EMPLOYEES RETIREMENT PLAN OF NATIONAL EDUCATION ASSOCIATION v. CLARK COUNTY EDUCATION ASSOCIATION (2024)

MEMORANDUM OPINION

Plaintiffs Employees’ Retirement Plan of the National Education Association of the United States and the Retirement Board of the Plan (collectively, “the Plan”) are a multiemployer defined-benefit pension plan. Dkt. 21-5 at 252 (Joint Appendix (“J.A.”) 4805). Defendant Clark County Education Association (“CCEA”) is an employer that contributed to that multiemployer benefit plan until it decided to withdraw in May 2018. Dkt. 21 at 188 (J.A. 182); Dkt. 21-5 at 253 (J.A. 4806). After CCEA notified the Plan of its decision to “terminate [its] participation,” Dkt. 21 at 188 (J.A. 182), the Plan assessed $3,246,349 in “withdrawal liability” against CCEA, id. at 194–95 (J.A. 188–189).

CCEA challenged this assessment in arbitration and for the most part prevailed. The arbitrator concluded, among other things, that the assumptions the Plan used to calculate CCEA's withdrawal liability were unreasonable, and he ordered the Plan to recalculate CCEA's liability under different assumptions. Dkt. 21-6 at 1252 (J.A. 6326 (Award at 3)). Specifically, the arbitrator concluded that the 5.0% discount rate assumption utilized in the withdrawal-liability calculation was not adequately supported and ordered the Plan to instead utilize a 7.3% discount rate assumption, which was the discount-rate assumption the Plan used to calculate withdrawal liability prior to 2018. Dkt. 21 at 129 (J.A. 123); Dkt. 21-6 at 1252 (J.A. 6326 (Award at 3)).

Dissatisfied with the arbitrator's decision, the Plan brought this suit. Dkt. 1. Both parties moved for summary judgment seeking to enforce in part and vacate in part the arbitrator's decision. See Dkt. 24; Dkt. 26. After several rounds of briefing, see Dkt. 28–43—due in large part to the D.C. Circuit's issuance of an on-point precedent after the initial summary judgment briefing had concluded, see United Mine Workers of Am. 1974 Pension Plan v. Energy W. Mining Co., 39 F.4th 730 (D.C. Cir. 2022)¹ —the Court issued its decision on the parties’ cross-motions to confirm and/or vacate the arbitrator's award, see Dkt. 44. The Court “agree[d] with CCEA and the arbitrator that the Plan's assessment of CCEA's withdrawal liability [could] not stand,” id. at 2, finding that the 5.0% discount rate used to calculate CCEA's withdrawal liability did not reflect the Plan actuary's “best estimate of anticipated experience under the plan,” see 29 U.S.C. § 1393(a)(1); Energy W., 39 F.4th at 734. But the Court was unable to determine whether the arbitrator's chosen remedy passed muster, since his decision failed to “explain why that remedy—as opposed to a more open-ended remedy was appropriate.” Dkt. 44 at 34-35.

In reaching that conclusion, the Court first noted that although the usual (and perhaps preferred) remedy when an actuary “fails to provide a sufficient explanation for his decisions [is] a remand” to the actuary, id. at 35, arbitrators do have the “flexibility to impose different remedies in different circumstances,” id. at 34, and sometimes it is “appropriate for an arbitrator to be more prescriptive,” id. at 33. In New York Times Co. v. Newspaper and Mail Deliverers’—Publishers’ Pension Fund, 303 F. Supp. 3d 236 (S.D.N.Y. 2018), for example, the court ordered the plan actuary to use a specific rate to calculate withdrawal liability after the actuary had testified that the plan's funding rate (rather than the rate actually used to calculate the withdrawal liability) was in fact her “best estimate of how the Pension Fund's assets ․ will on average perform over the long term,” id. at 255; see also, e.g., Sofco Erectors, Inc. v. Trs. of Ohio Operating Eng'rs Pension Fund, No. 2:19-cv-2238, 2020 WL 2541970, at *9–*10 (S.D. Ohio May 19, 2020), vacated in part on other grounds, 15 F.4th 407 (6th Cir. 2021) (imposing a discount rate); GCIU-Emp. Ret. Fund v. MNG Enters., Inc., No. 21-00061, 2021 WL 3260079, at *5 (C.D. Cal. July 8, 2021), vacated in part and remanded on unrelated grounds, 51 F.4th 1092 (same).

Here, however, the Court concluded that the arbitrator's decision failed to make a clear factual finding as to the actuary's “actual best estimate as of the time in question.” Dkt. 44 at 36. To be sure, “portions of [the arbitrator's] decision gesture[d] in that direction,” but “the arbitrator's reasoning [for his selected remedy was] unclear.” Id. And without greater clarity, the Court could not determine whether the arbitrator had concluded that the actuary had, for example, merely failed “to provide a sufficient explanation for his decision[ ],” which typically require a remand to the actuary, or whether the arbitrator “made a factual finding that 7.3% was in fact the actuary's best estimate of the appropriate discount rate,” which would not. Id. at 35. The Court, accordingly, remanded the case to the arbitrator to “reconsider the appropriate remedy” and make explicit his reasoning. Id. at 37.

On remand, the arbitrator clarified his reasoning and reaffirmed his prior award. As he explained, his prior award was premised on the finding that “the Plan actuary's 7.3% discount rate for withdrawal liability is applicable to CCEA's 2018 withdrawal and was part of assumptions and methods the Plan's actuary determined to be reasonable, in the aggregate, ‘taking into account the experience of the plan and reasonable expectations[,] and which, in combination, offer the [Plan] actuary's best estimate of anticipated experience under the plan’ as required by 29 U.S.C. § 1393(a)(1).” Dkt. 46-1 at 5. Following the arbitrator's decision, CCEA moved to confirm the arbitrator's award as supplemented, Dkt. 46, and the Plan cross-moved to vacate the award as supplemented, Dkt. 50. For the following reasons, the Court will AFFIRM the award.²

When reviewing an arbitration award under the Multiemployer Pension Plan Amendments Act (“MPPAA”), the Court presumes that the arbitrator's findings of fact are correct “unless they are rebutted ‘by a clear preponderance of the evidence.’ ” Energy W., 39 F.4th at 737 (quoting 29 U.S.C. § 1401(c)). As explained in greater detail in the Court's prior opinion, the “clear preponderance” standard has been interpreted by courts to “establish a ‘clearly erroneous’ standard of review for factual findings.’ ” Dkt. 44 at 13 (quoting Jos. Schlitz Brewing Co. v. Milwaukee Brewery Workers’ Pension Plan, 3 F.3d 994, 999 (7th Cir. 1993)). “Review under the clearly erroneous standard is significantly deferential, requiring a definite and firm conviction that a mistake has been committed” to reverse an arbitrator's factual finding. Concrete Pipe & Prods. of California, Inc. v. Constr. Laborers Pension Tr. for S. California, 508 U.S. 602, 623 (1993) (internal quotation marks omitted). Here, that means that the Court must accept the arbitrator's finding of fact that the 7.3% discount rate for withdrawal liability was the Plan actuary's “best estimate” unless the arbitrator's “account of the evidence is implausible in view of the entire record and it is apparent that its findings are clearly mistaken.” Robinson v. Am. Airlines, Inc., 908 F.2d 1020, 1022–23 (D.C. Cir. 1990). Because that high threshold is not satisfied here, the Court affirms the arbitrator's award as supplemented.

As described above, on remand, the arbitrator found that the 7.3% discount rate for withdrawal liability was the Plan actuary's “best estimate of anticipated experience under the Plan, and the rate he selected for the withdrawal liability discount rate when applying § 1393(a)(1) correctly.” Dkt. 46-1 at 8. In other words, the arbitrator found that the actuary's true “best estimate”—when “best estimate” has the meaning prescribed to it by the MPPAA—is 7.3%, notwithstanding the actuary's statements to the contrary that 5.0% was his “best estimate” in 2018.

To reach this conclusion, the arbitrator's reasoning proceeded in three steps. The arbitrator began by finding, as a matter of fact, that from 2015 to 2017, the Plan actuary's best estimate of the discount rate for withdrawal liability was 7.3%. That 7.3% figure, the arbitrator explained, was based on assumptions from the “2015 experience study” that the actuary had conducted when first retained by the Plan:

[W]hen taking into account the Plan's actual anticipated experience, based on the Plan's actual investments, the Plan's actuary chose 7.3% as his best estimate for a withdrawal liability discount rate. He did so in his 2015 study and in each year after ․

Id. at 5. Having found that from 2015 until 2017 the Plan actuary “chose 7.3% as his best estimate” based on assumptions from the 2015 experience study, the arbitrator then turned to 2018—the year the Plan changed its withdrawal rate to 5.0%.

For the 2018 valuation, the arbitrator found that once again, the actuary relied on the 2015 experience study for the assumptions underlying that year's valuation. Id. Among other things, the arbitrator emphasized that the 2018 valuation itself contained an “explicit statement ․ endorsing the 2015 study and its results.” Id. The arbitrator observed that, in the prior three years, when the actuary relied on the 2015 study for the valuation's assumptions, the actuary arrived at a best estimate of 7.3% for the withdrawal-liability discount rate. The arbitrator then found that the actuary's “best estimate” in 2018 must have remained at 7.3%—a figure “he reaffirmed for years”—absent some evidence that something had materially changed between 2017 and 2018.³ Id.

Accordingly, the arbitrator next considered whether the record contained evidence of “any changes in any factor considered in the 2015 study that might influence or call into question the Plan actuary's selection of the 7.3% withdrawal liability discount rate.” Id. The arbitrator found none. He explained:

[T]he Plan's actuary never indicated that bond rates had dropped significantly, that his views of risk shifting had changed since 2015, that any of his professional views had changed between March and September 2017, that the Plan's investment prospects had changed, or that he was newly aware or newly persuaded by the risk-adjusted theory of discount rate setting. The only substantive explanation given turned on events that predated the 2015 study. No theoretical or empirical inputs had changed ․

Id. at 5–6. Therefore, “[b]ased on the Plan actuary's reliance on the 2015 study in the 2018 valuation in combination with this actuary's reliance on his 2015 study over the prior years, and no evidence of changing factors,” the arbitrator concluded that “7.3% was in fact the Plan actuary's best estimate of the appropriate withdrawal liability discount rate applicable to 2018 when properly applying” the MPPAA. Id. at 6.

The Plan contends that the foregoing analysis by the arbitrator is flawed, both legally and factually. First, the Plan contends that the arbitrator, in making the above factual findings, “improperly shift[ed] the burden to the Plan to justify changing the withdrawal liability discount rate from the prior year.” Dkt. 50 at 17. As a result of this asserted legal error, the Plan contends that the entirety of the arbitrator's factual findings must be set aside and the case must be remanded to the actuary (rather than the arbitrator) to calculate the discount rate for withdrawal liability once more. The Court, however, is unpersuaded that the arbitrator shifted the burden of proof. The arbitrator did not conclude that, absent a showing of evidence from the Plan, the 7.3% discount rate must endure. Instead, he made a factual finding—based on the actuary's multi-year adoption of 7.3% as his “best estimate” for the withdrawal-liability discount rate, the endorsement of the 2015 experience study in the 2018 valuation, and the absence of changed circumstances—that the Plan actuary's best estimate of the withdrawal-liability discount rate had not changed from 2017 to 2018. A factfinder may consider the absence of evidence supporting a party's position when making a finding of fact without shifting the burden of proof. The Plan's argument regarding legal error is therefore unpersuasive.

Shifting gears, the Plan next takes aim at several of the arbitrator's specific factual findings, arguing that they are clearly erroneous and that, as a result, they undermine the entirety of the arbitrator's decision to reimpose his original remedy on remand. First, the Plan argues that the arbitrator was wrong to view the 2018 valuation's reference to the 2015 study as an endorsement of the 7.3% figure the 2015 study recommended as the discount rate for withdrawal liability. Dkt. 50 at 22. The Plan notes that the “endorsement” in the 2018 valuation to which the arbitrator referred was “only one line,” and provided little detail as to what assumptions it referred. Id. at 23. The 2015 experience study, moreover, itself discusses numerous assumptions, of which the discount rate for withdrawal liability was just one. It would therefore be a “gross mischaracterization,” the Plan argues, to conclude that the single sentence in the 2018 valuation referencing the 2015 study was an endorsement of the 2015 study's withdrawal-liability discount rate specifically. Id. at 22.

But Appendix A of the 2018 valuation does “endorse” the 2015 study, as the arbitrator found. In detailing the assumptions underlying that year's valuation, the report states that, “[t]he assumed inflation on the 401(a)(17) compensation limit and 415(b) benefit limit and the Current Liability interest and mortality assumptions are prescribed by law. All other assumptions below were selected by the plan's enrolled actuary based on the results of an experience study completed in 2015.” Dkt. 21 at 735 (J.A. 729) (emphasis added). One of those “other assumptions below,” id., is the interest rate for withdrawal liabilities, and the 2015 experience study recommends the rate of “7.30% per annum, net of investment expenses, for funding and withdrawal liability purposes,” Dkt. 21 at 611 (J.A. 605). Based on this evidence, it was reasonable for the arbitrator to find that the actuary used as a starting point for the 2018 valuation the assumptions recommended in the 2015 study, including the withdrawal-liability discount rate. The Plan's reading of the 2018 valuation (and the sentence referencing the 2015 report) might be a reasonable one as well. But “[w]here there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous.” Overby v. Nat'l Ass'n of Letter Carriers, 595 F.3d 1290, 1294 (D.C. Cir. 2010) (quoting Anderson v. City of Bessemer City, 470 U.S. 564, 573–74 (1985)).

The Plan also argues that the arbitrator's findings are factually erroneous because they rely, in part, on his conclusion that there is no evidence of changing factors that would have caused the actuary to deviate from his prior best estimate of 7.3%. Dkt. 50 at 18–20. Here, the Plan relies principally on the actuary's testimony (or rather the Court's summary of that testimony in its prior opinion) that the change from 7.3% to 5.0% was “justified because a rate of 5.0% reflected both a low-risk investment environment and the expected returns on lower-risk, fixed-income investments.” Dkt. 44 at 7 (citing Dkt. 21-2 at 442 (J.A. 3006 (Hudecek Dep.))). Because “the Plan's actuary believed, based on his professional judgment, that it was appropriate to choose a withdrawal liability rate that was adjusted for the additional risk borne by the Plan,” the Plan argues, the actuary's best estimate cannot have been the 7.3% figure that does not account for risk-shifting. Dkt. 50 at 20. Once again, however, the Plan's argument fails—not because it is premised on an implausible factual finding the arbitrator could have made—but because it is not the only reasonable account of the evidence that was presented to the arbitrator.

Central to the Plan's account of the evidence is the actuary's deposition testimony that he experienced a change of professional opinion regarding risk shifting between 2017 and 2018. Dkt. 21-2 at 450 (J.A. 3014). But the arbitrator was under no obligation to find that testimony credible. And, as the arbitrator's decision on remand reflects, he found that there was reason to discredit the actuary's testimony. In recounting the facts on remand, the arbitrator emphasized that in the months and days leading up to the Plan's decision to change the discount rate for withdrawals, the actuary had repeatedly told the Board and others that it was his view that the 7.3% discount rate was appropriate for this Plan. Specifically, the arbitrator found as follows on remand:

On March 7, 2017, during a meeting with the Plan's Board, the Plan's actuary said that the current 7.3% discount rate for withdrawal liability was “appropriate for this Plan.” On May 12, 2017, the Plan's actuary told the Plan's withdrawal liability subcommittee that the 7.3% discount rate was reasonable to use for a well-funded “green” plan like the Plan in this case. The actuarial valuation report for the Plan, issued on August 31, 2017, and covering 2017, reflects the use of a 7.3% discount rate for withdrawal liability calculations.

Dkt. 46-1 at 3. Yet, the arbitrator noted, only “[t]welve days later, on September 12, 2017, while [the] CCEA and the [Nevada State Education Association (the NEA's Nevada state affiliate)] were in litigation regarding termination of the services agreement [which triggered the withdrawal], the Plan's actuary recommended the Plan reduce its withdrawal liability discount rate from 7.3% to 5%, for withdrawals occurring after December 31, 2017.” Id. at 3–4. In light of this timeline, the arbitrator declined to credit the actuary's testimony regarding his change of views on risk shifting; instead, the arbitrator found that “the Plan's actuary never indicated” to others at the time “that his views of risk shifting had changed since 2015, that any of his professional views had changed between March and September 2017, that the Plan's investment prospects had changed, or that he was newly aware or newly persuaded by the risk-adjusted theory of discount rate setting.” Id. at 5–6. Such a weighing of the evidence is in the factfinder's purview. See also Sofco Erectors, 2020 WL 2541970 at *9 (discounting the testimony from the fund's actuary that the Segal Blend rate was his best estimate calculation, and instead crediting the testimony that “the 7.25% rate that the Fund uses to determine funding levels” was the true best estimate calculation).

The Court, accordingly, discerns no clear error in the arbitrator's factual findings in his supplemental decision. Because the arbitrator concluded that 7.3% was, in fact, the actuary's actual best estimate of anticipated experience under the plan, the Court further concludes that the arbitrator's decision to order, as a remedy, that the “withdrawal liability assessment [for CCEA] must be recalculated using the 7.3% WL discount rate applicable prior to the change to 5%” is enforceable. Dkt. 21-6 at 1252 (J.A. 6326 (Award 3)).

CONCLUSION

For these reasons and those explained in the Court's prior memorandum opinion, Dkt. 44, the Court will GRANT CCEA's motion to confirm the arbitration award as supplemented, Dkt. 46; will DENY the Plan's cross-motion to vacate the arbitration award, Dkt. 50; will ORDER the Court's prior judgment, Dkt. 45, AMENDED to provide: “It is further ORDERED that the Arbitration Award issued by Arbitrator Adam P. Segal on November 20, 2020, and Supplemental Award Following Remand issued on July 27, 2023, in the arbitration case styled Clark County Education Association v. Employees’ Retirement Plan of the National Education Association, AAA Case Number: 01-190000-4728, is AFFIRMED and ENFORCED;” will LIFT the STAY of CCEA's obligation to make further withdrawal liability payments, will DIRECT the Clerk to file this opinion and the accompanying order in Clark County Education Association v. Employees’ Retirement Plan of National Education Association, Case No. 1:23-cv-02486; Employees’ Retirement Plan of National Education Association v. Clark County Education Association, Case No. 1:23-cv-02507, and will DIRECT that the Clerk terminate those cases for the reasons provided herein.

A separate order will issue.

FOOTNOTES

1.   In Energy West, the D.C. Circuit clarified how an arbitrator (and a court reviewing an arbitrator's decision) should review an actuary's analysis to determine if it faithfully applied the MPPAA's “Best Estimate Requirement.” 39 F.4th at 738. Because Energy West did not address how an actuary should conduct its analysis in the first instance, remand to the actuary in light of Energy West is unwarranted.

2.   The Plan contends that CCEA's motion to confirm the arbitrator's award as supplemented is improper because the Court, in resolving the parties’ earlier motions for summary judgment, issued an order that “constitute[d] a final judgment of the Court within the meaning of Rule 58(a) of the Federal Rules of Civil Procedure.” Dkt. 50 at 13. In response, CCEA argues that the Court's prior order is best construed as an order compelling arbitration, which is injunctive in nature and therefore can be modified by the Court. Dkt. 52 at 6 (citing Int'l Longshoremen's Ass'n, Loc. 1291 v. Phila. Marine Trade Ass'n, 389 U.S. 64, 75 (1967)). Because CCEA and the Plan have filed separate lawsuits before this Court, in which the parties can bring the same motions to confirm and/or vacate that they bring here, see Clark Cnty. Educ. Ass'n v. Emps.’ Ret. Plan of Nat'l Educ. Ass'n, Case No. 1:23-cv-02486; Emps.’ Ret. Plan of Nat'l Educ. Ass'n v. Clark Cnty. Educ. Ass'n, Case No. 1:23-cv-02507, this dispute is an academic one. Regardless of whether the motions are docketed in this case or in the other cases, which the Court has consolidated, the same arguments would appear before this Court in the same procedural posture. Moreover, neither party contends that the Court lacks subject matter jurisdiction over these claims. Cf. Owen-Williams v. BB & T Inv. Servs., Inc., 717 F. Supp. 2d 1, 12–15 (D.D.C. 2010). For the sake of judicial expediency, the Court will thus consider the motions in this case. To the extent necessary, moreover, the Court orders that 1:20-cv-3443 is re-opened for purposes of considering the instant dispute and also, out of a further abundance of caution, treats the pending motions as though they were filed in the consolidated cases as well. Finally, the Court notes that by staying CCEA's obligation to make further withdrawal payments pending further order of the arbitrator of this Court, the Court made clear that it contemplated further proceedings (following the remand) in this case. See Dkt. 50.

3.   The 2018 valuation, of course, does not explicitly use a 7.3% discount rate to calculate withdrawal liability. Instead, it uses the 5.0% rate, which both the arbitrator and this Court have found was inconsistent with the Plan's obligations under the MPPAA. As a consequence, in determining what the actuary's best estimate actually was, the arbitrator ignored the explicit statement in the 2018 valuation (and from the actuary himself) that his best estimate in 2018 was 5.0%.

RANDOLPH D. MOSS, United States District Judge