Mar-Can Transportation Company, Inc. v. Local 854 Pension Fund

Background

Mar-Can Transportation Company, Inc. participated in the Local 854 Pension Fund, which the opinion calls the “Old Plan,” under a collective bargaining agreement with Teamsters Local 553. In March 2020, Mar-Can’s employees voted in a certified election to leave that union and join Local 854 of the Amalgamated Transit Workers Union. After the new union was certified, the collective bargaining agreement with Teamsters Local 553 ended, triggering Mar-Can’s complete withdrawal from the Old Plan.

The Old Plan assessed about $1.8 million in withdrawal liability against Mar-Can under the Employee Retirement Income Security Act of 1974 (ERISA). While the case was pending, Mar-Can deposited withdrawal-liability payments into the Court Registry, although the parties disputed whether all required payments had been made.

ERISA Section 1415 required the Old Plan to transfer pension liabilities and assets to the new plan. The Old Plan transferred about $5.5 million in liabilities and $3.7 million in assets for Mar-Can employees. Mar-Can argued that Section 1415(c) required the Old Plan to reduce its withdrawal liability by the transferred liabilities minus the transferred assets—about $1.8 million, reducing the liability to zero. The Old Plan argued that no reduction was required because the transferred liabilities, after accounting for the transferred assets, did not exceed the assets transferred.

Expert reports

Both parties sought to exclude the other side’s actuarial expert reports under Federal Rule of Evidence 702. The court explained that expert testimony must assist the factfinder and cannot tell the court what the law means or state legal conclusions.

The court found that the bulk of both experts’ reports consisted of legal opinions about ERISA’s meaning and analyses of relevant case law. Because statutory interpretation is the court’s responsibility, the court excluded the reports of the Old Plan’s expert, Victoria Jones, and Mar-Can’s expert, Mitchell Hofing. The court therefore granted both sides’ requests to exclude the opposing expert reports, as reflected in the order’s partial-grant rulings.

Summary-judgment ruling

Summary judgment is appropriate when there is no genuine dispute about a material fact and the moving party is entitled to judgment under the law. The parties agreed that Section 1415(c) applied; their dispute was how to interpret the phrase “unfunded vested benefits allocable to the employer” in that provision.

Judge Seibel concluded that the phrase is ambiguous in Section 1415(c). ERISA defines “unfunded vested benefits” in Section 1393(c), but that definition expressly applies to Part 1 of ERISA, while Section 1415 appears in Part 2. The court also noted that the statute’s wording and the parties’ competing interpretations supported finding ambiguity.

The court then held that, for purposes of Section 1415(c), “unfunded vested benefits” means the amount of liabilities transferred. Section 1415(c) therefore requires subtracting the value of transferred assets from the value of transferred liabilities. Here, the calculation was approximately $5.5 million in transferred liabilities minus $3.7 million in transferred assets, producing a $1.8 million reduction. Because that matched Mar-Can’s assessed withdrawal liability, the court held that Mar-Can’s liability to the Old Plan must be reduced to zero.

The court relied on ERISA’s purpose and structure. It reasoned that requiring Mar-Can to continue paying the Old Plan for liabilities that had been transferred to the new plan could result in duplicate payments and would treat an employer whose employees changed unions worse than an employer that voluntarily withdrew. The court also concluded that its interpretation helped prevent a funding gap if Mar-Can later withdrew from the new plan.

The court rejected the contrary interpretation in an earlier Eastern District of New York decision, concluding that the decision did not adequately account for the distinction between ERISA’s Part 1 definition and Section 1415’s Part 2 provisions. The court stated that the parties’ other arguments concerning mass withdrawal were not relevant to the statutory-interpretation question and expressed no opinion on them. It also reserved factual disputes concerning the calculation of withdrawal liability, including actuarial assumptions such as interest rates, for arbitration.

Attorney’s fees and final dispositions

The Old Plan sought attorney’s fees and costs under ERISA. The court held that the mandatory fee provision for an action to collect delinquent withdrawal-liability payments did not apply because this was not such an action. The Old Plan also had not obtained success on the merits, so the court denied its requests for discretionary fees.

Because Mar-Can was the prevailing party, the court granted Mar-Can leave to move for a discretionary attorney’s-fee award. The court stated that the schedule for that motion would be set at a later conference and directed the parties to address the possible return of Mar-Can’s escrowed payments and the next steps in the litigation.

The court’s final order denied the Old Plan’s summary-judgment motion. It granted Mar-Can’s motion for partial summary judgment. It granted Mar-Can’s cross-motion in part to exclude Jones’s expert report and to allow Mar-Can to seek attorney’s fees, and denied that cross-motion in part as to its remaining requests. It granted the Old Plan’s cross-motion in part to exclude Hofing’s expert reports, and denied that cross-motion in part as to its remaining requests. The court directed the Clerk to terminate the pending motions and scheduled an in-person status conference for April 8, 2024.