The 6th U.S. Circuit Court of Appeals found the employer had standing under the Employee Retirement Income Security Act (ERISA) to sue the plan trustees for negligence, but only regarding actions that violated the purpose of ERISA, which is “to promote the interests of employees and their beneficiaries in employee benefit plans.” Similarly, the court found the employer’s claim that the plan trustees negligently managed the plan, causing the employer to suffer an increased withdrawal liability, did not run afoul of the purpose of the Multiemployer Pension Plan Amendment Act (MPPAA)—to protect multiemployer plan beneficiaries by providing contributing employers with an incentive to remain in financially unstable plans rather than withdrawing from such plan.
Acknowledging that its negligence claim is not authorized by any section of ERISA, the employer urged the court to use its lawmaking powers to create a new negligence claim in favor of employers that participate in multiemployer plans. The court noted that previously it has held its authority to create federal common law in this area is restricted to instances in which (1) ERISA is silent or ambiguous; (2) there is an awkward gap in the statutory scheme; or (3) federal common law is essential to the promotion of fundamental ERISA policies.
The appellate court found ERISA is not silent about who holds a claim against trustees for negligent management of plan assets: participants and beneficiaries do. By omission, employers do not. “We are reluctant to tamper with an enforcement scheme crafted with such care because Congress has expressly defined who may challenge a trustee’s plan management decisions and a contributing employer is not included in that definition, even after the enactment of the MPPAA which created the possibility of large withdrawal liability,” the 6th Circuit said in its opinion. “Had Congress intended to create a negligence cause of action in favor of contributing employers against trustees, it certainly knew how to do so.”
The appellate court also found its recognition of a new negligence cause of action will not close an awkward gap in the statutory scheme “because there is no gap to close.” The court said it presumes that Congress deliberately omitted this remedy because the trustees’ plan-management duties flow to participants and beneficiaries, not contributing employers.
Finally, the 6th Circuit decided that a holding that trustees of a multiemployer plan owe contributing employers a duty of reasonable care regarding plan management is not essential to promote the fundamental policy of ERISA—ensuring that private-sector workers would receive the pensions that their employers have promised them. “The same can be said regarding the fundamental policy of the MPPAA,” the court added.
The employer, DiGeronimo Aggregates, LLC, and a number of other employers contributed to the Teamsters Local Union No. 293 Pension Plan. The trustees of the plan managed the plan, including negotiating and ratifying contribution rates, and overseeing the plan’s investments and expenses. They terminated the plan in December 2009, because substantially all of the plan’s contributing employers withdrew from paying contributions. Consequently, the trustees assessed $1,755,733 in “withdrawal liability” to DiGeronimo, which represented its share of the $49,000,000 in unfunded, vested benefits that the contributing employers owed the plan. In May 2013, DiGeronimo sued the trustees, alleging that they negligently managed the plan’s assets, causing the employer harm in the form of an increased withdrawal liability. A federal district court dismissed the case and the 6th Circuit affirmed.
The 6th Circuit’s opinion in the case is here.
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