Summary
The United States Court of Appeals for the Third Circuit held that an employer's fraud and misrepresentation claims concerning its inducement to join a multiemployer pension fund could proceed in federal court and did not first require MPPAA arbitration. The court held that a challenge to the calculation of withdrawal liability had to be submitted to arbitration, but that the related claim should be stayed rather than dismissed. The court also remanded the state-law claims for consideration of ERISA preemption.
Topics
Practice areas
Questions Presented
- Whether claims that an employer was fraudulently induced to join and remain in a multiemployer pension fund must first be submitted to arbitration under the MPPAA.
- Whether an employer has federal subject-matter jurisdiction and a substantive cause of action to seek recovery of withdrawal-liability sums allegedly assessed as a result of fraudulent inducement.
- Whether a challenge to the classification of merger-related payments as contributions for calculating withdrawal liability must first proceed to MPPAA arbitration.
- Whether the district court should have retained jurisdiction over state-law claims to determine whether ERISA preempted them rather than dismissing them for lack of pendent jurisdiction.
Holdings
- Claims alleging that a pension fund fraudulently induced an employer to join and remain in the fund are not disputes concerning a determination made under 29 U.S.C. §§ 1381-1399 and therefore need not first be submitted to MPPAA arbitration.
- Under 29 U.S.C. § 1451, an employer adversely affected by an act or omission concerning a multiemployer plan may sue in federal court; under federal common law developed pursuant to ERISA, a defrauded employer may seek return of withdrawal-liability sums assessed as a result of fraudulent inducement to join the fund.
- A challenge to whether merger-related payments constitute contributions for purposes of calculating withdrawal liability under 29 U.S.C. § 1391 must first be submitted to arbitration under 29 U.S.C. § 1401(a)(1).
- The district court erred in dismissing the state-law claims for lack of pendent jurisdiction because a federal question remained within its jurisdiction; on remand, it must determine whether those claims are preempted by ERISA.
Key quotations
“under the federal common law of pension plans, Colteryahn, as a defrauded employer, may sue in federal court for the return of any withdrawal liability sums that were assessed as a result of a fraudulent inducement to join the Fund.” (¶ 30)
“it should be beyond cavil that the existence of an issue of statutory interpretation, standing alone, does not justify bypassing arbitration.” (¶ 36)
Factual background
Colteryahn was a contributing employer in the Greater Pittsburgh Dairy Industry Pension Fund, which negotiated a merger with the Western Pennsylvania Teamsters and Employers Pension Fund. Colteryahn alleged that the Western Pennsylvania Fund and related trustees, accountants, and actuaries misrepresented or concealed substantial pre-merger unfunded liabilities, inducing Colteryahn to approve the merger and remain a contributing employer. After Colteryahn withdrew during a labor dispute, the Fund assessed withdrawal liability of $589,239.
Procedural history
Colteryahn challenged a withdrawal-liability assessment under the Multiemployer Pension Plan Amendments Act, asserting fraudulent inducement, misrepresentation, improper calculation, and state-law claims. The district court dismissed the federal claims on the ground that they had to proceed first to arbitration and dismissed the state-law claims for lack of pendent jurisdiction. The Third Circuit reversed in part, affirmed in part, and remanded.
Remand instructions
Exercise federal subject-matter jurisdiction over Counts 1, 3, and 4; stay proceedings on Count 2 until completion of arbitration; and determine whether Counts 5 through 9 are preempted by ERISA.