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Federal appeals court sides with contractor in pension fund dispute

By: Erika Strebel, [email protected]//September 4, 2015//

Federal appeals court sides with contractor in pension fund dispute

By: Erika Strebel, [email protected]//September 4, 2015//

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The 7th Circuit Court of Appeals has sided with Brownsville-based Michels Corp. and 34 other contractors, saying that they properly stopped contributing to an employee pension fund in 2011.

Michels filed a lawsuit against the Central States, Southeast and Southwest Areas Pension Fund and its trustees in March 2012, arguing that its duty to contribute to the pension fund ended in November 2011, when its collective bargaining agreement ended, and that the fund and its trustees were illegally refusing to let the contractor stop paying into the fund.

The Pipe Line Contractors Association, which negotiates for the International Brotherhood of Teamsters, joined the lawsuit in May 2012, agreeing with the contractor’s concerns. The Teamsters are not involved in the lawsuit.

Attorneys for the pension fund and its trustees, Michels and the PLCA, could not immediately be reached for comment.

In 2011, while the PLCA and the Teamsters were negotiating a new collective bargaining agreement, they agreed that Michels and other contractors represented by the PLCA could cancel the pension fund coverage and instead make payments to an escrow fund while the groups negotiated a new agreement, according to court documents. Michels and the PLCA sent letters to the pension fund, stating that they were cancelling contributions, but they did not receive a response until 2012.

The pension fund claimed, according to court documents, that letters from Michels and the PLCA weren’t enough to end the pension fund coverage. The fund, responding to Michels’ lawsuit, filed a counterclaim in August 2012.

The federal district court ruled in the pension fund’s favor in September 2014, holding that Michels had to pay the fund $895,565.48 in contributions and $336,670 in interest, damages and fees.

The 7th Circuit’s ruling Wednesday reversed the lower court’s ruling and money judgment.

Chief Judge Diane Wood, writing for a three-judge panel, noted that Michels’ obligation to contribute was tied exclusively to the collective bargaining agreement between the Teamsters and the PCLA that was signed in 2006.

That agreement ended in November 2011, after eight extensions, the first of which was made within the parameters of the original agreement, according to court documents. Before the eighth extension ended, the Teamsters and the PCLA agreed that the employers would stop contributing to the fund as of November 2011 and instead contribute to an escrow account until a new agreement was reached.

The fund argued, however, that the agreement did not end until May 2012, according to the terms of the trust agreement between the union and the PCLA.

But the appeals court disagreed, reversing the court’s decision and money judgment in favor of the pension fund.

According to the appeals court, Michels and the PLCA properly notified the fund that it was changing its duty to contribute to the fund.

“The Fund had no reason to think that the parties would extend the 2006 (collective bargaining agreement) even a minute beyond Nov. 15, 2011,” according to the opinion.

Of the 34 other contractors involved in the case, several are based in Wisconsin: Rhinelander-based Terra Restoration LLC, Chippewa Falls-based IndianHead Pipeline Services LLC, Ashland-based Northern Clearing Inc., Eau Claire-based Precision Pipeline LLC and Mayville-based Schmid Pipeline Construction Inc.

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