Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_14-cv-03743/USCOURTS-cand-3_14-cv-03743-11/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1001 E.R.I.S.A.: Employee Retirement

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

HEAVENLY HANA LLC, et al.,

Plaintiffs,

v.

HOTEL UNION & HOTEL INDUSTRY OF 

HAWAII PENSION PLAN,

Defendant.

Case No. 14-cv-03743-JCS 

ORDER GRANTING PLAINTIFF’S 

MOTION FOR PREJUDGMENT AND 

POST-JUDGMENT INTEREST

Re: Dkt. No. 119

I. INTRODUCTION

Plaintiffs Heavenly Hana LLC d/b/a Travaasa Hotel Hana, Green Tea, LLC d/b/a Green 

Tea Management, LLC, and Amstar-39, LLC (collectively, “Amstar”) bring this Motion for 

prejudgment and post-judgment interest on a refund of overpaid withdrawal liability payments.. 

This Motion arises out of this Court‟s previous judgment that Defendant Hotel Union & Hotel 

Industry of Hawaii Pension Plan (the “Plan”) must repay Amstar $372,780 of withdrawal liability 

that Amstar paid the Plan. Amstar seeks $65,601.11 plus daily interest of $71.49 from April 1, 

2016 until the overpayments are refunded. The Court held a hearing on the Motion on Friday, 

June 10, 2016, at 9:30 a.m. Because Pension Benefit Guaranty Corporation (“PBGC”) regulations 

require that plans refund overpaid withdrawal liability to employers at the same rate that interest is 

charged to employers on overdue withdrawal liability payments and for the reasons explained 

below, Amstar‟s Motion for Prejudgment and Post-Judgment Interest is GRANTED.1

II. BACKGROUND

In May 2010, Amstar completed its purchase of the assets of Ohana Hotel Company, LLC 

(“Ohana”), including the hotel that Ohana had been operating in Hana, Hawaii. Findings of Fact 

 

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The parties have consented to the jurisdiction of the undersigned magistrate judge for all 

purposes pursuant to 28 U.S.C. § 636(c). 

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& Conclusions of Law (“FFCL,” dkt. 111) ¶ 14, 16.2 Prior to the sale, Ohana was a party to a 

collective bargaining agreement that required Ohana to make contributions to the Plan for its 

employees. Id. ¶ 18. Before selling its assets to Amstar, Ohana terminated all 211 employees who 

worked at the hotel. Id. ¶ 17, 19. Ohana stopped contributing to the Plan and withdrew from the 

Plan pursuant to Employee Retirement Income Security Act (“ERISA”) § 4203, 29 U.S.C. § 1383 

in May of 2010. Id. ¶ 26. Because the Plan has unfunded vested benefit liabilities, employers 

who withdraw from the Plan are subject to withdrawal liabilities. See id. ¶ 12, 61.

On December 5, 2012 the Plan sent a demand letter to Amstar notifying it that it owed

withdrawal liability as a successor employer to Ohana. Id. ¶ 32. The demand letter assessed 

Amstar‟s withdrawal liability at $757,981 and laid out a payment plan with quarterly payments of 

$74,556. Id. ¶ 34. Amstar made five quarterly payments totaling $372,780 before seeking a 

declaratory judgment that it was not a successor employer to Ohana and therefore owed no 

withdrawal liability to the Plan. Id. ¶ 35, 2. This Court held that Amstar was not liable for the 

withdrawal liability because Amstar had no notice when it purchased the hotel from Ohana that 

the Plan was underfunded and thus lacked notice that as a successor employer, Amstar would 

inherit Ohana‟s withdrawal liability.3Id. ¶ 97. The Court ordered the Plan to refund Amstar‟s 

$372,780 of overpaid withdrawal liability and gave leave to Amstar to seek to recover interest on 

that amount. Judgment (dkt. 114), Feb. 24, 2016.

Pursuant to ERISA, the Plan is a multiemployer employee benefit pension plan subject to 

the Multiemployer Pension Plan Amendments Act (“MPPAA”) and the regulations promulgated 

by the PBGC. FFCL ¶ 7, 61. 

Amstar now argues that it should recover interest on its overpaid withdrawal liability. 

Mot. (dkt. 119) at 2. It notes that § 4219.31(d) of the PBGC regulations require that when “a plan 

sponsor or arbitrator determines” that withdrawal liability has been overpaid, “the plan sponsor 

shall refund the overpayment, with interest, in a lump sum.” Id. at 3. Although this regulation 

 

2 Heavenly Hana LLC v. Hotel Union & Hotel Indus. of Hawaii Pension Plan, No. 14-cv-03743, 

2016 WL 524327, at *3 (N.D. Cal. Feb. 10, 2016).

3

The Court also held that had Amstar had appropriate notice that the Plan was underfunded,

Amstar would have been liable for Ohana‟s withdrawal as a successor employer. FCCL ¶ 124. 

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appears to apply when the plan sponsor or an arbitrator, rather than a court, determines that an 

employer has overpaid, Amstar argues it is still applicable here. Id. at 5. It notes that the Third 

Circuit has implemented the regulation and awarded interest on overpaid withdrawal liability. Id. 

at 3–5 (citing Huber v. Casablanca Indus., 377 F.3d 288, 304 (3d Cir. 2004); Bd. of Trs. of 

Trucking Emps. of North Jersey Welfare Fund, Inc. v. Kero Leasing Corp., 916 F.2d 85, 103 (3d 

Cir. 1990), abrogated on other grounds by Milwaukee Brewery Workers’ Pension Plan v. Joseph 

Schlitz Brewing Co., 513 U.S. 414 (1995)). Amstar relies on Huber, where the Third Circuit held 

that “it would be inequitable and raise serious constitutional questions” if an employer did not 

recover interest on overpaid withdrawal liability, and argues that “Amstar must be compensated 

through an award of interest for the Plan‟s use of its payments” during the relevant period. See 

Huber, 377 F.3d at 304; Mot. at 3–4. 

Amstar also claims that allowing it to collect interest on its overpaid withdrawal liability is 

not a violation of ERISA‟s anti-inurement provision which states that “the assets of a plan shall 

never inure to the benefit of any employer.” Mot. at 4. Citing Mary Helen Coal, a Fourth Circuit 

case, Amstar argues since it never owed the Plan withdrawal liability, its withdrawal liability 

payments were never “assets of the Plan” and so the interest earned on those payments is similarly 

not the Plan‟s to keep and must be returned to Amstar. Id. at 5–6 (citing Mary Helen Coal Corp. 

v. Hudson, 235 F.3d 207 (4th Cir. 2000)).

Amstar argues that the Plan should either pay 7% or 3.25% interest on the overpaid 

withdrawal liability. Mot. at 8. Acknowledging that the plan document provides for “an 

unspecified „prevailing market rate,‟” Amstar argues that 7% is the most appropriate rate because 

the Plan applied this rate to Amstar‟s unpaid withdrawal liability. Id. Amstar states that if the 

Court believes that 7% is inappropriate then it should default to the 3.25% interest rate supplied by 

the PBGC for use where plans do not otherwise provide an interest rate. Id.

Alternatively, if PBGC regulations do not apply then Amstar argues that it should receive 

the “overall rate of investment return received by the Plan during the period it held Amstar‟s 

payments.” Id. at 9. The Ninth Circuit has held that an appropriate prejudgment interest rate is 

“what a reasonably prudent person [would receive] investing funds so as to produce a reasonable 

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return while maintaining safety of principle.” Id. Amstar argues that the Plan‟s overall rate of 

return would be “a good measure” of such a figure. Id.

The Plan does not contest that Amstar is owed some amount of interest on its overpaid 

withdrawal liability payments. Opp‟n (dkt. 128) at 1. The Plan argues that either the PBGC 

default rate should apply, or the Court should apply “well-established precedent to calculate 

interest.” Id. at 3. 

The Plan agrees with Amstar that unless the plan provides for an interest rate then the 

PBGC default rate applies. Id. at 2. The Plan and Amstar also agree that the default rate was 

3.25% for the relevant period. Id. The Plan argues that the PBGC rate, rather than the “prevailing 

market rate” specified in the plan document, should apply. Id. The Plan notes that the plan 

document‟s “prevailing market rate” provision does not explicitly state that it applies to overpaid 

withdrawal liability. Id. Should the Court choose to apply the “prevailing market rate” to the 

overpaid withdrawal liability, then the Plan argues that the term “prevailing market rate” is 

defined by the MPPAA and the PBGC regulations as the PBGC default rate of 3.25% for the 

relevant period. Id. at 2–3. Regardless of whether the Court uses the “prevailing market rate” or 

the PBGC default rate, the Plan argues that the correct interest rate is 3.25%. Id.

The Plan contends that a 7% interest rate is inappropriate as the Plan only applies a 7% 

interest rate to delinquent payments and “delinquency is not relevant here.” Id. at 3. 

Alternatively, the Plan contends that MPPAA regulations do not apply and should not 

guide the interest rate the Court awards. Id. The Plan claims that the parties agree “that MPPAA 

regulations do not cleanly apply” since the Court, rather than the plan sponsor or an arbitrator,

determined that Amstar‟s withdrawal liability was overpaid. Id. The Plan then argues that “the 

amount of post-judgment interest in a civil suit is set by statute” and is currently 0.66%. Id. at 4. 

The Plan claims that “fairness dictates a limited amount of pre-judgment interest that mirrors the 

post-judgment amount.” Id. The Plan argues that an interest rate of 0.66% is appropriate since it 

is “the amount that the Federal Reserve calculates that Amstar could have earned on its money 

during the relevant time period.” Id.

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III. ANALYSIS

A. Legal Standard

The Ninth Circuit has recognized that “awards of prejudgment interest . . . „ensure that a 

party is fully compensated for its loss.‟” United States v. Bell, 602 F.3d 1074, 1084 (9th Cir. 

2010) (quoting City of Milwaukee v. Cement Div., Nat’l Gypsum Co., 515 U.S. 189, 196 (1995)).

Typically, courts have substantial discretion in awarding interest that fairly compensates a party 

for its loss. See Milwaukee, 515 U.S. at 196. Here, however, the Court‟s discretion is confined by 

PBGC regulations that control what interest rate applies to multiemployer pension plans.

PBGC regulations mandate that when an employer overpays the withdrawal liability due to 

the plan sponsor, the plan sponsor must “refund the overpayment with interest.” 29 C.F.R. 

§ 4219.31(d). Unless the plan provides for an interest rate, the PBGC provides a default rate that 

will apply. Id. § 4219.32(b). Neither the Plan nor Amstar noted that PBGC regulations further 

require that “[t]he plan sponsor shall credit interest on the overpayment . . . at the same rate as the 

rate for overdue withdrawal liability payments” as established by either the plan or PBGC 

regulations. Id. § 4219.31(d). This interest is due “from the date of the overpayment to the date 

on which the overpayment is refunded to the employer.” Id.

B. PBGC Regulations Guide the Interest Rate Amstar is Due

PBGC regulations control what interest rate Amstar is due on its refund of withdrawal

liability payments. The Plan is an “employee benefit pension plan” as defined in ERISA § 3(2), 

29 U.S.C. § 1002(2), and a “multiemployer plan” as defined in ERISA §§ 3(37) and 4001(a)(3), 

29 U.S.C. §§ 1002(37) and 1301(a)(3). FFCL ¶ 5. As such, it is subject to MPPAA provisions 

which require that interest be paid on withdrawal liability payments in line with the regulations set 

out by the PBGC. 29 U.S.C. § 1399(c)(6). 

PBGC regulation § 4219.31(d) governs the overpayment of withdrawal liability. 29 C.F.R. 

§ 4219.31(d). On its face, the regulation applies to plan sponsors‟ or arbitrators‟ determinations of 

overpayment rather than determinations made by the Court. Id. The Plan claims that because this 

Court, rather than the Plan or an arbitrator, decided that Amstar‟s withdrawal liability was 

overpaid, “the parties agree that the MPPAA regulations do not cleanly apply.” Opp‟n at 3. The 

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Plan makes this claim over Amstar‟s repeated objection that the PBGC regulations, as allowed for 

in the MPPAA, do control. See Mot. at 2–5; Reply at 1–2. As this Court has noted, the question 

of whether an employer is a successor employer, and thus liable for the withdrawal liability of the 

previous employer, “has generally been addressed by the courts.” FFCL ¶ 63. Nor would this 

Court be the first to implement this specific PBGC regulation and award interest on overpaid 

withdrawal liability; the Third Circuit has similarly applied § 4219.31(d) in Kero and Huber. See

Kero, 377 F.3d at 304; Huber, 916 F.2d at 103. In both of these cases the Third Circuit awarded 

interest on overpayments of withdrawal liability to the employers notwithstanding the PBGC 

regulation‟s reference to plan sponsors and arbitrators. See Kero, 377 F.3d at 304–05; Huber, 916 

F.2d at 102–03. The Plan does not distinguish this case from Kero or Huber. See Opp‟n at 3. The 

Court is not persuaded that the outcome should differ where a court, rather than a plan sponsor or 

arbitrator, is called upon to determine whether an employer is a “successor” employer, and the 

appropriate interest rate.4

C. Interest Due to Amstar

Applying the reciprocal interest rate rule of § 4219.31(d), the Court holds that Amstar is 

entitled to an interest rate of seven percent (7%) on the repayment of its overpaid withdrawal 

liability payments.

1. Prejudgment Interest

The parties agree that if the plan document provides an interest rate then that rate will 

control, rather than the PBGC default rate of 3.25%. See Mot. at 8; Opp‟n at 2. The plan 

document at issue here states that an employer who fails to make “any payment when due” is 

liable for interest “at the prevailing market rate” until the payment is made. Christenson Decl. Ex. 

A (dkt. 119-2), Art. XIII § 7(d); see Mot. at 8; Opp‟n at 2–3. The Plan‟s Trust Agreement gives 

further meaning to the interest provision in the plan document, specifying that “contributions. . . 

 

4

In the alternative, if the Court were not bound by the regulations, the Court in its discretion 

would reach the same result. As a matter of fairness, a 7% interest rate is appropriate here both 

because the rate should not differ based on the forum in which the dispute is resolved, and also 

because it is appropriate to assess interest against the Plan at the same rate that the Plan sought to 

impose against Amstar. 

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unpaid [by the date they are due] shall bear interest from such date at the rate of seven percent 

(7%) per annum.” Jacobs Decl. Ex. N (dkt. 86-5) at 3.5 Since the plan document specifies that 

interest will be charged when “any payment” is overdue, this encompasses overdue withdrawal 

liability payments. See Christenson Decl. Ex. A, Art. XIII § 7(d) (emphasis added). In the Plan‟s 

December 5 letter to Amstar demanding payment of withdrawal liability, the Plan applies a 7% 

interest rate to calculate Amstar‟s payment schedule. Christenson Decl. Ex. B (dkt. 119-3) Ex. II. 

This indicates that the Plan treated Amstar‟s unpaid withdrawal liability as an overdue payment 

pursuant to the Trust Agreement and Plan Document. See id; Christenson Decl. Ex. A, Art XIII 

§ 7(d); Jacobs Decl. Ex. N at 3. PBGC regulations require that “[t]he plan sponsor shall credit 

interest on the overpayment . . . at the same rate as the rate for overdue withdrawal liability 

payments.” 29 C.F.R. § 4219.31(d). Therefore, because the Plan applied a 7% interest rate to 

Amstar‟s unpaid withdrawal liability payments, the same rate it would have applied had the 

payments been overdue, it must return the overpaid withdrawal liability at the same rate. See id.

2. Post-judgment Interest

PBGC regulations mandate that the overpaid withdrawal liability be calculated “from the 

date of the overpayment to the date on which the overpayment is refunded to the employer.” See 

id. Giving meaning to the regulations, this unites the prejudgment and the post-judgment interest 

rates into a single interest rate to be applied for the entire period. See id. Since the appropriate 

interest rate is 7%, this rate applies until the Plan refunds Amstar in full.

3. Total Amount Due

This Court previously ordered the Plan to repay the $372,780 in overpaid withdrawal 

liability that Amstar paid the Plan. FFCL ¶ 125. Per the PBGC regulations, the 7% interest rate 

must be applied from the date of overpayment to the date the overpayment is refunded. 29 C.F.R.

§ 4219.31(d). Amstar has calculated the total interest due at the 7% rate to be $65,601.11 plus 

$71.49 per day beginning April 1, 2016. Christenson Decl. ¶ 5–6 & Ex. F. The Plan does not 

contest Amstar‟s interest calculations if the 7% rate applies. See Opp‟n at 3–4. 

 

5

The Jacobs Declaration and accompanying exhibits were filed with the Plaintiff‟s trial brief.

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IV. CONCLUSION

For the forgoing reasons Plaintiff‟s Motion for prejudgment and post-judgment interest on 

overpaid withdrawal liability in the amount of $65,601.11, plus daily interest of $71.49 beginning 

April 1, 2016, is GRANTED. 

IT IS SO ORDERED.

Dated: June 10, 2016

______________________________________

JOSEPH C. SPERO

Chief Magistrate Judge

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