Opinion

King v. United States

Court: United States Court of Federal Claims
Filed: Apr 8, 2022
Status: Published
On the bench: Richard A. Hertling
Cited by: 0 cases
Authority: More cited than 8.2%

applying Omnia in a regulatory-takings case

How later courts described this case

applying Omnia in a regulatory-takings case
analyzing the character of the government action under the third prong of Penn Central
describing the ways in which government action may give rise to a regulatory or a per se taking
finding that the plaintiffs had a property interest in their vested disability retirement benefits under the due process clause

Written by the judges who cited it.

The opinion

In the United States Court of Federal Claims

No. 18-1115

Filed: April 8, 2022*

FOR PUBLICATION

WILLIAM KING, et al.,

Plaintiffs,

UNITED STATES,

Defendant.

Noah A. Messing, Messing & Spector LLP, New York, NY, for the plaintiffs, with Phillip M.

Spector and Jason H. Kim, of counsel.

Geoffrey M. Long, Commercial Litigation Branch, Civil Division, U.S. Department of Justice,

Washington, D.C., for the defendant, with Alison S. Vicks, of counsel.

MEMORANDUM OPINION

HERTLING, Judge

The plaintiffs are vested participants in a pension plan. They allege that the United

States, acting through the Department of the Treasury (“Treasury”), in consultation with the

Department of Labor (“Labor”) and the Pension Benefit Guaranty Corporation (“PBGC”),

violated the takings clause of the fifth amendment of the U.S. Constitution by authorizing cuts to

their pension benefits under the Multiemployer Pension Reform Act of 2014 (“MPRA”). The

case involves important issues that go to the heart of the ability of Congress and regulators to

address the growing problem of underfunded pension plans. See, e.g., Tankersley & Rappeport,

1.5 Million Retirees Await Congressional Fix for a Pension Time Bomb, N.Y. Times (Feb. 18,

2018), https://www.nytimes.com/2018/02/18/business/multiemployer-pension-crisis.html (last

visited Mar. 18, 2022).

Pursuant to the protective order in this case, the Court initially filed this opinion under seal

on March 24, 2022, and directed the parties to review the opinion and propose redactions of

confidential or proprietary information. The parties have notified the Court that they have no

redactions to propose. (ECF 147.) Accordingly, the Court hereby releases in full the

memorandum opinion of March 24, 2022.

The defendant moves for summary judgment under Rule 56 of the Rules of the Court of

Federal Claims (“RCFC”) on the grounds that (1) the plaintiffs have not identified a

constitutionally cognizable property interest, and (2) no government action has given rise to a

taking. The defendant reserves for later briefing issues that will affect the Court’s takings

analysis and the resolution of this case in the event the Court denies this motion.

The plaintiffs have identified a constitutionally cognizable property interest in receiving

their vested pension benefits without any reduction in the amount of their monthly benefits.

Further, the approval by the defendant of the plaintiffs’ pension plan’s request for authorization

to reduce the pension benefits it pays to the plaintiffs may constitute sufficient government

action to hold the government liable for a taking. The defendant has demonstrated, however, that

the government did not coerce the plaintiffs’ pension plan to apply to suspend benefits under the

MPRA and that the pension plan was not the government’s agent. Accordingly, the Court grants

the defendant’s motion for summary judgment with respect to the plaintiffs’ claims relying on

agency and coercion theories. The remainder of the defendant’s motion for summary judgment

is denied.

I. LEGAL BACKGROUND

A. ERISA

The Employee Retirement Income Security Act (“ERISA”) was enacted in 1974. Under

ERISA, “[e]ach pension plan shall provide that an employee’s right to his normal retirement

benefit is nonforfeitable upon the attainment of normal retirement age . . . .” 29 U.S.C.

§ 1053(a). A “normal retirement benefit” is statutorily defined as “the greater of the early

retirement benefit under the plan, or the benefit under the plan commencing at normal retirement

age.” Id. § 1002(22). A plan participant reaches “normal retirement age” under the terms of the

plan or at the later of “the time a plan participant attains age 65, or . . . the 5th anniversary of the

time a plan participant commenced participation in the plan.” Id. § 1002(24). “The term

‘nonforfeitable’ when used with respect to a pension benefit or right means a claim obtained by a

participant or his beneficiary to that part of an immediate or deferred benefit under a pension

plan which arises from the participant’s service, which is unconditional, and which is legally

enforceable against the plan.” Id. § 1002(19).

Under ERISA, pension benefits are generally protected by the “anti-cutback” rule. The

“anti-cutback” rule forbids pension plans from reducing plan participants’ accrued benefits

unless a statutory exception applies. Id. § 1054(g)(1) (“The accrued benefit of a participant

under a plan may not be decreased by an amendment of the plan, other than an amendment

described in section 1082(d)(2) or 1441 of this title.”); see also 26 U.S.C. § 411(d)(6) (providing

identical language).

One statutory exception to the “anti-cutback” rule permits insolvent pension plans to

reduce accrued benefits to the level guaranteed by the PBGC, a government agency that insures

pension funds. 29 U.S.C. § 1426(a) (“Notwithstanding sections 1053 and 1054 of this title, in

any case in which benefit payments under an insolvent multiemployer plan exceed the resource

benefit level, any such payment of benefits which are not basic benefits shall be suspended, in

accordance with this section . . . .”). The PBGC may pay a guaranteed benefit to the participants

and beneficiaries of an insolvent pension fund, but the level of benefits would be lower than if

the fund were solvent. 29 U.S.C. § 1322(a).

B. The MPRA

In 2014, Congress passed the MPRA to “provide[ ] new options for troubled

multiemployer plans to avoid insolvency.” Pension Benefit Guaranty Corporation: PBGC Paid

Nearly $6 Billion in Pension Benefits to Retirees in FY 2015, 15-12, 2015 WL 7249945 (Nov.

17, 2015); see also 160 Cong. Rec. H9264 (daily ed. Dec. 11, 2014) (statement of Rep. King)

(the MPRA was enacted to give trustees of “troubled” pension plans “additional tools to maintain

the solvency of the plans”). The MPRA permits solvent pension funds that are in “critical and

declining” status to, “by plan amendment, suspend benefits” of plan participants to avoid

insolvency. 29 U.S.C. § 1085(e)(9)(A).1 The MPRA defines a “suspension of benefits” as “the

temporary or permanent reduction of any current or future payment obligation of the plan to any

participant or beneficiary under the plan, whether or not in pay status at the time of the

suspension of benefits.” Id. § 1085(e)(9)(B)(i). Before a pension fund may suspend benefits

under the MPRA, the MPRA requires the completion of five steps.

First, a pension fund must apply to the Secretary of the Treasury for approval of its plan

to reduce pension benefits. Id. § 1085(e)(9)(G)(i). A fund’s application must specify the size of

the proposed cuts and demonstrate that the cuts are projected to prevent insolvency. Id. The

suspensions “shall be equitably distributed across the participant and beneficiary population,

taking into account factors” such as the participants’ age and life expectancy, length of time in

pay status, and amount and type of benefit. Id. § 1085(e)(9)(D)(vi). Another factor is whether

there is a risk that active participants will withdraw support for the plan. Id.

§ 1085(e)(9)(D)(iv)(X). The suspension of benefits is prohibited for anyone who is over the age

of 80 or disabled. Id. § 1085(e)(9)(D)(ii), (iii). The proposed suspensions may not reduce

benefits below 110 percent of the benefit level guaranteed by the PBGC. Id. § 1085(e)(9)(D)(i).

Second, Treasury consults with the PBGC and Labor to review the application. Id.

§ 1085(e)(9)(G)(i). Treasury must approve or reject the application within 225 days; otherwise,

the application is deemed approved. Id. § 1085(e)(9)(G)(iii). Treasury must approve the

application unless it is “clearly erroneous.” Id. § 1085(e)(9)(G)(v).

Third, if the plan is approved, Treasury, the PBGC, and Labor must administer an

election in which plan participants vote on the proposed reductions. Id. § 1085(e)(9)(H)(i). For

the proposal to be rejected, a majority of plan participants must vote to reject the cuts. Id.

§ 1085(e)(9)(H)(ii). Plan participants who do not cast a vote are counted as voting to approve

the proposed reductions. Id. Even if a majority of plan participants vote to reject the cuts,

The Internal Revenue Code (“Tax Code”) contains an identical provision at 26 U.S.C.

§ 432(e)(9)(A). For consistency, the Court cites the provisions in 29 U.S.C. § 1085(e)(9), but the

same language may be found in 26 U.S.C. § 432(e)(9).

Treasury may override the vote if it determines that the proposed reductions are “systematically

important,” i.e., the PBGC would be exposed to more than $1 billion in insurance obligations if

the pension plan were to become insolvent. Id. § 1085(e)(9)(H)(ii), (v).

Fourth, Treasury, the PBGC, and Labor must issue a final authorization for the

suspension within seven days of the vote. Id. § 1085(e)(9)(H)(vi). For the fifth and final step,

the pension fund may amend its plan documents to implement the suspension of benefits. Id.

§ 1085(e)(9)(A).

A pension plan that applies under the MPRA and receives approval from Treasury to

reduce its benefits is immunized from liability for any reduction in benefits resulting from the

approved MPRA application. Id. § 1085(e)(9)(B)(iii). A participant or beneficiary whose

benefits are suspended has no cause of action arising under the MPRA. Id. § 1085(e)(9)(I)(iii).

C. Further Legislative Developments

In March 2021, Congress enacted the American Rescue Plan Act of 2021 (“ARPA”),

Pub. L. 117-2, 135 Stat. 4. Under the ARPA, pension plans that reduced benefits to plan

participants under the MPRA may apply to Treasury for economic assistance to improve the

plans’ financial stability. Id. § 1432(a)(1). To obtain ARPA funding, a pension plan must

commit to restoring the benefits it pays to plan participants to the levels it was paying prior to

any MPRA-authorized reductions. Id. § 1432(k)(1). A pension plan must also agree to

reimburse beneficiaries the amount their benefits were reduced due to MPRA-authorized

reductions. Id. § 1432(k)(2). These restorative payments may be made either as a lump sum

within three months of Treasury’s approval of a pension plan’s ARPA application or in equal

monthly installments over a period of five years. Id. These reimbursement payments under the

ARPA do not include any adjustment for interest. Id. A qualifying plan may apply to Treasury

under the ARPA at any time until December 31, 2025. Id. § 1432(f).

The plaintiffs’ fund was eligible to apply for assistance beginning on January 1, 2022.

Special Financial Assistance by PBGC, 86 Fed. Reg. 36,598 (July 12, 2021) (codified at

29 C.F.R. pt. 4000, 4262). Nothing currently in the record discloses whether the fund has

specified if and when it intends to apply for financial assistance under the ARPA.

II. FACTUAL BACKGROUND2

A. The Fund

The plaintiffs are retired employees of United Parcel Service (“UPS”) and vested

participants in the New York State Teamsters Conference Pension and Retirement Fund (“the

Teamsters Fund”). The Teamsters Fund was established in 1954, 20 years before ERISA was

enacted. One of the plaintiffs began contributing to his pension prior to ERISA’s enactment.

This summary of facts does not constitute findings of fact but is simply a recitation of the

parties’ representations. The facts underlying the plaintiffs’ claims are not in dispute.

Since the beginning of its establishment, the Teamsters Fund has advertised that “[a]ll pensions

are payable for life without reduction.” (ECF 129-1 at 4.3) Trustees of the Teamsters Fund are

divided equally between management and the unions. (ECF 129-3 at 883:13-23.)

Plan documents govern the administration of the Teamsters Fund, as is the case generally

with pension funds. The Teamsters Fund’s plan documents provide that a participant’s benefits

have vested when the participant “has (a) met the minimum service requirements of Section

5.04(a) and has acquired a non-forfeitable right to a pension benefit under the Plan, or (b)

attained Normal Retirement Age.” (ECF 129-1 at 339.) When “non-forfeitable” is used with

respect to a pension benefit or right, the term is statutorily defined as a claim to a benefit under

the pension plan “which is unconditional, and which is legally enforceable against the plan.”

29 U.S.C. § 1002(19). The plan documents provide a lengthy, complex formula for the

calculation of the participants’ benefits and vesting. (ECF 129-1 at 349-63.) The plan

documents provide that the “normal form of benefit payment shall be a Life Annuity,” which it

defines as “provid[ing] monthly payments for the life of the Pensioner.” (Id. at 364.)

Plan participants have a limited right of access to the trust estate. A participant does not:

have any right, title or interest in or to the Fund Estate or any part

thereof, except the right of the member of the Union, or other person,

who is covered for pension or retirement benefits, to pension or

retirement benefits, subject to such terms and conditions as the

Trustees shall have determined for entitlement thereto, and further

subject to the limitations, terms and conditions that may or shall be

specified in the Pension Plan or in any amendment or amendments

thereto, except as the Trustees may in their sole and exclusive

judgment and discretion otherwise determine and decide upon.

(ECF 126-1 at 145.)

The Teamsters Fund’s trustees have repeatedly amended the plan documents to conform

with evolving ERISA, Tax Code, and regulatory requirements. Article X of the plan provides, in

pertinent part:

The provisions of the Plan may be modified or amended,

retroactively if necessary, to bring the Plan into conformity with

statutory or regulatory requirements to preserve the qualified status

of the Plan under section 401 of the [Tax] Code and the exempt

status of the Trust under section 501 of the [Tax] Code. In no event,

however, shall any modification or amendment of the provisions of

the Plan make it possible for any part of the funds of the Plan to be

The parties have filed documents and exhibits appended to their briefs. (ECF 126-1, 126-2,

129.) The Court refers to these documents by citing the pagination reflected in these appendices.

used for, or diverted to, purposes other than for the exclusive benefit

of Pensioners, Participants and Survivors, or have the effect of

decreasing a Participant’s Accrued Benefit in violation of section

411(d)(6) of the [Tax] Code [the “anti-cutback” rule].

(ECF 129-1 at 383.)

The plaintiffs allege that prior to the enactment of the MPRA, the Teamsters Fund had

informed all three named plaintiffs that their benefits had vested and that they would be entitled

to receive their full benefits for life. (ECF 129-3 at 1029, 1044, 1061.) The plaintiffs further

assert that the promise of lifetime pension benefits was a major factor in their career choices and

decisions to retire. (ECF 128 at 14-15.) As of 2016, all three plaintiffs had retired and started to

receive their vested pension benefits. (Id. at 14.)

B. Reduction of the Plaintiffs’ Benefits

The Teamsters Fund submitted its first MPRA application on August 31, 2016, to reduce

the amount it paid to plan participants. (ECF 129-6 at 1848.) Treasury identified concerns

regarding some of the fund’s actuarial assumptions. (ECF 129-2 at 496.) Treasury encouraged

the Teamsters Fund to withdraw its application and resubmit it, offering to expedite its

consideration of the resubmission. (Id. at 526, 551.) The Teamsters Fund subsequently

withdrew its application. (Id. at 562.)

The Teamsters Fund submitted a revised application on May 15, 2017. (Id. at 638.) In

its revised application, the Teamsters Fund proposed an 18-percent cut to the benefits of plan

participants still actively employed and a 29-percent cut to the benefits of retirees. (Id. at 640.)

The Secretary of the Treasury approved the application on August 2, 2017. (Id. at 698-99.)

Treasury proceeded to hold an election among Teamsters Fund plan participants.

Regardless of the outcome, the PBGC had advised Treasury that the Teamsters Fund would

likely qualify as “systematically important”—i.e., big enough to allow Treasury to override any

adverse MPRA vote. (ECF 129-6 at 1853.) Participants were given approximately three weeks

to vote by mail, phone, or internet. (ECF 129-2 at 710.) Of the fund’s 34,636 eligible

participants, only 40 percent voted. (Id. at 724.) Of those who voted, 71 percent rejected the

proposed reductions, and 29 percent approved them. (Id.) Treasury treated the outcome of the

election as approval of the proposed reductions because, pursuant to the MPRA, the 60 percent

of plan participants who did not vote were counted as voting to approve the proposed reductions.

(Id.)

Following the vote, the Secretary of the Treasury issued a final authorization for the

Teamsters Fund to reduce its benefit payments by the amounts that had been requested by the

application, approved by Treasury, and ratified by the vote of plan participants. (Id. at 728-29.)

With technical assistance and recommended edits from Treasury, the Teamsters Fund then

amended its plan documents to implement the reductions. (Id. at 754-59.)

The reductions in pension benefits became effective on October 1, 2017. Since then, the

monthly pension benefits paid to the three named plaintiffs have reflected a 29-percent reduction

in their pre-MPRA benefits. As a result of that reduction, they allege that they have suffered

financial hardship, including dwindling retirement savings, diminished access to necessary

medical care, and increased debt.

III. PROCEDURAL HISTORY

The plaintiffs filed suit on July 31, 2018. (ECF 1.) The defendant moved to dismiss the

plaintiffs’ claims under RCFC 12(b)(1) and 12(b)(6). (ECF 7.4) After holding oral argument on

the defendant’s motion, that motion to dismiss was converted into a motion for summary

judgment to be briefed after discovery regarding the government’s alleged liability. (ECF 21.)

On December 17, 2019, the case was transferred to the undersigned. (ECF 36, 37.) The parties

proceeded with discovery.

The defendant filed a motion for summary judgment on January 22, 2021. (ECF 99.)

The plaintiffs responded to the defendant’s motion and cross-moved for summary judgment on

March 6, 2021. (ECF 105.)

On March 11, 2021, Congress enacted the ARPA. The following day, the defendant

moved to vacate the schedule for summary-judgment briefing and to stay proceedings. (ECF

109.) The plaintiffs opposed the motion. (ECF 110.) On March 26, 2021, following oral

argument on the defendant’s motion, the Court stayed proceedings until July 30, 2021. (ECF

114.)

When the stay expired, the plaintiffs argued that the ARPA does not moot their claims,

even if the Teamsters Fund applies for and receives relief under that law. Although relief under

the ARPA would restore the plaintiffs to their pre-MPRA level of benefits and compensate them

for the losses they have suffered under the MPRA-approved reductions, the plaintiffs argued that

the ARPA makes no provision for the payment of interest on the plaintiffs’ reduced benefits and

that as a result, even under the ARPA the defendant has still committed a per se taking. (ECF

120 at 1.) The plaintiffs urged that proceedings in the case continue and not wait for the

Teamsters Fund to apply for relief under the ARPA.

The Court held a status conference on August 30, 2021, and requested that the defendant

choose any discrete legal issues that were ripe for consideration on a motion for summary

judgment even before the Teamsters Fund applied for relief under the ARPA. (See ECF 121

(scheduling the status conference); ECF 125 at 7:8-15 (transcript of the status conference).) The

Court then adopted a schedule for summary-judgment briefing (ECF 122) and denied the parties’

previous cross-motions for summary judgment as moot (ECF 123).

After the defendant moved for summary judgment, the defendant’s earlier motion to

dismiss was denied as moot. (ECF 104.)

On September 27, 2021, the defendant moved for summary judgment on two specific

grounds: (1) that the plaintiffs do not have a cognizable property interest in their entitlement to

unreduced pension benefits; and (2) that no government action gave rise to a taking. (ECF 126.)

The plaintiffs filed a response brief (ECF 128) on October 19, 2021, and the defendant filed a

reply brief (ECF 130) on November 2, 2021. The Court heard oral argument on November 10,

2021. The Court held a telephonic status conference on November 19, 2021, and ordered

supplemental briefing on the applicability of the doctrine of Omnia Commercial Co. v. United

States, 261 U.S. 502 (1923), to the present case. (ECF 131, 132.) The parties filed supplemental

briefs on December 23, 2021, (ECF 139, 140) and reply briefs on January 21, 2022 (ECF 142,

143).

IV. JURISDICTION

“[F]ederal courts have an independent obligation to ensure that they do not exceed the

scope of their jurisdiction, and therefore they must raise and decide jurisdictional questions that

the parties either overlook or elect not to press.” Henderson ex rel. Henderson v. Shinseki, 562

U.S. 428, 434 (2011). The Tucker Act, 28 U.S.C. § 1491(a)(1), gives the Court of Federal

Claims jurisdiction over claims for damages against the United States:

The United States Court of Federal Claims shall have jurisdiction to

render judgment upon any claim against the United States founded

either upon the Constitution, or any Act of Congress or any

regulation of an executive department, or upon any express or

implied contract with the United States, or for liquidated or

unliquidated damages in cases not sounding in tort.

The plaintiffs have the burden of establishing jurisdiction by a preponderance of the evidence.

See, e.g., Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988).

At an earlier stage of this case, the defendant moved to dismiss the plaintiffs’ claim for a

lack of subject-matter jurisdiction under RCFC 12(b)(1). The Court converted the defendant’s

motion to dismiss into a motion for summary judgment (ECF 21) and later denied the

defendant’s motion to dismiss as moot. (ECF 104.) The defendant does not raise the issue of

subject-matter jurisdiction in its present motion for summary judgment and focuses its argument

instead on issues going to the merits of the dispute. (See ECF 126, 130.) Nonetheless, the Court

sua sponte must examine whether it has jurisdiction over this dispute. See Henderson, 562 U.S.

at 434.

“Without subject matter jurisdiction, the trial court’s ruling on the Government’s motion

for summary judgment is moot.” Booth v. United States, 990 F.2d 617, 620 (Fed. Cir. 1993).

“In determining whether the Court of Federal Claims has jurisdiction, all that is required is a

determination that the claim is founded upon a money-mandating source and the plaintiff has

made a nonfrivolous allegation that it is within the class of plaintiffs entitled to recover under the

money-mandating source.” Jan’s Helicopter Serv., Inc. v. FAA, 525 F.3d 1299, 1309 (Fed. Cir.

2008). The court has “undisputed” jurisdiction over claims brought under the takings clause of

the fifth amendment. Id.

As was evident in the defendant’s original motion to dismiss, issues of “‘merits and

jurisdiction will sometimes come intertwined,’ and a court can decide ‘all . . . of the merits

issues’ in resolving a jurisdictional question, or vice versa.” Brownback v. King, 141 S. Ct. 740,

749 (2021) (quoting Bolivarian Republic of Venez. v. Payne Int’l Drilling Co., 137 S. Ct. 1312,

1319 (2017)). The Federal Circuit has provided some guidance on the appropriate approach:

[F]ailure of proof of an element of the cause of action means the

petitioner is not entitled to the relief he seeks. To conclude in such

a case that the petitioner loses because the forum is “without

jurisdiction” is to obscure the nature of the defect. It would be more

accurate to conclude that the petitioner has failed to prove the

necessary elements of a cause for which relief could be granted.

Spruill v. Merit Sys. Prot. Bd., 978 F.2d 679, 687 (Fed. Cir. 1992); see also Engage Learning,

Inc. v. Salazar, 660 F.3d 1346, 1354 (Fed. Cir. 2011) (quoting identical language). The Court

therefore declines to convert the merits of this case into a jurisdictional question.

The Court has jurisdiction over this dispute. The plaintiffs’ nonfrivolous claim is based

on the takings clause, which is a money-mandating source of law.

V. STANDARD OF REVIEW

Under RCFC 56(a), “[t]he court shall grant summary judgment if the movant shows that

there is no genuine dispute as to any material fact and the movant is entitled to judgment as a

matter of law.” “Only disputes over facts that might affect the outcome of the suit under the

governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 248 (1986). A court should draw inferences from the underlying facts

in the light most favorable to the party opposing the motion. See Matsushita Elec. Indus. Co. v.

Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). The essential facts of the present case are not

in dispute; the legal implications of the facts are at the heart of the parties’ dispute.

VI. DISCUSSION

The defendant moves for summary judgment on two grounds. First, the defendant argues

that the plaintiffs have not identified a constitutionally cognizable property interest. Second, the

defendant argues that the federal government took no action that could be considered a taking.

Throughout this opinion, the Court limits its analysis to these specific issues raised by the

defendant’s motion. As previously discussed, implementation of the ARPA is ongoing, and the

plaintiffs’ benefits are subject to further change based on potential regulatory action if the

Teamsters Fund applies for relief under the ARPA. Because of the ongoing nature of the

regulatory process, whose outcome may well change the nature and scope of the plaintiffs’

interests, the defendant has reserved many of its arguments, including those regarding which

takings test applies and the application of that test, until the final contours of the plaintiffs’

alleged injuries are settled. (See ECF 126 at 5 n.1; ECF 99 at 22-33.) The Court therefore

confines its analysis to the issues of whether the plaintiffs have a cognizable property interest at

stake and whether there was any government action that could constitute a taking.

A. Property Interest

The takings clause of the fifth amendment provides: “nor shall private property be taken

for public use, without just compensation.” (Emphasis added.) To prevail in a claim for a taking

under the fifth amendment, a plaintiff must first identify a cognizable property right forming the

subject of the alleged taking. E.g., Hearts Bluff Game Ranch, Inc. v. United States, 669 F.3d

1326, 1329 (Fed. Cir. 2012). A court must then determine whether the “asserted right is one of

the rights in the bundle of sticks of property rights that inheres in a res by looking to ‘existing

rules or understandings’ and ‘background principles’ derived from an independent source such as

state, federal, or common law.” Am. Pelagic Fishing Co. v. United States, 379 F.3d 1363, 1376

(Fed. Cir. 2004) (quoting Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1030 (1992)).

The first step in a takings analysis is thus to define the property interest at stake. The

defendant urges a narrow definition of the plaintiffs’ alleged interest as “the right to receive

unreduced payments.” (ECF 126 at 16.) During oral argument, the Court asked whether the

plaintiffs’ alleged property interest was “an entitlement to pension payments” or “an entitlement

to a specific level of pension payments.” (ECF 138 at 67:19-24.) Counsel for the plaintiffs

responded, “the answer is both because [the plaintiffs’] pensions have vested. The Government

tries to segregate the concepts of accruing and vesting, but they’re closely related.” (Id. at

67:25–68:1.)

Although the Court agrees with the plaintiffs that vesting affects their claims, the law

supports the defendant’s narrow definition of the interest at stake. In its most recent takings

case, Cedar Point Nursery v. Hassid, 141 S. Ct. 2063, 2072 (2021), the Supreme Court focused

its analysis on the plaintiffs’ rights to exclude others from their property. In American Pelagic

Fishing, the Federal Circuit determined whether the use of a specific commercial fishing vessel

to fish for Atlantic mackerel and herring in the Exclusive Economic Zone was “a legally

cognizable property interest.” 379 F.3d at 1376. Similarly, in Acceptance Insurance Cos. v.

United States, 583 F.3d 849, 857 (Fed. Cir. 2009), the Federal Circuit framed the property

interest at stake as the plaintiff’s ability to sell a specific insurance portfolio to a specific buyer.

These cases, and many others, did not analyze fishing rights, insurance-portfolio rights,

or real-property rights generally; rather, they focused on the specific interest at stake. The same

approach must be applied here. Under the MPRA, the plaintiffs have not lost their right to their

pensions; they continue to receive them to this day. Instead, they lost their entitlement to the

specific amount they were receiving under the Teamsters Fund plan prior to the MPRA-

authorized reductions of these amounts.

The Court rejects the plaintiffs’ effort to widen the analytical lens to the scope of pension

rights generally. The Court focuses its analysis on the more limited issue of whether the

plaintiffs have a legally cognizable property interest in their entitlement to a specific level of

pension benefits.5

The defendant argues that the plaintiffs lack a constitutionally cognizable property

interest in the level of their pension payments for four reasons. First, the defendant argues that

the level of pension benefits originates in ERISA and the Tax Code through the “anti-cutback”

rule, and the plaintiffs cannot have a constitutionally cognizable property interest in benefits

created under and subject to a statute. Second, the defendant analogizes this case to other cases

in which the Federal Circuit found no property interest. Third, the defendant underscores that

the plaintiffs’ pension payments are subject to lawful reductions under the plan documents and

ERISA. Fourth, the defendant argues that no property interest can arise because the plaintiffs

voluntarily engaged in an activity that brought them within an area subject to pervasive

government regulation.

1. Source of the Plaintiffs’ Rights

The source of the plaintiffs’ right to receive unreduced pension benefits largely

determines whether they have a constitutionally cognizable property interest. If the right to

receive unreduced pension benefits derives from statute, the plaintiffs lack a cognizable property

interest. “[N]o one is considered to have a property interest in a rule of law.” Branch v. United

States, 69 F.3d 1571, 1577-78 (Fed. Cir. 1995). For example, the Federal Circuit has held that

claimants did not have a cognizable property interest under the fifth amendment when the rights

forming the subject of the alleged taking “were governed exclusively by statute, not contract.”

Adams v. United States, 391 F.3d 1212, 1221, 1225 (Fed. Cir. 2004). The Federal Circuit

explained that it would not “treat a statutory right to be paid money as a legally-recognized

property interest, as we would real property, physical property, or intellectual property. Instead,

[the Circuit] view[ed] it as nothing more than an allegation that money is owed.” Id. at 1225.

The defendant argues that the source of the plaintiffs’ right to receive unreduced pension

benefits lies in the “anti-cutback” rule of ERISA. That provision generally forbids the reduction

of pension benefits unless a statutory exception applies. 29 U.S.C. § 1054(g)(1). (ECF 126 at

17-19.) The defendant posits that the “plaintiffs at most enjoy a ‘statutory right to be paid

money’ based on the operation of ERISA as spelled out in the plan document.” (Id. at 19

(quoting Adams, 391 F.3d at 1225.) The plaintiffs can have no property interest in a statutory

regime.

The plaintiffs also argue that the government unconstitutionally deprived the plaintiffs of

their remedy against the Teamsters Fund by enacting 29 U.S.C. § 1085(e)(9)(B)(iii), which

immunizes pension plans from liability for MPRA cuts. (ECF 140 at 19.) The plaintiffs raise

this argument in the alternative. (Id.) The Court does not reach this issue because the plaintiffs

have prevailed in demonstrating a cognizable property interest in receiving a certain level of their

vested benefits.

If the right to receive unreduced pension benefits originates in contract, however, the

plaintiffs do have a cognizable property interest under the fifth amendment. “[T]here is also

ample precedent for acknowledging a property interest in contract rights under the Fifth

Amendment.” Cienega Gardens v. United States, 331 F.3d 1319, 1329 (Fed. Cir. 2003) In

general, under the fifth amendment, “[v]alid contracts are property, whether the obligor be a

private individual, a municipality, a state, or the United States.” Lynch v. United States, 292 U.S.

571, 579 (1934); see also A & D Auto Sales, Inc. v. United States, 748 F.3d 1142, 1152 (Fed. Cir.

2014).

The plaintiffs argue that their right to receive unreduced pension payments derives from

their pension contracts with the Teamsters Fund, not from ERISA or any other statute. (ECF 128

at 18-29.) The plaintiffs highlight that one of the named plaintiffs began contributing to his

pension prior to the enactment of ERISA and its “anti-cutback” rule. (Id. at 14.) The plaintiffs

also emphasize the legal significance of vesting in pension law. (Id. at 16-22.)

In response, the defendant decries the plaintiffs’ effort to give “talismanic significance”

to vesting and points out that the MPRA regulates primarily accrued benefits and does not alter

ERISA’s vesting rules. (ECF 130 at 5, 10.) The defendant also objects to importing cases

regarding the interpretation of provisions of ERISA into a takings case: the plaintiffs “are

making a statement about courts’ application of a Federal statute, rather than the Fifth

Amendment.” (ECF 126 at 26.)

Background principles of law are relevant to whether a cognizable property interest

exists. See Am. Pelagic Fishing, 379 F.3d at 1376. In determining whether an asserted property

right is cognizable under the fifth amendment, courts look to “‘existing rules or understandings’

and ‘background principles’ derived from an independent source such as state, federal, or

common law.” Id. (quoting Lucas, 505 U.S. at 1030). Those background principles “define the

dimensions of the requisite property interest for purposes of establishing a takings claim.” Id. at

1376-77. These same principles also may inform whether a right derives from statute or contract

and is therefore constitutionally incognizable or cognizable. See Am. Bankers Ass’n v. United

States, 932 F.3d 1375, 1384-86 (Fed. Cir. 2019) (examining background principles of law to

determine whether the plaintiff’s property interest derived from statute or contract).

In addition to numerous sources from federal law, the plaintiffs cite various cases arising

under New York state law providing that the vesting of a pension confers a property interest on

plan participants.6 (ECF 128 at 19-20.) The plan documents in this case provide: “The

provisions of the Plan shall be construed, regulated and administered under the laws of New

York except as otherwise provided by ERISA.” (ECF 129-1 at 380.) The defendant highlights

Majauskas v. Majauskas, 61 N.Y.2d 481, 463 N.E.2d 15 (1984); Poslock v. Tchrs.’ Ret. Bd.

of the Tchrs.’ Ret. Sys., 209 A.D.2d 87, 94 (N.Y. App. Div. 1995); Tereskiewicz v. Tereszkiewicz,

128 A.D.2d 605, 606 (N.Y. App. Div. 1987).

that under 29 U.S.C. § 1144(a), ERISA pre-empts “any and all State laws insofar as they may

now or hereafter relate to any employee benefit plan . . . .” (ECF 130 at 10.)

The Court analyzes precedents in both federal pension law and takings jurisprudence in

determining whether the plaintiffs have identified a cognizable property interest. The Court

focuses its analysis on federal law rather than state law because ERISA may pre-empt the cases

arising under New York law cited by the plaintiffs. Moreover, federal law alone amply supports

the plaintiffs’ contention that they have a cognizable property interest in their vested pension

benefits arising under their pension contracts.

Supreme Court precedent supports the conclusion that participants whose pension

benefits have vested have a contractual entitlement to those benefits, and that this entitlement

stems from the participants’ contracts with the pension plans themselves, not from ERISA.

In Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 (1981), the Supreme Court

examined whether ERISA pre-empted a New Jersey statute. The Supreme Court identified a

“threshold issue”:

[W]hat defines the content of the benefit that, once vested, cannot

be forfeited? ERISA leaves this question largely to the private

parties creating the plan. That the private parties, not the

Government, control the level of benefits is clear from the statutory

language defining nonforfeitable rights as well as from other

portions of ERISA.

Id. at 511. ERISA merely sets outer bounds on the accrual and vesting of benefits; benefit levels

and formulas vary from plan to plan and from participant to participant. Id. at 513-14. The fact

that a participant’s benefits have vested and are thus nonforfeitable under ERISA does not itself

“guarantee a particular amount or a method for calculating a benefit.” Id. at 512.

The inference to be drawn from the Supreme Court’s analysis in Alessi supports the

conclusion that the plan documents, i.e., the contract between the plan and its participants, and

not ERISA, determine what level of benefits the plaintiffs are entitled to when their pensions

vest. Indeed, the plan documents of the Teamsters Fund provide a lengthy, detailed, and

complex formula for the calculation of participants’ pension benefits.7 (ECF 129-1 at 349-63.)

The approach taken in Black v. Pension Benefit Guaranty Corp., 983 F.3d 858, 865 (6th

Cir. 2020), cert. denied, 144 S. Ct. 874 (2022) also supports focusing on the plan documents as

the source of participants’ interest in the amount of their benefits. In Black, the Sixth Circuit

analyzed the language of the relevant plan documents and found that the plan documents

provided that only funded benefits were nonforfeitable and therefore protected by the fifth

amendment. Id. at 868-70. The Teamsters Fund at the heart of this case is, at present, funded

and solvent. The language in the plan documents of the Teamsters Fund is distinct from that of

The plan documents, not ERISA, also determine when a participant’s benefits have “vested.”

(Id. at 339 (“‘Vested’ means that a Participant has (a) met the minimum service

requirements . . . and has acquired a non-forfeitable right to a pension benefit under the Plan, or

(b) attained Normal Retirement Age.”).)

Although ERISA regulates the Teamsters Fund and the operation of its plan documents,

no statutory provision provides a similar level of detail in determining a particular plan

participant’s entitlement to a specific and determinable level of benefits.

In addition, the MPRA itself recognizes the centrality and controlling nature of the plan

documents as the source of beneficiaries’ entitlement. The MPRA provides that “the plan

sponsor of a plan in critical and declining status may, by plan amendment, suspend benefits

which the sponsor deems appropriate.” 29 U.S.C. § 1085(e)(9)(A) (emphasis added).

Reductions to pension benefits under the MPRA could not come into effect unless the plan

documents themselves were amended.

Other ERISA provisions also emphasize that the plans themselves are the source of the

calculation of benefits to which participants are entitled. For example, 29 U.S.C. § 1053(a)

provides, “Each pension plan shall provide that an employee’s right to his normal retirement

benefit is nonforfeitable . . . .” (Emphasis added.) Similarly, 29 U.S.C. § 1054 provides, “Each

pension plan shall satisfy the requirements” of the benefit-accrual minimums. (Emphasis

added.) ERISA also defines a “nonforfeitable” benefit as “a claim obtained by a participant or

his beneficiary to that part of an immediate or deferred benefit under a pension plan which arises

from the participant’s service, which is unconditional, and which is legally enforceable against

the plan.” 29 U.S.C. § 1002(19) (emphasis added).

The calculation of the plaintiffs’ benefits therefore depends here on the plan documents

and not ERISA. The plaintiffs’ rights stem from the plan documents and, as previously noted,

the plan documents provide that pension benefits are paid “for the life of the Pensioner.” (ECF

129-1 at 364.)

a. Vesting

The Supreme Court has equated the vesting of pensions under a plan to property

ownership. In Thole v. U.S. Bank N.A, 140 S. Ct. 1615, 1618 (2020), the Supreme Court noted

that vested participants in a private defined-benefit pension plan, such as the Teamsters Fund,

were “legally and contractually entitled to receive [the] same monthly payments for the rest of

the plan documents in Black, so that case is distinguishable in important respects. Nonetheless,

the Sixth Circuit’s reliance in its analysis on the language of the plan documents is instructive.

their lives.”8 The plaintiffs in Thole were pension-plan participants alleging that the trustees of

the plan had mismanaged the fund’s assets. The Supreme Court held that the plaintiffs lacked

standing because the alleged mismanagement of the fund had caused the plaintiffs no injury. Id.

at 1622. The plaintiffs had received all their vested benefits and did not allege that the

mismanagement had jeopardized the fund’s future ability to pay their benefits. The Supreme

Court nonetheless opined that if the plaintiffs “had not received their vested benefits, they would

of course have Article III standing to sue and a cause of action under ERISA § 502(a)(1)(B) to

recover the benefits due to them.” Id. at 1619 (emphasis added).

The defendant argues that Thole “does not stand for the principle that benefit levels in

vested pensions are inviolable,” given that the Supreme Court acknowledged that a defined-

benefit plan could fail. (ECF 130 at 9.) In the discussion relied on by the defendant, the

Supreme Court identified the remedies that would be available to vested participants whose

benefits were not paid in full: employers and their shareholders could “root out” fiduciary

misconduct; the Department of Labor can enforce the plan’s fiduciary obligations under ERISA;

the PBGC “is required by law to pay the vested pension benefits of the retirees, often in full”;

and fiduciaries of the plan could sue each other. Thole, 140 S. Ct. at 1621. Accordingly, the

prospect that a defined-benefit pension fund could fail does not eviscerate the plaintiffs’ property

interests when there are remedies available to the plaintiffs to recoup the vested benefits due to

them. In Thole, the Supreme Court’s acknowledgement of the availability of remedies when

plan participants are not paid their vested benefits in full reinforces the importance of vesting and

supports the plaintiffs’ right to receive a certain level of benefits when their benefits have vested.

Like the plaintiffs in Thole, the plaintiffs in this case are vested participants in a defined-

benefit plan. Even though they may not have a property interest in the pooled assets of the

The Supreme Court in Thole, 140 S. Ct. at 1618, explained the difference between defined-

benefit and defined-contribution plans:

In a defined-benefit plan, retirees receive a fixed payment each

month, and the payments do not fluctuate with the value of the plan

or because of the plan fiduciaries’ good or bad investment decisions.

By contrast, in a defined-contribution plan, such as a 401(k) plan,

the retirees’ benefits are typically tied to the value of their accounts,

and the benefits can turn on the plan fiduciaries’ particular

investment decisions.

The Department of Labor also provides guidance on the differences between a defined-benefit

plan and a defined-contribution plan. U.S. Dep’t of Labor, Types of Retirement Plans,

https://www.dol.gov/general/topic/retirement/typesofplans (last visited Jan. 28, 2022). In a

defined-benefit plan, a participant’s level of benefits is commonly calculated through a formula

considering time of service, and the benefits may be federally insured by the PBGC.

Teamsters Fund (see ECF 126-1 at 145), the plaintiffs are “legally and contractually entitled” to

receive a set level of benefits for their lifetimes. Thole, 140 S. Ct. at 1618.

In Central Laborers’ Pension Fund v. Heinz, the Supreme Court noted that through

vesting, “an employee’s already-accrued pension account becomes irrevocably his property.”

541 U.S. 739, 749 (2004) (emphasis added). The Supreme Court determined in Heinz that the

amendment of the plan documents of a private pension fund to curtail already-accrued, early-

retirement benefits violated the “anti-cutback” rule of ERISA. The Supreme Court discussed the

difference between ERISA’s provisions applying to accrued benefits and its provisions applying

to vested benefits: “To be sure, the concepts [of accrual and vesting] overlap in practical effect,

and a single act by a plan might raise both vesting and accrual concerns.” Id.

Because the plaintiffs’ pensions have vested, their pension benefits have become

“irrevocably” their “property.” See id. The defendant argues that the plaintiffs improperly

conflate vested pensions with accrued benefits. (ECF 130 at 13.) Notably, all benefits—

accrued, vested, or otherwise—may be suspended under the MPRA. See 29 U.S.C.

§ 1085(e)(9)(B)(i). Article X of the Teamsters Fund plan documents limits the ability of plan

trustees to reduce accrued benefits and does not expressly limit the reduction of vested benefits.

(ECF 129-1 at 383.) The MPRA-authorized reductions to the plaintiffs’ pensions affected both

accrued and vested benefits. See Heinz, 541 U.S. at 749. The plaintiffs’ benefits, however, have

vested. Accordingly, the property implications of vesting are relevant to this case. The

defendant’s distinction between accrued and vested benefits is nonetheless well-taken, and the

Court limits its finding of a property interest only to vested benefits.

The principle in Heinz and Thole that plan participants have a property right in their

vested benefits is echoed in a publication by the Internal Revenue Service:

“Vesting” in a retirement plan means ownership. This means that

each employee will vest, or own, a certain percentage of their

account in the plan each year. An employee who is 100% vested in

his or her account balance owns 100% of it and the employer cannot

forfeit, or take it back, for any reason.

Internal Revenue Service, Retirement Topics – Vesting (June 3, 2021),

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-vesting (last

visited Feb. 23, 2022).

The plaintiffs have demonstrated under federal pension law that their right to a specific

level of pension benefits stems from the plan documents, i.e., their contracts with the Teamsters

Fund, and that vesting conferred ownership of the benefits and a concomitant property interest in

the amount of those benefits on the plaintiffs.

b. Pension Plans as Contracts

The defendant argues that even if the plan documents are the source of binding

commitments, these documents are not truly “contracts” because of their dependence on ERISA.

(ECF 130 at 3 n.1.)

That argument is inconsistent with the language the Supreme Court has employed in

construing pension-plan documents. In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101

(1989), the Supreme Court decided on the appropriate standard of judicial review for benefit

determinations made by plan fiduciaries under ERISA. The petitioner advocated for an arbitrary

and capricious standard, while the respondent advocated for de novo review. Id. at 111-12. The

Supreme Court held that, as with judicial review of contracts, de novo review applied:

Actions challenging an employer’s denial of benefits before the

enactment of ERISA were governed by principles of contract law.

If the plan did not give the employer or administrator discretionary

or final authority to construe uncertain terms, the court reviewed the

employee’s claim as it would have any other contract claim—by

looking to the terms of the plan and other manifestations of the

parties’ intent.

Id. at 112-13. The Court declined to “impose a standard of review that would afford less

protection to employees and their beneficiaries than they enjoyed before ERISA was enacted.”

Id. at 114.

Firestone reflects that, both before and since the enactment of ERISA, courts must

consider provisions of pension-plan documents as contractual agreements. Furthermore, the

enactment of ERISA and exceptions to the “anti-cutback” rule did not abrogate otherwise valid

pension contracts. See id.

In addition, the Supreme Court has consistently explained that participants in a pension

plan are contractually entitled to the level of benefits promised by the plan. For example, in

Massachusetts Mutual Life Insurance Co. v. Russell, the Supreme Court noted that the plaintiff

was “entitled to benefits under the provisions of the plan contract . . . .” 473 U.S. 134, 147

(1985) (emphasis added).

The petitioner in Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 370

(1980) conceded that “its employees’ benefits are ‘vested in a contractual sense.’” In his dissent

in Nachman, Justice Powell noted a point of agreement between the parties and justices:

“Everyone concedes that the plan is a valid contract enforceable according to its terms, except to

the extent that ERISA provides otherwise.” Id. at 396.

In U.S. Airways, Inc. v. McCutchen, the Supreme Court noted that “[c]ourts construe

ERISA plans, as they do other contracts, by ‘looking to the terms of the plan’ as well as to ‘other

manifestations of the parties’ intent.’” 569 U.S. 88, 102 (2013) (emphasis added) (quoting

Firestone Tire, 489 U.S. at 113). In Thole, the Supreme Court again noted that “a defined-

benefit plan is more in the nature of a contract.” 140 S. Ct. at 1620.

The Corpus Juris Secundum on Pensions and Retirement Plans and Benefits also explains

that pension plans are akin to contracts: “The rights and obligations associated with a pension are

contractual in nature. Whether a pension is public, established by a collective bargaining

agreement, or voluntarily funded by an employer, it is contractual in nature.” 70 C.J.S. Pensions

§ 2 (footnotes omitted).

The defendant’s effort to tie the entire pension edifice to ERISA proves too much. In an

abstract sense, all contracts are dependent on the law to some degree. A “contract” is defined as

“a promise or a set of promises for the breach of which the law gives a remedy, or the

performance of which the law in some way recognizes as a duty.” Restatement (Second) of

Contracts § 1 (1981) (emphasis added). Despite their dependence on the law, contractual rights

may still constitute property under the fifth amendment, and the federal government is not

always free to take contractual rights for its own benefit without paying just compensation. See

Lynch, 292 U.S. at 579.

ERISA provides a statutory backstop, and since its enactment pension plans must be

ERISA-compliant at a minimum, but pension plans may also provide greater entitlement than

ERISA demands. In this case, a particular plan participant’s entitlement to a specific level of

benefits depends upon the operation of plan documents contractually setting the rates for the

accrual of benefits and vesting. Considering the ample precedent supporting the Court’s reading

of the pension plan as a contract, the Court finds that the plaintiffs’ vested benefits under the

pension plan give them a contractual entitlement to those benefits.

Other federal courts have also found that vested pension benefits give rise to a property

interest under the fifth amendment, even though the plaintiffs in those cases participated in

public rather than private pension plans. See Mallette v. Arlington Cnty. Empls.’ Supplemental

Ret. Sys. II, 91 F.3d 630, 636 (4th Cir. 1996) (finding that the plaintiffs had a property interest in

their vested disability retirement benefits under the due process clause); Coffman v. New Mexico,

No. 10-cv-1027, 2011 WL 13284465, at *13 (D.N.M. Sept. 12, 2011) (“Plaintiffs correctly

contend that their vested and matured pension benefits are constitutionally protected property

interests . . . .”); Bloch v. Powell, 227 F. Supp. 2d 25, 38 (D.D.C. 2002) (noting that “courts

consistently find property rights when an employer’s pension system clearly gives its employees

a vested right in retirement annuities” but holding that the plaintiff was not qualified for the

annuity “and therefore had no cognizable property rights”).9

The plaintiffs in this case would be in a more difficult position if their pensions were

publicly funded rather than privately funded. The Supreme Court has held that a disabled

veteran had no vested legal right to his military pension. United States v. Teller, 107 U.S. 64, 68

(1883); see also Lynch, 292 U.S. at 576-77 (1934) (providing that pensions for veterans were

In Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211 (1986), the Supreme Court

left open the possibility that contractual provisions unrelated to vested benefits in pension plans

could constitute property interests under the takings clause. The Supreme Court reviewed a

decision holding that a withdrawal provision in a contract between an employer and a pension

fund did not constitute property for purposes of a claim under the takings clause. See Connolly

v. Pension Benefit Guar. Corp., 631 F. Supp. 640, 645 (C.D. Cal. 1984) (“[T]he contractual right

which insulates employers from further liability to the pension plans in which they participate is

not ‘property’ within the meaning of the takings clause.”), direct appeal granted, 472 U.S. 1006

(1985). The appellants switched arguments at the Supreme Court and focused on the property

interest of the money that would be due to a fund upon employer withdrawal. 475 U.S. at 221.

The Supreme Court thus did not review the district court’s original holding finding no property

interest and affirmed instead on the grounds that there was no regulatory taking.

The Federal Circuit has not determined whether benefits of a vested private pension plan

may constitute property interests under the fifth amendment. In Zucker v. United States,

758 F.2d 637, 639 (Fed. Cir. 1985), the Federal Circuit opined in dicta that former government

employees may have a property interest in “the payment of an annuity upon retirement.” The

Federal Circuit ultimately did not decide that issue, however, and limited its holding to the

principle that the retirees lacked cognizable property interests in post-retirement cost-of-living-

adjustment benefits. Unlike the pension plan in Zucker, the pension plan in this case is private.

Notably, “‘courts have consistently refused to give effect to government-fostered expectations

that, had they arisen in the private sector, might well have formed the basis for a contract or an

estoppel.’” Id. at 640 (quoting Kizas, 707 F.2d at 536). While the rights of government

employees to retirement benefits are “determined by reference to the statute and regulations

governing these benefits,” the rights of participants in private pension plans are determined by

reference “to ordinary contract principles.” Id.

In sum, the plaintiffs’ entitlement to a specific level of benefits stems not from ERISA or

a rule of law, but from the pension contracts between the plaintiffs and the Teamsters Fund. The

plaintiffs are “legally and contractually” entitled to receive those vested benefits. Thole, 140 S.

Ct. at 1618.

Given that the plaintiffs have a property interest arising from the pension-plan

documents, applicable precedents support the existence of an enforceable property interest even

“gratuities” creating no vested legal right because they involved “no agreement of parties”).

Under federal-employment law, “courts have consistently refused to give effect to government-

fostered expectations that, had they arisen in the private sector, might well have formed the basis

for a contract or an estoppel.” Kizas v. Webster, 707 F.2d 524, 535 (D.C. Cir. 1983). As

employees in the private sector, the plaintiffs have a stronger right to their pension benefits

arising from the plan documents than the public-sector employees had in Mallette, Coffman, and

Bloch.

in the face of extensive government regulation. This case is also distinct from Federal Circuit

and Supreme Court cases finding no property interest in a rule of law.

2. Analogy to Federal Circuit Precedents

The Federal Circuit has consistently identified constitutionally cognizable property

interests in cases, like this one, when the asserted interest stems from contract or quasi-contract

but is somewhat dependent on the operation of law.

In Cienega Gardens, 331 F.3d at 1324, the plaintiffs had entered into mortgage

agreements with the U.S. Department of Housing and Urban Development (“HUD”). The

agreements provided that the plaintiffs had the right to prepay their 40-year mortgages without

HUD approval after 20 years. Id. at 1325. Portions of the agreements referenced relevant

statutory and regulatory provisions, and, under HUD regulations, the agreements could be

amended. Id. at 1325-26. A federal law later annulled the provision of the plaintiffs’ agreements

permitting mortgagors to prepay their mortgages without HUD approval after 20 years. Id. at

1326. The trial court ruled that the plaintiffs lacked a cognizable property interest because HUD

could have amended the regulations at any time, and the government advanced a similar

argument on appeal. Id. at 1330-32. The Federal Circuit reversed because it refused to “read

into private contracts limitations that are not even hinted at in their text.” Id. at 1331. The

Federal Circuit held that the plaintiffs had a cognizable property interest in their contractual right

to prepay their mortgages. Id. at 1330.

Like the mortgage agreements in Cienega Gardens, the plan documents provided the

plaintiffs with a contractual right. The plan documents of the Teamsters Fund promised

participants benefits at a particular level for life. The plan documents also referenced various

statutory provisions in ERISA and the Tax Code, which Congress retains the power to amend.

Under Cienega Gardens, he possibility that those statutes would be amended in the future does

not defeat an otherwise valid property interest that finds its source in the plan documents. The

plan documents contain no hint of a limitation that vested benefits could be suspended while the

plan remained funded.10

The Federal Circuit later relied on and reinforced Cienega Gardens in Piszel v. United

States, 833 F.3d 1366, 1375 (Fed. Cir. 2016). In Piszel, the plaintiff, an executive at Freddie

Mac, had an employment contract providing that, in the event of his termination without cause,

he was to receive a $7 million “golden-parachute” payment. Under new statutes and regulations

restricting golden-parachute payments following the 2008 financial crisis, the plaintiff was

terminated without cause and denied the golden-parachute payment he was due under his

The plaintiffs assert that the Teamsters Fund remained fully funded when it applied to

Treasury for relief under the MPRA. (See ECF 138 at 117:18–118:3 (arguing that the actuarial

assumptions of the Teamsters Fund’s MPRA applications were erroneous).) The defendant has

not disputed the plaintiffs’ contention that the Teamsters Fund was still solvent at the time it

suspended the plaintiffs’ benefits.

employment contract. Id. at 1371-72. A judge of this court dismissed the plaintiff’s takings

claim, finding in part that the plaintiff lacked a cognizable property interest in his employment

agreement. Id. at 1372-73. On appeal, the government argued that the plaintiff could not have a

property interest in the golden-parachute payment because “Freddie Mac operated in an

environment of pervasive federal regulation.” Id. at 1374. The Federal Circuit opined that the

plaintiff may have lacked a cognizable property interest and a claim for the alleged taking of that

interest if the law and regulations restricting golden-parachute payments had existed at the time

the plaintiff formed his employment contract; in that case, the limitation on the property interest

would have inhered in his title to the contractual right. Id. The Federal Circuit held, however,

that, as to the post-contract changes to the governing legal landscape, “the existence of

government regulation does not defeat a property interest.” Id. at 1375. Instead, the Federal

Circuit concluded that the plaintiff had a constitutionally cognizable property interest in the

golden-parachute payments under his employment contract. Id.

This case is similar to Piszel. Like the plaintiff in Piszel, the Teamsters Fund and, by

extension, the plan participants operate in a highly regulated environment. The plaintiffs’ receipt

of the benefits they are due under the plan documents is regulated and determined to some

degree by ERISA and its regulatory landscape. At the time that the plaintiffs’ pensions vested

under the plan, however, the MPRA did not exist. When the plaintiffs’ pensions vested, the

plaintiffs’ entitlement to their benefits contained no restriction that their benefits could be

reduced even when the Teamsters Fund remained solvent and funded. That restriction therefore

did not inhere in the plaintiffs’ contractual rights. See id. at 1374. The fact that, like the

management of Freddie Mac, pension plans are highly regulated under ERISA does not defeat an

otherwise valid property interest deriving from the pension contract between the Teamsters Fund

and plan participants.

The Federal Circuit has clarified when a challenged government action inheres in an

agreement. In A & D Auto, the plaintiffs were former car dealers for auto manufacturers who

terminated the plaintiffs’ franchise agreements during bankruptcy proceedings. 748 F.3d at

1147. The plaintiffs alleged that the agreements were terminated because the federal government

had conditioned financial assistance to the manufacturers on their termination of excess

dealership franchises. Id. at 1153. The plaintiffs argued that their franchise agreements

constituted a cognizable property interest. Id. at 1152. The government argued that the

bankruptcy-law principle permitting the termination of franchise agreements in bankruptcy

“inhered” in the plaintiffs’ contractual rights and therefore prevented the plaintiffs from

demonstrating a valid property interest under the fifth amendment. Id. The Federal Circuit held

that “[i]f a challenged [government] restriction was enacted after the plaintiff’s property interest

was acquired, it cannot be said to ‘inhere’ in the plaintiff’s title.” Id.; see also Tulare Lake Basin

Water Storage Dist. v. United States, 49 Fed. Cl. 313, 321-24 (2001) (describing when state-law

principles inhere in a contractual property interest). Existing bankruptcy law inhered in the

plaintiffs’ franchise agreements, and the plaintiffs did not challenge the bankruptcy law that

franchise agreements can be terminated in bankruptcy. A & D Auto, 748 F.3d at 1153. Instead,

the plaintiffs challenged the government’s action of requiring the terminations as a condition of

financial assistance, an action postdating the franchise agreements. Accordingly, the Federal

Circuit held that the franchise agreements constituted “valid and compensable property

interests.” Id.

The parties here do not dispute that ERISA provisions, especially the “anti-cutback” rule

as it was prior to its amendment in the MPRA, inhered in the plaintiffs’ entitlement to receive a

certain level of benefits. For example, the plaintiffs do not argue that if the Teamsters Fund were

to become insolvent, it could not reduce the plaintiffs’ vested benefits. (See ECF 138 at 74:12-

16.) The challenged government conduct in this case—the enactment of the MPRA and

government authorization to reduce the plaintiffs’ vested benefits—postdates the vesting of the

plaintiffs’ pensions. As a result, the existence of an extensive and evolving regulatory

framework cannot defeat the plaintiffs’ preexisting property interest in the specific level of

pension benefits determined and payable in accordance with the plan documents.

In all three cases (Cienega Gardens, Piszel, and A & D Auto), the property interests at

stake depended at least in part on an assumption that the law would not change. The plaintiffs in

all three cases operated in highly regulated environments. Those facts did not eliminate, as a

matter of law, the plaintiffs’ otherwise cognizable property interests under the fifth amendment,

even when the governing legal framework did change. Accordingly, the plan documents’

dependence on ERISA and the Tax Code does not eviscerate the plaintiffs’ property rights under

the fifth amendment and thereby eliminate the premise of their claims for the taking of those

rights.

The defendant has analogized this case to other cases in which the Supreme Court and

Federal Circuit found no cognizable property interest. Those cases present factual circumstances

differing from those in the present case; none of the cases alter the Court’s analysis that

contracts—even heavily regulated contracts—between private parties can give rise to property

interests under the fifth amendment.

The defendant relies primarily on Bowen v. Public Agencies Opposed to Social Security

Entrapment, 477 U.S. 41, 49-50 (1986). In Bowen, the State of California and some of its public

agencies claimed that a Social Security termination provision in their employment agreements

constituted a cognizable property interest and that Congress’s amendment of the provision of law

upon which the agreements relied constituted a taking. The Supreme Court held that the

termination provision in the contracts did not constitute property under the fifth amendment.

The termination provision “exactly tracked the language of the statute, conferring no right on the

State beyond that contained in [the statute] itself.” Id. at 55. The termination provision was not

unique to those employment agreements, and California had not bargained or provided

consideration for inclusion of that provision in its employment agreements. Id. The termination

provision therefore did not constitute property under the takings clause because it derived

entirely from statute.

The contractual provisions at issue in the present case differ from those at issue in Bowen.

The calculation of benefits under the plan documents is unique to the Teamsters Fund; it has no

basis in statute and therefore does not track the language of ERISA. Additionally, the plan

documents confer rights on the plaintiffs that ERISA and the Tax Code do not. The plaintiffs’

rights stem from a private contractual relationship that is regulated by the government, not a

statutory scheme conferring a benefit to government employees. The plaintiffs also provided

consideration for the level of their benefits in the form of their labor at UPS. They accepted

lower wages during their employment in return for an income stream in retirement, and the

amount of their contributions and the calculation of the amount of the income stream are both

spelled out not in ERISA but in the plan documents. Accordingly, the plaintiffs’ interest in

unreduced pension benefits differs from the plaintiffs’ interest in Bowen.

The defendant also points to several decisions from the Federal Circuit to support its

position. In Adams, 391 F.3d at 1220, the plaintiffs, a group of federal employees, claimed a

property interest under the fifth amendment in underpaid overtime compensation that was due to

them under the Fair Labor Standards Act. The plaintiffs argued that vested property rights could

arise either by statute or by contract. Id. at 1219. The Federal Circuit held that the Adams

plaintiffs did not have a compensable property interest under the fifth amendment. Id. at 1225.

“The terms of [the plaintiffs’] employment and compensation . . . were governed exclusively by

statute, not contract.” Id. at 1221. The Federal Circuit highlighted that when the government

contracts with private parties, “[t]he express rights under this contract are just as concrete as the

inherent rights arising from ownership of real property, personal property, or an actual sum of

money.” Id. at 1221-22. The Federal Circuit concluded that “a statutory right to be paid money,

at least in the context of federal employee compensation and benefit entitlement statutes, is not a

property interest for purposes of the Takings Clause.” Id. at 1225.

Unlike the plaintiffs in Adams, the plaintiffs in this case are not claiming a property

interest arising solely in a statute. This case would be like Adams only if the calculation of the

plaintiffs’ benefits and vesting rights were based solely on the text of ERISA, the Tax Code, or

some other statutory scheme of entitlement. Because the plaintiffs’ vested interest in a certain

and specific level of benefits derives from the plan documents themselves, the rationale of

Adams does not apply.

In Acceptance Insurance, 583 F.3d at 850, the plaintiff alleged that the government had

violated the fifth amendment when the Department of Agriculture blocked the plaintiff’s sale of

crop-insurance assets to a third party. The Federal Circuit held that the plaintiff had no

constitutionally cognizable property interest in its ability to sell insurance policies without

government approval. Id. at 858. Under rules existing at the time the plaintiff entered the crop-

insurance business, the plaintiff could not freely transfer the policies at issue. Id. at 857. The

Department of Agriculture had always had the authority to block transactions. Id. at 858. The

plaintiff therefore lacked a cognizable property interest in the ability to transfer insurance

policies freely because statutory and regulatory requirements had inhered in the plaintiff’s

property interest. Id.

Until the MPRA, the government had little involvement in the calculation of the specific

level of benefits each plaintiff received when the Teamsters Fund was solvent. The defendant

has not asserted that the government dictated the exact sum of money that the plaintiffs were to

receive each month. Similarly, the defendant does not argue that the vesting of plaintiffs’

benefits was subject to government approval. This case is more like A & D Auto than it is like

Acceptance because the MPRA cuts postdated the vesting of the plaintiffs’ benefits from the

Teamsters Fund. The MPRA-based restrictions on the plaintiffs’ entitlement to their contractual

rights thus did not inhere in the plaintiffs’ property interests.

The defendant also cites Commonwealth Edison Co. v. United States, 271 F.3d 1327

(Fed. Cir. 2001). The plaintiffs in that case alleged that a law imposing monetary liability on

utilities for uranium cleanups constituted a taking. There was no taking in that case because the

law merely imposed an obligation to pay money. Id. at 1339-40. The Federal Circuit held that

“while a taking may occur when a specific fund of money is involved, the mere imposition of an

obligation to pay money, as here, does not give rise to a claim under the Takings Clause of the

Fifth Amendment.” Id. at 1340.

The Federal Circuit did not hold that monetary benefits cannot constitute a property

interest, as the defendant suggests. (ECF 126 at 18 n.10.) Rather, the Federal Circuit

acknowledged that a taking may arise “when a specific fund of money” is involved.

Commonwealth Edison, 271 F.3d at 1340. In this case, the plaintiffs claim a right to receive the

unreduced benefits of their vested pensions. Commonwealth Edison is distinct; the monetary

obligation in that case was more akin to a tax or user fee.

Finally, the defendant analogizes this case to McCutchen v. United States, 14 F.4th 1355

(Fed. Cir. 2021). In McCutchen, the plaintiffs claimed that a federal regulation requiring the

destruction or surrender of their bump-stock devices constituted a taking under the fifth

amendment. Id. at 1357. The Federal Circuit held that the plaintiffs lacked a compensable

property right in the continued possession and transferability of their bump-stock devices. Id. at

1370. A bump-stock device allows a semi-automatic firearm to fire rapidly, in the manner of a

machine gun. Prior to the adoption of the federal regulation at issue, a statute already prohibited

the possession and transfer of “machineguns” and authorized agency implementation of that

statute. Id. at 1365-66. The Federal Circuit noted that “the federal-law prohibition on possession

and transfer, together with a congressional grant of implementation authority, predated the

existence, let alone plaintiffs’ possession, of the bump-stock-type devices that plaintiffs were

compelled to destroy or surrender.” Id. “And valid preexisting federal-law limitations on what

otherwise would be state-law property rights are among the limitations that may inhere in title so

as to limit compensable property rights.” Id. at 1355. The plaintiffs’ demonstration of a

compensable property interest depended on the application of Chevron, U.S.A., Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837 (1984), to the regulation to determine whether

bump-stock devices fell within the definition of “machinegun” and thus inhered in the plaintiffs’

entitlement to possess and transfer bump-stock devices. 14 F.4th at 1366. Ultimately, the

Federal Circuit rejected the plaintiffs’ claim in McCutchen because the preexisting law limiting

title to “machineguns” had inhered in the plaintiffs’ rights to those devices, as defined by future

valid agency interpretations of “machinegun.” Id. at 1367-68.

Unlike the situation in McCutchen, prior to the enactment of the MPRA no other statute

would have authorized the Teamsters Fund to reduce the plaintiffs’ vested benefits when the

Teamsters Fund remained solvent. The plaintiffs’ interest in a certain level of pension benefits

predated the enactment of the MPRA. The restrictions on the plaintiffs’ pension benefits

imposed by the MPRA did not inhere in the plaintiffs’ rights to their unreduced and vested

pension benefits. There is also no Chevron issue presented in this case. Therefore, McCutchen

is inapposite.

In sum, the Court’s finding that the plaintiffs have demonstrated a cognizable property

interest is consistent with Supreme Court and Federal Circuit precedents.

3. Reduction of Benefits Under the Plan

The defendant argues that the plaintiffs’ rights under the Teamsters Fund pension plan

are still limited by Article X of the plan documents. As already noted above (at 5-6), Article X

provides: