By: Mark Casciari

Synopsis: A recent decision by the District Court from the Southern District of New York shows why it often makes sense to consider, on a privileged basis, the universe of potential defendants to a withdrawal liability assessment upon issuance of the assessment, even though many potential defendants did not receive notice of the assessment.

ERISA’s Multi-Employer Pension Plan Amendments Act (MPPAA), 29 U.S.C. § 1381 et seq. provides an arbitration mechanism for challenging withdrawal liability assessments. The MPPAA also provides that the “employer” is responsible for assessments, on a joint and several liability basis. MPPAA defines “employer” to include all members of the withdrawing entity’s “controlled group” at the time of the withdrawal trigger, and not just the entity that signs a collective bargaining agreement mandating contributions to the multi-employer pension fund. Defining the “controlled group” is complicated. See 29 U.S.C. § 1301(b) and implementing IRS regulations.

Not satisfied with the contours of the statutory definition, some courts have expanded it to include “successors,” as that term is defined by the courts. See

Matters get even more complicated by virtue of court decisions saying that notice to one member of a joint and several liability group as to a withdrawal liability assessment is notice to all in the group. See e.g. Trustees v. Central Transport, Inc., 888 F.2d 1161, 1163 (7th Cir.1989),

All this means that any business entity or individual who might be an employer as to a withdrawal liability assessment is at legal risk of joint and several liability.

That legal risk can require immediate attention. That is because receipt of notice of a withdrawal liability assessment triggers time deadlines for initiating arbitration to challenge the assessment or its amount. A failure to timely arbitrate usually equates to a bar to the challenge.

There often are good reasons to challenge assessments. The approximate 140 multi-employer funds in critical and declining status have, in recent years, issued withdrawal liability assessments that reach well into the millions of dollars. Many assessments expand the boundaries of MPPAA in new ways that maximize liability and thus open them to legal challenge.

The universe of entities and individuals at risk was broadened even further by a recent ruling by Judge Seibel of the District Court for the Southern District of New York. In Trustees of the National Retirement Fund v. Fireservice Management LLC, et al., No. 17-CV-4003, an assessment issued and arbitration was not timely initiated. On preliminary motions, the Judge permitted a trial on a withdrawal liability default claim that a company alleged not to be party to a collective bargaining agreement mandating fund contributions nonetheless is jointly and severally liable on a controlled group basis, or on an alter ego, single employer or joint employer relationship basis. This occurred even though the company had different owners, filed separate tax returns, maintained separate bank accounts and kept separate financial records, and even though the court cited no evidence of an intent to avoid withdrawal liability.

So, any individual or entity that may be sued on a joint and several liability basis on a questionable withdrawal liability assessment should consider, on a privileged basis, timely compliance with the MPPAA arbitration rules. This careful consideration could make sense even if the individual or entity did not directly receive notice of the assessment.