888 F.3d 696
4th Cir.2018Background
- Just Born II and Union were bound by a CBA (2012–2015) requiring employer contributions to a multiemployer Pension Fund beginning on employees’ first day.
- While the CBA remained in effect, the Pension Fund was certified in "critical status" under ERISA, and the trustees adopted a PPA-required rehabilitation plan with a revised contribution schedule (including a 5% annual increase) that still required contributions for all hours worked from hire.
- Negotiations for a successor CBA failed; Just Born declared a good-faith impasse and unilaterally implemented its last offer: continue Pension Fund contributions for existing employees but place new hires into a separate 401(k) with no Fund contributions.
- The Pension Fund sued to compel contributions for post-expiration hires under 29 U.S.C. § 1085(e)(3)(C)(ii) (the PPA provision addressing expired CBAs while a plan is in critical status).
- Just Born denied liability and asserted affirmative defenses alleging the Fund (or its actuary/trustees) fraudulently or improperly certified critical status; the district court granted the Fund judgment on the pleadings, holding the PPA provision applied and that Just Born’s fraud-based defenses were not pleaded with the particularity Rule 9(b) requires.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1085(e)(3)(C)(ii) requires an employer to continue contributions for employees hired after a CBA expired while the plan is in critical status | Fund: The statute applies to the bargaining parties to the expired CBA and mandates implementation of the rehabilitation contribution schedule in effect when the CBA expired | Just Born: Once the CBA expired (and after impasse), it was no longer a "bargaining party with respect to" new hires, so the Provision does not apply to post-expiration hires | The court held the plain text applies to bargaining parties to the expired CBA; Just Born remained a bargaining party "with respect to" the expired agreement and thus must contribute under the rehabilitation schedule |
| Whether the PPA reading conflicts with employers’ withdrawal rights under ERISA | Fund: Provision governs employers who remain participants; withdrawal rights are separate and unaffected unless exercised | Just Born: Interpreting the Provision to bind former CBA parties indefinitely conflicts with Honerkamp and effectively prevents withdrawal | The court distinguished Honerkamp and held the Provision does not bar withdrawal rights; Just Born had not elected withdrawal and cannot avoid both rehabilitation contributions and withdrawal liability |
| Whether Just Born could invoke its NLRA-based right to impose last, best terms after impasse to avoid PPA obligations | Just Born: Federal labor law allows unilateral imposition after impasse, so it could stop Fund contributions for new hires | Fund: NLRA rights do not negate statutory ERISA/PPA duties | The court held labor-law impasse doctrine does not supersede separate statutory duties under the PPA; employer may impose terms vis-à-vis the union but still must comply with ERISA obligations |
| Whether Just Born’s affirmative defenses alleging fraud/defective critical-status determination were adequately pleaded | Just Born: Only some defenses sounded in fraud and were sufficiently pled in the alternative; Rule 9(b) inapplicable or satisfied | Fund: Defenses assert fraudulent conduct and must meet Rule 9(b) particularity; pleadings are conclusory and ambiguous | The court held Rule 9(b) applies to fraud-based affirmative defenses; Just Born’s allegations failed to plead who, what, when, and how with specificity and thus were inadequate |
Key Cases Cited
- AMF Bowling Co. v. NLRB, 63 F.3d 1293 (4th Cir. 1995) (an employer may impose its last, best offer unilaterally after a good-faith impasse in bargaining)
- Trustees of the Local 138 Pension Trust Fund v. F.W. Honerkamp Co., 692 F.3d 127 (2d Cir. 2012) (PPA does not prohibit employers from withdrawing from critical-status multiemployer plans)
- Lehman v. Nelson, 862 F.3d 1203 (9th Cir. 2017) (PPA amendments to ERISA aim to help severely underfunded multiemployer plans recover)
- U.S. ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370 (4th Cir. 2008) (Rule 9(b) requires particularity: who, what, when, where, and how for fraud allegations)