Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

HOP Energy, LLC v. Local 553 Pension Fund

August 26, 2010

HOP ENERGY, LLC, PLAINTIFF,
v.
LOCAL 553 PENSION FUND, DEFENDANT.



The opinion of the court was delivered by: John G. Koeltl, District Judge

MEMORANDUM OPINION AND ORDER

The plaintiff, HOP Energy, LLC ("HOP"), brought this action to vacate Arbitrator Elliott Shriftman's August 31, 2009 Opinion and Award ("Award"). The Award upheld the assessment of the defendant, Local 553 Pension Fund ("Pension Fund"), that HOP was subject to withdrawal liability pursuant to section 4219 of the Employee Retirement Income Security Act of 1974 (codified as amended at 29 U.S.C. § 1399) ("ERISA") as a result of HOP's sale of the assets of its Madison Oil Division ("Madison") to the Approved Oil Company ("Approved") in May 2007. The Arbitrator rejected HOP's contention that it was exempt from withdrawal liability under the sale of assets provision of section 4204 of ERISA, 29 U.S.C. § 1384, and entered an Award in favor of the Pension Fund. The defendant Pension Fund cross-moves to confirm the Award.

I.

The following facts are undisputed and are taken from the Record of Arbitration ("Record"), unless otherwise indicated.

The defendant Pension Fund is an "employee benefit plan" and a "multiemployer plan" for the purposes of section 3(3) and 3(37) of ERISA, 29 U.S.C. § 1002(3) and 1002(37). The plaintiff, HOP, is an employer within the meaning of section 3(5) of ERISA, § 1002(5), and was a signatory to the 2004-2007 Master Contract of Teamsters Local Union No. 553 at the time of HOP's sale of Madison to Approved in May 2007. (Record 56-57, 239-266). Approved was a signatory to the 2004-2007 Master Contract as well as to the 2007-2010 Master Contract of Teamsters Local Union No. 553 (collectively, the "Master Contracts" or "collective bargaining agreement"). (Record 56-57, 267-291.) Approved was a signatory to the Master Contracts both before and after the sale of the Madison assets. (Record 56-57.)

HOP sold its Madison assets to Approved pursuant to an Asset Purchase Agreement ("APA") entered into by HOP and Approved on April 12, 2007. (Record 206.) After the sale of Madison, HOP ceased making contributions to the Pension Fund. (Record 324.) As a result, in July 2007, the Trustees of the Pension Fund assessed withdrawal liability against HOP pursuant to section 4219 of ERISA, 29 U.S.C. § 1399, in the amount of $1,204,007. (Record 324.) HOP contested the assessment of withdrawal liability and filed for arbitration pursuant to section 4221 of ERISA, 29 U.S.C. § 1401. (Record 2.) HOP contended that the Pension Fund should have granted HOP an exemption from withdrawal liability under the sale of assets provision of section 4204 of ERISA, 29 U.S.C. § 1384. (Record 5.) The parties stipulated before the Arbitrator that the transaction between HOP and Approved met the requirements of the sale of assets exemption in sections 4204(a)(1)(B) and 4204(a)(1)(C). (Record 3.) Those provisions required the purchaser to provide a bond and the seller to be secondarily liable for a set amount of time. As a result the only issue for the Arbitrator in determining whether the transaction complied with the sale-of-assets exemption was whether the transaction met the requirements of section 4204(a)(1)(A). (Record 2.) That section requires the purchaser of assets to have "an obligation to contribute to the plan with respect to the operations for substantially the same number of contribution base units for which the seller had an obligation to contribute to the plan," 29 U.S.C. § 1384(a)(1)(A).

The Arbitrator issued his Award on August 31, 2009, upholding the Pension Fund's assessment of withdrawal liability against HOP. The Arbitrator found that the transaction between HOP and Approved failed to meet the requirements of section 4204(a)(1)(A) because there was no evidence that Approved actually had an obligation to contribute to the plan "for substantially the same number of contribution base units." (Record 28-31.)

Pursuant to section 4301 of ERISA, 29 U.S.C. § 1451, HOP brought this action and now moves to vacate the Award. The defendant moves to confirm the Award.

II.

The parties dispute the proper standard of review for the Court to apply in this case. The defendant, citing a case from the Seventh Circuit Court of Appeals, argues that the question of whether a party has satisfied the requirements of an exemption from withdrawal liability under ERISA is a mixed question of law and fact and is subject to review for clear error. See Chicago Truck Drivers, Helpers and Warehouse Workers Union (Indep.) Pension Fund v. Louis Zahn Drug Co., 890 F.2d 1405, 1412 (7th Cir. 1989). The plaintiff argues that the proper standard of review is de novo because the arbitrator's determination of whether the transaction complied with the statutory exemption is a question of law. HOP cites a case from the Second Circuit Court of Appeals in which the Court assumed, without deciding, that the de novo standard was appropriate for the review of arbitrators' decisions regarding withdrawal liability. Bowers v. Andrew Weir Shipping, Ltd., 27 F.3d 800, 804-05 (2d Cir. 1994). The Court of Appeals noted that "all the other circuits that have considered the issue" have decided that the same standard applies. Id. At least one district court in this Circuit has recognized that the Court of Appeals has assumed that the de novo standard is appropriate. ISB Liquidating Co. v. District No. 15 Machinists' Pension Fund, 127 F. Supp. 2d 192, 206 (E.D.N.Y. 2001).

While the Court of Appeals for the Second Circuit has not finally decided the issue and has only "assumed" that de novo review is the appropriate standard, the guidance provided in Bowers, including the Court's indication that all other circuits that have considered the issue have applied the de novo standard, is instructive. Because, as the Arbitrator found (Record 23), the question of whether HOP's sale of its Madison assets complied with the statutory requirements to qualify for an exemption is essentially a question of law, the Court will review the Arbitrator's Award de novo.

III.

In any event, the standard of review is not determinative in this case because the Arbitrator's decision was correct.

Section 4204 of ERISA provides an exemption from the imposition of withdrawal liability on a seller who withdraws from contributing to a covered pension plan if the seller engages in a "bona fide, arm's-length sale of assets to an unrelated party" that meets certain statutory requirements. 29 U.S.C. § 1384(a)(1). Among other requirements, the purchaser of the assets must have "an obligation to contribute to the plan with respect to the operations for substantially the same number of contribution base units for which the seller had an obligation to contribute to the plan." Id. at § 1384(a)(1)(A). In this case, the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.