Opposition Brief — USX Corp. v. United States

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Nos. 94-830 and 94-831

In the Supreme Court of the Unite Soe

OCTOBER TERM, 1994

USX CORPORATION, PETITIONER

HITED STATES OF AMERICA

THERMON PHILLIPS, ET AL., PETITIONERS

INITED STATES OF AMERI(

ON PETITIONS FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

DREW'S. DAYs, II]

Solicitor (re ie ral

JOANN HARR

en) am i Gene

JOSEPH C. WYDERKO

Attorney

Dre partme nt of Justi

Washington, DC

I-17

(202) 514

BEST AVAILABLE COPY

QUESTIONS PRESENTED

1. Whether Section 302(a) of the Labor Management

Relations Act, 29 U.S.C. 186(a), prohibits an employer

from retroactively granting full-time union officials who

are former employees indefinite leaves of absence to earn

credits toward pension eligibility.

2. Whether Section 302(d)(2), which makes it a felony

to violate Section 302(a) “willfully,” requires proof that a

defendant acted with the specific intent to do something

that the law forbids.

(I)

TABLE OF CONTENTS

Page

EEL TSEC Re REE TE 1

SEE ET EO ee ee ee 2

TREASON cee ne 2

NAIA tila euiuh dibiubicedensiessidiintndnttindnadmcessieasnineeincnannce 12

RES CERES ise NO 26

TABLE OF AUTHORITIES

Cases:

Arroyo v. United States, 359 U.S. 419 (1959) .........cecceeeee 13

BASF Wyandotte Corp. v. Local 227, International

Chemical Workers Union, 791 F.2d 1046

a . scoaunucsenteceres 16

Cheek v. United States, 498 U.S. 192 (1991) ..........cccceeeeee 18

Communications Workers of America v. Bell Atlantic

Network Services, Inc., 670 F. Supp. 416

I a cusinovins 16

Korholz v. United States, 269 F.2d 897 (10th Cir. 1959),

cert. denied, 361 U.S. 929 (1960) .............ccccccoscceccccssenee 24

Miles v. Apex Marine Corp., 498 U.S. 19 (1990) .............. 21

Ratzlaf v. United States, 114 S. Ct. 655 (1994) wo 17, 18

Screws v. United States, 325 U.S. 91 (1945) c.ecceccccccccesceee 18

Spies v. United States, 317 U.S. 492 (1943) ..........ececeeeee. 18

Toth v. USX Corp., 883 F.2d 1297 (7th Cir.), cert.

denied, 493 U.S. 994 (1989) ............ccssssccscecoeee 12, 14, 15, 16

Trailways Lines v. Trailways, Inc. Joint Council of

Amalgamated Transit Union, 785 F.2d 101 (3d Cir.),

cert. denied, 479 U.S. 932 (1986) ..........ccscccsccssessseore 13, 14, 15

United States v. Bloch, 696 F.2d 1213 (9th Cir. 1982) ..... 23

United States v. Carter, 311 F.2d 934 (6th Cir.), cert.

I Pe TP, WN COD vnc ceccctscoccececcvcescccccocsecececsccess 24

United States v. Cody, 722 F.2d 1052 (2d Cir.), cert.

I MT WP I COI gov csccoecccrcncesdsevsnescoarcaccovseese 23

Cases—Continued: Page

United States v. Inciso, 292 F.2d 374 (7th Cir.), cert.

Ce Te ee Te Ee wchadinbev disk nivitataseartapatasseses 24

United States v. Keegan, 331 F.2d 257 (7th Cir.), cert.

Dae, SEW TFs TES CID. epecstaensaciineeivadedscenssveasaseassces 24

United States v. Lanni, 466 F.2d 1102 (3d Cir. 1972) ...... 23

United States v. Murdock, 290 U.S. 389 (1933) ............+.. 18, 24

United States v. Overton, 470 F.2d 761 (2d Cir. 1972),

cont. embed, G21 Uae. Fa GR te sccsincevnsctencmntscasesicrsienn 23

United States v. Papia, 910 F.2d 1357 (7th Cir. 1990) ..... 25, 26

United States v. Pecora, 484 F.2d 1289 (8d Cir. 1973) ..... 23

United States v. Ricciardi, 357 F.2d 91 (2d Cir.), cert.

eins, SOE ae ee ee ciate tacisatitic ccsintriensinsins 23-24

Statutes:

Comprehensive Crime Control Act of 1984, Pub. L. No.

98-473, Tit. II, Ch. VIII, § 801, 98 Stat. 2131 00... 21

Employee Retirement Income Security Act, 29 U.S.C.

1001 et seq.:

S DORE), BP U.S.C. TORRE) cncccesecsssescccssccesssccnsccsse 8

§ 104(a)(1)(D), 29 U.S.C. 1024(a)(1)(D) «0. eee eee 8

Da ite SN hicnikienchtuthinieinocinnensideninapteneniotins 2, 12, 18

Labor Management Relations Act, 29 U.S.C. 141 et seq.:

$ BOB, FO USC. 1G .ncccccccesss. 2, 8, 9, 11, 12, 14, 17, 18, 19, 22

S BED, Be WTA. SRD. fecreccicccsvsnssgrsccsnssssivisincese 12, 13, 19

Oe te ay TID kshttideacinccendicssecotesconrsseressccenns 13, 19

OS es le OED recieves cccsssscncesescenccesnsices 2

§ 302(c)(1), 29 U.S.C. 186(c)(1) ... 8, 9, 10, 12, 13, 14, 15, 16, 17

§ 302(c)(1)-(3), 29 U.S.C. 186(c)(1)-(8) ............ecceecesecees 22

§ 302(c)(4)-(9), 29 U.S.C. 186(c)(4)-(9) ...... eee eeeeeee 19, 20, 23

§ 302(d), 29 U.S.C. 186(d) ............... 11, 12, 18, 23, 24, 25, 26

§ 302(d)(1), 29 U.S.C. 186(d)(1) ................4. 11, 12, 19, 20, 21

Statutes—Continued: Page

§ 302(d)(2), 29 U.S.C. 186(d)(2) «0.0.0.0... 9, 12, 19, 22, 23, 25

Be See WI srtinhcncnistdieisenenkimamidascaunigandaaeiode: 2

ee SIRs SOE scsnnexenrenecidinsbieeasathbcaasdomsabeiaipniaa tea 2

Be MEAs UE etisipetnekecesissnspaobessinsadinigebeadiehiaaabenaa ada 23

OO Wes HITE. scivcanisctesnieceiebacesnbecnibcdeebabdinatoianaiabadion 18

Re ee I Get tecinisbisines rotensintiiaidag ie taianog 18

Miscellaneous:

129 Cong. Rec. (1983):

SRE rome eager omy SAN nc Neh 21

is EE sebihvicnitsincticndersbonka biteiatebistenmliigiadamiiaahidedsaice te 21

Labor Management Racketeering Act of 1983: Hearing

Before the Subcomm. on Labor of the Senate Comm.

on Labor and Human Resources, 98th Cong., Ist Sess.

CZINUEE. sidsinicindaiciniaseomentbaiedeapeciaudunldasasakiteaediadd ies uneiicabiiaes ue 23

S. Rep. No. 83, 98th Cong., Ist Sess. (1983) ............... 21, 22, 23

S. Rep. No. 225, 98th Cong., Ist Sess. (1983) wc... 21, 22

Jn the Supreme Court of the United States

OCTOBER TERM, 1994

No. 94-830

USX CORPORATION, PETITIONER

Vv.

UNITED STATES OF AMERICA

No. 94-831

i i 4 : “9 S| QO} Ue

THERMON PHILLIPS, ET AL. PETITIONERS

Vv.

UNITED STATES OF AMERICA

ON PETITIONS FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINION BELOW

The opinion of the court of appeals (Pet. App. 1a-40a) is

reported at 19 F.3d 1565.’

' Unless otherwise noted, “Pet. App.” refers to the appendix to

the petition in No. 94-830.

(1)

JURISDICTION

The judgment of the court of appeals was entered on

May 10, 1994. A petition for rehearing was denied on

August 9, 1994. Pet. App. 4la-42a. The petitions for a

writ of certiorari were filed on November 7, 1994. The

jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

STATEMENT

Following a jury trial in the United States District

Court for the Northern District of Alabama, petitioners

Phillips, Rich, and USX Corporation (USX) were

convicted of conspiracy to violate the Labor Management

Relations Act (LMRA or Act), 29 U.S.C. 186, in violation

of 18 U.S.C. 371. In addition, petitioners Rich and

Phillips were convicted of receiving illegal benefits from

an employer, in violation of 29 U.S.C. 186(b)(1). Peti-

tioner USX was convicted on two counts of paying

illegal benefits to employee representatives, in violation

of 29 U.S.C. 186(a)(1); ten counts of mail fraud, in

violation of 18 U.S.C. 1341; and one count of failure to

notify potential beneficiaries of a change in their pension

plan, in violation of the Employee Retirement Income

Security Act (ERISA), 29 U.S.C. 1131. Petitioner USX

was fined $4,105,000 and ordered to pay $290,000 in

restitution to the United States Steel and Carnegie

Pension Fund. Petitioner Rich was sentenced to 36

months’ imprisonment, to be followed by three years’

supervised release, and fined $6,000. Petitioner Phillips

was sentenced to 30 months’ imprisonment, to be fol-

lowed by two years’ supervised release, and fined $6,000.

C.A. App. Tabs 4-6.

1. Petitioner USX owns and operates steel mills

throughout the United States. The steel workers in the

mills are represented by the United Steelworkers

of America, International Union (Union), which every

three years negotiates a basic collective bargaining

agreement with USX that governs the rates of pay,

including pension benefits, of the steel workers. The

Union is divided into districts. After the basic agree-

ment is reached, the Union’s district directors and sub-

district directors negotiate local collective bargaining

agreements with USX that govern working conditions

at the steel mills within their districts. Pet. App. 2a-3a.

USX’s Fairfield Steel Mill (Fairfield) in Birmingham,

Alabama, was located in District 36. In 1983, petitioners

Phillips and Rich were the district director and sub-

district director, respectively, of District 36. Phillips

and Rich were full-time Union employees. Phillips had

worked for USX from 1948 to 1951, and Rich had worked

for USX from 1949 to 1964. When Phillips and Rich left

USX’s employment, the basic agreement provided that a

worker who left USX to become a Union employee could

request a one-year leave of absence. If USX granted the

request, the worker would continue to accrue, for

pension purposes, continuous service credits for that

year. USX could extend the leave of absence for an

additional year, but the basic agreement limited such

leaves to two consecutive years. To maintain his pension

eligibility, a worker who left USX to accept Union

employment had to return to USX before his leave of

absence expired. Since Phillips and Rich did not return

to USX after accepting Union employment, they were

not eligible for pensions. Pet. App. 3a-4a.

In September 1983, six months after USX and the

Union had reached a basic agreement, Phillips and Rich

began negotiating a local collective bargaining agree-

ment on behalf of the ten Union locals at Fairfield with

William Miller, the USX vice president for labor re-

lations. At that time, Fairfield and several other USX

steel mills were idle due to depressed market conditions.

USX was not willing to resume production at those mills

unless the locals agreed to a permanent reduction in the

work force, the elimination of incentive pay, and the

discontinuation of certain restrictive work practices.

Pet. App. 3a. For their part, Phillips and Rich decided to

condition any local agreement on USX’s willingness to

award them and seven other Union employees sufficient

retroactive “continuous service” credits to allow them to

retire and to receive a pension from USX. /d. at 3a, 5a.

The negotiations over the local agreement involved

several meetings over the course of four months. At the

first meeting, Phillips and Rich told Miller that the

Union wanted the basic agreement amended to authorize

the granting of unlimited leaves of absence for workers

who wished to leave USX to accept Union employment.

Miller responded that USX would not agree to such an

amendment. At the second meeting, Rich took Miller

aside and told him, “[Y]Jou accommodate us and we'll

accommodate you.” Rich then handed Miller a proposal

extending the leaves of absence of Phillips, Rich, and the

other seven Union employees “for an indefinite period of

time until such person dies or takes pension.” Miller

sent the proposal to J. Bruce Johnston, the USX execu-

tive vice president for employee relations, who consulted

with David Roderick, the chief executive officer and

chairman of the board of USX. Johnston instructed

Miller to reject the proposal. Following another meeting

in October 1983, Phillips and Rich told Miller that there

would be no local agreement with Fairfield until USX

authorized the pensions. Miller responded that USX

knew of no way to pay the pensions. Pet. App. 3a, 5a-7a.

In the meantime, USX was demanding concessions

similar to those demanded of Fairfield in the negotia-

tions of local agreements with other Union district

directors. When the Union refused to grant the con-

cessions, all negotiations ceased in mid-November 1983.

Miller, however, continued to communicate with Phillips

and Rich. At a meeting on December 23, 1983, Miller told

Roderick and Johnston that one of the items still “on the

table” at Fairfield was the pensions for Phillips, Rich,

and the seven other Union employees. Johnston in-

structed Miller to reopen the negotiations with Phillips

and Rich. Pet. App. 7a.

On December 24, 1983, Miller met Phillips and Rich in

Birmingham, and they negotiated a local agreement for

Fairfield. Phillips and Rich nevertheless refused to sign

the agreement because USX had not agreed to authorize

the pensions. Miller called Johnston, who instructed

Miller to tell Phillips and Rich that USX would consider

their request for retroactive leaves of absence on certain

conditions. When Miller relayed the conditions, Phillips

and Rich asked Miller whether he believed that USX

would grant the pensions. Miller answered that USX

would favorably consider the matter. Phillips and Rich

then signed the local agreement, which called for a

reduction in the work force at Fairfield, reductions in

the incentive pay of the mill’s workers, and the elimi-

nation of the work practices disliked by USX. Shortly

afterwards, USX resumed steel production at Fairfield

and permanently closed several other plants. Pet. App.

7a-9a; Gov’t C.A. Br. 23-24. -

In July 1984, several workers at Fairfield filed

grievances against USX challenging its interpretation

of the local agreement. Phillips and Rich, as the local

Union officials, were responsible for determining

whether the grievances would be prosecuted and, if they

were not resolved, whether to demand arbitration. When

Johnston learned of the grievances, he contacted Miller.

On Johnston’s instructions, Miller told Phillips and Rich

that USX would grant their pensions. The grievances

were subsequently withdrawn. Pet. App. 9a.

Shortly thereafter, Johnston drafted an amendment to

the basic agreement’s leave of absence provision. He did

not submit it to the Union because he was advised that

the Union members at Fairfield might learn of the

amendment and conclude that Phillips and Rich had

betrayed them. Instead, Johnston decided to have USX’s

Corporate Policy Committee, on which he and Roderick

served, authorize the pensions that Phillips and Rich

sought. Pet. App. 9a-10a.

On October 22, 1984, Johnston submitted to the

Corporate Policy Committee a two-part proposal that

was adopted the same day. First, the proposal amended

the USX Personnel Manual to allow the Committee, in

its discretion, to grant leaves of absences for periods in

excess of two years to workers who left USX’s em-

ployment to work for the Union. Second, the proposal

granted retroactive leaves of absence to former em-

ployees who had left USX’s employment to work for the

Union and who had lost their right to a USX pension

because they had exhausted their leaves of absences.

Pet. App. 10a-13a.

Johnston also prepared and signed a standard company

form that both recommended and authorized pensions for

Phillips, Rich, and four of the Union employees on their

list.” Johnston backdated the form to January 1, 1984,

* In fact, only Rich met the requirements of the second part of

the proposal that was approved by the Corporate Policy

and indicated that the pensions would be effective March

1, 1984. When the form arrived at the employee benefits

office at Fairfield, the benefits office questioned its

propriety because it had not been prepared in accordance

with USX’s standard procedure. After the office super-

visor called his superior at USX headquarters, he

instructed the benefits office to “keep the matter quiet.”

Although the form prepared by Johnston was not entered

into the record system, the employee benefits office at

Fairfield certified to the United States Steel and

Carnegie Pension Fund, Inc. (the Administrator), that

Phillips, Rich, and the other four Union employees were

eligible for pensions. Pet. App. 13a-14a.

Shortly thereafter, Rich and the other four Union

employees signed pension applications indicating that

they had retired from USX effective March 1, 1984. One

of the Union employees also signed a pension application

on behalf of Phillips, who was in Florida at the time. The

Administrator finished processing the applications on

November 19, 1984, and began mailing pension checks on

December 1, 1984. Phillips received a total of $55,319,

and Rich received $48,318. Although receiving the pen-

sions violated the Union’s rules, Phillips, Rich, and the

other four Union employees continued to work for the

Union. Pet. App. 14a-15a.

Committee. Phillips did not satisfy the requirements because he

had left USX to work for another union, and the other four Union

employees did not qualify because they had not continuously

served bargaining units at the USX division where they had been

employed. Pet. App. 15a. Moreover, although more than 50 other

Union employees became eligible for pensions under the second

part of Johnston's proposal, neither Johnston nor anyone else at

USX made any effort to identify the potential pensioners or to

include their names on the authorization form. /d. at 12a, 14a n.11.

—

Under an earlier contract, USX had undertaken some

of the duties imposed on the Administrator by ERISA,

including the duty to notify the Department of Labor and

the participants in the pension plan of any material

changes to the plan. See 29 U.S.C. 1021(a)(1), 1022(a)(1),

1024(a)(1)(D). The Corporate Policy Committee’s adop-

tion of Johnston’s proposal constituted a material change

in the pension plan because the second part of the

proposal created a new class of beneficiaries. USX did

not notify the Department of Labor or the pension plan’s

participants of the new class of beneficiaries created by

the adoption of Johnston’s proposal. Pet. App. 15a-16a.

2. The grand jury charged that the retroactive leaves

of absence granted to Phillips and Rich violated 29

U.S.C. 186(a)(1), which prohibits any employer from

giving anything of value “to any representative of any of

his employees who are employed in an industry affecting

commerce.” Petitioners argued that the leaves of ab-

sence did not violate the LMRA because they fell within

an exception provided in 29 U.S.C. 186(¢c)(1), which

exempts from the Act’s prohibition benefits given by an

employer to a union official “who is also an employee or

former employee of such employer, as compensation for,

or by reason of, his service as an employee of such

employer.”* Over petitioners’ objections, the district

% Section 302 of the Labor Management Relations Act, 29

U.S.C. 186, provides in pertinent part:

(a) Payment or lending, etc., of money by employer or

agent to employees, representatives, or labor organi-

zations

It shall be unlawful for any employer * * * to pay, lend,

or deliver, or agree to pay, lend, or deliver, any money or

other thing of value—

court instructed the jury that the exception in 29 U.S.C.

186(c)(1) applies “only to payments by an employer to

former employees for past services actually rendered by

those former employees while they were employees of

the employer company.” Pet. App. 19a.

The district court also rejected petitioners’ argument

that 29 U.S.C. 186(d)(2), which provides that any person

who “willfully violates” 29 U.S.C. 186 is guilty of a

criminal offense, required the government to prove that

they acted with the specific intent to violate the law.‘

Over petitioners’ objections, the court instructed the

jury that “the Government is not required to prove that

(1) to any representative of any of his employees who are

employed in an industry affecting commerce[.]

x* * K ke *

(b) Request, demand, etc., for money or other thing of

value

(1) It shall be unlawful for any person to request, demand,

receive, or accept, or agree to receive or accept, any payment,

loan, or delivery of any money or other thing of value

prohibited by subsection (a) of this section.

* * * * *

The provisions of this section shall not be applicable (1) in

respect to any money or other thing of value payable by an

employer * * * to any officer or employee of a labor

organization, who is also an employee or former employee of

such employer, as compensation for, or by reason of, his

service as an employee of such employer{.]

4 29 U.S.C. 186(d)(2) provides in part that, “[e]lxcept for

violations involving transactions covered by subsection (d)(1) of

this section, any person who willfully violates this section shall,

upon conviction thereof, be guilty of a felony.”

the pension payments were made by or for USX

Corporation or received by the individual defendants

with an evil or bad purpose or with intent to violate the

law or with knowledge that the law would be or was

violated.” 94-831 Pet. App. 41a. In addition, the court

charged the jury as follows:

The word [“]wilfully[”] means that the person or

entity charged as a defendant knowingly and

intentionally commit‘ed acts which constitute the

offense charged and that such acts were not

committed accidentally or by some mistake. For

example, if USX Corporation caused a pension check

to be sent to one of the individual defendants by

accident or mistake, such as [a] computer error, such

USX Corporation act would not be intentional and

thus would not be wilful. On the other hand, if USX

Corporation intended for such a pension check to be

sent and knowingly caused it to be sent, then that act

would be wilful.

Id. at 42a.

3. The court of appeals affirmed. Pet. App. la-40a. It

ruled that the district court correctly instructed the

jury on the scope of the exception provided in 29 U.S.C.

186(c)(1). Pet. App. 18a-23a. The court rejected peti-

tioners’ claim that payments given “by reason of”

service as a former employee need not be for past

services actually rendered by former employees while

they were employees to fall within Section 186(c)(1)’s

exception. “Because section 186(c)(1) only excepts

payments given ‘as compensation for’ or ‘by reason of’ an

employee’s ‘service as an employee,’” the court reasoned

that “a payment given to a former empioyee must be for

services he rendered while he was an employee to

qualify for the exception.” Pet. App. 21a.

The court of appeals also rejected petitioners’ claim

that the government was required to prove that they

acted with the specific intent to violate 29 U.S.C. 186.

Instead, the court held that the term “willfully,” as used

in 29 U.S.C. 186(d), requires proof only of general intent.

Pet. App. 23a-37a. The court pointed out that, “in some

contexts, courts have interpreted ‘willfully’ as requiring

a finding of general intent, meaning the intent to engage

in the prohibited conduct; that is, acting voluntarily,

knowingly, and intentionally, and not accidentally or

mistakenly.” Jd. at 24a. The court relied principally on

the statutory framework of Section 186, and especially

Section 186(d)(1), which indicates that, when Congress

required proof of specific intent, it did not rely solely on

the word “willfully” but employed additional language to

impose that requirement.” See Pet. App. 29a-34a.

5 29 U.S.C. 186(d)(1) provides in part:

Any person who participates in a transaction involving a

payment, loan, or delivery of money or other thing of value to

a labor organization in payment of membership dues or to a

joint labor-management trust fund as defined by clause (B) of

the proviso to clause (5) of subsection (c) of this section or to a

plant, area, or industry-wide labor-management committee

that is received and used by such labor organization, trust

fund, or committee, which transaction does not satisfy all the

applicable requirements of subsections (c)(4) through ‘¢)(9) of

this section, and willfully and with intent to benefit himself or

to benefit other persons he knows are not permitted to receive a

payment, loan, money, or other thing of value under

subsections (c)(4) through (c)(9) violates this subsection, shall,

upon conviction thereof, be guilty of a felony * * * ; but if

the value of the amount of money or thing of value involved in

any violation of the provisions of this section does not exceed

The court also noted that four courts of appeals had

construed Section 186(d) to require only general intent

before Congress amended Section 186(d) in 1984 to create

separate subsections (d)(1) and (d)(2). The amendment

retained the term “willfully” in both subsections but

established a specific intent requirement for prose-

cutions under subsection (d)(1). Pet. App. 34a-35a & n.27.

“Because Congress left the willfulness requirement of

former section 186(d) unchanged when it created section

186(d)(2) in 1984,” the court “assume[d] that Congress

intended ‘willfully’ to require a finding of only general

intent.” Pet. App. 34a-35a.°

ARGUMENT

1. Petitioner USX contends (Pet. 8-14) that the

retroactive credits and pensions that it gave to Phillips

and Rich did not violate 29 U.S.C. 186(a), because those

payments were sheltered under 29 U.S.C. 186(c)(1) as

payments given “by reason of” the former employees’

“service as an employee.” That contention does not

warrant this Court’s review.

Section 186 “is, in part, a conflict-of-interest statute

designed to eliminate practices that have the potential

for corrupting the labor movement.” Pet. App. 18a. “It is

fairly universally acknowledged that a central purpose of

[Section 186] as a whole [is] to prevent employers from

bribing union officials.” Toth v. USX Corp., 883 F.2d

1297, 1300 (7th Cir.), cert. denied, 493 U.S. 994 (1989); see

$1,000, such person shall be guilty of a misdemeanor{.]

[Emphasis added. ]

6 The court of appeals likewise rejected USX’s argument that

the district court erroneously instructed the jury that proof of

only general intent was required to establish that USX “willfully”

violated ERISA, 29 U.S.C. 1131. Pet. App. 37a-40a.

also Arroyo v. United States, 359 U.S. 419, 425-426

(1959). Section 186(a) thus prohibits employers from

paying anything of value to employees’ representatives

or union officials, and Section 186(b), in turn, prohibits

those representatives and officials from receiving such

payments.

The narrow exception provided in Section 186(c)(1)

states that Sections 186(a) and (b) are not applicable “in

respect to any money or other thing of value payable by

an employer * * * to any officer or employee of a labor

organization, who is also an employee or former

employee of such employer, as compensation for, or by

reason of, his service as an employee of such employer.”

Because Section 186(c)(1) excepts only payments given

“as compensation for” or “by reason of” an employee’s

“service as an employee,”’ the court of appeals correctly

held that the retroactive payments given to Phillips and

Rich were not covered by the exception, for those

payments had no relation to any “service” that they

rendered when they were USX employees. See Pet. App.

21a-22a.

Contrary to petitioner USX’s argument (Pet. 9-13),

the court of appeals’ decision in this case does not

conflict with the decision of any other court of appeals.

In Trailways Lines v. Trailways, Inc. Joint Council of

Amalgamated Transit Union, 785 F.2d 101, cert. denied,

479 U.S. 932 (1986), the Third Circuit ruled that a

provision in a collective bargaining agreement granting

employees leaves of absence to work for a union while

accumulating pension credits with the company did not

7 Petitioners conceded in the court of appeals that the pension

payments in this case were not given “as compensation for” the

past service of Phillips and Rich as USX employees. Pet. App. 19a-

20a.

fall within the Section 186(c)(1) exception. 785 F.2d at

104-108. In rejecting the claim that the arrangement

qualified for the exception because it was offered “by

reason of” the former employees’ service to Trailways,

the Third Circuit found that “({a] logical reading of the

statute makes clear that [Section 186(c)(1)] applies solely

to payments made as ‘compensation [for] or by reason of’

the former employees’ past service to the employer.” /d.

at 106. The Third Circuit concluded that Section

186(c)(1) “contemplates payments to former employees

for past services actually rendered by those former

employees while they were employees of the company.”

Ibid.

In Toth v. USX Corporation, 883 F.2d 1297, cert.

denied, 493 U.S. 994 (1989), the Seventh Circuit con-

sidered the leave of absence policy at issue in this case,

in the context of a civil action brought by union

representatives who were former USX employees and

were denied benefits when USX rescinded the policy.

The court held that the policy violated Section 186. 883

F.2d at 1300-1306." As petitioner USX points out (Pet.

11), the Seventh Circuit in Toth questioned part of the

Third Circuit’s reading of the language of Section

186(c)(1) in Trailways. In particular, the Seventh

Circuit suggested that an employer might permissibly

make payments under Section 186(c)(1) to former

employees, as well as current employees, “as long as the

payments are in some way motivated by past service.”

883 F.2d at 1304. The Seventh Circuit reasoned that

continuing payments to former employees might

* In Toth, petitioner USX argued, contrary to its position in

this case, that the leave of absence policy violated Section 186. See

883 F.2d at 1300.

constitute permissible payments “by reason of” past

service when those continuing payments were embodied

in a collective bargaining agreement, as, for example,

when an employee leaves the employer’s service

temporarily but continues to accrue benefits provided for

in the agreement. See id. at 1304-1305. The Seventh

Circuit stressed, however, that “collective bargaining

and inclusion [of the payments] in a generally dis-

seminated collective bargaining agreement, whose terms

are uniformly applicable and nondiscriminatory, [would

be] crucial.” Jd. at 1304. The Seventh Circuit ultimately

concluded that USX’s policy could not qualify as

“compensation for or by reason of” former employment

because, unlike the policy in Trailways, USX’s leave

policy was not a part of a bargained-for labor agreement.

Ibid.

In light of the decisions in Trailways and Toth, it is

clear that the outcome of this case would not have been

different in either the Third Circuit or the Seventh

Circuit. Under the Seventh Circuit’s reading of Section

186(c)(1), the payments in this case were illegal because

they were not “part of the bargained-for collective

bargaining agreement” that set the terms of compen-

sation for all the employees in the bargaining unit.

Toth, 883 F.2d at 1305. The Third Circuit’s reading of

the exception in Section 186(c)(1) is even narrower than

the Seventh Circuit’s construction; the Third Circuit

would hold that the payments in this case were illegal

because they were not directly attributable to past

services actually rendered by Phillips and Rich while —

they were employees of USX. See Trailways, 785 F.2d

at 106. ;

While the Third Circuit does not appear to share the

Seventh Circuit’s view that the exception in Section

186(c)(1) may cover pension credits accumulated by union

officials during leaves of absence from their former

employer that accrued pursuant to provisions of a

collective bargaining agreement, the question whether

Section 186(c)(1) covers such credits is not presented in

this case. Phillips and Rich were not granted their

retroactive leaves of absence to earn pension credits

pursuant to a collective bargaining agreement; rather,

they obtained the credits under a private arrangement

with USX, which USX sought to conceal from the union

membership to avoid the perception that Phillips and

Rich had betrayed union members. Pet. App. 9a-10a.

Likewise, petitioners are not helped by cases involving

fringe benefits offered, pursuant to a collective

bargaining agreement, to employees on temporary leaves

of absence from an employer as well as current

employees,’ or cases in which employers, under such

agreements, allow currently employed union officials

time off with pay for the purpose of conducting union-

related business.’ No court of appeals that has

addressed the scope of Section 186(c)(1) would have found

% The district court case cited by petitioner USX (Pet. 11)

therefore does not support its interpretation of Section 186(c)(1).

In Communications Workers of America v. Bell Atlantic Network

Services, Inc., 670 F. Supp. 416, 419-423 (D.D.C. 1987), the court

held only that provisions in collective bargaining agreements

permitting employees to take unpaid leaves of absence for union

business without losing fringe benefits fell within the exception

provided in Section 186(c)(1). In reaching that conclusion, the

court reasoned that the terms of employment for which unions

bargain (including the possibility of unpaid leave) should be

considered part of the compensation for which employees work.

670 F. Supp. at 419-420; accord Toth, 883 F.2d at 1304.

0 See BASF Wyandotte Corp. v. Local 227, International

Chemical Workers Union, 791 F.2d 1046, 1048-1051 (2d Cir. 1986).

the payments in this case te be lawful, and this case does

not implicate any broad-ranging policy issues regarding

the scope of the Section 186(c)(1) exemption."

2. Petitioners contend (94-830 Pet. 14-19; 94-831 Pet.

9-24) that the government was required to prove that

they acted with specific intent to violate the law to

establish that they “willfully” violated 29 U.S.C. 186.

That contention also does not warrant this Court’s

review.

a. Contrary to the individual petitioners’ contention

(Pet. 12-15), this Court did not hold, in Ratzlaf v. United

1! Petitioners Phillips and Rich rely (Pet. 7) on a 1977 letter

from the Department of Labor as support for their assertion that

the continued accrual of pension credits while an employee is on a

leave of absence and working as a union official was thought to be

permissible. That letter, however, specifically disclaimed any

authority on the part of the Labor Department to “provide a

definitive opinion as to whether a violation would occur in

cornection with the situation described,” and it addressed the issue

only “[iJn the abstract.” Moreover, the letter concerned an

employee who was “on a leave of absence without pay from a

company to serve as a union officer,” not (as in this case) former

employees who sought to be placed on unpaid leave retroactively.

Moreover, in a 1979 letter, the Department of Labor concluded

that a “former employee” who was “on leave” from the employer

and working for a union could not be “placed back” in 1

employer’s pension plan, because of the strictures of Section 186.

The Department expressed the view that “the payment by a

company into a pension plan for an employee of the labor

organization * * * who renders no service to the company”

would violate Section 186. That situation more closely resembles

this case.

Likewise, the 1980 Department of Labor report relied on by

USX (Pet. 9), which surveyed unpaid leave arrangements

embodied in collective bargaining agreements, has no relevance to

this case, which does not involve any provision of a collective

bargaining agreement.

States, 114 S. Ct. 655 (1994), that the use of the term.

“willfully violates” in every criminal statute requires

proof of specific intent.” In Ratzlaf, the Court construed

the term “willfully” in 31 U.S.C. 5322(a), the criminal

enforcement provision for the prohibition in 31 U.S.C.

5324 against structuring currency transactions for the

purpose of evading a financial institution’s reporting

requirement. Although the Court held that Section

5322(a) required proof that the defendant acted with

knowledge that the structuring in which he engaged was

unlawful, 114 S. Ct. at 663, the Court emphasized that

“willfully” is “a ‘word of many meanings,’ and ‘its

construction [is] often * * * influenced by its

context.’” Id. at 659 (quoting Spies v. United States, 317

U.S. 492, 497 (1943)); see also Screws v. United States,

325 U.S. 91, 101 (1945) (plurality opinion); United States

v. Murdock, 290 U.S. 389, 395 (1933).

“{I]n many contexts, * * * ‘willfully’ refers to

consciousness of the act but not consciousness that the

act is unlawful.” Cheek v. United States, 498 U.S. 192,

209 (1991) (Scalia, J., concurring in the judgment). In this

case, the court of appeals correctly held that “willfully,”

as used in 29 U.S.C. 186(d), requires proof only of general

intent. The criminal enforcement provision of Section

186 is set forth in subsection (d). Before subsection (d)

was amended in 1984, it provided that “[a]ny person who

willfully violates any of the provisions of * * * section

[186] shall * * * be guilty of a misdemeanor.” 29 U.S.C.

186(d) (1982). When Congress amended subsection (d) in

12 Indeed, neither the individual petitioners nor USX takes

issue with that portion of the court of appeals’ opinion (Pet. App.

37a-40a) holding that ERISA’s criminal enforcement provision, 29

U.S.C. 1131, which employs the phrase “willfully violates,” re-

quires only proof of general intent.

1984 to make some violations of Section 186 felonies, it

also divided subsection (d) into two parts. Subsection

(d)(1) applies to payments that are illegal because they

do not satisfy certain technical requirements of

subsections (c)(4)-(9). For those violations, 29 U.S.C.

186(d)(1) requires proof that the person participating in

the payment acted “willfully and with intent to benefit

himself or to benefit other persons he knows are not

permitted to receive a payment.” Subsection (d)(2)

applies to all other illegal payments that are not covered

by subsection (d)(1), i.e., payments prohibited by

subsections (a) and (b) for which Congress did not

provide any exception in subsection (c). For those

violations, subsection (d)(2) requires proof only that the

parties participating in the payment “willfully violate[d]

this section.”

In light of that statutory structure, the court of

appeals correctly found that “Congress had to have

intended the term ‘willfully’ as used in both sections

186(d)(1) and (d)(2) to require a finding of general intent;

otherwise the [additional] ‘intent to benefit’ language in

section 186(d)(1) would be superfluous, because a person

who had the specific intent to violate [Section 186] would

also necessarily intend to benefit himself or to influence

a union official.” Pet. App. 3la-32a. As the court ex-

plained, under petitioners’ interpretation, the additional

intent requirement of Section 186(d)(1) would serve little

or no purpose, for it would exclude from the reach of

criminal liability only those “payments made with the

specific intent to violate the law, but without the intent

to benefit himself or influence the recipient.” Jd at 32a.”

1S Petitioners Phillips and Rich assert (Pet. 19-20) that the

court of appeals’ reasoning is “specious” because an employer and

20)

In addition, as the court of appeals explained (Pet. App.

32a-33a), other aspects of the statutory scheme confirm

that the term “willfully” requires proof only of general

intent. The criminal enforcement provision applicable to

Section 186 prohibits payments if the employer acts

“willfully,” yet Sections 186(a)(3) and 186(a)(4) bar

payments by an employer only if the employer also acts

with an “intent to influence” the recipient. Given that

the “intent to influence” language applies only to

subections (a)(3) and (a)(4), the court of appeals concluded

that “Congress must have intended sections 186(a)(1)-(2)

to prohibit payments to representatives even if they

were made without any intent to influence.” Pet. App.

33a. But it would be “nonsensical” to suppose that

Congress intended to create a criminal prohibition that

applied to “payments made to employee representatives

without any intent to influence but with specific intent

union may knowingly violate the technical requirements of

subsections (c)(4)-(9) without having any intent to confer an

improper benefit on anyone. But, as the court of appeals observed

(Pet. App. 32a), it is doubtful-that such a “scenario could actually

occur, let alone [that] Congress intended such an absurd statutory

scheme.” In the absence of an intent to obtain or confer an

improper benefit, there appears to be no reason for anyone who

knows about the technical requirements of subsections (c)(4)-(9) to

disregard them, and petitioners offer none. Moreover, it is highly

unlikely that Congress added the intent-to-benefit requirement to

subsection (d)(1) to protect from criminal prosecution those

persons who knowingly disobeyed the law, but who did not intend

to reap any personal benefit. Rather, Congress sought, in sub-

section (d)(1), to exempt from criminal prosecution those persons

who committed acts that contravened subsections- (c)(4)-(9), but

who did not intend to benefit someone prohibited by the statute

from receiving things of value and did not know that the intended

beneficiary was prohibited from receiving things of value, i.e.,

persons acting only with general intent.

to violate the law.” Jbid. In sum, “[t]he double enforce-

ment provision in section 186(d) and the dual structure of

prohibited payments in section 186(a) suggest that

Congress intended the term ‘willfully’ to require proof

only that the payment was made knowingly and

intentionally, not accidentally or by some mistake.” /d.

at 34a.

b. The court of appeals also noted that, “[wJhen

Congress amended Section 186(d) in 1984, it made no

attempt to change the clear majority rule [in the courts

of appeals] that ‘willfully’ required a finding of only

general intent.” Pet. App. 34a. “Because Congress left

the willfulness requirement of former section 186(d)

unchanged when it created section 186(d)(2),” the court

“assume[d] that Congress intended ‘willfully’ to require

a finding of only general intent.” Jd. at 34a-35a. See

Miles v. Apex Marine Corp., 498 U.S. 19, 32 (1990) (“We

assume that Congress is aware of existing law when it

passes legislation.”).

The court of appeals’ analysis is supported by the

legislative history of the 1984 amendments to Section

186. The amendments were enacted as part of Chapter

VIII of the Comprehensive Crime Control Act of 1984,

and were identical to amendments contained in a labor-

racketeering bill passed by the Senate in 1983.'* The

Senate committee reports accompanying the 1984 Act

and the 1983 bill indicate that Congress included the

“intent to benefit” language in Section 186(d)(1)

precisely because it was concerned that “willfully”

carried the connotation of general intent, and that a

14 See Comprehensive Crime Control Act of 1984, Pub. L. No.

98-473, Tit. II, § 801, 98 Stat. 2131; S. Rep. No. 225, 98th Cong., Ist

Sess. 297 & n.1 (1983); cf. 129 Cong. Rec. 16,367, 16,378 (1983);

S. Rep. No. 83, 98th Cong., Ist Sess. 2 (1983).

person could be prosecuted for a willful violation of the

law even if he believed his actions were lawful. The 1984

committee report states, for example:

Title VIII grants special treatment to transactions

addressed by [29 U.S.C. 186(c)(4) through (9)]. These

subsections contain exceptions, often technical in

nature, to the prohibitions contained in [29 U.S.C.

186(a) and (b)]. Because a person can violate a

prohibition of [29 U.S.C. 186(a) and (b)] even

though he proceeded in the belief that his conduct

fell within the excepted behavior of [29 U.S.C.

186(c)(4) through (9)], title VIII adds to the “willful”

requirements for this behavior the additional

element that such conduct be “with intent to benefit

himself or to benefit other persons whom he knows

are not permitted to receive such payment, loan,

money or other thing of value under subsection (c)(4)

through (¢)(9).”

S. Rep. No. 225, 98th Cong., Ist Sess. 298 (1983) (em-

phasis added).

The 1988 Senate report also expressed the concern

that, without the “intent to benefit” language, one could

violate Section 186 “simply because of a failure to satisfy

one of the technical requirements for an exemption

stated in subsections (c)(4) through (c)(9).” S. Rep. No.

83, 98th Cong., Ist Sess. 12-13 (1983). The 1983 bill did

not, however, add any additional element to Section

186(d)(2) for violations of Sections 186(c)(1) through

186(c)(3). To the contrary, the committee noted that the

transactions proscribed by subsections (c)(1)-(3) “are not

likely to be innocently motivated. Rather, the very fact

of the payment generally shows the attributes of self-

dealing and abuse of position that justify the criminal

penalty.” S. Rep. No. 88, supra, at 13. Therefore, the

committee determined “not to include a specific intent

requirement for prosecutions under subsection (d)(2).

The mens rea requirement for prosecutions under

subsection (d)(2) will continue to be ‘willfully.’” bid."

c. The court of appeals’ conclusion that “willfully,” as

used in 29 U.S.C. 186(d)(2), does not require proof of

specific intent to violate the law is consistent with

decisions of the Second, Third, Sixth, and Ninth

Circuits, all of which held, before Section 186(d) was

amended in 1984, that its use of “willfully” required only

proof of general intent. See United States v. Cody, 722

F.2d 1052, 1059 (2d Cir.), cert. denied, 467 U.S. 1226

(1984); United States v. Bloch, 696 F.2d 1213, 1216 (9th

Cir. 1982); United States v. Pecora, 484 F.2d 1289, 1294

(3d Cir. 1973); United States v. Overton, 470 F.2d 761, 767

(2d Cir. 1972), cert. denied, 411 U.S. 909 (1973); United

States v. Lanni, 466 F.2d 1102, 1110 (3d Cir. 1972); United

15 Petitioners Phillips and Rich state (Pet. 20 n.11) that the

Department of Justice assured the Senate in 1983 that “willfully”

connotes a specific intent to disobey the law. The letter relied on

by petitioners, from Assistant Attorney General Robert McConnell

to Senator Orrin Hatch, concerned the definition of “willfully” in a

different provision, 29 U.S.C. 504. See Labor Management

Racketeering Act of 1983: Hearing Before the Subcomm. on Labor

of the Senate Comm. on Labor and Human Resources, 98th Cong.,

lst Sess. 150 (1983) (1983 Hearing). More pertinently, at a hearing

on the 1983 Senate bill, Assistant Attorney General Lowell Jensen

submitted for the record a statement that observed that, under the

proposed amendments to Section 186, illegal employer payments to

union officials (like the ones at issue in this case, but unlike the

ones covered by subsections (c)(4)-(9)) “which are not transmitted

through and used by unions, benefits plans, and cooperation

committees * * * will continue to be prosecuted under Section

186 without proof of evil intent or bad motive as under current

law.” 1983 Hearing, supra, at 104.

- 7

States v. Ricciardi, 357 F.2d 91, 100 (2d Cir.), cert.

denied, 384 U.S. 942 (1966); United States v. Carter, 311

F.2d 934, 943 (6th Cir.), cert. denied, 373 U.S. 915 (1963)."°

The Seventh Circuit does appear to have taken a

different approach, although, as the individual peti-

tioners appear to acknowledge (Pet. 23-24), that court’s

decisions are not fully consistent with one another. In

United States v. Inciso, 292 F.2d 374, 380 (7th Cir.), cert.

“denied, 368 U.S. 920 (1961), the court held that Section

186(d) “contemplates proof of an awareness of the

restrictions of that section or a reckless disregard for

that section.” Subsequently, in United States v.

Keegan, 331 F.2d 257, 262 (7th Cir.), cert. denied, 379

U.S. 828 (1964), the court held that, because the element

of willfulness is satisfied by a showing of recklessness,

Section 186(d) does not require proof of a specific intent

16 The decision below does not conflict with the Tenth Circuit’s

decision in Korholz v. United States, 269 F.2d 897 (1959), cert.

denied, 361 U.S. 929 (1960). In that case, the Tenth Circuit upheld

against a defendant’s challenge a jury instruction that a person

must be “either conscious of the fact that what he is doing

constitutes a violation of the law or unless he wholly disregards the

law and pursues a course without making any reasonable effort to

determine whether the plan he is following would constitute a

violation of the law or not.” 269 F.2d at 903. As the court of

appeals noted (Pet. App. 34a-35a n.27), the Tenth Circuit’s

discussion of Section 186(d) in Korholz is “too cryptic * * * to

draw a conclusion about whether a general intent instruction

would have been upheld.” Moreover, the Tenth Circuit also

rejected the defendants’ contention that the district court should

have required the jury to acquit “unless they found that the

payments were made with a bad purpose or motive and without

justifiable excuse,” 269 F.2d at 903, relying on this Court’s

statement in United States v. Murdock, 290 U.S. 389, 394 (1933),

that “willfully” often denotes “that which is ‘intentional, or

knowing, or voluntary,’ as distinguished from accidental.’”

to disobey the law, but only proof that a reasonable

person “would be aware that [the] conduct would likely

be illegal.” The court of appeals noted in this case (Pet.

App. 34a-35a n.27) that such a jury instruction is “the

practical equivalent of a general intent jury instruc-

tion.”

More recently, in United States v. Papia, 910 F.2d

1357, 1862 (1990), the Seventh Circuit appeared to

reaffirm its holding in Inciso that Section 186(d)

requires “an awareness of or reckless disregard for

§ 186(d)’s restrictions.” In Papia, however, the court

upheld the trial court’s jury instruction that “[a}n act is

done ‘willfully’ if done voluntarily and intentionally with

the intent to do something the law forbids; that is to say,

with a purpose either to disobey or disregard the law,”

against the defendant’s contention that the trial court

should have required the government to show that she

acted with an intent to benefit herself or another. [bid.

(emphasis omitted). Because the court concluded that

the jury was given a specific intent instruction similar

to the one requested by the defendant, it did not need to

decide whether Section 186(d)(2) required such an

instruction. Thus, as the court of appeals noted (Pet.

App. 28a n.23), the Seventh Circuit’s decision in Papia

does not address the question presented in this case.

Papia is the only appellate decision other than the

decision below to consider the meaning of “willfully” in

29 U.S.C. 186(d) since it was amended in 1984. Moreover,

the Papia court’s consideration of the significance of the

post-amendment statutory structure of Section 186(d)

for the definition of “willfully” was limited, because one

count at issue in Papia concerned conduct predating the

1984 amendment, and the other two counts concerned

post-amendment conduct for which the government was

required to show that the defendant acted with an intent

to benefit herself or another. See 910 F.2d at 1363.

Unlike the court of appeals in this case, the court in

Papia did not consider whether an interpretation of

“willfully” to require specific intent would render other

parts of the statute superfluous, nor did it consider the

legislative history of the 1984 amendments to Section

186(d). If the issue returns to the Seventh Circuit, that

court will now have the benefit of the extensive

statutory analysis of the Eleventh Circuit, which is the

only court of appeals to have examined the post-

amendment structure of Section 186(d) in depth.

Moreover, since the definition of “willfully” has been

litigated in the courts of appeals only twice since 1984,

there does not appear to be any pressing need for the

Court to decide the issue now. Accordingly, review by

this Court is not warranted at this time.

CONCLUSION

The petitions for a writ of certiorari should be denied.

Respectfully submitted.

DREW S. DAYS, III

Solicitor General

JOANN HARRIS

Assistant Attorney General

JOSEPH C. WYDERKO.

Attorney

FEBRUARY 1995

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