Employer failed to timely demand arbitration under approved AAA rules

Questions about whether other rules and procedures of a pension fund and the American Arbitration Association had been approved by the PBGC, as required, did not change the fact that the rules defining timely initiation of arbitration had been approved, and, under those rules, an employer charged with withdrawing from a multiemployer pension plan had not timely invoked arbitration, the U.S. Court of Appeals in Chicago (CA-7) has ruled.

Withdrawal liability

After concluding that the employer had withdrawn from its underfunded multiemployer pension plan, the Central States Pension Fund sent it a bill for about $375,000. Under ERISA Sec. 4219, an employer has 90 days to ask a pension fund to review its decision. If the fund confirms its original decision—or does not act within 120 days—then, under ERISA Sec. 4221, the employer has a further 60 days to seek arbitration. For the employer, the last day to seek arbitration was July 16, 2013. On July 9, the employer sent the Fund a letter demanding arbitration, but it waited to send notice to the AAA until July 29. AAA rules (under Section 7 for initiating arbitration), however, require notices to be sent to both the relevant fund and the AAA. The employer did not notify the AAA within the statutory time limit. The district court concluded that the employer had waited too long to seek arbitration and had to pay the withdrawal liability as the Fund calculated it.

Other procedures unapproved?

In 1985 the PBGC had approved the AAA’s rules for arbitration under the MPPAA. On appeal, the employer claimed it was not required to comply with Section 7 of the AAA rules, which it admittedly had not done, because other procedures and requirements from both the Fund and the AAA had not been submitted nor approved by the PBGC, as required for privately adopted dispute resolution rules. These included AAA fee increases, as well as differences between the Fund and the AAA regarding venue provisions and whether the arbitrator has discretion to award attorneys’ fees. But even assuming those differences required PBGC approval, the Seventh Circuit asked, why would that relieve the employer from being required to submit the demand for arbitration to both the Fund and AAA?

No timely demand for arbitration

Even if those other procedures, including any differences between the Fund and the AAA, did require PBGC approval, said the court (noting it was not deciding that issue), it was the rules that were clearly approved by the AAA in 1985 that required the demand to be sent to the AAA (as well as the Fund) during the 60 days allowed by statute. Those other unapproved and disputed procedures, such as fees and venue, never became an issue, reasoned the court, because the employer never submitted a timely demand for arbitration to the AAA. Noting that the employer never argued that the Fund needed PBGC approval to adopt AAA rules or that notice to the Fund, but not to the AAA, actually was sufficient notice, the appeals court found no reason to disturb the district court’s finding that there was no effective demand for arbitration. Thus, the employer was required to pay withdrawal liability.

Source: Central States, Southeast and Southwest Areas Pension Fund v. Allega Concrete Corp. (CA-7).

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