Operating Engineers' Pension Trust Fund et al v. Fife Rock Production Company et al, No. 3:2010cv00697 - Document 47 (N.D. Cal. 2011)

Court Description: ORDER GRANTING DEFENDANTS' MOTION TO COMPEL ARBITRATION AND STAYING CASE PENDING ARBITRATION (SI, COURT STAFF) (Filed on 1/24/2011)

Download PDF
Operating Engineers' Pension Trust Fund et al v. Fife Rock Production Company et al Doc. 47 1 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT 8 FOR THE NORTHERN DISTRICT OF CALIFORNIA 9 United States District Court For the Northern District of California 10 11 12 OPERATING ENGINEERS’ PENSION TRUST FUND; GIL CROSTHWAITE and RUSS BURNS, as Trustees, Plaintiffs, 13 14 15 16 17 18 No. C 10-697 SI ORDER GRANTING DEFENDANTS’ MOTION TO COMPEL ARBITRATION AND STAYING CASE PENDING ARBITRATION v. FIFE ROCK PRODUCTS COMPANY, a Utah Corporation; FIFE EQUIPMENT & INVESTMENTS, LLC, a Utah limited liability company; FIFE EQUIPMENT & INVESTMENTS COMPANY, a Utah unincorporated general partnership; GENEVA H. FIFE, as an individual; and KATHRYN F. DAMON, as an individual, 19 Defendants. 20 21 22 / On January 14, 2011, the Court held a hearing on defendants’ motion to compel arbitration. For the reasons set forth below, the Court GRANTS the motion. 23 24 25 26 27 28 BACKGROUND This action arises under the Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendments Act of 1980 (29 U.S.C. §§ 1001-1461 (1982)) (“ERISA”). Plaintiffs are the Operating Engineers’ Pension Trust Fund (“the Fund”), a multi-employer pension plan, and trustees Gil Crosthwaite and Russ Burns. Defendants are Fife Rock Products Company (a Utah corporation), Fife Equipment & Investment Company, LLC (a Utah limited liability Dockets.Justia.com 1 company), Fife Equipment & Investment Company (a Utah unincorporated general partnership), Geneva 2 H. Fife Irrevocable Trust, and Kathryn F. Damon (collectively “Fife”). 3 Fife was a participating employer in the Fund. In the plan year beginning January 1, 2005, Fife 4 withdrew from the Fund, which triggered the Fund to assess “withdrawal liability” under ERISA against 5 Fife in the sum of $678,020. By a letter dated May 16, 2008, the Fund notified Fife of this assessed 6 withdrawal liability and demanded payment on a defined schedule. Under protest, Fife made three 7 quarterly installment payments through January 1, 2009, and then allegedly defaulted on the remaining 8 payments. The Fund agreed to an extension until September 14, 2009 for the allegedly delinquent 9 payments.1 United States District Court For the Northern District of California 10 Pursuant to ERISA, on June 11, 2008, Fife timely requested review of the assessed withdrawal 11 liability. On December 5, 2008, in a letter titled “Initiation of Arbitration,” Fife demanded arbitration 12 to challenge the assessed withdrawal liability. The parties dispute whether Fife’s December 5, 2008 13 letter constituted an “initiation” of arbitration under Section 4221(b)(1) of ERISA, 29 U.S.C. 14 § 1401(b)(1). Following the December 5, 2008 letter, the parties engaged in prolonged negotiations that 15 included exchange of information and discussions regarding settlement or arbitration to resolve the 16 dispute. 17 During their negotiations, the parties agreed to use the American Arbitration Association (AAA) 18 rules in any future arbitration proceeding regarding this matter. Settlement negotiations fell apart, and 19 on January 5, 2010, the Fund filed a claim with AAA for arbitration. AAA and the Fund sent letters to 20 Fife providing notice of the proceeding and the AAA letter requested a response by January 19, 2010. 21 When Fife failed to respond by that deadline, the Fund terminated the AAA proceeding on January 22, 22 2010. On February 17, 2010, the Fund filed this action to collect the amount allegedly owed by Fife. 23 Fife has stated that it failed to timely respond to the letters regarding AAA arbitration because it lacked 24 legal representation at that time and that the Fund was aware of this fact because of an earlier letter from 25 Fife. On May 10, 2010, the Fund filed a motion to strike Fife’s affirmative defenses, arguing that Fife 26 27 28 1 As of October 20, 2010, Fife was current on its interim payments to the Fund. Finlinson Decl. ¶ 18. 2 1 had waived its right to assert affirmative defenses by failing to initiate arbitration. In an order filed June 2 30, 2010, the Court denied the Fund’s motion, and held that “defendants have not waived their 3 affirmative defenses due to any alleged failure to initiate arbitration.” Order at 5. 4 5 DISCUSSION 6 Defendants move to compel arbitration, or in the alternative, for leave to amend the answer to 7 assert the affirmative defense that the parties are required to arbitrate this dispute. Defendants contend 8 that Fife timely initiated arbitration by sending the December 5, 2008 “Initiation of Arbitration” letter, 9 and that Fife was not required to take any additional steps to “initiate” arbitration under ERISA. United States District Court For the Northern District of California 10 When an employer withdraws from a multi-employer pension plan, ERISA requires the employer 11 to pay to the multi-employer fund “a proportionate share of the fund’s unfunded vested benefit liability.” 12 Bd. of Trs. of the W. Teamsters Pension Trust Fund v. Thompson Bldg. Materials, Inc., 749 F.2d 1396, 13 1399 (9th Cir. 1984); 29 U.S.C. § 1381. The plan sponsor must, “as soon as practicable,” notify the 14 employer of the amount and payment schedule for such liability and demand payment. 29 U.S.C. § 15 1399(b)(1). The employer may, within 90 days after such notice, request a review of specific matters 16 by the plan sponsor and the sponsor must notify the employer of its decision. 29 U.S.C. § 1399(b)(2). 17 Disputes between the employer and plan sponsor regarding the amounts assessed must be 18 resolved initially by arbitration. Bd. of Trs., 749 F.2d at 1399-1400; 29 U.S.C. § 1401(a)(1). Either 19 party may initiate arbitration within the earlier of (A) 60 days after notification of the results of a review 20 requested by the employer or (B) 180 days after the employer’s request for review. 29 U.S.C. 21 § 1401(a)(1). “If no arbitration proceeding has been initiated, the amounts demanded by the plan 22 sponsor shall be due and owing on the schedule set forth by the plan sponsor.” 29 U.S.C. § 1401(b)(1). 23 “The plan sponsor may bring an action in a State or Federal court of competent jurisdiction for the 24 collection.” Id. If arbitration is not timely initiated, all affirmative defenses to withdrawal liability are 25 waived. Bd. of Trs. of Trucking Emps. of N. Jersey Welfare Fund, Inc. Pension Fund v. Centra, 983 26 F.2d 495, 507 (3d Cir. 1992). However, the federal regulations governing ERISA provide that “[t]he 27 parties may agree, at any time, to waive or extend the time limits for initiating arbitration.” 29 C.F.R. 28 § 4221.3(b). 3 Plaintiffs assert that notwithstanding the language in Fife’s December 5, 2008 letter “request[ing] 2 to initiate arbitration in accordance with 29 C.F.R. § 4221.3(d),” that letter only “requested” arbitration 3 and did not formally “initiate” arbitration. Plaintiffs do not advance any specific argument about why 4 Fife’s December 5, 2008 “Initiation of Arbitration” letter did not “initiate” arbitration under ERISA. 5 Instead, plaintiffs generally assert that this case is similar to Combs v. Leishman, 691 F. Supp. 424 6 (D.D.C. 1998). In Combs, the defendant disputed its liability and sent a letter to the plaintiff requesting 7 that the dispute be submitted to arbitration in the event that it could not be resolved by the parties. Id. 8 at 426. In a further exchange of letters regarding the disputed liability, the plaintiff twice informed the 9 defendant of the requirement under ERISA to timely initiate arbitration, and the defendant declined to 10 United States District Court For the Northern District of California 1 do so. Id. at 426-27. Under those circumstances, the court held that the defendant had only 11 conditionally requested arbitration, and did not “initiate” arbitration under ERISA. Id. at 428. 12 As this Court previously found in connection with plaintiffs’ motion to strike affirmative 13 defenses, Combs is readily distinguishable. In its December 5, 2008 letter titled “Initiation of 14 Arbitration,” Fife not only “request[ed] to initiate arbitration in accordance with 29 C.F.R. § 4221.3(d)” 15 but also requested the Fund to propose potential arbitrators. Finlinson Decl. Ex. G. Thus, unlike the 16 conditional request in Combs, Fife formally requested to initiate arbitration pursuant to the governing 17 regulation. Moreover, Fife and the Fund engaged in prolonged settlement negotiations that lasted, at 18 a minimum, from December 22, 2008 to September 30, 2009. During this time, the parties exchanged 19 information and made settlement offers, and on several occasions the Fund encouraged Fife to continue 20 participating in the settlement negotiations in order to avoid the delay and expense associated with an 21 arbitration proceeding. See id. Ex. H and L. 22 Aside from specifying the time limits for initiating an arbitration, ERISA Section 4221 does not 23 state what steps are required to “initiate” an arbitration. See 29 U.S.C. § 1401. However, the 24 corresponding regulation, titled “Initiation of Arbitration,” provides, 25 26 27 28 (d) Contents of agreement or notice. If the employer initiates arbitration, it shall include in the notice of initiation a statement that it disputes the plan sponsor’s determination of its withdrawal liability and is initiating arbitration. A copy of the demand for withdrawal liability and any request for reconsideration, and the response thereto, shall be attached to the notice. If a party other than an employer initiates arbitration, it shall include in the notice a statement that it is initiating arbitration and a brief description of the questions on which arbitration is sought. If arbitration is initiated by agreement, the agreement shall include a brief description of the questions submitted to arbitration. In no case is 4 1 compliance with formal rules of pleading required. 2 29 C.F.R. § 4221.3(d). Here, Fife’s December 5, 2008 letter stated that it disputed the plan sponsor’s 3 determination of its withdrawal liability, and Fife attached to the letter a copy of the demand for 4 withdrawal liability as well as related correspondence. Finlinson Decl. Ex. G. The Court finds that the 5 December 5, 2008 “Initiation of Arbitration” letter “initiated” arbitration under ERISA Section 4221 6 and 29 C.F.R. § 4221.3. Moreover, as defendants assert, if the Fund believed that Fife’s December 5, 2008 “Initiation 8 of Arbitration” letter was deficient in any way, the Fund was required to “object promptly in writing to 9 [such] deficiencies.” 29 C.F.R. § 4221.3(e). Plaintiffs assert they “promptly advised Defendants on 10 United States District Court For the Northern District of California 7 December 22, 2008, that their request to initiate arbitration was deficient and asked them to stipulate 11 to proceed to arbitration under AAA rules.” Opp’n at 19:6-8. However, there is no language in the 12 Fund’s December 22, 2008 letter that can be interpreted as advising defendants that their request to 13 initiate arbitration was deficient. That letter states, 14 Dear Mr. Finlinson, 15 I am writing in response to Fife Rock Products’ demand for arbitration made on December 5, 2008, and request for potential arbitrators. 16 17 18 19 20 21 The Trust Funds propose for the parties to stipulate to proceed with arbitration pursuant to the American Arbitration Association’s Multi-employer Pension Plan Arbitration Rules for Withdrawal Liability Disputes (“AAA Rules”). A copy of the AAA rules are enclosed herein for your review. In light of these well established arbitration rules relating specifically to withdrawal liability disputes involving multiemployer pension plans and given the experience of AAA arbitrators with such disputes, it will be efficient and in the best interest of both parties to utilize AAA. Further, since the Trust is administered at its principal place of business in Alameda, California, the Trust Funds request Fife Rock Products to stipulate to arbitrating at a mutually convenient location in the San Francisco Bay Area. Please promptly let me know if your client is agreeable to the proposed stipulation. 22 23 24 Please note that we still have not received Fife Rock Product’s quarterly installment payment in the sum of $22,724 that was due on October 1, 2008. Payment in said sum plus 12% interest should be made immediately, and quarterly installment payments must continue to be made even while the arbitration is pending. ERISA § 4421. 25 27 Given that we are still in the early stages of this dispute and arbitration proceedings can be very costly, I wanted to take this opportunity to bring relevant legal authority to your attention in addition to the authority I specified in my last correspondence. 28 [paragraph discussing legal authority] 26 5 1 2 3 4 5 6 7 Please further evaluate your client’s position with respect to its withdrawal liability in light of all relevant authority, including not limited to, the foregoing authority. I once again request that you provide me with any and all relevant documents as well as information that will assist us in determining whether Fife Rock Products was considered to be in the “building and construction industry.” Doing so may actually resolve this matter in an efficient matter instead of incurring fees associated with formal discovery and a lengthy arbitration proceeding. Please note that letters, schedule, reports, etc. that do not contain details regarding the names of covered employees, job duties, location of work, dates and hours worked, type of work performed each time, type of construction project, etc. may not constitute sufficient evidence to establish that Fife Rock Products was in the building and construction industry. [citation]. Should you have any questions or require additional information, please feel free to contact me. 8 Finlinson Decl. Ex. H. 9 Contrary to plaintiffs’ assertion in their opposition brief, the December 22, 2008 letter does not United States District Court For the Northern District of California 10 advise or even suggest that plaintiffs found Fife’s December 5, 2008 letter initiating arbitration deficient. 11 The Court finds that the December 22, 2008 letter did not object to Fife’s initiation of arbitration. 12 Plaintiffs do not assert that they informed Fife in any other letter of any deficiencies in the December 13 5, 2008 initiation of arbitration, and accordingly the Court finds that plaintiffs “fail[ed] to object 14 promptly in writing to deficiencies in an initiation agreement or a notice of initiation of arbitration, [and 15 thus plaintiffs have] waive[d] [their] right to object.” 29 C.F.R. § 4221.3(e). 16 Plaintiffs also argue that Fife failed to “initiate” arbitration because Fife did not initiate 17 arbitration under AAA rules. Those rules provide that a party initiates arbitration by filing a claim at 18 a AAA regional office and paying the AAA filing fee. See Babu Decl. Ex. I at Section 7 (AAA Rules). 19 However, there is nothing in ERISA Section 4221 or the regulations that require a party to initiate 20 arbitration pursuant to the AAA rules in order to “initiate” arbitration under ERISA. The cases in which 21 courts have held that the failure to initiate an arbitration with AAA constituted a failure to “initiate” 22 arbitration under ERISA Section 4221 have done so where the trust funds’ rules specifically required 23 the employer to initiate arbitration pursuant to AAA rules. For example, in Robbins v. B&B Lines, Inc., 24 830 F.2d 648, (7th Cir. 1987), the trust fund’s rules provided, inter alia, that “[t]he commencement of 25 an arbitration proceeding is made by written notice to the withdrawn employer in question, to the 26 bargaining representative (if any) of the affected employees of the withdrawn Employer, to the Central 27 States Fund and to the Chicago Regional Office of the American Arbitration Association.” Id. at 650-51 28 n.5. The court held that the employer’s failure to pay the AAA filing fee rendered the initiation of 6 1 arbitration untimely because “[t]he Fund’s rules, read in conjunction with the AAA arbitration rules, 2 explicitly require a party initiating arbitration to pay the initial filing fee.” Id. at 651. 3 Similarly, in Combs v. Western Coal Corp., 611 F. Supp. 917 (D.D.C. 1985), the employer was 4 a signatory to the Plans’ arbitration rules, which incorporated the AAA rules. Id. at 921. The employer 5 requested arbitration in a letter to the Plans, and the Plans responded by informing the employer that it 6 had failed to properly institute arbitration pursuant to the rules adopted by the Plans. The Plans’ letter 7 indicated that the Plans would treat the arbitration request as proper if the employer complied with the 8 Plans’ arbitration rules within 15 days. The employer made no further attempt to initiate arbitration. 9 Under those circumstances, the court held that the employer had failed to initiate arbitration. Id. United States District Court For the Northern District of California 10 Here, there was no contractual agreement to arbitrate, and thus the parties had not, prior to 11 initiating arbitration, agreed that any particular rules governed how to initiate arbitration. The fact that 12 Fife agreed to the AAA rules for the arbitration hearing does not mean that Fife agreed to, or was bound 13 by, the AAA rules for the purpose of determining whether Fife “initiated” arbitration under ERISA 14 Section 4421. 15 Plaintiffs also assert that any purported extensions of time to initiate arbitration terminated on 16 January 14, 2010, or at the latest on January 19, 2010, when defendants failed to agree to proceed with 17 the AAA arbitration initiated by plaintiffs. Plaintiffs do not cite any authority for their contention that 18 Fife’s failure to respond in January 2010 amounted to a waiver of its right to seek arbitration under 19 ERISA. The Court finds that Fife did not waive its right to seek arbitration, particularly given the facts 20 that Fife timely sent the “Initiation of Arbitration” letter in December 2008, the parties’ subsequent 21 extensive settlement negotiations in lieu of proceeding with arbitration, and plaintiffs’ own initiation 22 of arbitration in January 2010. Further, the Court finds that on this record there is no prejudice to 23 plaintiffs if the parties are required to submit this dispute to arbitration. 24 25 CONCLUSION 26 For the foregoing reasons, the Court GRANTS defendants’ motion to compel arbitration. 27 (Docket No. 35). The Court STAYS this action pending the arbitration. All pretrial dates are 28 VACATED and this action shall be administratively closed. The parties are directed to inform the Court 7 1 within 30 days of the completion of the arbitration proceedings. 2 3 IT IS SO ORDERED. 4 5 Dated: January 24, 2011 SUSAN ILLSTON United States District Judge 6 7 8 9 United States District Court For the Northern District of California 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.