North Star Industries, Inc. v. Local 854 Pension Fund

Background

North Star Industries participated in the Local 854 Pension Fund, which the opinion calls the “Old Plan,” through a collective bargaining agreement. After the union representing North Star’s employees disclaimed interest, North Star completely withdrew from the Old Plan. The National Labor Relations Board later certified the employees’ election to join another union, after which North Star began contributing to the Local 854 Pension Fund’s successor plan, which the opinion calls the “New Plan.”

The parties agreed that the statutory conditions for transferring pension liabilities and assets from the Old Plan to the New Plan were satisfied. The Old Plan had not completed the transfer because North Star challenged the amount of assets proposed for transfer. The Old Plan assessed North Star’s initial withdrawal liability at $39,757, plus interest. After reporting a mass withdrawal, the Old Plan assessed additional redetermination liability of $50,000, plus interest, and reallocation liability of $248,236. North Star disputed those assessments in ongoing arbitration.

North Star filed this action seeking, among other things, an order requiring the Old Plan to transfer the pension assets and liabilities, calculate the transfer under 29 U.S.C. § 1415(g)(1), reduce North Star’s withdrawal liability under § 1415, and refund any overpayments. North Star moved for partial summary judgment and also requested a stay and attorneys’ fees and costs.

Statutory interpretation

Section 1415(g)(1) defines the “appropriate amount of assets” as the value of the nonforfeitable benefits transferred minus the employer’s withdrawal liability to the old plan, calculated under the relevant part of the Employee Retirement Income Security Act without considering § 1391(e). North Star argued that “withdrawal liability” included its initial liability as well as redetermination and reallocation liability arising from the Old Plan’s mass withdrawal. The Old Plan argued that the phrase referred only to initial withdrawal liability determined when North Star withdrew.

Judge Seibel found the statutory language ambiguous when read in context. She concluded, however, that the structure and purpose of § 1415 supported the Old Plan’s interpretation. The transfer statute concerns liabilities associated with active employees who move to the New Plan because of a certified change in bargaining representative. Mass-withdrawal liabilities, by contrast, arise from a separate event and can include amounts related to inactive employees and other employers.

The court therefore held that § 1415(g)(1) uses North Star’s initial withdrawal liability, calculated at the time of its withdrawal from the Old Plan. It does not include redetermination or reallocation liability imposed because of a later mass withdrawal. The court reasoned that including those later amounts could cause the Old Plan to transfer liabilities without corresponding assets and could give North Star a reduction for liabilities that were not transferred to the New Plan.

Disposition

The court granted in part and denied in part North Star’s motion for partial summary judgment. It denied the motion to the extent North Star sought an order requiring the Old Plan to include redetermination or reallocation liability in the § 1415(g)(1) asset calculation. The court ordered the Old Plan to transfer pension assets and liabilities under § 1415, determine the appropriate amount of assets under § 1415(g)(1) consistently with the opinion, and calculate the corresponding reduction in North Star’s withdrawal liability.

The court denied North Star’s request for discretionary attorneys’ fees and costs because North Star had not obtained success on the statutory-interpretation issue decided in the motion. The court also denied North Star’s request for sanctions under Federal Rule of Civil Procedure 11 because North Star had not filed a separate sanctions motion or shown compliance with Rule 11’s 21-day safe-harbor procedure. The court further stated that the Old Plan’s position was not frivolous and would not warrant sanctions even if the procedural requirements had been satisfied.

The court granted North Star’s request to stay the action pending the parties’ arbitration concerning the mass-withdrawal liability assessments. The parties must submit a status report within seven days after the arbitrator issues a decision.