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Caesars Entertainment Corp. v. Iuoe Local 68 Pension Fund

United States District Court, D. New Jersey

June 14, 2018



          MCNULTY. U.S.D.J.

         This matter concerns partial-withdrawal liability under the Employee Retirement Income Security Act of 1974 ("ERISA") and Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"). Showboat Atlantic Operating Company, d/b/a Showboat Atlantic City ("Showboat"), is associated with several other companies, which are together referred to as "CEC" or the "CEC Controlled Group." The employees of the companies in the CEC Controlled Group, including Showboat, were covered by a multiemployer plan, the IUOE Local 68 Operating Engineers Pension Fund ("Local 68 Pension Fund" or "the Fund"). Pursuant to their respective collective bargaining agreements ("CBA"), Showboat and the other employers in the CEC Controlled Group made contributions to the Fund. Showboat closed on August 31, 2014 and ceased to make contributions to the Fund under its CBA. The remaining companies in the CEC Controlled Group, and their CBAs with their represented employees, were unaffected. As to the employers other than Showboat, then, the contributions to the Fund continued uninterrupted.

         The withdrawal provisions of ERISA may impose liability on an employer who withdraws or partially withdraws from a multiemployer plan. The intent is to ensure that the employees' pensions are adequately funded, and to avoid a race for the exits by other employers in the plan, who would otherwise fear being left behind with the entire pension liability. Thus an employer may incur liability when, by terminating or shifting some of its operations, it partially withdraws from a multiemployer pension plan.

         There is one per se rule: A partial withdrawal occurs when the decline in contributions totals at least 70%, That, as all agree, did not occur as a result of the Showboat closing.

         A partial withdrawal may nevertheless be found, however, if certain alternative conditions are met. The employer (or group) may be liable to pay into the fund if the employees' work, or similar work, is still carried on, but is no longer covered by a plan that requires the employer to contribute. A common scenario might be a transfer of previously covered work to a nonunionized plant.

         Some work covered by the Fund, as well as the associated contributions, surely ceased as a result of the closing of the Showboat casino. I cannot find, however, that the same work or similar work was carried on, whether at the Showboat facility or anywhere else, by noncovered employees. I will therefore reverse an arbitrator's award holding the CEC Controlled Group liable for partial withdrawal contributions.

         I. BACKGROUND[1]

         A. The CBC Controlled Group

         Showboat formerly operated in Atlantic City. (SMUF ¶ 1). It closed on August 31, 2014. (SMUF ¶ 1). Showboat was associated with a group of companies referred to here as the "CEC Controlled Group." On or about August 31, 2014, Caesars Entertainment Corporation ("CEC") controlled more than 80 percent of the voting shares of Caesars Entertainment Resort Properties, Inc. ("CERP") and Caesars Entertainment Operating Company, Inc. ("CEOC"). (SMUF ¶¶ 4-5, 14).

         At this time, CEOC also owned Bally's Park Place, Inc. d/b/a Bally's Hotel and Casino ("Bally's AC"); Boardwalk Regency Corporation d/b/a Caesars Atlantic City ("Caesars AC"); and Showboat (SMUF ¶¶ 6-8). CEOC controlled more than 80 percent of all voting stock in those companies. (SMUF ¶ 15).

         CERP owned Harrah's Operating Company, Inc. d/b/a Harrah's Atlantic City Casino and Hotel ("Harrah's AC"). (SMUF ¶ 8). CERP controlled more than 80 percent of all voting stock in Harrah's AC. (SMUF ¶ 16).

         Based on these relationships, it is undisputed that CEC, CEOC, Showboat, Bally's AC, Caesars AC, and Harrah's AC constitute the same "controlled group" (the "CEC Controlled Group") and are treated as a single employer under ERISA § 4001(b)(1), 29 U.S.C. § 1301(b)(1).

         B. The Fund and the Collective Bargaining Agreements

          Each member employer of the CEC Controlled Group has a separate collective bargaining agreement ("CBA") with the International Union of Operating Engineers. (SMUF ¶ 18). Each CBA has a separate and distinct term and contribution rate. (SMUF ¶¶ 24-25). Each CEC Controlled Group CBA covers a group of pension fund participants. These groups of pension fund participants are separate and distinct. (SMUF ¶ 26).[2]

         Showboat contributed to the Local 68 Pension Fund, as required by the Showboat CBA that was in effect from May 1, 2011 through April 30, 2014. (SMUF ¶ 19). Showboat's contributions to the Fund continued until August 31, 2014, when the casino closed and the Showboat CBA terminated. (SMUF ¶ 20).

         Caesars AC, Bally's AC, and Harrah's AC had separate CBAs, which were effective from May 1, 2014 through April 30, 2017. As required by their CBAs, these three employers separately contributed to the Fund during the same period that Showboat was contributing (i.e., before August 31, 2014). (SMUF ¶¶ 21-23). Their obligations were not affected by the Showboat closure; after August 31, 2014, each of them continued to contribute to the Fund. (SMUF ¶¶ 21-23).

         Since Showboat's closure, CEC's remaining constituents (Caesars AC, Bally's AC, and Harrah's AC) have continued to contribute substantial amounts to the Local 68 Pension Fund. Those contributions were as follows:

• $390, 683.17 from September 1, 2014 through December 31, 2014
• $ 1, 065, 493.01 from January 1, 2015 through December 31, 2015
• $794, 826.12 from January 1, 2016 through September 30, 2016 - $286, 285.37 from October 1, 2016 through December 31, 2016
• $740, 532.14 from January 1, 2017 through August 31, 2017.

(SMUF ¶ 27). Adding these post-Showboat-closure contributions by CEC yields a total of $3, 277, 819.81.

         Showboat's closure did not cause a decline in the CEC Controlled Group's contributions to the Fund that amounted to 70% (a threshold of statutory significance, see infra). (SMUF ¶ 28). Rather, Showboat's closure resulted in a much smedler decline in CEC contributions, amounting to approximately 17%. (SMUF ¶ 28).

         C. Dispute, Arbitration, and Appeal to this Court

          Disputes regarding withdrawal liability from multiemployer pension plans follow a four-step process:

[1] The plan sponsor has the responsibility of determining this withdrawal liability, notifying the employer, and collecting payment. 29 U.S.C. § 1382. [2] If the employer disputes the amount set, it may ask the plan sponsor to conduct a reasonable review of the computed liability. 29 U.S.C. § 1399(b)(2)(A). [3] In the event the dispute is unresolved, either party may request arbitration. 29 U.S.C. § 1401(a)(1). [4] The arbitrator's award, in turn, may be challenged in federal court. 29 U.S.C. § 1401(b)(2).

Galgay v. Beaverbrook Coal Co., 105 F.3d 137, 138-39 (3d Cir. 1997) ([bracketed] numbers added). The dispute now before the Court followed that pattern.

         On March 11, 2016, Local 68 Pension Fund assessed CEC for complete withdrawal liability. (SMUF ¶ 29). The Fund initially asserted that CEC and its members were jointly and severally liable for complete withdrawal. CEC disagreed. (SMUF ¶ 30).

         In a letter dated July 13, 2016, CEC submitted its demand for arbitration. (SMUF ¶ 31). CEC argued that it was not liable for complete withdrawal liability because its members continued to contribute to the Fund. (SMUF ¶ 31).

         During the arbitration, the Fund raised an alternative argument that partial-rather than complete-withdrawal liability should be assessed against CEC. (SMUF ¶ 32). The arbitrator, the Fund, and CEC agreed that the issue of partial withdrawal liability could be reviewed in the arbitration. (SMUF ¶ 33).

         On December 23, 2016, CEC submitted its memorandum to the arbitrator, moving for the equivalent of summary judgment. The memo addressed both complete and partial withdrawal liability. (SMUF ¶ 34). On January 19, 2017, Local 68 Pension Fund submitted a brief in opposition. (SMUF ¶ 35). At this time, the Fund abandoned its argument for complete withdrawal liability, and argued solely for partial withdrawal liability. (SMUF ¶ 35). On January 27, 2017, CEC submitted a reply in support of its motion for summary judgment. (SUMF ¶ 36).

         On February 27, 2017, arbitrator Norman Brand submitted an interim award and opinion upholding the Fund's partial withdrawal liability assessment against CEC. (SUMF ¶ 37). The arbitrator found that CEC "permanently cease[d] to have an obligation to contribute [to the Fund] under .... Fewer than all collective bargaining agreements under which ... [it] ... has been obligated to contribute...." (ECF No. 17-2, p. 13). The arbitrator also found that CEC continued to perform "work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required ...." (ECF No. 17-2, p. 13). Thus, the arbitrator held that not a total but a "partial cessation'* occurred under ERISA § 4205(b)(2)(A)(i), 29 U.S.C. § 1385(b)(2)(A)(i).

         On March 7, 2017, CEC requested that the arbitrator reconsider or amend the interim award and opinion. (SUMF ¶ 38). The arbitrator largely rejected the request for reconsideration; he slightly modified the award but ...

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