Downtown Lawyer

Borntrager v. Central States Southeast & Southwest Areas Pension Fund, Nos. 08-2008/08-2744.

CRST Flatbed, Inc., CRST Van Expedited, Inc., and six current and former employees of these companies (collectively “CRST”) brought suit against Central States Southeast Areas Pension Fund (“Central States”), a multi-employer employee benefit plan.  CRST alleged that Central States wrongfully expelled them from the plan.

Central States is regulated by the Employee Retirement Income Security Act of 1974 (“ERISA”), as well as the language contained in the Trust Agreement for the plan.  The plan, in part, is funded by contributions of younger employees to help pay the benefits of retired employees.  If these contributions are not received, the plan may become financially unsound.  In that event, Central States may not be able to pay guaranteed benefits.  To avoid this problem, the Trust Agreement includes an “adverse selection” rule, which allows expulsion of the employer and employees if “the Employer is engaged in one or more practices or arrangements that threaten to cause economic harm to, and/or impairment of the actuarial soundness of, the Fund . . .”

Central States determined that CRST was violating the “adverse selection” rule because employee participation had decreased over the past decade.  Some of this decline in participation was related to CRST’s use of outsourced employees, who were ineligible to participate in the plan.  In September 2002, Central States terminated CRST’s participation in the plan.

CRST immediately filed suit in federal court.  The parties eventually filed cross motions for summary judgment.  The trial court granted Central States’ motion, holding that Central States had lawfully exercised its authority under the Trust Agreement to expel CRST.  On appeal, the Eighth Circuit Court of Appeals first noted the following:

Central States’s “determination that the trust documents authorize their [actions] has significant weight, for the trust agreement explicitly provides that ‘any construction [of the agreement's provisions] adopted by the Trustees in good faith shall be binding upon the Union, Employees and Employers.”

Based on this language, the court held that Central States has authorization to expel an employer once Central States finds the employer is engaged in an employment practice that might threaten the fund’s viability.  Accordingly, the court affirmed.