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from the I.A.M. National Pension Fund ("Fund") and assessed liability for a
partial withdrawal within the meaning of ERISA Sec 4205(a)(2),1 because the
Company closed its Los Angeles facility and transferred work to its facility at
Long Beach, California. On the basis of the governing plan documents and
Fund, 770 F2d 106 (CA 8, 1985), the Fund's actions are sustained.
II. Background
the years, the Company has transported automobiles for most of the well-known
automobile manufacturers in the world. In the late '70s and early '80s, the
2
Conference Automotive Shop Servicing, Truck Servicing Agreement
In 1980, due to the loss of General Motors' business, the Company's L.A.
operations began a downturn [CX 2-4, 9], which culminated with the loss of
Chrysler's business in early 1982 [CX 5, 10, 4, 9]. Not only was Chrysler's
business lost, but the Company's lease on its L.A. facility was terminated [CX
6]. As a result of the loss of business and leasehold in L.A., the Company
4
"Tr " denotes the hearing transcript.
5
"FX" denotes Fund Exhibit.
3
behalf of transferred mechanics.
However, there was a conflict between the Machinists and the Teamsters,
because Long Beach was a Teamsters facility. The two unions resolved their
("Memorandum Agreement"):
3. It is agreed that this protection is only made for those members who
initially transferred and by attrition will be replaced by Teamsters
4. Effective April 7, 1982, these members will begin working under the
Teamsters Automotive Shop and Truck Servicing Supplemental
Agreement.
fully acquiesced therein. Thus from and after April 7, 1982, all Long Beach
mechanics, including those transferred from L.A., worked under the Teamster
Contract.6
4
transferred mechanics, per the Memorandum Agreement. However, early in
1983, the Fund became apprised of the transfer to Long Beach and of the
behalf of mechanics at Long Beach and cancelled all service credits earned after
April 7, 1982, the date of the Memorandum Agreement. The Company then
demanded, and the Fund gave, a refund of all contributions made after April 7,
1982.
Initially, the Fund charged the Company for a complete withdrawal under
ERISA Sec 4203(a). However, the Company informed the Fund that it and its
1F].7 See ERISA Sec 4001(b)(1). The Company requested that the Fund review
its determination [JX 1C], as provided in ERISA Sec 4219(b)(2)(A). The Fund
did so and reiterated the correctness of its decision [JX 1E]. The Company then
A hearing was held May 13, 1987 and July 10, 1987, in the offices of the
7
"JX" denotes Joint Exhibit.
5
conducted in accordance with the Multiemployer Pension Plan Arbitration
employer from a plan on the last day of a plan year if for such plan year * * *
6
provisions to ERISA, provides examples of partial withdrawals:
7
covers two facilities. Suppose further that the employer ceases to have an
obligation to contribute to the plan for employees at one of the four facilities but
that the collective bargaining agreements and work at the facilities otherwise
Representative Thompson), but the scenario cannot be fitted into the literal
Sec (A)(ii).
its L.A. facility and consolidation of operations in Long Beach gave rise to a
partial cessation of the employer's contribution obligation for 1982, within the
Inc and IAM National Pension Fund, 7 EBC 2562 (Arb, 1986) was an
arbitration over a partial withdrawal, the particular issue presented here was not
(I) a permanent cessation of the obligation to contribute for some, but not
all, covered work;
and
(II) a continuation of work previously covered.
In Fraser Shipyards, at issue was when (I) occurred, not whether (II) was
8
satisfied.
In the Fraser Shipyards matter, the company closed its shipyard machine
shop and consolidated operations with another company machine shop nearby.
During the arbitration, the company did not attack the pension fund's
determination regarding requirement (II) but argued only that the fund's
Consequently, the arbitrator did not discuss, and made no ruling on, requirement
Unlike Fraser Shipyards, here there is no doubt that all of the operative
9
The arbitrator's decision in Fraser Shipyards is being challenged by the employer, IAM National Pension Fund
v Fraser Shipyards, Inc, Civ Action No. 86-3492 (D DC).
In Fraser Shipyards, there was evidence in the record which might tend to support the fund's implicit
determination that the work previously done at the shipyard machine shop was subcontracted to third parties or
transferred to the other machine shop nearby. Indeed, after the closing of the shipyard machine shop, former
shipyard machinists filed numerous protests that their work was being subcontracted to outside companies or
being performed by machinists from the other shipyard. The subcontracting of work previously performed by
employees of an employer participating in a multiemployer plan may give rise to withdrawal liability; see e.g., HC
Elliott, Inc v Carpenters Pension Trust Fund, 663 F Supp 1016; 8 EBC 2121 (ND Cal, 1987). It is with respect to
the transfer of work to another facility that the true difficulty arises.
Recall that Representative Thompson explained that the transfer of work provision of ERISA Sec
4205(b)(2)(A)(i) was intended to cover the transfer "by the employer to another of his plants at a geographic
location where contributions to a plan for the work performed are not required" (emphasis supplied). However, the
statutory provision does not contain this limiting language and the transfer of work to a covered facility (as in
Fraser Shipyards, 7 EBC 2562) may have the same effect as the transfer to a non-covered one. Suppose, for
example, that the transferred work is performed during overtime hours for which contributions to the pension plan
are not required. In such a case, the employer is still performing the same volume of covered work but the plan is
experiencing the identical decline in contributions it would have experienced if the work had been transferred to a
non-covered facility.
Thus, when an employer permanently ceases to have an obligation to contribute under one or more but
fewer than all collective bargaining agreements under which the employer has been obligated to contribute under
the plan but transfer work of the type for which contributions were previously required to a different geographic
location where contributions to the plan for the work performed also are required, it is unclear whether the transfer
(a) is within the ambit of ERISA Sec 4205(b)(2)(A)(i), or (b) is wholly outside the ambit, or (c) must be
investigated to determine the effect on the plan. The point here is that, in Fraser Shipyards, these issues were not
raised by the parties and so not ruled upon by the arbitrator. Instead, the employer based its entire defense on the
labor dispute exception in ERISA Sec 4218. 7 EBC 2573.
9
events occurred in a single plan year, 1982. The Company's L.A. lease expired
February 1, 1982 [CX 6] and the move to Long Beach was completed by
February 15, 1982 [CX 7 & 8; Tr 92-93]. The issue presented is whether the
previously covered; if not, then the mere closure of the L.A. facility in and of
At the outset, it should be noted that the work with which we ultimately
are concerned is that for which contributions were required to be made to the
Fund, not necessarily that which constituted the Company's principal business.
The Company presented revenue data for L.A. and Long Beach during
the years 1979-1982 [CX 4]. Reproduced below are the data for all L.A.
business other than General Motors and Chrysler; the 1982 figures for L.A.
10
It is unclear whether the L.A. data for 1982 represent only the month of January or the first six weeks of the
year [CX 4]. To keep the annualized figures conservative, it is assumed that they represent 6-week totals. I am not
unmindful that a Company witness, Jack N. Cate, twice remarked that the 1982 figures were for "the first few
months of 1982" [Tr 55]. However, Mr. Cate's remarks were somewhat offhand and, if taken literally, were
against the great weight of the evidence pointing to February 1, 1982 and February 15, 1982 as the dates the
Company lost its L.A. lease and completed the move to Long Beach.
10
REVENUE
Although it may be true that the Company lost millions of dollars in Chrysler
business in 1982 [CX 9], the year was not destined to be a complete dud insofar
Beach in 1982:
The Company argues that the Van Nuys business ought not to be considered
without it, in 1982, the Company's revenues in Long Beach almost tripled over
the previous year, due in large measure to the transfer of business from L.A.
11
Indeed, an examination of these figures suggests that the consolidation in Long
Beach was as much the result of the loss of the lease in L.A. as it was the result
of the loss of Chrysler business. That is, if the Company had not lost its lease in
L.A., it could have remained there and done perhaps as much as $7,127,163 in
business, and even handled the $2,763,904 in Van Nuys business out of L.A., as
L.A. is closer to Van Nuys than is Long Beach. The Company's own revenue
business in L.A.
the revenue figures and reinforce the conclusions drawn from them, namely,
that there was not a mere closing of the L.A. facility, but the transfer of a
LONG BEACH
TOTAL UNITS 37 45 41 197
12
The personnel data are, of course, the most important [CX 11]:
LONG BEACH
DRIVERS 19 21 18 16 17 104
YARD MEN 6 6 6 6 6 10
MECHANICS 4 4 4 4 4 11
SERVICE MEN 1 1 1 1 0 5
TOTAL 30 32 29 27 27 130
At the end of 1981, there were eight mechanics in L.A. and four in Long Beach.
When the Company lost Chrysler's business early in 1982, one of the L.A.
mechanics went to work for the company which took over the Chrysler account
[Tr 58]; the rest moved to Long Beach so that by 6/30/82, there were eleven
At Long Beach, the mechanics transferred from L.A. performed the same
type of work (in many cases, on the very same vehicles) that they had
performed in L.A. A few quotes from the testimony are instructive on this
crucial point:
13
they were in Long Beach originally or whether they came down from
L.A.: the maintenance of the fleet.
***
Q. And those mechanics were in 1982 transferred to Long Beach to
repair that same equipment?
A. Yes, sir.
The marked increases in all Long Beach data for 1982, revenues,
equipment, personnel, leave no doubt that the closure of the L.A. facility
resulted in the transfer of work, including covered work, to Long Beach. The
closure of the L.A. facility definitely was not the type of terminal event,
14
Commercial did not operate at Long Beach, there would have been no
basis for the Fund to impose a withdrawal liability. Co Brief, p 36.
The facts of the matter are that the Company did operate at Long Beach and that
The events just chronicled can be fit into the statutory framework in
several ways, the easiest of which is to fit them into ERISA Sec
obligation to contribute to the Fund for work performed at its Long Beach
facility but otherwise continued to perform the same work at Long Beach and
continued to contribute to the Fund for work done at other facilities. There was
Machinists Contract, which called for contributions to the Fund, and their duties
11
It is interesting to note that, prior to the transfer, all of the Company's interstate import business emanated from
Los Angeles, whereas Long Beach was restricted to intrastate imports. See CX 4; Co Brief, pp 11-13.
15
this argument ignores controlling provisions of the Participation Agreement12,
which provide:
Machinists contract [FX 12] was due to expire May 31, 1982), it violated
other than merely "increasing the contribution rate or increasing the categories
16
The changes made in the participant group by paragraph 3 of the
142-144]. Under the funding policy adopted for the plan, it is assumed that
by Teamsters who were not covered. The Fund was well within its contractual
3]. After execution of the Memorandum Agreement [CX 15] on April 7, 1982,
all mechanics in Long Beach were represented by the Teamsters [Tr 109, 112,
131, 207; CX 22]. Although the Trust Agreement does provide for coverage of
The term "Employees" may also include such other class or classes of
employees who are not within the bargaining unit represented by the
Local or District Lodges of the I.A.M., or the I.A.M., but who are
employed by an Employer making contributions in their behalf, provided
that the acceptance of such class or classes is not discriminatory and in
each case is subject to actuarial evaluation by the Trustees, whose
decision with regard to their acceptance or rejection shall be final. Art I,
Sec 2(c) [emphasis supplied].
17
participant group such as that created by the Memorandum Agreement. Under
the express terms of the Trust Agreement, the Trustees' decision in this regard is
final.
representing its employees cannot force their will upon the trustees of a
Vema, 627 F Supp 408, 411 (WD Wash, 1986) ["(I)f an employer * * * could
force its individualized labor contract on the Trustees, then such an employer
Workers Pension Fund, 479 F Supp 1072, 1082 (D Neb, 1979) ["A multi-
agreement, the Fund's trustees have the right under the Plan and the duty under
program."]. In the present matter, it is undisputed that the Fund was not a party
to, had no prior knowledge of, and has not consented to the Memorandum
Agreement. See, for example, Tr 213. Consequently, neither the Company nor
18
the Machinists nor the Teamsters can force the Fund to abide by it.
Southwest Areas Pension Fund, 770 F2d 106 (CA 8, 1985), cert den 106 S Ct
1515 (1986), is very much applicable to the instant matter. In that case, the
providing that employees hired after the execution of the agreement would be
covered under a different plan. The trustees' rationale was founded upon the
retiring members would be used in part to pay the benefits due retired members.
In the absence of replacements, the fund would suffer an actuarial loss. 770 F2d
110. The Fund's actuary testified to the same effect in this matter, and the same
The Company does not contest the Fund's actuarial theory but argues
only that it is irrelevant to any express statutory provision and that its
application to the Company is unfair. On the first point, the Company writes:
In part to justify its action, the Fund offered testimony by the enrolled
actuary under the Plan that continued acceptance of the contributions
would theoretically adversely affect the actuarial status of the Plan (Tr
143). Commercial does not contest this actuarial theory, instead,
Commercial contends that these actuarial consequences are irrelevant to a
demand for partial withdrawal liability under ERISA. Co Brief, p 24
(emphasis supplied).
19
The Fund submitted actuarial evidence to justify its actions under plan
triggered.
With respect to the second point of unfairness, the actuary ably answered
the Company's suggestion that its situation was no different than that of any
continued accordingly [Co Brief, p 32]. The actuary pointed out that just
because a pension plan unwittingly may become the victim of industrial decline
does not mean that it knowingly should submit to adverse selection [Tr 146-
147].
20
[The Company] was not required to take any further actions such as a
request for written approval from the Fund, to substitute collective
bargaining agreements. Co Brief, p 31.
The plain language of the governing documents, especially that quoted above
from section 4 of the Participation Agreement, makes it clear that the Company
Based upon this statutory provision, the Company argues that the Memorandum
Agreement was but a substitute for the Machinists Contract and hence it cannot
another.
Implicit in the statutory language (if not actually encompassed within the
replaces; if this were not so, participating employers could virtually rewrite a
21
sought to radically alter the terms of the Participation Agreement without the
exception in ERISA Sec 4218(2). The Company argues that a "labor dispute"
need not be restricted to a conflict between employer and union but may be
instigated by a third party, in this case, the Fund. Surely, if the labor dispute
exception applied to disputes between employer and plan, the whole MPPAA
If the dispute is resolved in favor of the employer, then the employer is entitled
resolve this matter, the operative events also can be fit into ERISA Sec
obligation to contribute to the Fund under the Machinists Contract but continued
22
agreement of the type for which contributions were previously required.13 The
controlled group [the "employer" for purposes of Title IV, ERISA Sec 4001(b)]
unspecified collective bargaining agreements [Co Brief, p 8]. The events further
can be fit into the "transfer" portion of ERISA Sec 4205(b)(2)(A)(i) by viewing
the L.A. mechanics' work as having been transferred to Long Beach and
these views leads to the conclusion that the Company (more precisely, the
ERISA Sec 4205(a)(2) and that the Fund's determination to that effect is correct.
Inc and Central States, Southeast and Southwest Areas Pension Fund, 8 EBC
2009, 2018-2019 (Arb, 1987), and so only will be summarized here. ERISA Sec
4221(a)(3)(A) provides:
23
shows by a preponderance of the evidence that the determination was
unreasonable or clearly erroneous.
if not nonsensical. 7 EBC 2571 & n 19. The phrase, "the party contesting the
place the burden of persuasion as to fact and law on the party contesting the
52(a). 7 EBC 2571 & n 20. Under the federal rules, findings of fact shall not be
set aside unless the reviewer on the entire evidence is left with the definite and
firm conviction that a mistake has been committed. United States v United
States Gypsum Co, 333 US 364, 395 (1948). "Unreasonable" was related to
24
contesting the plan sponsor's determination must (A) prove to the arbitrator,
definitely and firmly, on the basis of the entire evidence, that a mistake has been
In the matter before me, the Company has not convinced me that the Fund's
The Company urges that, since the standard of review for trustee actions
is the same under ERISA as under the Labor Management Relations Act
judge trustee behavior, citing Elser v IAM National Pension Fund, 684 F2d 648
(CA 9, 1982) and Danti v Lewis, 312 F2d 345 (CA DC, 1962). As was pointed
14
The argument that the phrase, unreasonable or clearly erroneous, in ERISA Sec 4221(a)(3)(A) creates a
bifurcated standard of review for a plan sponsor's conclusions of law and findings of fact, receives unexpected
support from IAM National Pension Fund v Stockton TRI Industries, 727 F2d 1204, 1207 n 7 (CA DC, 1984):
Under MPPAA, however, the decisions of the arbitrator, like the decisions of a typical administrative
agency, are fully reviewable to determine whether applicable statutory law has correctly been applied
and whether the findings comport with the evidence. See 29 U.S.C. Sec 1401(a)(3)(A) (presuming in
general that the decision of the arbitrator is correct "unless the party contesting the determination shows
by a preponderance of evidence that the determination was unreasonable or clearly erroneous").
The court is, of course, mistaken in asserting that this is the standard for reviewing the arbitrator's decision; rather,
it is the standard by which the arbitrator reviews the plan sponsor's determination. The standard for a court's
review of the arbitrator's decision is set forth in ERISA Sec 4221(c). Additional support for the bifurcated standard
(and especially for the proposition that "unreasonable" in ERISA Sec 4221(a)(3)(A) refers to conclusions of law)
can be found in Dorn's Transportation, Inc v IAM National Pension Fund, 578 F Supp 1222 (D DC, 1984); aff'd
w/o opinion 753 F2d 166 (CA DC, 1985), where the court wrote:
Review in arbitration may thus curtail any partiality, unfairness or mistake by the plan's trustees under
the "unreasonable or clearly erroneous" standard.
Further, the reasonableness of a plan's legal determinations may be weighed by the arbitrator in
light of the plan's interests and expertise. 578 F Supp 1238.
25
see also Struble v NJ Brewery Employees' Welfare Trust Fund, 732 F2d 325
"clearly erroneous". See generally 9 Wright and Miller, Federal Practice and
Procedure: Civil Sec 2585, p 735 & n 10 (West 1971). For this reason, the
correct.
arbitral standard of review [JX 1D; Tr 11]. This issue was discussed at length in
Teamsters Union Local No. 115 Pension Plan v Yahn & McDonnell, Inc, 787
F2d 128 (CA 3, 1986), the Third Circuit declared ERISA's arbitral standard of
26
divided Supreme Court affirmed, 107 S C. 2171; 8 EBC 1649 (1987) [White, J,
In light of the affirmance by the Supreme Court, the Company urges that
the arbitrator reevaluate Fraser Shipyards and proffers the following arguments,
which I address:
The Company, and every other MPPAA critic, ignores ERISA Sec 4023:
Whatever the trustees' duties to a plan under Title I of ERISA [especially Sec
Title IV, they are excused from those duties. Moreover, under ERISA Sec
4301(a)(1), an employer has a cause of action against trustees who deprive the
employer of its MPPAA rights. Amax is a LMRA, not a MPPAA, case and does
15
ERISA Sec 4021 applies because the plan at issue is qualified; see Trust Agreement, Art VI, Sec 6 [FX 3].
27
not address fiduciary duties under Title IV of ERISA. See generally Fraser
than a duty of good faith and fair dealing toward employers in withdrawal
liability matters.
The Fund's trustees have the discretion to pick among four (4) actuarial
methods and its conclusion in its selection of one (1) of the four (4) may
very well have an adverse impact upon the Employer without benefit of a
more reasonable standard. Co Brief, p 19.
ERISA Sec 4211 sets forth four methods for allocating a share of a plan's
unfunded vested liabilities. 7 EBC 2577 & n 26, viii (for correction). Trustees
rather, a method is selected initially and thereafter can be changed only by plan
amendment. Id. In the instant matter, the Fund's method was selected in 1981
and the Company was informed of this fact in correspondence dated May 22,
contacts with the withdrawing employer. ERISA Secs 4202; 4219(b). In the
28
Oolite Industries arbitration, 8 EBC 2009, the plan, without waiving any rights
under the statutory presumption, agreed to present its prima facie case first.
Federal Regulations [29 CFR Sec 2641.5(e)] and the Arbitration Rules (Sec 24)
issue in opening statement [Tr 11], it did not claim to be unaware of the Fund's
position and made no request that the customary procedural order be varied. It
thus does not appear that the statutory presumption, insofar as its reversal of the
usual order of proof is concerned, had any negative impact on the Company.
Nor does the presumption seem to have had any profound impact on the
tally of decisions which have been reported in Employee Benefits Cases (BNA),
beginning with Herman Segall, Inc and ILGWU Retirement Fund, 3 EBC 1609
(Arb, 1982) through Don Hutson, Inc and Central States Pension Fund, 8 EBC
arbitrations analyzed. See, for example, Oolite Industries, 8 EBC 2009. The
statutory presumption has not made arbitration a rubber stamp of plan sponsor
29
in Yahn & McDonnell was explained in Oolite Industries, 8 EBC 2027-2028; it
leaves the judgment below in force but is not of any precedential value. Thus,
the split over the constitutionality of ERISA Sec 4221(a)(3) remains, with the
First, Second, Fourth, Ninth and D.C. Circuits upholding constitutionality, and
with the Third Circuit voting against. Fraser Shipyards, 7 EBC 2574. The
matter before me is not governed by the law of the Third Circuit nor is this
arbitration being conducted under the auspices of a federal district court which
has sided with the Third Circuit, e.g., Robbins v Pepsi-Cola Metropolitan
Bottling Co, 636 F Supp 641; 7 EBC 2033 (ND Ill, 1986) [later case history
plan documents, it compels the determination which the Fund in fact made.
Even if I were to decide this matter de novo, I would reach the same conclusion.
X. Costs of Arbitration
Each party seeks costs and attorneys' fees. In particular, the Fund
arbitrator will, in a proper case, award costs and attorneys' fees. See, for
16
Fund Reply Brief dated October 15, 1987, p 19. With its Reply Brief, the Fund tendered some exhibits not
previously submitted. In reaching a decision on this matter, it is unnecessary to consider this additional material.
30
example, EA Nord Co and Western Council LPIW-TOC Pension Fund, 8 EBC
2171, 2177-2178 (Arb, 1987); see also Oolite Industries, 8 EBC 2026-2027.
Federal Regulations make splitting the costs of arbitration the norm, 29 CFR
I am unable to conclude that the Company has acted in bad faith. Indeed,
the Company recites that it itself has expended over $36,000 in attorneys' fees in
pursuing this matter.17 As part of the relief requested, the Company asks to be
difficult to find bad faith on the part of a party which asked to be allowed to pay
contributions which ultimately will far exceed the amount of the withdrawal
liability at issue.
contrary.
17
Co Reply Brief dated October 15, 1987, pp 20-21.
18
Co Brief, p 47.
19
For the period April 1982 through October 1987, based upon an extrapolation of refunded contributions [Tr 7-
8].
31
XI. Observation
comply with the terms of the Memorandum Agreement and thereby protect the
Although the Company cannot force the Fund to accept the terms of the
Memorandum Agreement, it can offer the Fund a premium for covering the
Rules Sec 37 are included (but not explicitly designated as such) in this opinion.
32