Trustees of the Utah Carpenters and Cement Masons Pension Trust et al v. Perry Olsen Drywall et al
Filing
100
MEMORANDUM DECISION-The Court grants the Plans motion for summary judgment on the remaining issue, finding that there is indeed a material difference between installment payments of withdrawal liability and statutory payments of withd rawal liability. The installment payments of withdrawal liability in this case were made with a principal purpose to evade or avoid withdrawal liability. 29 U.S.C. 1392. The statute, and equity, demands that withdrawal liability be determined without regard to such transactions. Thus, no credit or refund shall be granted to POD. Signed by Judge David Sam on 2/7/13. (jmr)
THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
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Case No. 2:10-cv-00809-DS
TRUSTEES OF THE UTAH
CARPENTERS’ AND CEMENT
MASONS’ PENSION TRUST and
UTAH CARPENTERS’ AND
CEMENT MASON’S PENSION TRUST,
)
)
)
Plaintiff,
)
vs.
MEMORANDUM DECISION
)
ELIZABETH LOVERIDGE,
TRUSTEE FOR PERRY OLSEN
DRYWALL, INC.
)
)
Defendant.
)
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The parties in the above-captioned matter previously filed cross-motions for summary
judgment on claims brought under the Employee Retirement Income Security Act of 1974. The
Court granted Plaintiffs’ motion, in part, but reserved judgment on the issue of whether the
Arbitrator erred in refusing to credit the $0.52 per hour payments toward Defendant’s withdrawal
liability. (Doc. 90). The Court requested, and has since received from the parties, memoranda
explaining the legal basis for granting or denying such a credit. Defendant, Elizabeth Loveridge,
Trustee for Perry Olsen Drywall, Inc. (“POD”), is the only defendant who has not settled with
Plaintiffs, Trustees of the Utah Carpenters’ and Cement Masons’ Pension Trust and Utah
Carpenters’ and Cement Masons’ Pension Trust (together, the “Plan”), and is still before the
court. For the reasons set forth below, the Court grants Plaintiffs’ motion for summary judgment
on this last remaining issue—that is, as a matter of law, the Arbitrator did not err in refusing to
credit the $0.52 per hour payments toward Defendant’s withdrawal liability.
Background
On July 3, 2006, the Plan determined that Amendment 5—adopted by the Employers and
Trustees1 on July 1, 2003—was essentially an attempt by the Employers to “evade and avoid”
withdrawal liability. Accordingly, the Plan filed a complaint against the Employers claiming that
the Employers had completely withdrawn from the pension plan. The case was handled by
Arbitrator Norman Brand. Brand agreed with the Plan and found that the Employers’ agreement
to pay a minimum contribution of $.52 per hour constituted a “transaction” with “a principal
purpose to evade or avoid withdrawal liability” under 29 U.S.C. §1392(c). Brand determined
that the Employers had completely withdrawn under the ERISA framework, and that their
“contributions” after the adoption of Amendment 5 should be re-characterized as “installment
payment[s] of withdrawal liability.” With their contributions now being characterized as
“installment payments of withdrawal liability,” the Employers sought to receive a refund of the
payments or at least a credit toward their liability in the amount they had paid. Arbitrator Brand
ruled that the Employers were not entitled to a refund of the $0.52 per hour [payments], nor were
those payments creditable against the amount of withdrawal liability owed.
Concurring in the Arbitrator’s findings, this Court held as a matter of law that even “a
collective bargaining agreement [could] constitute ‘any transaction’ for withdrawal liability
purposes within the plain meaning of 29 U.S.C. § 1392(c).” (Doc. 90) This Court likewise
affirmed the Arbitrators finding that the Employers’ incurred withdrawal liability by adopting
Amendment 5 with the “principal purpose” to “evade or avoid” that liability. (Doc. 90) However,
with regard to the $0.52 per hour contribution credit, this Court reserved judgment and requested
memoranda from the parties to clarify (1) whether there is a material difference between
“installment payments of withdrawal liability” and “payments of withdrawal liability” under the
relevant provisions of ERISA; (2) if not, whether a payment schedule is absolutely required
1
The board of trustees comprised two Okland employees and one New Star employee.
under ERISA for a payment to count toward withdrawal liability; and (3) whether crediting
payments of withdrawal liability even fell within the Arbitrator’s jurisdiction at all. (Doc. 90)
Following this request, three of the four employers settled this issue with the Plan outside
of Court. However one employer, POD, still contends this issue.
Jurisdiction & Venue
This Court has jurisdiction over this matter pursuant to 29 U.S.C. § 1451(c) and 28
U.S.C. § 1331. Venue is proper as the suit is “brought in the district where the plan is
administered or where a defendant resides or does business.” Id. §1451(d).
Summary Judgment Standard
Pursuant to the Federal Rules of Civil Procedure, “[t]he court shall grant summary
judgment 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.” FED. R. CIV. P. 56 (a). In considering
summary judgment motions, the Court must examine “the record and all reasonable inferences
that might be drawn from it in the light most favorable to the non-moving party.” Berry &
Murphy, P.C. v. Carolina Cas. Ins. Co., 586 F.3d 803, 808 (10th Cir. 2009). Furthermore, “an
issue of fact is genuine ‘if the evidence is such that a reasonable jury could return a verdict for
the non-moving party’ on the issue. An issue of fact is material ‘if under the substantive law it is
essential to the proper disposition of the claim.’” Adler v. Wal-Mart Stores, Inc., 144 F.3d 664,
670 (10th Cir. 1998) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). As the
Court has already entered judgment on all other issues presented by the parties for summary
judgment, the Court now enters judgment on the last issue remaining on motion—the credit or
refund for POD’s $0.52 per hour payments.
Discussion
A. Installment Payments of Withdrawal Liability
Arbitrator Brand found that POD’s payments—made in accordance with Amendment
5—were made with a principal purpose to evade or avoid withdrawal liability. Thus, the
Arbitrator found that they were not “contributions,” but rather “installment payment[s] of
withdrawal liability.” This finding fits squarely within the statutory framework since “payments
of withdrawal liability” cannot also be considered “obligation[s] to contribute” within the
meaning of §1392(b). Consequently, Arbitrator Brand also found that POD had completely
withdrawn from the Plan as of the date it began to engage in these strategic transactions under
Amendment 5. Now, since these payments have been reclassified as “installment payments of
withdrawal liability,” POD seeks to have these payments credited toward their withdrawal
liability. To this end, POD contends that there is no material difference between “installment
payments of withdrawal liability” and “payments of withdrawal liability” under the statute.
POD’s argument would lead to the conclusion that—regardless of whether or not the payments
were made in accordance with a prescribed installment schedule—the payments should be
credited toward POD’s overall withdrawal liability. To the contrary, the Plan argues that there is
a material difference between “payments of withdrawal liability” and “installment payments of
withdrawal liability.” The Plan’s argument leaves open the possibility that the payments may not
be creditable toward POD’s overall withdrawal liability.
Based on our previous findings, it appears that “installment payments of withdrawal
liability”—unlike “payments of withdrawal liability”—can be made even before withdrawal
liability has been decided or assessed. This difference seems immaterial on its face; however, the
facts of this case demonstrate the spurious intentions that can bely “contributions,” later recast as
“installment payments of withdrawal liability,” made before actual withdrawal liability has been
assessed. In other words, the court finds “contributions” can be deceptively tailored to avoid
withdrawal liability altogether. And the fact that the payments are later recast as “installment
payments of withdrawal liability” rather than “contributions” does not negate the fact that they
did in fact comprise a “transaction . . . to evade or avoid liability.” The material difference, then,
is that “installment payments of withdrawal liability” can be made with deceptive intent to
“evade or avoid,” and “payments of withdrawal liability” cannot. Accordingly, POD’s
“contributions” cannot be considered in the determination of withdrawal liability. To be sure,
Section 1392(c) clearly states that “liability shall be determined and collected without regard to
[evade and avoid] transaction[s].”
POD’s argument, on the other hand, conveniently looks past the “evade or avoid” nature
of the transaction, permitting the scheme to go unsanctioned on the premise that the Arbitrator
reclassified the deceptive “contributions” as “installment payments of withdrawal liability.”
POD asserts that the Plan attempts to “have its cake and eat it too” by reclassifying the
contributions as “installment payments of withdrawal liability,” and yet refusing to credit those
payments toward POD’s withdrawal liability. Ironically, it appears that POD has attempted to
“have its cake and eat it too” by engaging in a transaction to “evade or avoid” liability, and then
demanding that its investment in that deceitful transaction be credited toward the withdrawal
liability it incurred because of that transaction. Equitable considerations will not allow this.
Indeed, one that seeks equity must do equity. Furthermore, POD’s position would not fit within
the statutory framework even if equitable considerations slanted in its favor. To be sure, “liability
shall be determined and collected without regard to such [evade or avoid] transactions.” 29
U.S.C. §1392(c). Evidently, the statute itself incorporates equitable considerations, tailoring the
punishment for an employer’s deceit to the severity of the “evade or avoid” transaction the
employer embraced.
There is, therefore, a material difference between “installment payments of withdrawal
liability” and “payments of withdrawal liability” for purposes of the Employee Retirement
Income Security Act of 1974. This legal conclusion is bolstered by equitable considerations
which demand such a distinction as applied to this case.
B. Payment Schedule Requirement
Because the court holds that there is a material difference between the phrases “payments
of withdrawal liability” and “installment payments of withdrawal liability,” the question of
whether a payment schedule is absolutely required under ERISA is irrelevant to the disposition of
the issue before the court. However, even if there were no material difference between the
phrases, the statute does not clarify whether a payment schedule is absolutely required for
payments of withdrawal liability made before liability has been assessed. The statute only
contains credit/refund provisions with regard to overpayments or underpayments made in
accordance with a payment schedule defined after liability has been assessed. In other words, the
statute is silent with regard to these pre-assessment-type payments, neither requiring nor
prohibiting that a credit be given.
C. Arbitrator Jurisdiction
The Plan contends that even if the Arbitrator decided that a credit was warranted, he did
not actually have jurisdiction over the issue. The Plan cites 29 U.S.C. § 1103 which indicates that
“in the case of a contribution, or a payment of withdrawal liability . . . if such . . . payment is
made . . . by mistake of fact or law . . . [the general rule] shall not prohibit the return of such
contributions or payment to the employer.” However, the Plan points out that because this
section of ERISA exists, but not in the range of withdrawal liability sections that may be
arbitrated, it must be that the Arbitrator lacked jurisdiction to address the issue. Finally, the Plan
references C.F.R. § 4219.31(d) which explains that an Arbitrator may only make adjustments for
overpayments under an actual withdrawal liability payment schedule. While the Plan is correct
that there was no actual withdrawal liability payment schedule, they seem to overlook the word
“overpayments.” Indeed, the language cited by the Plan is limited to a discussion of
“overpayments.” Here, we are not dealing with an overpayment of withdrawal liability, but rather
a prepaid portion of the overall withdrawal liability that was only later incurred and assessed.
Thus, C.F.R. § 4219.31(d) is irrelevant to the question of the Arbitrator’s jurisdiction over this
matter.
On the other hand, POD contends that 29 U.S.C. 1401 grants jurisdiction to an Arbitrator
with respect to §§1382(1)2, 1391, 1392(b)3 and 1399(b)(2)4. True, but the question is whether
2
29 U.S.C. §1382.
When an employer withdraws from a multi-employer plan, the plan sponsor, in accordance with this part,
shall—
(1)determine the amount of the employer’s withdrawal liability,
(2)notify the employer of the amount of the withdrawal liability, and
(3)collect the amount of the withdrawal liability.
3
29 U.S.C. § 1392. (quoted in part)
(b)Payments of withdrawal liability not considered contributions
Payments of withdrawal liability under this part shall not be considered contributions for purposes of
this part.
4
29 U.S.C. § 1399. Notice, collection, etc., of withdrawal liability (quoted in part)
(b)Notification, demand for payment, and review upon complete or partial withdrawal by employer
…
(2)(A) No later than 90 days after the employer receives the notice described in paragraph (1), the
employer—
(i)may ask the plan sponsor to review any specific matter relating to the determination of
the employer’s liability and the schedule of payments,
(ii) may identify any inaccuracy in the determination of the amount of the unfunded
vested benefits allocable to the employer, and
(iii) may furnish any additional relevant information to the plan sponsor.
(2)(B) After a reasonable review of any matter raised, the plan sponsor shall notify the employer
of—
(i)the plan sponsor’s decision,
(ii)the basis for the decision, and
(iii)the reason for any change in the determination of the employer’s liability or schedule
or liability payments.
those sections bear on the issue before the Court. Section 1382, read properly, regards the
determination of an amount or proportion of the overall liability that one employer should be
allocated with respect to others in a multi-employer plan—not the amount with respect to
previous payments. This section fails to provide Arbitrator jurisdiction over this matter. Section
1392(b), read properly, regards the simple fact that contributions are not to be considered
payments of withdrawal liability—not the determination of credits toward withdrawal liability.
This section also fails to provide Arbitrator jurisdiction over this matter. Section 1399(b)(2), on
the other hand, does provide a basis for Arbitrator jurisdiction. Specifically, Section (b)(2)(B)(iii)
relates to “any change in the determination of the employer’s liability.” While this section
specifically provides a directive for the plan sponsor, the Arbitrator has the jurisdiction to decide
whether the “basis for [The Plan’s] decision” is appropriate in light of the other ERISA
provisions. The breadth of this language surely provides grounds for Arbitrator jurisdiction over
this matter.
Conclusion
The Court grants the Plan’s motion for summary judgment on the remaining issue,
finding that there is indeed a material difference between “installment payments of withdrawal
liability” and statutory “payments of withdrawal liability.” The “installment payments of
withdrawal liability” in this case were made with “a principal purpose to evade or avoid”
withdrawal liability. 29 U.S.C. § 1392. The statute, and equity, demands that withdrawal liability
be determined without regard to such transactions. Thus, no credit or refund shall be granted to
POD.
SO ORDERED.
DATED this 7th day of February, 2013.
BY THE COURT:
_____________________________________
DAVID SAM
SENIOR JUDGE
UNITED STATES DISTRICT COURT
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