Amicus Curiae Brief — Concrete Pipe & Products of Cal., Inc. v. Construction Laborers Pension Trust for Southern Cal.

"apreme Court, |

< FILED.

= whats | SEP 11 1992

THE CLERK

In THE

Supreme Court of the United States

OCTOBER TERM, 1992 >

CONCRETE PIPE AND PRODUCTS

OF CALIFORNIA, INC.,

Petitioner,

Vv.

CONSTRUCTION LABORERS PENSION

TRUST FOR SOUTHERN CALIFORNIA

Respondent.

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF OF THE AMERICAN FEDERATION OF LABOR

AND CONGRESS OF INDUSTRIAL ORGANIZATIONS

AS AMICUS CURIAE IN SUPPORT OF RESPONDENT

ROBERT M. WEINBERG

VIRGINIA A. SEITZ

1000 Connecticut Avenue, N.W.

Washington, D.C. 20086

LAURENCE GOLD

(Counsel of Record)

815 16th Street, N.W.

Washington, D.C. 20006

(202) 687-6890

Witeou - Eras Paerrine Co., Inc. - 769-0096 - WasHINGTON, D.C. 20001

o> ~

BEST AVAILABLE COPY!

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ...000000 ii

SUMMARY OF ARGUMENT .....W00 en. 1

ARGUMENT ............................ shadushbteaiadtceebbediesiieaebeanuaitaaateedes

I, PETITIONER’S TAKINGS CLAUSE CLAIM... 4

II. PETITIONER’S SUBSTANTIVE DUE PROC-

ESS CLAIM............ siianlansasiciitntinabeiaidscaanadaeiaiiialieateie 11

III. PETITIONER’S PROCEDURAL DUE PROC-

ITER wisiscovcucsirsinctnienenseicsenenssbinnine eensnaicabiaibanbetenia 11

CORI annccsneececessecnccccnvsseeess ‘sccheiiemenneenemnninennnne 20

ii

TABLE OF AUTHORITIES

CASES Page

Air Line Pilots Ass'n v. O'Neill, 111 5. Ct. 1127

(1991) 13

Rd. of Trustees of Western ¢ ‘ont. of Teamsters

Pension Fund v. Thompson Bldg, Materials, Ine.,

749 F.2d 1396 (Oth Cir. 1984), cert. denied, AT

U.S. 1054 (1985) . 13

Bruch v. Firestone Tire & Rubber Co., 489 US.

LOL (1989) 13

Chicago Truck Drivers Pension Fund vo L. Zahn

Drug, 890 F.2d 1405 (7th Cir, 1989) 13, 19

Connolly v. Pension Benefit Guaranty Corp. AT

U.S. 211 (1986) 4,5, 10-11

FHA v. The Darlinaton, Ine., 358 U.S. 84 (1958) 6

International Ass'n of Machinists N ational Pen-

sion Fund Benefit Plan C. v. Stoekton Tri Indus.,

727 F.2d 1204 (D.C. Cir. 1984). 13, 19

Keith Fulton & Sons v. New England Teamsters,

762 F.2d 1187 (1st Cir. 1985) 16,17

Lavine v. Milne, 424 U.S. 577 (1976) —. 19

Nachman Corp. v. PBGC, 446 U.S. 359 (1980) 4

PBGC v. R.A. Gray, re TES CAGED ovcccccsmcone 6

Republie Indus., Ine. v. Teamsters Joint Council

No. 82 of Va. Pension Fund, 718 F.2d 628 (4th

Cir. 1983), cert. denied, 467 U.S, 1259 (1984). 13

Sinclair Oil Corp. v. Levien, 280 A.2d 717 (Del.

1971) eiouetall 13

Trustees of Amalgamated Ins. Fund vr. -Geltman

Indus... Inc., 784 F.2d 926 (9th Cir.) cert. denied,

Yr bee S 2. | ee prnenee: 13

Union Asphalts and Roadoils, Ine. v. MoKan

Teamsters Pension Fund, 857 F.2d 1230 (8th

Cir. 1988) . ...... 13

United Retail & Wholesale E mployees ¢ v. “Yahn «&

McDonnell, 787 F.2d 128 (3d Cir. 1986) aff'd by

an equally divided court, 481 U.S. 735 (1987)... 18

STATUTES

29 U.S.C. § 1002 (35) ......... a 4

TABLE OF AUTHORITIES—Continued

Page

29 U.S.C. § 1053 0b) 01) a}

29 U.S.C. & 1060Ca) . ee 5

29 U.S.C, § 1082 (ce) (3) 18

29 U.S.C. § 1391 0b) - ae 6

29 U.S.C. § 1391 (Ce) (4) | Sh i)

29 U.S.C. § 1393 | YY

29 U.S.C, § 13940b) Peete OE nit ee 15

29 U.S.C. § 1401 (a) () —.. __...12, 13, 15, 16

29 U.S.C. § 1401 (ce) .. . <aik Soll 12, 18, 19

LEGISLATIVE HISTORY

H.R. Conf. Rep. No. 1280, 93d Cong., 2d Sess.

(1974) | ro 18

H.R. Rep. No. 869, 96th Cong., 2d Sess. (1920) 7,16,17

° Sen. Comm. on Labor and Human Resources, Sec-

tion 1076, The Multiemployer Pension Plan

Amendments Act of 1980: Summary and

Analysis of Consideration, 96th Cong., 2d Sess.

a ccseenenenawcoruscsees re 17

MISCELLANEOUS

testatement (Second) Trusts § 187 (1959) 13

3A W. Fletcher, Cyclopedia of the Law of Private

Corporations § 1039 (rev. perm. ed. 1975) tae 13

IN THE

Supreme Comet of the United States

OCTOBER TERM, 1992

No. 91-904

CONCRETE PIPE AND PRODUCTS

OF CALIFORNIA, INC.,

. Petitioner,

CONSTRUCTION LABORERS PENSION

TRUST FOR SOUTHERN CALIFORNIA

Respondent.

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF OF THE AMERICAN FEDERATION OF LABOR

AND CONGRESS OF INDUSTRIAL ORGANIZATIONS

AS AMICUS CURIAE IN SUPPORT OF RESPONDENT

The American Federation of Labor and Congress of

Industrial Organizations (“AFL-CIO”), a federation of

89 national and international unions with a total member-

ship of approximately 14,000,000 working men and

women. files this brief amicus curiae with the consent of

the parties, as provided for in the Rules of this Court.

SUMMARY OF ARGUMENT

I. In Connolly v. Pension Benefit Guaranty Corp., 475

U.S. 211, 225 (1986), this Court ruled that as a general

matter “the imposition of withdrawal liability [under the

2

Multiemployer Pension Plan Amendments Act| does not

constitute a compensable taking under the Fifth Amend-

ment.” Each of the reasons given by the Connolly Court

in support ef that ruling is applicable here.

Petitioner’s attempt to evade Connolly rests on a mis-

apprehersion of the statutory scheme. Peti¢ioner, first of

all, fails to recognize that, upon withdrawal, petitioner

left behind a financial burden on the plan. And, in any

event, petitioner's effort te measure a withdrawing em-

plover’s financial responsibilities to the plan by a post hoe

calenlition of the benefits due to the employer's employees

and to those employees alone--is contrary to the basic

premises of multiemployer pension plans such as the plan

here and of the legislation designed to protect the integrity

of these plans.

In a multiemplover pension plan, the payment of bene-

fiis to the covered employees as a group becomes the re-

sponsibility vot of each employer but of the plan. That

being so, MPPAA defines an employer's obligation to

contribute to a plan, such as the plan here, upon with-

drawal on the same basis as the plan defines the em-

ployer’s obligation to contribute as an ongoing partici-

pant. In this way, MPPAA spreads the cost of the un-

funded vested liability of the plan over the class of em-

ployers who participated in creating that liability in the

same manner that cost would here been spread had all

of the participating employers seen the venture through.

It may be that petitioner’s employees will receive rela-

tively little benefit from petitioner’s participation in, and

payments into, the plan compared to the benefits received

by employes of other participating employers. But that is

a possibility that is irherent in every pooling arrange-

ment based, as here, on payments into a fund on one set

of criteria and payments out of the fund on another

set of criteria.

As long as petitioner was a party to the plan, peti-

tioner received the labor market benefit that participa-

tion in the plan provides to all member employers: a pen-

sion program that constitutes a significant part of the

compensation package for covered employees and that does

so on an cconomically advantageous basis. Neither the

‘Takings Clause nor the Due Process Clause prevents Con-

gress from requiring petitioner to pay its fair share of

the ongoing costs of the joint venture to which petitioner

Was a party.

Il. A. MPPAA does provide for, and petitioner has

availed itself of, access to impartial decisionmakers: a

neutral arbitrator and a federal judge. Properly analyzed,

petitioner’s complaint is not addressed to the impartiality

of the decisionmakers who passed on its legal challenge to

the withdrawal liability the plan assessed, but to Con-

gress’ determination of the substantive standards and

burdens of proof that those decisionmakers were to apply

on that challenge.

Those substantive standards reflect a congressional

judgment to preserve an area of discretion for plan trus-

tees, and their actuaries, in choosing among reasonable

alternatives with respect to a range of issues that are

implicated by MPPAA’s statutory scheme. Legal rules

that incoroprate a standard of review that is def-

erential to decisions of private actors are an established

means of implementing the public policy determination

that in given instances preservation of the ability of pri-

vate entities to exercise discretion is preferable to regu-

lation by government fiat. The Constitution has never

been held to require Congress or the courts to pretend

to omniscience or to stultify all private initiative in order

to extend the rule of law.

B. MPPAA’s presumption in favor of the correctness

of arbitral findings of fact is nothing more than the

sound rule that, Congress having established arbitration

as the preferred forum for finding facts, courts should

defer to those findings rather than engage in the fact-

finding precess on a de novo basis.

4

ARGUMENT

I. PETITIONER’S TAKINGS CLAUSE CLAIM

(a) Petitioner argues that the withdrawal liability

provisions of the Multiemployer Pension Plan Amend-

ments Act (“MPPAA”), as applied to petitioner in this

case, violate the Fifth Amendment’s restriction against

goveriment takings of private property without just com-

pensation. The facts on which this “as applied” consti-

tutional challenge is based can be summarized in a

paragraph:

In 1976, petitioner purchased a plant and adopted the

extant collective bargaining agreement covering the

plant’s employees. The collective bargaining agreement

contained a provision requiring petitioner to make con-

tributions to a multiemployer defined benefit pension plan

—viz. a plan pooling the contributions of a number of

emplovers to provide stated pension benefits to employees

who attain eligibility by working a specified number of

years for one or more employers participating in the

plan.' In 1978—after the Pension Benefit Guaranty Cor-

poration (“PBGC”) had issued a report to Congress rec-

ommending the adoption of an amendment to the federal

statutes regulating pension plans to provide that em-

ployers that withdraw from multiemployer pension plans

be assessed a “withdrawal liability” “petitioner agreed

to a new collective bargaining agreement, continuing peti-

tioner’s participation in the plan. In 1980, MPPAA was

enacted. The 1980 Act requires that employers that with-

1 The plan at issue here is a “defined benefit plan,’ promising

covered emplovees a fired and definite benefit, rather than a “defined

contribution plan” promising a benefit based upon the amount

of contributions made to a participant’s individual account. See 2)

U.S.C. § 1002/35); see also Nachman Corp. v. PBGC, 446 U.S. 359,

363-64 n.5 (1980).

2 See Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211,

217 (1986).

5

draw from a multiemployer pension plan pay their aliquot

share of the plan’s unfunded vested liabilities as of the

time of the withdrawal. After the enactment of MPPAA,

petitioner conducted only minimal operations involving

employees covered by the plan. Cn December 15, 1981,

petitioner withdrew from participation in the plan.“ At

the time of petitioner’s withdrawal, none of petitioner's

covered employees had sufficient service credits to entitle

the employee to a vested pension under the plan’s eligi-

bility rules, but each of petitioner’s covered employees

had earned, in petitioner’s employ, service credits toward

a vested pension entitlement that the employee could carry

over and build upon in employment with any other em-

ployer participating in the plan.‘ Petitioner has refused

to pay the withdrawal liability required by MPPAA.

(ib) In Connolly v. Pension Benefit Guaranty Corp.,

supra, 475 U.S. at 255, this Court ruled that as a general

matter “the imposition of withdrawal liability does not

constitute a compensable taking under the Fifth Amend-

ment.” (Emphasis added.) Each of the reasons given by

the Connolly Court in support of that ruling is applicable

here.

As the Connolly Court pointed out, MPPAA’s withdrawal

liability provisicns do no more than “safeguard|| the

participants in multiemployer pension plans by requiring

a withdrawing employer to fund its share of the plan

obligations incurred during its association with the plan.”

Id. at 225 (emphasis added). “The assessment of with-

drawal liability is not made in a vacuum, .. . but directly

“In arbitration, petitioner contended that it had withdrawn from

the plan prior to the effective date of MPPAA, The Arbitrator re-

jected this argument and found that December 15, 1981, was the

date of withdrawal. J.A. 216. The court below affirmed the Arbi-

trator’s decision in this regard. This Court declined to grant cer-

tiorari to review this aspect of the decision below.

' See 29 U.S.C. §§ 1053(b) (1), 1060(a).

6

depends on the relationship between the employer and

the plan to which it made contributions” (id.)—viz., in

essence, the withdrawing employer is required to pay

the proportion of the plan’s unfunded vested liabilities

at the time of withdrawal that is equal to the proportion

of the plan’s contributions paid by the employer during

the employer’s participation in the plan.” The Court added

that well prior to the enactment of MPPAA,

|p}rudent employers ... had more than sufficient no-

tice not only that pension plans were currently regu-

lated, but also that withdrawal itself might trigger

additional financial obligations. See |PBGC v. R.A.

Gray, 467 U.S. 717, 732 (1984) |. “Those who do busi-

ness in the regulated field cannot object if the legis-

lative scheme is buttressed by subsequent amend-

ments to achieve the legislative end.”” FHA v. The

Darlington, Inc., 358 U.S. 84, 91 (1958). |475 at

227. ]

(c) Petitioner contends that Connolly does not justify

requiring an employer to pay any portion of a multiem-

ployer plan’s unfunded liabilities when that employer did

not participate in the plan long enough for any of its

employees to have obtained a vested right to pension

benefits based solely on service with that employer. Peti-

tioner’s attempt to evade Connolly rests on a misappre-

hension of the statutory scheme.

At the outset, it should be understood that the fact

that as of December 1981—when petitioner withdrew

from the plan—none of petitioner’s employees was yet

vested does not entail the conclusion that petitioner’s

participation in the plan created no further financial

burden to the plan. Petitioner’s covered employees re-

ceived service credits toward an entitlement to a pension

under the plan for their time working for petitioner.

° This is the general rule under the presumptive method set forth

in 29 U.S.C, § 1391(b), which was used in calculating petitioner’s

withdrawal liability in this case.

7

Those service credits are portable: in determining each

of those employees’ total years of credited service, the

credit earned through employment with petitioner is com-

bined with the credit earned through employment for

other employers participating in the plan. See, e.g.,

29 U.S.C. $1053(b) (1) (“In computing the period of

service uncer the plan ... all of an employee’s years of

service with the employer or employers maintaining the

plan shall be taken into account ....”). Thus, the time

worked for petitioner increases the likelihood that peti-

tioner’s employees will acquire a vested right to pension

benefits from the plan.

It is noteworthy, in this regard, that Congress was well

aware of the prevalence of this type of pension portability

when it enacted the withdrawal liability provision of

MPPAA:

Pension portability under a multiemployer plan

means that a participant’s benefit is based on service

with all contributing employers for whom the partici-

pant hus worked. This enables a participant who

moves from one contributing employer to another,

who might otherwise not be eligible for benefits based

oi service With any one employer, to receive a pen-

sion if his or her total service with all the contribut-

ing employers is sufficient to satisfy the plan’s re-

quirements for a vested benefit. This feature is par-

ticularly but not exclusively important in industries

such as construction, water transportation, and the

performing arts, which are characterized by mobility

of employees, or employers, or rapid turnover, or both.

|H.R. Rep. No. 869, 96th Cong., 2d Sess., pt. 1, at 53

(1990) }.

But petitioner’s failure to recognize that it left behind

a potential financial burden on the plan is only the first

flaw in petitioner’s analysis. For petitioner’s effort to

measure a withdrawing employer’s financial responsibil-

ities to the plan by a post hoe calculation of the benefits

due to the employer’s employees—and to those employees

alone—is contrary to the basic premises of multiemployer

8

pension plans such as the plan here and of the legislation

designed to protect the integrity of these plans.

A multiemployer pension plan is in effect a joint ven-

ture of participating employers in which the employers

agree to pool the costs of providing pension benefits to

their employees. This joint venture provides each par-

ticipating employer the mechanism to provide—and_ to

gain the labor market benefits of providing—a pension

program for its own employees in a manner that allows

each employer to spread the risks inherent in any insur-

ance scheme over a larger group. Pensions for the cov-

ered employees become the responsibility not of each in-

dividual employer but of the plan.

Inherent in the multiemployer plan mechanism is the

possibility that employer A may in effect bear some of

the cost of providing pension benefits to employer B’s

employees, as well as the possibility that employer B

may in effect bear some of the cost of providing pension

benefits to employees of employer A, depending on such

factors as the demographic composition of each employer’s

workforce, employee turnover and the like.

Employer contributions in a multiemployer plan are,

moreover, generally geared to some measure of the work

done by the employer’s covered employees, not to the

proportion of the employer’s workforce that has attained

or will attain a vested right to receive a pension.® As

just noted, a small proportion of one employer’s employees

may become entitled to vested pensions while a high pro-

portion of another employer’s employees may attain that

status. But the contribution responsibility of each em-

ployer is not affected by its employees’ vesting rate: each

employer continues to make an equal contribution based

on the quantum of their employees’ work.

Against this background, MPPAA defines an employer’s

obligation to contribute to the plan upon withdrawal

®In this case the measure is the number of hours worked by the

employer’s employees during the contribution period.

9

on the same basis as the plan defines the employer’s

obligation to contribute as an ongoing plan participant.

Under MPPAA, the withdrawing employer’s obligation

is geared to the proportion of the plan’s contributions

yaid by that employer during the employer’s participation

in the plan, not to the number of the employer’s employees

who have attained or may attain a vested right to pension

benefits from the plan.’

In this way, MPPAA spreads the cost of the unfunded

vested liability of the plan over the class of employers

who participated in creating that liability in the same

manner that cost would have been spread had all of the

joint venturers seen the venture through. MPPAA’s with-

drawal liability is merely the application in a particular

context of the general principle that governs the making

of ongoing contributions in a multiemployer plan. Some

withdrawing employers may leave behind a higher propor-

tion of employees that have attained or will attain vested

status than other withdrawing employers. But, with-

drawal liability, measured as it is by the employer’s

contribution experience, rather than its employees’ vesting

experience, will not be affected by that difference. And,

given the nature of the joint venture the employers un-

dertook, that is exactly as it should be.

In sum petitioner on withdrawing from the plan has

left behind a number of employees who have attained

service credits toward a vested pension. The extent to

which those service credits may result in pension obliga-

tions of the plan is presently not ascertainable. It may

be that petitioner’s employees will receive relatively little

benefit from petitioner’s participation in, and payments

into. the plan compared to the benefits received by em-

ployees of other participating employers. But that is a

7 In certain circumstances not applicable here, MPPAA author-

izes use of an alternative method for allocating a plan’s unfunded

vested liabilities that links an employer’s withdrawal liability to the

benefits earned by its employees. See 29 U.S.C. §1391(c) (4). See

note 4, supra.

10

possibility that is inherent in every pooling arrangement

based on payments into a fund on one set of criteria and

payments out of the fund on another set of criteria.

At least of equal moment, whatever the benefit ulti-

mately achieved by petitioner’s employees, petitioner

received precisely the benefit petitioner sought on enter-

ing the plan. As long as petitioner was party to the

plan, petitioner received the labor market benefit that

participation in the plan provides to all member em-

ployers: a pension program that constitutes a significant

part of the compensation package for covered employees,

and that does so in a manner that takes advantage of

cost and risk sharing mechanisms for providing a con-

tingent benefit. Petitioner having achieved that benefit,

the Takings Clause does not prevent Congress from im-

posing on petitioner a fair share of the ongoing costs of

the joint venture to which petitioner Was a party. The

Connolly Court’s conclusion applies here with equal force:

The purpose of forbidding uncompensated takings

of private property for public use is “to bar Govern-

ment from forcing some people alone to bear public

burdens which, in all fairness and justice should be

borne by the public as a whole.” Armstrong v. United

States, B64 U.S. 40. 49 (1960). We are far from

versuaded that fairness and justice require the pub-

lic. rather than the withdrawing employers and other

parties to pension plan agreements, to shoulder the

responsibility for rescuing plans that are In financial

trouble. The employers in the present litigation vol-

untarily negotiated and maintained a pension plan

which was determined to be within the strictures of

ERISA .... Congress determined that unregulated

withdrawals from multiemployer plans could en-

danger their financial vitality and deprive workers of

the vested rights they were entitled to anticipate

would be theirs upon retirement. For this reason

Congress imposed withdrawal liability as one part of

ay overall statutory scheme to safeguard the solvency

of private pension plans. We see no constitutionally

11

compelled reason to require the Treasury to assume

the financial burden of attaining this goal. [475 U.S.

at 227-28. |

‘ il. PETITIONER’S SUBSTANTIVE DUE PROCESS

CLAIM

What we have already said suffices to demonstrate that

petitioner’s substantive due process claim is without merit.

Congress’ determination that an employer’s withdrawal

liability should be based on the employer’s proportionate

share of all employer contributions to the plan over the

period of the employer’s participation in the plan is, to

say the least, rational. Employers that agree to partici-

pate in a multiemployer plan normally agree—as is true

here—to make contributions based on a measure of em-

ployee work done, not on employee benefits due; those

contributions are used to fund benefits for all covered

employees, not just for the contributing employer’s own

employees. As we have shown in Part I, Congress’ decision

that withdrawal liability should be calculated based on

contribution share simply applies in the withdrawal con-

text the principles that govern the ongoing contribution

obligations of participating employers.

III. PETITIONER'S PROCEDURAL DUE PROCESS

CLAIM

Petitioner challenges three presumptions adopted in

MPPAA that come into play in determining and measur-

ing withdrawal liability. Petitioner argues that these

presumptions deprive the withdrawing employer of the

right to an impartial decisionmaker and thereby deprive

the employer of procedural due process. °

As we show, MPPAA doves provide for, and petitioner

has availed itself of, access to impartial decisionmakers:

a neutral arbitrator and a federal judge. Properly ana-

lyzed, petitioner’s complaint is not addressed to the im-

partiality of the decisionmakers who passed on its legal

challenge to the withdrawal liability the plan assessed,

12

but to Congress’ determination of the substantive stand-

ards and burdens of proof that those decisionmakers were

to apply in passing on that challenge. That complaint

simpiy has no merit,

The presumptions petitioners challenged are found in

two subsections of MPPAA, 29 U.S.C. $1401 (a) (03), and

© 14011¢). We address these subsections separately, in

turn,

A.

Title 29 U.S.C. § 1401(a) (3) provides that:

(A) For purposes of any proceeding under this see-

tion, any determination made by a plan sponsor under

sections 1381 through 1399 of this title and section

1405 of this title is presumed correct unless the party

contesting the determination shows by a preponder-

ance of the evidence that the determination was un-

reasonable or clearly erroneous.

‘B) In the case of a determination of a plan’s un-

funded vested benefits for a plan year, the determina-

tion is presumed correct unless a party contesting the

determination shows by a preponderance of evidence

that—

(i) the actuarial assumptions and methods used in

the determination were, in the aggregate, unreason-

able (taking into account the experience of the plan

and reasonable expectations), or

(ji) the plan’s actuary made a significant error in

a»plying the actuarial assumptions or methods.

1. Subsection 1401(a)(3)(A) ‘hereinafter “subsection

‘A:”) thus provides that decisions of the plan sponsor—

here the trustees of the plan—shall receive deference upon

review by arbitrators or courts in two respects: as to

decisions made on matters committed to the trustees’

discretion. decisions of the trustees will only be set aside

if found to be “unreasonable’—viz., outside the zone of

discretion granted to the trustees; as to factual deter-

minetions made by the trustees in the course of making

decisions covered by this subsection, the trustees’ fac-

13

tual determinations will be set aside only if “clearly

erroneous,” *

2. Public law rules that accord a measure of deference

to decisions of private actors are an established feature

of ovr legal system. Indeed, such rules are at the heart

of the law of trusts. Both at equity and under ERISA,

ina veriety of circumstances, trustees are granted sub-

stantial deference in interpreting and administering their

trusts. See Resicatement (Second) Trusts £187 (1959);

Bruch v. Fivestone Tire & Rubber Co., 489 U.S. 101

(1989). The labor law and the law of corporations pro-

vide for analogous forms of deference to decisions of

private entities. E.g., Air Line Pilots Ass’n v. O'Neill,

111 S. Ct. 1127, 1186 (1991) (decisions of labor organi-

zations in negotiating and administering collective bar-

gaining agreements are entitled to deference as long as

the decisions are within a “wide range of reasonable-

ness”); 3A W. Fletcher, Cyclopedia of the Law of Pri-

vate Corporations $ 1039 (rev. perm. ed. 1975) (decisions

of corporate officers are entitled to deference as long as

the decisions reflect “reasonable business judgment”):

Sinclair Oi Corp. v. Levien, 280 A.2d 717, 720 (Del.

1971) (same).

* The lower federal courts have uniformly interpreted subsection

(A) not to call for deference to decisions by trustees and arbitra-

tors os to the meaning or application of federal law. Chicago Truck

Drivers Pension Fund v. L. Zahn Drug, 890 F.2d 1405, 1411 (7th

Cir, 1989); Union Asphalts and Roadoils, Ine. v. MoKan Teamsters

Pension Fund, 857 F.2d 1230, 1233-34 (8th Cir. 1988); Trustees of

Amalgamated Ins. Fund v. Geltman Indus., Inc., 784 F.2d 926, 928-

29 (9th Cir.), cert. denied, 479 U.S, 822 (1986); Bd. of Trustees of

Western Conf. of Teamsters Pension Fund v. Thompson Bldq. Ma-

terials, Ine, 749 F.2d 1396, 1405-06 (oth Cir. 1984), cert. di nied,

471 U.S. 1054 (1985): International Ass'n of Machinists National

Pension Fund Benefit Plan C v. Stockton Tri Indus., 727 F.2d 1204.

1207 n7 (D.C. Cir, 1984): Republic Indus., Ine. v. Teamater Joint

Council No. 83 of Va. Pension Fund, 718 F.2d 628, 641 (4th Cir.

1983), cert. denied, 467 U.S. 1259 (1984).

14

As the foregoing examples show, lawmakers often de-

termine that it is sernd public pollev to preserve the

nbility of a private entity to exercise a range of disere-

tion in making decisions subject only to legal limitations

at the margin. Lega! rules that incorporate a deferential

standard of review are a proven means of implementing

that publie policy determination. If Congress were denied

the option of enacting such rules, the Legislature would

be compelled to establish rules that specify the precise

course of conduct the regulated entity must take in every

given circumstance or to establish a general standard

charging the courts ‘or arbicrators: to determine whether

the entity hes acted precisely as the judge ‘or arbitrator)

believes that general standard requires in the cireum-

stances at hand.

Very simply stated, the Constitution has never been

held to require Congress or the courts to pretend to

omniscience or to stultify all private initiative in order

to extend the rule of law. So far as we are aware, there

is no authority for the proposition that a putative claim-

ant has a constitutional right to a cause of action that re-

quires the regulated party to act in one particular way

in each conceivable particular circumstance and no other

and that assures that a judge or arbitrator will conduct

a de novo review to determine whether the regulated

party has done so. Yet, on analysis, it is just such a

right that petitioner claims here.

3. Here Congress determined to preserve the ability of

trustees, as fiduciaries bound to act in the best interest of

their beneficiaries, to use their discretion in choosing

among reasonable alternatives with respect to a range of

issues that are implicated in MPPAA’s statutory scheme.

It is certainly rational, and probably wise, for Congress to

conclude that trustees who have a workine knowledge

and familiarity with the circumstances of particular

trusts—and, of necessity, with the industry in which the

employers participating in the trust are engeeed—are

15

better able to make decisions on an ongoing basis that

properly fit those cireumstances than the Legislative

Branch, the federal judiciary or an outside arbitrator.

By the same taken, Congress could sensibly conclude

that trustees, by reason of their specialized knowledge

and expertise, are well suited to make the factual deter-

minations that are integral to their withdrawal liability

decisions, This conclusion is sufficient in itself to justify

deference to t>> trustees’ factual determinations. It is

also very much to the point that if deference were not

fiven to such factual determinations, every decision com-

mitted to the trustees’ diseretion would be subject to

review of its factual premises on a de novo basis, and

the practical effect of such review would be to impede

the trustees’ ability to carry out their proper role.

The limiting standards of “reasonableness” and “clearly

erroneous” written into subsection (A) are, moveover,

sufficient to prevent abuse by the trustees of their deci-

sionmaking prerogatives. Other factors as well serve to

prevent arbitrary or biased decisions by the trustees.

MPPAA specifically requires that a plan’s rules for

determining withdrawal liability “operate and be applied

uniformly with respect to each employer.” 29 U.S.C.

* 1394(b). The trustees thus cannot adopt ad hoe stand-

ards to meet a given case but must consider the long

term impact of the rules adopted on the interests of the

trust. In particular, the trustees of a multiemployer trust

must consider the effect of rules respecting withdrawal

liability on the willingness of employers to continue par-

ticipating in the plan or of new employers to become party

to the plan. Rules that may be advantageous in the short

term but that would be seen as unduly onerous by such

employers would not serve the long term interests in the

plan. As the House Report on the bill which became

MPPAA states:

Plan fiduciaries are given a great deal of flexibility

to strike a balance among the competing considera-

16

tions of encouraging new entrants, discouraging

withdrawals, easing administrative burdens, and pro-

tecting the financial soundness of a fund. The com-

mittee wishes to make it clear that in choosing the

rules that would eliminate or reduce liability, the

choice of such a rule is not per se a violatiog of fi-

duciary standards; the determination must be made

as to whether the fiduciary has acted reasonably and

in the interests of plan participants and beneficiaries

and otherwise in accordance with the fiduciary stand-

ards. |H.R. Rep. No, 869, 96th Cong., 2d Sess. 67. |

And, as the Court of Appeals for the Virst Cireuit has

added: .

This commentary makes it clear that the trustees’

role is not simply to find the highest value for with-

drawal liability; they would not meet their fiduciary

duty to the fund, for example if they set excessively

high withdrawal liabilities which would have the ef-

fect of discouraging future participation. [Keith

Fulton & Sons v. New England Teamsters, 762 F.2d

1137, 1142-43 (1st Cir. 1985). ]

4. Much of what we have said to this juncture applies

as well to the presumptions adopted in 20 U.S.C, £1401

‘a’ (3)«(B?) thereinafter “subsection (Bi). Subsection

(B) requires deference to the trustees’ determination of

the plan’s unfunded liabi’ities: the “actuarial assump-

tions and methods used in the determination” are pre-

sumed correct unless shown to be “unreasonable (taking

into account the experience of the plan and reasonable

expectations!”; the application of these assumptions and

methods is presumed correct unless it is shown that

“the Plan’s actuary made a significant error’ in that

process,

The congressional reports accompanying the bill that

became MPPAA explain that the presumptions in sub-

section (B) were created “to reduce the likelihood of

dispute and delay over technical actuaria! matters with

respect to which there are often several equally ‘correct

17

approaches.’” Sen, Comm. on Labor and Human Re-

sources, Section 1076, The Multiemployer Pension Plan

Amendments Act of 1980: Summary and Analysis of

Consideration, 96th Cong., 2d Sess. 21 (1980) ( quoted in

Keith Fulton & Sons v, New England Teamsters, 762

F.2d 1157, 1143 n.7 (ist Cir. 1985)). Without these

presumptions, Congress feared that plans might be “help-

less to resist dilatory tacties by a withdrawing employer—

tactics that could, and could be intended to, result in

prohibitive collection costs to the plan.” Jd. See also

H.R. Rep. 869, 96th Cong., 2d Sess., pt. 1, at 86 (1980),

(“These rules are necessary in order to ensure the en-

forceability of employer liability. In the absence of these

presumptions, employers could effectively nullify their

obligation by refusing to pay and forcing the plan sponsor

to prove every element involved in making an actuarial

determination”).

Here again, Congress chose not to dictate a “correct”

choice of “assumptions and methods” but to permit

trustees and their actuaries to choose from a range of

reasonable alternatives, taking into account the particular

experience of the plan. Implicit in this legislative choice

is the recognition that, for example, actuaries who have

knowledge of a plan’s investment experience and invest-

ment options are better able to determine the investment

return assumption than the drafters of federal legislation

or reviewing courts or arbitrators. Without the pre-

sumption, courts and arbitrators would be placed in the

position of making a de novo detemination of what as-

sumption is “best” as to future investment returns. The

Constitution does not compel Congress to place the courts

and arbitrators in that position.

Moreover, here too, there are additional constraints on

the determinations made by the plan and the plan actu-

aries. MPPAA requires trustees to adopt actuarial as-

sumptions “which, in the aggregate, are reasonable .. .

and which, in combination, offer the actuary’s best esti-

18

mate of anticipated experience under the plan.” 29 U.S.C.

$1393. Identical language appears in ERISA, 29 U.S.C.

$ 1082(¢) (3), governing trustees’ adoption of actuarial

assumptions to be used in determining whether a plan has

satisfied ERISA’s minimum funding requirements. This

scheme requires plan trustees to use a consistent set of

actuarial assumptions for all purposes.’ By so doing,

MPPAA and ERISA significantly cabin the trustees’

discretion:

'Tlhe use of assumptions overly favorable to the

fund in one context will tend to have off-setting un-

favorable consequences in other contexts. For ex-

ample, the use of assumptions (such as low interest

rates! that would tend to increase the fund’s un-

funded vested liability for withdrawal liability pur-

poses would also make it more difficult for the plan

to meet the minimum funding requirements of

[ERISA]. [United Retail & Wholesale Employees v.

Yahn & McDonnell, 787 F.2d 128, 146-47 (3d Cir.

1986) (Seitz, J., dissenting in part) aff'd by an

equally divided court, 481 U.S. 735 (1987).]

B.

The second subsection of MPPAA which petitioner chal-

lenges, 29 U.S.C. § 1401\c}, provides:

In any proceeding under subsection (b) of this sec-

tion, there shall be a presumption, rebuttable only by

a clear preponderance of the evidence, that the find-

ings of fact made by the arbitrator were correct.

Congress determined that, in this context, arbitration is

the preferred forum for making findings as to facts in

dispute. As the District of Columbia Circuit stated in

° H.R. Conf. Rep. No. 1280, 93d Cong., 2d Sess. 18 states: “The

conferees intend that under this provision [section 1082(c)(3)}

a single set of actuarial assumptions will be required for all purposes

‘eg., for the minimum funding standard, reporting to the Depart-

ment of Labor and to participants and beneficiaries, financial re-

porting to stockholders, ete.)”.

19

1AM. National Pension Fund Benefit Plan C v. Stockton

Tri Indus.. supra, 727 F.2d at 1208 (footnote omitted) :

[In| establishing the arbitrative scheme, as in estab-

lishing an administrative agency, Congress has ex-

pressed a preference for initial resolution of the

dispute in a non-judieial forum.... [A]n arbitrator

sleillod in pension and labor matters, like an agency

ina given administrative area, is in theory likely to

fashion superior resolutions of disputes within the

arbitratoi’s area of expertise. [I]nitial resort to

arbitration, like initial resort to an administrative

tribunal, promotes judicial economy both because an

arbitrator’s decision may dispose of the dispute, and

because even if one party appeals the arbitral de-

cision, courts will have the benefit of the arbitrator’s

sifting of the facts. |See also Chicago Truck Drivers

Pension Fund v. L. Zahn Drug, supra, 890 F.2d at

1410.]

Having decided that the facts should be determined in

the arbitral process, Congress in § 1401(c) did no more

than adopt a rule that courts should defer to the arbitra-

tor’s factual findings rather than engage in the fact-

finding process on a de novo basis. In this context, that

rule serves the legitimate objectives of the statute and in

no way impinges on the right of a withdrawing employer

to an impartial decisionmaker.”

Petitioner may also intend to challenge the allocation of the

burden of proof in the two subsections at issue. Suffice it to say

here that the allocation of the burden of proof established in these

provisions works with the presumptions discussed in text to fur-

ther the interests already described that Congress sought to serve

in creating the procedures governing withdrawal liability. And,

as this Court has stated:

Where the burden of proof lies on a given issue is, of course,

rarely without consequence and frequently may be dispositive

to the outcome of the litigation or application. ... . However

that may be, it is not for us to resolve the question of where

the burden ought to lie on this issue. Outside the criminal law

area, where special concerns attend, the locus of the burden of

persuasion is normally not an issue of federal constitutional

moment. [Lavine v. Milne, 424 U.S. 577, 585 (1976).]

20

CONCLUSION

For the foregoing reasons, the judgment of the Ninth

Circuit should be affirmed.

Respectfully submitted,

ROBERT M. WEINBERG

VIRGINIA A, SEITZ

1000 Connecticut Avenue, N.W.

Washington, D.C. 20036

LAURENCE GOLD

(Counsel of Record)

815 16th Street, N.W.

Washington, D.C. 20006

(202) 637-5390