Stevens Eng'rs & Constr. v. Local 17 Iron Workers Pension Fund

Citation: 877 F.3d 663Docket: 16-4099

Court: Court of Appeals for the Sixth Circuit; December 12, 2017; Federal Appellate Court

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Stevens Engineers Constructors, Inc. (Plaintiff-Appellee) is involved in a legal dispute with the Local 17 Iron Workers Pension Fund and its Board of Trustees (Defendants-Appellants) regarding pension liability under the Multiemployer Pension Plan Amendments Act (MPPAA) of ERISA. The Trustees assessed liability against Stevens, asserting that its work on a construction project fell within the jurisdiction of a previous collective bargaining agreement requiring contributions. However, both an arbitrator and the district court found that Stevens did not incur such liability, as the work did not align with the agreement and was correctly assigned to another trade union, thereby exempting Stevens from pension contributions to Local 17.

The MPPAA, enacted in 1980, revised ERISA to manage pension contributions for multiemployer plans, ensuring that employers could not easily evade funding responsibilities during underfunding situations. It established withdrawal liability for employers exiting a multiemployer plan, requiring them to pay a share of the plan's unfunded amount upon exit. The plan's sponsors are tasked with calculating this liability, and disputes regarding its existence or extent must generally be resolved through arbitration.

Local 17 presented further arguments for imposing withdrawal liability on Stevens, but these were also rejected. Overall, the court upheld the findings that Stevens had no obligation to pay the assessed pension liability.

The MPPAA establishes a rebuttable presumption that arbitrator findings on withdrawal liability are correct in civil actions (29 U.S.C. 1401(c)). Although most employers face withdrawal liability, a specific scheme applies to the construction industry, exempting employers from liability if they withdraw completely from work under the relevant collective bargaining agreement (CBA) (29 U.S.C. 1383(b)). This exemption exists because the overall construction workforce is not necessarily diminished when a contractor exits, as workers may be reassigned to other contributing contractors. However, if an employer exits the plan while remaining in the industry but becomes non-union, it must pay a proportional share of the plan’s unfunded amount based on prior contributions (29 U.S.C. 1391(b)(1)(A)).

The Iron Workers Local 17 Pension Fund, a multiemployer plan under the MPPAA, is significantly underfunded with a deficit exceeding $170 million. Employers withdrawing from the Fund without the construction industry exception face substantial liabilities. Stevens Engineers. Constructors (Stevens), a construction company, was bound by multiple CBAs with Local 17 from 1985 to April 2013, contributing to the Fund as required. The final CBA defined the craft jurisdiction (ironworker work) and the geographic territory (counties in Northern Ohio) for which Stevens was obligated to pay into the Fund. The CBA also included provisions recognizing national agreements among unions to allocate work jurisdiction, acknowledging potential overlaps in craft claims in the construction industry. Work assigned to one union through such agreements does not incur pension liabilities to other unions.

The National Maintenance Agreement (NMA) governs work assignments among various craft unions, including ironworkers and millwrights, in construction projects. It mandates that employers conduct a pre-job conference to assign work when multiple unions claim the same task, and a neutral umpire resolves any disputes that arise afterward. In April 2013, Stevens terminated its collective bargaining agreement (CBA) with Local 17, opting to hire subcontractors for ironworker tasks and ceasing contributions to the Fund. In September 2013, Stevens won a contract for renovations at the U.S. Steel No. 4 Seamless plant, where it held a pre-job conference and assigned millwrights, not ironworkers, to perform demolition and power rigging tasks. This decision drew objections from Local 17, citing the now-abrogated 1971 Ironworker Millwright Rigging Agreement, which had given ironworkers priority in rigging work. Despite Local 17's protest, Stevens maintained its assignments and did not pursue further dispute resolution through the NMA process. During the project, two incidents occurred where tasks assigned to ironworkers were mistakenly performed by laborers and millwrights, but Stevens promptly addressed these issues. The amount of work wrongly done by other crafts totaled twenty hours, representing a minimal percentage of overall ironworker work. Following these events, the Fund Board of Trustees determined that Stevens was performing work previously assigned to ironworkers, leading to a resolution to impose withdrawal liability on Stevens.

The Fund relied on the annulled 1971 Rigging Agreement to claim that Stevens owed $5,056,017 for withdrawal liability. Stevens requested a review of this determination under ERISA, leading the Trustees to reaffirm their jurisdiction. Stevens then sought arbitration as mandated by ERISA. During arbitration, the Fund discovered two additional irregularities related to Stevens' activities at the job site, which were not considered when initially imposing withdrawal liability. After four days of testimony, the arbitrator ruled that Stevens was not subject to withdrawal liability, determining that the work assigned to millwrights did not fall under the collective bargaining agreement (CBA) jurisdiction. The arbitrator acknowledged the Fund's assessment had a presumption of correctness but deemed it clearly erroneous in this case. The arbitrator also found Stevens was not liable for rebar installation or iron grating installation but did not address the laborers’ drilling holes for rebar. Following the award, Stevens filed a civil action to enforce it, while the Fund sought to vacate the award. The district court consolidated the cases, upheld the arbitrator’s decision, and concluded that the assigned tasks were outside the Fund's jurisdiction. The court rejected the Fund's argument regarding Local 17's silence over the assignment and stated the Fund could not assess withdrawal liability independently of the CBA. The Fund appealed, but it was determined that Stevens owed no withdrawal liability since the assigned power rigging work was not within the CBA's jurisdiction, as it allowed for assignments to other unions.

The NMA stipulates that jobs assigned through a pre-job conference are exclusively under the jurisdiction of the assigned union. Consequently, the Fund cannot use power rigging work to assess withdrawal liability since this work was assigned to the millwrights, placing it outside the jurisdiction of the ironworkers. This situation fails to meet the "performance in the jurisdiction of the collective bargaining agreement" criterion for 29 U.S.C. 1383(b)(2). The court has not previously defined "jurisdiction" under this statute, but similar cases indicate that withdrawal liability is defined by the jurisdictional provisions of the relevant collective bargaining agreement. 

For instance, the Ninth Circuit ruled that an employer, despite withdrawing from the construction industry, did not incur withdrawal liability for ownership in a joint venture since the CBA in effect did not mandate contributions for that ownership. The Seventh Circuit also acknowledged that an employer's obligation to contribute is strictly tied to the CBA. Other circuits have confirmed that work assignment processes direct pension contributions to the respective union. The Eighth Circuit noted that a pension fund of a union not assigned work is not entitled to contributions for work assigned to a competing union.

The interpretation that withdrawal liability does not arise from work outside the jurisdiction of a collective bargaining agreement aligns with this circuit's precedents on the Multiemployer Pension Plan Amendments Act (MPPAA). The MPPAA's provisions state that withdrawal liability attaches only to work within the jurisdiction of the collective bargaining agreement where contributions were previously required. The Fund failed to demonstrate that the CBA necessitated contributions for work under another union's jurisdiction. Although there is a general policy promoting employer contributions to underfunded pension plans, this does not extend to establishing liability where it does not exist. The specific provisions of the MPPAA take precedence over broader principles, reinforcing that "jurisdiction" as defined by collective bargaining agreements aligns with the rationale for withdrawal liability and the construction industry exception.

The Ninth Circuit's interpretation of the Multiemployer Pension Plan Amendments Act (MPPAA) establishes that withdrawal liability aims to prevent employers from avoiding pension obligations while benefiting from union work. Withdrawal liability does not apply if the employer's work assignment would not have required pension contributions under the collective bargaining agreement (CBA). Specifically, prior to withdrawal, Stevens would not have owed contributions to Local 17 for work assigned to another union. The Fund's objections to this interpretation are unsubstantiated. The Fund argues that "jurisdiction" in Section 1383(b) should be limited to geographic jurisdiction, but precedent shows that it encompasses both trade and geographic aspects. The Fund's assertion that interpreting "jurisdiction" broadly leads to absurd results is unfounded; both craft and geographic jurisdictions are valid. The MPPAA stipulates that employers owe withdrawal liability for work that would have necessitated contributions under the CBA if it were still effective. The text of the MPPAA is clear enough that legislative history need not be consulted. The Fund's claim that the requirement for contributions renders the jurisdiction clause redundant is incorrect; both elements work together to clarify that employers are not liable for actions post-withdrawal that did not incur liability pre-withdrawal. Finally, the Fund's argument regarding Stevens' past employment of ironworkers for rigging work fails to consider that Stevens had the right to assign work to various unions without incurring liability unless the task was explicitly assigned to a craft union.

The Fund argues that despite the abrogation of the rigging agreement, it believes Stevens would still be liable for rigging work under the collective bargaining agreement (CBA) due to prevailing area practices. However, the court emphasizes that clear contract language supersedes extrinsic evidence like area practices. The CBA, through the incorporated National Master Agreement (NMA), grants Stevens the flexibility to assign rigging work, eliminating the need to consider area practices. Local 17, as the only party to the CBA, had the authority to challenge work assignments, binding the Fund under the NMA, which does not allow the Fund to independently assess liability based on assignments made to another union. The Fund's assertion that it should be allowed to pursue claims against Stevens is rejected because Local 17's actions under the NMA were essential for creating a liability to contribute to the Fund. Under the Multiemployer Pension Plan Amendments Act (MPPAA), withdrawal liability can only be assessed against employers for work within the jurisdiction of the CBA. Since Local 17 had no jurisdiction over the rigging work assigned to millwrights, the Fund cannot retroactively claim jurisdiction based on its own authority, as the NMA’s provisions are exclusive and final. The court cites precedent, noting that pension funds cannot collect contributions for work assigned to another union without following proper inter-union dispute resolution processes.

The Fund attempts to differentiate its case from McKenzie by claiming that McKenzie involved delinquent contributions instead of withdrawal liability. However, this distinction may actually reinforce McKenzie’s relevance, as delinquent contributions indicate that liability has already accrued under ERISA, which entitles an entity to payment (29 U.S.C. 1145). In contrast, without established withdrawal liability, no entitlement exists. The Fund references precedents that suggest plan sponsors are typically not bound by union actions, but these cases fail to address the core issue of liability assessment by a fund. For instance, a Supreme Court case (Lewis v. Benedict Coal Corp.) involved a specific pledged payment for coal produced, which differs from the Fund's claim that lacks an actual accrued amount.

Furthermore, the Fund’s assertion that ERISA mandates payment from obligated employers without considering other defenses does not resolve whether Stevens was obliged to contribute in this instance. If Stevens had no obligation, it did not violate ERISA by not paying contributions it did not owe. The Fund also cites cases indicating that plan sponsors are not subject to estoppel or waiver due to union actions, yet these procedural rules do not address the substantive lack of liability here. The Fund argues that Stevens should still be liable for withdrawal, despite Local 17’s inaction regarding work assignments. However, existing case law (Operating Eng’rs Local 324 Health Care Plan v. G.W. Const. Co.) confirms that a union's failure to comply with a collective bargaining agreement (CBA) does not affect the Funds' right to collect contributions that are due. The Fund does not provide precedent indicating that a union's inaction can compel payment of contributions not owed. 

The assessment of liability hinges on established agreements, which dictate that work assignments remain valid unless contested at the time. As such, the Fund lacks rights to contributions from work assigned to other crafts and cannot challenge those assignments retroactively. Additionally, the Fund claims that tasks performed by Stevens workers—like drilling holes for rebar and unloading machinery—justify its assessment of withdrawal liability, emphasizing that these tasks were not previously identified.

The district court determined that the Fund could not rely on after-acquired information to impose withdrawal liability on Stevens, as this information did not establish Stevens' liability. Specifically, the Fund noted that Stevens' laborers drilled holes for rebar installation, but this task was outside the mandatory jurisdiction of the Local 17 Collective Bargaining Agreement (CBA), which only covered the actual installation of rebar and related tasks. The CBA's craft jurisdiction explicitly excluded site preparation work. Although the Fund argued that Stevens had previously assigned drilling work to ironworkers, prior practices do not equate to liability unless the CBA mandated such assignments, and no evidence was provided to show that drilling necessitated contributions from Stevens.

Additionally, while the Fund claimed that unloading machinery fell under Local 17's jurisdiction, this was permissible under the Non-Metallic Agreement (NMA) to be assigned to non-ironworkers, and thus did not constitute work imposing liability on Stevens. The unloading was assigned to non-ironworkers at a pre-job conference, eliminating Local 17's exclusive claim to that work.

Furthermore, the Fund's assertion of various irregularities in the construction process did not implicate Stevens, as the work in question was conducted without Stevens' order or knowledge and was terminated upon discovery. Under Ohio law, an employer is not liable for acts outside a worker's scope of employment, and Stevens had consistently assigned ironworker tasks to the appropriate union. Therefore, the district court affirmed that Stevens was not liable for work conducted beyond its control.