The Western Conference of Teamsters Pension Trust Fund and its Trustees ("the Fund"), defendant in action number C-92-2725 MHP and plaintiff in action number C-92-2740 MHP, and United Foods, Inc. ("United") bring this consolidated action, seeking review and modification of an arbitrator's calculation and award of United's withdrawal liability under the Multiemployer Pension Plan Amendments Act of 1900 ("MPPAA"), 29 U.S.C. § 1381, et seq. The matter is currently before the court on cross-motions for summary judgment. Having considered the submissions and arguments of the parties, the court enters the following Memorandum and Order.
The Fund is a "multiemployer pension fund" which administers a "multiemployer pension plan" as defined by the Employee Retirement Income security Act ("ERISA"), 29 U.S.C. § 1002(37)(A), and regulated under the relevant provisions of ERISA, 29 U.S.C. § 1001 et seq. The Fund collects amounts owed by various employers in the Western United States and uses those funds to provide pensions and other benefits to employees of those employers. The plan is a "defined benefit plan" under ERISA, 29 U.S.C. § 1002(35), which means that employees' benefits are not limited solely to contributions made by the employer and therefore employer contributions do not necessarily cover the full cost of the employees' vested benefits. Woodward Sand Co. v. Western Conference of Teamsters Pension Trust Fund, 789 F.2d 691, 694 (9th Cir. 1986). As a result, defined benefit plans often have an "unfunded vested benefit liability," that is, the difference between the fund's current assets and the present actuarial value of employees' vested benefits. Id.
Congress passed the MPPAA in 1980 to establish a system for calculating and collecting the unfunded vested benefit ("UVB") liability from employers who withdraw from pension plans. See 29 U.S.C. § 1381 et seq.; Woodward Sand, 789 F.2d at 694 (citation omitted). The MPPAA requires that when employers withdraw from a multiemployer pension plan regulated by ERISA, they must pay their proportionate share of the UVB as "withdrawal liability" so that the plan is compensated for benefits which have already vested with the employees at the time of the employer's withdrawal. Id. Otherwise, the financial burden of the employees' vested benefits would shift to other employers in the plan, and ultimately to the Pension Benefit Guaranty Corporation ("PBGC"), which insures such benefits. Central State Pension Fund v. Slotky, 956 F.2d 1369, 1371 (7th Cir. 1992).
United contributed to the Fund under collective bargaining agreements with Locals 748 and 890 of the International Brotherhood of Teamsters in Modesto and Salinas, California. After various impasses in labor negotiations, United withdrew completely from the Fund in 1988. Pursuant to 29 U.S.C. § 1382, which requires the plan's sponsor to determine the amount of the employer's withdrawal liability, the Fund calculated United's withdrawal liability at $ 1,066,025.23.
In March 1990 United initiated arbitration under 29 U.S.C. § 1401 to challenge the Fund's withdrawal liability assessment. After extensive discovery, ten days of hearings, and weighty post-hearing submissions, the Arbitrator issued an award and a 98 page decision. The Arbitrator found that the actuarial methods and assumptions used by the Fund were "reasonable in the aggregate and not clearly erroneous" and therefore denied United's request to substantially reduce its withdrawal liability.
Arbitrator's Award ("Award") at 2. The Arbitrator did, however, hold that death benefits payable to a participating employee's estate or to relatives other than the surviving spouse or dependant children were improperly included in the UVB calculation and ordered that they be deducted from United's withdrawal liability and paid back. Id. Finally, pursuant to 29 U.S.C. § 1401(2), the Arbitrator awarded the Fund $ 135,720 in attorneys' fees, $ 25,218 in expenses, and $ 95,254 in witness fees against United.
The Fund argues that the Arbitrator's ruling excluding the above mentioned death benefits from the UVB calculation was erroneous and the Fund's full assessment should be reinstated. Except for this slight modification, the Fund urges the court to enforce the Arbitrator's award.
United challenges the Fund's withdrawal liability assessment and the Arbitrator's award on several grounds: (1) forfeitable death, disability and early retirement benefits were improperly included in the UVB calculation for United's withdrawal liability assessment, (2) the Fund's actuarial assumptions were unreasonable in the aggregate, and (3) the Arbitrator's opinion should be vacated because he refused to hear pertinent and material evidence. United also maintains that the Fund's assessment was not entitled to any presumption of correctness because the Fund's trustees breached various statutory and fiduciary obligations. Finally, United asks this court to vacate the Arbitrator's award of attorneys' fees and costs against them and seeks its fees and costs for the proceedings before this court and the Arbitrator.
I. Summary Judgment
Under Federal Rule of Civil Procedure 56, summary judgment shall be granted:
against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial . . . since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); T.W. Elec. Serv. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). The moving party bears the initial burden of identifying those portions of the record which demonstrate the absence of a genuine issue of material fact. The burden then shifts to the nonmoving party to "go beyond the pleadings, and by [its] own affidavits, or by 'depositions, answers to interrogatories, or admissions on file' designate 'specific facts showing that there is a genuine issue for trial. Celotex, 477 U.S. at 324; see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986) (a dispute about a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.").
The moving party does not surmount its initial burden through conclusory allegations as to the state of the material on file, however, it is not required to "support its motion with affidavits or other similar material negating the opponent's claim." Celotex, 477 U.S. at 323. The moving party discharges its burden by showing that the nonmoving party has not disclosed the existence of any "significant probative evidence tending to support the complaint." First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 290, 20 L. Ed. 2d 569, 88 S. Ct. 1575 (1968).
The court's function on a motion for summary judgment is not to make credibility determinations. Anderson, 477 U.S. at 249. The inferences to be drawn from the facts must be viewed in a light most favorable to the party opposing the motion. T.W. Elec. Serv., 809 F.2d at 631.
II. Scope of Review
Under the MPPAA, an arbitrator's factual findings are presumed correct, and the presumption is "rebuttable only by a clear preponderance of the evidence." 29 U.S.C. § 1401 (c); CMSH Co. v. Carpenters Trust Fund For N. Cal., 963 F.2d 238, 239-40 (9th Cir.), cert. denied, 121 L. Ed. 2d 130, U.S. , 113 S. Ct. 185 (1992). The arbitrator's conclusions of law are reviewed de novo. CMSH, 963 F.2d at 240 (citations omitted).
Although the MPPAA does not provide an explicit standard for reviewing an arbitrator's resolution of mixed questions of law and fact, mixed questions generally are reviewed de novo because they require the court to consider legal concepts and exercise judgment about the values that animate legal principles. Boone v. United States, 944 F.2d 1489, 1492 (9th Cir. 1991); see also Rozay's Transfer v. Local Freight Drivers, L. 208, 850 F.2d 1321, 1331 (9th Cir. 1988) (de novo review for mixed questions of fact and law that require court to assess whether legal duties arise under a given set of facts). If, however, the application of the law to the facts requires an inquiry that is "essentially factual," review is for clear error. Boone, 944 F.2d at 1492; see also Chicago Truck Drivers Pension Fund v. L. Zahn Drug, 890 F.2d 1405, 1411 (7th Cir. 1989) (when issue requires fact-finding expertise or the arbitrator's special expertise in the area of pension law, substantial deference is proper).
I. Death, Disability and Early Retirement Benefits Were Properly Included in the Withdrawal Liability Assessment
The MPPAA provides that "nonforfeitable" benefits are considered in the calculation of " unfunded vested benefits" for the purposes of determining a withdrawing employer's withdrawal liability. 29 U.S.C. § 1393(c). Nonforfeitable benefits are defined as those:
for which a participant has satisfied the conditions for entitlement under the plan or the requirements of this chapter (other than submission of a formal application, retirement, completion of a required waiting period, or death in the case of a benefit which returns all or a portion of a participant's accumulated mandatory employee contributions upon the participant's death), whether or not the benefit may subsequently be reduced or suspended by a plan amendment, an occurrence of any condition, or operation of this chapter or Title 26.
29 U.S.C. § 1301(a)(8).
This case raises the question of whether the death, disability and early retirement benefits contained in the plan can be included in the calculation of nonforfeitable, unfunded vested benefits under ERISA. The court is sailing on uncharted waters for there is a veritable dearth of decisional law considering this issue.
Before proceeding, the court notes that whether a category of benefits are "nonforfeitable" under section 1301(a)(8) is primarily a question of statutory construction and legislative intent, which does not rest on a factual inquiry. Accordingly, the Arbitrator's legal conclusions concerning the propriety of including death, disability and early retirement benefits in United's withdrawal liability are reviewed de novo.
A. Death Benefits
United argues that death benefits cannot be included in their withdrawal liability because they are not nonforfeitable under section 1301(a)(8). United reads section 1301(a)(8) to mean that, except for death benefits which return mandatory employee contributions, the employee's death is a condition for entitlement to death benefits. The court disagrees. A plan participant doesn't have to die to be entitled to the type of death benefits at issue in this case. Rather, death is simply the time at which vested benefits are paid out to the beneficiaries of plan participants.
The plain meaning of the term "entitlement" lays bare United's inaccurate reading of the statute. "In its usual sense, to entitle is to give a right, . . . to qualify for, [or] to furnish with proper grounds for seeking or claiming." Black's Law Dictionary 626 (4th ed. 1968). Nothing in ERISA suggests that Congress meant to depart from the ordinary definition of "entitlement" when it drafted section 1301(a)(8). Furthermore, the statute expressly provides that a benefit is nonforfeitable when the plan participant has "satisfied the conditions for entitlement under the plan. . . ." 29 U.S.C. § 1301 (a)(8) (emphasis added). United has already conceded that vested plan participants are "assured some death benefit." Zeldin Dec., Ex. B (United's Post-Hearing Brief) at 2. As the plan states: "Once a person has become a Vested Participant or Pensioner or completes ten Years of Vesting Service, he cannot have a Forfeiture of Service." Id. (citing Pension Plan, Effective January 1, 1987, at art. 3).
United also relies on a PBGC Opinion Letter which states that death benefits are nonforfeitable under section 1301(a)(8) if "the participant's death occurred before the date of plan termination." Excerpt of Record at 755 (PBGC Op. Ltr. 89-5, Aug. 1, 1989) (emphasis added). Although this court owes deference to the interpretation of ERISA by the PBGC, Mead v. Tilley, U.S. , , 109 S. Ct. 2156, 2162-64 (1989), the Opinion Letter upon which United relies does not support their argument. The letter refers to forfeitability in the context of the PBGC's effort to limit its liability in cases of plan termination due to a mass withdrawal, see 29 U.S.C. § 1399(c)(1)(D), not an employer's withdrawal from a multiemployer pension fund. The determination of which benefits are properly included in an employer's withdrawal liability involves different concerns than the question of which benefits the PBGC will guarantee upon plan termination. The policy behind multiemployer plan withdrawal liability is to ensure the solvency of pension plans, that is, to prevent such plans from terminating. Multi-employer plans do not terminate when an employer withdraws; they remain viable, and all plan participants, including the former employees of the withdrawing employer, may continue to accrue benefits. The PBGC has simply made it clear that in cases where an employer's withdrawal causes a plan to terminate, it will not guarantee the payment of death benefits where the employee has not fulfilled the qualifying condition for payment of the benefits by dying before the plan terminates.
So far as this court can determine, there is only one reported decision on the issue of whether death benefits are nonforfeitable benefits for the purpose of calculating withdrawal liability. In Huber v. Casablanca Industries, Inc., 916 F.2d 85 (3rd Cir. 1990), pet. for cert. filed (Jan. 9, 1991), the court held that a $ 2,500 lump-sum post-retirement death benefit provided for by the plan was not nonforfeitable and should therefore not be included in the calculation of unfunded vested benefits. Id. at 105. The court based its reasoning on a PBGC regulation which provided that it would not guarantee lump sum death benefits unless "the benefit was substantially derived from a reduction in the pension benefit payable to the participant or surviving beneficiary." Id, at 104 (citing 29 C.F.R. § 2613.4(c)). The PBGC regulation is of limited application to the instant case because, as with the Opinion Letter discussed above, the regulation defines what death benefits it will guarantee, not what benefits are properly included in calculating an employer's withdrawal liability.
More importantly, Huber is distinguishable because unlike the death benefits under review, the plan's fixed death benefit in Huber was essentially an allowance for funeral costs that had no relationship to an employee's retirement benefit. In other words, the death benefit was not related to the service or age of the participant, or the value of the employee's pension or annuity. The PBGC has stated that those death benefits which are "related to" pension benefits are nonforfeitable. See Arbitrator's Decision ("Decision") at 40 (citing Excerpt of Record at 2989 (PBGC Ltr. to Senator Charles E. Grassley, Jan. 24, 1985)); cf. 29 C.F.R. § 2613.2 (pension defined as "a benefit payable as an annuity or one or more payments related thereto . . . ."). The rationale for this view is that when death benefits are related to normal pension benefits, the survivor's entitlement to the benefit is derived from the participant's satisfaction of the conditions for entitlement to her pension. Huber, 916 F.2d at 103 n.39 (citing Reply Brief of amicus PBGC at 11); see also 29 U.S.C. § 1322(e) (in single-employer plan terminations, pre-retirement survivor annuities are nonforfeitable and guaranteed by the PBGC regardless of whether the participant has died by the termination date).
According to the Fund's pension plan, a lump sum death benefit in an amount not to exceed $ 10,000 is payable to the vested participant's surviving spouse or child under 18. If the participant dies before retirement and before the age of 65, the benefit equals 50% of the employer's contribution. If the participant dies before retiring but on or after the normal retirement date, the benefit is 12 times the monthly amount that would have been payable under a "life only pension" if the participant had become a pensioner on the date of his death. If the participant dies after retirement, the benefit is 12 times the monthly amount payable under the "life only pension." Decision at 55-56 (citing Pension Plan, Effective January 1, 1987, at art. 12). Therefore, the death benefits at issue in this case, unlike those in Huber, are directly related to pension benefits. That is, the amount of death benefit an individual receives depends on the applicable retirement benefit which, in turn, is based on the participant's age and years of service with the plan. As the PBGC wrote in its amicus brief in the Huber case, death benefits which are "based on the amount of the deceased participant's nonforfeitable pension benefit" are properly included in assessing an employer's withdrawal liability. See Excerpt of Record at 2989 (Reply Brief of amicus PBGC at 30 n.9).
Also pertinent to the proper resolution of this case is the statutory history and purpose of withdrawal liability. Under the regulatory scheme prior to the MPPAA, an employer who withdrew from a plan more than five years before the plan terminated had no further obligations to fund the liabilities of the plan. Employers who remained with a plan until it terminated, or who withdrew within five years of termination, were liable to the PBGC for unfunded vested benefits, up to 30 percent of the employer's net worth. Because employers who remained in a plan were left "holding the bag" of the plan's unfunded liabilities, the pre-MPPAA regime created an incentive for each employer to withdraw before other contributing employers did so. As the number of participating employers declined, the remaining employers would find it cheaper to terminate the plan than to continue funding it. See H.R. Rep. No. 869, Part I, 96th Cong., 2d Sess. 51, 54, reprinted in 1980 U.S.C.C.A.N. 2918, 2922. As the PBGC explained to Congress:
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. This vicious downward spiral may continue until it is no longer reasonable or possible for the pension plan to continue.