# Opposition Brief — USX Corp. v. United States

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1995
- **Citation:** 514 U.S. 1003

## Text

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
ee

(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

lV

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.:

© BR, Fe Ti DOD Whseckcnedesciccssscisicctscsestss 8

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

© FRA, Be i BION <ctctcesncsceccnsesssssesesccseneses 2,8

© ee Be Tiree MIG vvcsectesncscscenvencovccssecancenen 20

© FROG Be UA BOING) ccccc ccc cccscccccccescasesccssscees 20

Oe te ay TID kshttideacinccendicssecotesconrsseressccenns 13, 19

OS es le OED recieves cccsssscncesescenccesnsices 2

© Ss Fee, Was IED Cedetcnrensiccsvecnetisscesenepstincosiecones 19

§ 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

© SOUT, BO TBC. BBE) CEI). caceccectccccsciscsesesesintenssis 18

§ 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)

2

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

3

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

4

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.

5

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

6

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

7

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.

—

8

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—

9

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.

* * * * *

(c) Exceptions

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.”

bs

10

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

11

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

12

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.

NL

13

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.

ow

14

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.

15

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

16

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).

17

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.

18

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.

19

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.

21

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).

22

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

23

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
-

24

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.’”

25

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

26

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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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386012_0775%3A4. Public record. Not legal advice.