Company Owes $1.7M; Judge Nixes Challenge To ‘Union-Mandated' Withdrawal Liability

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March 2 — A rubber company can't escape a $1.7 million withdrawal liability assessment by arguing that its withdrawal from a multiemployer pension plan was “union-mandated,” a federal judge concluded.

In seeking relief from a $1,713,169 arbitration award, the rubber company argued that the arbitrator failed to use the Pension Benefit Guaranty Corporation's alternate method for calculating withdrawal liability when an employer's withdrawal resulted from union action. Under this method, the company argued that its liability totaled only $312,000.

Judge Sara Lioi of the U.S. District Court for the Northern District of Ohio sided with the pension fund and upheld the $1.7 million assessment. According to Lioi, the Employee Retirement Income Security Act's equitable remedies provision doesn't provide a federal cause of action for employers challenging withdrawal liability calculations for union-mandated withdrawals.

Union-Mandated Withdrawal 

In challenging the arbitrator's withdrawal liability calculation, the company pointed to a 1991 PBGC report dealing with union-mandated withdrawals.

In the report, the PBGC found that a union-mandated withdrawal occurs when: (1) a union “voluntarily disclaims” its status representing a group of employees; and (2) the relevant pension plan “refuses to accept” the continued contributions submitted by the employer.

Although the report stated that union-mandated withdrawals were rare and didn't justify the creation of special rules, the report also offered three methods for calculating liability in these instances in case Congress decided that special rules were appropriate. At this time, Congress hasn't acted on the report or amended ERISA to account for union-mandated withdrawals.

No Viable Claim 

In considering the company's counterclaim, the court found that even if the company experienced a union-mandated withdrawal, such action didn't provide the company with a federal claim for equitable relief under ERISA.

According to the court, ERISA includes a “comprehensive” scheme for determining withdrawal liability. That scheme includes several specific exceptions that reduce withdrawal liability in certain circumstances, “but an exception for union-mandated withdrawals is not among them,” the court said.

“If Congress intended to create special rules for union-mandated withdrawals, in addition to the other statutory exceptions it created, Congress knew how to do so,” the court said.

Given this, the court found that the company had no valid basis for challenging the $1.7 million withdrawal liability assessment, which was calculated according to the rules provided in ERISA.

The pension fund was represented by Littler Mendelson. The company was represented by Jackson Lewis.

Text of the opinion is at