Seventh Circuit Affirms Central States’ Authority to Expel a Single Bargaining Unit and Holds Withdrawal-Date Counterclaim Must Be Arbitrated

In Penske Truck Leasing, L.P. v. Central States, Southeast & Southwest Areas Pension Plan, No. 25-1738, No. 25-1872, — F.4th —-, 2026 WL 1502200 (7th Cir. May 29, 2026), the Seventh Circuit affirmed across the board in this dispute between an employer and a multiemployer pension plan over the plan’s authority to expel a single bargaining unit and the timing of the resulting withdrawal. Penske Truck Leasing, L.P., contributed to the Central States, Southeast and Southwest Areas Pension Plan on behalf of ten bargaining units under ten separate collective-bargaining agreements, including Local 745, which represents Penske’s employees in Dallas, Texas. Central States grew concerned that Penske was arranging for all ten agreements to expire in 2022 so that it could withdraw all units at once and effect a complete withdrawal, thereby avoiding a separate partial-withdrawal assessment, a difference both parties agreed amounted to tens of millions of dollars. After negotiations failed, the Trustees voted to terminate Local 745’s participation effective December 25, 2021. Penske sued in the Northern District of Illinois, obtained a temporary restraining order that was later vacated, and Central States counterclaimed for a declaration that Local 745’s effective withdrawal date was 2021. On cross-motions, the district court granted Central States summary judgment on Penske’s claims and dismissed the counterclaim as subject to mandatory arbitration. Both sides appealed.

The court first addressed the standard of review for interpreting the plan’s Trust Agreement and held that deferential review applies. Drawing on Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), and Conkright v. Frommert, 559 U.S. 506 (2010), the court explained that where trust documents grant the trustee power to construe disputed terms, the trustee’s interpretation will not be disturbed if reasonable. The Trust Agreement vested the Trustees with discretionary and final authority to construe plan documents, placing it within Firestone’s first category. The court rejected Penske’s contention that a court must first find the language ambiguous on de novo review before deferring, explaining that Waste Management did not address the standard of review and turned on an employer’s interpretation that was unreasonable under any standard.

Applying deferential review, the court declined to disturb the Trustees’ reasonable interpretation that the Expulsion Provision permitted termination of a single bargaining unit without expelling all of Penske’s other units. The provision expressly stated that rejection or termination of one or more of an employer’s groups would not affect the continued participation of any other group, and it referred to termination of the affected group. Although the court acknowledged that the provision was not a model of clarity and that portions of the text lent support to Penske’s reading, it held that under deferential review it need not resolve the ambiguity once it found the Trustees’ interpretation reasonable. The court rejected Penske’s two remaining counterarguments. It held that 29 U.S.C. § 1394(b), which requires certain plan rules and amendments governing withdrawal liability calculations to operate uniformly, did not apply to an expulsion decision, and that the provision’s differing effects on single-unit versus multi-unit employers did not render it non-uniform. It also rejected Penske’s argument that the interpretation would force a violation of the National Labor Relations Act’s duty to maintain the status quo, reasoning that expulsion of Local 745 effectively guaranteed an impasse in negotiations.

The court next held that Central States’ decision to expel Local 745 was not arbitrary or capricious. Both sides invoked that standard, so the court assumed without deciding it applied, while declining to import wholesale the arbitrary-and-capricious framework from its ERISA benefits-denial cases, which is shaped by fiduciary duties and statutory and regulatory notice requirements that have no place in an expulsion decision. The court concluded that Penske’s arguments amounted to minor quibbles with the thoroughness of Central States’ investigation and the explanation of its decision, and that Penske identified no source imposing the procedural requirements it urged. The court observed that a plan sponsor owes no fiduciary duty to a participating employer and was under no obligation to allow Penske to minimize its withdrawal liability. The court also addressed Penske’s contention that Central States conducted a sham investigation and misrepresented its status to the district court, finding the record did not support the charge and cautioning that an unsupported accusation that opposing counsel made a knowingly false statement in open court is a serious matter that should not be advanced merely to aid a merits argument.

Finally, the court affirmed dismissal of Central States’ counterclaim seeking a declaration that Local 745’s effective withdrawal date was 2021. Under 29 U.S.C. § 1401(a), disputes concerning determinations made under the withdrawal-liability provisions must be resolved through arbitration, which the court characterized as a mandatory administrative-exhaustion requirement rather than a jurisdictional prerequisite. The court held that the question of an employer’s withdrawal date is a quintessential issue for arbitration and that Central States’ counterclaim came too soon, as no withdrawal-liability assessment, demand, or payment had occurred since the TRO was vacated in April 2022 to trigger arbitration. The court declined to read § 1401 as requiring a finalized determination before it applies, reasoning that such a reading would hollow out the arbitration requirement and create incentives for employers to race to court and for plan sponsors to delay assessments. It likewise rejected Central States’ effort to recharacterize its claim as concerning contributions rather than withdrawal liability, explaining that the request, properly understood, sought to determine when Penske’s contribution obligation ended, which is a withdrawal question. Although the court recognized that the case’s unusual procedural posture, in which a now-vacated court order delayed the expulsion, gave Central States’ position some force, it held that § 1401’s mandate left no room to hear the counterclaim before arbitration.

The Seventh Circuit affirmed the grant of summary judgment for Central States and the dismissal without prejudice of the counterclaim, remanded for further proceedings on attorney-fee issues, and denied Central States’ request that the district court be instructed to retain jurisdiction for a later case.