The U.S. District Court for the Southern District of New York has issued an interim ruling in the lawsuit known as The National Retirement Fund v. InterContinental Hotels Group, determining that the litigation should not be summarily dismissed.
Plaintiffs in the union pension funding liability lawsuit include the National Retirement Fund (NRF) and its board of trustees, who brought the underlying suit based on the Employee Retirement Income Security Act (ERISA). Named as the sole defendant is the InterContinental Hotels Group Resources (IHG).
According to the text of the pro-plaintiff ruling, prior to NRF’s filing of this action, IHG initiated arbitration proceedings to dispute the union pension fund’s withdrawal liability assessment. The arbitration is ongoing and, in fact, is “concurrent with this action.”
At stake in this ruling is the question of whether refusal to provide information to help a multiemployer pension fund determine withdrawal liability for one of its members constitutes a default, therefore making the full withdrawal liability payment immediately payable.
“NRF alleges that IHG failed to respond to NRF’s information requests,” the ruling states. “NRF allegedly crafted these requests to determine the risk that IHG would be unable to pay its withdrawal liability in accordance with the terms and schedule set forth in the fund’s trust agreement. NRF alleges that IHG’s failure to respond to its information requests constituted a default under the trust agreement.”
The text of the ruling notes that the trust agreement “provides that a default permits NRF to demand that IHG accelerate payment of the full amount of its withdrawal liability.”
“Because ERISA mandates that any dispute regarding withdrawal liability be submitted to arbitration in the first instance, the court cannot rule on the merits of the underlying withdrawal liability dispute at this time,” the ruling stipulates. “Rather, the court is limited to assessing whether NRF has plausibly alleged a breach of the trust agreement, pending the arbitrator’s final decision on the merits.”
The decision concludes this assessment rather quickly by ERISA litigation standards, requiring just 17 pages to explain that NRF has, in fact, plausibly alleged that the fund’s trust agreement provides that an employer’s failure to respond to an information request constitutes a default and that IHG indeed failed to respond to an information request.
“NRF has adequately pleaded its acceleration claim,” the ruling states. “Accordingly, IHG’s partial motion to dismiss is denied.”
The decision goes on to detail the fact that the parties do not dispute that, if there is a valid default under ERISA Section 1399(c)(5)(B), NRF can require IHG to pay its full withdrawal liability on an interim basis “during the pendency of arbitration.” Thus, the court is “limited to determining whether—assuming the trust agreement’s insecurity default provision is valid under ERISA, a question that must be determined by the arbitrator in the first instance—NRF has plausibly alleged a default within the meaning of the trust agreement.”
“Because courts may not determine in the first instance whether the trust agreement is consistent with ERISA, the withdrawal liability inquiry at the motion to dismiss stage is narrow,” the ruling explains. “To survive a motion to dismiss, the fund must plausibly allege that it adopted rules setting forth events indicating a substantial likelihood that the employer will be unable to pay its withdrawal liability and that, based on the occurrence of one or more such events, a default occurred.”
The ruling then states that, because NRF alleges that it adopted its information request default rule based on the substantial likelihood that employers that fail to respond to such requests will not pay their withdrawal liability and that IHG defaulted by failing to respond, NRF’s complaint “contains sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” IHG’s arguments to the contrary, the court says, are “unpersuasive.”
The full text of the ruling is available here.