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Bakery and Confectionery Union and Industry International Pension Fund v. Just Born II, Inc.

United States District Court, D. Maryland

February 8, 2017



          DEBORAH K. CHASANOW United States District Judge

         Presently pending and ready for resolution in this breach of contract case are: (1) a motion for judgment on the pleadings filed by Plaintiffs Bakery and Confectionery Union and Industrial International Pension Fund (the “Fund”) and the trustees of the Fund (the “Trustees”) (ECF No. 24); and (2) a cross-motion for judgment on the pleadings by Defendant Just Born II, Inc. (“Defendant”) (ECF No. 25). The issues have been briefed, and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, Plaintiffs' motion will be granted in part and denied in part, and Defendant's cross-motion will be denied.

         I. Factual Background[1]

         Plaintiffs are a trust fund established and maintained pursuant to 29 U.S.C § 186(c)(5), and the Trustees who administer it (together, “Plaintiffs”). (ECF No. 1 ¶¶ 4 & 5). The Fund provides retirement benefits to eligible employees of participating employers and qualifies under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001, et seq., as both an employee benefit plan, see Id. § 1002(2), (3), and a multiemployer pension plan, see Id. § 1002(37). (ECF No. 1 ¶ 4). Defendant is a candy manufacturer that was a party to a series of collective bargaining agreements with the Bakery, Confectionery and Tobacco Workers International Union, Local Union 6 (the “Union”). (Id. ¶ 10). The most recent collective bargaining agreement (the “CBA”) between Defendant and the Union was effective from March 1, 2012, through February 28, 2015. (Id.). Article 22 of the CBA stated that contributions:

shall be paid [to Plaintiff] from the first day the employee begins working in a job classification covered by the [CBA], and shall be paid on behalf of all employees in covered job classifications - there are no exceptions for employees who are not members of the Union, temporary, seasonal, or part-time employees, for leased employees, or for any other type of employee.

(ECF No. 1-2, at 17).

         In 2012, during the term of the CBA, the Fund's actuary certified that the Fund was in “critical” status. (ECF No. 1 ¶ 15). Under ERISA, multiemployer plans can be certified as being in “endangered” or “critical” status based on the present and projected value of the plan, its projected costs and benefits payable, and other potential funding deficiencies. See 29 U.S.C. § 1085(b). When a plan is in critical status, ERISA requires the plan sponsor to “adopt and implement a rehabilitation plan” designed to improve the fund's fiscal health. Id. § 1085(a)(2), (e). The Trustees developed a rehabilitation plan with revised benefit and contribution schedules and proposed two revised options to the Union and Defendant. (ECF Nos. 1 ¶ 16; 1-3). On December 28, 2012, the Union and Defendant selected one of the revised schedules and signed a “PPA Schedule Election Form.” (ECF Nos. 1 ¶ 17; 1-4). The revised schedule proposal and the PPA Schedule Election Form both included language similar to the CBA that bound Defendant to make payments for all work done by employees in a job classification covered by the CBA. (See ECF Nos. 1-3, at 7; 1-4, at 2-3).

         When the CBA expired on February 28, 2015, Defendant and the Union agreed to a short-term extension of the CBA until April 30, 2015, and the two sides began bargaining for a new agreement. (ECF Nos. 1 ¶ 18; 1-5). During negotiations, Defendant demanded that any new agreement relieve it from the obligation to make contributions to the Fund on behalf of newly hired employees. (ECF No. 1 ¶ 19). In its cross-motion, Defendant explains that it had developed serious concerns about the management of the Fund and that it no longer believed that participation in the Fund was in its employees' best interest. (ECF No. 25-1, at 11). The Union refused to accept Defendant's terms, and, eventually, Defendant declared that negotiations were at an impasse. (ECF No. 1 ¶ 20). Under federal labor law, when an impasse in bargaining is reached in good faith, bargaining can be suspended and the employer can make unilateral changes, so long as the terms it applies are not substantially different from those terms it last proposed in negotiations. See McClatchy Newspapers, Inc., 321 NLRB 1386, 1996 WL 506086, at *6 (2000). Defendant thus unilaterally implemented its “best offer, ” under which it would continue to contribute to the Fund on behalf of then-current employees and would contribute to an unrelated 401(k) retirement plan on behalf of subsequently hired employees. (ECF No. 1 ¶ 20). Defendant has not made contributions to the Fund for newly hired employees since declaring impasse and implementing its best offer. (Id. ¶ 22).

         II. Procedural Background

         On March 17, 2016, Plaintiffs filed the instant suit under 29 U.S.C. § 1145, which gives a multiemployer plan the right to sue an employer for delinquent contributions. Plaintiffs allege that Defendant's failure to make payments to the Fund on behalf of new employees is a breach of its obligation under 29 U.S.C. § 1085(e)(3)(C)(ii) (the “Provision”). The Provision was passed as part of the Pension Protection Act (“PPA”), which amended ERISA law to give multiemployer pension funds that are at risk of failing authority to make the changes necessary to prevent insolvency. The Provision mandates that, even after a collective bargaining agreement expires, a plan sponsor like the Trustees must impose the contribution schedule previously in place under that agreement when certain criteria are met. In full it states:

(I) a collective bargaining agreement providing for contributions under a multiemployer plan in accordance with a schedule provided by the plan sponsor pursuant to a rehabilitation plan (or imposed under subparagraph (C)(i)) expires while the plan is still in critical status, and
(II) after receiving one or more updated schedules from the plan sponsor under subparagraph (B)(ii), the bargaining parties with respect to such agreement fail to adopt a contribution schedule with terms consistent with the updated rehabilitation plan and a schedule from the plan sponsor,
then the contribution schedule applicable under the expired collective bargaining agreement, as updated and in effect on the date the collective bargaining agreement expires, shall be implemented by the plan sponsor beginning on the date specified in clause (iii) [180 days after the date on which the collective bargaining agreement expires].

Id. The primary dispute in this case derives from the parties' interpretations of the Provision. Defendant also raised nine affirmative defenses in its answer. (ECF No. 9-1, at 15-16). Plaintiffs filed the pending motion for judgment on the pleadings on June 24, 2016. (ECF No. 24). Defendant filed a cross-motion for judgment on the pleadings in its favor on August 15. (ECF No. 25). Plaintiffs responded to that motion, and Defendant replied. (ECF Nos. 26; 27).

         III. ...

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