Opposition — New York State Teamsters Conference Pension & Retirement Fund v. Pension Benefit Guaranty Corp.

( ’ Supreme Court, U.S.

MM, FILED

=

In THE JUN 25 1979

Supreme Court of the United Sikes oon. yR. CLERK

OCTOBER TERM, 1978

No. 78-1663

NEW YORK STATE TEAMSTERS CONFERENCE

PENSION AND RETIREMENT FUND, ET AL.,

Peitttioners,

v.

PENSION BENEFIT GUARANTY CORPORATION,

AND BREWERY WORKERS PENSION FUND,

ET AL.

BRIEF IN OPPOSITION TO PETITION FOR A WRIT

OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

I. Pumir Sreser

380 Madison Avenue

New York, New York 10017

Grorce G. GaLLANTz

300 Park Avenue

New York, New York 10022

Counsel for Respondents

Brewery Workers Pension Fund,

Sidden, Thynne, Hoh,

Pfleiderer, Siegman, Conroy,

Borra, Fink and Frank

Of Counsel:

Epwarp SILvER

Bertina B. PLevan

ProsKavER Rose Goetz

& MENDELSOHN

300 Park Avenue

New York, New York 10022

Sipser, Weinstock, Harper,

Dorn & LizsowrTz

380 Madison Avenue

New York, New York 10017

In THE

Supreme Court of the United States

OCTOBER TERM, 1978

No. 78-1663

i,

=

New York Strate TEAMSTERS CONFERENCE PENSION

AND RETIREMENT F'unD, ET AL.,

Petitioners,

v.

Pension Benerir Guaranty CoRPORATION, AND

Brewery Workers Pension F'unp, Ef AL.

A.

-

BRIEF IN OPPOSITION TQ PETITION FOR A WRIT

OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

Respondents Brewery Workers Pension Fund and its

former trustees oppose the issuance of a writ of certiorari

to review the decision of the United States Court of

Appeals for the District of Columbia Cireuit issued in

this case on January 10, 1979.

Question Presented

Whether the Court of Appeals properly applied Section

514(b)(1) of the Employee Retirement Income Security

Act of 1974 (‘‘ERISA’’), 29 U.S.C. § 1144(b)(1), to the

particular facts of this case involving an agreement to

merge two multiemployer pension funds, executed and

repudiated before January 1, 1975.

2

Statement of the Case

This is the third court action in which petitioners have

sought to avoid their obligation to merge the petitioner

New York State Teamsters Conference Pension and Re-

tirement Fund (‘‘Teamsters Fund’’) with the respondent

Brewery Workers Pension Fund (‘‘Brewery Fund’’) pur-

suant to an agreement executed in 1973. The proceedings

in the New York State courts and the relevant facts of

this lawsuit are set forth in the opinions below and will

not be repeated here.

The opinion below does not mention that a week before

commencement of this suit, Teamsters Fund participants

brought an action in the District Court for the Western

District of New York seeking to enjoin the merger as vio-

lative of ERISA. That action was dismissed for failure

to state a claim. Cicatello v. Brewery Workers Pension

Fund, 434 F. Supp. 950 (W.D.N.Y. 1977), aff’d, 578 F.2d

1366 (2d Cir. 1978).

REASONS FOR DENYING THE WRIT

I. No Important Federal Question Is Presented In

This Case |

Petitioners agree with the decision below that ERISA

does not preempt state law ‘‘with respect to any cause of

action which arose, or any act or omission which occurred

before January 1, 1975,” Section 514(b)(1) of ERISA, 29

U.S.C. $1144(b)(1) (Pet. pp. 16-17). The only question

raised by the petition is whether the Court of Appeals

erred in applying Section 514(b)(1) to the unique and com-

plex facts of this case, involving a particular agreement to

merge two pension funds and protracted litigation over the

enforceability of that agreement. ERISA has now been in

effect more than four years, and there is therefore no dis-

a———aaEaEEeeee

OS

8

cernible possibility that the decision below will affect other

litigants.

The Court of Appeals held that the federal court lacked

subject matter jurisdiction over this dispute because of

these undisputed facts:

1. The merger agreement was executed before Jan-

uary 1, 1975;

2. Petitioners repudiated the merger agreement be-

fore January 1, 1975;

3. The 1974 suit to compel specific performance of

the merger agreement was not premature and peti-

tioners never contended that it was; and

4. The New York State court declared the agree-

ment to be ‘‘valid, binding and enforceable’’ and di-

rected petitioners to ‘‘specifically perform the agree-

ment.”

Petitioners’ principal argument, that the pre-ERISA

agreement could not have been the subject of a mature

cause of action to compel performance before IRS ap-

proval of the agreement, was rejected by the court below,

which based its decision on settled principles of contract

law and the plain language of Section 514(b)(1) as applied

to these particular facts.*

The court did not hold, as petitioners state, “that the

repudiation of the agreement was an anticipatory breach

which eliminated IRS approval as a precondition to the

*Contrary to petitioners’ assertion that IRS approval of the

merger was required by law (Pet. p. 19), Treasury Department

regulations merely provide a method whereby parties may obtain

an advance determination of the continuing qualified status of a

pension plan. Treas. Reg. § 601.201(0), 26 C.F.R. § 601.201(0)

(1978). Since the merger agreement’s provision for IRS approval

was purely contractual, cases involving State and federal licensing

requirements cited by petitioners (Pet. pp. 20, 23) are both factu-

ally and legally irrelevant.

4

merger.’’ (Pet. p. 18). It merely noted that the Teamsters

Fund had refused to assist in seeking IRS approval of

the merger agreement and, without reaching the question

whether that refusal constituted a waiver of the provision

for IRS approval, determined that the Teamsters Fund’s

anticipatory breach

“effectively eliminated IRS’ approval as a pre-condi-

tion to a suit by the Brewery Fumd to enforce specifi-

cally the agreement’s terms.” Slip Op. at 10 (em-

phasis supplied).

That determination raises no important question of fed-

eral law. As the court below stated:

‘‘Under traditional doctrine, repudiation constitutes

a breach of contract even though made in advance of

the time performance is due.” Slip Op. at 9-10.

The New York appellate court also held that a cause

of action to enforce the merger agreement arose in Feb-

ruary 1974 when petitioners repudiated the agreement

and that:

“The fact that plaintiffs were required to bring a

supplemental proceeding to enforce the judgment be-

cause of defendants’ failure to comply with the earlier

decision can mandate no different result. The present

application was based upon the same facts as sup-

ported the original complaint.” Brewery Workers

Pension Fund v. New York State Teamsters Con-

ference Pension & Retirement Fumd, 62 A.D.2d 1046,

1047, 404 N.Y.S.2d 158, 161 (2d Dep’t 1978).

The Court of Appeals thus correctly determined that

the physical transfer of assets after January 1, 1975, re-

sulting directly from a post-judgmert proceeding to hold

the Teamsters Fund in contempt, occurred “with respect

to [a] cause of action which arose . . . before January

1, 1975.” 29 U.S.C. §1144(b) (1).

5

II. The Court Below Fully Considered And Correctly

Decided The Issue In Accord With The Decisions

Of This And Other Courts

The Court of Appeals’ application of Section 514(b)(1)

of ERISA to the particular facts of this case is consistent

with this Court’s interpretation of that section in Malone

v. White Motor Corp., 435 U.S. 497, 499 n.1 (1978) :

“Because ERISA did not become effective until Janu-

ary 1, 1975, and expressly disclaims any effect with

regard to events before that date, it does not apply

to the facts of this case.”

With respect to the specific exemption in Section 514

(b)(1) for pre-existing causes of action, the First Circuit

recently stated:

“The most natural reading of [Section 514(b)(1) of

ERISA] is that state substantive law contimues to

apply to causes of action that arose prior to 1975.”

Cowan v. Keystone Employee Profit Sharing Fund,

586 F.2d 888, 893 (1st Cir. 1978) (emphasis supplied).

See also Azzaro v. Harnett, 414 F. Supp. 473, 475 (S.D.N.Y.

1976), aff'd, 553 F.2d 93 (2d Cir.), cert. denied, 434 U.S.

824 (1977) (Section 514(b)(1) leaves to the States “what

is essentially a cleanup role, . . . the disposition of causes

of action and disputes with respect to employee benefit

plans existing before January 1, 1975”) ; Martin v. Bankers

Trust Co., 565 F.2d 1276 (4th Cir. 1977); Morowittz v.

Bakery Drivers Local 802 Pension Fumd, 79 Lab. Cas.

711,602 (E.D.N.Y. 1976).

Other courts, interpreting the “acts or omissions” clause

of Section 514(b)(1), have likewise held that ERISA is

not applicable to disputes existing prior to January 1, 1975.

Reuther v. Trustees of Trucking Employees of Passaic &

Bergen County Welfare Fund, 575 F.2d 1074, 1078 (3rd

Cir. 1978); Nolan v. Meyer, 520 F.2d 1276, 1278 n.2 (2d

6

Cir.), cert. denied, 423 U.S. 1034 (1975) ; Keller v. Graphic

Systems of Akron, Inc., 422 F. Supp. 1005 (N.D. Ohio

1976). .

The decision below is also in accord with the legislative

history of Section 514(b)(1). Representative Dent, Chair-

man of the General Subcommittee on Labor and sponsor

of the House Pension Bill, stated, with respect to the stat-

ute’s effect on cases pending in State courts on the effective

date of Section 514:

“_.(Mr. Thomson.]—The question is: Will the pre-

emption of State law nullify any pending litigation a

State may be involved in concerning violations of State

law which occurred prior to the preemption?

‘*_Mr. Dent.—Mr. Chairman, in reply to the inquiry

of the gentleman from Wisconsin (Mr. Thomson) may

I say that in my opinion they would be able to proceed

with any pending judicial proceeding. So far as I

know we have no retroactivity in any such case.’’ II

Legislative History of ERISA 3404 (Feb. 26, 1974—

House: Floor Debate on H.R. 2 Employee Benefit

Security Act) (emphasis supplied).

Petitioners have not demonstrated that the decision

below is in conflict with any decision of this Court. Their

conclusory assertion that Fleming v. Rhodes, 331 U.S. 100

(1947), Loutsville d N. R.R. v. Mottley, 219 U.S. 467 (1911)

and Brewing Corp. of America v. Cleveland Trust Co., 185

F.2d 482 (6th Cir. 1950), each involved ‘ta §514(b)(1)

type clause’’ and ‘‘factual contexts nearly identical to the

ease at bar’’ (Pet. p. 16 n.10), is unsupported and incor-

rect. Neither the statutes involved nor the factual circum-

stances in those cases are remotely relevant here.

The statute in issue in Motiley was Section 6 of the

Interstate Commerce Act of February 4, 1887, as amended

by Act of June 29, 1906, C. 3591 § 2, 34 Stat. 586. That

7

statute contained no savings provision whatever, and this

Court noted that Congress had considered ‘‘what excep-

tions, if any, should be made’’ and resolved the issue

“without making any exceptions of existing contracts,”

219 U.S. at 479. By contrast, in enacting Section 514(b) (1)

of ERISA, Congress expressly precluded application of

ERISA to causes of action which arose, or acts or omis-

sions which occurred, before January 1, 1975.

Both Fleming and Brewing Corp. involved the Price

Control Extension Act of 1946, Pub. L. No. 548, 60 Stat.

664 (1946), which re-enacted the Emergency Price Control

Act of 1942 after it had expired by its terms on June 30,

1946. In those cases the re-enacted statute was applied

to transactions undertaken during the intervening 25-day

period bat not completed until after the statutory controls

had been reinstated. Those situations are hardly analogous

to the enactment of the first comprehensive federal statute

in an area previously regulated exclusively by the States.

See Malone v. White Motor Corp., supra at 507. (The Wel-

fare and Pension Plans Disclosure Act, 29 U.S.C. $301 ez

seq., repealed by ERISA ‘‘was designed ‘to leave to the

States the detailed regulations relating to insurance, trusts

and other phases of their operations’ ’’ (citation omitted).)

The savings provision of the statute involved in Fleming

and Brewing Corp., Section 18, did not even involve pre-

emption of State law. That section merely provided that,

despite the express retroactive effect of the July 25, 1946

re-enactment, no ‘‘act or transaction or omission or failure

to act’’ occurring during the twenty-five day period would

be deemed a violation of the Act. Section 514(b)(1) of

ERISA, on the other hand, not only precludes retroactive

effect of the statute but also expressly prohibits prospec-

tive application where the dispute involves a cause of

action which arose before January 1, 1975.

Accordingly, the lower court’s ruling that the objective

of “‘an orderly transition from state to federal regulation”

8

is accomplished by application of State law to this case is

consistent both with the decisions of this and other courts,

and with the intent of Congress.

Ill. The Question Presented By Petitioners Would

Not, In Any Event, Be Dispositive

Even if the Court of Appeals had erred in applying Sec-

tion 514(b)(1) to the facts of this case, the judgment of the

District Court could be reversed only if, on remand, the

Court of Appeals were to reject the District Court’s

alternative ground for dismissal, that petitioners’ claims

were barred by res judicata. Moreover, if that were to

occur, the case would still have to be remanded to the

District Court for consideration of respondents’ other con-

tentions that petitioners are barred by laches and that the

‘specific provision of ERISA invoked, Section 208, 29 U.S.C.

§ 1068, by its own terms does not apply to the type of

merger involved in this case. The District Court

characterized these issues as “substantial,” but found it

unnecessary to decide them (Pet. App. B at 13a).

Under such circumstances and in light of the already

protracted litigation over an agreement executed six years

ago, review of the question presented by petitioners should

be denied.

CONCLUSION

For these reasons, the petition for a writ of certiorari

should be denied.

Respectfully submitted,

I. Pamir Sreser

Georce G. GaLLANTz

Counsel for Respondents

Brewery Workers Pension Fund,

Sidden, Thynne, Hoh,

Pfleiderer, Siegman, Conroy,

Borra, Fink and Frank

Of Counsel:

Epwarp Si.ver

Bertina B. PLEvAN

ProsKavER Rose Goetz

& MENDELSOHN

300 Park Avenue

New York, New York 10022

Sreser, Weinstock, Harper,

Dorn & Lizsowrrz

380 Madison Avenue

New York, New York 10017

Dated: June 25, 1979