The 7th Circuit Court of Appeals has reversed a judgment against a union pension plan after finding the District Court erred as a matter of law and abused its discretion.
The Indiana Electrical Pension Benefit Plan, through its trustee James Tsareff, sued ManWeb Services Inc., for the withdrawal liability to the pension fund. When ManWeb, an Indianapolis-based company, acquired Tiernan & Hoover, an Indianapolis-based electrical contractor, in August 2009, Tiernan & Hoover stopped contributing to the multiemployer pension fund and did not make withdrawal payments.
Consequently, the pension plan assessed a withdrawal liability against Tiernan & Hoover for $661,978 and added ManWeb as a defendant under the theory of successor liability.
The U.S. District Court for the Southern District of Indiana found ManWeb was not liable to the plan. In particular, the District Court held that since Tiernan & Hoover did not enter into arbitration with the pension plan, the plan would have to establish that ManWeb knew of the liability before the acquisition.
The 7th Circuit found on this point that the District Court erred as a matter of law. The Circuit Court held the successor liability notice requirement under the Multiemployer Pension Plan Amendments Act of 1980 does not mean the pension plan had to establish that ManWeb knew Tiernan & Hoover had failed to arbitrate.
Moreover, the 7th Circuit panel ruled the District Court abused its discretion when it ignored that fact that ManWeb did protect itself against liability. ManWeb obtained indemnification from any and all liabilities and expenses by Tiernan & Hoover. Also, ManWeb had knowledge of the potential withdrawal liability.
Finally, the 7th Circuit tossed the District Court’s analysis of Tiernan & Hoover’s underlying liability. The Circuit Court agreed with the pension plan that Tiernan & Hoover should have gone to arbitration as required by the MPPAA.
In short, the 7th Circuit reiterated Clinton Engines, 825 F.2d at 422, by holding that arbitration reigns supreme under the MPPAA. Therefore, the District Court’s substantive review of Tiernan & Hoover’s underlying withdrawal liability constituted as error of law and an abuse of discretion.
The case is James Tsareff et al. v. ManWeb Services, Inc., 14-1618.