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Pace Industry Union-Management Pension Fund v. O. E. Clark Paper Box Co.

United States District Court, M.D. Tennessee, Nashville Division

December 29, 2017




         Pending before the court is Plaintiffs' Motion for Partial Summary Judgment on Default Interest and Liquidated Damages (Docket No. 50). Plaintiffs' Motion was filed pursuant to this court's prior Memorandum (Docket No. 46), in which the court granted Plaintiffs' Motion for Judgment on the Pleadings as to Plaintiffs' entitlement to outstanding withdrawal payments from Defendant but denied, without prejudice, Plaintiffs' Motion as to the applicable interest rate and the calculation of liquidated damages. The court found that it could not determine, without additional facts, whether Plaintiffs' 12% interest rate on outstanding withdrawal payments reasonably reflects prevailing market rates for comparable obligations, as required by the Employee Retirement Income Security Act (“ERISA”). The court ordered Plaintiffs to file a properly supported Motion for Partial Summary Judgment on the issue of the applicable interest rate.


         To reiterate the court's prior findings, in order to enforce the statutory obligation of an employer to make contributions to a multi-employer plan, ERISA provides that, if judgment is awarded in favor of the plan, the court shall award, in addition to attorney's fees and costs, the following:

(1) the unpaid contributions,
(2) interest on the unpaid contributions, and
(3) an amount equal to the greater of interest on the unpaid contributions or liquidated damages in an amount not in excess of 20 percent of the amount of the unpaid contributions.

29 U.S.C. § 1132(g).

         In determining what rate should apply, an ERISA fund may choose between the rate specified in 29 C.F.R. § 4219.32, which sets out a rate that is essentially equivalent to the prevailing market rate for a short-term commercial loan, or a rate specified by the plan itself pursuant to 29 C.F.R. § 4219.33, which allows ERISA funds to adopt reasonable rules setting out interest rates that will apply to overdue withdrawal liability:

Plans may adopt rules relating to overdue and defaulted withdrawal liability, provided that those rules are consistent with ERISA. These rules may include, but are not limited to, rules for determining the rate of interest to be charged on overdue, defaulted and overpaid withdrawal liability (provided that the rate reflects prevailing market rates for comparable obligations). . . . Plan rules adopted under this section shall be reasonable.

29 C.F.R. § 4219.33 (emphasis added). Thus, plans may adopt rules that provide for interest on overdue withdrawal liability at rates other than those set out in the regulations, but these alternative rates must reflect “prevailing market rates for comparable obligations.”


         Plaintiffs have submitted evidence that the 12% rate is consistent with rates currently charged in the market for overdue short-term and unsecured obligations and within the range charged by other multi-employer ERISA plans for unpaid contributions and withdrawal liability. For example, Plaintiffs offer the Declaration of Trevor England, Chief Executive Officer of the Fund for more than ten years. Docket No. 58. England states that the facts in his Declaration are based on his personal knowledge and his review of the records of the Fund. He further states that he is familiar with the proceedings of the Board of Trustees and attends its meetings. Id. England states that the Board of Trustees, in setting the 12% interest rate, [1] considered the interest rates charged by various businesses for past due accounts and drew on their knowledge of the interest rates employers face if they are late paying invoices and the interest rates charged by employers in the industry to customers who are delinquent in paying their obligations. Id.

         Plaintiffs have also presented the Declaration of Kathleen Keller, in which she states that she researched the average interest rates charged by commercial banks for their credit cards and found them, generally, to be between 11% and 14%. Docket No. 51-1. Keller also states that the average purchase interest rate for business credit cards in 2017 is 15.37%, and the average penalty rate for creditors who fail to make on-time payments range from 27% to 29%. Id. Finally, Plaintiffs have presented evidence of federal cases in which the multi-employer funds charged, and courts either approved or did not challenge, [2] interest rates of 10% to 24% for delinquent contributions and withdrawal liability. See Docket No. 51 at 12-13. For example, in Board of Trustees of Trucking Employees of North Jersey Welfare Fund, Inc. - ...

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