By Diane Dygert and Richard Schwartz 

Seyfarth Synopsis: The IRS recently issued somewhat helpful guidance to plan administrators on what to do about the constant problem of uncashed benefit checks from qualified retirement plans. The initial excitement upon hearing the news, however, was quickly met with disappointment as the realization set in that the guidance was limited. 

For more background on this IRS Revenue Ruling, click on our client alert. For now, suffice it to say that the guidance applied narrowly to benefit checks that are required to be issued to participants. So, for example, a small amount cash-out check issued following termination of employment, or a check issued to a participant who made a distribution election. In these situations, the IRS advises that the participant’s failure to cash the distribution check does not affect the employer’s obligation to withhold and report taxes under the assumption that the participant had control of the check but for one reason or another simply didn’t cash it.

The more prevalent problem plaguing plan administrators is the “case of the missing participant.” These are participants who have gone missing despite the plan’s good faith efforts to find them. Plan administrators face a genuine dilemma about how to handle required distributions to such AWOL account holders. If the administrator gets returned mail and is unable to identify a better address, no distribution check will be able to be issued. Or perhaps a check is issued but gets returned as undeliverable. In these situations, plan administrators have been left to devise their own practices aligning with the plan qualification rules and their third party administrator’s systems as best they can.

The very agencies in charge of enforcing the plan qualification rules and fiduciary obligations appear to not have their arms around the situation. They acknowledge that guidance is needed in this area and are working on it. So, as the saying goes “the check is in the mail.”

By Jules Levenson and Mark Casciari

Seyfarth Synopsis: The Court of Appeals for the Seventh Circuit recently held that once a multi-employer pension fund accelerates withdrawal liability periodic payments into a lump sum liability, there is no statutory mechanism to revoke that acceleration. So the Court affirmed a finding that the fund’s trustees waited too long to collect on the lump sum debt when it sued more than six years after the initial acceleration.

Bauwens v. Revcon Tech. Grp. et al., No. 18-3306, — F.3d –, 2019 WL 3797983 (7th Cir. Aug. 13, 2019) concerned the decade-long quest of multiemployer pension fund trustees to recover defaulted withdrawal liability payments triggered by a withdrawal in 2003 (and 2004).

In 2008, the employer defaulted on its quarterly payments and, after it failed to cure the default in a timely fashion, the trustees accelerated the remaining liability, and filed suit to recover the liability in a lump sum. The trustees voluntarily dismissed the suit when the company agreed to resume quarterly payments. In April 2009 the same scenario happened again. And then it happened three more times, in 2011, 2013 and 2015.

In 2018, after yet another non-payment, the trustees sued again for the lump sum. This time, the employer moved to dismiss on the ground that the six-year statute of limitations accrued upon the 2008 acceleration and expired in 2014. The trustees argued that they had revoked the acceleration after each of the voluntary dismissals (so that the statute of limitations ceased to run). The district court sided with the employer and granted the motion to dismiss.

The Court of Appeals agreed with the district court. The Court noted that ERISA’s withdrawal liability provisions explicitly allow accelerating debt under certain circumstances, but are silent on deceleration. The trustees asked the Court to create federal common law to fill this “gap,” but the Court said that it is reticent to create common law remedies or implied causes of action. The Court also noted that deceleration, when allowed, is permitted by a contractual or statutory authorization. The Court said that Congress could have authorized — but did not authorize — a deceleration provision.

The key takeaway from Bauwens is that courts tend to interpret the ERISA statute consistent with its plain language. This means that they are reluctant to read into the statute what is not there to create expedient remedies that ameliorate statutory missteps.

By: Mark Casciari and Ian Morrison

Synopsis: A recent decision of the federal district court for the Southern District of New York warns ERISA fiduciaries that even innocent mistakes that do not misuse plan assets or unjustly enrich the fiduciaries can cause an unexpected and substantial expense to the plan, at least in the context of a less than clear summary plan description (SPD)

Chief Justice Roberts once famously said: “People make mistakes. Even administrators of ERISA plans.” Conckright v. Frommert, 559 U.S. 506, 509 (2010). He was right, of course, but the legal consequence, or not, of innocent ERISA mistakes remains a matter of some debate.

A recent decision on remand from the Court of Appeals for the Second Circuit presents a disturbingly common fact situation and legal analysis that shows, in one district judge’s view, how an innocent ERISA plan administrator mistake can lead to monetary relief.

In DeRogatis v. Board of Trustees of the Welfare Fund of the International Union of Operating Engineers Local 15, No. 14 Civ. 8863 (S.D.N.Y. June 13, 2019), Chief Judge McMahon denied the plan trustees’ motion for summary judgment on a claim for “surcharge” damages resulting from an innocent misrepresentation by a welfare plan benefits counselor. The counselor advised a beneficiary spouse not to submit her dying husband’s application for early retirement benefits out of a misplaced concern that doing so would cut off his medical benefits. (It would have cut off future medical benefit accruals, but not current eligibility). This failure caused her to lose $300 per month in additional surviving spouse benefits under a separate, but related, pension plan.

The surviving spouse sued the trustees for relief equivalent to the $300 per month benefit. She claimed a right to the money under the equitable theory of surcharge, described by the Supreme Court in CIGNA Corp. v. Amara, 563 U.S. 421 (2011).

Surcharge damages can be awarded upon a showing of “but for” causation, the court said — here, a showing that the misrepresenting benefits counselor, acting on behalf of ERISA fiduciaries, caused harm. No showing that the defendant fiduciary misused plan assets or was enriched by the breach was needed. Nor was a showing of detrimental reliance or an intent to deceive necessary.

The Court of Appeals had previously found that a genuine issue of material fact exists as to whether the SPD at issue clearly advised the surviving spouse (contrary to the oral misrepresentation) to submit her husband’s early retirement papers. So the trustees could not argue that the misrepresentation was immaterial, or did not cause the harm at issue.

The parties will now presumably proceed to a trial on the merits of the surviving spouse claim.

To be sure, the DeRogatis summary judgment decision is that of just one district judge in a case with unfortunate facts. But it, and decisions like it, increase plan sponsor expenses in administering ERISA plans. That in turn may reduce benefits, if employment market forces would allow it.

Benefit administration is necessarily complicated, and, being summaries, SPDs often do not contain complete plan details or instructions for every situation. Further complicating matters is the reality that reliance on oral representations or other informal guidance about what is in a plan, for many, is a necessary feature of hyper-paced modern living.

What is an ERISA fiduciary to do? There are ways to minimize risk, including (i) writing plans simply, succinctly and clearly, (ii) authorizing only knowledgeable, articulate and appropriately cautious benefits counselors to speak on behalf of the fiduciary, and (iii) recording all authorized oral or other informal communications. We are reminded about the admonition of one of our retired partners, who often said in the benefits plan context:  “Write like you are writing a coloring book.”  This is overstatement to be sure, but overstatement often best makes the point. Still, mistakes are sure to happen — one can only hope to minimize them.

By: Mark Casciari and Kathleen Cahill Slaught

The hyper-partisan political warfare in the American health care industry is far from over. But another small battle in a federal district court was just resolved in favor of the Trump Administration.

In Association for Community Affiliated Plans v. U.S. Department of Treasury, No. 18-2133, Judge Richard Leon of the federal district court for the District of Columbia granted a summary judgment in favor of the Trump Administration’s efforts to reform health care regulation outside the confines of the Affordable Care Act (ACA).

At issue in Association for Community Affiliated Plans is a 2018 rule promulgated by the Departments of Labor, Treasury, and Health and Human Services that broadened the definition of “short-term, limited duration insurance,” or STLDI, to mean a contract that caps its maximum initial term at 12 months and (after two renewals) its maximum total duration at 36 months. This category of insurance was exempted from individual market regulations in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and not addressed by the ACA.

The Trump 2018 rule superseded an Obama Administration rule that capped the maximum term and duration of STLDI to less than three months in duration (including renewals). The Obama rule was itself a cut back on the original 1997 STLDI rule, during the Clinton Administration, that mirrored the Trump 2018 rule (without regard to renewals). The Obama Administration cut back on the original rule because STLDI was not addressed in the ACA, and it feared that the STLDI market would rob the ACA Exchanges of healthy insureds and cause Exchange premiums to rise.

Insurers, providers, and consumers who operate in the ACA Exchanges initiated Association for Community Affiliated Plans   These plaintiffs first argued that the new rule would affect the competitive standing of Exchange insurers, and the court agreed. To be sure, the new rule would cause at least some business to move to the STLDI market. This relative competitive disadvantage was enough to afford federal district court standing to secure a ruling on the merits.

The district court then considered whether the new rule was illegal under the Administrative Procedure Act — is it agency action beyond what Congress has allowed and is it arbitrary or capricious?

The court found that the ACA did not forbid the Trump 2018 definition of STLDI because the original rule went unchallenged in the courts, and because the ACA did not alter that status quo. The court added that there is nothing “extraordinary” about the new rule because it is unlikely to cause an exodus from the individual market Exchanges and thus unlikely to threaten the ACA’s structural core. The court also found that the new rule affords consumers the option to pay ACA plan premiums or buy insurance in the STLDI market, in lieu of being uninsured (now that the individual mandate is effectively repealed and thus provides no incentive to pay Exchange premiums). The court also found that the new rule applies a reasonable dictionary definition of “short term” and “duration,” the key words in the Congressional delegation of authority to the agencies at issue.

It remains to be seen whether this district court ruling, like so many other judicial resolutions regarding small partisan political battles, will be appealed. At its core, Judge Leon decided that the Trump Administration did not attempt an end-around Congress, and permissibly took a small administrative step to further its political agenda.

By Michael W. Stevens and Mark Casciari

Seyfarth synopsis: Arkansas has sought certiorari on the question of the ability of states under the ERISA preemption clause to regulate the rates charged by PBMs, and the Supreme Court has asked for the input of the Solicitor General on whether it should decide the issue..

In Rutledge v. Pharmaceutical Care Management Association, No. 18-540, the Supreme Court has again been asked to define the scope of ERISA preemption. Thirty-six states have passed legislation regulating the rates charged by PBMs. The issue is whether such state laws are preempted by ERISA.

PBMs are entities that manage prescription drug benefits. They operate by billing health plans for participant prescriptions and then reimbursing pharmacies on behalf of the plans.

In 2013, Arkansas enacting a law purporting to regulate PBMs, and amended the law in 2015. The statute created an appeals process through which pharmacies could challenge the reimbursement rates offered by PBMs. The stated goal of the law was to protect pharmacies against below-cost reimbursement. The law applied to both ERISA and non-ERISA health plans.

An Arkansas district court found the law preempted by ERISA but not by Medicare Part D. The Court of Appeals for the Eighth Circuit affirmed as to ERISA preemption, but reversed on Medicare Part D preemption.

The Eighth Circuit held that the Arkansas law included PBMs that cover ERISA plans, so the law “relate[d] to and has a connection with employee benefit plans,” and was therefore preempted. In its petition for certiorari, Arkansas argued that merely because the law included ERISA governed plans, in addition to non-ERISA plans, there should be no preemption: “If a law regulates a class of third-party administrators or claims processors whose customers merely include ERISA plans, it logically follows that the law does not act immediately and exclusively upon ERISA plans, and that the existence of ERISA plans is not essential to the law’s operation.” Pet. at 18 (emphasis in original).

The Circuits are split on whether ERISA preempts all regulation of PBMs (the D.C. and Eighth Circuits), or whether ERISA preempts no regulations of PBMs (the First Circuit). After Arkansas submitted its petition for certiorari, the Supreme Court has requested that the Solicitor General provide the position of the United States. The Solicitor General has not yet submitted his brief.

Stay tuned to this blog for further updates. If the Supreme Court grants certiorari in this case, it will likely affect the operation of PBMs, and further define the scope of ERISA preemption.

 

By: Mark Casciari

Synopsis: ERISA stock-drop litigation has diminished in recent years due to the Supreme Court’s Dudenhoeffer decision (and a rising stock market). Now, the Court will have another chance to weigh in on whether federal ERISA litigation in this space should breathe new signs of life.

There is a trend-line in recent Supreme Court decisions limiting federal court jurisdiction before a plaintiff ever enters the world of expansive and expensive discovery. This trend-line is a great assist to all federal court defendants, including ERISA defendants. Key decisions to note are Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Spokeo, Inc. v. Robbins, 136 S. Ct. 1540 (2016).   As to Twombly’s “plausibility” precondition to discovery, see generally here. As to Spokeo’s “concrete injury” precondition to discovery, see generally here.

The Supreme Court has just accepted certiorari in Jander v. Retirement Plans Committee of IBM, 910 F.3d 620 (2d Cr. 2018). In Jander, ESOP plan participants claimed that the ERISA plan fiduciaries knew but failed to disclose that IBM’s microelectronics division (and thus IBM’s stock) was overvalued. The district court found that the plaintiffs did not plausibly plead a violation of the ERISA fiduciary duty of prudence. The Court of Appeals for the Second Circuit reversed.

The Second Circuit ruled that the following allegations equated to plausibility: (i) the fiduciaries knew that IBM stock was artificially inflated by virtue of the impairment of a business unit and its associated accounting violations, (ii) the fiduciaries had the power to disclose the truth to SEC filing recipients and to plan participants, (iii) the failure to disclose long-term investment prospects was harmful because uncorrected fraud causes greater damages the longer the fraud continues, (iv) correcting the fraud would reduce the stock price only by the amount of the artificial inflation, and (v) the fiduciaries knew that disclosure of the truth was inevitable. The Second Circuit was not dissuaded by the fact that the district court dismissed a related securities fraud claim that the plaintiffs did not appeal.

The petition for certiorari accepted by the Supreme Court presents this issue: Can the Dudenhoeffer standard that a plaintiff must “plausibly allege[] that a prudent fiduciary in the defendant’s position could not have concluded that [an alternative action] would do more harm than good to the fund,” be satisfied by “generalized allegations that the harm of inevitable disclosure of an alleged fraud generally increases over time.”

Cutting through the legal niceties, the issue boils down to the level of detail required in a federal complaint to open the discovery door. Entering that door is of utmost significance to plaintiffs because discovery is so expensive to defendants, even after taking proportionality preconditions into account. Many large cases that find themselves stuck in discovery settle without any adjudication on the merits.

The forthcoming Jander decision will advise ERISA litigants whether the trend towards closing the discovery door will continue. A Court majority seems disinclined to loosen pleading standards in the hyper-partisan political culture now enveloping the country. Should the Court reverse the Second Circuit, moreover, ERISA plaintiffs may find it tougher to assert fiduciary breach claims in contexts other than the stock-drop context, in the absence of inculpatory information uncovered outside discovery.

 

By: Mark Casciari

Synopsis: A new Third Circuit decision has allowed an ERISA fee complaint to stand even though there were no specific allegations of fiduciary errors in the process of selecting investment options and fees. This development is yet another in the line of decisions that decide if the federal door to discovery will be opened or closed at the complaint stage of the litigation. Expect judges to differ and more such decisions to issue.

We recently reported, in a sister blog, on a Supreme Court decision affirming that a federal plaintiff needs to allege concrete allegations of injury, caused by a defendant, in order to trigger the onerous discovery weapons in the Federal Rules of Civil Procedure. See here.

ERISA lawsuits are not immune from this specificity precondition to discovery, and the expensive consequences if is satisfied.

A new decision from the Court of Appeals for the Third Circuit, Sweda v. University of Pennsylvania, 2019 U.S. App. LEXIS 13284 (May 2, 2019), shows the difference of opinion of judges when it comes to opening the discovery door.

In Sweda, a putative plaintiff class of 20,000 participants in an ERISA-regulated 403(b) defined contribution plan with assets in 2014 totaling $3.8 billion sued plan fiduciaries to recover on alleged overpayments of fees and underperformance of investment options. The class undoubtedly seeks tens of millions of dollars in damages.

The Sweda putative class presented the question whether the allegations of a breach of ERISA fiduciary duties were sufficiently specific and plausible. Two judges answered in the affirmative; one dissented.

The majority employed a “holistic” analysis that did not parse the complaint “piece by piece to determine whether each allegation, in isolation, is plausible.” The majority twice described the allegations as “numerous” — showing that lengthy complaints help plaintiffs pass through the discovery door. The majority also said that the complaint contained “circumstantial” evidence allegations of better performing benchmarks and allegations that the fiduciaries selected high fee retail mutual funds, as opposed to lower fee institutional funds, as investment options.

The majority ignored the lack of allegations of how the fiduciaries mismanaged the plan — there is no fiduciary breach if the fiduciary process is reasonable. To be sure, specific allegations of an illegal fiduciary process are hard to come by because ERISA fiduciary disclosure rules are limited, but that is the balance Congress struck in limiting fiduciary legal obligations in order to encourage the establishment of ERISA plans and not discourage individuals from serving as fiduciaries.

The dissent tracked recent Supreme Court decisions that require “concrete” and “plausible” allegations before allowing the discovery “pressure to settle,” regardless of the merits, to kick in. The dissent found the complaint insufficient, for example, because it lacked allegations of facts linking any of the named plaintiffs to any chosen investment option and shortcoming. The allegations of harm, the dissent reasoned, lacked the specificity (“concreteness”) needed before full discovery can commence.

Sweda shows that federal judges will continue to grapple with whether to find complaint allegations sufficiently specific to allow the case to proceed to discovery and a likely settlement. This is especially so when the complaint is lengthy and the plan assets are substantial. ERISA is no different than other federal statutes in this regard. The result in any one case likely depends on the level of concern a judge has about allowing litigation to devour resources and cause settlements as a result, without a trial on the merits of the federal claim.

By Ronald Kramer, S. Bradley Perkins, and Michael W. Stevens

Seyfarth Synopsis: A provider that is not seeking benefits based upon an assignment of a patient’s claims under ERISA but instead is pursuing state law claims based solely on agreements and representations made directly by the insurer to the provider may survive attempts to remove the case on grounds of ERISA complete preemption.

Can an out-of-network health care provider bring state law claims in state court against an ERISA plan insurer and avoid removal of those claims to federal court pursuant to ERISA’s complete preemption? This issue is often litigated, and sometimes, such as in California Spine and Neurosurgery Institute v. Boston Scientific Corp., Case No. 18-CV-07610 (N.D. Cal. May 3, 2019), the answer is yes.

In Boston Scientific, an out-of-network provider brought breach of oral contract and promissory estoppel claims in state court against the insurer of an ERISA plan after the insurer refused to pay the $77,000 the provider had billed for surgical services. The provider claimed it had phoned the insurer prior to the surgery, and the carrier had offered “promises and information” that the insurer would pay. The insurer promptly removed to federal court on the grounds that the provider’s state law claims were completely preempted by ERISA § 502(a). The provider moved to remand, claiming there could be no preemption given it had no standing to bring an ERISA claim.

The Court applied the two-prong test set forth in Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004), wherein a state law cause of action is completed preempted if (1) the plaintiff at some point in time could have brought the claim under ERISA § 502(a)(1)(B), and (2) there is no other independent legal duty that is implicated by the defendant’s actions. While a claim for benefits under ERISA § 502(a)(1)(B) may only be brought “by a participant or beneficiary,” the Ninth Circuit permits assignees to bring ERISA claims.

The Court focused on the first prong of Davila. The provider argued that, since it was not a participant or beneficiary, it could not have brought a 502(a)(1)(B) claim. After examining whether there was an assignment-in-fact (which would permit the provider to bring an ERISA claim), and determining there was not, the Court agreed with the provider that it could not have brought an ERISA claim. Because Davila is a conjunctive test, the Court stated that it was declining to examine the second prong regarding an independent legal duty, and found complete preemption unavailable.

Notably, although the Court stated that it was not examining the second prong of Davila, it spent considerable time analyzing the provider’s allegations that it was “owed additional money based on an oral contract [which] is a different obligation than a payment to a medical provider required under a patient’s ERISA plan.” The Court relied on the Ninth Circuit’s decision in Marin Gen Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941 (9th Cir. 2009), a similar case involving a phone conversation between a provider and payor, to find complete preemption inapplicable and allowing the state law causes of action to proceed.

Boston Scientific is an important lesson that, while claims brought by providers as assignees of a patient’s rights under an ERISA plan generally are preempted, providers that bring state law claims based solely on their direct dealing with an insurer often can defeat attempts at removal to federal court based on complete ERISA preemption, especially where the provider disclaims an assignment. ERISA plan administrators and insurers would be well-advised to take care that any statements made to providers redundantly clarify that any payments would be subject to plan terms. Moreover, this case did not address conflict preemption under ERISA § 514(a), which provides insurers and health care plans with another avenue to defeat out-of-network providers’ claims. Stay tuned to this blog as future case law addressing the intricacies of ERISA preemption unfolds.

 

 

By: Meg Troy and Mark Casciari

Seyfarth Synopsis: There is a deep circuit split on who bears the burden of proving loss causation on ERISA breach of fiduciary duty claims. The Supreme Court has now invited the U.S. Solicitor General to submit the United States position on the issue in connection with a petition for a writ of certiorari from a First Circuit decision finding that the burden of proof shifts to the breaching fiduciary to disprove causation once a plaintiff proves loss.

Putnam Investments has filed a petition for a writ of certiorari that raises an important issue in the developing law on complex ERISA litigation. Putnam is asking the Supreme Court to decide whether plaintiff bears the burden of proof not only on breach of fiduciary duties and on loss, but also on causation. Courts of Appeal for the Fourth, Fifth and Eighth Circuits have held that an ERISA defendant bears the burden of proof on causation, while the Second, Sixth, Seventh, Ninth, Tenth, and Eleventh Circuits have held that the plaintiff bears the causation burden. Putman argues: “This case offers the perfect opportunity to resolve a deep divide.”

On April 18, 2019, Putnam’s petition and related papers were distributed to the Justices. On April 22, the Court asked for the U.S. Solicitor General’s position on the petition. The invitation to the Solicitor General is a sign that certiorari might be granted, so this case is worth watching carefully.

The backdrop to the case is the claim by participants in Putnam’s 401(k) Plan that the Plan fiduciaries imprudently allowed 85% of Plan assets to be invested in proprietary mutual funds. It is worth noting that the fiduciaries also allowed participants to use a self-directed brokerage window. The class nonetheless alleged that the mutual fund fees were unreasonably high.

In June 2017, the District of Massachusetts ruled in favor of Putman, determining that plaintiffs failed to prove at trial that the fiduciaries acted imprudently, and put their and the company’s own interests ahead of the interests of plan participants.

On appeal, the First Circuit vacated the trial court’s judgment and opted to “align [itself] with the Fourth, Fifth, and Eighth Circuits and hold that once an ERISA plaintiff has shown a breach of fiduciary duty and loss to the plan, the burden shifts to the fiduciary to prove that such loss was not caused by its breach, that is, to prove that the resulting investment decision was objectively prudent.” The First Circuit remanded the case to the district court, explaining that, if loss is proven on remand, the burden shifts to the fiduciary to prove that the fiduciary decision was objectively prudent. See Brotherston v. Putnam Investments, LLC, No. 17-1711 (1st Cir. Oct. 15, 2018).

Burden of proof issues are key to the defense of any case, including of course complex ERISA cases. If the Supreme Court grants certiorari, the outcome of the case in that Court will have substantial impact on how ERISA litigation defendants organize and pursue their defense efforts and arguments. There is no question that ERISA fiduciaries would prefer not to have any burden of proof, other than as to true affirmative defenses.

By: Mark Casciari

Synopsis: A recent decision by the District Court from the Southern District of New York shows why it often makes sense to consider, on a privileged basis, the universe of potential defendants to a withdrawal liability assessment upon issuance of the assessment, even though many potential defendants did not receive notice of the assessment.

ERISA’s Multi-Employer Pension Plan Amendments Act (MPPAA), 29 U.S.C. § 1381 et seq. provides an arbitration mechanism for challenging withdrawal liability assessments. The MPPAA also provides that the “employer” is responsible for assessments, on a joint and several liability basis. MPPAA defines “employer” to include all members of the withdrawing entity’s “controlled group” at the time of the withdrawal trigger, and not just the entity that signs a collective bargaining agreement mandating contributions to the multi-employer pension fund. Defining the “controlled group” is complicated. See 29 U.S.C. § 1301(b) and implementing IRS regulations.

Not satisfied with the contours of the statutory definition, some courts have expanded it to include “successors,” as that term is defined by the courts. See https://www.erisa-employeebenefitslitigationblog.com/2015/08/06/is-an-asset-purchaser-liable-for-sellers-withdrawal-liability/

Matters get even more complicated by virtue of court decisions saying that notice to one member of a joint and several liability group as to a withdrawal liability assessment is notice to all in the group. See e.g. Trustees v. Central Transport, Inc., 888 F.2d 1161, 1163 (7th Cir.1989),

All this means that any business entity or individual who might be an employer as to a withdrawal liability assessment is at legal risk of joint and several liability.

That legal risk can require immediate attention. That is because receipt of notice of a withdrawal liability assessment triggers time deadlines for initiating arbitration to challenge the assessment or its amount. A failure to timely arbitrate usually equates to a bar to the challenge.

There often are good reasons to challenge assessments. The approximate 140 multi-employer funds in critical and declining status have, in recent years, issued withdrawal liability assessments that reach well into the millions of dollars. Many assessments expand the boundaries of MPPAA in new ways that maximize liability and thus open them to legal challenge.

The universe of entities and individuals at risk was broadened even further by a recent ruling by Judge Seibel of the District Court for the Southern District of New York. In Trustees of the National Retirement Fund v. Fireservice Management LLC, et al., No. 17-CV-4003, an assessment issued and arbitration was not timely initiated. On preliminary motions, the Judge permitted a trial on a withdrawal liability default claim that a company alleged not to be party to a collective bargaining agreement mandating fund contributions nonetheless is jointly and severally liable on a controlled group basis, or on an alter ego, single employer or joint employer relationship basis. This occurred even though the company had different owners, filed separate tax returns, maintained separate bank accounts and kept separate financial records, and even though the court cited no evidence of an intent to avoid withdrawal liability.

So, any individual or entity that may be sued on a joint and several liability basis on a questionable withdrawal liability assessment should consider, on a privileged basis, timely compliance with the MPPAA arbitration rules. This careful consideration could make sense even if the individual or entity did not directly receive notice of the assessment.