Caesars Owes No Withdrawal Liability for One Closed Pension in Controlled Group

A federal appellate court has determined that Caesers Entertainment Corporation owes no withdrawal liability for ceasing to make contributions to a multiemployer pension plan for a closed casino while it continued to make contributions for others.

The 3rd U.S. Circuit Court of Appeals notes that the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) imposes liability on employers who withdraw from covered plans by ceasing contributions in whole or in part. The current case involves one type of partial withdrawal, “bargaining out,” which occurs when an employer “permanently ceases to have an obligation to contribute under one or more but fewer than all collective bargaining agreements under which the employer has been obligated to contribute … but continues to perform work… of the type for which contributions were previously required.”

Caesars Entertainment Corporation (CEC) once operated four casinos in Atlantic City: Caesars, Bally’s, Harrah’s and Showboat. These comprised a “controlled group” under the Employee Retirement Income Security Act (ERISA), with CEC being the “single employer” of the group. CEC bargained with the International Union of Operating Engineers, Local 68, for engineering work at all four casinos.

In 2014, the Showboat casino closed, and CEC stopped contributing to the fund for engineering work there. The other three casinos under CEC’s control remain open, and CEC continues to pay the fund for their union work. Showboat’s closure reduced CEC’s total contributions to the fund by 17%—well below the MPPAA’s 70% threshold that would have automatically triggered liability for a partial withdrawal.

The fund claimed CEC was liable under the “bargaining out” provision of the MPPAA, but CEC disagreed. So the parties went to arbitration, and CEC lost. The arbitrator held CEC had triggered both clauses of the bargaining out provision. The arbitrator reasoned clause [2] applied because“[t]he type of work for which contributions were required at the closed Showboat is the same type of work currently being done at the remaining casinos.”

The U.S. District Court for the District of New Jersey, reversed the arbitrator’s decision. The Court assumed without deciding that, under clause [1], the jurisdiction of the Showboat collective bargaining agreement (CBA) included all engineering work in Atlantic City. But it held that, under clause [2], liability exists only when an employer replaces work that contributes to the pension fund with “work—of the same sort—that does not.” Such replacement hadn’t occurred because CEC’s “constituent members [aside from the shuttered Showboat] continue to contribute to the fund for all engineering work they perform throughout Atlantic City.”

The 3rd Circuit agreed with the District Court that the dispositive question is whether under the bargaining out provision of the MPPAA “work… of the type for which contributions were previously required” includes work of the type for which contributions are still required. The appellate court said the statutory text and Pension Benefit Guaranty Corporation (PBGC) guidance confirm that the answer is no.

The 3rd Circuit first noted that the bargaining out provision typically applies when there is a change in union representation or the employer negotiates out of an obligation to contribute to a plan. “Neither of those things happened here,” it wrote in its decision. However, the fund claims CEC continues to perform “work … of the type for which contributions were previously required,” because engineering work continues at Caesars, Bally’s, and Harrah’s. According to the court document, in the fund’s view, it is irrelevant that CEC still must contribute to the plan for the work performed by Union members at those three casinos. The appellate court disagreed.

“[W]ork … of the type for which contributions were previously required” means “work … of the type for which contributions are no longer required,” the court wrote, citing prior case law. In arriving at this conclusion, the appellate court gives “previously” its ordinary meaning at the time Congress enacted the relevant provision. “If Congress had meant to adopt the fund’s interpretation, it could have omitted ‘previously’ to no effect,” the decision states. “The provision would have targeted work ‘for which contributions were required.’ Because that’s not what Congress wrote, we give ‘previously’ some meaning. And that meaning tracks what we’ve learned from dictionaries and corpus linguistics.”

For these reasons, the appellate court said the best reading of “work … of the type for which contributions were previously required” excludes work of the type for which contributions are still required. “To hold otherwise would put us in conflict with our sister courts’ interpretation of identical language in another MPPAA provision,” the court wrote. For example, the court noted Section 1383(b)(2)(B)(i) imposes complete withdrawal liability on employers in the construction industry when they continue to perform “work… of the type for which contributions were previously required.” Two of its sister courts have held that the same provision imposes liability only when employers “cease making payments to the plan” for a type of work (e.g., construction) “while continuing to do [that work] in the area.”

The 3rd Circuit found additional support for its view in longstanding guidance from the PBGC. In the case, the District Court found persuasive PBGC Opinion Letter 83-20, which says that no withdrawal liability results from “merely ceasing or terminating an operation.” According to the PBGC, liability under the bargaining out pro-vision arises “only [in] situations where work of the same type is continued by the employer but for which contributions to a plan which were required are no longer required.” So an employer isn’t liable when it “closes one [facility] and shifts the work of that [facility] to other [facilities] which are covered by other [CBAs] under which contributions are made to the plan.”

The appellate court said, “That’s precisely what happened here. And we, like the District Court, find that the PBGC’s view tracks the text of the MPPAA.”

The appellate court affirmed the judgement of the District Court finding that, because CEC continues to contribute to its pension plan for engineering work at its remaining three casinos, it is not liable under the bargaining out provision of the MPPAA.