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Marine Carpenters Pension Fund v. Puglia Marine, LLC

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

April 10, 2019

PUGLIA MARINE, LLC, a Washington limited liability company, et al, Defendants.


          Ronald B. Leighton United States District Judge.


         THIS MATTER is before the Court on Plaintiffs Marine Carpenters Pension Fund and Pacific Coast Shipyards Pension Fund's (the Funds) Motion for Partial Summary Judgment, an Order to Pay, and Injunctive Relief. Dkt. #19. This dispute originated when Puglia Engineering, Inc., purchased all the stock of San Francisco Ship Repair, Inc. (SFSR), quickly realized that the new venture was financially unsustainable, and then ceased all operations after just a few months. The Funds assert that the decision to pull the plug on SFSR amounted to a “complete withdrawal, ” which triggered withdrawal liability to pay any “unfunded vested benefits” to multiemployer pension plans. 29 U.S.C. § 1381.

         The Funds assert that all Defendants are jointly and severally liable for Puglia Engineering and SFSR's withdrawal liability because they constitute a single “employer” under the Multiemployer Pension Plan Amendments Act (MPPAA). This is because, according to the Funds, each non-individual defendant is a “trade or business” under the “common control” of Neil Turney. See § 1301(b)(1). They also contend that Turney himself is jointly and severally liable as the sole proprietor of a business that leases property to Puglia Engineering. The Funds thus ask the Court to enter judgment in their favor for the outstanding amount of interim withdrawal liability payments, which comes to $1, 034, 184. The Funds also request an injunction ordering Defendants to make future interim withdrawal liability payments, which will come to roughly an additional $1.3 million before the parties engage in arbitration.

         Defendants Puglia Marine, LLC, Puglia Engineering of California, Inc., Bari Marine Holdings, LLC, 1410 Thorne Road, LLC, and Neil Turney (collectively “the Control Group”) do not oppose the assertion that they are one employer for purposes of withdrawal liability.[1] They are also relatively silent regarding whether they owe the amount of withdrawal liability claimed by the Funds. However, Defendants do ask the Court to adopt and apply an “equitable exception” to the MPPAA's requirement that withdrawing employers make interim payments until their liability can be litigated at arbitration. Defendants insist that several other circuits have wisely applied such an exception where making interim payments would irreparably harm the withdrawing employer. If the Court applies this exception, Defendants assert that their likely economic hardship supports denying the Funds' Motion or at least staying review pending arbitration.


         Puglia Engineering is a third-party Washington corporation with 100% of its stock owned by its president, Neil Turney. Dkt. #18, at 8. On December 1, 2016, Puglia Engineering entered into a stock purchase agreement with BAE Systems Ship Repair, Inc. Through this agreement, Puglia Engineering obtained ownership of 100% of the stock of SFSR, a subsidiary of BAE Systems Ship Repair. However, a mere four days after Puglia Engineering took possession of the shipyard on January 2, 2017, it became clear that at least $15 million worth of repairs would be necessary to continue the venture. Rather than expend this large amount, Puglia Engineering ceased operating the shipyard on May 28, 2017.

         Before Puglia Engineering purchased its stock, SFSR was signatory to two collective bargaining agreements. The first was with Carpenters Local Union 2236, affiliated with the Northern California Regional Council of Carpenters. The second was with the Bay Cities Metal Trades Council of the Metal Trades Department, AFL-CIO. Each CBA respectively required SFSR to report and pay pension contributions to the Marine Carpenters Pension Fund and the Pacific Coast Shipyards Pension Fund for each hour of covered work performed by union employees. SFSR reported and paid pension fringe benefit contributions to these funds after the CBAs were executed.

         When Puglia Engineering took ownership of SFSR's stock on December 1, 2016, it also adopted the terms and conditions of all the union contracts to which SFSR was bound. Dkt. #22, Ex. 5, at ¶ 9.06. Specifically, the purchase agreement states that the Puglia Engineering shall have “sole responsibility for all Liabilities arising under each such Union Contract and Benefit/Pension Plan” and explicitly releases SFSR from “any obligation or Liability . . . .” Id. Although Puglia Engineering reported and paid fringe benefit contributions to the Funds while operating SFSR, this stopped once SFSR was shut down.

         In April of 2017, both Puglia Engineering and SFSR filed for Chapter 11 bankruptcy protection. See In re Puglia Engineering, Inc., United States Bankruptcy Court, Western District of Washington, No. 18-41324 BDL; In re San Francisco Ship Repair, Inc., United States Bankruptcy Court, Western District of Washington, No. 18-41350 BDL. On April 20, 2018, the Funds filed proofs of claim in both bankruptcy proceedings claiming ERISA withdrawal liability. Dkt. #23, Exs. 14 & 15. The Marine Carpenters Pension Fund claimed it was owed a total of $2, 170, 785.00, with quarterly payments of $49, 520.00. Dkt. #14, Ex. 18. The Pacific Coast Shipyards Pension Fund claimed it was owed $14, 887, 521.00, with quarterly payments of $295, 208.00. Dkt. #23, Ex. 15.

         In addition to owning all of Puglia Engineering's stock, Neil Turney also owns 100% of the stock in Puglia Engineering of California, Inc., and is the sole member of Puglia Marine, LLC, Bari Marine Holdings, LLC, and 1410 Thorne Rd., LLC. Dkt. #18, at 8; Dkt. #23, Exs. 8 & 9. Turney also owns two parcels of real property in Tacoma, WA, that he leases to Puglia Engineering. Dkt. #23, Ex. 10. On May 7, 2018, the Funds sent written demands for payment of withdrawal liability to several of the non-bankrupt members of the Control Group, including Puglia Marine, LLC, Puglia Engineering of California, Inc., and 1410 Thorne Rd., LLC. Dkt. #23, Exs. 18 & 19. The letters stated the amounts owing and that payment was due within 60 days of receipt.

         After the members failed to pay by July 8, 2018, the date that the first installment was due, [2] the Funds sent two additional letters notifying the members of the Control Group that they were in default. Dkt. #23, Ex. 20; Dkt. #23, Ex. 21. However, the quarterly installments due on October 8, 2018, and January 8, 2019, were also not paid, and no payments subsequent to those dates have been made either. Dkt. #23, at ¶¶ 10-14; Dkt. #22, at ¶ 12. The Funds filed this action in October, 2018, to compel payment by the Control Group. Dkt. #1. The Control Group demanded arbitration on November 21, 2018. Dkt. #23, at ¶ 12.

         In his declaration, Turney states that Puglia Engineering has not yet confirmed a plan of reorganization but that its assets are more than fully encumbered by the secured claims of Washington Federal Bank. Dkt. #32, at 2. Further, as a personal guarantor of Puglia Engineering's obligations, Turney asserts that his personal assets are also encumbered. Id. at 3. Turney thus states that being ordered to make the interim payments on the Control Group's withdrawal liability would effectively force him into personal bankruptcy and result in little being actually paid to the Funds. Id. at 4.


         1. Legal Standard

         Summary judgment is proper “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). In determining whether an issue of fact exists, the Court must view all evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986); Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir. 1996). A genuine issue of material fact exists where there is sufficient evidence for a reasonable factfinder to find for the nonmoving party. Anderson, 477 U.S. at 248. The inquiry is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Id. at 251-52. The moving party bears the initial burden of showing that there is no evidence which supports an element essential to the nonmovant's claim. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once the movant has met this burden, the nonmoving party then must show that there is a genuine issue for trial. Anderson, 477 U.S. at 250. If the nonmoving party fails to establish the existence of a genuine issue of material fact, “the moving party is entitled to judgment as a matter of law.” Celotex, 477 U.S. at 323-24. There is no requirement that the moving party negate elements of the non-movant's case. Lujan v. National Wildlife Federation, 497 U.S. 871 (1990). Once the moving party has met its burden, the non-movant must then produce concrete evidence, without merely relying on allegations in the pleadings, that there remain genuine factual issues. Anderson, 477 U.S. 242, 248 (1986).

         2. Collecting Withdrawal Liability under the ...

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