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Gciu- Employer Retirement Fund v. Quad Graphics, Inc.

United States District Court, C.D. California

April 19, 2017

GCIU-EMPLOYER RETIREMENT FUND, Plaintiff,
v.
QUAD/GRAPHICS, INC., Defendant.

          ORDER AFFIRMING IN PART AND VACATING IN PART ARBITRATION AWARD [22, 23]

          OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         This case concerns withdrawal liability under the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Multi employer Pension Plan Amendments Act of 1980 (“MPPAA”). Quad/Graphics, Inc. (“Quad”) ceased contributing to a multi employer pension plan called GCIU-Employer Retirement Fund (“Fund”). The MPPAA imposes liability on employers that withdraw from multi employer pension plans, and thus the Fund calculated Quad's withdrawal liability and demanded payment. Quad disputed the Fund's calculation on several grounds, prompting the parties to submit the matter to arbitration. See 29 U.S.C. §1401(a)(1). The arbitration recently concluded, and both parties now petition this Court to affirm and vacate opposing portions of the arbitration award. (ECF Nos. 22, 23.) For the reasons discussed below, the Court AFFIRMS IN PART and VACATES IN PART the arbitrator's final award, and DISMISSES AS MOOT the Fund's challenge to portions of the arbitrator's final award.

         II. BACKGROUND

         A. Statutory Background

         Collective bargaining agreements (“CBAs”) between an employer and an employee-union often require the employer to provide pension benefits to its employees. To ensure that these employees actually receive their promised benefits, ERISA requires the employer to contribute to a pension plan in an amount sufficient to cover those benefits. Moreover, where the plan is a multi employer plan (as opposed to a single-employer plan), the MPPAA requires withdrawing employers to pay their share of the plan's unfunded vested benefits. This ensures that employer withdrawals do not bankrupt the plan. See generally Milwaukee Brewery Workers' Pension Plan v. Joseph Schlitz Brewing Co., 513 U.S. 414, 416 (1995).

         A withdrawal is either partial or complete. 29 U.S.C. § 1381(a). A withdrawal is partial when the employer's obligation to contribute to the plan ceases under some, but not all, of the CBAs by which it is bound. Id. § 1385(a)(2), (b)(2)(A). A withdrawal is complete when the employer's obligation to contribute to the plan ceases under all CBAs by which it is bound. Id. § 1383(a)(1).[1] Moreover, withdrawal liability is assessed based on the “plan year” in which the employer withdraws, see Id. § 1391, and the extent of the employer's liability can change substantially based on the particular plan year in which the withdrawal occurs.

         B. Factual Background

         Quad is an employer in the commercial printing business. (Arbitration Record (“AR”) at 9, ¶ 2.) Quad maintains facilities at multiple locations within the United States, and is bound by separate CBAs at each of those facilities. (Id. at 9, ¶ 4.) One of Quad's facilities is located in Versailles, Kentucky. (Id. at 9, ¶ 5.) In 2007, Graphic Communications Conference, International Brotherhood of Teamsters, Local 826-C (“Local 826-C”) was the exclusive bargaining representative for the Versailles employees. (See Id. at 349.) That year, Local 826-C entered into a CBA with Quad's predecessor, World Color (USA), formerly known as Quebecor World (USA), Inc. (“Quebecor”). (Id. at 349-411.) Quad acquired Quebecor in 2010, and the parties appear agree that Quad assumed Quebecor's obligations under the CBA. (Id. at 9, ¶ 3.)

         The Versailles CBA contained two provisions relevant to the parties' dispute. The first concerned the manner in which employee vacation time accrued and was used. Under the CBA, employees received their yearly allotment of vacation time in a “bank” at the beginning of the year. (Id. at 12, ¶ 28.) Employees could use their vacation time at any time throughout the year, up until the end of the day on December 31. (Id. at 10, ¶ 8; id. at 12, ¶¶ 29-31.) Any unused vacation time left in the banks thereafter must be paid out to the employee by January 31. (Id. at 10, ¶ 9.) Thus, for example, if John Doe accrued 20 hours of vacation time over the course of 2008, Quad would credit 20 hours of vacation time in John's bank at the beginning of 2009. John could use this vacation time at any point up to December 31, 2009. Any unused vacation time left in the bank at the end of this period must be paid out to John on or before January 31, 2010.

         The other relevant CBA provision concerned the timing of pension benefit payments. Under the CBA, Quad was required to make monthly contributions to the Fund. (Id. at 9-10, ¶ 7.) The CBA required Quad to calculate its monthly contribution obligation based on, inter alia, the hours worked by the employee that month and vacation time taken by (or paid out to) the employee that month. (Id.) Thus, the January payout of the previous year's unused vacation time triggered Quad's obligation to contribute to the Fund.

         In December 2010, the Versailles employees voted to decertify Local 826-C as their exclusive bargaining representative. (Id. at 10, ¶ 11.) The National Labor Relations Board (“NLRB”) certified the results of the election on December 27, 2010. (Id.) As of January 1, 2011, there were over 5, 000 hours of total unused vacation time in the banks of Versailles employees. (Id. at 12, ¶ 33.) Quad paid out this vacation time to the Versailles employees on January 21, 2011, in the total amount of $84, 953.62. (Id. at 13, ¶ 38.) On January 11, 2011, Quad submitted its contribution payment to the Fund for its Versailles employees in the amount of $48, 445.20. This payment was for work performed and contributions due in December 2010. (Id. at 10, ¶ 14; id. at 13, ¶ 36.)

         Because the decertification voided the CBA-and therefore cut off Quad's obligation thereunder to contribute to the Fund-Quad notified the Fund of the decertification. (Id. at 10, ¶ 13.) While calculating Quad's withdrawal liability, the Fund concluded that Quad's contribution obligation under the Versailles CBA ceased in 2010.[2] (Id. at 11-12, ¶ 27; id. at 14, ¶¶ 45-46.) The Fund also concluded that Quad's contribution obligation under the CBAs governing Quad's other facilities ceased in 2011 (except for the Memphis facility, which previously withdrew in 2009). (Id. at 11-12, ¶ 27.) As a result, the Fund assessed liability for a 2010 partial withdrawal (for the Versailles facility), and a 2011 complete withdrawal. (Id. at 10, ¶ 15; id. at 11, ¶ 17.) Quad disputed that its obligation to contribute under the Versailles CBA ceased in 2010, and thus argued that the Fund should not have assessed liability for a 2010 partial withdrawal. (See Id. at 11, ¶ 18.) The allegedly erroneous assessment increased Quad's total withdrawal liability by approximately $20 million. (Id. at 13, ¶ 42.) Finally, in assessing Quad's liability for the 2011 complete withdrawal, the Fund applied a partial withdrawal credit (for the 2009 Memphis partial withdrawal) before applying the MPPAA's 20-year payment cap on withdrawal liability. (Id. at 15, ¶¶ 55-56.) Quad contends that the Fund should have applied the 20-year cap before the partial withdrawal credit, and that the Fund's failure to do so increased its 2011 withdrawal liability by approximately $14 million. (Id. at 1639.)

         C. Arbitration Proceedings

         The parties presented three issues to the arbitrator for decision. The two issues pertinent to this action are: (1) whether Quad's obligation under the Versailles CBA to contribute to the Fund ceased in 2010 or 2011; and (2) in calculating Quad's withdrawal liability, whether the Fund properly applied the partial withdrawal credit before applying the 20-year cap. (Id. at 4-5.)[3]

         On the first issue, the arbitrator concluded that Quad's obligation under the Versailles CBA to contribute to the Fund ceased in 2011. The arbitrator reasoned that: (1) the Versailles CBA required Quad to pay out all unused vacation and personal time to its employees from 2010; (2) vacation days could be used up until midnight on January 1, 2011; (3) Quad therefore could not calculate (and thus could not pay out) any unused vacation time to its employees until thereafter; and thus (4) Quad's obligation to contribute to the Fund based on those payments did not cease until 2011. (See Id. at 12-13, ¶¶ 31, 34, 35, 39; id. at 18-21.) On the second issue, the arbitrator concluded that the wording and structure of the various statutes under the MPPAA supported the Fund's decision to apply the partial withdrawal credit before applying the 20-year payment cap. (Id. at 21-23, ¶¶ 8-15.)

         At the conclusion of the arbitration proceeding, both Quad and the Fund moved for an award of attorneys' fees based on the other's bad faith conduct during the proceedings. (Id. at 24-25, ¶¶ 22.) Quad argued that: (1) the Fund lacked a good faith basis for seeking an additional evidentiary hearing on the second issue put before the arbitrator; and (2) the Fund lacked a good faith basis for attempting to submit several revised withdrawal assessments that were purposely inconsistent with the arbitrator's rulings. (Id.) The Fund, in turn, argued that Quad lacked a reasonable basis on which to assert the second issue regarding the sequence of withdrawal liability adjustments. (Id.) The arbitrator concluded (without explanation) that neither Quad nor the Fund had engaged in bad faith conduct, and thus denied their respective requests for fees and costs. (Id. at 25, ¶ 24.) Finally, the arbitrator also denied the Fund's motion to delay issuance of the final arbitration award based on Quad's “unclean hands.” (Id. at 24, ¶ 21.)

         D. Civil Action

         On May 17, 2016, the arbitrator issued his final award addressing all issues raised in the arbitration. (Id. at 2.) Both parties immediately filed separate civil actions to affirm and/or vacate the arbitrator's decision, which the Court consolidated into one action. (ECF No. 19.) On August 17, 2016, both parties timely moved to affirm and/or vacate the arbitrator's decision. (ECF Nos. 22, 23.) On November 21, 2016, the Court heard oral argument from the parties on their respective Motions, after which the Court took the Motions under submission. (ECF No. 34.) Those Motions are now before the Court for decision.

         III. ISSUES PRESENTED

         The parties seek to affirm and/or vacate various portions of the arbitrator's final award. The Court rules on each issue as follows:

(1) Quad asks this Court to affirm, and the Fund asks this Court to vacate, the arbitrator's decision that Quad's Versailles facility withdrew from the Fund in 2011 rather than 2010. The Court VACATES the arbitrator's decision.
(2) The Fund asks this Court to vacate the arbitrator's decision that the Fund prepare only a revised 2011 complete withdrawal liability assessment. The Court DISMISSES AS MOOT the Fund's challenge to the arbitrator's decision.
(3) Quad asks this Court to vacate, and the Fund asks this Court to affirm, the arbitrator's decision that the Fund properly applied the partial withdrawal credit before applying the 20-year payment cap to the 2011 complete withdrawal assessment. The Court AFFIRMS the arbitrator's decision.
(4) Quad asks this Court to vacate the arbitrator's decision denying Quad's request for an award of attorneys' fees and costs against the Fund. The Court VACATES the arbitrator's decision.
(5) Quad asks this Court to affirm the arbitrator's decision denying the Fund's request for a delay in issuing the final arbitration award based on Quad's “unclean hands.” The Court AFFIRMS the arbitrator's decision.

IV. STANDARD OF REVIEW

         An arbitrator's conclusions of law are reviewed de novo. Penn Cent. Corp. v. W. Conference of Teamsters Pension Trust Fund, 75 F.3d 529, 533 (9th Cir. 1996). An arbitrator's factual findings, however, are presumed correct, “rebuttable only by a clear preponderance of the evidence.” 29 U.S.C. § 1401(c). While the question “[w]hether a withdrawal within the meaning of the statute has occurred presents a mixed question of law and fact, ” Penn Cent. Corp., 75 F.3d at 533, “[t]he construction of the CBA is a question of law that [is] review[ed] de novo.” Nw. Adm'rs, Inc. v. San Bruno Garbage Co., 312 F. App'x 916, 918 (9th Cir. 2009) (citing Santa Monica Culinary Welfare Fund v. Miramar Hotel Corp., 920 F.2d 1491, 1493 (9th Cir. 1990)); see also Nw. Adm'rs, Inc. v. B.V. & B.R., Inc., 813 F.2d 223, 225 (9th Cir. 1987) (interpretation of the written terms of a CBA is a question of law to the extent that the language is not ambiguous). Finally, “an award of attorneys' fees is reviewed for an abuse of discretion.” Penn Cent. Corp., 75 F.3d at 535; see also Trs. of Utah Carpenters' & Cement Masons' Pension Trust v. Loveridge, 567 F. App'x 659, 662 (10th Cir. 2014).

         V. DISCUSSION

         A. Issue 1: Quad's Withdrawal Under the Versailles CBA

         The Fund argues that the arbitrator erred in concluding that Quad's obligation to contribute to the Fund survived the decertification of Local 826-C. The Fund argues for a bright line rule that any obligation under a CBA to contribute to a pension plan ceases immediately upon NLRB confirmation of the decertification vote. Any other rule, the Fund contends, would create uncertainty and litigation in an area of law that emphasizes administrative uniformity and simplicity. Quad, on the other hand, argues that whether an employer's obligation to contribute to a pension plan survives decertification depends on the terms of the specific CBA at issue. Here, because Versailles employees could take vacation any time up until January 1, 2011, it was impossible to determine before that date the amount of unused vacation time Quad would need to pay out. Moreover, because the CBA required Quad to contribute to the Fund based on the payment of unused vacation time, Quad argues that its obligation to ...


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