Opinion
1:22-cv-03303 (PAE) (SDA)
12-27-2022
Dycom Industries, Inc., Plaintiff, v. Pension, Hospitalization & Benefit Plan of the Electrical Industry, Defendant.
HONORABLE PAUL A. ENGELMAYER, UNITED STATES DISTRICT JUDGE.
REPORT AND RECOMMENDATION
STEWART D. AARON United States Magistrate Judge.
INTRODUCTION
This action arises under the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended by the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”), 29 U.S.C. §§ 1001-1461. Plaintiff Dycom Industries, Inc. (“Plaintiff” or “Dycom”) brings this action against the Pension, Hospitalization & Benefit Plan of the Electrical Industry (“Defendant” or the “Fund”) seeking to vacate a March 23, 2022 award (the “Award”) of arbitrator Mark M. Grossman (“Arbitrator Grossman”). (See Compl., ECF No. 1.) Pending before the Court are Plaintiff's motion, pursuant to 29 U.S.C. § 1401(b)(2), to vacate the Award (Pl.'s Mot. to Vacate, ECF No. 25), and Defendant's motion to confirm the Award. (Def.'s Mot. to Confirm, ECF No. 28.)
A copy of the Award is annexed as Exhibit A to Plaintiff's Complaint. (See Award, ECF No. 1-1.)
For the following reasons, I respectfully recommend that Plaintiff's motion be DENIED and that Defendant's motion be GRANTED.
BACKGROUND
Dycom is the successor in interest to Midtown Express, LLC (“Midtown”), a now dissolved wholly owned subsidiary of Dycom. (See Compl. ¶ 5.) Midtown performed work involving the installation, servicing and disconnection of telecommunications cables and equipment in private residences for customers of Time Warner Cable, Inc. (“TWC”). (See id. ¶¶ 7-9; Award at 4.)
The bulk of Midtown's employees were represented for collective bargaining purposes by Local 3 of the International Brotherhood of Electrical Workers (“Local 3”). (Award at 4.) Midtown was a signatory to collective bargaining agreements (“CBAs”) with Local 3 that required contributions to the Fund. (Id.) These CBAs covered cable installation work for TWC and classified all the bargaining unit employees as electronic technicians, with the following sub-classifications: installers, warehouse, data entry, dispatch, crew chief and foreman.(See id. at 4-5.) A Field Installation Services Agreement covered Midtown's work for TWC (the “TWC Installation Contract”). (Compl. ¶ 7.)
In the Award, Arbitrator Grossman referred to installers as “technicians.” (Award at 5.)
The Fund is a multiemployer pension plan (“MPP”) covering employees in the building and construction industry. (Compl. ¶ 2.) The MPPAA imposes liability for unfunded vested benefits on employers who withdraw from an MPP. (Award at 2.)
Midtown ceased contributions to the Fund for periods after July 12, 2016, because Midtown permanently had ceased all operations and all employees had been terminated. (Compl. ¶ 11.) On October 4, 2016, the Fund assessed Midtown (and its successor, Dycom) withdrawal liability for a 2016 complete withdrawal. (See id. ¶ 13.) Thereafter, Dycom demanded arbitration challenging the Fund's withdrawal liability assessment against Dycom because, according to Dycom, under the building and construction industry exemption set forth under ERISA § 4203(b), 29 U.S.C. § 1383(b), Midtown had not withdrawn from the Fund. (See id. ¶¶ 1415.)
On December 2, 2021, an arbitration hearing was conducted before Arbitrator Grossman. (See Compl. ¶ 16.) On March 23, 2022, Arbitrator Grossman issued the Award in favor of the Fund, holding that “[t]he work performed by [Midtown] under its service and maintenance contract with [TWC] did not qualify for the ‘Building and Construction Industry' exemption from ERISA withdrawal liability under 29 U.S.C. § 1383(b).” (See Award at 31.)
As further discussed infra, at page 12, the contract referenced by Arbitrator Grossman is the TWC Installation Contract.
Dycom commenced this action to vacate the Award and now moves to vacate the Award, while the Fund moves to confirm the Award.
The Court finds that the Fund's motion to confirm is timely made since it was made within one year after issuance of the Award. See 29 U.S.C. § 1401(b)(3) (arbitration award to be “enforced in United States courts as an arbitration proceeding carried out under title 9”); 9 U.S.C. § 9 (“at any time within one year after the award is made any party to the arbitration may apply to the court . . . for an order confirming the award”).
LEGAL STANDARDS
In a proceeding to vacate or confirm an arbitration award under 29 U.S.C. § 1401(b), there is “a presumption, rebuttable only by a clear preponderance of the evidence, that the findings of fact made by the arbitrator were correct.” 29 U.S.C. § 1401(c); see also Nat'l Ret. Fund On Behalf of Legacy Plan of Nat'l Ret. Fund v. Metz Culinary Mgmt., Inc., 946 F.3d 146, 149 (2d Cir. 2020), cert. denied, 141 S.Ct. 246 (2020) (citing 29 U.S.C. § 1401(c)). However, an arbitrator's legal conclusions are subject to de novo review by the district court. See HOP Energy, LLC v. Local 553 Pension Fund, 678 F.3d 158, 160 (2d Cir. 2012).
“ERISA was enacted to protect the interests of employee retirement benefit plan participants and their beneficiaries.” Ret. Plan of UNITE HERE Nat. Ret. Fund v. Kombassan Holding A.S., 629 F.3d 282, 285 (2d Cir. 2010) (citing 29 U.S.C. § 1001b). “One aim is to provide for a sound termination insurance system that ensures participants and beneficiaries will receive their full benefits even if, for example, their employer ceases operations.” Id. (internal quotation marks omitted). “When an employer ‘permanently ceases all covered operations under the plan,' i.e., a ‘complete withdrawal,' an obligation called ‘withdrawal liability' may be imposed on that employer. Id. (citing 29 U.S.C.§§ 1381(a), 1383(a)). There is an exception to withdrawal liability where “substantially all the employees with respect to whom the employer has an obligation to contribute under the plan perform work in the building and construction industry.” 29 U.S.C. § 1383(b)(1)(A).
“In light of the policy behind ERISA, as amended by the MPPAA, exemptions to a withdrawing employer's liability should be narrowly construed.” New York State Teamsters Conference Pension & Retirement Fund v. St. Lawrence Transit Mix Corp., 612 F.Supp. 1003, 1009 (N.D.N.Y. 1985) (cited favorably in Bowers v. Andrew Weir Shipping, Ltd., 27 F.3d 800, 806 (2d Cir. 1994)); see also Hop Energy, LLC v. Loc. 553 Pension Fund, No. 09-CV-08269 (JGK), 2010 WL 3398475, at *3 (S.D.N.Y. Aug. 26, 2010), aff'd, 678 F.3d 158 (2d Cir. 2012) (“The imposition of withdrawal liability under ERISA was enacted as a strict liability measure on the withdrawing employer and exemptions to a withdrawing employer's liability should be narrowly construed.” (internal quotation marks and citation omitted)).
DISCUSSION
I. Parties' Arguments
In seeking to vacate the Award, Plaintiff argues that Arbitrator Grossman made the incorrect legal conclusion that the “Building and Construction Industry” exemption from ERISA withdrawal liability under 29 U.S.C. § 1383(b) did not apply and that he also made factual mistakes. (See Pl.'s Mem., ECF No. 26, at 6-10, 16-19; Pl.'s Resp. to Def.'s Mot., ECF No. 32, at 4; Pl.'s Reply Br., ECF No. 30, at 2.) Plaintiff argues that “by drilling holes to run cable, by running cable through buildings or structures and attaching the cable through use of material and parts, and hooking up the cable to the necessary equipment to provide cable, television, Wi-Fi, and home security services,” Midtown was engaged in the building and construction industry. (See Pl.'s Mem. at 10.)
On the other hand, in seeking to confirm the Award, Defendant argues that the work performed by Midtown was not work within the building and construction industry and that Arbitrator Grossman's factual findings were correct. (See Def.'s Mem., ECF No. 30, at 4-16, 1922; Def.'s Opp. Mem. to Pl.'s Mot., ECF No. 34, at 2-3, 16-18; Def.'s Reply, ECF No. 35, at 3.) II. Arbitration Hearing And Award
At the outset of the hearing, the parties jointly submitted the following single issue to be decided by Arbitrator Grossman: “Did the work performed by [Midtown] under its service and maintenance contract with a residential telecommunications provider [i.e., the TWC Installation Contract] qualify for the ‘Building and Construction Industry' exemption from ERISA withdrawal liability under 29 U.S.C. § 1383(b)?” (Award at 1-2.) In his reasoned Award, Arbitrator Grossman found that Midtown's work did not qualify. (See id. at 31.)
In his Award, Arbitrator Grossman stated, as follows:
I find that Midtown did not contribute to the Fund for employees who perform work in the building and construction industry, as that term is intended under 29 U.S.C. § 1383(b)(1)(A), and, therefore, is not entitled to protection of the building and construction industry exemption under [MPPAA].
Typically, employees in the building and construction industry combine material and parts on a building site to form, make or build a structure. That does not suggest that every employee must fit within that definition or that such employees must be only working on new construction. Clearly, an employer who employs workers who repair or modify a structure may also qualify for the exemption.
In this case, Midtown almost never worked on new construction projects. It mostly provided cable service for homes or apartment houses that were prewired for that service. Midtown's case would have undoubtedly been stronger had its employees worked on new construction.
Some of Midtown's employees worked as warehousemen, dispatchers, and data entry employees. There is no doubt but that these employees were not directly performing work that can be said to be in the building and construction industry. The bulk of Midtown's employees installed or disconnected service (this worked ended in 2012).
None of these employees had, or were required to have, a license to perform their work. Midtown did not have to obtain any permits for its employees' work to be performed. Although the employees were referred to as electricians, they did not have the qualification, or training, to be a licensed/journeymen electrician. Midtown's employees were also not paid as journeymen electricians. Clearly, Midtown's case would have been stronger had the work required a license and/or the employees paid at anything near a construction worker's rate.(Award at 28-29.)
Arbitrator Grossman then went on to consider the work that “the bulk of the installers/technicians perform[ed]” and whether “that work constitute[d] work within the building and construction industry.” (Award at 29.) He considered testimony from witnesses “about what type of assignments technicians were given and approximately how often they performed that work,” and found them credible. (Id.) He then made the following conclusion:
The conclusion is that the technician's job of connecting services to the customer generally did not require any repairs and/or alterations to an existing building or other structures. The technicians worked almost exclusively in existing buildings that were prewired for their purposes.
While undoubtedly there were situations that required some alteration to the building, those jobs were not the majority and did not constitute the typical assignments of the technicians. I find that Midtown's employees were not engaged in the work involving the building and construction industry. They were generally not involved in modification or alteration of buildings. Moreover, I cannot conclude that the technicians were working in the building and construction industry.(Id. at 30.)
In light of his conclusion that Midtown was not eligible for the building and construction industry exemption, Arbitrator Grossman declined to consider the issue of whether substantially all the employees with respect to whom Midtown had an obligation to contribute under the plan performed worked in the building and construction industry. (Award at 31.)
III. Analysis of Award
Upon de novo review, after careful review of the record, the Court finds that Arbitrator Grossman's legal conclusion that the work performed by Midtown under the TWC Installation Contract did not qualify for the “Building and Construction Industry” exemption from ERISA withdrawal liability under 29 U.S.C. § 1383(b) is a sound one.
The parties agree that the term “building and construction industry” is not defined in ERISA and that the legislative history of ERISA shows that Congress intended that the words “building and construction industry” in ERISA should be given the same meaning as has developed in the context of the Taft-Hartley Act. (See Pl.'s Mem. at 4-5, 13 (citing Union Asphalts and Roadoils, Inc. v. Mo-Kan Teamsters Pension Fund, 857 F.2d 1230, 1234 (8th Cir. 1988)); Def.'s Mem. at 6 (citing Cent. States, Southeast & Southwest Areas Pension Fund v. Waterland Trucking Serv., 375 F.Supp.2d 684, 686 (N.D. Ill. 2005)).)
Under the Taft-Hartley Act, “construction industry” work is referred to as that work “relating to the contracting or subcontracting of work to be done at the site of the construction, alteration, painting, or repair of a building, structure, or other work.” 29 U.S.C. § 158(e). The provision relating to the “building and construction industry” in 29 U.S.C. § 158(f) of the Taft-Hartley Act provides no definition of that term; however, in order to avail themselves of the provisions of § 158(f), an employer must be “engaged primarily in the building and construction industry.” 29 U.S.C. § 158(f).
With respect to the meaning of “building and construction industry” under the Taft-Harley Act, both Plaintiff (Pl.'s Mem. at 14) and Defendant (Def.'s Mem. at 9) refer to the Decision and Order of the National Labor Relations Board (“NLRB”) in Painters, Loc. 1247 (Indio Paint & Rug Ctr.), 156 NLRB 951, 1966 WL 18139 (1966). In Indio Paint, the NLRB defined the “building and construction industry” as “subsum[ing] the provision of labor whereby materials and constituent parts may be combined on the building site to form, make or build a structure.” See id., 1966 WL 18139, at *12 (emphasis omitted). The NLRB in Indio Paint decided that “work providing labor and materials in connection with floor covering installations, both for general building contractors and homeowners . . . constitute[d] ‘building and construction' work.'” Id.
In 1988, in Union Asphalts & Roadoils, Inc., 857 F.2d at 1234, the Eighth Circuit applied the NLRB's definition of “building and construction industry” from Indio Paint, noting that “the term ‘building and construction industry' has been construed narrowly because, as in section 1383 of MPPAA, the term is part of a statutory exception.” Id. The Eighth Circuit found that an asphalt company whose employees only transported its products to a construction site was not involved in the “building and construction industry” and thus was subject to withdrawal liability under the MPPAA when it went out of business. See id. at 1235.
In 1996, the NLRB issued a decision in Adderley Indus., Inc. & Loc. 1448, Int'l Bhd. of Elec. Workers, Afl-Cio, No. E 4-CA-23435, 1996 WL 33321485 (N.L.R.B. Div. of Judges Oct. 2, 1996), regarding whether cable television installation work constituted “construction industry” work under the Taft-Hartley Act. The NLRB decided that installation work performed outside of new construction did not constitute “construction industry” work under the Taft Hartley Act: “Prewiring [as part of new construction], as defined by the [NLRB], at least arguably constitutes work in the building and construction industry. . . [h]owever, the work of installers does not constitute work in that industry.” Id.
In 2007, the NLRB had before it an employer, The Kravis Center for the Performing Arts (“Kravis Center”), which was a theatrical performance complex located in West Palm Beach, Florida. See The Raymond F. Kravis Ctr. for the Performing Arts & Int'l All. of Theatrical Stage Emps. & Moving Picture Technicians & Allied Crafts of the United States, Its Territories & Canada, Iatse, Afl-Cio, Loc. 623, 351 N.L.R.B. 143, 2007 WL 2891100, at *2 (NLRB Sep. 28, 2007), aff'd, 550 F.3d 1183 (D.C. Cir. 2008). The Kravis Center argued that its agreements with the union were governed by Section 8(f) of the Taft-Hartley Act (29 U.S.C. § 158(f)), since they were agreements covering employees engaged in the building and construction industry. See id., 2007 WL 2891100, at *41. The NLRB “reject[ed] this argument as it [was] clear that the Kravis Center, which is a cultural arts performance forum, is not an enterprise engaged in the construction industry.” Id. The NLRB stated: “While it is true that stagehands do carpentry, electrical work and laborer's work, what they do involves the transient creation of sets, lighting, sound, etc., and is not related to the construction of permanent fixtures.” Id. The D.C. Circuit agreed with the NLRB, noting that 29 U.S.C. § 158(f) “is a narrow statutory exception carved out for employers in the construction industry only.” Raymond F. Kravis Ctr. for Performing Arts, Inc. v. N.L.R.B., 550 F.3d 1183, 1189 (D.C. Cir. 2008).
Narrowly construing the building and construction industry exemption, the Court finds on the record in this action that Arbitrator Grossman was correct in holding that the work performed by Midtown did not qualify for the exemption. Midtown's employees did not combine materials and constituent parts “on the building site to form, make or build a structure.” See Indio Paint, 1966 WL 18139, at *12. They also did not alter or repair “a building, structure, or other work.” See 29 U.S.C. § 158(e).
The Court agrees with Arbitrator Grossman's conclusion that “[t]here is no doubt” that Midtown's warehousemen, dispatchers and data entry employees were not working in the building and construction industry. (See Award at 28-29.) Moreover, the Court finds that Midtown's installers (also referred to as technicians) were not engaged in the building and construction industry. See Adderley, 1996 WL 33321485. In the Court's view, drilling holes and running cable through existing buildings or structures, and then using material and parts to hook up the cable to the necessary equipment in order to provide cable, television, Wi-Fi and home security services (see Pl.'s Mem. at 10) is not within the ambit of work performed in the “building and construction industry” under 29 U.S.C. § 1383.
Since the Court recommends confirming the Award as written, the Court, like Arbitrator Grossman, declines to consider the issue of whether substantially all the employees with respect to whom Midtown had an obligation to contribute under the plan performed worked in the building and construction industry. (See Award at 31.)
The Court finds that that the three “factual errors” that Plaintiff asserts Arbitrator Grossman made (see Pl.'s Mem. at 8-9) do not alter the outcome:
First, Plaintiff asserts that Arbitrator Grossman erred in stating that Peter Grimaldi (“Grimaldi”) “was a Midtown installer who testified that at Midtown he always ran cable outside of the wall.” (See Pl.'s Mem. at 8 (citing Award at 15).) On page 13 oor f the Award, ArbitratGrossman is discussing both Grimaldi and another Midtown employee, Hector Lavergne (“Lavergne”). (See Award at 13.) It was Lavergne, not Grimaldi, who was the Midtown installer who testified that at Midtown he always ran cable outside of the wall. (See Arb. Tr., ECF No. 319, at 255-56.) The error by Arbitrator Grossman in confusing Grimaldi with Lavergne is of no consequence.
Plaintiff's memorandum erroneously cites to page 15 of the Award. The portion of the Award that relates to Grimaldi's running a wire along the wall is on page 13 of the Award.
Second, Plaintiff asserts that Arbitrator Grossman erred by finding that Mike Sicsko (“Sicsko”) “was not in a position to know what steps were taken by Midtown's installers” even though “Sicsko was the head of Midtown's operations and had 40 years of industry experience, including as an installer.” (See Pl.'s Mem. at 8-9.) In his Award, Arbitrator Grossman stated, in relevant part, “Mr. Sicsko was clearly not in a position to testify as to how often any of the tasks he described were actually performed by the technicians.” (Award at 29.) This finding is supported by Sicsko's hearing testimony. (See, e.g., Arb. Tr. at 222 (Sicsko: “I don't feel comfortable answering [questions about how often technicians had to run cable behind walls] because I haven't been out there lately.”). Plaintiff has not rebutted by a clear preponderance of the evidence Arbitrator Grossman's finding with respect to Sicsko. See 29 U.S.C. § 1401(c).
Third, Plaintiff asserts that Arbitrator Grossman “referred to the TWC Installation Contract as a service and maintenance contract, even though it[']s titled and its terms established that it was an Installation Contract.” (See Pl.'s Mem. at 9.) The TWC Installation Contract was titled as “Field Installation Services Agreement.” (See 9/30/11 Agmt., ECF No. 29-1.) The only two portions of the Award that contain the reference to the subject contract as “a service and maintenance contract” are on the first and last page. (See Award at 1, 31.) The first page uses that reference in the context of the issue that the parties jointly submitted to be resolved, i.e., “Did the work performed by [Midtown] under its service and maintenance contract with a residential telecommunications provider qualify for the ‘Building and Construction Industry' exemption from ERISA withdrawal liability under 29 U.S.C. § 1383(b)?” (See Award at 1-2.) And the last page provides Arbitrator Grossman's resolution of that issue. (See id. at 31.) Regardless of these two references, it is clear from the face of the Award that Arbitrator Grossman was aware that Midtown was an installation contractor. (See, e.g., Award at 14 (“Midtown was a cable installation contractor.”).)
Because the Award is legally sound, and because Plaintiff has not rebutted by a clear preponderance of the evidence any of Arbitrator Grossman's factual findings, the Award should be confirmed.
CONCLUSION
For the foregoing reasons, I respectfully recommend that Plaintiff's motion to vacate the Award be DENIED and that Defendant's motion to confirm the Award be GRANTED.
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. A party may respond to another party's objections within fourteen days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Any requests for an extension of time for filing objections must be addressed to Judge Engelmayer.
FAILURE TO OBJECT WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).