). It served as “written notification” of Defendant’s failure to make its first
scheduled payment on January 12, 2012.
“Defendant ASI . . . failed to make the first payment and . . . if
such failure [is] not cured within sixty (60) days after the date of
receipt of the notice, it would constitute a default under the statute
and the entire amount of withdrawal liability would become due.”
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(Compl. ¶ 11.)
Courts have held complaints filed in civil actions sufficient to serve as demand notices
for purposes of determining default. See e.g., Amalgamated Lithographers of Am. Litho. Indus.
Pension Plan, 670 F. Supp. 2d 214, 230 (S.D.N.Y. 2009) (“Unz did not make payments within 60
days of receiving the complaint; therefore Unz is in default . . . .”); Trs. of the Local 531 Pension
Fund v. Corner Dist., 2008 U.S. Dist. LEXIS 113104, at *11 (E.D.N.Y. 2008) (“On February 8,
2007, plaintiffs provided notice of the defendant’s default by serving defendant with a copy of
the complaint that commenced this action); Board of Trustees of Trucking Emp. of N.J. Welfare
Fund, 900 F. Supp. 583, 593 n.3 (N.D.N.Y. 1995) (“the Amended Complaint would satisfy
[Section 1399(c)(5)(A).”).
ASI did not cure its default within 60 days of receiving notice on April 2, 2012 of both its
withdrawal liability and default. Further, ASI failed to timely seek a review with the 90 days
provided by 29 U.S.C. § 1399.
PLAINTIFF’S REQUEST FOR REVIEW DOES NOT BAR ACCELERATION
BECAUSE IT WAS UNTIMELY
The timeliness of review depends on the effective date of the notice of withdrawal
liability. See 29 U.S.C. 1399(b)(2)(A) (limiting employers to 90 days of receipt of notice of
liability to request review from the plan sponsor). ASI asserts that notice was not effective until
June 4, 2012, when PTF provided copies of the September 26 and October 18 letters as exhibits
to the Complaint. Under ASI’s method of calculating time, it had until September 2, 2012 to
request review, and, accordingly, August 9, 2012 request was timely. On the other hand, if the
Complaint, as served on April 2, 2012, provided adequate notice, then ASI had to request review
by July 1, 2012.
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As indicated, the Complaint by itself constituted sufficient notice. The standard for
giving notice is a liberal one. “The MPPAA does not specify the form that this [29 U.S.C. 1399]
notification is to take, or mandate a particular template that it must conform to. All that is
necessary is that the plan gives the employer the necessary information.” Amalgamated
Lithographers of Am. Lithographic Indus. Pension Plan, 670 F.Supp.2d 214, 224-25 (S.D.N.Y.
2009). “Notice ‘substantially complying’ with Section 1399 is adequate.” Id. at 225. All that is
required is that the Plaintiff “notify” Defendant of the amount of withdrawal liability, schedule
for payment, and make a demand, which the Complaint adequately does. Since Defendant
received notice of withdrawal liability on April 2, 2012, it was required to request review by July
1, 2012—its August 9-request was too late. ASI has waived its right to arbitration.
As Defendants have defaulted on their obligations, Defendants are directed to pay the
withdrawal liability of $206,798.00, interest on the unpaid contributions, liquidated damages
under the plan capped at 20%, and reasonable attorney’s fees and costs. 29 U.S.C. § 1132(g)(2).
The PTF’s Agreement and Declaration of Trust and Plan states that liquidated damages shall be
20% of liability, which in this case equals $41,359.60. (Gaudioso Aff. Ex. A Article VIII § 5.)
“Interest on unpaid contributions shall be determined by using the rate provided under the plan.”
29 U.S.C. § 1132(g)(2). Interest accrues “on the total outstanding liability from the due date of
the first payment which was not timely made.” 29 U.S.C. § 1399(c)(5). ASI is deemed to have
received notice of its withdrawal liability through the complaint on April 2, 2012. It was
required to start making payments on June 1, 2012, sixty days after it received notice of
withdrawal liability. Amalgamated Lithographers of Am. Litho. Indus. Pension Plan, 670 F.
Supp. 2d 214, 222 (S.D.N.Y. 2009) (citing 29 U.S.C. § 1399). Accordingly, interest will accrue
from June 1, 2012 until the date hereof. See id. at 230. The PTF’s Agreement and Declaration

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