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Total Articles: 11

Ninth Circuit’s Expansion of Successor Liability May Make Asset Purchases More Costly

n June 1, 2018, the U.S. Court of Appeals for the Ninth Circuit ruled that an asset purchaser that was deemed a successor was liable to pay the seller’s withdrawal liability even though the purchaser did not have actual knowledge of the liability. The Ninth Circuit found that constructive notice of the liability was sufficient to impose withdrawal liability on the asset purchaser. This ruling raises the hurdles that a successor must overcome to avoid withdrawal liability in an asset sale transaction.

Constructive Notice Enough for Successor Withdrawal Liability, Ninth Circuit Holds

The expansion of the multiemployer pension plan successor withdrawal liability doctrine continues for asset purchasers. Establishing a constructive notice standard, the federal appellate court in San Francisco has ruled that a common law successor of a seller that withdrew from a multiemployer pension plan covered by the Employee Retirement Income Security Act (ERISA), as amended by the Multiemployer Pension Plan Amendment Act (MPPAA), had constructive notice of, and was therefore liable for, withdrawal liability incurred by the asset seller. Heavenly Hana, LLC v. Hotel Union & Hotel Industry of Hawaii Pension Plan, No. 16-15481 (9th Cir. June 1, 2018).

Multiemployer Pension Plans: Potential Successor Liability from Buyer’s Attempts to Continue Seller’s Business

The district court erred in finding a multiemployer pension plan did not show sufficient continuity of business operations to support imposing successor liability on an asset purchaser, the federal appeals court in Chicago has ruled in a case under the Multiemployer Pension Plan Amendments Act (MPPAA) involving withdrawal liability of $661,978. Indiana Electrical Workers Pension Benefit Fund v. ManWeb Services, Inc., No. 16-2840 (7th Cir. Mar. 12, 2018).

Calculating Withdrawal Liability with ‘Segal Blend’ Violated Multiemployer Pension Plan Amendments Act, Judge Rules

In a decision that could have far-reaching implications for multiemployer pension plans and employers, a federal district court has held that the use of the “Segal Blend” to calculate a company’s withdrawal liability when it withdrew from a multiemployer pension plan violated the Employee Retirement Income Security Act (ERISA), as amended by the Multiemployer Pension Plan Amendments Act (MPPAA). The New York Times Co. v. Newspapers & Mail Deliverers’-Publishers’ Pension Fund, No. 1:17-cv-06178-RWS (S.D.N.Y. Mar. 26, 2018). The decision likely will be appealed to the U.S. Court of Appeals for the Second Circuit in New York.

Multiemployer Pension Plans: Section 1405 – Limitation on Withdrawal Liability

Executive Summary: In a recent decision involving a withdrawal liability assessment by a multiemployer pension plan, an arbitrator reduced the assessment by approximately 50 percent and ruled in favor of the employer on several significant legal issues.

Arbitrator Slashes Annual Withdrawal Liability Payments in Underfunded Multiemployer Pension Plan Dispute

Employers who cease contributing to an ERISA multiemployer pension plan are liable for their allocable share of any underfunding, or “withdrawal liability.”

Tenth Circuit Expands Withdrawal Liability of Construction Industry Employer

In a case of first impression, the United States Court of Appeals for the Tenth Circuit held that work performed by a non-union company acquired after a construction industry employer ceased contributing to a multiemployer pension plan (MEP) triggered withdrawal liability. The case, Ceco Concrete Construction, LLC v. Centennial State Carpenters Pension Trust, Nos. 15-1021, 15-1190 (10th Cir. May 3, 2016), should be paid close heed by unionized construction companies.

Multiemployer Pension Plans - Withdrawal Liability is Mounting

There are approximately 1,400 multiemployer pension plans and nearly 10 percent are projected to become insolvent within the next 15 years. Plan insolvency will trigger a termination and the assessment of withdrawal liability. Collectively, these plans have over $30 billion in unfunded liabilities. These plans are now being designated as in "critical and declining status" and have the authority to reduce benefits under the changes to the law made in 2014. While those benefit cuts, which require regulatory approval, may forestall insolvency for a while, they are not going to reduce any withdrawal liability over the next 10 years.

Updates to "Withdrawal Liability to Multi-Employer Pension Plans Under ERISA" White Paper

Labor & Employment Shareholders Charles B. Wolf and Patrick W. Spangler recently updated their white paper on Withdrawal Liability to Pension Plans Under ERISA, which has been used by Mr. Wolf and Mr. Spangler in prior meetings of the ERISA Litigation National Institute, presented by the American Bar Association. The paper was originally authored by Mr. Wolf.

Requiring Union to Indemnify Employer for Withdrawal Liability Does Not Violate Public Policy Under ERISA

The Sixth Circuit Court of Appeals recently held that a collective bargaining agreement (CBA) provision, which obligated a union to indemnify an employer for withdrawal liability did not violate public policy under the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA). This issue was undecided in the Sixth Circuit, and the decision provides some much-needed guidance for employers. Shelter Distribution, Inc. v. Gen’l Drivers, Warehousemen & Helpers Local Union No. 89, No. 11-5450, Sixth Circuit Court of Appeals (March 16, 2012).

Contract Language on Pension Withdrawal Liability Does Not Violate Public Policy

In the case of Shelter Distribution, Inc. v. General Drivers, Warehousemen & Helpers Local Union No. 89, No. 11-5450 (6th Cir. Mar. 16, 2012), a court considered whether a collective bargaining agreement shifted employer withdrawal liability to a union. In Shelter Distribution, a multi-employer pension fund assessed withdrawal liability against an employer. In response, the employer attempted to enforce language contained in its collective bargaining agreement in which the union agreed to indemnify the employer if withdrawal liability was assessed by the pension fund. At arbitration, the union argued that the indemnification language violated the policy expressed in the Multiemployer Pension Plan Amendments Act which prohibits the shifting of withdrawal liability through collective bargaining agreements. The arbitrator rejected the Union’s argument, and ordered the union to pay the employer the withdrawal liability that was assessed by the pension fund. A district court upheld the arbitration award and the union appealed to the U.S. Court of Appeals for the Sixth Circuit.
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