Opinion ID: 4270394
Heading Depth: 2
Heading Rank: 1

Heading: The Pension Fund’s Statutory Party Claim

Text: Just Born first argues that the district court erred in concluding that the Provision required it to contribute to the Pension Fund for employees hired after the expiration of the CBA. In essence, Just Born contends that the Provision does not apply to it because the company is not a “bargaining party” with respect to newly hired employees in the 8 absence of an operative CBA. The Pension Fund responds that Just Born falls squarely within the Provision because it was a bargaining party to the expired CBA. We hold that the district court properly interpreted the statute and, accordingly, did not err in concluding that Just Born remained a “bargaining party” required to contribute to the Pension Fund under the rehabilitation plan schedule in effect, even after the CBA expired. Congress enacted the Provision as part of the Pension Protection Act of 2006 (“PPA”), which amended ERISA to “help severely underfunded multiemployer pension plans recover.” Lehman v. Nelson, 862 F.3d 1203, 1207 (9th Cir. 2017). The Provision states: If— (I) a collective bargaining agreement providing for contributions under a multiemployer plan in accordance with a schedule provided by the plan sponsor pursuant to a rehabilitation plan . . . expires while the plan is still in critical status, and (II) after receiving one or more updated schedules from the plan sponsor . . . , the bargaining parties with respect to such agreement fail to adopt a contribution schedule with terms consistent with the updated rehabilitation plan and a schedule from the plan sponsor, then the contribution schedule applicable under the expired collective bargaining agreement, as updated and in effect on the date the collective bargaining agreement expires, shall be implemented by the plan sponsor beginning [180 days after the collective bargaining agreement expires]. § 1085(e)(3)(C)(ii). Under a plain reading of the Provision, the CBA’s expiration does not alter Just Born’s status as a bargaining party to that CBA. If Just Born was a bargaining party to the 9 CBA, it remains a bargaining party “with respect to” that CBA even after the CBA’s provisions lapsed. Indeed, the Provision only applies after a collective bargaining agreement expires. That precondition is expressly set out in the first paragraph of subsection I: “If a collective bargaining agreement . . . expires.” § 1085(e)(3)(C)(ii)(I). What follows are additional limiting criteria that are all framed within the context of an expired collective bargaining agreement. For example, the second paragraph refers to “the bargaining parties with respect to such agreement” § 1085(e)(3)(C)(ii)(II) (emphasis added). These “bargaining parties” can only be the bargaining parties to the expired collective bargaining agreement because that is the “such agreement” referred to in the statutory text. No other interpretation makes sense of all the words in the Provision. Because the CBA’s expiration cannot change Just Born’s status as a bargaining party under the Provision, the only question is whether Just Born was ever such a party. It was, as Just Born acknowledges. And the remaining conditions of § 1085(e)(3)(C)(ii) are also satisfied, another fact Just Born does not challenge. That is, the CBA expired while the Pension Fund was in critical status and operating under a rehabilitation plan schedule, and Just Born and the Union—the bargaining parties to the expired CBA—“fail[ed] to adopt a contribution schedule” with terms consistent with an updated rehabilitation plan. With these preconditions met, the Provision requires the Pension Fund to implement the contribution schedule “as updated and in effect on the date the [CBA] expire[d].” See § 1085(e)(3)(C)(ii)(II). Thus, the plain language of the Provision requires Just Born to continue to contribute according to the revised schedule that applied at the time the CBA 10 expired, and that schedule, in turn, requires contribution for all employees: existing and new hires. Contrary to Just Born’s contention, this interpretation of the Provision does not render the word “bargaining” in “bargaining parties” superfluous. “Bargaining parties” is a statutorily defined term, and that definition determines an entity’s status. See § 1085(j)(1)(A)(i) (stating, with certain exceptions not relevant here, that a “bargaining party” is “an employer who has an obligation to contribute under the plan”). It is Just Born’s interpretation that would read “bargaining” out of the statutory language. As the district court aptly explained, Just Born’s argument ignores the temporal element inherent in the reference. [Just Born] does not and could not suggest that it was never a bargaining party. Rather, it contends that it ceased to be a bargaining party when its obligation to contribute expired with the CBA. Even if that is true and [Just Born] is no longer a bargaining party, however, it still was a bargaining party with respect to the expired CBA. Hence, it is actually [Just Born]’s reading that would read words out of the Provision, applying it only to “bargaining parties” that remain “bargaining parties” without regard for the fact that the phrase “with respect to such agreement” necessarily includes former bargaining parties whose obligation to contribute has expired. Those former “bargaining parties with respect to” the expired CBA are indeed a subset of all “bargaining parties,” and they are the subset identified in the Provision. Therefore, [Just Born] is a bargaining party in this context. Just Born, 2017 WL 511911, at . Just Born also contends that this interpretation of the Provision creates a Hotel California 6 scenario in which employers must contribute to a critical-status plan into perpetuity once a governing collective bargaining agreement has expired. In support of its 6 The band Eagles tells us that at the Hotel California, “You can check out any time you like / But you can never leave!” Eagles, Hotel California (Asylum 1976). 11 argument, Just Born points to the Second Circuit’s decision in Trustees of the Local 138 Pension Trust Fund v. F.W. Honerkamp Co., 692 F.3d 127 (2d Cir. 2012). Just Born posits that Honerkamp stands for the principle that employers must be allowed to leave a critical-status plan by invoking the statutory right to withdraw from a multiemployer plan, and that upon withdrawing, that employer no longer has a duty under the PPA to continue contributing to the plan. Just Born contends that the district court’s interpretation of the Provision—and thus our interpretation of it—conflicts with Honerkamp and creates an irreconcilable conflict between the Provision and ERISA’s withdrawal provisions because it would treat employers who have withdrawn to still be “bargaining parties” to an expired collective bargaining agreement and thus obligated to continue making contributions. We disagree. Honerkamp involved a different issue: whether the PPA prohibited an employer from withdrawing from a multiemployer pension fund while the fund was in critical status. 7 There, the Second Circuit observed that “in enacting the PPA, Congress did not intend to prevent employers from withdrawing from multiemployer pension plans in critical status.” 692 F.3d at 135. In doing so, the Second Circuit recognized that Congress’ objective in enacting the PPA’s provisions requiring participating employers to continue contributing to a critical-status plan is compatible with Congress’ recognition 7 The employer was obligated to contribute to a pension fund that was placed in critical status. Honerkamp, 692 F.3d at 132. When the employer reached an impasse with its union in negotiating a new collective bargaining agreement, the employer implemented its last best offer, “withdrawing from the [pension fund] in favor of [a] 401(k) plan.” Id. at 133. 12 that withdrawing employers must pay a withdrawal liability because both requirements seek to ensure properly funded plans. Id. at 135–36. Our interpretation of the Provision in no way limits the application of other ERISA provisions governing when and how an employer may withdraw partially or completely from an ERISA-qualified plan. See Borden, Inc. v. Bakery & Confectionary Union & Indus. Int’l Pension, 974 F.2d 528, 530 (4th Cir. 1992); see also 29 U.S.C. § 1381. Instead, our decision centers on what is required of employers who have not sought to withdraw, and who instead remain participants in the plan by virtue of an expired collective bargaining agreement. Here, Just Born has never sought to withdraw from the Pension Fund and our interpretation of the Provision does not limit its ability to do so. We simply recognize that the Provision applies to entities like Just Born that meet its requirements and have not exercised their option to withdraw. Just Born is attempting a de facto partial withdrawal from the Pension Fund by not covering new employees, which could lead to a complete withdrawal eventually over time through the attrition of its older employees. In so doing, Just Born is seeking to circumvent both the criticalstatus contributions for an expired collective bargaining agreement under the Provision and the withdrawal penalty under § 1381. As the district court observed, Just Born seems to be trying to walk the line between [ERISA provisions], avoiding the contributions required under [the Pension Fund’s] rehabilitation plan schedules while simultaneously avoiding [statutory] withdrawal liability by removing itself from the Fund by attrition, making each new hire an effective withdrawal without acknowledging withdrawal in a way that would trigger the withdrawal penalty. 13 Just Born, 2017 WL 511911, at . ERISA does not allow Just Born this course. Just Born can either withdraw and pay the penalty for doing so, or remain and make the required payments under the Provision; it cannot avoid both obligations. Just Born also maintains that this interpretation of the Provision undermines its right under federal labor law to enforce the last, best proposal when CBA negotiations reach an impasse. This argument derives from the National Labor Review Board’s view that although an employer has a duty to negotiate in good faith, it does not have “an obligation to agree[, so w]hen the parties are . . . without a collective bargaining agreement, having made good faith efforts to reach one, the employer may impose its own terms and conditions of employment unilaterally.” AMF Bowling, 63 F.3d at 1299. But this principle describes Just Born’s obligations and rights only when negotiating with the Union. Just Born’s obligations to the Pension Fund arise from a different authority: ERISA, including the PPA. The Provision, as part of the PPA, is a separate and independent statutory requirement under ERISA, distinct from the collective bargaining process between an employer and union. Our interpretation leaves unaffected Just Born’s ability under labor law to implement its last, best offer so long as it does not contravene its statutory duties under the PPA. 8 Under a plain-language application of the Provision to the facts of this case, Just Born is liable to the Pension Fund for continued contributions for all employees hired 8 Because no other potentially conflicting duty is at issue in this case, we take no view on whether or when other legal principles may affect an employer’s ability to invoke its last-andbest offer outside the specific context of ERISA. 14 after the declaration of an impasse, pending the execution of a new CBA in compliance with § 1085, the invocation of the withdrawal provisions, or some other statutorily required act. Accordingly, the Pension Fund was entitled to judgment on the pleadings so long as Just Born did not present a cognizable affirmative defense, the topic to which we now turn.