March 1, 1989 -- under which Sigmund Cohn had expressly requested the estimated calculation -- the Director's letter advised that the report was sent "in response" to Sigmund Cohn's request. On March 1, 1989, Sigmund Cohn withdrew as a contributing employer. Nearly nine months later, on December 22, 1989, the Fund advised the employer that its withdrawal liability amounted to $ 1,751,733, using the direct attribution method.
Sigmund Cohn timely challenged the Fund's assessment and the parties proceeded to arbitration, conducted by John E. Sands, Esq. Three issues were strongly contested: whether the Fund's calculation of Sigmund Cohn's withdrawal liability was entitled to the statutory presumption of correctness; whether the Trustees effectively amended the Plan and Trust Agreement as of March 1, 1989; and whether the arbitrator could apply equitable estoppel to vary the MPPAA's scheme for assessing withdrawal liability.
After presiding over a day-long hearing of testimony and argument, and after considering the parties' stipulated facts and extensive written submissions, Arbitrator Sands rendered a sixteen-page decision, finding in Sigmund Cohn's favor on the first two issues.
He found that the Fund had not amended its Plan and Trust Agreement until May 22 and June 5, 1989, respectively, and concluded that "the Fund lacked authority under the terms of its own documents to use any but the statutory presumptive method in calculating [Sigmund] Cohn's liability for withdrawal from the Fund on March 1, 1989." Exh. E at 11 (Opinion and Award of Arbitrator Sands, June 21, 1991). Its assessment, therefore, was "clearly erroneous." Id. Arbitrator Sands directed the Fund to recompute Sigmund Cohn's withdrawal liability using the statutory presumptive method, and stop all efforts to enforce its claim.
Sigmund Cohn seeks confirmation of this award under ERISA section 4221, 29 U.S.C. § 1401, and attorney's fees under section 4301(e), 29 U.S.C. § 1451(e).
A. Standard of Review
Section 4221 of ERISA, as amended by the MPPAA, governs this Court's review of Arbitrator Sands, decision. Subsection (b) provides for judicial review of an action to "enforce, vacate or modify the arbitrator's award." ERISA § 4221(b), 29 U.S.C. § 1401(b). "There shall be a presumption, rebuttable only by a clear preponderance of the evidence, that the findings of fact made by the arbitrator were correct." ERISA § 4221(c), 29 U.S.C. § 1401(c) (1988). Courts reviewing arbitration awards have consistently upheld the arbitrator's factual findings under section 4221(c)'s "presumption of correctness." See, e.g., Chicago Truck Drivers Pension Fund v. Louis Zahn Drug Co., 890 F.2d 1405, 1406 (7th Cir. 1989).
As the parties agree, however, the statute does not prescribe the standard of review for an arbitrator's conclusions of law. See Huber v. Casablanca Indus., Inc., 916 F.2d 85, 89 (3d Cir. 1990). In the absence of an express statutory provision, some courts have themselves determined the appropriate standard of review; the Second Circuit has yet to address the issue.
The Fund relies on decisions by several other courts of appeal to argue for de novo review of the arbitrator's legal determinations. See Huber, 916 at 89; Parmac, Inc. v. I.A.M. Nat'l Pension Fund Benefit Plan A, 277 U.S. App. D.C. 99, 872 F.2d 1069, 1071 (Fed. Cir. 1989); Trustees of Iron Workers Local 473 v. Allied Prods.,, 872 F.2d 208, 211 (7th Cir.), cert. denied, 493 U.S. 847, 107 L. Ed. 2d 102, 110 S. Ct. 143 (1989); Union Asphalts and Roadoils, Inc. v. MO-KAN Teamsters Pension Fund, 857 F.2d 1230, 1233-34 (8th Cir. 1988), cert. denied, 490 U.S. 1022, 104 L. Ed. 2d 185, 109 S. Ct. 1748 (1989); Trustees of Amalgamated Ins. Fund v. Geltman Indus., 784 F.2d 926, 928-29 (9th Cir.), cert. denied, 479 U.S. 822, 93 L. Ed. 2d 42, 107 S. Ct. 90 (1986); I.A.M. Nat'l Pension Fund Benefit Plan C v. Stockton Tri Indus., 234 U.S. App. D.C. 105, 727 F.2d 1204, 1207 n.7 (D.C. 1984).
Sigmund Cohn, in advocating a more deferential standard, argues that since the MPPAA expressly provides that withdrawal liability arbitrations shall be conducted and enforced in the same manner as those "carried out under title 9," see ERISA § 4221(b)(3), 29 U.S.C. § 1401(b)(3), the judicially developed standard usually applied under title 9, that of "manifest disregard of the law," should apply in this instance. See Mangan v. Owens Truckmen, Inc. 715 F. Supp. 436, 444 (E.D.N.Y. 1989) (applying title 9 "manifest disregard" standard to vacate arbitration award of withdrawal liability under ERISA). It offers, however, no relevant Second Circuit authority to support its argument.
The Court need not determine the appropriate standard since even a de novo review shows that the Arbitrator's award must be confirmed. His findings establish that the Fund imposed a calculation method on Sigmund Cohn's withdrawal that was only later adopted -- in contravention to the Plan's and ERISA's express provisions.
B. Plan Amendment Process
ERISA requires an employer withdrawing from a multiemployer pension plan to pay for its allocable share of the plan's unfunded vested benefits. See ERISA § 4201, 29 U.S.C. § 1381; Park South Hotel Corp. v. New York Hotel Trades Council, 851 F.2d 578 (2d Cir.), cert. denied, 488 U.S. 966, 102 L. Ed. 2d 530, 109 S. Ct. 493 (1988). Section 4211(c) provides that the plan may be amended to incorporate one of four alternative methods specified in the statute, see ERISA § 4211(c)(2), (3) or (4), 29 U.S.C. § 1391(c)(2), (3) or (4), or any other method receiving the PBGC's approval. See ERISA § 4211(c)(5), 29 U.S.C. § 1391(c)(5). If, however, the plan is silent as to the method of calculation, the plan must use the "presumptive method" found in ERISA section 4211(b), 29 U.S.C. § 1391(b).
Section 4221(a)(3)(A) provides that any determination by a plan's sponsor is "presumed correct unless the party contesting the determination demonstrates by a preponderance of the evidence that the determination was unreasonable or clearly erroneous." 29 U.S.C. § 1401(a)(3)(A). Arbitrator Sands invalidated the Fund's assessment of Sigmund Cohn's withdrawal liability because it had erroneously applied the attributable method prior the Plan's effective amendment, in contravention of the Plan and Trust Agreement's express terms.
The Fund attacks the Arbitrator's decision on the ground that he failed to give proper deference to the Fund's determination of liability in accordance with the attributable method. The Fund additionally claims that its interpretation of the Plan -- permitting retroactive use of the attributable method -- is itself entitled to deference. It argues that Article XIII's provision eschewing "literal or formal interpretation" overrides the "technical" requirements of Article XIV regarding the amendment process.
Although a fund's interpretation of its own pension agreement deserves some deference, such construction must abide by the plain meaning of the plan's terms. See Pilon v. Retirement Plan for Salaried Employees of Greater Northern Nekoosa Corp., 861 F.2d 217, 218 (9th Cir. 1988). An application of the plan's provisions that conflicts with its unambiguous meaning must be considered unreasonable and not entitled to any deference. Moreover, such interpretation cannot fly in the face of the statute's express provisions.
ERISA section 402 requires that each plan shall "provide a procedure for amending such plan, and for identifying the persons who have authority to amend the plan." 29 U.S.C. § 1102(b)(3). By explicitly requiring a plan to specify its amendment procedure, Congress rejected the use of informal written documents. See Nachwalter v. Christie, 805 F.2d 956, 960 (11th Cir. 1986). Where a plan has complied with section 402 by establishing a method for accomplishing amendment, each putative amendment must be evaluated by reference to that procedure. Frank v. Colt Indus., 910 F.2d 90, 98 (3d Cir. 1990).
Here, the Trust Agreement establishing the Fund and defining the Trustees' powers could not be more clear: the procedure to amend the Trust may be accomplished only "by an instrument in writing executed by the Trustees." By the provision's plain meaning, no amendment occurs until the Trustees have executed the required written instrument. Arbitrator Sand found that the January 30th meeting did not amount to an amendment of the Plan's documents to include the attributable method of calculation; rather, it was "a resolution or statement of intention that required amendment of the Plan and Trust Agreement according to the Agreement's terms to become effective." Exh. E at 11. This conclusion is bolstered by ERISA's statutory prohibition of retroactive application, in the absence of the employers' consent, of plan amendments adopting alternative withdrawal liability calculation methods. See ERISA § 4214(a), 29 U.S.C. § 1394(a).
The Fund cites the Third Circuit's decision in Huber, supra, to reduce the express requirement of Article XIV to a "mere technicality" unnecessary to effect an amendment of the Plan. To be sure, the Arbitrator in Huber found it sufficient that the modifications "had been adopted pursuant to resolutions of the Board of Trustees and written in the minutes of the meetings." 916 F.2d at 105. However, he explicitly noted that the plan "granted the Trustees broad powers to amend the plan without limitations on the particular format of such actions." Id. (emphasis added). In contrast, the provision in Article XIV of the Trust Agreement grants the Trustees power to amend the Plan or Trust Agreement only by a written instrument which they have executed. They cannot, except in accordance with Article XIV, vary the clear and unambiguous terms of the provision establishing their power to act in the first place.
The Court is unpersuaded by the Fund's argument that the practical realities of administering "such complex legal documents as a pension trust agreement and plan document" required the Arbitrator to ignore the clear import of Article XIV. The Trustees could have satisfied the provision simply by executing the "written instrument" of the minutes of the January 30th meeting. In the alternative, they could have exercised their authority and amended the amendment process itself to allow modification by resolution at a Board meeting. Their past practice of operating in accordance with amendments that failed to satisfy Article XIV's terms cannot justify this Court's failure to abide by the document's express provisions.
The Court, in agreement with the Arbitrator, concludes that the Fund had not effectively amended the Plan and Trust Agreement to adopt the attributable method as of March 31, 1989; its assessment of Sigmund Cohn's withdrawal liability is therefore clearly erroneous and must be recalculated under the "statutory presumption" method.
C. Attorney's Fees
Sigmund Cohn seeks, as a prevailing party, the award of attorney's fees and other expenses under the fee-shifting provisions of the MPPAA and ERISA section 4301(e), 29 U.S.C. § 1451(e).
Although the fee-shifting provisions are available in withdrawal liability actions, when the prevailing party is the employer, "courts exercise cautiously the discretionary power to award fees." Anita Foundations, Inc. v. ILGWU Nat'l Retirement Fund, 902 F.2d 185, 187 (2d Cir. 1990); see, e.g., Cuyamaca Meats, Inc. v. San Diego and Imperial Counties Butchers' and Food Employers' Pension Fund Trust Fund, 827 F.2d 491, 500 (9th Cir. 1987), cert. denied, 485 U.S. 1008, 99 L. Ed. 2d 703, 108 S. Ct. 1474, (1988); Central States, Southeast and Southwest Areas Pension Fund v. 888 Corp., 813 F.2d 760, 767 (6th Cir. 1987); Dorn's Transp., Inc. v. Teamsters Pension Trust Fund, 799 F.2d 45, 49-50 (3d Cir. 1986).
The Second Circuit has adopted the five-part conjunctive test first articulated in Miles v. New York State Teamsters Conference Pension and Retirement Fund, 698 F.2d 593, 602 n.9 (2d Cir.), cert. denied, 464 U.S. 829, 78 L. Ed. 2d 108, 104 S. Ct. 105 (1983). See Anita Foundations, 902 F.2d at 187-89. To assess the reasonableness of awarding attorney's fees under ERISA and the MPPAA, a court must consider:
(1) the degree of the offending party's culpability or bad faith, (2) the ability of the offending party to satisfy an award of attorney's fees, (3) whether an award of fees would deter other persons from acting similarly under like circumstances, (4) the relative merits of the parties' positions, and (5) whether the action sought to confer a common benefit of a group of pension plan participants.
Id. at 188 (citations omitted). As the Anita Foundations court recognized, the five factors will often balance against a prevailing employer. Id. at 189. Such is the circumstance in this case.
While the Fund has ultimately proved unsuccessful in this litigation, nothing in the record indicates that it exhibited bad faith or culpability. In fact, Arbitrator Sands found that the Fund pursued the matter "in good faith" to comport with the Trustees' fiduciary duty to protect the Fund's assets. See Exh. E at 15. The Fund had assessed the employer's withdrawal liability consistent with a longstanding, albeit erroneous, operating principle concerning the effective date of Plan amendments followed in the past without objection from the participating employers. Its interpretation of the Plan's provisions, in light of the generally broad "presumption of correctness" afforded by ERISA section 4221(e), is neither strained nor untenable. Because the Fund advanced colorable legal arguments in what is an uncertain area of law, the Court declines to grant Sigmund Cohn's fee request.
For the reasons discussed above, the arbitration award in petitioner's favor is confirmed. Petitioner's application for costs and attorney's fees is denied.
Dated: Brooklyn, New York
October 22, 1992
RAYMOND J. DEARIE
United States District Judge