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Service Employees International Union National Industry Pension Fund v. Scientific and Commercial Systems Corp.

United States District Court, District of Columbia

September 22, 2016

SERVICE EMPLOYEES INTERNATIONAL UNION NATIONAL INDUSTRY PENSION FUND, et al., Plaintiffs,
v.
SCIENTIFIC AND COMMERCIAL SYSTEMS CORPORATION, et al., Defendants.

          MEMORANDUM OPINION

          James E. Boasberg United States District Judge

         For the past five years, Plaintiff Service Employees International Union's National Industry Pension Fund has been chasing down Defendant Scientific Commercial Systems Corporation, requesting that it pay its arrears. It all started when SCSC began janitorial work as a subcontractor to Tessada & Associates, Inc., then a contractor with the National Aeronautics and Space Administration. In that role, Defendant hired the Union's members and was contractually obligated to contribute to the Fund's pension plan. Whatever space-age glamour might have existed all came to an end when Tessada's own circumstances forced it to terminate SCSC, an action that in turn caused SCSC to cancel its Union contract. From then on, the Fund hounded SCSC for statutory payments due upon withdrawal from a pension plan. That dogged pursuit has now reached federal court in the form of the Fund's suit against SCSC.

         The Fund now seeks summary judgment for its still-outstanding withdrawal liability. Discarding each of SCSC's defenses, the Court will grant the Motion.

         I. Background

         The Court's prior Opinion in this case offers a brief primer on this pension-plan drama. See Serv. Emps. Int'l Union Nat'l Indus. Pension Fund v. Sci. & Commercial Sys. Corp., No. 13-1705, 2015 WL 4078006, at *1-2 (D.D.C. July 2, 2015). For purposes of this Motion, the Court draws from the parties' renditions of the facts - largely undisputed - drawing all reasonable inferences in SCSC's favor.

         A. Factual Background

         In 2009, NASA awarded a work contract to Tessada, which subcontracted with SCSC to perform certain tasks, namely janitorial and other support services at the Ames Research Center in California. See ECF No. 53 (Defendant's Statement of Facts), ¶ 2; ECF No. 52, Exh. 7 (Contracting Officer Decision). Defendant then hired Union members, signing on to a series of collective-bargaining agreements with SEIU. See DSOF, ¶ 3; ECF No. 47, Exh. 2 (Collective-Bargaining Agreements). As part of its obligations under those CBAs, SCSC contributed to Union members' pensions by making payments to the Fund. See DSOF, ¶ 4.

         This relationship fell apart in November 2011 when Tessada - apparently because of its own funding issues - terminated Defendant. See DSOF, ¶ 5; ECF No. 8 (SCSC Answer), ¶ 66. From then on, Tessada took over the NASA contract's janitorial duties by hiring as its own SCSC's former employees. See DSOF, ¶ 5; Contracting Officer Decision at 3 (“All employees that had worked for [SCSC] were hired by Tessada . . . .”). Tessada also continued Fund payments for those employees. See DSOF, ¶ 5; ECF No. 52, Exh. 9 (Union Forms).

         On June 12, 2012, the Fund notified SCSC that by way of its termination it had incurred a “complete withdrawal” from the pension plan. See DSOF, ¶ 7; ECF No. 47, Exh. 6 (Withdrawal Notice). That notice informed Defendant that under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq., as amended by The Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), 29 U.S.C. § 1381 et seq., it owed Plaintiff “withdrawal liability” of $1, 117, 162.72. See Withdrawal Notice. Displeased with this hefty assessment, on July 15, 2012, SCSC sent a letter to the Fund requesting review of the details of those withdrawal payments. See DSOF, ¶ 8. In the course of that letter, Defendant acknowledged that “as a result of an illegal contract termination . . . we are immediately obligated to pay withdrawal assessments in excess of one million dollars, ” but also advised the Fund that it was pursuing a contract claim against Tessada and for that purpose needed a ninety-day “hiatus” on any payments. See ECF No. 47, Exh. 7 (Request for Review) at 1-2.

         The Fund obliged. See ECF No. 47 (Plaintiff's Statement of Facts), ¶ 10. By August 2012, however, SCSC's breach-of-contract action had stalled, as a district court in Virginia granted summary judgment in Tessada's favor. See Sci. & Commercial Sys. Corp. v. Tessada Assocs., Inc., No. 11-1278, 2012 WL 3866497 (E.D. Va. Aug. 30, 2012), aff'd, 542 F. App'x 239 (4th Cir. 2013) (per curiam).

         Undeterred, Defendant tried a different tack. In November 2012, it told Plaintiff that under the McNamara-O'Hara Service Contract Act of 1965 (SCA), 41 U.S.C. §§ 6701-6707, Tessada should have sought an “equitable adjustment” to its contract - i.e., obtained additional compensation from NASA commensurate with the withdrawal assessment - and then used that money to pay off SCSC's debt. See DSOF, ¶ 10; ECF No. 52, Exh. 5 (Nov. 1, 2012, Email from SCSC to Fund). The Fund disagreed. It responded by email in December 2012, letting SCSC know that it “remains liable for its complete withdrawal” and that liability could not be shifted to Tessada under the SCA. See ECF No. 47, Exh. 9 (Dec. 17, 2012, Email from Fund to SCSC) (reasoning that “Fund cannot enforce the SCA” and “benefits protected by the [Act] likely do not include withdrawal liability”). Per an attachment, Defendant's revised payment schedule would start in January 2013. See ECF No. 47, Exh. 8 (Revised Withdrawal Notice).

         Defendant missed that payment, and a few weeks later Plaintiff notified SCSC that it would be in default if no payment was made within sixty days. See ECF No. 47, Exh. 12 (Delinquency Notice). To date, SCSC has not paid. See PSOF, ¶ 19; DSOF, ¶¶ 21-22.

         B. Procedural Background

         Desiring to end its payment truffle hunt, the Fund (and its Trustees) filed the present action against SCSC in November 2013 to claim the owed withdrawal liability. SCSC answered, counterclaimed against the Fund, and cross-claimed against Tessada. On the cross-claims, Defendant sought “declaratory judgment and equitable relief to declare that [Tessada] is liable to Plaintiff for any withdrawal liability assessed against SCSC and liable to indemnify SCSC for the same.” SCSC Answer, ¶ 105.

         Once Tessada entered the action, the parties agreed to stay the proceedings. See ECF No. 10 (Joint Motion for Stay). As SCSC had hoped, Tessada availed itself of the SCA to seek an equitable adjustment from NASA around July 2013. See Contracting Officer Decision at 1. In April 2014, however, a NASA contracting officer denied this request, explaining that “[t]he withdrawal liability that Tessada . . . is trying to pass on to the Government has nothing to do with [its] cost of compliance with the terms of the CBA.” Id. at 2. In other words, NASA would not pay Tessada extra money (to then be paid to SCSC) when there was no extra cost to Tessada in performing on the contract. The company nonetheless appealed that decision to the Armed Services Board of Contract Appeals. See ECF No. 52, Exh. 8 (ASBCA Notice of Docketing).

         In November 2014, SCSC and Tessada assured this Court that the ASBCA had let them know “a decision was imminent and would be rendered within the next 60 days.” ECF No. 21 (SCSC & Tessada's Joint Status Report). Heeding this timeline, the Court lifted the stay so that the case could proceed if no ASBCA decision was issued by March 12, 2015. See Minute Order (Jan. 26, 2015).

         Once March rolled around without an ASBCA ruling, the parties wasted no time. Tessada answered, with cross-claims against Defendant and a request to stay Plaintiff's withdrawal-liability collection. See ECF No. 24 (Tessada Answer), ¶ 92. As for the Fund, it immediately moved to dismiss SCSC's counterclaims against it, arguing that an employer was required to request arbitration before challenging the withdrawal determination in court. See ECF No. 22 (Motion to Dismiss) at 4-5. In denying the motion, the Court acknowledged that, even if this were the case, because the “arbitrate-first rule” can be waived, “it is ultimately the Fund's responsibility to prove that SCSC failed to ...


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