Board of Trustees of the Pacific Coast Roofers Pension Plan v. Petersen-Dean

Background

The Pacific Coast Roofers Pension Plan is an employee benefit plan and multiemployer plan governed by the Employee Retirement Income Security Act (ERISA). The Board of Trustees administers the Plan. Petersen-Dean, Inc. and related employers had signed collective bargaining agreements requiring benefit contributions to the Plan.

By March 2017, Petersen-Dean no longer had an obligation to contribute. The Plan’s third-party administrator determined that Petersen-Dean had completely withdrawn from the Plan, making it responsible for withdrawal liability. The Plan calculated the liability based on partial withdrawals in 2014, 2015, and 2016, and a complete withdrawal in 2017. It assessed a lump-sum amount of $5,344,325.

The Plan sent Petersen-Dean notice of the withdrawal liability on July 17, 2017. Petersen-Dean requested reconsideration and demanded arbitration. The arbitration remained pending, and Petersen-Dean had not made withdrawal-liability payments. Petersen-Dean asserted that it was in financial distress and argued that entering judgment could place it in a financially untenable situation and reduce the likelihood of the Plan’s recovery.

Claims and Motion

The Plan sued under ERISA for payment of withdrawal liability and for failure to provide required information. The Plan moved for summary judgment. Petersen-Dean did not oppose the calculation of the withdrawal-liability amount and conceded that existing Ninth Circuit law generally required payment while its challenge was arbitrated.

The dispute focused on whether the court should adopt an equitable exception to ERISA’s “pay now, dispute later” rule and, if so, expand that exception to allow Petersen-Dean to avoid payments even though the Plan’s claim was not frivolous.

Court’s Analysis

ERISA requires an employer to make payments according to the plan’s withdrawal-liability determination until the arbitrator issues a final decision. An employer that does not pay while arbitration is pending is treated as delinquent. If the arbitrator later finds that the employer overpaid, the Plan must return the overpayment with interest.

The court discussed decisions from the Fifth and Seventh Circuits recognizing a narrow equitable exception. Under those decisions, a court might excuse interim payments when the plan’s claim is frivolous or not colorable—meaning it lacks a legitimate basis or is almost certain to fail in arbitration. The court also noted that the Ninth Circuit had not directly addressed whether this exception exists, and that the Sixth Circuit had declined to follow it.

The court did not decide whether the Ninth Circuit would adopt the exception. Instead, it held that there was no support for Petersen-Dean’s proposed expansion of the exception. The court reasoned that removing the frivolousness requirement could allow the exception to swallow the general payment rule and undermine Congress’s purpose in enacting the governing pension statute. Because Petersen-Dean did not argue that the Plan’s withdrawal-liability claim was frivolous or not colorable, it was required to make interim payments.

Petersen-Dean alternatively asked the court to decline summary judgment and stay the case until settlement efforts ended. The court found no support for that request and noted that the Plan opposed further delay.

Disposition

The court granted the Plan’s motion for summary judgment and stated that no claims remained for further adjudication. The order did not itself resolve whether judgment could be entered against certain defendants that appeared no longer to exist and had not answered the complaint. It also noted that, because arbitration remained pending, entering judgment might be premature if the parties intended to seek enforcement of the arbitration process. The court ordered the plaintiffs to file a proposed judgment and ordered both sides to respond to those two issues by May 19, 2020.