PENSKE LOGISTICS LLC; PENSKE TRUCK LEASING CO., L.P., Plaintiffs - Appellees, v. FREIGHT DRIVERS AND HELPERS LOCAL UNION NO. 557 PENSION FUND; JOINT BOARD OF TRUSTEES OF THE FREIGHT DRIVERS AND HELPERS LOCAL UNION NO. 557 PENSION FUND, Defendants - Appellants.
No. 16-2115
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
Argued: September 13, 2017 Decided: January 10, 2018 Amended: January 10, 2018
Appeal from the United States District Court for the District of Maryland, at Baltimore. J. Frederick Motz, Senior District Judge. (1:15-cv-03277-JFM)
Before TRAXLER, DIAZ, and FLOYD, Circuit Judges.
ARGUED: Corey Smith Bott, ABATO, RUBENSTEIN AND ABATO, P.A., Baltimore, Maryland, for Appellants. David R. Levin, DRINKER BIDDLE & REATH LLP, Washington, D.C., for Appellees. ON BRIEF: Paul D. Starr, ABATO, RUBENSTEIN AND ABATO, P.A., Baltimore, Maryland, for Appellants. Brian A. Coleman, Washington, D.C., Mark E. Furlane, DRINKER BIDDLE & REATH LLP, Chicago,
Unpublished opinions are not binding precedent in this circuit.
We are asked to review the district court‘s affirmance of the Arbitrator‘s conclusion that Penske Logistics LLC and Penske Truck Leasing Co., L.P. (collectively, “Penske“) are not liable for Leaseway Motorcar Transport Co.‘s withdrawal liability under the
I.
A.
ERISA provides a statutory framework to promote employee benefit plans in private industries by establishing “minimum standards . . . assuring the equitable character of such plans and their financial soundness.”
To “shore up the financial stability of multiemployer pension plans,” BES Services, 469 F.3d at 374, the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) amended ERISA to require a withdrawing employer to pay the employer‘s proportionate share of the plan‘s unfunded vested benefits by creating withdrawal liability “in rough proportion to that employer‘s relative participation in the plan over the last 5 to 10 years,” Borden, Inc. v. Bakery & Confectionary Union & Indus. Int‘l Pension, 974 F.2d 528, 530 (4th Cir. 1992). See also
Under the MPPAA, all trades or businesses under common control are treated as a single employer, and each member of the controlled group is liable for the withdrawal of any other member.
B.
The Fund is a multiemployer pension plan, organized under ERISA to provide pension benefits to plan participants and their beneficiaries. Leaseway Motorcar Transport Co. (“Leaseway“) had long been a contributing employer to the Fund; it employed over 200 Fund participants in 1996, but only 33 by 2003. Penske acquired Leaseway in 1995, and Leaseway became a member of the Penske-controlled group for MPPAA purposes in 1996. On March 26, 2004, Penske sold 100% of the Leaseway stock to Performance Logistics Group (PLG) (the “Transaction“) in exchange for a secured $25 million note and 43.5% of the PLG stock, among other things.
In early 2006, the Fund‘s Board of Trustees—who are the plan sponsors (the “Fund Sponsors“)—issued an assessment of withdrawal liability to Penske for the partial withdrawal of Leaseway that was effective December 31, 2004, stating that Leaseway‘s contribution obligation to the Fund had declined at least 70% in 2004. See
The arbitration record contains over 50,000 pages of documentary evidence gathered over six years of discovery, five days of hearings, and two rounds of briefing, and includes the Arbitrator‘s Phase One Rulings, issued July 13, 2012, and the 123-page final award (the “Award“), issued September 30, 2015. In the Phase One Rulings, the Arbitrator determined that Penske is not liable for Leaseway‘s complete withdrawal because unrelated predicates for liability were not satisfied. The Arbitrator‘s final Award held that Penske is not liable for either of Leaseway‘s partial withdrawal assessments based on his conclusion that a principal purpose of the Transaction was not for Penske to evade or avoid withdrawal liability. The Arbitrator ruled that the Fund must refund Penske‘s withdrawal liability payments, amounting to $9,586,345.39, plus interest, and that Penske was entitled to an award of attorneys’ fees due to the Fund‘s discovery abuse. See
II.
The Fund raises three challenges on appeal: (1) that the court erred in denying its motion to stay the proceedings pending the Arbitrator‘s decision on the motion for modification; (2) that the court erred in affirming the award because the Arbitrator applied the wrong burden of proof, incorrectly concluded that the burden was satisfied, and clearly erred in reaching several factual conclusions; and (3) that the court erred in determining that the attorneys’ fees awarded were reasonable. We address each in turn.
A.
We reject the Fund‘s contention that the district court erred in declining to stay the proceedings to wait for the Arbitrator to rule on the motion for modification. The statute
B.
Next, we consider the Fund‘s contention that the court erred in affirming the award. This Court reviews a district court‘s grant of summary judgment de novo, applying the same standards as the district court. Reynolds v. Am. Nat‘l Red Cross, 701 F.3d 143, 149 (4th Cir. 2012). When considering an arbitrator‘s award issued under the MPPAA, this Court reviews findings of fact for clear error and conclusions of law de novo. See
In assessing withdrawal liability, the plan sponsor makes a factual determination of whether a principal purpose of a parent company‘s stock sale of its subsidiary was to evade or avoid withdrawal liability. Under ERISA, as clarified in Concrete Pipe, this factual finding is entitled to a presumption of correctness. See
In the entire 123-page Award, the Arbitrator never once concludes that Penske disproved by a preponderance that a principal purpose of its stock sale of Leaseway was to evade or avoid withdrawal liability. Instead, the Arbitrator concluded Penske was not liable because the Fund failed to prove evasion or avoidance as a principal purpose of the Transaction. The Arbitrator expressly “found that the preponderance of the record evidence failed to establish that a principal purpose of the Transaction was to evade or avoid withdrawal liability . . . .” J.A. 132; see also J.A. 118 (titling a subsection in the Award, “The Record Failed to Substantiate the Fund‘s Claim that a Principal Purpose of the Transaction was to Evade or Avoid Withdrawal Liability“). This error is particularly glaring because the Arbitrator correctly applied the burden to an unrelated finding that was also entitled to a presumption of correctness. See J.A. 132 (“Penske has failed to shoulder its burden under Concrete Pipe to prove by a preponderance of the evidence that
A review of the Award in its entirety confirms our conclusion. The Arbitrator‘s statements throughout the Award indicate that his findings resulted from a lack of evidence that a principal purpose was to evade or avoid withdrawal liability, thereby erroneously placing the burden on the Fund rather than the Employer. For example, the Arbitrator stated that “[t]here was no direct evidence of any intent to evade or avoid withdrawal liability by Penske.” J.A. 120. But, under the correct burden, the Arbitrator should have found evidence disproving that Penske intended to evade or avoid withdrawal liability. By stating, “I am unable to find that withdrawal liability was a principal purpose of Penske selling Leaseway to PLG in the form of a stock sale,” the Arbitrator again failed to apply the required presumption of correctness and did not place the burden on Penske. J.A. 130. This failure is contrary to Congress‘s clear intent to “burden the party more likely to have information relevant to the facts about its withdrawal from the Plan with the obligation to demonstrate that facts treated by the Plan as amounting to a withdrawal did not occur as alleged.” Concrete Pipe, 508 U.S. at 626; see also J.A. 121 (stating that evidence did not “warrant[] an inference that a principal purpose of the Transaction was to evade or avoid withdrawal liability“); J.A. 131 (“[T]he fact that a business is sold as a stock transaction without more does not give rise to an inference that a principal purpose of the sale is to evade or avoid the imposition of withdrawal liability.“).
If the preponderance of the evidence establishes that a principal purpose of the transaction was to evade or avoid withdrawal liability, then the March 26, 2004 stock sale will be disregarded when determining Penske‘s liability for Leaseway‘s withdrawal(s). If, on the other hand, the preponderance of the evidence fails to establish that a principal purpose of the transaction was to evade or avoid withdrawal liability, then the [] stock sale will be given full effect . . . . The issue of burden of proof would be significant in this case, therefore, only in the highly improbable situation that the totality of the evidence on this question, viewed as a whole, is equally balanced.
J.A. 190. This statement reflects that the Arbitrator was erroneously looking for evidence proving what the Fund Sponsors had already determined, instead of looking for evidence disproving that fact. And although the Arbitrator stated that, “[Mr. Angelbeck‘s] testimony that the evasion or avoidance of withdrawal liability was not a principal purpose (or even a non-principal purpose) of the Transaction is supported by a number of record facts,” without more, we decline to find that this single reference to one witness is a conclusive statement by the Arbitrator that Penske met its burden. J.A. 119.
Upon reviewing the entire Award, there is insufficient evidence that the Arbitrator reached his conclusions under the correct burden. By ignoring the presumption of correctness and instead requiring the Fund to prove that evasion or avoidance was a principal purpose of the Transaction, the Arbitrator committed clear error.
C.
Finally, we consider the Fund‘s contention that the attorneys’ fees awarded to Penske were not reasonable because the Arbitrator did not follow the United States District Court for the District of Maryland Local Rules, Appendix B, in determining the amount of the fees. Because we are vacating the court‘s affirmance of the Award and remanding for further consideration, we decline to consider whether the court erred in determining that the attorneys’ fees issued as part of that Award were reasonable.
For the foregoing reasons, the judgment of the district court is
VACATED AND REMANDED.
My colleagues rely on a few inartful sentences in a 123-page opinion to conclude the Arbitrator misstated, and therefore, presumably misapplied the burden of proof in this case. According to the majority, the Arbitrator was “erroneously looking for evidence proving what the Fund Sponsors had already determined” as to Penske‘s principal motivation for selling Leaseway (the “Transaction“). Maj. Op. at 13. In their view, given the presumption of correctness owed to a Fund‘s determination under the Multiemployer Pension Plan Amendments Act of 1980 (the “MPPAA“), the Arbitrator should instead have been “looking for evidence disproving” that determination. Maj. Op. at 13 (emphasis added).
This error (says the majority) “impacts nearly every finding made and [thus] likely require[s] review of the entire arbitration record.” Maj. Op. at 14. Inexplicably, however, my colleagues claim that conducting such an “extensive review ourselves would undermine ERISA‘s express intention for these matters to be handled in arbitration rather than in the courts.” Maj. Op. at 14. Consequently, they punt, opting instead to require the Arbitrator to start over. Because this disposition rests on a flawed understanding of the Arbitrator‘s opinion, ignores the record, and undermines clear congressional objectives, I respectfully dissent.
First, I do not agree that the Arbitrator applied the incorrect burden of proof. Rather, the framework the Arbitrator set out in his July 2012 ruling, and which the majority quotes at ante 13, states the question that needs to be answered, the requisite degree of certainty with which it needs to be answered, and what is to happen if the evidence is equipoised. My colleagues are no fans of the Arbitrator‘s syntax, but that alone does not constitute legal error.
Second, even if the Arbitrator did apply the wrong burden, we are still obligated to review both the Arbitrator‘s findings of fact and conclusions of law.
My colleagues mistakenly decline to consider whether the Arbitrator clearly erred in finding “Penske‘s principal motivations in looking to sell Leaseway were business motivations, not the evasion or avoidance of withdrawal liability.” J.A. 120. There was no such error. Penske offered evidence disproving the Fund‘s claim that avoiding withdrawal liability was a principal purpose behind the Transaction. And after presenting
Despite quoting from and criticizing language found at the end of the award, the majority does not address the first ninety-eight pages of the Arbitrator‘s decision, which detail the evidence offered by both sides. This lengthy discussion makes clear that the Arbitrator‘s findings rest on evidence offered by Penske, not on the Fund‘s failure to meet a misapplied burden. Some of the critical evidence the Arbitrator considered includes: (1) Penske‘s continuous efforts to sell Leaseway since acquiring the company in 1995; (2) Penske‘s limited knowledge of any withdrawal liability linked to Leaseway; and (3) Penske‘s belief that Performance Logistics Group (“PLG“) would be a profitable company following the Transaction. J.A. 120–26.
The record shows that Penske‘s original reason for purchasing Leaseway was to obtain its advanced computer logistics system, and because neither of Leaseway‘s two operating units aligned with Penske‘s core businesses, its plan was always to resell the company. Penske sold Leaseway‘s leasing unit in August 1996 and had been in talks to sell the auto-carrier division as early as March 1996. J.A. 89. Though this effort fell through, Penske talked with three other buyers in 1998, 1999, and 2000. J.A. 120. Importantly, these efforts all occurred when the Fund had no withdrawal liability, and the record is devoid of any other ERISA liability linked to Leaseway during that time. While sales talks with PLG did not begin until early 2002, the Arbitrator noted (I believe correctly) that this “prior behavior is strong evidence that Penske‘s principal motivations
The Arbitrator also considered internal documents and testimony from Penske executives, which showed that Penske had little knowledge of any withdrawal liability linked to Leaseway even when it was finally sold in 2004. J.A. 83, 97. The only concurrent document discussing possible pension liability tied to Leaseway was a 2003 diligence chart identifying just under $20 million in withdrawal liability for all Penske controlled groups. J.A. 83; 97–98. But that figure was also contingent on Leaseway and or Penske ceasing their contributions to the relevant pension funds, something Penske did not believe was likely to happen. J.A. 129. Because there was “no indication that Penske was in possession of any information that reasonably should have suggested” it would be “responsible for complete withdrawal liability to the Fund,” the Arbitrator reasonably concluded that the amount of withdrawal liability was not “demonstrated to be a motivating factor.” J.A. 126, 129.
Finally, the Fund‘s case rests heavily on the assumption—born of hindsight—that PLG was not economically viable, and therefore any equity Penske received as part of the Transaction was worthless. From this premise, the Fund offered expert testimony that the Transaction only made sense if viewed as a way of shedding $20 million in potential withdrawal liability. But Penske attacked both the logic of this conclusion and its factual premise. The Arbitrator found nothing to support the Fund‘s assertion that “Penske knew or should have known that the stock was, and would be, worthless,” relying instead on evidence which “revealed that Penske believed that PLG would be a viable and profitable
On this record, I am unable to come to the definite and firm conviction that a mistake has been made. Accordingly, I would affirm the Arbitrator‘s award in its entirety.2
By its terms, Appendix B applies to fee awards for a “prevailing party.” Local Rules, United States District Court for the District of Maryland, Appendix B (July 2016). The problem for the Fund is that Penske need not be a prevailing party to receive a fee award under
The majority‘s decision to vacate the award also frustrates clear congressional objectives. The MPPAA requires arbitration in order to “create a more efficient dispute-resolution process,” “thereby limiting dispute-resolution costs and preserving plans’ assets.” Bd. of Trs., Sheet Metal Workers’ Nat‘l Pension Fund v. BES Servs., Inc., 469 F.3d 369, 374 (4th Cir. 2006). This streamlined process includes judicial review of an award, but with the understanding that the arbitrator‘s decision is “presumptively correct and may be rebutted only by a clear preponderance of the evidence.” Republic Indus., Inc. v. Teamsters Joint Council No. 83 of Virginia Pension Fund, 718 F.2d 628, 641 (4th Cir. 1983).
By refusing to consider whether the evidence supports the award in spite of the Arbitrator‘s alleged mistake regarding the burden of proof, the majority gives short shrift to this carefully crafted statutory scheme and (regrettably) exalts form over substance.
I respectfully dissent.