This is the most recent article in our series which focuses on the impact on employers of the downward spiral and death knell of the multi-employer defined benefit plan.

The Eleventh Circuit has dealt another blow to employers who contribute to multi-employer defined benefit funds.

In Westrock RKT Company v. Pace Industry Union-Management Pension Fund No. 16-16443, the Eleventh Circuit affirmed a ruling from the Northern District of Georgia.  The gist of the ruling is that the employer involved in the case was found to lack standing under ERISA to challenge an action by the board of a pension fund.  In particular, Westrock RKT Company (“Westrock”) was found to lack standing to challenge the Board of Trustees (“Board”) of the Pace Industry Union-Management Pension Fund (the “Fund”) under two sections of ERISA.

The facts are not unique for multi-employer pension funds.  Based on requirements imposed by the Pension Protection Act of 2006 (“PPA ’06”), the Fund found itself in critical status.  As a result, it complied with its requirement under PPA ’06 to adopt a Rehabilitation Plan.  A Rehabilitation Plan typically consists of action items such as reduction in plan expenditures, reductions in future benefit accruals and increases in contribution rates.  All of these were designed to improve the Fund’s financial outlook.

The Fund had adopted a Rehabilitation Plan in 2010.  In 2012, the Fund amended the Rehabilitation Plan to include a provision stating that an employer withdrawing from the Fund was required to pay a portion of the Fund’s accumulated funding deficiency in addition to the statutorily mandated withdrawal liability.  Withdrawal can occur for a number of specified reasons, including actions over which an employer has absolutely no control such as de-certification by the bargaining unit or disclaimer by the Union.

Westrock sought relief from that amendment by filing a declaratory action seeking a declaration that the amendment violated ERISA.  The district court never addressed the merits of the action but rather dismissed the complaint under Federal Rule of Civil Procedure 12(b)(6) stating that Westrock lacked standing.

The Eleventh Circuit, acknowledging that this was a case of first impression which turned on statutory interpretation, affirmed the district court.  In doing so, it opined that civil actions under ERISA were limited only to those parties and actions which Congress specifically enumerated.

The plaintiff had asserted that it had a valid cause of action under either 29 U.S.C.  Section 1132(a)(1) or Section 1451(a).  As to Section 1132(a)(1), the Circuit Court recognized that section as initially drafted did not authorize contributing employers to bring any kind of civil suit at all but that in its passage of PPA ’06 Congress had provided employers with a limited cause of action.  The Court then addressed whether new Section 1132(a)(10) provided the plaintiff with standing to bring its cause of action.  The Court rejected that concept stating that Section 1132(a)(10) did not provide an employer with the right to challenge a provision in a rehabilitation plan.  The cause of action was limited to procedural issues rather than the substance of a Rehabilitation Plan.  As such, the plaintiff as an employer did not have a role to play when a plan sponsor enacted reasonable measures.  Moreover, the Circuit Court found that there was no portion of ERISA which prohibited a fund from putting into place a system for charging withdrawing employers for their share of the accumulated funding deficiency.

WestRock had also asserted a cause action under 29 U.S.C. Sec. 1451(a).   Section 1451 appears to be a catch-all provision which authorizes an employer to bring an action when it is “…adversely affected by the act or omission of any party under this subtitle with respect to a multi-employer plan…”  The Circuit Court found that the “subtitle” noted was Subtitle E which is entitled “Special Provisions for Multiemployer Plans.”  Because Subtitle E dealt with unfunded vested benefits and the amendment addressed accumulated funding deficiency, the plaintiff lacked standing under Section 1451 because the amendment had nothing to do with Subtitle E.

In a chilling statement for employers, the Eleventh Circuit concluded with the following about ERISA:

There is nothing in the text that indicates Congress intended for ‘withdrawal liability’ to be the only payments a withdrawing employer would ever face, and because of the comprehensive nature of ERISA, we read the absence of such language as intentional.

            It is feared by this commentator that the decision may embolden funds to adopt this type of penalty in future rehabilitation plans.  It is further evidence of the need for employers to move pro-actively in dealing with multi-employer pension funds.


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Photo of Paul A. Friedman Paul A. Friedman

Paul A. Friedman is a principal in the White Plains, New York, office of Jackson Lewis, P.C. His legal practice is focused on ERISA litigation, labor and Multiemployer Pension Plan Amendments Act (MPPAA) arbitrations and is well grounded in his earlier experience as…

Paul A. Friedman is a principal in the White Plains, New York, office of Jackson Lewis, P.C. His legal practice is focused on ERISA litigation, labor and Multiemployer Pension Plan Amendments Act (MPPAA) arbitrations and is well grounded in his earlier experience as outside counsel to numerous union pension funds. During years of litigating cutting-edge ERISA issues before the U.S. Department of Labor, U.S. district courts, bankruptcy courts and courts of appeal on behalf of employers, plan sponsors and ERISA plan fiduciaries, Paul sometimes finds his own prior landmark decisions cited to him.

For Paul, MPPAA has all the excitement of a trial – it is an intricate and counter-intuitive statute. He has first chair experience in more than 40 jury trials and has handled hundreds of arbitrations and bench trials on all aspects of ERISA. ERISA knows no organizational bounds and so Paul has defended cases for clients representing many industry sectors, including life sciences, financial services, energy, hospitality, and construction.

Paul has served as litigation counsel for numerous multi-employer and single-employer employee benefit plans in ERISA matters, where he:

  • Devotes his practice mainly to the defense of employers, plan sponsors, fiduciaries, and financial institutions against claims brought under ERISA by benefit funds, plan beneficiaries, and the U.S. Department of Labor. He handles issues related to breach of fiduciary duties, excessive plan expenses, benefit entitlement issues retiree health benefits, and functional fiduciary liability
  • Successfully represents companies as plan sponsors against claims of participants and qualified beneficiaries for violations of COBRA
  • Defends employers that have been assessed withdrawal liability under MPPAA or have experienced increased liability due to the passage of the Pension Protection Act of 2006
  • Performs employee benefits due diligence for buyers or sellers in mergers and acquisitions transactions, filling a knowledge gap between labor and financial counsel, ensuring that buyers and sellers price-in or mitigate against ERISA violations and potentially millions of dollars in liabilities
  • Conducts comprehensive strategic reviews of clients’ current operations to avoid or mitigate against exposure to ERISA enforcement and risk of civil and criminal charges brought against company executives, principals, and trustees

In the last decade, he has developed a business model for use by businesses across a broad spectrum of ERISA issues from the beginning of the ownership of these companies to their sale. He also provides benefits guidance to Mergers and Acquisitions counsel in complex transactions.

Outside of work, Paul is an ardent Civil War and World War I buff. He expressly enjoys traveling to Europe and touring World War I battlefields.