Retaliation Claim Against Central States Multiemployer Plan Dismissed

Employees of Kroger say Central States’ plan trustees refused to negotiate a proposal with them after they filed an ERISA fiduciary duty lawsuit, but court documents show the trustees attempted negotiations after the filing of the suit and not before.

A federal district court judge has dismissed an Employee Retirement Income Security Act (ERISA) Section 510 retaliation complaint against the Central States, Southeast and Southwest Areas Pension Plan, the plan’s trustees and its executive director, explaining that the defendants’ refusal to negotiate a proposal presented by Kroger before employees filed a lawsuit means the defendants’ unwillingness to negotiate after the lawsuit was filed could not represent improper retaliation.

Current and former employees of The Kroger Company, who are enrolled in the Central States, Southeast and Southwest Areas Pension Plan, allege that the defendants neglected their duties of prudence and loyalty by refusing to consider a third-party’s offer to take on the plaintiffs’ pension liabilities and thereby preserve their retirement benefits. They also claim that the defendants retaliated against them for filing a lawsuit by refusing to negotiate about the third-party offer after the complaint’s filing. The defendants moved to dismiss the retaliation claim.

The Kroger Co. and the International Brotherhood of Teamsters (IBT), which represents Kroger employees in collective bargaining, proposed to set up a separate, fully-funded pension plan for the Kroger participants, taking away the Central States’ responsibility to pay participants’ benefits. However, in exchange, Kroger and the IBT would not have to pay ERISA withdrawal liability to the Central States plan. Within five days of the proposal, the trustees rejected the proposal in a letter saying they were “not authorized to accept the non-cash consideration offered by Kroger,” emphasizing that the fund had a “firm policy against facilitating employer withdrawals in any way,” and disputing that the proposal would leave the plan better off than if it held Kroger to its duty to make cash withdrawal payments.

The plaintiffs filed a lawsuit one year later. The Central States plan’s executive director sent an email to Kroger saying the trustees would “either negotiate or litigate, but not both.” The court opinion lays out details of attempted negotiations following the filing of the lawsuit.

However, the plaintiffs allege that the letter was in essence saying that the trustees were not willing to negotiate the proposal because of the lawsuit and that, “After the lawsuit was filed, Defendants attempted to create the appearance of bargaining in order to gain a litigation advantage.” However, U.S. District Judge Edmond E. Chang of the U.S. District Court for the Northern District of Illinois found that “the defendants’ pre-lawsuit refusal to negotiate fatally undermine the plausibility of the retaliation claim, so [it] must be dismissed.”

Chang said this meant there was no need to determine whether the plaintiffs have sufficiently alleged that the defendants had a specific intent to interfere with the plaintiffs’ benefits. However, he pointed out that Kroger funded and directed the lawsuit, including by selecting the plaintiffs’ counsel, so the defendants’ refusal to negotiate appears to be a strategy intended to prevent Kroger’s maneuver in instigating the lawsuit—not one intended to interfere with the plaintiffs’ benefits.

The Central States plan still faces breach of fiduciary duty claims for refusing to consider Kroger and the IBT’s proposal.

Kroger withdrew from the plan on December 10, 2017, and Kroger and the plan signed a settlement agreement on February 2, 2018, in which Kroger agreed to pay $418,546,581.91 for its withdrawal liability. Kroger and the IBT have established a new fund that will make up benefits that are reduced by Central States as a result of Kroger’s withdrawal. Should Central States become insolvent and benefits are reduced, the new fund will restore benefit reductions above the level guaranteed by the Pension Benefit Guaranty Corporation (PBGC).