United States District Court, E.D. New York
NATIONAL INTEGRATED GROUP PENSION PLAN and BOARD OF TRUSTEES OF THE NATIONAL INTEGRATED GROUP PENSION PLAN, Plaintiffs,
DUNHILL FOOD EQUIPMENT CORP., ESQUIRE MECHANICAL CORP., GEOFFREY THAW, SANFORD ASSOCIATES and CUSTOM STAINLESS, INC., Defendants
For National Integrated Group Pension Plan, Board of Trustees of the National Integrated Group Pension Plan, Plaintiffs: Julia P. Clark, LEAD ATTORNEY, Bredhoff & Kaiser, P.L.L.C., Washington, DC; Osvaldo Vazquez, LEAD ATTORNEY, PRO HAC VICE, Osvaldo Vazquez, LEAD ATTORNEY, PRO HAC VICE, Bredhoff & Kaiser, P.L.L.C., Washington, DC; Patricia McConnell, LEAD ATTORNEY, Elise S. Feldman, Meyer, Suozzi, English & Klein, P.C., New York, NY; Kathleen M Keller, PRO HAC VICE, Bredhoff and Kaiser, Washington, DC.
For Dunhill Food Equipment Corp., Esquire Mechanical Corp., Custom Stainless, Inc., Defendants: Joseph Ted Donovan, Finkel Goldstein Rosenbloom & Nash LLP, New York, NY.
For Geoffrey Thaw, Sanford Associates, also known as Sandford Associates, Defendants: Joseph Ted Donovan, Finkel Goldstein Rosenbloom & Nash LLP, New York, NY; Kevin J. Nash, Goldberg Weprin Finkel & Goldstein LLP, New York, NY.
MEMORANDUM & ORDER
MARGO K. BRODIE, United States District Judge.
Plaintiffs National Integrated Group Pension Plan (the " Plan" ) and the Board or Trustees of the Plan filed the above-captioned action pursuant to the Employee Retirement Income Security Act (" ERISA" ) to collect a sum of withdrawal liability against Defendants Dunhill Food Equipment (" Dunhill" ), Esquire Mechanical (" Esquire" ), Geoffrey Thaw, Sanford Associates (" Sanford" ) and Custom Stainless. This action was filed on July 28, 2011. The Complaint named only Dunhill, Esquire and Does 1 through 10. Plaintiffs
filed an Amended Complaint to add Thaw, Sanford and Custom Stainless as defendants. Defendants now move for partial summary judgment with respect to Plaintiffs' claims against Thaw, Sanford and Custom Stainless. Plaintiffs move for summary judgment against all Defendants. Defendants Sanford and Thaw also move for protective relief, including a stay of this action, in the event that the Court finds that certain factual issues must be arbitrated. The Court heard argument on December 4, 2012. For the following reasons, Defendants' motion for partial summary judgment is granted in part and denied in part, and Plaintiffs' motion for summary judgment is granted in part and denied in part. The Court finds Dunhill, Esquire and Thaw, jointly and severally, liable for the withdrawal liability, plus reasonable attorney's fees and costs, interest and liquidated damages. The Court dismisses the Amended Complaint as to Sanford and Custom Stainless. Defendants' motion for protective relief is denied as moot.
Plaintiff National Integrated Group Pension Plan (the " Plan" ) is an employee benefit plan maintained for the purpose of providing retirement and related benefits to eligible participants. (Am. Compl. ¶ 4.) Thaw is the sole owner of Dunhill, Esquire and Custom Stainless. Id. at ¶ 15. Dunhill manufactured and sold equipment for commercial kitchens, and Esquire manufactured and sold commercial rotisseries. (Pl. 56.1 ¶ 4.) Dunhill and Esquire both employed workers but, as of 2000, Esquire's employees were transferred to Dunhill, and the employees manufactured equipment for both entities. Id. at ¶ 5. Sanford is a general partnership that, until September of 2004, owned the property where Dunhill and Esquire operated. (Am. Compl. ¶ 14.) That month, Sanford sold the property to a third party for approximately $5,382,745. (Pl. 56.1 ¶ 13.) Thaw, the sole partner, received the proceeds of the sale in his personal account. (Pl. 56.1 ¶ 14; Def. 56.1 ¶ 14.) Sanford marked its 2005 tax return as " final," which Defendants claim constitutes the termination of the partnership pursuant to federal tax law. (Def. 56.1 ¶ 17.) Sanford has not filed a formal dissolution. (Pl. 56.1 ¶ 17.) After the sale, Dunhill obtained a lease from the new owner and continued doing business at the property until the end of 2008, when it ceased production entirely. (Def. Mem. 4.) Defendants claim that Custom Stainless dissolved as a New York corporation in 1992, moved to New Jersey, and ceased business entirely in the early 2000s, filing its tax return in 2003 and describing itself as " Inactive." (Def. 56.1 ¶ 16.) Plaintiffs contend that Custom Stainless has not been formally dissolved. (Pl. 56.1 ¶ 16.)
Dunhill was a participating employer in the Plan. (Am. Compl. ¶ 18.) As such, Dunhill was obligated to make contributions to fund benefits for employees covered by the Plan. Id. On December 31, 2008, Dunhill completely withdrew from participation in the Plan. (Pl. 56.1 ¶ 18.) Plaintiffs allege that at the time of the withdrawal, Esquire, Custom Stainless, Sanford and Thaw were under common control with Dunhill. (Am. Compl. ¶ 22.) Plaintiffs made a determination of the amount of Dunhill's withdrawal liability and made a demand for payment in a letter dated January 13, 2010. (Pl. 56.1 ¶ 21.) The letter stated that the amount of withdrawal liability was $612,512.75, and
the liability should be paid in 80 quarterly payments of $7,362.75 each. Id. The first payment was due February 12, 2010, but Dunhill did not make a payment. Id. at ¶ ¶ 21-22. By letter dated February 22, 2010, Dunhill requested that the Plan review its determination. Id. at ¶ 23. On March 8, 2010, Dunhill sent a demand for arbitration to the American Arbitration Association (" AAA" ). (Am. Compl. ¶ 25.) On March 22, 2010, counsel for the Plan notified Dunhill that its arbitration demand was not timely, that Dunhill had failed to provide the required withdrawal liability payment and that Dunhill would be in default unless payment was made within 60 days. (Pl. 56.1 ¶ ¶ 24, 28.)
Dunhill and the Plan selected an arbitrator, but a hearing date was not set. Id. at ¶ 29. On May 10, 2010, Claire Connelly, an AAA representative, asked the parties for an update of the status of the arbitration. Id. at ¶ 31. Neither party responded. (Def. 56.1 ¶ 31.) The Plan notified Dunhill by letter dated May 24, 2010 that Dunhill was in default. (Pl. 56.1 ¶ 26.) On June 14, 2011, the AAA representative informed the parties that, unless advised to the contrary by June 24, 2011, the AAA's file would be closed. Id. at ¶ 31. The AAA also informed Dunhill that it had not yet paid its filing fee in full. Id. Neither party responded, and the AAA notified the parties on July 18, 2011 that the arbitration file had been closed. Id. at ¶ 32.
Defendants move for partial summary judgment, arguing that (1) Sanford, Thaw and Custom Stainless cannot be held liable under control group liability because Sanford and Custom Stainless dissolved prior to December 31, 2008, and (2) Thaw cannot be held liable through a veil piercing claim. (Def. Mem. 1-2.) Plaintiffs move for summary judgment against all Defendants for the assessed withdrawal liability and interest. (Pl. Opp'n 1.) Defendants also seek a protective order, if necessary, to stay further proceedings pending completion of arbitration proceedings. (Def. Stay Mem. 1.)
a. Standard of Review
Summary judgment is proper only when, construing the evidence in the light most favorable to the non-movant, " there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Redd v. N.Y. Div. of Parole, 678 F.3d 166, 174 (2d Cir. 2012). The role of the court is not " to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Cioffi v. Averill Park Cent. Sch. Dist. Bd. of Educ., 444 F.3d 158, 162 (2d Cir. 2006) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). A genuine issue of fact exists when there is sufficient " evidence on which the jury could reasonably find for the [non-moving party]." Anderson, 477 U.S. at 252. The " mere existence of a scintilla of evidence" is not sufficient to defeat summary judgment; " there must be evidence on which the jury could reasonably find for the [non-moving party]." Id. The court's function is to decide " whether, after resolving all ambiguities and drawing all inferences in favor of the non-moving party, a rational juror could find in favor of that party." Pinto v. Allstate Ins. Co., 221 F.3d 394, 398 (2d Cir. 2000).
b. Withdrawal Liability
The Plan is a multiemployer pension plan. Multiemployer pension plans, created by ERISA, are plans " in which multiple employers pool contributions into a single fund that pays benefits to covered retirees who spent a certain amount of time working for one or more of the contributing employers." Trustees of Local 138 Pension
Trust Fund v. F.W. Honerkamp Co., 692 F.3d 127, 129 (2d Cir. 2012). Multiemployer pension plans are advantageous in industries where companies frequently go in and out of business and employees transfer among employers, making a single-employer plan " unfeasible." Id. However,
[a] key problem of ongoing multiemployer plans, especially in declining industries, is the problem of employer withdrawal. Employer withdrawals reduce a plan's contribution base. This pushes the contribution rate for remaining employers to higher and higher levels in order to fund past service liabilities, including liabilities generated by employers no longer participating in the plan, so-called inherited liabilities. The rising costs may encourage -- or force -- further withdrawals, thereby increasing the inherited liabilities to be funded by an ever-decreasing contribution base.
Id. (quoting Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 722 n.2, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984)). In recognition of this problem, Congress enacted the Multiemployer Pension Plan Amendments Act of 1980 (" MPPAA" ). Id. at 130. Under the MPPAA, " an employer [that] withdraws from a multiemployer plan . . . is liable to the plan in the amount determined . . . to be the withdrawal liability." 29 U.S.C. § 1381(a). " Withdrawal liability is the withdrawing employer's proportionate share of the pension plan's unfunded vested benefits." Trustees of Local 138 Pension Trust Fund, 692 F.3d at 130.
Plaintiffs move for summary judgment against Dunhill, the withdrawing employer. Employers that wish to challenge a withdrawal liability assessment must do so through a mandatory system of arbitration. 29 U.S.C. § 1401(a)(1); see also N.Y. Teamsters Conference Pension & Ret. Fund v. Express Services, Inc. (" Express Services" ), 426 F.3d 640, 645 (2d Cir. 2005). " Where a defendant does not initiate arbitration, it waives its right to arbitration and its right to assert any defenses in an action seeking withdrawal liability," and the " withdrawal liability assessed against the defendant becomes fixed." Finkel v. Fred Todino & Sons, Inc., No. 08 Civ. 4598, 2010 WL 4646493, at *4 (E.D.N.Y. Oct. 8, 2010), report and recommendation adopted, 2010 WL 4673961 (E.D.N.Y. Nov. 3, 2010); see also Labarbera v. United Crane & Rigging Services, Inc., No. 08 Civ. 3274, 2011 WL 1303146, at *5 (E.D.N.Y. Mar. 2, 2011) (noting that the " law is unforgiving where, as here, an employer fails to take action in a timely manner after being notified" ). The statute provides that if an arbitration proceeding has not been initiated in the prescribed time period, the amounts demanded by the plan are " due and owing on the schedule set forth by the plan sponsor" and the " plan sponsor may bring an action in a State or Federal court of competent jurisdiction for collection." 29 U.S.C. § 1401(b)(1). In order to prevail on summary judgment, a plaintiff must establish three elements: " (1) that defendants constituted an 'employer' under MPPAA prior to the withdrawal; (2) that defendants received notice of a withdrawal liability assessment against them; and (3) that defendants failed to initiate arbitration as required by MPPAA." Bd. of Trustees of Trucking Emps. of N. Jersey Welfare Fund, Inc.--Pension Fund ...