Board of Trustees, Michigan United Food and Commercial Workers Unions and Food Employers Joint Pension Fund v. Eberhard Foods, Inc.

WELLFORD, Circuit Judge,

dissenting:

Judge Merritt has set out well the background of the dispute in this case involving the complex and opaque Multiemployer Pension Plan amendments Act of 1980 (MPPAA), 29 U.S.C. § 1001 et seq. (1982). 1 He recited the essentials:

Eberhard sought arbitration to dispute the trustee’s six percent interest rate assumption. In the arbitration proceedings, the trustee’s calculations “are presumed correct unless” the employer “shows by a preponderance of the evidence that the determination was unreasonable or clearly erroneous.” 29 U.S.C. § 1401 (a)(3)(A), (B) (1982).

In this case, the arbitrator concluded that Eberhard had not met its burden of proving that the interest assumption was unreasonable. Eberhard Foods, Inc., 6 Employee Benefits Cas. (BNA) 1961 (1985). The trustees filed a complaint in the District Court seeking enforcement of the arbitrator's award, and Eberhard counterclaimed seeking to vacate or modify the award. The Multiemployer Act provides that on completion of the arbitration proceedings, either party may bring suit in federal district court to “enforce, vacate, or modify an arbitrator’s award.” 29 U.S.C. § 1401 (b)(2) (1982). The statute further provides that in an action in the district court brought under subsection (b), “there shall be a presumption, rebuttable only by a clear preponderance of the evidence, that the findings of fact made by the arbitrator were correct.” 29 U.S.C. § 1401 (c) (1982) (emphasis added). The District Court granted the trustee’s motion for summary judgment, finding that Eberhard “failed to establish a clear preponderance of the evidence that the findings of fact made by the Arbitrator were not correct.”

(Footnote omitted).

Because I am persuaded that the statutory presumptions in the Act, with respect to what I deem to be discretionary and potentially interested acts of the trustees in setting withdrawal interest rates, deprive Eberhard of procedural due process under the Constitution, I would reverse and remand the case for a further consideration of a reasonable interest rate to be applied for withdrawal liability calculation as to Eberhard. My views in this respect coincide with those expressed by Judge Becker in United Retail & Wholesale Emp. v. Yahn & McDonnell, 787 F.2d 128 (3d Cir. 1986), aff'd by equally divided vote, — U.S.-, 107 S.Ct. 2171 , 95 L.Ed.2d 692 (1987), and the views in dissent expressed by Judge Aldrich in Keith Fulton & Sons, Inc. v. New England Teamsters & Trucking Industry Pension Fund, 762 F.2d 1124, 1137 (1st Cir.1985). See also Robbins v. Pepsi-Cola Metro Bottling Co., 636 F.Supp. 641 (N.D.Ill.1986). 2

*1265 I would hold the presumptions of correctness given the trustees’ assessment of liability should be stricken as inconsistent with procedural due process, and that “consistent with due process, the arbitrators cannot accord any presumption of correctness to the withdrawal liability assessments determined and calculated by the trustees of a pension fund.” Robbins, 636 F.Supp. at 676 .

The trustees, in my view, have a potential personal interest “to maximize withdrawal liability of employers,” and cannot be deemed to be an “impartial decisionmaker.” Yahn, 787 F.2d at 138. Being potentially liable themselves to the fund, there is some conflict of interest in the trustee’s assessment of a very low and conservative interest rate against withdrawing employers. See Yahn, 787 F.2d at 139; Massachusetts Mutual Life Ins., Co. v. Russell, 473 U.S. 134 , 105 S.Ct. 3085 , 87 L.Ed.2d 96 (1985). “The trustees’ factual determinations and discretionary judgments, which must indisputably be reviewed deferentially in both arbitration and the district court, are critical to assessments of withdrawal liability.” Yahn, 787 F.2d at 135 n. 9. I would set aside and sever that part of the statute requiring such a presumption and deferential treatment as unconstitutional, but retain the remainder of the statutory scheme.

Interestingly, another of the cases cited by appellees as a supplement to their brief, Joseph Aronauer, Inc. and United Furniture Workers Pension Fund A, (AAA Case No. 1362 00584 (O’Loughlin 1985), involved an arbitrator’s decision applying the presumption in controversy. It approved a 7% funding rate instead of the 6% approved in the instant case, and noted that “since the rate under review is in excess of 6%, it appears that the Plan is in line as far as future expectations are concerned.” (Slip op. 62, 63) (emphasis added). The expert, Grubb, who testified for appellant Eberhard, also testified in Aronauer that he had no objection to 7% as a funding rate. The arbitrator inferred that a rate above 6% was the developing norm or consensus” in April of 1985 in Aronauer. 3

Accordingly, I would reverse and remand this matter to the arbitrator with the direction that he proceed to determine, without any presumption of correctness given the trustees’ assessment, whether the 6% withdrawal rate utilized was unreasonable and arbitrary under the circumstances and the record.

. One of the authorities cited in a supplemental addendum to the brief of appellee in this case, Fraser Shipyards, Inc. and IAM National Pension Fund, 7 EBC 2562, 2583 (1986), describes the MPPAA as "one of the most unpopular enactments of our day; no law in recent memory has been assailed so frequently and so passionately....”

. I tend to agree with Judge Nordberg in Robbins, 636 F.Supp. at 676 , that the presumptions contained in § 1401(a)(3)(A) and (B) of MPPAA violate the due process rights of Eberhard with respect to statutory presumptions of correctness, including the presumption granted the arbitrator’s determination.

. The rate applied in Keith Fulton was 7.5%.