Summary
The Seventh Circuit affirmed summary judgment for Central States in a dispute concerning the authority to terminate the participation of a Penske bargaining unit in a multiemployer pension plan. The court held that the Trust Agreement granted the trustees discretionary authority to interpret the plan documents and reasonably authorized expulsion of Local 745 without terminating Penske’s other bargaining units. The court also affirmed dismissal of Central States’ counterclaim concerning Local 745’s effective withdrawal date because the dispute had not first been submitted to arbitration as required by 29 U.S.C. § 1401.
Topics
Practice areas
Questions Presented
- Whether the Trust Agreement granted Central States authority to terminate the participation of a single Penske bargaining unit rather than only Penske as a whole.
- Whether the Trustees' interpretation of the Trust Agreement was entitled to deference because the Agreement granted them discretionary and final interpretive authority.
- Whether Central States' decision to expel Local 745 was arbitrary and capricious.
- Whether Central States' counterclaim concerning Local 745's effective withdrawal date had to be submitted to arbitration before a federal court could consider it under 29 U.S.C. § 1401.
- Whether the district court had jurisdiction over the appeals despite the unresolved attorney-fee petition and the judgment's treatment of the counterclaim.
Holdings
- Because the Trust Agreement grants the Trustees discretionary and final authority to construe plan documents, courts must defer to the Trustees' interpretation and disturb it only if unreasonable. The Trustees reasonably interpreted the Expulsion Provision to permit termination of a single bargaining unit without terminating all of the employer's bargaining units.
- Section 1394(b)'s requirement that certain plan rules operate and be applied uniformly does not apply to Central States' expulsion decision because the dispute concerned expulsion, not the methods for calculating withdrawal liability.
- Central States' decision to expel Local 745 was not arbitrary and capricious.
- A dispute concerning the date on which withdrawal liability accrues must be submitted to arbitration before a federal court may consider it under 29 U.S.C. § 1401. Central States' counterclaim was therefore properly dismissed without prejudice because no withdrawal-liability assessment or arbitration had occurred.
Key quotations
“On deferential review, we adopt the Trustees’ reasonable interpretation of the Trust Agreement.” (at 12)
“Section 1401 is a mandatory exhaustion requirement.” (at 26)
“Before we can hear the dispute over the date of withdrawal in federal court, the parties must proceed to arbitration.” (at 30)
Factual background
Penske participated in the Central States multiemployer pension plan on behalf of ten bargaining units, including Local 745 employees in Dallas, Texas. Central States became concerned that Penske was aligning the expiration dates of its collective-bargaining agreements to facilitate a complete withdrawal in 2022 and thereby reduce withdrawal liability by tens of millions of dollars. Central States offered to extend the Local 745 agreement only if a 2022 withdrawal were treated as a 2021 withdrawal, and after Penske rejected that proposal, the Trustees voted to terminate Local 745's participation. Central States later sought a declaration concerning Local 745's withdrawal date, but no withdrawal-liability assessment or arbitration had occurred.
Procedural history
Penske filed an action in the Northern District of Illinois seeking to enjoin Central States from terminating Local 745's participation in the pension plan and seeking declaratory relief concerning Central States' expulsion authority. The district court initially entered a temporary restraining order, later denied a preliminary injunction and vacated the TRO, and ultimately granted Central States summary judgment after discovery. The district court also dismissed Central States' counterclaim under Rule 12(b)(6), concluding that the withdrawal-date dispute had to be arbitrated first under 29 U.S.C. § 1401. The Seventh Circuit affirmed the summary judgment and dismissal without prejudice, and remanded for attorney-fee and other appropriate proceedings.
Remand instructions
The case was remanded for further proceedings concerning attorney-fee issues and any other appropriate matters consistent with the opinion. The counterclaim remained dismissed without prejudice, and the court denied Central States' request that the district judge retain jurisdiction for a later case.