By Kayleigh Butterfield
On June 29, 2015, the Fourth Circuit issued a published decision in the civil case Trustees of the Plumbers & Pipefitters National Pension Fund v. Plumbing Services, Inc. The case involved the Plumbers and Pipefitters National Pension Fund (“Fund”) and its suit against Plumbing Services, Inc. (“PSI”) and PSI’s successor company (collectively “Defendants”) for failing to pay withdrawal liability pursuant to 29 U.S.C. § 1381. The Fourth Circuit affirmed the district court’s grant of summary judgment in favor of the Fund.
PSI’s Agreement to Contribute
On April 8, 1998, the sole shareholder of PSI, Kenneth Julian, agreed in writing that PSI would make contributions to the Fund “as provided for by the [labor] Agreements now existing and hereafter.” Pursuant to this agreement, PSI began making contributions to the Fund in 1998 and continued to do so until 2011. On March 10, 2011, Julian—writing again on behalf of PSI—stated that PSI wanted to “abolish its working relationship with” the union that maintained the Fund. PSI’s successor, PSI Mechanical, filed articles of incorporation shortly before PSI went out of business in the summer of 2011. Julian remained the shareholder of PSI Mechanical.
Over a year after the March 10 letter, the Fund notified Julian that PSI had incurred withdrawal liability of $188,685 because the company was continuing the type of work that previously obligated it to contribute. PSI refused to pay and instead formally objected and sought review of the withdrawal liability. The Fund ultimately rejected PSI’s objections and demanded payment. Defendants did not pay, and failed to demand arbitration.
The issue of withdrawal liability stems from Congress’s enactment of the Employment Retirement Income Security Act (“ERISA”), which was meant to promote and stabilize employee benefit plans in private industries. In 1980, Congress expanded that goal by passing the Multiemployer Pension Plan Amendments Act (“MPPAA”), which established withdrawal liability for building and construction employers who (1) cease to have an obligation to contribute and (2) continue to perform the same type of work for which contributions were previously required in the jurisdiction of the collective bargaining agreement.
If an employer objects to an imposition of withdrawal liability, the plan sponsor must review the matter and notify the employer of the outcome and basis for its decision. If the employer still disagrees with the response, it must demand arbitration within 60 days after the sponsor’s notification, or 120 days after the employer’s initial request for review. Without a demand for arbitration, the employer is considered to have waived review of the withdrawal liability determination.
No Issue with Jurisdiction, Venue, or Merit Findings
The Fourth Circuit first addressed Defendants’ motions to dismiss for lack of personal jurisdiction and to transfer venue. The standard of review for jurisdiction is de novo, while the Court reviews venue transfer under abuse of discretion. The Court quickly disposed of the personal jurisdiction issue, noting that ERISA is a nationwide program that allows for a nationwide service of process. Thus, Defendants argument that it lacked “minimum contacts” with the chosen jurisdiction was moot. The Court went on to examine the four factors considered for a venue transfer, and found that (1) the weight accorded to plaintiff’s choice of venue was strong; (2) witness convenience and access was irrelevant given the lack of witness testimony needed for this case; (3) Defendant’s were not substantially inconvenienced; and (4) the interest of justice favored keeping the original venue.
Next, the Fourth Circuit addressed Defendant’s argument that the district court lacked subject matter jurisdiction because the action for withdrawal liability should have been brought under the National Labor Relations Act as opposed to ERISA. The Court explained that because Section 1145 of ERISA explicitly requires contractually obligated employers to contribute to a retirement fund in accordance with the operative collective bargaining agreement, it creates a federal right of action for collecting delinquent contributions as well as overdue withdrawal liability. Thus, the district court had subject matter jurisdiction over the Fund’s claim.
Finally, the Fourth Circuit reviewed de novo the district court’s grant of summary judgment on the merits. The Court noted that the Fund met its initial burden of providing sufficient evidence for its motion by providing an affidavit, correspondence, admissions from PSI, and a number of other documents. The Defendants failed to then provide evidence showing that there was a genuine issue for trial. Defendants did not dispute that they never demanded arbitration. Rather, they argued that PSI was not an employer subject to the arbitration requirement because Julian’s letter was not sufficient to bind PSI to future contributions.
The Fourth Circuit disagreed, stating that the text of Julian’s letter of assent clearly bound PSI to successor agreements under federal law. The Court noted that PSI’s conduct—decision to sign the letter, and contributing to the Fund for 13 years prior to withdrawing—also supported its obligations to contribute. Further, because PSI’s successor had the same shareholder and performed the same type of work, it was considered the same employer under ERISA. The Fourth Circuit concluded that Defendants were therefore one employer subject to the arbitration requirement, and, since they failed to demand arbitration, summary judgment in favor of the Fund should be upheld.
For the foregoing reasons, the Fourth Circuit affirmed the district court’s grant of summary judgment for the Fund.