Service Employees International Union National Industry Pension Fund v. Scientific and Commercial Systems Corporation ( 2015 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SERVICE EMPLOYEES
INTERNATIONAL UNION NATIONAL
INDUSTRY PENSION FUND, et al.,
Plaintiffs,
v. Civil Action No. 13-1705 (JEB)
SCIENTIFIC AND COMMERCIAL
SYSTEMS CORPORATION, et al.,
Defendants.
MEMORANDUM OPINION
From 2009 to 2011, Scientific and Commercial Systems Corporation and Tessada &
Associates, Inc. teamed up on a job for the National Aeronautics and Space Administration.
While carrying out the contract, SCSC employed Service Employees International Union
workers who participated in SEIU’s National Industry Pension Fund. In 2011, after being
terminated as subcontractor, SCSC discontinued its participation in this labor arrangement, at
which point the Fund determined that SCSC was liable to the Fund for this withdrawal. When
SCSC was not forthcoming with payments, the Fund (together with members of its Board of
Trustees) brought this suit seeking to collect. While SCSC answered the Complaint, it
simultaneously counterclaimed against the Fund and cross-claimed against TAI – praying for
declaratory and injunctive relief from any liability assessment. The Fund now moves to dismiss
SCSC’s Counterclaim on the ground that Defendant was required to first arbitrate its dispute, yet
failed to do so. Because the Court finds Plaintiff’s arbitration argument to be premature, it will
deny the Motion.
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I. Background
For the purposes of this Opinion, the Court assumes the truth of SCSC’s Answer and
Counterclaim. Where applicable, it also supplements this account with background facts drawn
from the Complaint so as to aid the reader in understanding the nature of the dispute.
In 2009, SCSC entered into a “Teaming Agreement/Joint Venture” with TAI in order to
procure a contract for work with NASA. See Answer, Counterclaim & Cross-claim, ¶ 59. TAI
was awarded the job as prime contractor, at which point it entered into a subcontractor agreement
with SCSC. See id., ¶ 61. Between 2009 and 2011, SCSC and TAI performed work under the
contract. See id., ¶¶ 62-65. On November 14, 2011, however, TAI informed SCSC that it
intended to terminate SCSC as its subcontractor due to a “significant funding reduction.” See
id., ¶¶ 65-67. Although SCSC objected, it granted TAI full control over its employees in order to
prevent a disruption of services on government facilities. See id., ¶ 68. TAI, accordingly,
terminated SCSC’s subcontract on November 30, 2011, and continued operations on the site with
substantially all of SCSC’s employees. See id., ¶ 69. In the meantime, SCSC sued TAI for this
breach of contract, a case it ultimately lost. See id., ¶¶ 70-71.
While servicing the contract, SCSC had employed workers who participated in SEIU’s
Pension Fund. See Compl., ¶¶ 4, 8. The Fund is an employee-pension benefit plan within the
meaning of the Employment Retirement Income Security Act and a multiemployer plan within
the meaning of the Multiemployer Pension Plan Amendments Act. As is relevant here, the
MPPAA obligates employers who withdraw from a multiemployer pension plan to contribute to
the plan a reasonable share of unfunded, vested employee benefits. Pursuant to the Act, it is up
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to the plan to determine the amount of the employer’s liability, notify the employer of the
amount, and collect it. See 29 U.S.C. §§ 1381-82.
In June 2012, Plaintiff initiated this process, notifying SCSC that it was liable for its
withdrawal from the plan created among SEIU, TAI, and SCSC. See Ans., ¶ 72. In response,
SCSC informed the Fund that it had been forced to withdraw by TAI’s termination of its
subcontract. See id., ¶ 73. Plaintiff nonetheless upheld its liability determination. See id., ¶ 74.
Believing there were ways to cover its liability, SCSC then pursued alternative avenues to
resolve the issue. On December 18, 2012, for instance, it urged TAI to request from the
Government “an equitable adjustment . . . to pay the withdrawal liability as a price adjustment to
cover the unfunded vested fringe benefits under the plan . . . .” Id., ¶¶ 83, 84. It appears that
TAI declined this invitation. See id., ¶¶ 84-87. SCSC also urged Plaintiff “to assert its claim for
withdrawal liability against TAI directly and thereby require that TAI request an equitable
adjustment from the Government . . . .” Id., ¶ 85. SEIU rejected this suggestion as well. See id.,
¶ 86.
Having received no payments, the Fund filed the present action on November 10, 2013,
seeking to collect withdrawal liability from Defendant. SCSC responded on January 22, 2014,
answering the Complaint, counterclaiming against the Fund, and cross-claiming against TAI.
Specifically, SCSC seeks declaratory and injunctive relief from this Court relieving it of
withdrawal liability. The Fund now moves to dismiss SCSC’s Counterclaim.
II. Legal Standard
Under Rule 12(b)(6), a court must dismiss a claim for relief when the complaint “fail[s]
to state a claim upon which relief can be granted.” In evaluating a motion to dismiss under Rule
12(b)(6), the Court must “treat the complaint’s factual allegations as true and must grant plaintiff
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the benefit of all inferences that can be derived from the facts alleged.” Sparrow v. United Air
Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000) (citation and internal quotation marks
omitted); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A court need not accept as true,
however, “a legal conclusion couched as a factual allegation,” nor an inference unsupported by
the facts set forth in the complaint. Trudeau v. FTC, 456 F.3d 178, 193 (D.C. Cir. 2006)
(quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)). Although “detailed factual allegations”
are not necessary to withstand a Rule 12(b)(6) motion, Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007), “a complaint must contain sufficient factual matter, [if] accepted as true, to
state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (internal quotation
marks omitted). Though a plaintiff may survive a Rule 12(b)(6) motion even if “recovery is very
remote and unlikely,” the facts alleged in the complaint “must be enough to raise a right to relief
above the speculative level.” Twombly, 550 U.S. at 555–56 (quoting Scheuer v. Rhodes, 416
U.S. 232, 236 (1974)).
A motion to dismiss under Rule 12(b)(6) must rely solely on matters within the
pleadings, see Fed. R. Civ. P. 12(d), which include statements adopted by reference as well as
copies of written instruments joined as exhibits. See Fed. R. Civ. P. 10(c). Where the Court
must consider “matters outside the pleadings” to reach its conclusion, a motion to dismiss “must
be treated as one for summary judgment under Rule 56.” Fed. R. Civ. P. 12(d); see also Yates v.
District of Columbia, 324 F.3d 724, 725 (D.C. Cir. 2003).
III. Analysis
The Fund’s central argument for dismissal here is that SCSC failed to arbitrate its
withdrawal-liability dispute and is therefore precluded from bringing any related claims in this
Court. As noted above, the MPPAA imposes liability on employers who withdraw from
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multiemployer pension plans, see Grand Union Co. v. Food Employers Labor Relations Ass’n,
808 F.2d 66, 68 (D.C. Cir. 1987), and details the procedural steps parties are to follow upon such
a withdrawal. To begin the process, it is the plan sponsor’s responsibility to determine the
amount of liability, notify the employer, and collect the amount due. See 29 U.S.C. §§ 1382,
1399(b)(1). Within ninety days of such notification, a withdrawing employer may request
review and explanation of the determination. See id. § 1399(b)(2)(A). “After a reasonable
review of any matter raised, the plan sponsor” must then “notify the employer of . . . the plan
sponsor’s decision, the basis for the decision, and the reason for any change in the determination
of the employer’s liability or schedule of liability payments.” Id. § 1399(b)(2)(B). If this
exchange does not resolve the issue, “[a]ny [remaining] dispute . . . concerning [such a
determination] . . . shall be resolved through arbitration.” Id. § 1401(a)(1).
As Plaintiff points out, failure to follow this dispute-resolution process through to
arbitration generally precludes a party from raising otherwise arbitrable arguments in court. See
Mot. 4-5 (citing Grand Union, 808 F.2d 66). And it correctly notes that SCSC did “not plead in
its counterclaim that it filed for, or that there has been, an arbitration or arbitration decision
regarding the withdrawal liability assessment.” Id. at 5. Yet Plaintiff mistakenly concludes from
this that “the counterclaim must be dismissed because Defendant fails to plead satisfaction of the
required jurisdictional threshold prior to filing suit.” Id.
To begin, it is settled law in the D.C. Circuit that the arbitrate-first rule is non-
jurisdictional. See I.A.M. Nat. Pension Fund Ben. Plan C. v. Stockton TRI Indus., 727 F.2d
1204, 1208 (D.C. Cir. 1984). In Stockton, the D.C. Circuit distinguished “between exhaustion
requirements that are ‘statutorily specified jurisdictional prerequisites’ and those that are
judicially imposed and reflect prudential concerns.” Id. (alteration omitted) (quoting Weinberger
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v. Salfi, 422 U.S. 749, 766 (1975)). “Because Congress has not clearly stated in MPPAA that a
court cannot decide an issue without first requiring arbitration,” it concluded, “arbitration under
MPPAA is not a statutorily specified jurisdictional prerequisite.” Id. Instead, the question of
whether a court can proceed to otherwise arbitrable issues is to be determined “as a prudential
matter.” Id. at 1209. To be sure, subsequent case law has made clear that the set of
circumstances in which arbitration will not be required is exceedingly narrow. See Grand Union,
808 F.2d at 70. Arbitrate-first nonetheless remains “a general but sometimes waivable rule.” Id.
Because arbitration can be waived, the Court cannot require SCSC to have pled
exhaustion of this remedy in its Counterclaim, and SEIU, has provided no authority to the
contrary. Indeed, non-jurisdictional exhaustion requirements in other contexts generally arise in
affirmative defenses that must themselves be pled and proven unless clearly established on the
face of the complaint. See, e.g., Bowden v. United States, 106 F.3d 433, 437 (D.C. Cir.1997)
(exhaustion in Title VII context is affirmative defense that “defendant bears the burden of
pleading and proving”). In other words, it is ultimately the Fund’s responsibility to prove that
SCSC failed to timely arbitrate its claims. Finally, the Court is particularly loath to resolve this
dispute at this early stage considering the fact that the window for arbitration (and with it any
alternative avenue for relief) has apparently closed. Cf. Grand Union Co. v. Food Employers
Labor Relations Ass’n, No. 85-1551, 1985 WL 6072, at *1 (D.D.C. Oct. 25, 1985), aff’d, 808
F.2d 66 (D.C. Cir. 1987) (affirming dismissal of employer’s claim on failure-to-exhaust grounds
where arbitration provided available alternative remedy). Whatever the merits of the Fund’s
exhaustion argument, therefore, the Court finds this Motion to Dismiss the wrong stage to
adjudicate them.
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The prudence of this approach is further underscored by the fact that the parties’
arbitration arguments reference materials outside of the pleadings. In its Complaint, the Fund
alleged that “SCSC did not timely initiate arbitration proceedings,” and in its Answer, SCSC
denied this contention. See Compl., ¶ 19; Ans., ¶ 19. The pleadings said nothing more on the
matter. In briefing, SCSC now forwards several arguments regarding why it could not arbitrate
in the first place, all of which relate to communications between the parties prior to the filing of
this lawsuit. Without getting into the details of these arguments, SCSC contends that the Fund
refused to initiate arbitration, refused to exhaust potentially dispositive alternative administrative
remedies, and ultimately precluded the parties from jointly initiating arbitration proceedings
altogether. See Opp. at 3. While Plaintiff disputes these contentions, the Court would need to
look beyond SCSC’s pleadings to address the parties’ divergent characterizations of their pre-
trial communications. This dispute is best left for resolution on a complete factual record.
Finally, the Fund contends that SCSC cannot proceed on its Counterclaim because this
Court lacks statutory jurisdiction over it. SCSC, for its part, identifies several alleged bases for
jurisdiction, but the Court need only address one of them – namely, 29 U.S.C. § 1451. This
provision provides that an “employer . . . who is adversely affected by the act or omission of any
party under this subtitle with respect to a multiemployer plan or an employee organization which
represents such a plan participant or beneficiary for purposes of collective bargaining, may bring
an action for appropriate legal or equitable relief, or both.” Id. § 1451(a)(1). It further indicates
that “district courts of the United States shall have exclusive jurisdiction of an action under this
section without regard to the amount in controversy, except that State courts of competent
jurisdiction shall have concurrent jurisdiction over an action brought by a plan fiduciary to
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collect withdrawal liability.” Id. § 1451(c). According to SCSC, its Counterclaim is precisely
the kind of action contemplated by Section 1451. See Opp. at 10-11.
In response, the Fund argues that SCSC cannot “establish a substantive cause of action
under Section 1451 because ERISA does not provide any basis for an employer to challenge
withdrawal liability prior to exhausting arbitration.” Reply at 6. This argument, however, is
precisely the one the Court has already rejected.
In conclusion, the Court finds Plaintiff’s exhaustion arguments premature at the motion-
to-dismiss stage. It emphasizes, however, that it passes no judgment on the merits of these
contentions. Given the limited circumstances in which arbitration is not required, SCSC may
ultimately be precluded from pursuing not only its Counterclaim, but related affirmative defenses
as well. See, e.g., I.A.M. National Pension Fund v. Clinton Engines Corp., 825 F.2d 415, 416
(D.C. Cir.1987) (withdrawing employer had to arbitrate defenses in order to preserve them for
judicial consideration). These issues, however, must wait for another day.
IV. Conclusion
For the foregoing reasons, the Court will deny Plaintiffs’ Motion to Dismiss.
/s/ James E. Boasberg
JAMES E. BOASBERG
United States District Judge
Date: July 2, 2015
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