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Lehman v. Nelson

United States District Court, W.D. Washington, Seattle

January 9, 2018

RICHARD LEHMAN on behalf of himself and others similarly situated, Plaintiffs,
v.
WARNER NELSON; WILLIAM BECK, JR.; BRIAN BISH; KLAAS A. DeBOER; MICHAEL G. MARSH; ROCKY SHARP; RICHARD BAMBERGER; DENNIS CALLIES; CLIF DAVIS; TIM DONOVAN; HARRY THOMPSON; GARY YOUNGHANS; CLINT BRYSON; MICHAEL CHURCH; MICHAEL DOYLE; GREG ELDER; GLEN FRANZ; GARY GONZALES; CARL D. HANSON; PATRICK POWELL; GARY PRICE; SCOTT STEPHENS; ROGER TOBIN; and GRANT ZADOW, in their capacity as Trustees of the IBEW Pacific Coast Pension Plan, Defendants.

          ORDER GRANTING PLAINTIFFS' SECOND MOTION FOR SUMMARY JUDGMENT

          RICARDO S. MARTINEZ, CHIEF UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on Plaintiffs' Second Motion for Summary Judgment. Dkt. #117. Defendants oppose this Motion. Dkt. #119. The Court has determined that oral argument is unnecessary. For the reasons set forth below, the Court GRANTS Plaintiffs' Motion and enters summary judgment in favor of Plaintiffs.

         I. BACKGROUND

         This case involves Defendant trustees of the IBEW Pacific Coast Pension Fund's allegedly improper withholding of funds from transfer to the home funds of travelers operating outside their jurisdiction and within the jurisdiction of the IBEW Pacific Coast Pension Fund (“Pacific Coast Fund.”). To understand why and how the withholding of these funds could be improper requires a reading of several key documents, including the Pension Plan of the Pacific Coast Fund (hereinafter, the “Pension Plan” or the “Plan”), the National Electrical Industry Pension Reciprocal Agreement (hereinafter, the “Reciprocity Agreement” or the “Agreement”), and Amendments 14 and 24 to the Pension Plan.

         The background facts of this case have already been summarized in the Court's prior Order on Motions, and those facts are incorporated by reference. See Dkt. #48.[1] At that time, the Court found that “[t]he plain language of Article 5 of the Pension Plan precludes withholding of any funds subject to reciprocity transfer, ” because “Section 5.04 mandates that the Pension Plan collect and transfer ‘all contributions received on behalf of the Employee, ' and because “[t]he Agreement bars withholdings for the purposes of subjecting transfers to an ‘administrative fee' or ‘for any other reason.'” Dkt. #48 at 2 and 13 (emphasis in original).

         Based on the stipulation of the parties, the Court certified a Class on December 4, 2014, with Plaintiff Richard Lehman as class representative. Dkt. #57. Later, the Court granted summary judgment for Plaintiffs and awarded damages of $1, 911, 116.49 in wrongfully withheld funds and $562, 016.28 in earnings thereon. See Dkt. #74. These damages were found to be warranted based on improper withholdings under Amendments 14 and 24 to the Plan. See Dkts. #63 and #74. On May 26, 2015, Defendants filed an appeal with the Ninth Circuit (case number 15-35414) appealing this Court's Order on Motions (Dkt. #48), Order Granting Plaintiff's Motion to Enforce or Clarify (Dkt. #63), and Order Granting Plaintiff's Motion for Damages (Dkt. #74). Dkt. #88.

         On July 14, 2017, the Ninth Circuit affirmed this Court's ruling regarding Amendment 14, but found that the claims with regard to Amendment 24 had not been fully analyzed or briefed, and remanded for further proceedings. Dkt. #112 at 37-38. In pertinent part, the Ninth Circuit stated:

Because the class raised the issue of contributions withheld under Amendment 24's Rehabilitation Plan for the first time in their second motion to enforce or clarify the district court's summary judgment order, and the district court's order did not analyze whether the Trustees abused their discretion by interpreting Amendment 24 to apply to contributions transferred out of the Pacific Coast Fund, the district court erred by awarding damages for withholdings under the Rehabilitation Plan. We vacate the damages award with respect to withholdings under Amendment 24 because the Trustees did not have notice that those withholdings were at issue nor an opportunity to respond.
At oral argument, the Trustees explained that with proper notice they would have argued that travelers are not entitled to the required increases in employer contributions in the default and alternative schedules under Amendment 24's Rehabilitation Plan because the Pension Protection Act of 2006 required the Trustees to increase employer contributions once the Fund entered critical status, and the increased contributions would be analogous to surcharge payments under the Act. The class does not maintain that they are entitled to the surcharge payments withheld under Amendment 24, and the district court did not wrestle with the interaction between the Pension Protection Act's requirements, which are aimed at shoring up plans that enter critical status, and Amendment 24, which purports to increase the “pass through” employer contributions for travelers. We therefore remand to the district court for further proceedings consistent with this opinion.

Id. at 26-27.

         To the extent not previously discussed in this case, the Court will summarize the facts surrounding Amendment 24. Under the Pension Protection Act of 2006, plans deemed in “critical status” must “adopt and implement a rehabilitation plan” to “enable the plan to cease to be in critical status by the end of the rehabilitation period.” 29 U.S.C. § 1085(a)(2)(A).

         On July 1, 2008, Defendants took such action by passing Amendment 14 to the Pacific Coast Plan, previously addressed by this Court and the Ninth Circuit. Despite this effort, in June of 2009, the Pacific Coast Plan's actuary certified that the Plan was in “critical status” for the plan year beginning April 1, 2009. The Pacific Coast Plan then adopted Amendment 24, a rehabilitation plan, as contemplated by the Pension Protection Act. Dkt. #31-5 (Amendment 24 to the Pacific Coast Plan). For Travelers receiving contributions at a rate of less than $3.00 per hour, Amendment 24 mirrors Amendment 14 and imposes a $1.00 hourly withholding from each hourly contribution. See Id. at 6. Amendment 24 also required employers to make increased contributions, and those increased contributions were withheld by the Trustees for funding improvement and not transferred to the Travelers' Home Fund. See Id. At the time the Rehabilitation Plan, Amendment 24, went into effect the standard employer contribution made on behalf of Mr. Lehman and other employees was $4.62 an hour. See Dkts. #24 at 84; #24-1 at 48. The default schedule increased this contribution rate by 121.8% to $5.62 an hour, with the extra dollar an hour designated for fund improvement. Thus, under the default schedule, $1 per hour would continue to be withheld from the employer contributions made on behalf of Mr. Lehman or other Travelers. The schedules under the Rehabilitation Plan were, therefore, designed at a minimum to incorporate the results of amendment 14: at least $1 per hour would be withheld by the Plan from employer contributions and used by the Plan for funding improvement, rather than transferring that amount as required by the Reciprocity Agreement. Over time, the percentages under the Rehabilitation Plan schedules increased. Instead of continuing to withhold a $1 an hour, the Trustees withheld as much as $9.06 under the default schedule and more was withheld under the alternative schedules. See Dkts. #31-2 and #31-5. Amendment 24 also modified Article 5 of the Plan Document by adding a new Section 5.09, which states: “any provision in this Article which is inconsistent with the requirements of Article 16, the Rehabilitation Plan, shall be superseded by the provisions contained within Article 16, except to the extent otherwise required by applicable law or regulations.” Dkt. #31-5 at 3.

         Plaintiffs argue that by enacting Amendment 24 and withholding a portion of pension contributions made to the Travelers' Home Funds, Defendants violated Article 5 of the Pacific Coast Plan and ERISA in the same way that the Court already found to be the case for Amendment 14.

         II. ...


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