By: Danielle Nichole Smith
Law360 (May 23, 2018, 9:25 PM EDT) — A Jewish music group can’t challenge a withdrawal fee imposed on it by a union pension fund since the group didn’t request to arbitrate the issue until after the deadline passed, a New York federal judge ruled Wednesday, awarding the fund a partial quick win.
U.S. District Judge John G. Koeltl said in his order granting the American Federation of Musicians and Employers’ Pension Fund partial summary judgment that Neshoma Orchestra and Singers Inc. had forfeited the right to dispute the fund’s demand for a $1.1 million withdrawal liability, finding that the group didn’t ask to arbitrate the fee until nearly two months after the Employee Retirement Income Security Act deadline for doing so.
The fund’s response to Neshoma’s perceived request for a review of the fee started the clock on the 60-day window for the music group to initiate arbitration, Judge Koeltl said.
“Because Neshoma did not meet the deadline to file for arbitration set by ERISA, the amount of withdrawal liability is fixed and Neshoma cannot challenge its imposition,” Judge Koeltl said in his
The music group offered several reasons for why its tardy arbitration filing shouldn’t doom its challenge to the withdrawal fee, but Judge Koeltl was not persuaded.
The judge found that the rules for withdrawal liability between the group and the fund required that any arbitration requests be filed at the American Arbitration Association, rejecting the group’s
contention that its letter responding to the initial notice about the liability constituted an arbitration demand.
Additionally, the fund not using the music group’s precise name in its first letter about the withdrawal liability didn’t render the notice insufficient, Judge Koeltl said.
The judge also dismissed arguments about the validity of the American Arbitration Association’s $8,200 filing fee, finding that the music group’s challenges to the constitutionality and enforceability of the fee should have been brought in arbitration.
Further, the group’s objections to the fee didn’t explain why it filed for arbitration late and offered $275 in lieu of the required amount, Judge Koeltl said.
“The alleged unconstitutionality of the AAA fee does not excuse Neshoma’s failure to file a timely demand for arbitration together with a payment of whatever portion of the fee it could afford,” he
said. “The demand was untimely and therefore would have been ineffective regardless of what fee was required or submitted or whether that fee was unconstitutional.”
AFM-EPF told the music group in August 2015 that it owed a $1.1 million withdrawal liability because the group stopped making contributions to the fund in July 2012 after the expiration of a collective bargaining agreement it had with some of its employees, according to the order. The pension fund determined in June 2013 that the group no longer had an obligation to make contributions and had consequently withdrawn from the fund, the order said.
The music group disputed this claim and said that it had not withdrawn from the fund, arguing that the labor dispute between itself and its employees excused it from making contributions, the order said. The group’s response letter also said that if the fund didn’t rescind its request for payment, the correspondence should be considered as an arbitration demand, according to the order.
The fund construed the letter as a request to review the withdrawal liability and told the music group in September 2015 that it didn’t qualify for a labor dispute exception, the order said. The following January, the group sent an arbitration request and $275 payment to the American Arbitration Association, according to the order.
AFM-EPF sued Neshoma in April 2017 to compel payment of the withdrawal fee.
Counsel and representatives for the parties didn’t respond Wednesday to requests for comment.
Neshoma is represented by Ira A. Sturm of Raab Sturm & Ganchrow LLP.
AFM-EPF and its board of trustees are represented by Patricia McConnell of Meyer Suozzi English & Klein, P.C.
The case is American Federation of Musicians and Employers’ Pension Fund v. Neshoma Orchestra and Singers Inc., case number 1:17-cv-02640, in the U.S. District Court for the Southern District of New York.
–Editing by Adam LoBelia.
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