ERISA-Seventh Circuit Rules That Employer Is Not Entitled For A Refund Of Erroneous Contributions, and That A Multiemployer Plan May Enforce Its Own Rules As To Arbitration Of Withdrawal Liability Issues.

In Central States, Southeast and Southwest Areas Pension Fund v. Bulk Transport Corp., Docket Nos. 15-3208 and 15-3346 (7th Cir. 2016), the plaintiff, Central States, Southeast and Southwest Areas Pension Fund (the “Fund”), is a multiemployer pension plan. The defendant, Bulk Transport Corp. (“Bulk”), is an employer and a member of the Fund, and has made contributions to the pension account in the Fund of Terry Loniewski (“Loniewski”), one of its employees. Bulk had certified that Loniewski was entitled by a collective bargaining agreement between Bulk and a Teamsters local to participate in the Fund, even though the agreement was limited by its terms to the drivers that Bulk employed and Loniewski was a mechanic—he had never been a driver in the more than 40 years that he had worked for the company.

Although for decades Bulk had treated Loniewski as though he were covered under the company’s collective bargaining agreements, it now denies that he was covered and has demanded that Central States refund the $49,000 that Bulk had contributed to Loniewski’s pension account between 2002 and 2012. (The rules of the Fund limit refunds to money contributed to the Fund during the ten years preceding the refund request.) The Fund denied the request and filed this suit, in which it seeks a declaratory judgment that Bulk is not entitled to the refund. Bulk counterclaimed, arguing that it is entitled to the refund, because it contributed to Loniewski’s account by mistake. The district judge rejected Bulk’s counterclaim. He concluded that Bulk was at fault for the erroneous contributions, and could not believe that Bulk had employed Loniewski for more than 40 years as a mechanic, contributing to the Central States Pension Fund on his behalf, without knowing he’d never been a driver. Bulk appeals the rejection.

There was a further issue, as to what rules govern the arbitration proceedings to determine Bulk’s withdrawal liability. ERISA imposes such liability on employers who withdraw, partially or completely, from an underfunded multiemployer pension fund. The Fund assessed Bulk with withdrawal liability of about $740,000 for the years 2010 through 2012, and Bulk contends that the amount is excessive. The issue of Bulk’s obligation to contribute to Loniewski’s pension account bears on (though it is distinct from) the issue of withdrawal liability because if Bulk was never obligated to make those contributions, it follows that it withdrew from the Fund completely in 2009, when the last member of the Teamsters local other than Loniewski retired, rather than in 2012, as the Fund contends. The consequence should Bulk prevail would be to reduce its withdrawal liability from $739,700 to $473,300.

ERISA requires an employer who wants to dispute its withdrawal liability to initiate arbitration with the multiemployer plan (29 U.S.C. § 1401(a)(1)), and Bulk did this. The parties disagree however about the rules governing the arbitration. Bulk’s counterclaim asked the district judge to bar the Fund from enforcing its own rules, which require arbitration by and conforming to the procedures of the Ameri‐ can Arbitration Association. The judge agreed with Bulk on this issue and so barred the Fund from using its arbitration rules (in an opinion separate from his opinion rejecting Bulk’s refund claim). Central States now challenges that ruling.

The Seventh Circuit Court of Appeals affirmed the rejection of Bulk’s request to have its contributions returned, but reversed the bar on the Fund from enforcing its arbitration rules.

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