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Jorgensen v. Scolari's of California, Inc.

United States District Court, Ninth Circuit, California, C.D. California, Southern Division
Nov 12, 2014
SACV 14-01211-CJC(RNBx) (C.D. Cal. Nov. 12, 2014)

Opinion

          For Frank Jorgensen, as trustee of the Southern California United Food and Commercial Workers Unions and Food Empoyers Joint Pension Trust Fund, Greg Conger, as trustee of the Southern California United Food and Commercial Workers Unions and Food Employers Joint Pension Trust Fund, Plaintiffs: Stuart Libicki, LEAD ATTORNEY, Schwartz Steinsapir Dohrmann and Sommers LLP, Attorneys at Law, Los Angeles, CA.

          For Scolari's of California, Inc., Scolari's Food and Drug Company, Scolari's Warehouse Markets, Inc., doing business as Scolari's Food and Drug Company, Pyramid Shopping Center, LLC, Orcutt Boys Enterprises, LP, Two/Twenty-One, Inc., Defendants: Karl R Lindegren, LEAD ATTORNEY, Fisher and Phillips LLP, Irvine, CA; Nathan Vern Okelberry, Fisher & Phillips LLP, Los Angeles, CA.


          ORDER GRANTING PRELIMINARY INJUNCTION

          CORMAC J. CARNEY, UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION & BACKGROUND

         Plaintiffs Frank Jorgensen and Greg Conger, as trustees of the Southern California United Food and Commercial Workers Unions and Food Employers Joint Pension Trust Fund (the " Fund"), bring this action against Defendants Scolari's of California, Inc. dba Scolari's Food and Drug Company, Scolari's Warehouse Markets, Inc. dba Scolari's Food and Drug Company, Pyramid Shopping Center, LLC, Orcutt Boys Enterprises, LP, and Two/Twenty-One, Inc. (collectively, " Defendants"). (Dkt. No. 1 [" Compl." ].) For many years, Scolari's of California was involved in the retail food industry and was a contributor to the Fund, a multiemployer pension fund as defined by ERISA Section 3(2), 29 U.S.C. § 1002(3). (Compl. ¶ 8.) The Fund alleges that around June 2012, Scolari's ceased their operations in California, made their final payment to the Fund, and then " completely withdrew" from participation. (Compl. ¶ 9.) As a result, in December 2013 and again in February 2014, the Fund notified Scolari's that they owed the Fund over $4, 640, 586.00 in withdrawal liability pursuant to ERISA, 29 U.S.C. § 1001 et seq., as amended by the Multiemployer Pension Plan Amendment Act of 1980 (" MPPAA"), 29 U.S.C. § 1381 et seq . (Compl. ¶ 9.) The Fund also provided a payment schedule for interim withdrawal liability payments of $77, 934.00 per month for 70 consecutive months beginning April 2013 and an additional final payment of $43, 353.00 due on February 1, 2020. (Compl. ¶ 9.) Defendants made none of the requested liability payments, but initiated arbitration proceedings on July 17, 2014 pursuant to ERISA § 4221(a), 29 U.S.C. § 1401(a). (Compl. ¶ 10.) On July 31, 2014, the Fund brought the present action under ERISA seeking recovery of the interim withdrawal liability payments. Before the Court is the Fund's motion for a preliminary injunction, which seeks to compel Defendants to pay all 20 past due and 50 future scheduled monthly interim withdrawal liability payments in the amount of $77, 934.00, followed by a final scheduled payment of $43, 353.00. (Dkt. No. 16-4 Pls.' Proposed Prelim. Inj. [" Proposed Inj." ] ¶ 11; see also Dkt. No. 16-1 Pls' Mot. for Prelim. Inj. [" Inj. Mot." ].) For the following reasons, the Fund's motion is GRANTED.

Defendants Scolari's Warehouse Markets, Inc. dba Scolari's Food and Drug Company, Pyramid Shopping Center, LLC, Orcutt Boys Enterprises, LP, and Two/Twenty-One, Inc. are joined in this action as members of Scolari's of California's controlled group under the Employee Retirement Income Security Act of 1974 (" ERISA") § 4001(b)(1), 29 U.S.C. § 1301(b). ( See Compl. ¶ 5; Dkt. No. 16-2 Decl. of Rocco Calabrese ISO Pls.' Mot. for Prelim. Inj. [" Rocco Decl." ] Exh. D.) Under § 4001(b)(1), all trades or businesses that are under common control shall be treated as a single employer in accordance with Internal Revenue Code § 414(c) and each member of the control group is jointly and severally liable for their own and each other member's withdrawal liability.

         II. ANALYSIS

         Courts may grant multiemployer pension funds injunctive relief to ensure that mandatory interim withdrawal payments are made by employers. See Galgay v. Beaverbrook Coal Co., 105 F.3d 137, 139 (3d Cir. 1997). " A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008); Am. Trucking Ass'ns v. City of LA, 559 F.3d 1046, 1052 (9th Cir. 2009). A preliminary injunction is a drastic remedy that may only be awarded upon a clear showing that the moving party is entitled to relief. See Mazurek v. Armstrong, 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162 (1997) (per curiam). Here, the Fund has made a clear showing of the prerequisites to obtaining preliminary injunctive relief.

         A. Likelihood of Success on the Merits

         Pension plans are federally regulated pursuant to ERISA, as amended by the MPPAA. Carpenters Pension Trust Fund for. N. Cal. v. Underground Constr. Co., Inc., 31 F.3d 776, 778 (9th Cir. 1994). The MPPAA has established a statutory system for computing and assessing the liability of employers who stop contributing, or " withdraw, " from pension plans without paying their share of the plans' unfunded vested benefit liability. 29 U.S.C. § 1381 et seq . While any dispute between the fund and the employer regarding liability should be resolved through arbitration, the employer is still required to pay interim withdrawal liability payments, as determined by the plan sponsor, until the arbitrator issues a final decision. 29 U.S.C. § 1401; see also Trustees of Amalgamated Ins. Fund v. Geltman Indus., Inc., 784 F.2d 926 (9th Cir. 1986) (finding that an employer must make payments within 60 days of the pension plan's demand, regardless of the pendency of arbitration). If the employer fails to make the interim withdrawal liability payments, then the employer " shall be treated as being delinquent in making a contribution required under the plan (within the meaning of section 1145 of this title)." 29 U.S.C. § 1401(d); see also 29 U.S.C. § 1145. Because the employer must make interim withdrawal liability payments during the pendency of arbitration proceedings, a plan sponsor can bring a suit to recover interim payments from the employer pursuant to the payment schedule. Galgay, 105 F.3d at 139; Debreceni v. Merch. Terminal Corp., 889 F.2d 1, 6 (1st Cir. 1989) (holding that the MPPAA empowers a court to order the making of interim withdrawal payments forthwith, notwithstanding the pendency of arbitration of a fund's withdrawal claim). The plan sponsor must show that it notified the employer of the amount of liability, provided a schedule for liability payments, demanded payment in accordance with the schedule, and that the employer did not pay within 60 days after the demand. 29 U.S.C. § § 1382, 1399(b)(1), (c)(2); see also Galgay, 105 F.3d at 139 (" When an employer fails to make a withdrawal liability payment within the prescribed time, an action may brought . . . [and] the plan sponsor need show only that it made a demand for interim payments under 29 U.S.C. § 1382 and that the payments were not made.").

         The Fund has established that it notified Defendants of the amount of liability, provided a schedule for liability payments, and demanded payment in accordance with the schedule in December 2013. ( See Compl.; Rocco Decl. Exhs. A-C.) The Fund has also established, and Defendants do not dispute, that Defendants have failed to make any interim withdrawal liability payments pursuant to the schedule. The Court finds that under these circumstances, notwithstanding the pending arbitration, the Fund complied with all of the statutory requirements in order to prevail on its interim payments claim under the MPPAA.

         B. Irreparable Harm, Balancing Equities, and the Public's Interest

         The Court finds that the remaining prerequisites for obtaining injunctive relief are also met. First, it has been over two years since Defendants withdrew from the Fund and unless enjoined they will continue to saddle the Fund with the entire multi-million dollar liability for the unfunded pension benefits for their employees and beneficiaries, placing the Fund at risk of financial collapse. See Debreceni, 889 F.2d at 5 (" Congress believed that plan beneficiaries should have a right to rely on the continued solvency of the plans, and that the viability of such plans should not be put unnecessarily at risk by subjecting them to lengthy delays in their ability to collect withdrawal liability payments."). Second, the balance of equities tips in favor of granting injunctive relief. The Fund is clearly entitled to interim payments and Defendants have no legal justification for not making those payments while the arbitration is pending. Should the arbitrator determine that the Fund incorrectly assessed the interim payment amounts owing by Defendants, the arbitrator can make the necessary adjustments and refund any overpayments to Defendants with interest. See Debreceni, 889 F.2d at 4 (" Even assuming [the defendant employer] is forced to make interim withdrawal liability payments that later turn out to be excessive, it will not be at risk of losing its money or even the time value of the money since it will receive interest on the amount refunded." (internal quotation marks omitted)). Finally, granting the Fund injunctive relief is in the public's interest and consistent with the policies underlying the MPPAA. The MPPAA was enacted to eliminate employers' incentives from withdrawal to help bolster multiemployer pension plans so that the employees would not be deprived of their anticipated benefits in the future. Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 720-23, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984). Interim payments are intended to safeguard the pension plans' solvency and preserve the cash flow while the plan and employers resolve issues of liability in arbitration.

Defendants assert, in a conclusory manner, that they will suffer irreparable financial harm if required to make interim payments, but they present no reliable evidence to support their assertion and, in any event, their financial harm, even if suffered, is irrelevant to the Court's analysis. See Galgay, 105 F.3d at 141 (" [I]t would contort the law if we were to allow the undercapitalized or financially precarious companies that pose the very risk to pension funds that MPPAA was designed to correct to defer payments because they pose that risk. It is inappropriate to refuse a preliminary injunction ordering interim withdrawal liability payments on the grounds that the payments might pose a financial risk to the employer.").

         III. CONCLUSION

         For the foregoing reasons, the Fund's motion is GRANTED.

The Court hereby STAYS this action pending completion of the arbitration proceedings.


Summaries of

Jorgensen v. Scolari's of California, Inc.

United States District Court, Ninth Circuit, California, C.D. California, Southern Division
Nov 12, 2014
SACV 14-01211-CJC(RNBx) (C.D. Cal. Nov. 12, 2014)
Case details for

Jorgensen v. Scolari's of California, Inc.

Case Details

Full title:FRANK JORGENSEN and GREG CONGER, as Trustees of the Southern California…

Court:United States District Court, Ninth Circuit, California, C.D. California, Southern Division

Date published: Nov 12, 2014

Citations

SACV 14-01211-CJC(RNBx) (C.D. Cal. Nov. 12, 2014)