United States District Court, S.D. Indiana, Indianapolis Division
MARK McGRIFF and WILLIAM NIX, as Trustees of, and on behalf of, the INDIANA STATE COUNCIL OF CARPENTERS PENSION FUND, Plaintiffs,
SCHENKEL AND SONS INC. and SCHENKEL CONSTRUCTION INC., Defendants.
DEFENDANTS' MOTION TO STAY
DEBRA McVICKER LYNCH, Magistrate Judge.
Defendants Schenkel and Sons Inc. ("Sons") and Schenkel Construction Inc. ("Construction") request that the court stay this litigation pending the outcome of an arbitration proceeding between the plaintiff Fund and defendant Sons. They urge that the court's inherent power to control its docket favors a stay based on judicial economy, the balance of hardships between the parties, and the public interest. As addressed below, the court finds that this litigation should not be stayed entirely because the Fund should be permitted to seek relief against defendant Sons based on its failure to make interim withdrawal payments. A stay will be imposed as to the liability claims against Construction.
According to defendant Sons, it ceased construction operations in 2012 and later sold its assets to relatives of its principals, who had formed defendant Construction. Sons made its final contribution to the Fund in December 2013. In early 2014, the Union notified Sons that it was terminating their collective bargaining agreement, thus triggering withdrawal liability to the Fund. On May 7, 2014, the Fund notified Sons that it had assessed Sons's withdrawal liability in the amount of $1, 859, 363, and demanded payment in a lump sum or in quarterly installments, with the first installment to be paid by June 1, 2014.
Under the Multiemployer Pension Plan Amendments Act ("MPPAA"), Sons had 90 days to request the Fund to review its calculation or otherwise to challenge the Fund's assessment or payment schedule. 29 U.S.C. § 1399(b)(2)(A). Sons sent a letter to the Fund on August 4, 2014, requesting a review by the Fund (the "Request for Review"). Its letter contended that no withdrawal liability was appropriate based on a "construction industry exception" under 29 U.S.C. § 1383(b), and advised the Fund that Sons had no assets and should not be required to make interim withdrawal liability payments because it would be irreparably harmed if required to do so.
The MPPAA requires arbitration of a dispute between a fund and employer about whether an employer has withdrawal liability and, if so, its amount. 29 U.S.C. § 1401(a)(1). Arbitration may be commenced by the fund or the employer but arbitration may not be initiated by either party until the earlier of a fund's response to a request for review or 120 days after the request for review was made. Id.
On October 24, 2014, the Fund filed this lawsuit. The Fund's complaint seeks to recover interim withdrawal liability payments and seeks a determination that defendant Construction is jointly liable for Sons's obligations (as an alter ego or single employer), including interim withdrawal liability payments. On November 19, 2014, the Fund responded to Sons's Request for Review. It refused to modify its assessment. One month later, Sons initiated arbitration. An arbitrator has been selected, who has set deadlines for discovery and expert reports and scheduled a hearing for August 10-11, 2015. Only Sons and the Fund are parties to the arbitration; Construction is not a party.
I. Sons cannot avoid Congress's "pay now, dispute later" system via a motion to stay.
The MPPAA requires an employer to make interim withdrawal liability payments demanded by a fund notwithstanding the pendency of an employer's request for review or the arbitration of a withdrawal liability dispute:
Withdrawal liability shall be payable in accordance with the schedule set forth by the plan sponsor under subsection (b)(1) of this section beginning no later than 60 days after the date of the demand notwithstanding any request for review or appeal of determinations of the amount of such liability or of the schedule.
29 U.S.C. § 1399(c)(2).
As the Fund points out, this "pay now, dispute later" system is designed to protect pension funds from the risk of employer insolvency during the pendency of arbitration and any proceedings to review or enforce an arbitration award, while recognizing that the employer faces virtually no risk that the fund will be unable to repay any employer overpayments. Trustees of Chicago Truck Drivers, Helpers & Warehouse Workers Union Pension Fund v. Central Transport, Inc., 935 F.2d 114, 118-19 (7th Cir. 1991). If an arbitrator ultimately rules in favor of the employer and the employer's interim payments exceed its liability, the fund repays any overpayments. As the Seventh Circuit explained:
Although the [fund] bears substantial risk if the employer holds the stakes pending final resolution, the employer faces no corresponding risk if the fund holds the stakes. Pension trusts are solvent, diversified, regulated institutions.... [F]unds will be able to repay any withdrawal liability that ...