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Penske Logistics LLC v. Freight Drivers and Helpers Local Union No. 557 Pension Fund

United States District Court, D. Maryland

March 6, 2019

PENSKE LOGISTICS LLC, et al. Plaintiffs,
v.
FREIGHT DRIVERS AND HELPERS LOCAL UNION NO. 557 PENSION FUND, et al. Defendants.

          MEMORANDUM OPINION

          Richard D. Bennett, United States District Judge

         Penske Logistics LLC and Penske Truck Leasing Co., L.P. (collectively "Penske") filed this action under the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq. ("ERISA") and the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. §§ 1381-1453 ("MPPAA"), seeking to enforce an arbitration award issued on September 30, 2015. (ECF No. 1.) The arbitration concerned disputes between Penske and the Freight Drivers and Helpers Local Union No. 557 Pension Fund (the "Fund") and the Joint Board of Trustees of the Freight Drivers and Helpers Local Union No. 557 Pension Fund (the "Trustees") (collectively, the "Defendants"). (Id.) The Fund is an employee pension benefit plan as defined in ERISA §§ 3(37) and 4001(a)(3), 29 U.S.C. §§ 1002(37) and 1301(a)(3), and is also a "trucking industry fund" within the meaning of MPPAA § 4203, 29 U.S.C. § 1383. (ECF No. 1 at ¶ 2.) After years of discovery, five days of hearings and extensive briefing, the Arbitrator ruled that Penske was entitled to a refund of payment plus interest and attorneys' fees. Penske filed the subject complaint in this Court to enforce this Arbitration Award pursuant to 29 U.S.C. § 1401(b)(2).

         This Court ultimately ordered judgment in favor of Penske against the Fund on October 20, 2016. (ECF No. 39.)[1] The Fund appealed, and on January 10, 2018, the United States Court of Appeals for the Fourth Circuit, by an unpublished opinion, vacated and remanded this case to this Court for further proceedings. (ECF No. 41-1.) The Fourth Circuit held that the Arbitrator did not apply the appropriate burden of proof. (Id. at 13.) Thereafter, on February 26, 2018, this Court remanded to the Arbitrator to conduct further proceedings consistent with the Fourth Circuit's January 10, 2018 Opinion. (ECF No. 43.)

         Consistent with this Court's Order, the Arbitrator completed the proceedings and timely issued the Supplemental Opinion and Award (ECF No. 44-1) (the "Supplemental Award") on June 22, 2019. The Arbitrator reaffirmed its award, and the Supplemental Award once again requires payment to Penske of the same amount as was ordered to be paid by this Court's Supplemental Order and Judgment (ECF No. 39).[2] (See ECF No. 44-1.) Penske now moves for summary judgment to affirm and enforce the Arbitrator's award (ECF No. 48), and Defendants cross-move for summary judgment to again vacate the Supplemental Opinion and Award and enter judgment in favor of Defendants (ECF No. 51). This is an action for review on an Administrative Record, which was filed with this Court in 2016. (See ECF No. 19.)

         For reasons as stated herein, this Court shall GRANT Plaintiffs' Motion for Summary Judgment (ECF No. 48) and shall DENY Freight Drivers and Helpers Local Union No. 557 Pension Fund and Joint Board of Trustees of the Freight Drivers and Helpers Local Union No, 557 Pension Fund's Cross-Motion for Summary Judgment and Opposition to Plaintiffs'/Counter Defendants' Motion for Summary Judgment (ECF No. 51). This Court once again orders Judgment in favor of Penske.

         BACKGROUND

         In brief, [3] this case is focused on a transaction in which Penske sold a subsidiary, Leaseway Transportation Corp. ("Leaseway"), [4] for stock. The Trustees of the Fund issued an assessment of withdrawal liability against Penske to which Penske objected. Under ERISA, "[i]f an employer withdraws from a multiemployer plan in a complete withdrawal or a partial withdrawal, then the employer is liable to the plan . . . ." 29 U.S.C. § 1381 (a). A partial withdrawal occurs on the last day of a plan year if there is a 70 percent contribution decline or a partial cessation of the employer's contribution obligation. 29 U.S.C. § 1385 (a).[5]

         In the mid-1990s, Penske's core businesses were consumer and commercial truck leasing and rental, as well as logistics. (Arbitrator's Op., ECF No. 1-4 at 88.) In 1995, Penske acquired Leaseway, a successful logistics services business, which brought with it a personnel leasing business and an auto carrier business. (ECF No. 1-4 at 71-72.) Penske quickly took steps to integrate the logistics services and sell the personnel leasing and auto carrier businesses. (ECF No. 1-4 at 71-72.) The personnel leasing business was sold by August 1996 in an asset sale. (ECF No. 1-4 at 72.) Penske also engaged in discussions with prospective buyers of the remainder of Leaseway in 1996 and entered into formal negotiations on four occasions between 1996 and 2003 prior to the negotiation with Performance Logistics Group ("PLG") in 2004 that ultimately led to the transaction at issue. (ECF No. 1-4 at 60, 103.)

         When Penske purchased Leaseway in 1996, Leaseway was a contributing employer to the Fund. (ECF No. 1-4 at 2.) Leaseway became a wholly-owned subsidiary of Penske Truck Leasing Co., L.P. and a member of the "controlled group" as that term is described in ERISA § 4001(b)(1). (ECF No. 1-4 at 2.) In June 2001, the ownership of Leaseway was transferred to LAC Holding Corp. ("LAC"), which was also a wholly-owned subsidiary of Penske. (ECF No. 1-4 at 2.) As a result, Leaseway became a wholly-owned subsidiary of LAC, but the transfer did not change the controlled group status. (ECF No. 1-4 at 2.) On March 26, 2004, Penske entered into a purchase and sale agreement (the "Transaction") with Performance Transportation, which was a wholly-owned subsidiary of PLG. (ECF No. 1-4 at 2.) The Transaction provided, among other things, for Penske to receive a $25 million secured note and 43.5% of PLG's stock.[6] (ECF No. 1-4 at 2, 46.) Penske asserts that, after the Transaction, it was no longer a member of the same controlled group as Leaseway, having sold its controlling interest. (ECF No. 1-4 at 2.) Penske also asserts that market data at that time gave it reason to be optimistic that its equity stake in PLG would be valuable, and it expected to be able to convert to cash within the three- to five-year period following the Transaction. (ECF No. 1-4 at 74, 107.) Within ten months, the $25 million secured note was converted to cash. (ECF No. 1-4 at 64.)

         In December 2004, the Fund Trustees authorized the filing of a civil action against Leaseway for contributions due to the Fund based upon a payroll audit. (ECF No. 1-4 at 5.) Leaseway denied that it owed any audit deficiencies, and ultimately, the Fund agreed to accept a lump sum settlement payment. (ECF No. 1 -4 at 6-7.) The Record reflects that in November 2005, a partial withdrawal liability had been calculated for Leaseway as of December 31, 2004, and it was expected that there would be a further liability in 2005. (ECF No. 1-4 at 9-10.)

         Effective January 25, 2006, PEG, along with various affiliates including LAC, filed for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Western District of New York. (ECF No. 1-4 at 4.) In March 2006, the Fund sent notices for the First Partial Withdrawal Liability ("First PWL") of $3, 901, 840 to both Leaseway and Penske, noting the bankruptcy petition. (ECF No. 1-4 at 11.) Penske filed a Request for Review on May 30, 2006, asserting, among other things, that Leaseway was not a member of the same controlled group at the time of the alleged partial withdrawal. (ECF No. 1-4 at 12.) The Fund issued its Response on October 2, 2006 noting that it had not yet had an opportunity to review the substantive information about the Transaction but declined to withdraw the assessment. (ECF No. 1-4 at 12.) Penske paid the First PWL and pursued litigation, which was stayed pending arbitration to resolve the dispute.[7] (ECF No. 1-4 at 15-17, 30.)

         The Record reflects that in May 2007, updated in August 2007, the Fund calculated a Second Partial Withdrawal Liability ("Second PWL") for Leaseway—-$5, 136, 920 as of December 31, 2005. (ECF No. 1-4 at 18-19.) On October 1, 2007, the Fund notified Penske about the Second PWL and asserted that Penske was liable but provided no explanation. (ECF No. 1-4 at 19.) Penske filed a Request for Review of the Second PWL in October 2007, and on November 9, 2007, the Fund cancelled and rescinded the assessment. (ECF No. 1-4 at 19.)

         Leaseway emerged from bankruptcy as Leaseway LLC, but on November 19, 2007, it and various other affiliated reorganized debtors, again filed for relief under Chapter 11 of the United States Bankruptcy Code. (ECF No. 1-4 at 4.) These cases were converted to Chapter 7 of the Bankruptcy Code on July 14, 2008. (ECF No. 1-4 at 4-5.)

         The Fund issued a second Second PWL on November 30, 2010 asserting that Leaseway was a member of the Penske controlled group.[8] (ECF No. 1-4 at 19-20.) Penske filed a detailed Request for Review in February 2011, which was responded to by the Fund on June 23, 2011 denying all of Penske's claims. (ECF No. 1-4 at 20-21.) In December 2011, the Parties agreed to consolidate the active arbitrations into a single proceeding. (ECF No. 1-4 at 30.)

         After discovery, hearings were held from March 31 to April 4, 2014, the parties filed post-hearing briefs[9] in June 2014, and the Arbitrator issued a 123-page opinion and award on September 30, 2015. (ECF No. 1-4.) The Arbitrator found that Penske was not part of the same controlled group as Leaseway at the time the partial withdrawals occurred, so the First PWL and Second PWL were issued in violation of the MPPAA. (ECF No. 1-4 at 123.) The Arbitrator found that the "clear preponderance of the record evidence failed to establish that the Transaction was undertaken by Penske with a principal purpose of evading or avoiding withdrawal liability to the Fund or to other multiemployer pension funds to whom Leaseway was a participating employer." (ECF No. 1-4 at 102.) As a result, the Fund could not ignore the Transaction to hold Penske liable as part of the same controlled group. (Id. citing ERISA § 4212(c), 29 U.S.C. § 1392(c)). The Arbitrator ruled that ...


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