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McGriff v. Schenkel & Sons, Inc.

United States District Court, S.D. Indiana, Indianapolis Division

February 23, 2017

MARK MCGRIFF and WILLIAM NIX, Trustees, on behalf of INDIANA STATE COUNCIL OF CARPENTERS PENSION FUND, Plaintiffs,
v.
SCHENKEL & SONS, INC., and SCHENKEL CONSTRUCTION, INC., Defendants.

          ENTRY ON DEFENDANT'S MOTION TO DISMISS AND REQUEST FOR ATTORNEYS' FEES

          TANYA WALTON PRATT, JUDGE United States District Court

         This matter is before the Court on a Motion to Dismiss and Request for Attorneys' Fees filed by Defendant Schenkel & Sons, Inc. (“Schenkel”) (Filing No. 42). Plaintiffs Mark McGriff and William Nix, Trustees of the Indiana State Council of Carpenters Pension Fund (“the Fund”), brought this action on behalf of the Fund to collect interim withdrawal liability payments from Schenkel and co-defendant Schenkel Construction, Inc. (“Schenkel Construction”). Following the Indiana/Kentucky/Ohio Regional Council of Carpenters and its predecessors (“the Union”) unilateral termination of the collective bargaining agreement between the Union and Schenkel, the Fund demanded withdrawal liability payments from Schenkel. When Schenkel disputed its withdrawal liability, the Fund initiated this litigation for interim withdrawal liability payments. Schenkel initiated arbitration between the parties, and after the arbitration resolved the withdrawal liability dispute, Schenkel moved for dismissal of this action for interim withdrawal liability payments. For the following reasons, the Court grants the Motion to Dismiss but denies the request for fees.

         I. BACKGROUND

         The Fund is a multiemployer pension plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), 29 U.S.C. § 1001, et seq., which is administered in Indianapolis, Indiana. Plaintiffs Mark McGriff and William Nix are Trustees of the Fund and may initiate litigation as fiduciaries on behalf of the Fund under ERISA.

         Schenkel is a family-owned and operated Indiana corporation based in Fort Wayne, Indiana, which was engaged in the building and construction industry when it participated in the Fund. In 2012, Schenkel began to cease its operations and wind up its business. On January 1, 2014, Schenkel officially ceased all operations. Schenkel Construction also is an Indiana corporation based in Fort Wayne, Indiana. It is engaged in the building and construction industry.

         Schenkel participated in the Fund pursuant to collective bargaining agreements with the Union, which consisted of local unions of the Indiana/Kentucky/Ohio Regional Council of Carpenters and its predecessors. Schenkel and the Union most recently entered into a collective bargaining agreement in 2012, and the term of the agreement is March 13, 2012 through May 31, 2017 (Filing No. 43-2 at 29). Schenkel was considered an “employer” under ERISA, and the collective bargaining agreement between Schenkel and the Union required Schenkel to pay contributions to the Fund on behalf of bargaining unit employees working in the construction industry (Filing No. 43-2 at 23-24). Schenkel last contributed to the Fund in December 2013 (Filing No. 1 at 3).

         In February 2014, during the term of the current collective bargaining agreement, the Union sent a notice through its counsel that it was unilaterally terminating the collective bargaining agreement then in effect with Schenkel. The Union terminated the agreement and indicated that it had no interest in entering into further collective bargaining agreements with Schenkel (Filing No. 43-2 at 32). Based on the termination of the collective bargaining agreement, in May 2014, the Fund determined that Schenkel completely withdrew from the Fund for the plan year ending March 31, 2014, and thus, according to the Fund, Schenkel became liable for withdrawal liability payments.[1] On May 7, 2014, the Fund notified Schenkel that it had been assessed a withdrawal liability of more than $1.8 million (Filing No. 43-2 at 36). In the Fund's letter, it demanded that Schenkel make its first quarterly payment by June 1, 2014.

         Schenkel did not pay any withdrawal liability payments by June 1, 2014. In response to Schenkel's inaction, the Fund sent another letter to Schenkel dated June 23, 2014. In this letter, the Fund demanded payment of the June 1, 2014 quarterly installment plus interest.

         On August 4, 2014, Schenkel formally requested a review of the Fund's withdrawal liability assessment. Schenkel disputed any withdrawal liability. It noted that it was no longer in business, was not a viable company, and possessed no assets. It asserted that it was protected by the “construction industry exception” under ERISA because it was no longer operating in the construction industry. Schenkel also denied that it was obligated to make any interim payments (Filing No. 34-2 at 2).

         On October 24, 2014, the Fund initiated this lawsuit against Schenkel and Schenkel Construction. The Fund brought the litigation under ERISA, asserting that Schenkel was liable to make interim withdrawal liability payments while the parties disputed the final withdrawal liability. Schenkel Construction was included as a defendant in the case because the Fund asserted that Schenkel Construction was the alter ego of Schenkel or a continuation of the same company, just under a new name.

         On November 19, 2014, the Fund responded to Schenkel's request for review, asserting that there was no basis to modify the Fund's prior assessment for complete withdrawal liability in the amount of more than $1.8 million (Filing No. 34-3 at 2).

         Pursuant to its rights under ERISA, on December 18, 2014, Schenkel initiated arbitration to resolve the parties' dispute regarding Schenkel's withdrawal liability. In its notice initiating arbitration, Schenkel again raised the construction industry exception to dispute withdrawal liability, and it also asserted that it fell within ERISA's exception to the requirement of “pay now, dispute later” because the Fund's claim was frivolous, and making Schenkel pay interim payments during the pendency of the dispute would cause irreparable harm (Filing No. 34-4 at 2).

         Schenkel and Schenkel Construction answered the Fund's Complaint on January 9, 2015, denying any liability, asserting that Schenkel had not experienced a complete withdrawal, noting that the Fund could not unilaterally terminate the collective bargaining agreement, and explaining that Schenkel Construction was not the alter ego of Schenkel.

         Soon after filing their Answers, Schenkel and Schenkel Construction filed a motion with the Court to stay the litigation pending the outcome of the ongoing arbitration (Filing No. 33). On March 13, 2015, the motion to stay was granted in part and denied in part, allowing the claim against Schenkel to proceed but staying the litigation against Schenkel Construction. The Court determined that ...


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