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Roofers Local No. 30 Combined Pension Fund v. D.A. Nolt

June 18, 2010


The opinion of the court was delivered by: Robert F. Kelly, Sr. J.


Presently before the Court are two Motions for Summary Judgment. Plaintiffs Roofers Local No. 30 Combined Pension Fund, and its Board of Trustees and fiduciary Michael O'Malley (collectively, the "Fund") move for summary judgment against Defendant D.A. Nolt ("Nolt") and to dismiss all counterclaims in this action. Nolt filed a Cross-Motion for Summary Judgment against the Fund seeking to enforce a March 5, 2009 Opinion and Award ("Arbitration Decision") and a June 20, 2009 Final Award ("Final Award") of Arbitrator Ira F. Jaffe, Esquire (the "Arbitrator") resulting from arbitration conducted pursuant to 29 U.S.C. § 1401(a), and awarding attorneys fees and costs pursuant to 29 U.S.C. § 1451(e).


This is an appeal by a multiemployer pension fund of the determination made at statutory arbitration that an employer owed no withdrawal liability under the Multiemployer Pension Plan Amendments Act of 1980 (the "MPPAA"). This is the last of three related legal disputes involving the Fund which arose out of the former relationship between Nolt and Local Union 30 ("Local 30").

Nolt is a corporation that performs commercial roofing work. Local 30 is a labor union. Nolt was also a member of the Roofing Contractors Association (the "RCA"), a multi-employer association of commercial roofing contractors that exists primarily to conduct negotiations for collective bargaining agreements with the Union on behalf of its members. Since 1993, the RCA has entered into numerous collective bargaining agreements with Local 30. These were made possible because the RCA was authorized by its members to negotiate with Local 30 on their behalf. Nolt joined the RCA in June 1999. At that time, Nolt signed a Bargaining Agent Authorization ("BAA"), which authorized the RCA to serve as Nolt's bargaining agent with Local 30. Under the terms of the 1999 BAA, Nolt could withdraw from the RCA, but had to do so at least ninety days before the expiration of the existing agreement.

In June 2000, ten months before the 1997-2001 Collective Bargaining Agreement ("CBA") was due to expire, Local 30 initiated negotiations with the RCA concerning the terms of a subsequent agreement. In July 2000, the RCA and Local 30 concluded negotiations for a successor CBA for the period May 1, 2001 to April 30, 2009, and the union membership ratified the CBA. On January 30, 2001, Nolt sent a letter to the RCA stating that it was exercising its right to withdraw from the RCA. Because this had been the procedure for withdrawal under the terms of the 1999 BAA, Nolt asserted that this was proper notice of withdrawal. Consequently, Nolt believed that it was not bound by the new 2001-2009 agreement.

On May 2, 2001, Local 30 filed an unfair labor charge against Nolt before the National Labor Relations Board ("NLRB"), seeking to enforce the terms of the 2001-2009 CBA. On October 22, 2001, Local 30 also filed a Complaint in this Court under the Employee Retirement Income Security Act of 1974 ("ERISA") seeking contributions due under the terms of the 2001-2009 agreement. See Local 30, United Union of Roofers, Waterproofers and Allied Workers v. D.A. Nolt, Inc., 625 F. Supp. 2d 223 (E.D. Pa. 2008).*fn1

On January 23, 2002, a hearing was held before an Administrative Law Judge ("ALJ") on the unfair labor charges that Local 30 had filed before the NLRB. The ALJ found for Nolt and determined that Nolt was not bound by the terms of the 2001-2009 agreement. Local 30 appealed the ALJ's decision to the NLRB. On December 15, 2003, a three-member panel of the NLRB overturned the ALJ's decision and found that Nolt was bound to the terms of the 2001-2009 CBA. Nolt appealed the Board's decision to the Court of Appeals for the Third Circuit. On May 4, 2005, the Third Circuit overturned the Board's decision and issued an opinion in favor of Nolt, finding that Nolt was not bound by the terms of the agreement.*fn2 See NLRB v. D.A. Nolt, Inc., 406 F.3d 200 (3d Cir. 2005).*fn3

The instant action derives from the same factual circumstances as the labor dispute. Nolt ceased making contributions to the Fund after the prior CBA expired on April 30, 2001. On May 1, 2006, the Fund issued a notification to Nolt that it owed withdrawal liability (the "Withdrawal Liability Demand"). The Fund advised Nolt that Nolt had made a complete withdrawal from the Plan during the 2001 Plan year, and that Nolt was liable to pay withdrawal liability as required under 29 U.S.C. §§ 1382 and 1399(b)(1).*fn4 (Pls.' Mot. Summ. J., Ex. 49.) The Fund informed Nolt that its withdrawal liability, calculated pursuant to 29 U.S.C. § 1391(b), was $370,327, and demanded nine quarterly payments of $41,024, plus a final payment of $33,339. (Id.)

As will be discussed, infra, this was not the Fund's first calculation of its withdrawal liability, but rather, a second revised calculation, and was more than six times greater than the Fund's prior 2002 calculation of $58,226. (Id.., Ex. 79.) The Fund recalculated Nolt's withdrawal liability after a retroactive adjustment was made by the Fund's actuary that increased the Plan's 2000 schedule of unfunded vested benefit liabilities ("UVBLs"), or an excess of nonforfeitable benefits beyond the value of current fund assets, that is, benefits beyond the value of current fund assets by more than $10 million.*fn5 (Id.) Nolt issued a timely "Request for Review" of the Fund's Withdrawal Liability Demand on July 17, 2006, pursuant to 29 U.S.C. § 1399(b)(2)(A). (Id., Ex. 58.)

Nolt issued a demand for arbitration on December 26, 2006, and supplemented on January 7, 2007, challenging the amount of the Fund's withdrawal liability determination. (Id.) The parties agreed to arbitrate under the rules of the American Arbitration Association*fn6 (Id., Ex. 76.)

The arbitration hearings were held on April 28, 2008 and May 15, 2008, and the Arbitrator issued a 64-page written decision on March 5, 2009 (the "Arbitration Decision"). The Arbitrator rejected each successive change in position that the Fund had taken with respect to Nolt's withdrawal liability. This restored the matter to the Fund's initial determination of Nolt's withdrawal liability of $58,226, which was derived from the calculation of $2.7 million in UVBLs for 2000.*fn7

The Arbitrator further found that the Fund had improperly included certain benefits in its calculation of $2.7 million in UVBLs for 2000, and directed the Plan actuary to ascertain the value of those benefits and recalculate the amount of the UVBLs. The Plan actuary determined there was more than $8.5 million in improperly included benefits, and the net result of this correction was that there were no UVBLs for 2000. Accordingly, the Arbitrator determined that Nolt never owed any withdrawal liability.*fn8

The Arbitrator entered a Final Award on June 20, 2009. The Fund was directed to refund all of Nolt's payments, with statutory interest.*fn9 Subsequently, the Fund appealed this decision to this Court.


"Summary judgment is appropriate when, after considering the evidence in the light most favorable to the nonmoving party, no genuine issue of material fact remains in dispute and 'the moving party is entitled to judgment as a matter of law.'" Fed. R. Civ. P. 56(c); Hines v. Consol. Rail Corp., 926 F.2d 262, 267 (3d Cir. 1991) (citations omitted). The inquiry is "whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). The moving party carries the initial burden of demonstrating the absence of any genuine issues of material fact. Big Apple BMW, Inc. v. BMW of N. Am. Inc., 974 F.2d 1358, 1362 (3d Cir. 1992). "A fact is material if it could affect the outcome of the suit after applying the substantive law. Further, a dispute over a material fact must be 'genuine,' i.e., the evidence must be such 'that a reasonable jury could return a verdict in favor of the non-moving party.'" Compton v. Nat'l League of Prof'l Baseball Clubs, 995 F. Supp. 554, 561 n.14 (E.D. Pa. 1998), aff'd, 172 F.3d 40 (3d Cir. 1998) (citations omitted).

Once the moving party has produced evidence in support of summary judgment, the non-moving party must go beyond the allegations set forth in its pleadings and counter with evidence that demonstrates that there is a genuine issue of fact requiring a trial. See Big Apple BMW, 974 F.2d at 1362-63. Summary judgment must be granted "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). "[A]n opposing party may not rely merely on allegations or denials in its own pleading; rather, its response must . . . set out specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(e)(2).


The MPPAA amended ERISA to provide for "withdrawal liability." When an employer makes a "complete withdrawal" from a multiemployer pension plan, and that plan carries UVBLs or an excess of nonforfeitable benefits beyond the value of current fund assets, the employer may be responsible for its pro rata share of that plan's UVBLs. See 29 U.S.C. §§ 1383, 1391(b) and 1393(c). As noted, an employer's obligation to pay its proportional share of UVBLs is referred to as its withdrawal liability.

Before it was enacted, "many employers were withdrawing from multiemployer plans because they could avoid withdrawal liability if the plan survived for five years after the date of their withdrawal," and Congress was concerned "'that ERISA did not adequately protect multiemployer pension plans from the adverse consequences that result when individual employers terminate their participation or withdraw.'" Supervalu, Inc. v. Bd of Trs. of Sw. Pa. & W. Md. Area Teamsters & Employers Pension Fund, 500 F.3d 334, 336 (3d Cir. 2007) (quoting Warner-Lambert Co. v. United Retail & Wholesale Employee's Local No. 115 Pension Plan, 791 F.2d 283, 284 (3d Cir. 1986)). The MPPAA was therefore enacted and "designed '(1) to protect the interests of participants and beneficiaries in financially distressed multiemployer plans, and (2) to encourage the growth and maintenance of multiemployer plans in order to ensure benefit security to plan participants.'" Bd of Trs. of Trucking Employees of N. Jersey Welfare Fund, Inc. Pension Fund v. Centra Inc., 983 F.2d 495, 504 (3d Cir. 1992); see alsoVornado, Inc. v. Trs. of the Retail Store Employees' Union Local 1262, 829 F.2d 416, 420 (3d Cir. 1987) ("[T]he amendments as a whole clearly were meant to facilitate effective plan management and protect the interests of beneficiaries and participants."); Bd of Trs. of Teamsters Local 863 Pension Fund v. Foodtown, Inc., 296 F.3d 164, 168 (3d Cir. 2002) (explaining that the MPPAA works to "protect the retirement benefits of covered employees"); IUE AFL-CIO Pension Fund v. Barker & Williamson, Inc., 788 F.2d 118, 127 (3d Cir. 1986) ("Courts have indicated that because ERISA (and the MPPAA) are remedial statutes, they should be liberally construed in favor of protecting the participants in employee benefit plans.").

To accomplish these goals, the MPPAA "requires that a withdrawing employer pay its share of the plan's unfunded liability," which "insures that the financial burden will not be shifted to the remaining employers" in the fund. Supervalu, 500 F.3d at 337; see also 29 U.S.C. § 1381(a); Foodtown, 296 F.3d at 168 ("[T]he MPPAA requires employers who withdraw from underfunded multiemployer pension plans to pay a withdrawal liability."). The pension fund "determine[s] whether withdrawal liability has occurred and in what amount." Supervalu, 500 F.3d at 337 (citing 29 U.S.C. §§ 1382, 1391). Under 29 U.S.C. § 1383(a), 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." 29 U.S.C. § 1383(a). "[T]he amount of an employer's withdrawal liability is the employer's proportionate share of the unfunded vested benefits existing at the end of the plan year preceding the plan year in which the employer withdraws." Supervalu, 500 F.3d at 337 (citing 29 U.S.C. § 1391(b)(2)(A)).

In addition, a multiemployer pension plan is vested with the power under the MPPAA to determine when there is a complete withdrawal, to calculate the amount of withdrawal liability and the schedule of payments, and to demand and collect withdrawal liability in accordance with its determination. See 29 U.S.C. §§ 1382 and 1399(b)(1).


It is clear that, in arbitration under the MPPAA, the Arbitrator's factual findings are presumed to be correct and are "rebuttable only by a clear preponderance of the evidence." 29 U.S.C. § 1401(c); Huber v. Casablanca Indus., Inc., 916 F.2d 85, 89-90 (3d Cir. 1990); United Retail & Wholesale Employees v. Yahn & McDonnell, Inc., 787 F.2d 128, 135 n.9 (3d Cir. 1986). The "clear preponderance" language of the statute has been used interchangeably with "clear error." See, e.g.,Santa Fe Pac. Corp. v. Cent. States, Se. & Sw. Areas Pension Fund, 22 F.3d 725 (7th Cir. 1994). "A finding is clearly erroneous if the reviewing court, after duly acknowledging the superior proximity of the factfinder to the witnesses, is firmly convinced that the finding is erroneous." Santa Fe, 22 F.3d at 727 (citing Concrete Pipe & Prods., Inc. v. Constr. Laborers Pension Trust, 508 U.S. 602 (1993)).

Moreover, reviewing courts must give great deference to an arbitrator's determination because of the MPPAA's strong policy favoring arbitration of withdrawal liability disputes. Mason & Dixon Tank Lines, Inc. v. Central States Pension Fund, 852 F.2d 156, 163-64 (6th Cir. 1988) (stating that arbitration is the "preferred method" for resolving withdrawal liability disputes and that "under the MPPAA 'arbitration reigns supreme'"). In Sherwin-Williams Co. v. N.Y. State Teamsters Conference Pension, Ret. Fund, the court stated that:

[T]he series of presumptions prescribed by the Multiemployer Act were intended by Congress to "ensure the enforceability of employer liability.

In the absence of these presumptions, employers could effectively nullify their obligation by refusing to pay and forcing the plan sponsor to prove every element involved in making an actuarial determination." 158 F.3d 387, 392-93 (6th Cir. 1998); see also Board of Trs., Mich. United Food & Commercial Workers Unions v. Eberhard Foods, Inc., 831 F.2d 1258, 1260 (6th Cir. 1987).

Furthermore, deference to the findings of the arbitrator is proper because the arbitrators chosen to resolve the complicated issue of withdrawal liability often have relevant expertise in the field of pension law which can contribute significantly to the accuracy of a decision. Sherwin-Williams, at 392-93.

The Arbitrator's legal conclusions are reviewed de novo.*fn10 Crown Cork & Seal Co. v. Cent. States Se. & Sw. Areas Pension Fund, 982 F.2d 857, 860 (3d Cir. 1992). In Huber, the court stated that the "statute does not prescribe the standard of review for legal conclusions of the Arbitrator but the parties, including the amicus curiae Pension Benefit Guarantee Corporation ('PBGC'), and the district court agree that the legal conclusions of the Arbitrator must be reviewed de novo, and we concur."*fn11 Huber, 916 F.2d at 89.


As already noted, the parties have both filed Motions for Summary Judgment and have filed extensive briefs in support of their Motions.*fn12 It has been a difficult task to discern from these extensive briefs exactly what issues the Fund is appealing from the Arbitration Decision. These are the issues that we have identified and will address: (1) the date of Nolt's withdrawal from the Fund; (2) the inclusion of forfeitable benefits in the calculation of vested benefits; (3) the Fund's recalculation of withdrawal liability based upon a retroactive increase in UVBLs; (4) the validity of pre-demand interest; and (5) the calculation of the payment schedule for withdrawal liability.

1. Date of Withdrawal from the Fund

As detailed above, for a number of years, Nolt was a member of the RCA, a multiemployer association that bargained for new CBAs with the Roofer Union. Nolt was a signatory to the 1997 to 2001 CBA. In July 2000, a new eight-year CBA was ratified by the Union membership and Nolt accepted the CBA. However, ninety days before the expiration of the 1997-2001 CBA, Nolt advised the RCA that it was withdrawing from the RCA. The Fund brought unfair labor practices against Nolt with the NLRB. An ALJ found no violation of the MPPAA by Nolt's behavior. A split Board panel reversed and the Third Circuit eventually reversed the Board finding that Nolt's withdrawal from the RCA was proper and that Nolt was not bound by the 2001-2009 CBA.

Also, as noted earlier, on May 1, 2006, the Fund issued a notification to Nolt that it owed withdrawal liability based on Nolt making a complete withdrawal from the Roofers Local 30 Combined Pension Plan (the "Plan") during the 2001 Plan year. The Fund calculated the withdrawal liability to be $370,327 (Pls.' Mot. Summ. J., Ex. 49.) This, however, was not the Fund's first calculation of Nolt's liability. Rather, it was the Fund's second "revised" calculation because in 2002 the Fund had previously calculated the withdrawal liability to be $58,226. (Id., Ex. 76.) Thereafter, Nolt issued a timely "Request for Review" of the Fund's Withdrawal Liability Demand, and one month prior to arbitration, the Fund adopted a third position on Nolt's withdrawal liability. The former Plan actuary, and the Fund's expert at arbitration, James McKeough, F.S.A. ("McKeough") issued a March 18, 2008 expert report (the "McKeough Report") which set forth a third calculation of Nolt's withdrawal liability in the amount of $509,949. (Id., Ex. 53.) The Fund conceded at arbitration ...

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