Second Circuit Sides with Employer in Union Change Withdrawal Liability Appeal

On February 18, 2026, the U.S. Court of Appeals for the Second Circuit issued its opinion in Mar-Can Transportation Company, Inc. v. Local 854 Pension Fund, No. 24 1431 (2d Cir. 2026), affirming the district court's grant of partial summary judgment in favor of Mar-Can Transportation Company, Inc. In doing so, the court upheld the district court's interpretation of 29 U.S.C. § 1415(c) in determining that Mar-Can was entitled to a $1.8 million reduction in its withdrawal liability assessed by Local 854 pursuant to ERISA. Local 854 had appealed.

The dispute arose after Mar-Can's employees voted in 2020 to change union representation. As a result of the vote, Mar-Can was required to withdraw from Local 854 and begin contributing to its new union's pension plan. Because this withdrawal was employee driven rather than voluntary, several ERISA provisions were automatically triggered, including a requirement for Mar-Can to pay withdrawal liability to Local 854. Local 854 was required to transfer to the new plan the assets and liabilities associated with Mar-Can's active employees who had switched unions. Under § 1415(c), Local 854 was required to reduce Mar-Can's withdrawal liability by the amount that the "value of the unfunded vested benefits" transferred exceeded the "value of the assets transferred." In this case, Local 854 transferred approximately $5.5 million in liabilities and $3.7 million in assets to the new plan, while assessing a withdrawal liability of $1.8 million. The core of the dispute was the parties' differing interpretations of § 1415(c).

Mar-Can's interpretation of § 1415(c) required a withdrawal liability reduction equal to the $1.8 million difference between the liabilities and assets transferred. Local 854, by contrast, argued that § 1415(c) permitted no reduction in the withdrawal liability it assessed. Local 854's interpretation relied heavily on an earlier district court decision, Hoeffner v. D'Amato, No. 09 CV 316, 2016 WL 8711082 (E.D.N.Y. 2016), which had adopted a similar calculation. 

The Second Circuit observed that the phrase "unfunded vested benefits," as used in § 1415(c), is ambiguous and required interpretation within ERISA's broader statutory framework. To resolve the interpretive dispute, the court analyzed ERISA's structure and the objectives of the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA). One of the MPPAA's core reforms was its establishment of withdrawal liability to discourage employers from abandoning underfunded multiemployer pension plans (MEP) and shifting the financial obligations for retirees onto a MEP's remaining employers. Under the MPPAA, withdrawal liability refers to an employer's obligation to fund the old plan to the extent that the plan remains responsible for providing benefits to the withdrawing employer's employees.

The court then considered whether the definition of "unfunded vested benefits" found in 29 U.S.C. § 1391 (Part 1 of Subtitle E of ERISA) should govern the phrase "unfunded vested benefits allocable to the employer" in § 1415(c). The Second Circuit reasoned that although the Part 1 definition provides useful context, it does not resolve the interpretive ambiguity in § 1415(c). Instead, applying standard tools of statutory construction, the court agreed with Mar-Can that the reduction required under § 1415(c) is determined by subtracting the value of assets transferred from the full amount of transferred liabilities. The court found that this interpretation best aligns with ERISA's structural logic, especially when read alongside § 1415(g), which governs asset transfers and operates as a "mirror image… for the asset side of the ledger." The court noted that together, §§ 1415(c) and 1415(g) ensure that plan to plan transfers are financially neutral to old plans, preventing windfalls and promoting stability. The court reasoned that adopting Local 854's interpretation would create a windfall for the old plan inconsistent with MPPAA's "overarching aim" of preventing "double payments by the employer."

Accordingly, the Second Circuit held that "unfunded vested benefits allocable to the employer," as used in § 1415(c), refers to the entire amount of liabilities transferred when an employer withdraws pursuant to §§ 1415(a) and 1415(c). Because the liabilities transferred in this case exceeded the assets transferred by $1.8 million, Mar-Can was entitled to a reduction in its withdrawal liability, fully eliminating the assessment.

The decision represents a significant clarification of how withdrawal liability must be calculated when an employer is forced to withdraw from a MEP due to a union representation change. The Second Circuit's interpretation ensures that MEPs cannot generate unintended windfall gains during union driven plan transfers and provides critical guidance for employers and MEPs navigating § 1415(c).

Plaintiffs Cannot Amend Complaint to Cure Standing in Tobacco and Vaccine Surcharges Case 

On February 26, 2026, the District Court for the District of North Carolina dismissed without prejudice a tobacco and vaccine surcharges case against GardaWorld Cash Service, Inc., Fisher & Artis v. GardaWorld Cash Service, Inc., No. 3:24-CV-00837, which had been pending since September 2024. We previously wrote about this case, which concerned both tobacco and COVID-19 vaccine surcharges and alleged both breach-of-fiduciary-duty and anti-discrimination claims arising under ERISA. 

Last year, the court granted in part and denied in part GardaWorld's motion to dismiss, leaving only the anti-discrimination claims. More specifically, the plaintiffs alleged that the surcharges violated Department of Labor (DOL) anti-discrimination regulations set forth at 29 C.F.R. § 2590.702(f) because the plaintiffs were not offered retroactive refunds of surcharges for satisfying the surcharge avoidance requirements after the cut-off date but before the end of the plan year. The plaintiffs also alleged that they were prevented from earning the "full reward" because the wellness programs did not adequately disclose the reasonable alternative program (the tobacco cessation program) and participants were unaware that recommendations from their personal physicians would be accommodated because the plan documents lacked the necessary disclosures. 

The court dismissed the case without prejudice in response to the plaintiffs' motion to substitute new representative plaintiffs and to amend their complaint because the original putative class representative plaintiffs had not participated in GardaWorld's employer-sponsored health plan during the relevant period. In response, the defendants opposed the motion and moved to dismiss for lack of subject-matter jurisdiction. In dismissing the case without prejudice, the court stated that though it "is mindful of the efficiencies that might be gained by permitting amendment, it is equally compelled to consider the constitutional consequences of allowing plaintiffs to cure a jurisdictional defect through substitution." The court went on to warn that "[a]ccepting such a theory would erode Article III's limits by enabling litigants to initiate putative class actions with individuals who suffer no injury, secure the Court's involvement, and then — after the absence of standing is exposed — find and substitute a plaintiff with an actual stake in the controversy."
 
As tobacco surcharges cases continue to make their way through courts across the country, we are closely monitoring how these cases advance and specifically whether there will be additional decisions on the merits. Until then, the procedural posture and overall landscape of these cases continue to encourage early settlements. 

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