Background
Penske Truck Leasing participates in the Central States, Southeast and Southwest Areas Pension Plan, a multiemployer pension plan serving Teamster union members in the Midwest. Penske contributed to the plan on behalf of ten separate bargaining units, including Local 745, which represents Penske employees in Dallas. In fall 2021, Central States became concerned that Penske was deliberately timing the expiration of collective bargaining agreements to occur in the same year, enabling Penske to withdraw all bargaining units simultaneously and pay a single “complete withdrawal liability” rather than multiple “partial withdrawal” assessments—a difference worth tens of millions of dollars.
When Central States rejected a proposed extension of Local 745’s agreement, it triggered negotiations that Central States believed were part of Penske’s strategy. Central States offered to extend the agreement only if Penske agreed that any 2022 withdrawal of Local 745 would be treated as occurring in 2021 for withdrawal liability purposes. Penske rejected this proposal. In December 2021, the Trustees unanimously voted to terminate Local 745’s participation effective December 25, 2021, unless Penske accepted the retroactive withdrawal-date condition by December 22.
Penske sued in federal court seeking a temporary restraining order and permanent injunction, arguing that the Trust Agreement did not authorize the Trustees to expel a single bargaining unit—only to expel employers entirely. The district court initially granted a temporary restraining order but later vacated it. On summary judgment, the district court upheld Central States’ authority to expel Local 745 and rejected Central States’ counterclaim for declaratory relief regarding the effective withdrawal date, finding that dispute must be arbitrated first.
The Court’s Holding
The Seventh Circuit affirmed. The court first determined the proper standard of review for interpreting the Trust Agreement. Although Penske argued for de novo review, the court held that because the Trust Agreement explicitly grants the Trustees “discretionary and final authority” to interpret plan documents, the appropriate standard is deferential review under Firestone Tire & Rubber Co. v. Bruch. Under this standard, the Trustees’ interpretation is upheld if reasonable, not if it is the only or best interpretation.
Applying Firestone deference, the court found the Trustees’ interpretation reasonable. The Expulsion Provision authorizes the Trustees to “reject any collective bargaining agreement, participation agreement and/or terminate the participation of an Employer” and explicitly contemplates that “rejection/termination of one or more of the Employer’s groups” shall not affect other groups. Although the provision contains ambiguous language, the court found the Trustees’ reading—permitting expulsion of a single bargaining unit—was supported by the text and entitled to deference. The court rejected Penske’s arguments that this interpretation violated the uniformity requirement of 29 U.S.C. § 1394(b) or would force Penske to violate the National Labor Relations Act.
The court further held that even if arbitrary-and-capricious review applied, Central States’ decision was not arbitrary. The Trustees had a reasonable basis for investigating Penske’s conduct and reasonable concerns about threat to the plan’s financial soundness. Finally, the court affirmed dismissal of Central States’ counterclaim for declaratory relief regarding Local 745’s effective withdrawal date, holding that 29 U.S.C. § 1401 requires such disputes to be arbitrated before proceeding in federal court.
Key Takeaways
- The Trustees of a multiemployer pension plan can expel a single bargaining unit under a trust agreement that grants them interpretive discretion, even if that results in different treatment than expelling an entire employer.
- Firestone deference applies to trustees’ interpretations of plan documents outside the benefit-denial context, drawing on principles of trust law that permit trustee discretion in interpreting trust instruments.
- Withdrawal liability disputes must be arbitrated before proceeding in federal court under 29 U.S.C. § 1401, and employers must continue making demanded payments pending arbitration.
- A plan’s decision to expel a participant is not arbitrary merely because it lacks detailed explanation or because a court might have exercised different judgment.
Why It Matters
This decision significantly impacts multiemployer pension plans and participating employers. For plans, it establishes that they possess considerable flexibility under broadly-drafted expulsion provisions to remove participants perceived as threatening plan solvency, and that such decisions receive substantial deference in court challenges. The decision also confirms that even substantial financial consequences (tens of millions in different withdrawal liability calculations) do not necessarily render a trustee decision arbitrary or capricious if the trustees had a reasonable factual basis for their action.
For employers, the decision means that timing of collective bargaining agreement expirations is a legitimate basis for trustee investigation and expulsion, and that Firestone deference gives plan trustees considerable interpretive latitude in provisions addressing withdrawal and expulsion. The decision also emphasizes the mandatory arbitration requirement, meaning employers must continue funding disputed withdrawal liabilities while arbitration proceeds, creating significant interim financial obligations.