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govinfo:USCOURTS-njd-3_21-cv-13310-0
1
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
ALLIED PAINTING
& DECORATING, INC.,
Plaintiffs,
v.
INTERNATIONAL PAINTERS AND
ALLIED TRADES INDUSTRY
PENSION FUND,
Defendants.
Civil Action No. 3:21-cv-13310
MEMORANDUM
AND ORDER
This matter is an appeal from an arbitration award in the amount of
$427,195.00 in favor of Defendant International Painters and Allied Trades
Industry Pension Fund (“the Fund”) and against Plaintiff Allied Painting &
Decorating, Inc. (“Allied”). Both parties brought dispositive motions wherein the
Fund seeks to confirm the award (ECF No. 31) and Allied seeks to vacate the
award (ECF No. 34). See, PG Publishing, Inc. v. Newspapers Guild of Pittsburgh,
19 F.4th 308, 312-314 (3d. Cir. 2021). Procedurally the motions are more
appropriately read as cross motions to confirm or vacate the award. The Court has
jurisdiction under 29 U.S.C. §§ 1401(b)(2) and 1451(c). Venue is proper under 29
U.S.C. § 1451(d) as the Fund conducts its operations in the District of New Jersey.
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In this case, there is one issue – whether withdrawal liability is barred by
laches after an approximate 10-year delay between the resumption of work after
withdrawal by Allied, and the time of notification by the Fund to Allied that it is
subject to withdrawal liability. Specifically, the Fund’s demand letter was sent
twelve years after Allied’s obligation to contribute to the pension fund allegedly
ended in 2005; and in calculating five years pursuant to the construction industry
exception, seven years after which the Fund could have determined if Allied had
made a complete withdrawal by resuming covered work in the jurisdiction. In very
broad terms, the arbitrator found there was a very prolonged unreasonable delay by
the Fund of its notification of withdrawal liability to Allied; but since Allied
showed no prejudice, its laches objection was denied. (Decision on Employer’s
Motion for Calculation of the Award (“Opinion 5” at p. 30))1.
1 The Arbitrator filed six opinions in deciding this case (ECF No. 5, p. 27 - 69). Only four
are cited, as follows:
* Opinion and Partial Award dated August 24, 2019, p. 58 - 69 (referred herein as Opinion
1).
* Opinion and Partial Award and Revised November 25, 2019, p. 44 - 56 (referred to
herein as Opinion 2).
* Decision on Employer’s Request for Reconsideration dated November 25, 2019, p. 40 –
42 (referred to herein as Opinion 3).
* Second Decision on Employer’s Request for Reconsideration dated January 26, 2020, p.
33 – 38 (referred to herein as Opinion 4).
* Decision on Employer’s Motion for Clarification of Award dated November 25, 2020, p.
30 - 31 (referred to herein as Opinion 5).
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I.
There are certain undisputed facts.
The Fund identified the date of Allied’s withdrawal from its obligation to the
Fund as July 31, 2005, on or prior to the expiration of the alleged CBA in April
2006. (ECF 36, Allied SOMF at ¶ 2(b)).
Allied conceded before the Arbitrator that it was clear on its website that it
had been performing work in New Jersey throughout the alleged withdrawal period
(2005-2010). (ECF No. 5 at 67); see also (ECF No. 33-5 at 15); (ECF No. 38-35 at
T:350-1 to 351-23). Significantly, Robert Smith (owner of Allied) testified as
follows:
A. (Robert Smith): . . . Because we were performing
painting work in New Jersey on hospitality jobs. So the
ACM website referred to some of those previous
projects. There are also other projects, later, post-2005,
'06, '07, sometime in that period, that were strictly Allied
Construction renovation projects, where there were
painting components to them, to the contracts.
Q. (Mr. Begg, attorney for Allied). So what were
those jobs in New Jersey, timeframe-wise? And if you
need to look at the document, that's fine. I can show it to
you.
A. Yeah, I mean, generally 2007, 2008, somewhere
in that timeframe. One project in particular that I've been
reminded of that we did was a Hilton Hampton Inn in
Parsippany, New Jersey, significant renovation that had
painting and wall coverings in it.
Q. How about the Flamingo Hotel in Atlantic City?
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A. That was later, probably 2010-ish. Sometime
around that period.
(ECF No. 38-35 at Tr..350:1-24)
Allied appeared on the Fund’s October 2011 inactive list, thus noticing the
Fund staff that Allied was subject to withdrawal liability. (ECF 36, Allied SOMF
at ¶28).
On July 20, 2017, the Fund notified Allied of its obligation to pay over
$400,000 in withdrawal liability (relying upon a Withdrawal Liability Worksheet
noting that Allied defaulted on July 31, 2005).
On October 9, 2017, Allied requested review of the Fund’s demand. (ECF
36, Allied SOMF at ¶ 52). The Fund conducted a review and declined to withdraw
its statement of liability by letter dated February 1, 2018. (ECF No. 43, Fund
Response to SOMF at ¶ 53). Allied timely requested arbitration on March 29,
2018. (ECF 38-1 at p.1). The parties agreed to bring the claim before arbitrator,
James T. Carney, for a one-day hearing which was held on April 24, 2019. (ECF
No. 38-35).
II.
To prove a laches objection, one must show there was an unreasonable delay
by plaintiff and prejudice to the defendant. Kars 4 Kids Inc. v. Am. Can!, 8 F.4th
209, 220 (3d Cir. 2021). Since no party petitioned to vacate or confirm the
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Arbitrator’s finding that the Fund unreasonably delayed in pursuing the withdrawal
liability, those facts are not described herein. Suffice it to say, with regard to
unreasonable delay, the Arbitrator found that
the failure to devote sufficient resources to determine the
existence of withdrawal liability does not excuse the
Fund’s inaction in this case or make its delay reasonable.
See, Opinion 1 at p. 66; See also, Opinion 2 at p. 52. The facts regarding the
prejudice factor are recounted below; and these facts focus on the testimony of
Robert Smith, President of Allied, and the opinions of the Arbitrator concerning
the prejudice factor of the laches objection. Prior to reviewing Smith’s testimony
and the Arbitrator’s findings, the record provided by the parties is described.
The parties submitted a joint exhibit binder to the arbitrator. (ECF No. 38-
35, Tr. 5:14-21)2. The Arbitrator stated that exhibits 1 through 27 were admitted by
agreement. (Tr. 180:13-24). Despite the alleged agreement, the parties disputed
whether the admitted Collective Bargaining Agreement (“CBA”) (Exhibit 16) was
authenticated when admitted into evidence. Exhibit 16 is the CBA between
District Council No. 711 International Union of Painters and Allied Trades State of
New Jersey (“Union”) and the employers: Garden State Council Painting and
Decorating Contractors of America (“Council”), The New Jersey Glass and Metal
2 The transcript of the arbitration hearing is docket entry No. 38-35. As such, only the
transcript cite is referred to herein.
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Contractors Association (the “Association”), and The Drywall and Interior
Systems Contractors Association, Inc. of New Jersey (“DISCA”) with a term
commencing on May 1, 2000 and terminating on April 30, 2006. (ECF 38-16).
From a review of the record submitted at the arbitration hearing, there is no
evidence whether Allied was a member of any of the associations representing the
employers. In addition, neither the Fund nor Allied is a signator to the CBA, so
the authenticity of Exhibit 16 as a binding agreement was not examined or
dismissed by the Arbitrator.
The Fund alleges Exhibit 15 shows Allied’s consent to the CBA. It is a two-
page document. The first page to the exhibit contains a signature page to an
Agreement dated November 30, 2001 wherein the parties (Allied and District
Council No. 711 agreed to “set forth control and regulate the wages, hours, fringe
benefits, terms and conditions of employment under which the employer will
employ painter, tapers, glazers and Allied trades.” (ECF 38-15). Additionally, the
parties agreed that at the beginning of each contract year or upon beginning work
with the territory (which was not specified) during the contract year, the employer
will pay the Joint Trade Board $50.00. It contains the signatures of Robert Smith
(owner of Allied) as “employer,” and Patrick Brennan for the Union and is dated
November 30, 2001. Id. Exhibit 15 contains a second page outlining rates,
including pension rates; but it does not indicate any agreement by Smith to the
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terms of the CBA (Exhibit 16), and Exhibit 15 has a term of one year. Exhibit 15
was labeled by the Fund as the signature page of the CBA, but there is no reference
made within Exbibit 15 that Smith signed it to confirm Allied agreed to the terms
of the CBA. Confusingly, the alleged CBA signature page was signed more than a
year after the effective date of the CBA (Exhibit 16), so there is no temporal
connection between Exhibits 15 and 16.
In addition to the above issue, Binder No. 5 of the joint binders given to the
Arbitrator in advance of the hearing included the deposition transcripts of Vicki
McGlone, James Bogart, Kent Cprek and Robert Smith. (ECF No. 61-1 at p. 2).
The depositions were submitted to the Arbitrator prior to the arbitration hearing as
background materials. (Tr. 7:1-13). Counsel for the Fund acknowledged the
limited purpose for submitting the depositions as follows: “They were provided to
you yesterday or the day before, I believe, for your review just to enable you to
capture the full picture. But I believe that's how you viewed those documents.” (Tr.
11:23- 12:4). At the outset of the arbitration hearing, the Arbitrator indicated that
except for McClone’s deposition, only the testimony at trial would be considered.
“I went through briefly the depositions of the other witnesses, but I'm not -- I didn't
make notes on them. I accept that they will testify and I will use only what they
testify on the record today, except if you would choose to use portions of the
deposition. . . . I did it simply to try to get a good feel for what seems to be going
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on in this case.”. (Tr. 6:18 - 7:13). The parties and the Arbitrator agreed that “Ms.
McGlone's testimony can come in as substantive evidence, as if she were here
testifying today.” ( Tr. 11:7-16). Based on the Arbitrator’s direction, the Court
only reviewed the testimony of the arbitration hearing.
Robert Smith’s testimony is summarized below.
Robert Smith, as President of Allied, testified at the Arbitration hearing that
Allied possesses no business records from the early 2000s (Tr. 352: 9-15). Smith
explained that Allied does not possess any contribution records, correspondence
with the union, and the terminating agreement. (Tr. 352; 13-22). Allied has a
“regular protocol of . . . every five years or so, purging our records.” (Tr. 353:4-
11). Smith testified that it has been about 15 years from the termination of the
alleged CBA in 2004 or 2005 and that “those records are probably destroyed.” (Tr.
353; 9-12). Smith explained Allied’s record destruction policy. The protocol to
destroy records occurred over a period of years. (Tr. 385:11-15). Smith testified:
A. (Smith) So we’ve developed policies over the
course of years that have caught up to trends and
recommendations. The Society for Human Resources
recommends four years. Our accounting firm
recommends six years. We’ve erred on the side of safety
and went with five years.
Q. (Gelman, Attorney for the Fund) Okay.
A. So that evolution happened sometime in the last
five or so years. So, five years ago in 2014, we would
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have destroyed 2005, 2006, 2007 records. Maybe not
2010, we’d destroy them, but in 2014, we probably did.
(Tr. 385:3-15). Smith was questioned about when the policy began. He stated:
Q. (Gelman) What would have triggered their
destruction? APD closed shop –
A. (Smith) As I explained –
Q. -- they were in the rear-view mirror. You were
moving along. ACM is a thriving company. And one day
you said –
A. We gained knowledge. As we evolved and
understood things a little bit better, and what we were
required to do, and government requirements changing as
they do, we came to the conclusion that every five years
we should purge our records. Because, as I said, 30
years’ worth of records –
THE ARBITRATOR: But you can’t tell when that policy
began?
A.: (Smith) I can’t tell when that policy kicked in, but
it was within the last five or so years.
(Tr. 386:9 – 387:2). Smith was also questioned about years when the records were
destroyed. To that query, Smith estimated the “probable year” of destruction.
Smith testified:
A. (Smith) They existed at one time.
Q. (Gelman) Okay. Why don’t they exist anymore?
A. We believe we terminated the agreement sometime
in 2004 or ‘05, in that time ‘06 range. And we follow a
regular protocol of you know, every five years or so
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purging our records. It’s been 15 years. 14 years since
that happened and I’m certain that those records are
probably destroyed.
(Tr. 353: 1-11). On cross-examination, the Fund’s attorney questioned Smith
about the reliability of the remittance reports as proof of the amount of withdrawal
liability and that the destruction of Allied’s payroll reports was inconsequential
(Tr. 368:18 – 383:15). Smith would not confirm or deny the remittance reports
were accurate “because of the way the Fund has managed its fund.” (Tr. 372: 8-
10). This statement refers to the lackadaisical manner in which the Fund
investigated withdrawal liability claims. Smith furthered that Allied had no
documents to verify the Fund’s calculation. Smith stated:
Because if I were to dispute each one of those hours or
how the Fund calculated it, I wouldn’t have the ability to
do so based on the information that I had, because I
purged my records.
(Tr. 373:20-24). After some argumentative questioning, the Arbitrator
stepped in and summed up Smith’s point:
ARBITRATOR: I think that what he [Smith] is saying,
very simply, is that since his records of the contributions,
remittance reports, and everything else is gone, he has no
way to verify your [the Fund’s] records.
(Tr. 374:14-19). From a review of the record, there was no other testimony
contrary to Smith’s recollection concerning the destruction of Allied’s records.
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During the hearing, there was a colloquy among the Arbitrator and the
attorneys clarifying the content of the remittance forms. The Fund relied on the
remittance forms to confirm the existence of the CBA:
THE ARBITRATOR: Which suggests that these are back payments.
MR. GELMAN: Pardon me?
THE ARBITRATOR: If they're submitting money for a period in
which they're showing no work --
MR. GELMAN: But they weren't submitting money. These were --
remittances were zero.
THE ARBITRATOR: Okay. Excuse me. These were reports showing
no money --
MR. BEGG: Correct.
MR. GELMAN: Correct.
THE ARBITRATOR: Okay. I'm with you.
MR. GELMAN: Which we would argue is an acknowledgment of a
contractual obligation. Otherwise, why submit them? Why submit
zeros?
THE ARBITRATOR: But they didn't keep doing it through the end of
the contract?
MR. GELMAN: They did.
THE ARBITRATOR: Through --
MR. GELMAN: Through the middle of 2006 roughly.
THE ARBITRATOR: Okay.
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MR. GELMAN: Right. So they had about a year of a runoff from
when it appears as though, you know, assuming that their remittances
were correct, where they stopped working but continued to submit
monthly reports in no amount, for zero.
THE ARBITRATOR: So you’re arguing the fact simply reflects a
recognition by them that they were, although they may not be working
under the agreement or having work performed under the agreement,
that they had an obligation to tell you that.
MR. GELMAN: And it was recognizing their obligation that they
were a party to the contract and that their obligations continued. If
they didn’t have an obligation to submit remittances, then they
wouldn’t.
(Tr. 40:8 - 42:6).
It appears that Gelman argues that the remittance forms are circumstantial evidence
of a CBA obligation of Allied. The Arbitrator never dismissed or accepted this
circumstantial evidence in his opinions. According to Smith, an adverse financial
consequence occurred as a result of the notification of withdrawal liability. Smith
testified:
Q. And have you and your company been impacted as a result of this
litigation in the time that’s passed?
A. Significantly.
Q. How?
A. Well, in a number of ways. Since we were notified in 2017, we had to
report it on our financial reports. During the normal course of our
business we have a bank line of credit that we use to help us with our
working capital, and our bank -- because it is a contingent liability on
our financial reports -- has set aside or carved out that piece as an
availability in our working capital, the –
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ARBITRATOR: You no longer have that line of credit?
WITNESS: I had a line of credit, but I don't the level and that availability
that I had.
ARBITRATOR: No, I'm saying now.
WITNESS: It's affected my credit with the bank. The carry cost of our legal
costs, as well as the $71,000 that we were forced to pay out of
the blue. So it's affected my ability to bond projects, it's
affected my ability to borrow money, which has affected my
ability to move the business forward.
(Tr. 353:12 - 354:18).
On the other hand, the Arbitrator minimized Smith’s testimony and found
that Allied was not prejudiced by the unreasonable delay of the Fund. Within
Opinions 1 and 23, the Arbitrator initiates his fact finding by applying the Third
Circuit standard for determining prejudice.
In United States Fire Insurance Company v. Asbestos
Spray, Inc. (182 F.3d. 201, 208 (3d Cir. 1999) the Third
Circuit reiterated the normal rule for determining
prejudice: “To establish prejudice the party raising laches
must demonstrate that the delay caused a disadvantage in
asserting or establishing a claimed right or defense; the
mere loss of what one would otherwise have kept does
not establish prejudice.”
(Opinion 1, p. 63; See also Opinion 2, p. 49).
3 See Footnote 1.
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Within Opinion 1 and Opinion 2, the Arbitrator found that “Allied was not
prejudiced by reason of its loss of records” for several reasons. First, the
Arbitrator noted that the loss of an agreement with the Union to terminate the
Collective Bargaining Agreement was not prejudicial to Allied because
assessed withdrawal liability on the assumption the date
upon which the withdrawal occurred was on the last date
for which contributions were made. Had the Fund
contended that the withdrawal of Allied occurred in 2006
instead of 2005, the arbitrator might well have concluded
that with respect to the claim of a 2006 withdrawal, the
Fund did not proceed “as soon as practicable” and that
Allied was prejudiced because its records of union
agreements had been destroyed . . . (Opinion 1, p. 67)
(emphasis added).
Second, the Arbitrator found that the “probable” loss of its payroll records was not
prejudicial “because the Fund has microfiche of Allied’s remittance reports which
is sufficient to measure withdrawal liability,” and there was no “diligent search” by
Allied to warrant prejudice. (Opinion 1, p. 67; see also Opinion 2, p. 53). The
Arbitrator furthered:
There are two faults in this claim. First, the testimony
indicates that while Allied believes that the records were
“probably destroyed” it had not made any check to verify
this probability.” (Tr. 353). Laches due to loss of records
can only be found if the party so claiming has made a
diligent search for the missing records and as a result of
such investigation has determined that the records no
longer exist. Second, since the determination of number
of contribution units is based on Allied’s own remittance
forms, it is difficult to see how per se Allied is prejudiced
by the loss of the records which it used to make up the
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remittance reports given the availability of such reports.
Speculation that the Fund has forged the remittance
reports or some Allied employee had sent in inaccurate
reports is just that - speculation. Delay is not prejudicial
‘where the alleged harm was ‘entirely hypothetical.”
Meyers v. Asics Corp., 974 F.2d 1304, 1308 (Fed. Cir.
1992).
(Opinion 1, p. 67-68; see also Opinion 2, p. 53-54). Third, the Arbitrator found
that Allied benefitted from the delay for economic reasons. The Arbitrator penned:
Looking at it another way, Allied has the use, interest
free, of money which it might otherwise have had to pay
to the Fund. See Brentwood Financial Corporation v.
Western Conference of Teamsters Pension Trust Fund,
902 F. 2d. 1456, 1459-20 (9th Cir. 1990); Board of
Trustees of Trucking Employees of North Jersey Welfare
Fund Inc. v. Canny, 900 F. Supp. 583, 594-5 (N. D. N.Y.
2995)
(Opinion 1, p. 69; Opinion 2, p. 42). The Arbitrator does not cite to any testimony
to support this conclusion.
In Opinion 5, the Arbitrator utilized a different standard for showing
prejudice. The Arbitrator wrote:
undue delay was not sufficient to vacate an assessment of
withdrawal liability; rather the delay must be so
prejudicial as to deprive the employer of a reasonable
chance of contesting the assessment.
(Opinion 5, p. 30). The Arbitrator changed directions again and revised the
standard as one where “the undue delay by the Fund did not so prejudice Allied as
to make any assessment unfair per se.” Id.
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In Opinion 4, the Arbitrator offered yet another standard for showing
prejudice. (Opinion 4, p. 34). It reads:
Now to prove prejudice by reason of delay, the employer
must prove three things: (1) that the delay has resulted in
the unavailability of witnesses and documents which
would have been available but for the delay; (2) that the
unavailable witnesses or documents would have provided
or constituted relevant evidence on the merits of the
parties’ claims and (3) that the lack of such evidence
precludes a party from prevailing on the merits of its
claim with the result that it suffers financial detriment.
This standard has no supporting citation. Later in Opinion 4, the Arbitrator alters
the “diligent search” requirement, as noted in Opinions 1 and 2, to a
“comprehensive search.” This change is not supported by a citation. The
Arbitrator writes:
One defect in this claim is Allied has failed to prove that
it made a comprehensive search of its records and did not
find any records of its contract with the union.
(Opinion 4, p. 36). In addition, the Arbitrator recognizes that the CBA “may or
may not have been signed by Allied . . .” (Opinion 4, p. 37). This assertion is
different from the Arbitrator’s findings in Opinions 1 and 2. Compare, Opinion 1
at p. 58-59 and Opinion 2 at p. 44-45 (wherein the Arbitrator affirmed that there
was a CBA), with Opinion 4 at p. 37 (wherein the Arbitrator recognizes that Allied
may not have signed the alleged CBA). The Arbitrator, minimizing the disparity
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in the testimony, refers back to his lack of prejudice conclusion. The Arbitrator
concluded:
However, what throws this issue into doubt is Mr.
Smith’s testimony that he believed that he and the union
terminated the contract in 2005 and 2005 but the absence
of Allied’s collective bargaining agreement records
precluded him from producing documents evidencing
that date that the obligation to contribute ceased.
Assuming that he made diligent search for such records
(and the record is not totally clear on this point) and
could not locate them, Allied has a potential claim of
prejudice if the assessment of withdrawal liability is
made as of April 2006 instead of April 2005. However,
there was a suggestion at the trial that use of the later
date for cessation of the obligation to contribute might
actually benefit Allied because of improvement in the
finances of the Fund. If such is the case, then Allied
cannot be prejudiced by inability to prove an earlier
withdrawal date if such earlier date would have resulted
in the assessment of a greater withdrawal liability than
the later date.
(Opinion 4, p. 37).
III.
Withdrawal liability is a statutorily created liability wherein an employer is
responsible for its allocable share of unfunded vested benefits after withdrawing
from a plan. 29 U.S.C. § 1381(b), 1391(a). This case revolves around the statute of
limitations when withdrawal liability arises; and if that date is prolonged, the
statutory language of “as soon as practicable” engenders a laches objection. This
section provides the statutory background and the case law guiding this
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Memorandum.
Congress amended ERISA by enacting the Multiemployer Pension Plan
Amendment Act of 1980 (MPPAA). 29 U.S.C. § 1381 et seq. Under the
MPPAA, an employer is liable for any “unfunded vested benefits” after
withdrawing from a plan. 29 U.S.C. § 1391(a). Unfunded vested benefits are
“calculated as the difference between the present value of vested benefits and the
current value of the plan's assets.” In re Marcal Paper Mills, Inc., 650 F.3d 311,
316 (3d Cir. 2011) (quoting Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467
U.S. 717, 725 (1984)). This is known as “withdrawal liability.” 19 U.S.C. §
1381(a). It is a statutorily created liability wherein an employer is responsible for
its allocable share of withdrawal liability. 29 U.S.C. § 1381(b).
The legislative intent of the MPPAA was “to protect the financial solvency of
multiemployer pension plans.” Bay Area Laundry & Dry Cleaning Pension Tr.
Fund v. Ferbar Corp., 522 U.S. 192, 196 (1997). Under the MPPAA, “employers
who withdraw from underfunded multiemployer pension plans [must] pay a
withdrawal liability.” Id. at 196. When an employer withdraws, the employer
must pay his “proportionate share of the plan’s unfunded vested benefits.” Id.
(quoting R.A. Gray & Co., 467 U.S. at 725). Employer payments may be tendered
over a period of 20 years. Id. at 197. The MPPAA “places the calculation burden
on the plan’s trustees.” Id. The trustees must demand withdrawal penalties “as
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soon as practicable” after the employer’s withdrawal. 29 U.S.C. § 1451(f). After
receipt of notice of withdrawal liability, the employer may invoke a dispute
resolution procedure. 29 U.S.C. §§ 1401(a)(1)4. Suits enforcing MPPAA rights
must be filed within six years after the date on which the cause of action arose. 29
U.S.C. § 1451(f)(1); Bay Area, 522 U.S. at 198.
In 1997, the Supreme Court addressed the question of when the six-year
limitation of action period under MPPAA commences. Id. at 205. In Bay Area,
Ferbar owned three laundries prior to 1990. Id.at 198. For several years, Ferbar
contributed to the Bay Area Laundry and Dry Cleaning Pension Fund (Pension
Fund) on behalf of employees at all three facilities. Id. In 1983, Ferbar ceased
contributions for one of the laundries; and the company ceased contributions for
the other two facilities in March 1985. Id. “Ferbar never resumed participation in
the Pension Fund.” Id. In December, 1986, the Pension Fund forwarded notice to
Ferbar demanding payment of its withdrawal liability either in its entirety or in
monthly payments beginning on February 1, 1987. Id. On July 8, 1987, Ferbar
filed a notice of initiation of arbitration. Id. Despite said notice, arbitration
proceedings were not commenced. Id. The Pension Fund delayed initiating suit
until February 9, 1993. Id. at 199. Justice Ginsburg noted “the complaint was filed
4 The dispute resolution procedure entails that once notice is received, an employer has
ninety (90) days to request review of the demand, and an additional one hundred and twenty
(120) days to request arbitration.
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nearly eight years after Ferbar completely withdrew from the Pension Fund in
March 1985, six years and eight days after Ferbar missed its first scheduled
payment on February 1, 1987 . . .” Id. The Supreme Court held that the MPPAA
does not provide a pension plan with any claim of relief against an employer on the
date of withdrawal, but focused on two other subsequent events that would trigger
the limitations period for a withdrawal liability claim:
The plan's interest in receiving withdrawal liability does
not ripen into a cause of action triggering the limitations
period until (a) the trustees calculate the debt, sets the
schedule of installments, and demands payment pursuant
to 29 U.S.C.S. § 1399(b)(1); and (b) the employer
defaults on an installment due and payable under the
trustees' schedule.
Id. at 202. In adopting the Bay Area holding, the Supreme Court understood it
delayed the triggering date for a lengthy period of time, so within the decision,
Justice Ginsberg responded to some critics of its analysis. One opposing argument
was that the triggering date would improperly place the running of the limitations
period in control of the plan sponsor by “pegging the statute [of limitations] to the
schedule set by the plan's trustees.” Id. at 204. In response, Justice Ginsberg
noted that Congress did not precisely fix a time in which a fund must calculate the
employer’s withdrawal liability, so to accommodate the Congressional objective,
the time period must be flexible. Justice Ginsburg wrote:
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Congress’ adoption of a looser “as soon as practicable”
requirement for the initial determination of withdrawal
liability bespeaks a deliberate legislative choice
to afford some flexibility in gathering the information
and performing the complex calculations necessary to
make that assessment.
Id. at 205. Furthermore, the Court discounted the practical adverse impact of the
plan sponsor controlling the limitations period because there are “significant
incentives . . . [which] will, in the usual case, induce plan sponsors to act promptly
to calculate, schedule, and demand payment of withdrawal liability." Id. at 205
(quoting Joyce v. Clyde Sandoz Masonry, 871 F.2d 1119, 1126 (D.C. Cir., 1989).
Justice Ginsberg noted that since plan sponsors “have a financial imperative to act
quickly for the contributions lost when an employer withdraws will not be replaced
with withdrawal liability payments until the plan calculates those payments and
serves a demand on the employer. And, as time passes, the likelihood that the plan
will not receive payment increases.” Id. at 205. Justice Ginsberg reasoned that
such “a delay could constitute a breach of fiduciary duty actionable at the instance
of the plan’s beneficiaries.” Id. at 205. Thus, leaving the limitation period in the
hands of the plan’s sponsor appears to be a manageable downside risk in light of
the incentive to collect. Attempting to box-in that risk, Justice Ginsberg noted an
employer has some recourse under the statute, as it may assert that the plan sponsor
has not complied with the “as soon as practicable” language in the MPPAA.
Justice Ginsberg stated:
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if an employer believes the trustees have failed to comply
with their "as soon as practicable" responsibility, the
employer may assert that violation as a laches objection
at an arbitration contesting the withdrawal liability
assessment.
Id. at 205 (emphasis added).
When the Supreme Court decided Bay Area, it focused on when the cause of
action arises under MPPAA; but in the case at bar, there is another statutory
exception (construction industry exception) which when coupled with the Bay
Area holding muddies the waters more.
In the mid-1980s, withdrawal liability under the MPPAA was functioning
poorly in the construction industry. This was due to the transient nature of the
construction industry, and some unscrupulous actions by construction employers
who would sporadically change corporate structures, leaving the prior corporate
structure without funds, and plan sponsors without recourse to collect withdrawal
liability from such employers. Congress amended the MPPAA to effectuate its
goal of ensuring pension benefits for union construction workers. This amendment
is commonly known as the construction industry exception. Ceco Concrete
Constr., LLC v. Centennial State Carpenters Pension Tr., 821 F.3d 1250, 1253-55
(10th Cir. 2016); Stevens Eng’rs & Constructors, Inc. v. Local 17 Iron Workers
Pension Fund, 877 F.3d 663, 670 (6th Cir. 2017).
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The construction industry exception imposes withdrawal liability on a
construction industry employer who ceases to have an obligation to contribute
under a plan, “but resumes such work within five years after the date on which the
obligation to contribute under the plan ceases, and does not renew the obligation at
the time of the resumption.” 29 U.S.C. § 1383(b)(2). In addition, the amendment
broadened the definition of an employer to include one that reorganized its
corporate entity but remained in control of the same individuals who conducted
operations in the same jurisdiction. 29 U.S.C. § 1383(b)(1). Applying the
construction industry exception, the limitation period became more fluid. That is,
the Bay Area rationale plus the construction industry exception together may
extend the limitations of actions period substantially further.
Applying this standard to the case at bar, Allied allegedly withdrew in 2005
and resumed work in approximately 2007. (Tr. 350:14-20). The Fund knew of
Allied’s obligation by October 2011 but never notified Allied of its obligation to
pay withdrawal liability until July 20, 2017, which included a Withdrawal Liability
Worksheet noting Allied defaulted on July 31, 2005. (Allied SOMF 2(b), ECF 36).
Yet, the Fund was still able to (legitimately yet unsuccessfully) argue under Bay
Area and the construction industry exception, that it timely noticed Allied– despite
it being more than 10 years after the Fund’s cited withdrawal date.
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IV.
In reviewing an arbitrator’s award of withdrawal liability, a district court
must “presume[] that the arbitrator's factual findings are correct unless they are
rebutted by a clear preponderance of the evidence. Legal conclusions are reviewed
de novo.” Crown Cork & Seal Co. v. Cent. States Se. & Sw. Areas Pension Fund,
982 F.2d 857, 860 (3d Cir. 1992) (citations omitted). “A factual finding is clearly
erroneous ‘when although there is evidence to support it, the reviewing court on
the entire evidence is left with the definite and firm conviction that a mistake has
been committed.’ ” See United States v. Murray, 821 F.3d 386, 391 (3d Cir.), cert.
denied, ––– U.S. ––––, 137 S.Ct. 244 (2016) (quoting United States v. U.S.
Gypsum Co., 333 U.S. 364, 395 (1948)). “Where there are two permissible views
of the evidence, the factfinder's choice between them cannot be clearly erroneous.”
Anderson v. City of Bessemer, 470 U.S. 564, 574 (1985). Generally, a “motion to
confirm or vacate an arbitration award [is] not intended to involve complex factual
determinations, other than a determination of limited statutory conditions for
confirmation or grounds for refusal to confirm.” PG Publishing, 19 F. 4th at 314
(quoting Teamsters Local 117 v. United Parcel Serv. 966 F. 3d 245, 248-50 (3d
Cir. 2020).
“There is a strong presumption under the [FAA] in favor of enforcing
arbitration awards.” Brentwood Med. Assoc. v. United Mine Workers, 396 F.3d
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237, 241 (3d Cir.2005). Therefore, “an award is presumed valid unless it is
affirmatively shown to be otherwise, and the validity of an award is subject to
attack only on those grounds listed in [Section 10 of the FAA].” Id.
The Arbitrator's determination of denial of the laches affirmative defense to
Allied presents a mixed question of law and fact. Therefore, the Court will review
the Arbitrator's interpretations within that determination de novo but will apply a
“clearly erroneous” standard to the Arbitrator's application of that legal standard to
the facts to reach his findings of fact. Manhattan Ford Lincoln, Inc. v. UAW Local
259 Pension Fund, 331 F. Supp. 3d 365 (D.N.J. 2018) (citing Crown Cork & Seal
Co., 982 F.2d at 861; N.Y. Times Co. v. Newspaper & Mail Deliverers'-Publishers'
Pension Fund, 303 F.Supp.3d 236 at 247-48, 255 (S.D.N.Y. 2018)).
V.
Laches is an objection to liability because of the staleness of a claim. Gruca
v. United States Steel Corp., 495 F.2d 1252, 1258-59 (3d Cir.1974) “Laches
conceptualizes the inequity which may inhere when a stale claim is permitted to be
enforced”. Id. The purpose of laches is to avoid inequity. In re Bressman, 874
F.3d 142, 149 (3d Cir. 2017). The Supreme Court found that laches does not apply
when there is “no excusable delay in seeking a remedy and where no prejudice to
the defendant has ensued from the mere passage of time . . .” Gardner v. Panama
R. Co., 342 U.S. 29, 30-31, (1951), wherein the Court states:
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Though the existence of laches is a question primarily
addressed to the discretion of the trial court, the matter
should not be determined merely by a reference to and a
mechanical application of the statute of limitations. The
equities of the parties must be considered as well. Where
there has been no inexcusable delay in seeking a remedy
and where no prejudice to the defendant has ensued from
the mere passage of time, there should be no bar to relief.
The Key City, 1872, 14 Wall. 653, 20 L.Ed. 896;
Southern Pacific Co. v. Bogert, 1919, 250 U.S. 483, 39
S.Ct. 533, 63 L.Ed. 1099; Holmberg v. Armbrecht, 1946,
327 U.S. 392, 66 S.Ct. 582, 90 L.Ed. 743; see McGrath
v. Panama R. Co., 5 Cir., 1924, 298 F. 303, 304.
At common law, when laches was applied, the burden of proof was upon defendant
to show both the unreasonable delay by plaintiff and the prejudice suffered by
defendant. In some recent cases, the burden of proof shifts to plaintiff to show that
defendant did not suffer any prejudice. For instance, the Third Circuit shifted the
burden to disprove prejudice where the claim arises under a federal statute without
a statute of limitations, but the analogous state statute of limitations has expired.
Kars 4 Kids Inc. v. Am. Can!, 8 F. 4t 209 n.3 (3d Cir. 2021) (citing Santana
Products, Inc. v. Brobrick Washington Equipment, Inc., 401 F. 3d 123, 138-39 (3d
Cir. 2005). The underlying rationale for shifting the burden of proof onto the
plaintiff is that the courts presume prejudice when there is an unreasonable delay
and the statute of limitations has expired. In this case, Bay Area makes it clear that
the statute of limitations does not commence to run until notification of withdrawal
liability (July 2017), and since the statute of limitations has not expired, the
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presumption does not shift under the Kars 4 Kids rationale. Santana, 401 F. 3d at
138-39 (3d Cir. 2005). It is unclear whether this presumption of prejudice should
apply here because the statute of limitations has not expired. See also Travers v.
FedEx Corporation, 567 F. Supp. 3d 542 (E.D. Pa. 2021). See, e.g., Gruca v. U.S.
Steel Corp., 495 F.2d 1252, 1258–59 (3d Cir. 1974); citing Stevens v. Tennessee
Valley Authority, 712 F.2d 1047, 1056 (6th Cir.1983); Gall v. U.S. Steel Corp.,
598 F. Supp. 769, 773 (W.D. Pa. 1984). In light of same, and under the
circumstances, the Court imposes that the defendant must prove both unreasonable
delay and prejudice.
Thus, laches is an equitable defense, and the standard arose from considering
exactly what harm was caused to the defendant by the passage of time. Gardner,
342 U.S. at 30-31. “Laches bars an action from proceeding if there was (1) an
inexcusable delay in bringing suit, and (2) material prejudice to the defendant as a
result of the delay.” Joint Stock Soc. v. UDV N. Am., Inc., 266 F.3d 164, 185 n. 12
(3d Cir.2001) (citing Pappan Enter. v. Hardee's Food Sys., 143 F.3d 800, 804 (3d
Cir.1998)).
Therefore, consistent with the equitable intent of laches, the standard set
forth above, and in United States Fire Insurance Company v. Asbestos Spray, Inc.,
the inquiry for prejudice is whether the loss of documents was caused by the delay
and whether the loss materially (not simply allegedly) disadvantaged a defendant’s
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defense. See Smith v. Caterpillar Co., 338 F.3d 730, 733 (7th Cir. 2003). “Material
prejudice may be defined as either evidentiary prejudice or economic prejudice.
Evidentiary prejudice arises when the infringer cannot put on a fair defense
because of the loss of records, death of witnesses, or the dimming of memories.
Economic prejudice arises when an infringer suffers the loss of monetary
investments or incurs damages that would likely have been prevented by an earlier
suit.” Crown Packaging Tech., Inc. v. Rexam Beverage Can Co., 679 F.Supp.2d
512, 520 (D.Del.2010). (citing A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960
F.2d 1020, 1032 (Fed.Cir.1992).
The Third Circuit in In re Lower Lake Erie Iron Ore Antitrust Litigation,
applying an analogous “material prejudice” laches standard cited from the
Supreme Court of Ohio, assessed the prejudice prong of appellant B & LE’s laches
claim consistent with consideration of whether the delay caused a disadvantage in
asserting or establishing a claimed right or defense:
We need not determine whether the law of Ohio permits assertion of a
laches defense to antitrust suits or whether the fraudulent concealment
claims of the steel companies and Erie should have been submitted to
the jury. “‘Delay in asserting a right does not of itself constitute
laches, and in order to successfully invoke the equitable doctrine of
laches it must be shown that the person for whose benefit the doctrine
will operate has been materially prejudiced by the delay of the person
asserting his claim.’ ” Emrick v. Multicon Builders, Inc., 57 Ohio
St.3d 107, 566 N.E.2d 1189, 1194 (1991), quoting Smith v. Smith, 168
Ohio St. 447, 156 N.E.2d 113, 119–20 (1959).
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The district court found that B & LE had not shown any significant
prejudice attributable to the delay. Unless clearly erroneous, we will
not disturb that finding. B & LE contends that it was prejudiced by the
death of many critical witnesses and the loss of numerous documents;
B & LE, however, details neither the substance of these witnesses'
testimony nor the content of lost documents and what they would
have revealed concerning its defense against the conspiracy. Given the
number of witnesses and documents which were admitted in evidence,
it is difficult to see how B & LE was prejudiced by the lack of either
of those two components of evidence. We therefore conclude that
laches is not a bar to the Valentine Act claims.
In re Lower Lake Erie Iron Ore Antitrust Litigation, 998 F.2d 1144, 1174 (3d
Cir.1993).
Here, Allied differs from B & LE in that Allied’s destroyed documents were
not only identified and testified as to having existed at one point, but also clearly
relevant to Allied’s ability to dispute liability and damages. For example, the
disputed CBA (Exhibit 16) is necessary to confirm the date on which Allied’s
obligation to contribute began and ended as well as what constituted “covered
work.” Remittance reports may confirm or dispute the Fund’s calculations; but
Allied’s payroll records would allow Allied to confirm the accuracy of the
remittance reports. That is, Allied’s project records would confirm or dispute
whether Allied resumed “covered work” within five years and the extent of same.
In addition, Mr. Smith alluded to a termination agreement being signed in 2004
which may be a critical part of any liability.
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Further Smith testified before the Arbitrator as to the institution of its
document retention policy and that the papers were destroyed in 2014, three years
after Allied undisputedly appeared on the Fund’s internal list of employers to
investigate for withdrawal liability in 2011. (Tr. 385:3-15).
VI.
An arbitrator’s decision may be vacated under the following standards per
the Federal Arbitration Act (9 U.S.C.A. § 10):
(1) where the award was procured by corruption, fraud, or
undue means;
(2) where there was evident partiality or corruption in the
arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in refusing
to postpone the hearing, upon sufficient cause shown, or in
refusing to hear evidence pertinent and material to the
controversy; or of any other misbehavior by which the rights of
any party have been prejudiced; or
(4) where the arbitrators exceeded their powers, or so
imperfectly executed them that a mutual, final, and definite
award upon the subject matter submitted was not made.
“Evident partiality,” under § 10(a)(2) entails “the challenging party …
show[ing] ‘a reasonable person would have to conclude that the arbitrator was
partial’ to the other party to the arbitration.” Kaplan v. First Options of Chi., Inc.,
19 F.3d 1503, 1523 n. 30 (3d Cir.1994) (quoting Apperson v. Fleet Carrier Corp.,
879 F.2d 1344, 1358 (6th Cir.1989)). “Bias in refusing to consider certain evidence
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could result in an unfair hearing, and so, pursuant to § 10(a)(3), ‘a district court
may vacate an award if a party to an arbitration proceeding has not been given
notice and opportunity to present arguments and evidence on the merits of the
dispute.’” Andorra Services Inc. v. Venfleet, Ltd., 355 F. App'x 622, 628 (3d Cir.
2009) (quoting Teamsters Local 312 v. Matlack, Inc., 118 F.3d 985, 995 (3d
Cir.1997).
In consideration of the meaning of “misconduct . . . in refusing to hear
evidence pertinent and material to the controversy” under Federal Arbitration Act,
9 U.S.C.A. § 10(a)(3), the Third Circuit has “long held that for an error to justify
vacating an arbitration award, it must be ‘not simply an error of law, but [one]
which so affects the rights of a party that it may be said that he was deprived of a
fair hearing.” Whitehead v. Pullman Grp., LLC, 811 F.3d 116, 120 (3d Cir. 2016).
Further, vacating an award is appropriate in light of “procedural irregularities so
prejudicial that they result in ‘fundamental unfairness.” Id. (quoting Teamsters
Local 312 v. Matlack, Inc., 118 F.3d 985, 995 (3d Cir. 1997)).
Based on the above standards, the Arbitrator’s award is vacated for several
reasons.
Reason 1:
In Opinions 1 and 2, the Arbitrator finds that Allied was not prejudiced by
the unreasonable delay based on three facts. One of the Arbitrator’s factors was
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that the unreasonable delay economically benefitted Allied as “Allied had the use,
interest free, of money it might otherwise had to pay the Fund”.
(Opinion 1, 67-68; Opinion 2, p. 53-54). This economic benefit for finding no
prejudice does not comport with the case law. The Arbitrator does not cite to any
witnesses’ testimony to support the purported economic benefit. The standard for
finding prejudice is:
the party asserting laches as a defensive bar must
establish (1) an inexcusable delay in bringing the action
and (2) prejudice. EEOC v. Great Atlantic & Pacific Tea
Co., 735 F.2d 69, 81 (3d Cir.1984); Churma v. United
States Steel Corp., 514 F.2d 589, 593 (3d Cir.1975). To
establish prejudice, the party raising laches must
demonstrate that the delay caused a disadvantage in
asserting and establishing a claimed right or defense; the
mere loss of what one would have otherwise kept does
not establish prejudice. In re Bohart, 743 F.2d 313, 327
(5th Cir. 1984) (reversing district court's dismissal of
interpleader based on laches).
United States Fire Insurance Company v. Asbestos Spray, Inc. 182 F.3d. 201, 208
(3rd. Cir. 1999).
Within the above standard, there is no mention of economic benefit to the
employer as a means to mitigate the prejudice factor of laches. In reviewing this
legal conclusion de novo it is contrary to case law. Crown Cork & Seal Co. v. Cent.
States Se. & Sw. Areas Pension Fund, 982 F.2d 857, 860 (3d Cir. 1992) (citations
omitted).
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Moreover, the Arbitrator found this economic benefit without citing to any
testimony and without analyzing Allied’s adverse financial consequence as
asserted by Mr. Smith. Smith testified that the notice of withdrawal liability
impacted Allied’s “bank line of credit” by limiting its availability and reduced the
amount of credit. (Tr. 353:12 - 354:18).
In sum, to consider an economic benefit as a means to mitigate prejudice
does not comport with the case law. Assuming it is a factor, which it is not, failing
to consider Allied’s adverse economic consequence in the Arbitrator’s factual
findings is a clearly erroneous finding of fact. United States v. Murray, 821 F.3d
386, 391 (3d Cir.), cert. denied, ––– U.S. ––––, 137 S.Ct. 244 (2016) (quoting
United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)).
Reason 2:
In determining the year of withdrawal from the Fund by Allied, the
commencement of the five-year period under the construction industry exception,
the Arbitrator assumed that it occurred in 2005 rather than 2006. The Arbitrator
adopted this assumption in order to avoid a finding of prejudice. The Arbitrator
wrote:
assessed withdrawal liability on the assumption the date upon which
the withdrawal occurred was on the last date for which contributions
were made. Had the Fund contended that the withdrawal of Allied
occurred in 2006 instead of 2005, the arbitrator might well have
concluded that with respect to the claim of a 2006 withdrawal, the
Fund did not proceed “as soon as practicable” and that Allied was
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prejudiced because its records of union agreements had been
destroyed . . . (Opinion 1, p. 67) (emphasis added).
In order to find prejudice, one must find that the delay “caused a
disadvantage in asserting or establishing a claimed right or defense”. The standard
for imposing laches does not suggest that the Arbitrator may avoid a finding of
prejudice by “assuming” facts. Moreover, the Arbitrator’s “assumed” the year of
withdrawal; but this does not account for the scope of the destroyed records that
may have “established [other]claimed rights or defenses.” See, United States Fire
Ins., 182 F. 3d at 208. In short, the Arbitrator based a denial of an assumed date
rather than a disadvantage in asserting a defense. For example, Mr. Smith testified
that there was a termination letter that was destroyed which placed Allied at a
disadvantage in asserting a defense. The Arbitrator’s assumption does not cure the
disadvantage of production of the termination agreement. (T. 352, 13-22).
The assumption of a fact to undermine a determination of prejudice is not
supported by case law.
Reason 3:
In Opinion 1, the Arbitrator noted that prejudice cannot be found where the
harm is “entirely hypothetical.” More specifically, the Arbitrator wrote that “delay
is not prejudicial ‘where the alleged harm was entirely hypothetical’.” (citing
Meyers v. Asics Corp., 974 F.2d 1304, 1308 (Fed. Cir. 1992). The Meyers case
does not contain the “entirely hypothetical” language. Meyers states the following:
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Defendants also argue that they suffered evidentiary prejudice - loss
of key witnesses and loss of documentary evidence. However, none of
the defendants state exactly what particular prejudice it suffered from
the absence of these witnesses or evidence. Conclusory statements
that there are missing witnesses, that witnesses' memories have
lessened, and that there is missing documentary evidence, are not
sufficient. Meyers v. Asics Corp., 974 F.2d 1304, 1308
(Fed.Cir.1992).
In this case, Smith testified that the records were destroyed in accordance with its
procedures; and his recollection of the events would have been enhanced if those
records were available. (Tr. 388:17 - 389:8). These are not conclusory statements
but show that the long delay caused prejudice. The error is that the Arbitrator relied
on the entirely hypothetical language that is not set forth in Meyers; and reading
Meyers more closely supports an opposite finding. The use of this standard is
contrary to case law.
Reason 4:
The Arbitrator continually relies on his finding that Allied failed to perform
a “diligent search” for its records. Opinion 1, p. 67; Opinion 2, p. 53. The
Arbitrator found there was neither a “diligent search” or a “comprehensive search”
(Opinion 4, p. 36) because Smith at one juncture characterized that the records
were “probably destroyed.” (Opinion 1, p. 67-68; Opinion 2, p. 53-54; Opinion 4,
p. 36.) To the Arbitrator, the use of the language “probably destroyed” was
construed to mean Allied did not search for the relevant records. Reading Smith’s
testimony as a whole, that finding of fact is arbitrary. Smith is quite adamant that
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all the records were destroyed pursuant to a company policy. Undoubtedly Smith
said “probably” at one point (Tr. 359: 9-12); but the Arbitrator’s interpretation is
out of context with Smith’s testimony as a whole. In addition, there was no other
testimony contradicting Smith’s testimony. As such, this finding of fact is
definitively and clearly against the evidence as a whole.
Reason 5:
The applicable case law on laches is set forth in Gardner, 342 U.S. at 30-31,
Asbestos Spray, Inc. 182 F.3d. at 208 (3rd. Cir. 1999), and Joint Stock Soc., 266
F.3d at 185 n. 12 (3d Cir.2001) (citing Pappan Enter. v. Hardee's Food Sys., 143
F.3d 800, 804 (3d Cir.1998)). These cases confirm the inquiry for prejudice is
whether the loss of documents was caused by the delay and whether the loss
materially (not simply allegedly) disadvantaged a defendant’s defense. See Smith v.
Caterpillar Co., 338 F.3d 730, 733 (7th Cir. 2003). Essentially, Allied needed to
show: (a) attribution of the loss of its records to the delay; (b) identification of
missing evidence; and (c) relevance of the evidence to the party’s defense. In re
Lower Lake Erie Iron Ore Antitrust Litigation, 998 F.2d 1144, 1174 (3d Cir.1993).
The Arbitrator does not employ this standard. He not only incorporates a
stricter standard, but, as noted, the standard is changed in his opinions. At first, the
Arbitrator found there was no prejudice because Allied had not performed a
“diligent search” (Opinion 1, p. 67 and Opinion 2, p. 53). At another point the
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standard was changed to a “comprehensive search” (Opinion 4, p. 36). And finally,
the standard morphed into “the undue delay by the Fund did not so prejudice
Allied as to make any assessment unfair per se.” (Opinion 5, p. 30). In sum, these
standards are different from the standards set forth by the Third Circuit. As such,
the standards the Arbitrator used to show no prejudice against Allied are not
consistent with case law.
Reason 6
In the Arbitrator’s opinions, he finds that Allied was bound by a CBA
(Exhibit 16). For instance, in Opinion 1 and Opinion 2. He writes:
Allied Painting and Decorating Company (“Allied”) was owned by
Robert Smith who is also the owner of Allied Construction
Management (“ACM”) with the result that the two companies are part
of the same controlled group and are therefore considered the same
employer for the purpose of Multi-Employer Pension Plans Act
(“MPPAA”). (Tr. 44) Allied signed a contract with the District
Council 711 of the International Painters Union (“Union”) which
provided for Allied to use Union employees to do painting when
working in the state of New Jersey and which required Allied to
contribute to the International Painters & Allied Trades Industry
Pension Fund (“Fund”) for work performed by such Union
employees. (Tr. 39) Allied ceased painting operations in New Jersey
in 2005 with its last contributions to the Fund being made for April,
2005. (Tr. 14) Allied continued to submit monthly remittance reports
to the Fund showing that it had utilized no Union employees until the
expiration of the collective bargaining agreement on April 30, 2006
(Tr. 19) although there is some evidence that indicates that Allied had
reached an agreement with the Union before that date to cancel its
contract (Tr. 353). Such an agreement would have relieved Allied of
its reporting obligation for any period following the cancellation.
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(Opinion 1, p. 59). Notably, Opinion 2 restates the above paragraph, except where
it states Allied submitted remittance forms until the expiration of the CBA in April
30, 2006. The Arbitrator only relies on the opening statement of the Counsel for
the Fund (Tr. 19) which is not testimony, and also cites to the alleged signature
page of Exhibit 15 which does not reference the CBA. (Opinion 2, p. 44).
The Arbitrator does not analyze the admissibility of the CBA or weigh its
merits. The CBA is executed between an association of painting firms (but not by
Allied) and District Council No. 711 (but not by the Fund). As such, the CBA is
not a business document of either party, and it was not authenticated by a witness.
The Fund argues that Allied signed onto the CBA through Exhibit 15, a two-page
document. But Exhibit 15 does not state that it incorporates the terms of the CBA.
To make his findings, the Arbitrator should have discussed these facts in his
analysis. To simply assert there is a CBA, without more explanation is arbitrary.
As Smith testified, he discounted the Fund’s records “because of the way the Fund
has managed its fund,” referring to the Fund’s unreasonable delay and erratic work
procedures. (Tr. 372, 8-10). It was arbitrary for the Arbitrator not to explain his
rationale under the circumstances.
Conclusion
The cumulation of the above events amounts to a reasonable appearance of
bias against Allied and results in deprivation of a fair hearing. Allied was at a
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disadvantage by not having access to records, and accordingly, denied a defense
given by: (a) the Arbitrator’s application of inconsistent standards as to the
prejudice prong of Allied’s laches defense which increasingly challenged Allied’s
wherewithal to meet the stated burden; (b) acceptance of unauthenticated and
challenged documents without any discussion of any crucial facts as whether the
parties submitted the applicable CBA and accurate remittance reports (which were
then relied upon by the Arbitrator to deny prejudice) and leaving Allied with no
means to dispute the Fund’s calculations; and (c) irregularities such as finding an
avoidance of prejudice against Allied by assuming a 2005 withdrawal date; (d) by
adopting an economic benefit prong to the laches objection in Opinion 1 when it is
not in case law; and (e ) finding Smith’s testimony to mean that there was no
diligent search when Smith testified about any ongoing document retention
protocol. The totality of the circumstances worked to effectively deny Allied a fair
hearing, demanding vacating the award.
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ORDER
THIS MATTER having come before the Court on defendant’s Motion for
Judgment on the Pleadings (ECF No. 31) and Plaintiff’s Motion for Summary
Judgment (ECF No. 34); and the Court having carefully reviewed and taken into
consideration the submissions of the parties, as well as the arguments and exhibits
therein presented; and for good cause shown; and for all of the foregoing reasons,
IT IS on this 1st day of March, 2023,
ORDERED that for the foregoing reasons the Arbitrator’s Final Award
dated June 4, 2021 is vacated; and it is further;
ORDERED that the motions (ECF No. 31 and ECF No. 34) are denied as
moot as said motions are treated as cross motions to confirm or vacate the Award.
s/Peter G. Sheridan
PETER G. SHERIDAN, U.S.D.J.
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