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Utecht v. Diamond Lake, Inc.

United States District Court, D. Minnesota

December 29, 2017

MATT UTECHT and KENT DIXON, Trustees of the Minneapolis Retail Meat Cutters and Food Handlers Pension Plan, Plaintiffs,
DIAMOND LAKE, INC., Defendant.

          Amanda R. Cefalu and Bryan J. Morben, for plaintiffs.

          David E. Krause, for defendant.



         The trustees of the Minneapolis Retail Meat Cutters and Food Handlers Pension Plan (“the Plan”) brought this Employee Retirement Income Security Act (“ERISA”) case against Diamond Lake, Inc. (“Diamond Lake”), a Minneapolis supermarket that withdrew from the Plan when it went out of business in 2013. The Plan brings this action for collection, alleging that Diamond Lake defaulted on withdrawal liability payments that the Plan properly determined and scheduled under ERISA. Now before the Court is the Plan's Motion for Summary Judgment. The Plan argues that Diamond Lake waived its right to contest liability by failing to demand arbitration within the timeframe required by the statute. Diamond Lake responds that it was not required to do so because the Plan never completed the determination process. In keeping with the plain language of ERISA, the Court will find that the Plan's failure to respond to Diamond Lake's letter requesting review did not excuse Diamond Lake from the arbitration demand deadline. Diamond Lake also requests equitable relief, which the Court will decline to grant. Because Diamond Lake does not contest the other elements required for the Plan to prevail in this action, the Court will grant the Plan's Motion for Summary Judgment.


         The Plan is a multiemployer benefit plan administered in accordance with ERISA. (Compl. ¶ 1, Jan. 19, 2016, Docket No. 1.) Diamond Lake is a Minnesota corporation that operated Sullivan's SuperValu for nearly 30 years until going out of business in 2013. (Decl. of John H. Sullivan, III (“Sullivan Decl.”) ¶¶ 1-2, May 18, 2017, Docket No. 37.) When Diamond Lake was in business, it made contributions to the Plan on behalf of employees who were members of United Food & Commercial Workers Union District Local 653. (Id. ¶¶ 3, 6). On January 25, 2013, after laying off those employees, it sold its remaining non-cash assets and made its final contributions to the Plan. (Id. ¶¶ 4, 6-7.) This was a “complete withdrawal” under ERISA. See 29 U.S.C. § 1383(a).

         On July 22, 2013, the Plan sent Diamond Lake a letter stating that its withdrawal liability (calculated using the ERISA statutory formula) was $588, 361. (Sullivan Decl. ¶ 8; Decl. of David E. Krause (“Krause Decl.”) ¶¶ 2-3, Ex. A. at 1, May 18, 2017, Docket No. 38.) The letter explained that Diamond Lake had the right to request review of the Plan's calculations within 90 days, though it was required to begin payment either way. (Krause Decl. ¶ 2, Ex. A at 2.) On August 26, Diamond Lake responded with a letter from counsel contending that it was not subject to withdrawal liability because ERISA limits such liability to a percentage of a company's liquidation value, which for Diamond Lake was negative. (Sullivan Decl. ¶ 10; Krause Decl. ¶ 4, Ex. B at 1-2.) The letter stated that it was sent “pursuant to 29 U.S.C. § 1399(b)(2)(A), ” the statutory provision allowing an employer to request review, identify an inaccuracy, or furnish additional relevant information. (Krause Decl. ¶¶ 4-5, Ex. B. at 1-2.) The letter did not explicitly request review, but stated that “Diamond Lake is submitting the information in this letter for the Trustee's consideration in determining whether Diamond Lake has any withdrawal liability to the Plan.” (Krause Decl. ¶ 4, Ex. B. at 1.) Diamond Lake received no response. (Krause Decl. ¶¶ 4, 6-7, Ex. B. at 1-2.)

         Under the Plan's schedule, Diamond Lake's first payment was due on September 23, 2013. (Aff. of Bryan J. Morben (“Morben Aff.”) ¶ 2, Ex. A at 4-5, Apr. 27, 2017, Docket No. 33.) Diamond Lake did not make that payment, or any others. (Id. at 5.) On January 23, 2015, the Plan notified Diamond Lake that it would be in default if it did not cure its failure to pay within 60 days. (Aff. of Susan Knoblauch (“Knoblauch Aff.”) ¶¶ 8-9, Ex. 2 at 1, Apr. 29, 2016, Docket No. 15.) The Plan filed this action a year later, serving Diamond Lake via the Minnesota Secretary of State. (Compl.; Summons, Jan. 29, 2016, Docket No. 4.) Diamond Lake did not respond, and the Clerk entered default. (Clerk's Entry of Default, Mar. 25, 2016, Docket No. 8.) When the Plan subsequently moved for default judgment, Diamond Lake filed its Answer, and the entry of default was vacated and set aside. (Pls.' Mot. Default J., Apr. 29, 2016, Docket No. 11; Ans., May 27, 2016, Docket No. 20; Order, June 1, 2016, Docket No. 21.) Ten months later, the Plan filed the Motion for Summary Judgment that is now before the Court. (Pls.' Mot. Summ. J., Apr. 27, 2017, Docket No. 30.)



         Summary judgment is appropriate where there are no genuine issues of material fact and the moving party can demonstrate that it is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A fact is material if it might affect the outcome of the lawsuit, and a dispute is genuine if the evidence is such that it could lead a reasonable jury to return a verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A court considering a motion for summary judgment must view the facts in the light most favorable to the non-moving party and give that party the benefit of all reasonable inferences to be drawn from those facts. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Summary judgment is appropriate if the nonmoving party “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.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “To defeat a motion for summary judgment, a party may not rest upon allegations, but must produce probative evidence sufficient to demonstrate a genuine issue [of material fact] for trial.” Davenport v. Univ. of Ark. Bd. of Trs., 553 F.3d 1110, 1113 (8th Cir. 2009).


         A. Legal Background

         The Employee Retirement Income Security Act (“ERISA”) of 1974 “helped assure private-sector workers that they would receive the pensions that their employers had promised them.” Milwaukee Brewery Workers' Pension Plan v. Joseph Schlitz Brewing Co., 513 U.S. 414, 416 (1995). But the law's requirement that employers who had withdrawn from an insolvent plan in the five years prior to insolvency pay a fair share of the plan's underfunding perversely incentivized employers to withdraw from financially shaky plans. Id. The Multiemployer Pension Plan Amendments Act (“MPPAA”) of 1980 sought to fix the problem by requiring employers that withdraw from underfunded multiemployer pension plans to pay withdrawal liability. Id. at 415-16.

         Under the amended statute, withdrawal liability is created by an employer's partial or complete withdrawal from a multiemployer plan. 29 U.S.C. § 1381(a). Complete withdrawal occurs when an employer permanently ceases to have an obligation to contribute under the plan, or permanently ceases all covered operations under the plan. Id. § 1383(a). Withdrawal liability is calculated according to a statutory formula that considers the plan's total underfunding, the employer's fair share, certain de minimis reductions, and other limitations on liability. See Id. §§ 1391, 1389, 1405.

         “As soon as practicable” after withdrawal, the plan sponsor is obligated to determine the employer's withdrawal liability, notify the employer of the amount due, provide a payment schedule, and demand payment in accordance with it. Id. §§ 1399(b)(1), 1382. Within 90 days of receiving this determination, the employer “may ask the plan sponsor to review any specific matter” in the determination and payment schedule, “identify any inaccuracy, ” and “furnish any additional relevant information to the plan sponsor.” Id. § 1399(b)(2)(A). “After a reasonable review of any matter raised, the plan sponsor shall notify the employer of” its decision, the basis for it, and the reason for any changes. Id. § 1399(b)(2)(B).

         In a separate section, the statute provides that disputes between employers and plan sponsors “shall be resolved through arbitration. Either party may initiate the arbitration proceeding within a 60-day period after the earlier of (A) the date of notification to the employer under section 1399(b)(2)(B) of this title, or (B) 120 days after the date of the employer's request under section 1399(b)(2)(A) of this title.” Id. § 1401(a)(1) (emphases added). The Eighth Circuit explains: “Either party may initiate arbitration proceedings within 180 days of an employer's timely request to the plan sponsor for a review of the determination of amount due or within 60 days of the plan sponsor's notification to the employer of its decision after such review, whichever is earlier.” Vaughn v. Sexton, 975 F.2d 498, 501 (8th Cir. 1992) (emphasis added).[1]

         If neither party initiates arbitration, the statute provides that the plan sponsor's determination and payment schedule become final and allows the sponsor to bring a state or federal court action for collection. 29 U.S.C. § 1401(b)(1). Any factual defenses that could have been raised in arbitration are waived when the arbitration demand period closes. Vaughn, 975 F.2d at 501-02. The strictness of the ...

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