ERISA-Sixth Circuit Holds That An Employer Is Not Entitled To Equitable Relief From Withdrawal Liability, Which Was Incurred When The Union Stopped Representing The Employees And The Employer Had To Leave The Plan

In United Food and Commercial Workers Union-Employer Pension Fund v. Rubber Associates, Inc., No. 15-3434 (6th Cir. 2016), Rubber Associates appeals the district court’s dismissal of its counterclaim for equitable relief to reduce the withdrawal liability it incurred after the union-mandated withdrawal from the United Food and Commercial Workers Union-EmployerPension Fund (the “Fund”), a multiemployer pension plan which is governed by ERISA.

After the United Food and Commercial Workers Union (the “Union”) disclaimed interest in representing the company’s employees, Rubber Associates was deemed to have withdrawn from the, Fund under ERISA. The Fund calculated Rubber Associates’ withdrawal liability obligation to be $1,713,169, which the arbitrator awarded in full to the Fund. The Fund then sued Rubber Associates in the district court to enforce the arbitrator’s award. Rubber Associates counterclaimed on the basis that because its withdrawal from the Fund was union-mandated, its withdrawal liability should be calculated by an alternate method, making its liability only $312,000. The district court granted the Fund’s motion to dismiss Rubber Associates’ counterclaim.

Upon reviewing the case, the Sixth Circuit Court of Appeals (the “Court”) affirmed the district court’s decision. The Court said that ERISA provides four statutory methods for calculating withdrawal liability: (1) the presumptive method, (2) the modified presumptive method, (3) the rolling-5 method, and (4) the direct attribution method. With certain exceptions not applicable here, the plan computes withdrawal liability in accordance with the presumptive method, unless the plan adopts an alternative method which the PBGC must approve. In this case, the Fund calculated Rubber Associates’ withdrawal liability in accordance with the presumptive method, and the parties agree that, if the presumptive method is to be applied, the Fund accurately calculated Rubber Associates’ withdrawal liability.

Rubber Associates argues, continued the Court, that the Court should create federal common law under ERISA to carve out special liability rules for contributing employers which are forced out of pension funds due to union-mandated withdrawal, such as where the union stops representing the employees. Specifically, Rubber Associates contends that the Court should calculate its withdrawal liability pursuant to the direct attribution method, which would decrease its liability from $1,713,169 to $312,000. The Court declined to create the suggested federal common law, so that the presumption method of calculation will apply here, thereby affirming the district court’s decision.

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