remanding to arbitrator with direction that liability should be 13 recalculated using the 7.5% assumption testified to as the best estimate absent 14 “additional evidence sufficient to support a different rate”
How later courts described this case
- remanding to arbitrator with direction that liability should be 13 recalculated using the 7.5% assumption testified to as the best estimate absent 14 “additional evidence sufficient to support a different rate”
Written by the judges who cited it.
The opinion
1
2
3
4
5
UNITED STATES DISTRICT COURT
6 WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
7
CITY OF TACOMA, CASE NO. 2:24-cv-99
8
Plaintiff, ORDER ON CROSS-MOTIONS FOR
9 SUMMARY JUDGMENT
v.
10
WESTERN METAL INDUSTRY
11 PENSION FUND and its BOARD OF
TRUSTEES,
12
Defendants.
13
14
1. INTRODUCTION
15
An employer who withdraws from an underfunded multiemployer pension
16
plan must pay its fair share of the plan’s unfunded liabilities. Congress established
17
this “withdrawal liability” as a fixed debt owed to the pension plan when it passed
18
the Multiemployer Pension Plan Amendments Act of 1980. See Pension Ben. Guar.
19
Corp. v. R.A. Gray & Co., 467 U.S. 717, 724–5 (1984); 29 U.S.C. §§ 1381, 1391.
20
This case arises from an arbitration award concerning Plaintiff City of
21
Tacoma’s (“the City”) withdrawal liability to Defendant Western Metal Industry
22
Pension Fund (“the Plan”). An arbitrator has already ruled that the Plan
23
1 improperly calculated the City’s liability by using interest rates that didn’t reflect
2 the Plan’s actual investment experience. The parties now seek judicial review of
3 that arbitration decision.
4 At issue is whether the Plan’s actuary made appropriate assumptions when
5 calculating the City’s withdrawal liability. ERISA requires plan actuaries to use
6 reasonable assumptions that “tak[e] into account the experience of the plan and
7 reasonable expectations” of investment returns and “offer the actuary’s best
8 estimate of anticipated experience under the plan[.]” 29 U.S.C. § 1393(a)(1). The
9 Plan’s actuary, however, did not base her interest-rate assumptions on the Plan’s
10 actual or expected investment returns of 7%. Instead, she used significantly lower
11 “settlement rates” prescribed by the Pension Benefit Guaranty Corporation
12 (“PBGC”) for terminating plans—between 2.53% and 2.84%—ratcheting up the
13 City’s assessed liability by about $30 million.
14 Having reviewed the record, the parties’ briefing, and the law, the Court,
15 being fully informed, GRANTS the City’s motion to enforce the arbitrator’s award,
16 Dkt. No. 17, DENIES the Plan’s motion to vacate, Dkt. No. 18, and confirms the
17 arbitrator’s order requiring the Plan to recalculate the City’s withdrawal liability
18 using a 7% interest-rate assumption. Binding Ninth Circuit precedent clearly
19 prohibits plans from using PBGC settlement rates that ignore the plan’s actual
20 investment experience. The arbitrator correctly applied this law to the undisputed
21 facts.
22
23
1 2. BACKGROUND
2
2.1 Legal background.
3
Congress enacted the Employee Retirement Income Security Act of 1974
4
(ERISA) “to provide comprehensive regulation for private pension plans.” Connolly
5
v. Pension Ben. Guar. Corp., 475 U.S. 211, 213 (1986). ERISA aims “to ensure that
6
employees and their beneficiaries would not be deprived of anticipated retirement
7
benefits by the termination of pension plans before sufficient funds have been
8
accumulated in the plans.” Gray, 467 U.S. at 720 (citing Nachman Corp. v. Pension
9
Ben. Guar. Corp., 446 U.S. 359, 361–362 (1980)). To achieve this goal, Congress
10
“created the Pension Benefit Guaranty Corporation (PBGC), a wholly owned
11
Government corporation, to administer an insurance program for participants in …
12
pension plans.” Connolly, 475 U.S. at 214; see 29 U.S.C. § 1302.
13
To address financial instability in multiemployer pension plans, Congress
14
later passed the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA),
15
which requires employers who withdraw from such plans to pay “withdrawal
16
liability”—their “proportionate share of the plan’s unfunded vested benefits.” Gray,
17
467 U.S. at 717, 725; 29 U.S.C. §§ 1381, 1391.
18
Central to this case is how withdrawal liability is calculated. When an
19
employer withdraws, the plan’s actuary determines the liability amount by applying
20
various “actuarial assumptions,” with the interest-rate assumption being “arguably
21
the most important.” Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers
22
Pension Tr. for S. Cal., 508 U.S. 602, 633 (1993). A higher interest rate yields
23
1 higher projected growth, reducing the liability assessment; a lower rate increases
2 the liability assessment. GCIU-Emp. Ret. Fund v. MNG Enters., Inc., 51 F.4th 1092,
3 1099 (9th Cir. 2022).
4 ERISA requires that these actuarial assumptions be “reasonable (taking into
5 account the experience of the plan and reasonable expectations)” and, “in
6 combination, offer the actuary’s best estimate of anticipated experience under the
7 plan[.]” 29 U.S.C. § 1393(a)(1). Alternatively, the statute also permits the use of
8 actuarial assumptions derived from PBGC regulations (see 29 U.S.C. § 1393(a)(2)),
9 but because no such final regulations have been issued, plans must currently use
10 the first method. See GCIU, 51 F.4th at 1098 n.2.
11 Importantly, the legal framework for individual employer withdrawals differs
12 from that governing mass withdrawals when all employers exit and the plan is
13 terminated. In mass-withdrawal situations, plans must typically purchase
14 annuities to cover benefits, and PBGC prescribes settlement rates reflecting risk-
15 free annuity prices rather than expected investment returns. See Sofco Erectors,
16 Inc. v. Trs. of Ohio Operating Eng’rs Pension Fund, 15 F.4th 407, 420–21 (6th Cir.
17 2021).
18 The MPPAA also establishes procedures for employers to challenge
19 withdrawal-liability assessments. Once the plan determines the liability amount, it
20 issues a notification and demand to the employer. 29 U.S.C. § 1399(b). If the
21 employer objects, the matter proceeds to mandatory arbitration. 29 U.S.C. §
22 1401(a)(1). During arbitration, the plan’s calculations are presumed correct unless
23 the employer shows by a preponderance of evidence that “the actuarial assumptions
1 and methods used in the determination were, in the aggregate, unreasonable” or
2 “the plan’s actuary made a significant error.” 29 U.S.C. § 1401(a)(3)(B). After
3 arbitration concludes, either party may seek “judicial review of the arbitrator’s
4 decision” in federal district court “to enforce, vacate, or modify the [arbitration]
5 award.” Concrete Pipe, 508 U.S. at 611 (citing 29 U.S.C. § 1401(b)(2)).
6
2.2 Factual background.
7
The following uncontested facts support this Court’s decision. See Dkt. No. 14
8
(City of Tacoma, Claimant, v. Western Metal Industry Pension Fund, Respondent,
9
AAA Case No. 01-23-0001-6879).
10
The Plan is a multiemployer pension plan under ERISA § 4001(a)(3), 29
11
U.S.C. § 1301(a)(3), maintained and administered through its Board of Trustees.
12
Dkt. No. 1 ¶ 3; Dkt. No. 6 ¶ 3. The City is a municipal corporation and qualifies as
13
an “employer” under ERISA §§ 3(5) and 3(14), 29 U.S.C. §§ 1002(5) and 1002(14)(C).
14
Dkt. No. 1 ¶ 2; Dkt. No. 6 ¶ 2.
15
Before 2019, the City contributed to the Plan under collective bargaining
16
agreements with five employee units. Dkt. No. 1 ¶ 13; Dkt. No. 6 ¶ 10. In 2019, the
17
City partially withdrew from the Plan when its obligation to contribute on behalf of
18
two of these bargaining units ceased (“Partial Withdrawal”). Dkt. No. 14-1 at 52;
19
Dkt. No. 6 ¶ 10. In 2020, the City completely withdrew when its obligation to
20
21
22
23
1 contribute on behalf of the remaining bargaining units ceased (“Complete
2 Withdrawal”). Dkt. No. 14-2 at 274; Dkt. No. 6 ¶ 10.1
3 In November 2021, the Plan issued a demand letter to the City for
4 $44,325,881 in withdrawal liability. Dkt. No. 14-2 at 277. This amount combined
5 assessments for both the Partial Withdrawal and the Complete Withdrawal. For the
6 Partial Withdrawal, the Plan’s actuary used an interest-rate assumption of 2.84%
7 for the first twenty years and 2.76% thereafter. For the Complete Withdrawal, the
8 actuary applied an interest-rate assumption of 2.53% in perpetuity. See Dkt. No. 14-
9 1 at 492 (2019 actuarial report), 558 (2020 actuarial report).
10 The Plan’s actuary chose these interest-rate assumptions “based on the rates
11 prescribed by the PBGC” for mass withdrawals under ERISA § 4044. See Dkt. No.
12 14-2 at 290; see also supra § 2.1. The Plan’s annual actuarial valuation reports for
13 2019 and 2020 explained the reasoning behind this choice:
14 Withdrawal liability is used to allocate a portion of Unfunded Vested
Benefits to employers who withdraw from the fund. A withdrawal is
15 viewed as a settlement similar to an annuity purchase where the
transfer of investment risk for a portion of a plan’s liabilities is assumed
16 by an insurance company. Use of the PBGC rates reflects the fact that a
withdrawn employer transfers investment risk to the remaining
17 employers. As such, it is reasonable to use PBGC interest rates that are
used to measure plan termination liabilities and which are considered
18 comparable to rates used by insurance companies for annuities to
measure the financial obligation of the withdrawing employer. In our
19 professional judgement, the selected investment return assumption for
20
1 In arbitration, the parties disputed the effective dates of the City’s withdrawals.
21 See Dkt. No. 14-1 at 30–42. The arbitrator did not reach those issues, see Dkt. No.
14-2 at 750–51, and they are not before the Court. The City “accepted [the Plan’s
22 withdrawal-date contentions] for purposes of the [sic] challenging the interest rate
assumption, but reserved the right to raise an alternative argument if the interest
23 rate argument was unsuccessful.” Dkt. No. 1 ¶ 14.
1 withdrawal liability is reasonable for this purpose and is not expected to
have any significant bias.
2
Dkt. No. 14-1 at 492 (2019 report); id. at 558 (2020 report with identical language).
3
In her deposition, the Plan’s actuary admitted that the PBGC settlement rates do
4
not reflect the Plan’s actual or anticipated experience, but maintained that use of
5
the settlement rates was appropriate because “the employer is essentially settling
6
their obligation to the Trust.” See Dkt. No. 14-2 at 367.
7
Crucially, the Plan used a completely different interest rate—7%—when
8
calculating minimum-funding requirements for contributing employers. The Plan’s
9
2019 and 2020 actuarial reports explained this rate as follows:
10
The investment return assumption [of 7%] was selected based on the
11 Plan’s target asset allocation as of the valuation date and capital market
assumptions from several sources, including published studies
12 summarizing the expectations of various investment experts. This
information was used to develop forward-looking long-term expected
13 returns, producing a range of reasonable expectations according to
industry experts. Based on the resulting range of potential assumptions,
14 in our professional judgment the selected investment return assumption
is reasonable and is not expected to have any significant bias.
15
Id. at 558; id. at 492 (2019 report with identical language).
16
The Plan’s actuary admitted during her deposition that this seven-percent
17
funding assumption, unlike the PBGC rates, reflected the expected returns of the
18
assets of the Plan “based on the current portfolio of the [P]lan, all the things it’s
19
invested in, [and] the capital market assumptions or the forward-looking expected
20
returns of that portfolio based on a variety of publicly available information.” Id. at
21
429.
22
23
1 The City challenged the Plan’s withdrawal-liability calculations through
2 arbitration. See generally Dkt. No. 14 (Administrative Record of Arbitration). Both
3 parties moved for summary judgment, with the City requesting recalculation using
4 the 7% rate instead of the PBGC rates. See Dkt. No. 14-1 at 42. On January 2, 2024,
5 Arbitrator Scogland ruled for the City, finding that “using an interest rate based on
6 the settlement rate, as was done here, does not reflect the experience of the plan
7 and is, therefore, impermissible.” Dkt. No. 14-2 at 750–51. He ordered “[the Plan]
8 and its actuary [to] reassess the withdrawal liability at the interest rate of 7% and
9 give credit for payments previously made.” Id.
10 In January 2024, the City sued to enforce the arbitration decision, and the
11 Plan countersued to vacate it. Both parties now move for summary judgment. Dkt.
12 Nos. 17, 18.
13 3. DISCUSSION
14 3.1 Legal standard.
District courts play a limited role when reviewing arbitration decisions under
15
the MPPAA. The arbitrator’s factual findings enjoy a strong presumption of
16
correctness, “rebuttable only by a clear preponderance of the evidence[.]” 29 U.S.C. §
17
1401(c). “The arbitrator’s conclusions of law are reviewed de novo.” Penn Cent. Corp.
18
v. W. Conf. of Teamsters Pension Tr. Fund, 75 F.3d 529, 533 (9th Cir. 1996).
19
As always, summary judgment is warranted when “the movant shows that
20
there is no genuine dispute as to any material fact and the movant is entitled to
21
judgment as a matter of law.” Fed. R. Civ. P. 56(a). A dispute is “genuine” if “a
22
reasonable jury could return a verdict for the nonmoving party,” and a fact is
23
1 material if it “might affect the outcome of the suit under the governing law.”
2 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When considering a
3 summary judgment motion, courts must view the evidence “in the light most
4 favorable to the non-moving party.” Barnes v. Chase Home Fin., LLC, 934 F.3d 901,
5 906 (9th Cir. 2019) (internal citation omitted). “[S]ummary judgment should be
6 granted where the nonmoving party fails to offer evidence from which a reasonable
7 jury could return a verdict in its favor.” Triton Energy Corp. v. Square D Co., 68
8 F.3d 1216, 1221 (9th Cir. 1995).
9
3.2 The arbitrator correctly found that the Plan’s interest-rate
assumption did not reflect the anticipated experience of the Plan
10
and was therefore impermissible as a matter of law.
11
The uncontested facts show that the Plan based the City’s withdrawal-
12
liability assessment on an interest-rate assumption derived from the settlement
13
rates prescribed by the PBGC for mass withdrawals under ERISA § 4044—not from
14
the actual or expected experience of the Plan’s asset portfolio. Arbitrator Scogland
15
found this interest-rate assumption impermissible as a matter of law. Reviewing
16
this legal conclusion de novo, the Court agrees.
17
Binding Ninth Circuit precedent directly addresses this issue. In GCIU v.
18
MNG Enterprises, Inc., the Ninth Circuit confronted remarkably similar facts: a
19
multiemployer pension plan actuary calculated a departing employer’s withdrawal
20
liability using the PBGC-prescribed settlement rate as the interest-rate
21
assumption; the employer disputed the assessment and compelled arbitration; and
22
the arbitrator found that the employer “had shown that the actuary relied on
23
1 unreasonable assumptions in deciding the interest rate for the withdrawal liability
2 because the PBGC rate disregarded the experience of the plan and the expected
3 returns on assets.” GCIU, 51 F.4th at 1096. The district court agreed with the
4 arbitrator, and the pension plan appealed to the Ninth Circuit, which affirmed the
5 district court. Id. at 1099.
6 The Ninth Circuit held that “the actuary’s use of the PBGC rate—without
7 considering the ‘experience of the plan and reasonable expectations’—did not satisfy
8 the ‘best estimate’ standard.” Id. (quoting 29 U.S.C. § 1393(a)(1)).2 While
9 acknowledging that ERISA’s reasonableness standard “build[s] in some leeway” for
10 actuarial judgment, the Ninth Circuit found that “[b]y ignoring the expected returns
11 of the plan’s assets and experience, the actuary’s estimate fell short of the statutory
12 ‘best estimate’ standard because it was not tailored to the features of the plan.” Id.
13 (quoting 29 U.S.C. § 1393(a)(1)). The Ninth Circuit “follow[ed] [its] sister circuits
14 and interpret[ed] the statute to require that the actuary’s assumptions and methods
15 reflect the plan’s characteristics.” Id. (citing United Mine Workers of Am. 1974
16 Pension Plan v. Energy W. Mining Co., 39 F.4th 730, 738 (D.C. Cir. 2022); Sofco, 15
17 F.4th at 419).
18 This case is virtually identical to GCIU. The Plan’s actuary testified in her
19 deposition that she used the PBGC settlement rate to shift investment risk to the
20
2 In so holding, the Ninth Circuit “express[ed] no view on an actuary’s use of the
21 PBGC rate as a starting point or a component in a blended rate.” GCIU, 51 F.4th at
1099 n.4; cf. Sofco, 15 F.4th at 420–21 (holding that plan actuaries may not use “a
22 weighted blend of the interest rate used for minimum-funding purposes and
annuity rates published by the PBGC”). This case does not present the question of
23 the permissibility of a blended rate.
1 City because “the employer is essentially settling their obligation to the Trust.” Dkt.
2 No. 14-2 at 367. This is precisely the approach the Ninth Circuit rejected in GCIU.
3 The Plan nevertheless advances a very narrow reading of GCIU, arguing that
4 an exception should apply for “a multiemployer pension plan who has demonstrated
5 that they cannot meet minimum contributions necessary to backstop the risk or
6 volatility contemplated as certain in the ERISA minimum funding calculation (i.e.
7 have a negative credit balance)[.]” Dkt. No. 18 at 19. The Plan suggests that such an
8 exception might apply only to “multiemployer plans in critical status (or the smaller
9 subset who have already reached all reasonable measures).” Id. (emphasis original).
10 The Plan notes that it “has been in critical status since 2009 and has a credit
11 balance deficiency because contributions are inadequate to meet the ERISA
12 minimum funding calculation.” Id. at 32 n. 21 (“It’s in critical status for a reason –
13 it’s [sic] industry is fading, it’s cashflow negative, and the Plan is reliant on volatile
14 investment returns to fund benefits.”); see also Dkt. No. 14-2 at 177 (Notice of
15 Critical Status) (“The Plan is critical because the minimum contribution credit
16 balance is projected to be exhausted within the three years following the current
17 year.”).
18 This argument is unpersuasive. First, there is simply no evidence that the
19 Plan intends to terminate, liquidate its investment portfolio, and channel its assets
20 into risk-free annuities in the foreseeable future. See Dkt No. 14-2 at 368
21 (admission of Plan actuary in deposition that she is unaware of plans to terminate
22 in the next ten years). Second, creating such an exception for underfunded plans
23 would effectively swallow the rule, as withdrawal-liability calculations only apply to
1 underfunded plans in the first place. See also Sofco, 15 F.4th at 420–21 (holding
2 that annuity-based settlement rates are inappropriate when “plans are neither
3 going out of business nor required to purchase annuities to cover the departing
4 employer’s share of vested benefits”). Third, GCIU does not suggest any exception
5 based on a plan’s funding status. The Court cannot create an exception that would
6 undermine the clear statutory requirement that the actuarial assumptions used to
7 calculate withdrawal liability reflect the anticipated experience of the plan.
8 The Plan also devotes substantial space to arguing that PBGC settlement
9 rates reflect “fair market value” principles accepted by actuaries. Dkt. No. 18 at 14–
10 24. The Plan contends that its actuary followed “both the express terms of the
11 statute and U.S. Supreme Court’s interpretative directives exactly,” id. at 16, and it
12 suggests that modern actuarial standards favoring “financial economics and fair
13 value principles,” id. at 29, should influence this Court’s interpretation of ERISA’s
14 requirements. But as the Sixth Circuit aptly noted, “ERISA does not yield to the
15 Actuarial Standards of Practice; the standards must succumb to the statutory
16 requirements.” Sofco, 15 F.4th at 423. The Court must apply the law as interpreted
17 by the Ninth Circuit.
18 The arbitrator correctly determined that the Plan’s interest-rate assumptions
19 failed to reflect the Plan’s anticipated experience and therefore violated ERISA
20 § 1393(a)(1).
21
22
23
1 3.3 The arbitrator correctly ordered the Plan to recalculate the City’s
withdrawal liability using a seven-percent interest-rate assumption.
2
The arbitrator correctly ordered the Plan to recalculate the City’s withdrawal
3
liability using a 7% interest rate. This rate represents the Plan’s own estimate of its
4
anticipated investment returns—the same rate the Plan used when calculating
5
minimum-funding requirements for participating employers. While plans need not
6
use identical interest rates for both calculations, the arbitrator correctly determined
7
that 7% best reflects the Plan’s expected experience.
8
The Court begins by noting—as the Plan repeatedly argues at length, see,
9
e.g., Dkt. No. 18 at 13–20—that multiemployer plans are not statutorily required to
10
calculate withdrawal liability using the same interest-rate assumption that they
11
use when calculating participating employers’ minimum-funding contributions. See
12
United Mine Workers, 39 F.4th 730 at 741–43; Nat’l Ret. Fund v. Domestic Linen
13
Control Grp., No. 23-CV-5955, 2024 WL 3607316 (S.D.N.Y. July 31, 2024) (“[T]he
14
assumptions used to calculate withdrawal liability must be reasonable ‘in the
15
aggregate,’ whereas ‘each’ assumption used to calculate minimum funding must be
16
reasonable.”); compare 29 U.S.C. § 1393(a)(1), with id. § 1084(c)(3)(A). Therefore,
17
the mere fact that the Plan used 7% as the projected rate of return on its equity
18
investments when calculating minimum-funding contributions for 2019 and 2020
19
does not necessarily require the Plan to use the same assumption when calculating
20
withdrawal liability.
21
The case of Domestic Linen Control Group, 2024 WL 3607316, is instructive.
22
There, as here, the pension plan calculated the departing employer’s withdrawal
23
1 liability using the PBGC settlement rates. Id. at *1. The arbitrator found this
2 interest-rate assumption unreasonable and “ordered [the plan] to recalculate the
3 assessment using the 7.3% interest rate that [the plan] uses for determining
4 [minimum] funding levels.” Id. The district court affirmed the arbitrator’s decision
5 rejecting the plan’s calculations but remanded on the question of remedy. Id. The
6 court explained: “[T]he arbitrator ordered [the plan] to recalculate liability using
7 the 7.3% rate without ever stating why it was doing so.” Id. at *7 (citing Employees’
8 Ret. Plan of Nat’l Educ. Ass’n v. Clark Cnty. Educ. Ass’n, 664 F. Supp. 3d 24, 45
9 (D.D.C. 2023) (remanding to arbitrator where arbitrator did not make a specific
10 factual finding about the actuary’s best estimate); New York Times Co. v.
11 Newspaper & Mail Deliverers’-Publishers’ Pension Fund, 303 F. Supp. 3d 236, 256
12 (S.D.N.Y. 2018) (remanding to arbitrator with direction that liability should be
13 recalculated using the 7.5% assumption testified to as the best estimate absent
14 “additional evidence sufficient to support a different rate”)). The court noted that
15 while it was “difficult to see how any other rate could be used” given that “the Plan’s
16 actuary testified that his best estimate of anticipated returns was 7.3%[,]”
17 nevertheless, “because the arbitrator’s basis for using 7.3% is not explained in the
18 award, the Court will remand to the arbitrator for further consideration and to
19 make his reasoning explicit.” Id. at *8.
20 This case differs in a crucial respect. Unlike the arbitrator in Domestic Linen
21 Control Group, Arbitrator Scogland did state an affirmative factual conclusion that
22 “[t]he investment rate (7%) best reflects the anticipated experience under the plan.”
23 See Dkt. No. 14-2 at 751. This conclusion was supported by the evidentiary record
1 before him, including the actuarial reports and deposition transcript quoted above.
2 This factual conclusion, albeit brief and unexplained, is presumed correct absent a
3 preponderance of evidence to the contrary—a burden the Plan has not met. See 29
4 U.S.C. § 1401(c).
5 Also, unlike in Domestic Linen Control Group, this Court has the benefit of
6 circuit-level precedent directly on point. In GCIU, the arbitrator ordered the plan’s
7 actuary to recalculate the employer’s withdrawal liability using a rate of 7%—which
8 the arbitrator derived, as here, from the rate assumed by the plan’s actuary when
9 calculating minimum funding. See GCIU-Emp. Ret. Fund v. MNG Enters., Inc., No.
10 CV 21-00061 PA (C.D. Cal. July 8, 2021), Dkt. No. 25-6 at 225 (Arbitration Ruling)
11 (“[The plan actuary] testified for the past several years the funding rate he has used
12 was 7%), 230 (“The withdrawal liability assessments must be recalculated by using
13 a withdrawal liability rate of 7%). Even though the arbitrator provided no analysis
14 for this seven-percent choice (beyond simply stating that it was the rate used for
15 calculating minimum funding), the district court nonetheless affirmed the decision
16 (though modifying the rate from 7% to 8% based on a finding that the 7% rate
17 reflected a typographical error on the part of the arbitrator). See GCIU-Emp. Ret.
18 Fund v. MNG Enters., Inc., No. CV 21-00061 PA (JEMX), 2021 WL 3260079, at *5
19 (C.D. Cal. July 8, 2021) (“[T]he actuary should have used an 8% interest rate, which
20 was the actuary’s ‘best estimate’ of the Fund’s minimum funding rate during the
21 withdrawal years, i.e. the rate they anticipated the plan assets would grow.”). The
22 Ninth Circuit affirmed this part of the district court’s order. See GCIU, 51 F.4th at
23 1098–1100.
1 Ninth Circuit precedent thus counsels district courts to affirm MPPAA
2 arbitration decisions ordering pension plans to recalculate withdrawal liability
3 using the interest-rate assumption involved in the plan’s minimum-funding
4 calculation even when the arbitration decision offers little to no analysis about why
5 that’s the best assumption—at least as long as (1) the actuary is on the record
6 testifying that the minimum-funding interest rate reflects their reasonable estimate
7 of the plan’s anticipated experience, and (2) the arbitrator states a conclusion to
8 that effect. If this were not the law of the circuit, the Ninth Circuit in GCIU, like
9 the district court in Domestic Linen Control Group, would have remanded to the
10 arbitrator for further fact-finding about the appropriate interest-rate assumption.
11 Accordingly, this Court affirms Arbitrator William L. Scogland’s decision to order
12 the Plan to recalculate the City’s withdrawal liability using a seven-percent
13 interest-rate assumption.
14
3.4 The Court declines to award attorneys’ fees.
15
ERISA authorizes the Court to award attorneys’ fees and expenses to the
16
prevailing party in an action to enforce an MPPAA arbitration decision. 29 U.S.C.
17
§ 1451(e). The City requests fees “because [the Plan] lacks any legal authority for its
18
position and has caused the City to incur fees disputing arguments that the Ninth
19
Circuit has already resolved.” Dkt. No. 19 at 20.
20
Courts in the Ninth Circuit consider five factors when evaluating fee requests
21
in MPPAA cases: (1) the degree of the opposing party’s culpability or good faith; (2)
22
the ability of the opposing party to satisfy an award of fees; (3) whether an award of
23
1 fees would deter others; (4) whether the participants and beneficiaries under an
2 ERISA plan would benefit from an award of fees; and (5) the relative merits of the
3 parties’ positions. See Cuyamaca Meats, Inc. v. San Diego & Imperial Ctys.
4 Butchers’ & Food Employers’ Pension Tr. Fund, 827 F.2d 491, 500 (9th Cir. 1987).
5 Applying these factors here yields a close call. As the City rightly points out,
6 the Plan—attempting to wave away on-point, binding authority—raises arguments
7 that the Ninth Circuit has expressly rejected. The Plan devotes pages upon pages of
8 briefing to arguing in favor of actuarial practices that have no bearing on the clear
9 application of statutory law as construed by the Ninth Circuit to the facts here. See,
10 e.g., Dkt. No. 18 at 24 (“We should rely on, and then defer to, the highly skilled,
11 independent and regulated [actuarial] professionals tasked under the law with
12 being experts in their field. Their collective voice is clear - appellate courts have
13 made a clear error in understanding fair value concepts.”). Awarding fees would
14 have deterrent value in discouraging such borderline-frivolous arguments in the
15 future.
16 Yet the body of case law undermining the Plan’s arguments is relatively
17 recent, with the key decisions issued only in the past few years. It is reasonable that
18 it should take some time for actuarial “standards [to] succumb to the statutory
19 requirements.” See Sofco, 15 F.4th at 423. The Court does not find bad faith. The
20 Court also declines to impose a new financial burden on an already-underfunded
21 pension plan whose beneficiaries have played no role in this dispute.
22 The Court therefore denies the City’s request for attorneys’ fees and costs
23 under § 1451(e). But the Court warns the Plan and its actuary that as the weight of
1 precedent accumulates, the judicial calculus around awarding fees and costs to
2 deter meritless arguments will shift accordingly.
3 4. CONCLUSION
4 In sum, the Court GRANTS the City’s motion for summary judgment, Dkt.
5 No. 17, DENIES the Plan’s motion for summary judgment, Dkt. No. 18; DENIES
6 the City’s request for attorneys’ fees and costs; AFFIRMS the arbitration award of
7 Arbitrator William L. Scogland in City of Tacoma, Claimant, v. Western Metal
8 Industry Pension Fund, Respondent, AAA Case No. 01-23-0001-6879; ORDERS the
9 Plan and its actuary to reassess the City’s withdrawal liability using an interest-
10 rate assumption of 7% and to give the City credit for payments previously made;
11 and DIRECTS the Clerk of Court to ENTER JUDGMENT closing this case.
12 Finally, the Court regrets its delay in addressing these matters.
13 It is so ORDERED.
14 Dated this 28th day of May, 2025.
15 a
Jamal N. Whitehead
16
United States District Judge
17
18
19
20
21
22
23