Employer Fails To Qualify For Sale of Assets Withdrawal Liability Exemption

The Second Circuit has recently affirmed the decisions of the federal district court and the arbitrator which upheld the assessment of $1,204,007 in withdrawal liability by the Fund. In this significant 2-1 decision, the Court upheld the ERISA protections for pension plans in one of the few decisions addressing ERISA Section 4204's sale of assets exemption to the assessment of withdrawal liability. Eschewing the relevance of the language of collective bargaining agreements or other labor accords, the majority found assessment was warranted here because the asset purchase agreement between HOP and its buyer, on its face, disavowed the buyer's statutory obligation to contribute for substantially the same number of contribution base units, i.e., hours, as HOP had prior to the sale. Thus the agreement did not exempt HOP from withdrawal liability pursuant to ERISA 4204.

Eugene S. Friedman, William K. Wolf, Anusha Rasalingam, and Cristina E. Gallo of Friedman & Wolf represented the Local 553 Pension Fund in this case.  In his statement to the Daily Labor Report, Mr. Friedman commented that "at a time when multiemployer defined benefit pension plans are going through a challenging period, this decision will provide a measure of stability and protection to the plans.  As a result of the decision, an employer who withdraws from a plan will not easily be able to shed his share of the liability he left behind, and it will protect the remaining employers from having to shoulder that burden."  Mr. Friedman also noted that "the drafters of asset purchase agreements will have to carefully consider the terms and the cost implications for both selling and purchasing companies when allocating withdrawal liability responsibilities."  “Sale-of-Assets Withdrawal Liability Exemption Does Not Save Employer From Paying Fund,” Daily Lab. Rep. (BNA) No. 86, at A-7 (May 3, 2012).  HOP Energy, LLC v. Local 553 Pension Fund, Case No. 10-CV-3889, 2012 U.S. App. LEXIS 9088 (2d Cir. May 3, 2012).  Full text of the decision is available here.