Trustees of the Utah Carpenters and Cement Masons Pension Trust et al v. Perry Olsen Drywall et al

Filing 90

MEMORANDUM DECISION-granting 60 Motion for Summary Judgment on the grounds that a collective bargaining agreement can constitute any transaction for withdrawal liability purposes within the plain meaning of 29 U.S.C. 1392(c); that the Employers in fact incurred withdrawal liability by adopting Amendment 5 with a principal purpose to evade or avoid that liability; and that the Arbitrator did not err in awarding the Plan its attorneys fees and costs pursuant to 29 C.F.R. 4221.10. However, the Court reserves the question of whether the Arbitrator erred in failing to credit the Employers payments toward their withdrawal liability until it receives additional information from the parties. Signed by Judge David Sam on 6/27/12. (jmr)

THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
)
TRUSTEES OF THE UTAH
CARPENTERS’ AND CEMENT
)
MASONS’ PENSION TRUST and
UTAH CARPENTERS’ AND
)
CEMENT MASON’S PENSION TRUST,
)
Plaintiffs,

Case No. 2:10-cv-00809-DS

)
MEMORANDUM DECISION

vs.

)
)

ELIZABETH LOVERIDGE,
TRUSTEE FOR PERRY OLSEN
DRYWALL, INC.; OKLAND
CONSTRUCTION COMPANY, INC.,
a Utah Corporation; NEW STAR
GENERAL CONTRACTORS, INC.,
a Utah Corporation; and CULP
CONSTRUCTION COMPANY,
a Utah Corporation,

)
)
)
)
)

Defendants.

)

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

The parties in the above-captioned matter have filed cross-motions for summary
judgment in this claim brought under the Employee Retirement Income Security Act of 1974.
For the reasons set forth below, the Court grants the Plaintiffs’ motion in all respects, but
reserves the question of whether the Arbitrator erred in failing to credit payments Defendants
made toward its withdrawal liability until the Court receives additional information from the
parties.

1 

Background
Plaintiffs Trustees of the Utah Carpenters’ and Cement Masons’ Pension Trust
(“Trustees”) and Utah Carpenters’ and Cement Masons’ Pension Trust (“Plan”) bring suit against
Defendants under the Employee Retirement Income Security Act of 1974 (ERISA). Defendants
in this action are Okland Construction Company, Inc., New Star General Contractors, Inc., and
Culp Construction Company (sometimes referred to collectively as “ONC”), all Utah
corporations with their principal places of business in Utah. Also a defendant in this action is
Elizabeth Loveridge, trustee for Perry Olsen Drywall, Inc. (“POD”), formerly an Idaho
corporation with its principal place of business in Salt Lake City, Utah (together, “Employers”).
The Employers (with the exception of POD post-bankruptcy) are general contractors in the
building and construction industry, and each until 2003 had separate labor contracts with the
Rocky Mountain Regional Council of Carpenters (later subsumed by the Southwest Regional
Council of Carpenters), affiliated with the United Brotherhood of Carpenters and Joiners of
America (“Union”) to provide for contributions to the Plan for employee pension benefits.
The following facts were found during arbitration proceedings, and are materially
undisputed. The Plan is a Taft-Hartley trust fund established in 1963 with a joint labormanagement board of trustees formed in accordance with 29 U.S.C. 186(c)(5). (POD’s Mem. in
Supp. of Mot. for S.J., Ex. 1, at 4, Dec. 28, 2011, ECF No. 57-1.) Accordingly, two employees,
one from Okland and the other from New Star, sat as Trustees of the Plan. (POD’s Mem. in
Supp. of Mot. for S.J., Ex. 1, at 4.) The Plan further adheres to ERISA’s prohibited transaction
rules and collection policies, under which all delinquent employers must pay, in addition to the
delinquent contributions, interest, attorney fees, and liquidated damages on late contributions.
(POD’s Mem. in Supp. of Mot. for S.J., Ex. 1, at 5.)
The 2002 Winter Olympic Games held in Salt Lake City caused an upswing in the local
construction business and a corresponding increase in the number of participants enrolled in the
Plan. (POD’s Mem. in Supp. of Mot. for S.J., Ex. 1, at 5.) A short time later, a decrease in that
construction and stagnant interest rates on investments caused the Plan’s unfunded vested benefit
(“UVB”) liability to skyrocket to approximately $7.4 million. (POD’s Mem. in Supp. of Mot. for
S.J., Ex. 1, at 5.) At a Plan meeting on July 11, 2003, Okland, in response to the new UVB
liability information, discussed withdrawal liability and wished to know whether the Utah Plan
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could be merged with the Southwest Regional Council of Carpenters (“SWRCC”) Plan.1 The
Trustee Secretary (recently appointed to the board by SWRCC) informed Okland that the Utah
Plan’s UVB liability rendered a merger unlikely. (POD’s Mem. in Supp. of Mot. for S.J., Ex. 1,
at 6.) To facilitate the merger, SWRCC in December 2003 proposed that the Employers divert
the majority of their contributions to the SWRCC Plan and continue making a token contribution
of $.10 per employee hour worked “to the Utah fund to prevent a termination of the Plan and a
triggering of unfunded liability.” (POD’s Mem. in Supp. of Mot. for S.J., Ex. 1, at 7-8.)
At another meeting on February 4, 2004, the Trustees received an actuarial report that
found the hourly contributions needed to amortize the Plan’s UB liability over 15 years would be
$.52 per hour. (POD’s Mem. in Supp. of Mot. for S.J., Ex. 1, at 8.) At the same meeting,
Okland’s representative said that the $.10 payments would likely cause the Employers to incur
withdrawal liability under the “evade and avoid” provision of ERISA, 29 U.S.C. § 1392(c), but
that the Employers could alternatively pay $.52 per hour “to avoid withdrawal liability.” (POD’s
Mem. in Supp. of Mot. for S.J., Ex. 1, at 8.) Thus, in place of the $.10 agreements, the
Employers and Trustees added section 3.02(e) (“Amendment 5”) to the Plan to allow the
Employers to pay contributions to the Plan of $.52 per hour—not to accrue employee benefits,
but solely for the purpose of reducing the Plan’s UVB liability.2 Notably, the largest employers
at the time of the adoption of Amendment 5 were the Employers in this case; they also were the
participating employers who would have incurred the most substantial withdrawal liability
without the adoption of Amendment 5. (POD’s Mem. in Supp. of Mot. for S.J., Ex. 1, at 8.)
Thereafter, tension continued to mount between the Plan and the Employers. This tension
culminated in, among other events, Okland and New Star forming labor agreements with and
offering support for a newly-formed United Carpenters Association labor union (“UCA”), New
1

Withdrawal liability was an issue at the July 11, 2003 meeting because POD had at some time prior failed to
negotiate a new labor agreement with the Union, subsequently withdrew its voluntary recognition of the Union, and
ceased making contributions to the Plan. Pursuant to 29 U.S.C. § 1382, the Plan’s attorney presented POD with
notice of a withdrawal liability assessment in the amount of $965,111. (POD’s Mem. in Supp. of Mot. for S.J. 9,
Dec. 28, 2011, ECF No. 57.)
2
Amendment 5 states, in pertinent part:
§ 3.02 Regular Pension—Amount
(e) On and after April 1, 2004, no benefit will be earned for hours in Covered Employment for an
Employer contributing at a rate of $.52 per hour or less for such hours. (POD’s Mem. in Supp. of Mot. for
S.J., Ex. 1, at 8.)

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Star forming labor agreements with a non-Plan painters’ union, SWRCC filing suit against the
UCA before the NLRB, the resignation of the Plan’s counsel and accountants, and the
Department of Labor launching a formal investigation into the matter in late 2005 or early 2006,
which investigation remains open. (POD’s Mem. in Supp. of Mot. for S.J., Ex. 1, at 9-13.)
During plans to increase the minimum required hourly contribution from $.52 to $.97 per hour
during February 2006, the Plan directed its new counsel to investigate the Employers’ actions
and pursue withdrawal liability. The Plan, through its new counsel, issued initial withdrawal
liability assessments to New Star and Okland on June 28, 2006, and to POD and Culp on July 3,
2006, contending that all four Employers had withdrawn from the Plan after adopting
Amendment 5 in 2004. (POD’s Mem. in Supp. of Mot. for S.J., Ex. 1, at 13.)
The Employers requested arbitration soon thereafter, and Arbitrator Norman Brand
(“Arbitrator”) bifurcated the proceedings into two phases, the first for liability, and the second to
determine damages. (POD’s Mem. in Supp. of Mot. for S.J., Ex. 1, at 25.) From those
proceedings came five interim awards and one final award. Of relevance is the First Interim
Award, in which the Arbitrator determined that (1) the Employers’ agreements to pay a
minimum contribution of $.52 per hour “ha[d] a principal purpose to evade or avoid withdrawal
liability” under 29 U.S.C. § 1392(c); (2) the Employers’ contributions were “installment
payment[s] of withdrawal liability and did not create an ‘obligation to contribute’” within the
meaning of § 1392; (3) the Plan was entitled to disregard those payments under § 1392(c); and
(4) that the Plan was entitled to attorney’s fees and costs. (See POD’s Mem. in Supp. of Mot. for
S.J., Ex. 1.) Also relevant is the Fourth Interim Award, in which the Arbitrator ruled that the
Employers were not entitled to a refund of the $.52 per hour contributions, nor were those
payments creditable against the amount of withdrawal liability owed. (See POD’s Mem. in Supp.
of Mot. for S.J., Ex. 4, at 39-40, Dec. 28, 2011, ECF No. 57-4.) Lastly, in his Final Award, the
Arbitrator incorporated the five interim awards and awarded the Plan attorneys’ fees, costs, and
arbitration expenses, payable equally by the four Employers. (See POD’s Mem. in Supp. of Mot.
for S.J., Ex. 5, at 4-5, Dec. 28, 2011, ECF No. 57-5.)
The Plan, POD, and ONC have all filed cross-motions for summary judgment. ONC’s
and POD’s respective motions overlap to a large degree, and they move the Court to find that the
Arbitrator erred as a matter of law by (1) determining that the Employers had withdrawn from

4 

the plan by making payments with a principal purpose to “evade or avoid” withdrawal liability as
described in 29 U.S.C. § 1392(c); (2) attributing the behavior of the Trustees to the Employers
themselves; and (3) in the alternative, by refusing to credit the Employers’ $.52 per hour
contributions against their withdrawal liability and by awarding attorney’s fees. POD also seeks
an award of its own attorney’s fees and costs. The Plan’s motion asks that this Court uphold all
of the Arbitrator’s findings as legally and factually accurate. The Court grants the Plan’s motion
for summary judgment and denies the Employers’ motions in all respects, but withholds a ruling
on whether the Arbitrator erred in failing to credit the Employers for payment of withdrawal
liability.

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(c). In considering the
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 parties have filed cross-motions for summary judgment, the Court enters judgment
accordingly.

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Standard of Review
This case requires the Court to decide whether the Arbitrator erred as a matter of law in
finding that the Employers withdrew from the Plan and incurred withdrawal liability thereby.
ERISA provides that “there shall be a presumption, rebuttable only by a clear preponderance of
the evidence, that the findings of fact made by the arbitrator were correct,” applying the clearly
erroneous standard. 29 U.S.C. §§ 1401(a)(3)(A), 1401(c) (2006). Normally, then, the scope of
judicial review provided for in § 1401 is quite narrow, given the statutory language as well as
ERISA’s “strong policy favoring arbitration of withdrawal liability disputes.” Sherwin-Williams
Co. v. New York State Teamsters Conference Pension, 158 F.3d 387, 392 (6th Cir. 1998) (citing
Mason & Dixon Tank Lines, Inc. v. Central States Pension Fund, 852 F.2d 156, 163-64 (6th
Cir.1988)).
However, contrary to the Plan’s assertions, the question presented does not warrant
application of the clearly erroneous standard. The Supreme Court has distinguished “mere
question[s] of fact,” to which § 1401(a)(3)(A) would apply, from the question of “whether [the]
facts amount to a ‘complete withdrawal,’” as described in 29 U.S.C. § 1383(a). Concrete Pipe,
508 U.S. at 630. The question of whether a complete withdrawal occurred—the question
presented in this case—is not a “mere question of fact,” but rather, “one of law.”3 Id. Because
questions of law are reviewed de novo, see In re Amarex v. Temex Energy Inc., 853 F.2d 1526,
1529 (10th Cir. 1988), the Court applies that standard to review the Arbitrator’s findings as to
that question. However, as questions of fact are committed to his discretion, the Court applies the
clearly erroneous standard to the Arbitrator’s other findings.

3

Nor is the question a mixed question of law and fact. In Concrete Pipe, the Court characterized the question of the
date of complete withdrawal as a mixed question of law and fact, while it distinguished the question of whether
complete withdrawal occurred as purely legal. 508 U.S. at 630. Had the Court not characterized the latter question as
“one of law,” it may have been considered a mixed question involving a primarily factual inquiry, to which the
clearly erroneous standard would apply. See Estate of Holl v. C.I.R., 54 F.3d 648, 650 (10th Cir. 1995). However, in
light of the Court’s language to the contrary, de novo review is appropriate.

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Discussion
A. Relevant Legislative History
Congress enacted ERISA in 1974 to establish minimum standards for pension plans in
private industry. However, one of ERISA’s weaknesses was that it imposed only minimal
liability on employers who decided to withdraw from financially distressed plans with high UVB
liability, essentially leaving employees unable to collect on their earned benefits. Joint
Explanation of S. 1076: Multiemployer Pension Plan Amendments Act of 1980, 126 Cong. Rec.
20191-2. In response, Congress amended ERISA by passing the Multiemployer Pension Plan
Amendments Act of 1980 (MPPAA). Among other things, the MPPAA “made employers, unless
relieved by special provisions, liable for their share of unfunded plan benefits when they
withdrew from [multiemployer pension] plans . . . . serv[ing] to discourage withdrawals and the
shifting of liabilities to the program.” Id. Besides encouraging employers to merely remain in
benefit plans, one of the MPPAA’s major purposes was to discourage employers from taking any
action that would threaten to render multiemployer pension plans insolvent. See Cuyamaca
Meats, Inc. v. San Diego and Imperial Counties Butchers' and Food Employers' Pension Trust
Fund, 827 F.2d 491, 496 (9th Cir. 1987) (citing Board of Trustees v. Thompson Bldg. Materials,
Inc., 749 F.2d 1396, 1401–02 (9th Cir. 1984)). The MPPAA’s imposition of liability on
employers who withdraw from pension plans carries out these legislative purposes. Id.
B. Withdrawal Liability
The Employers first argue that the Arbitrator erred as a matter of law when he determined
that their actions constituted complete withdrawal under the MPPAA. This requires the Court to
answer two separate, but related, questions: first, whether an employer can, under the MPPAA
and pursuant to an ostensibly valid labor agreement, remain “in plan,” yet still statutorily
“withdraw”; and second, whether the Employers’ actions in this case warranted a finding that
they in fact withdrew from the Plan. The Court answers both questions in the affirmative.
1. May a bargaining agreement constitute “any transaction” under 29 U.S.C. § 1392?
The Court first disposes of the question of whether “any transaction” under § 1392(c) can
include an employer’s joint labor agreement with a union. The MPPAA imposes withdrawal

7 

liability on an employer if the employer completely or partially withdraws from a multiemployer
pension plan with UVB liability.4 The amount of withdrawal liability incurred is determined
using a complex formula, but essentially requires a withdrawing employer to pay a pro rata share
of any outstanding UVB liability at the time of withdrawal. 29 U.S.C. § 1381(b)(1). Under the
MPPAA, “a complete withdrawal . . . occurs when an employer (1) permanently ceases to have
an obligation to contribute under the plan, or (2) permanently ceases all covered operations under
the plan.” Id. § 1383(a). For an employer in the building and construction industry, complete
withdrawal may also occur if an employer ceases its obligation to contribute and the employer
continues working in the industry. Id. § 1383(b)(2). The MPPAA further defines “obligation to
contribute” as an obligation that arises “under one or more collective bargaining (or related)
agreements.” Id. § 1392(a)(1). Finally, and primarily at issue in this case, the MPPAA’s “evade
and avoid” rule provides that “[i]f a principal purpose of any transaction is to evade or avoid
liability under this part, this part shall be applied (and liability shall be determined and collected)
without regard to such transaction.” Id. at §1392(c) (emphasis added).
As with all questions of interpretation, the Court begins with the plain meaning of the
statute. Resolution Trust Corp. v. Connor, 817 F. Supp. 98, 100 (W.D. Okla. 1993) (“The
starting point for interpretation of a statute is the language of the statute itself.”) (quoting Kaiser
Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827, 835 (1990)). “If the language of a
statute is clear and unambiguous, then the Court's inquiry ends and the plain meaning of the
language is conclusive except in the rare instance where ‘literal application of a statute will
produce a result demonstrably at odds with the intentions of its drafters,’” id. (quoting United
States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241 (1989)), or if “patently absurd
consequences” would result from the plain meaning interpretation, id. (quoting United States v.
Brown, 333 U.S. 18, 27 (1948)). The statute is clear and unambiguous and must therefore be
accorded its plain meaning. In wording the statute, Congress chose perhaps the least restrictive
term it could have to describe what actions could rise to the level of a complete withdrawal:
“any.” Used in this ordinary context, there is on the face of § 1392 no apparent reason why
Congress would use such all-encompassing language, yet exclude transactions involving labor
4

“If an employer withdraws from a multiemployer plan in a complete withdrawal or a partial withdrawal, then the
employer is liable to the plan in the amount determined under this part to be the withdrawal liability.” 29 U.S.C. §
1381(a) (2006). Section 1385 governs partial withdrawal liability. However, no analysis of that provision is
necessary because the Plan seeks summary judgment on the grounds of complete withdrawal.

8 

unions. See also SUPERVALU, Inc. v. Bd. of Trustees of Sw. Pennsylvania & W. Maryland
Area Teamsters & Employers Pension Fund, 500 F.3d 334, 339 (3d Cir. 2007) (holding that an
arbitrator’s finding of withdrawal liability pursuant to a collective bargaining agreement “fits
squarely within the plain language of” § 1392(c)). In short, “any transaction” means just that, and
does not exclude collective bargaining agreements akin to the type the Employers entered into.
The Employers attempt to persuade the Court to disregard the plain text by arguing that
Amendment 5 did not violate § 1392(c) because “it in no way frustrated the purposes of the
MPPAA.” See Cuyamaca Meats, 827 F.2d at 499. However, even if the Court were to cast aside
the plain language of the statute in favor of the Employers’ interpretation, their arguments still do
not persuade the Court that the Employers did not violate § 1392. The Employers’ arguments
rely almost entirely on Cuyamaca Meats. In that case, an employer timed its withdrawal to avoid
incurring an additional $1 million in withdrawal liability. Id. at 494. However, the court found
that, although “motivated, at least in part, by a desire to minimize withdrawal liability,” the
employer’s actions did not “frustrate the purposes of the MPPAA” because they had “economic
substance” and constituted a “bona fide, arm’s length transaction” with a labor union. Id. at 499.
The Employers’ rationale is essentially the same: because Amendment 5 was mutually agreed
upon by the Employers and the Union, it created an obligation to contribute which does not
frustrate the purpose of the MPPAA because they remained “in plan.”
However, the Court declines to adopt this interpretation. First, Cuyamaca Meats is, as the
Arbitrator put it, “weak precedent.” Besides being an older case relative to other case law
interpreting the same statutory provision, it flouts more usual methods of statutory interpretation
by looking beyond the plain language of the statute and failing to accord the terms therein their
ordinary meaning. Relatedly, Cuyamaca Meats is apparently the only case to hold as it did. The
Court finds the ample body of more recent case law that accords the statutory language its plain
meaning to be more persuasive. See, e.g., SUPERVALU, Inc., 500 F.3d 334 (3d Cir. 2007);
Sherwin-Williams Co. v. N.Y. State Teamsters Conference Pension & Ret. Fund, 158 F.3d 387
(6th Cir. 1998); Central States, Southeast and Southwest Areas Pension Fund v. Midwest Motor
Exp., Inc., 999 F. Supp. 1153, 1163-64 (N.D. Ill. 1998).
Second, the Employer’s interpretation of the statute’s purpose is, given its legislative
history, too narrow to govern the Court’s decision. The MPPAA’s purpose is not merely to
9 

encourage employers to remain “in plan,” as the Employers suggest. Rather, it is to discourage
any transaction—including forming a collective bargaining agreement with a labor union and a
subsequent “obligation to contribute”—that might serve to harm the financial viability of a
pension plan. See SUPERVALU, Inc., 500 F.3d at 336 (MPPAA “designed to prevent employers
from . . . threatening the solvency of [multiemployer pension] plans”); Cuyamaca Meats, 827
F.2d at 496 (MPPAA’s purpose was to ensure that employers would not take action to render
plans insolvent); Central States, Southeast and Southwest Areas Pension Fund, 999 F. Supp. at
1163-64; (citing Central States Southeast and Southwest Areas Pension Fund v. Bellmont
Trucking Co., Inc., 788 F.2d 428, 433 (7th Cir. 1986)). Though the Employers rely on the fact
that the Plan’s UVB liability decreased after adopting Amendment 5, the statute on its face does
not contemplate such a result. Rather, it asks only whether “any transaction” had a principal
purpose to evade or avoid withdrawal liability. In light of the plain text and history of the
relevant provisions of the MPPAA, the Employers cannot escape the consequences of § 1392
merely by arguing that their actions did not “frustrate the purpose of the statute.” Thus, the
Arbitrator was correct in his interpretation that a collective bargaining agreement between a
union and an employer may fall under the “any transaction” language of § 1392’s “evade and
avoid” provision.1
2. Did the Employers in fact withdraw under MPPAA?
Having established that the Employers’ bargaining agreement can constitute statutory
withdrawal, the Court next decides whether the Arbitrator erred in finding that the Employers
had “a principal purpose” to “evade or avoid” withdrawal liability. Trying to evade or avoid
liability “needn’t be the only purpose” under § 1392(c). See Santa Fe Pacific Corp. v. Central
States, Southeast and Southwest Areas Pension Fund, 22 F.3d 725, 727 (7th Cir. 1994)
(emphasis added). Rather, avoidance of withdrawal liability, as a principal purpose, “need only
have been one of the factors that weighed heavily in the [Employers’] thinking.” Id.

1

ONC’s supplemental briefing does not sway the Court’s decision. ONC cites Shelter Distribution, Inc. v. General
Drivers, Warehousemen & Helpers Local Union No. 89, 674 F.3d 608 (6th Cir. 2012), for the proposition that a
collective bargaining agreement with a union to indemnify employers for withdrawal liability is not contrary to
public policy. However, the question in the instant case—whether an agreement between a union and an employer
can be “any transaction” under 1392(c)—is different in kind. Shelter Distribution is therefore unpersuasive.

10 

The Court finds that the Arbitrator did not err when he determined that one of the
Employers’ principal purposes was to evade or avoid withdraw liability. Based on an application
of the preponderance of the evidence standard delineated in 29 U.S.C. § 1401(a)(3)(A), “[t]here
can be no serious doubt” that avoiding withdrawal liability was “one of the [Employers’]
principal considerations” in their decision to adopt Amendment 5. Santa Fe Pacific Corp., 22
F.3d at 728. Perhaps the clearest evidence comes from the explicit statements of some of the
Employers that they intended to avoid withdrawal liability. For example, after POD withdrew its
recognition of the Union in 2003, POD stated that it “would never have agreed” to enter the $.10
agreement except to make “the unfunded liability issues . . . go away.” (POD’s Mem. in Supp. of
Mot. for S.J., Ex. 1, at 35.) During the same period, Okland discussed merging the Plan with the
SWRCC pension plan, during which withdrawal liability was a major issue of conversation and
concern. (POD’s Mem. in Supp. of Mot. for S.J., Ex. 1, at 36-37.) Okland likewise expressed its
reasoning for adopting Amendment 5, saying that because the $.10 agreement “constitutes a
withdrawal liability . . . the Contractors are either assessed a withdrawal liability or are asked to
pay the $.52 an hour into this Fund to avoid withdrawal liability.” (POD’s Mem. in Supp. of
Mot. for S.J., Ex. 1, at 8.) Similarly, Culp recognized the “potential for a large unfunded
liability” at the time the $.52 agreement was created, and extended its collective bargaining
agreement “in order to avoid that issue . . . .” (POD’s Mem. in Supp. of Mot. for S.J., Ex. 1, at
38.)
If outright statements are insufficient, the Employers’ behavior also supports the
Arbitrator’s findings. Some of the Employers originally intended to divert their payments to the
SWRCC plan, yet continued to make token $.10 payments to the Plan—payments which
increased to $.52 only after being told that the $.10 payments would cause them to incur
withdrawal liability. (POD’s Mem. in Supp. of Mot. for S.J., Ex. 1, at 6-7.) Okland and New Star
also engaged in “negotiations” with the UCA, a new “union” formed outside ERISA’s
parameters.5 (POD’s Mem. in Supp. of Mot. for S.J., Ex. 1, at 9-10.) When these negotiations
were undermined, New Star also attempted to make a labor agreement with the painters’ union as
a substitute for its participation in the Plan, again in an apparent effort to avoid withdrawal
5

Tellingly, the only representatives of the UCA were employees of Okland and New Star. The UCA also had no
physical location, address, or telephone number by which one could verify the authenticity of those negotiations or
communications. (POD’s Mem. in Supp. of Mot. for S.J., Ex. 1, at 9-10.)

11 

liability. (POD’s Mem. in Supp. of Mot. for S.J., Ex. 1, at 10-11.) Likewise, Amendment 5 on its
face was not intended to allow the $.52 payments to accrue benefits; rather, those payments
would go toward reducing UVB liability only. Interestingly, these four Employers (plus another
not a party to this lawsuit) were the only Plan employers paying at this lower rate, and would
have been subject to the greatest withdrawal liability had they left the plan with UVB liability
outstanding.
It is clear that, based on the Employers’ express statements and behaviors, the Arbitrator
did not err in finding that one of the Employers’ principal purposes was to evade or avoid
withdrawal liability within the meaning of § 1392. The Employers cannot realistically argue that
the actions of the Trustees are not attributable to them. The actions of the particular Trustees in
question were employees of New Star and Okland. Because of this, it seems that these Trustees
would be better informed as to what consequences their actions would have. And based on the
above-mentioned evidence, it indeed appears that all the Employers knew exactly what might
happen in adopting either the $.10 agreement or Amendment 5. To hold otherwise would be a
technical or artificial method of permitting the Employers to absolve themselves of withdrawal
liability, which they unquestionably incurred in this case.
C. Attorneys’ Fees and Costs
The Court next turns to the issue of whether the Arbitrator erred in granting attorneys’
fees and costs. The regulations set forth by the Pension Benefit Guarantee Corporation (PBCG)
govern the allocation of costs and attorneys’ fees in MPPAA arbitration claims. See 29 C.F.R. §
4221.14. Although ERISA’s standards and the PBCG regulations normally grant an arbitrator
broad discretion in determining the scope of such an award, see 29 U.S.C. § 1401 (2006); 29
C.F.R. § 4221.14, they limit that discretion in the withdrawal liability context. The rule provides:
The costs of arbitration under this part shall be borne by the parties as follows:
(a) Witnesses. Each party to the dispute shall bear the costs of its own witnesses.
(b) Other costs of arbitration. Except as provided in § 4221.6(d) with respect to a
transcript of the hearing, the parties shall bear the other costs of the arbitration
proceedings equally unless the arbitrator determines otherwise. The parties may,
however, agree to a different allocation of costs if their agreement is entered into after the
employer has received notice of the plan's assessment of withdrawal liability.

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(c) Attorneys' fees. The arbitrator may require a party that initiates or contests arbitration
in bad faith or engages in dilatory, harassing, or other improper conduct during the course
of the arbitration to pay reasonable attorneys' fees of other parties.

29 C.F.R. § 4221.10. Thus, although an arbitrator has broad discretion in awarding “other costs
of arbitration,” an arbitrator cannot award attorneys’ fees except for “initiat[ing] or contest[ing]
arbitration in bad faith” or for “other improper conduct” as described in § 4221.10.
Applying the clearly erroneous standard to the Arbitrator’s decision, the Court holds that
the Arbitrator ultimately did not err in apportioning and awarding attorneys’ fees. The Plan does
not assert that the Employers initiated arbitration in bad faith; the Arbitrator in his First Interim
Award recognized that “the employers initiated arbitration” and did not act in bad faith in so
doing. (POD’s Mem. in Supp. of Mot. for S.J., Ex. 1, at 2.) Rather, the Employers contend that
the Arbitrator erred in finding that they “contest[ed] arbitration in bad faith.” However, the Court
need not address that issue here because, even if that finding was incorrect, the Arbitrator also
relied on an alternative ground for awarding fees: that the Employers engaged in improper
conduct during the course of arbitration. To support that finding, the Arbitrator cited numerous
behaviors, mannerisms, statements, and actions from Employers’ witnesses, all of which the
Arbitrator himself either heard or observed, to show that the Employers’ conduct during
arbitration was improper. (POD’s Mem. in Supp. of Mot. for S.J., Ex. 2, at 8-24.) When an
arbitrator engages in fact-intensive inquiry, such as deciding whether a party has engaged in
improper conduct, the Court refrains overturning findings except for clear error, as the arbitrator
“is by far best-situated to assess these myriad [facts] and determine whether” such an event
occurred. See United States v. Mejia-Canales, 467 F.3d 1280, 1284 n.3 (10th Cir. 2006) (quoting
United States v. Lancaster, 6 F.3d 208, 210 (4th Cir.1993)).
ONC cites one case dealing with Rule 11 sanctions to argue that an award based on both
bad faith and improper conduct is necessarily tainted because it becomes “impossible to
determine whether the latter violation, by itself, would have resulted in an award of attorney
fees.” See Business Guides, Inc. v. Chromatic Communications Ent., Inc., 892 F.2d 802, 814
(9th Cir. 1989), aff’d, 498 U.S. 533 (1991). Although there is “almost no case law as to awards
of attorney fees as sanctions under 29 C.F.R. § 4221.10(c),” ONC likewise makes little effort to

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analogize that case to the case at bar. (See ONC’s Mem. in Supp. of Mot. for S.J. 36-37 n.55,
Dec. 28, 2011, ECF No. 59.) The Court likewise declines to do so. Rather, it appears that the
question of whether the Arbitrator erred in finding the Employers contested arbitration “in bad
faith” need not be answered; ample evidence from his first-hand perceptions supports a finding
of improper conduct and subsequent award of attorneys’ fees.6
D. Credit for Payment of Withdrawal Liability
Finally, the Employers argue that the Arbitrator erred in failing to credit payments they
made under Amendment 5 toward the withdrawal liability they incurred. This issue needs
additional explanation, as no party has provided an adequate basis upon which the Court can rest
its decision. The Arbitrator distinguished “installment payments of withdrawal liability,” which
the $.52 payments were found to be, from “payments of withdrawal liability,” the language used
in 29 U.S.C. § 1392. (POD’s Mem. in Supp. of Mot. for S.J., Ex. 4, at 15-16.) He also found that,
even if the $.52 contributions fall within the precise statutory definition, they do not technically
qualify because “they were never made pursuant to any schedule for liability payments
established by the Plan,” as required by § 1401(b)(1). (POD’s Mem. in Supp. of Mot. for S.J.,
Ex. 4, at 6, 15-16.) Finally, the Arbitrator found that because ERISA “confers no jurisdiction on
an arbitrator to consider whether [the Employers] are entitled to a credit in this arbitration for a
payment the Plan accepted when [they] had no obligation to contribute” under § 1392, it was not
within his purview to credit the payments toward the Employers’ withdrawal liability. (See
POD’s Mem. in Supp. of Mot. for S.J., Ex. 4, at 6-7.)
Thus, although the Employers have paid money to the Plan, the money has not been
credited toward anything—withdrawal liability or otherwise. Besides fundamental fairness
issues, this situation also raises questions that warrant additional briefing, namely: (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 under ERISA for a payment to count toward withdrawal
liability; and (3) whether crediting payments of withdrawal liability falls within the Arbitrator’s
6

Accordingly, it was also within the Arbitrator’s discretion to award the Plan its attorneys’ fees and to deny the
Employers their respective fees. The Court therefore declines to alter the Arbitrator’s decision and denies POD its
request for attorneys’ fees.

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jurisdiction at all. Because these questions are not sufficiently addressed in the briefing at
present, the Court directs counsel to contact the Court and schedule a telephone conference to
discuss resolution of this issue and the possible need for more information before it can render a
decision on that particular issue.
Conclusion
Thus, the Court grants the Plan’s cross-motion for summary judgment on the grounds that
a collective bargaining agreement can constitute “any transaction” for withdrawal liability
purposes within the plain meaning of 29 U.S.C. § 1392(c); that the Employers’ in fact incurred
withdrawal liability by adopting Amendment 5 with “a principal purpose” to “evade or avoid”
that liability; and that the Arbitrator did not err in awarding the Plan its attorneys’ fees and costs
pursuant to 29 C.F.R. § 4221.10. However, the Court reserves the question of whether the
Arbitrator erred in failing to credit the Employers’ payments toward their withdrawal liability
until it receives additional information from the parties.

SO ORDERED.
DATED this 27th day of June , 2012.

BY THE COURT:

__________________________
DAVID SAM
SENIOR JUDGE
UNITED STATES DISTRICT COURT

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