Petition for Writ of Certiorari — Midwest Motor Express, Inc. v. Central States, Southeast & Southwest Areas Pension Fund

Supreme Court brief1999

Ask Donna

What actually matters in this document.

Text

Brwems

F I

a 99 420 sEP7 1999

Court, U.S.

LED

UFFICE UF THE CLERK

IN THE

Siyreime Court of the United States

MIDWEST Moror Express, INC.,

MME, Inc., MIDNITE ExPRESsS, INC.,

and EXPRESS CARTAGE, INC.,

Petitioners,

CENTRAL STATES SGQUTHEAST AND

SOUTHWEST AREAS PENSION FUND,

Respondent.

Petition for Writ of Certiorari to the

United States Court of Appeals

for the Seventh Circuit

PETITION FOR WRIT OF CERTIORARI

HERVEY H. AITKEN, JR.*

Roy A. SHEETZ

TAYLOR THIEMANN & AITKEN, L.C.

908 King Street, Suite 300

Alexandria, VA 22314

(703) 836-9400

Attorneys for

Midwest Motor Express, Inc.

* Counsel of Record

WILSON - EPES PRINTING Co.. INC 789-0096 - WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

The Seventh Circuit’s judgment in this case presents

fundamental statutory and constitutional issues concerning

the collection of retroactive liabilities under the Employee

Retirement Income Security Act of 1974 (“ERISA”), 29

U.S.C. §§ 1001-1368, as amended by the Multiemployer

Pension Plan Amendments Act of 1980 (“MPPAA”),

29 U.S.C. §§ 1381-1461.

Whether the Seventh Circuit violated ERISA

anc this Court’s decision in Bay Area Laundry &

Dry Cleaning Pension Trust Fund y. Ferbar Cor-

poration of California, Inc. when it held that a

second amended complaint could cure the lack

of federal subject matter jurisdiction, when the

plan flied suit before the withdrawal liability debt

became due and prior to any injury in fact to

the plan?

Whether the imposition of retroactive withdrawal

liability on an employer who joined the Plan in

1958 before the enactment of ERISA violates

substantive due process when there is no em-

ployer conduct in the withdrawal from the Plan,

when there was no control or conduct by the

employer over any factor that produces under-

funding, and when there is no detriment to any

retirees or beneficiaries of the plan?

Whether the imposition of retroactive withdrawal

liability, as applied to the petitioner, is unconsti-

tutional under the Ex Post Facto Clause of Arti-

cle I, Section 9, clause 3 of the U.S. Constitution?

(i)

PARTIES TO THE PROCEEDING

Petitioners, who are part of the control group that has

been found liable for withdrawal liability under MPPAA

are:

Midwest Motor Express, Inc.

MME, Inc.

Midnite Express, Inc.

Express Cartage, Inc.

Pursuant to Supreme Court Rule 29.6, petitioners de-

clare that MME, Inc., a privately held company, is the

parent company of the other above-named petitioners.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ..............2.....0.....c0000000:- cia i

PARTIES TO THE PROCEEDING .....0WW...... ee ii

yo Ve He Me Nip yt fy | reer Vv

Ie Ry BI eck ktnscenssctneinetsuctonsenscinteststibineaunaibicsianes 1

FUP sisthcasinanicndistincttennnbenieia iseaaiabanbimanedl hisatann a 1

CONSTITUTIONAL PROVISIONS AND STATUTES

gg SEE RES Cer ce ae NN nce 1

STATEMENT OF THE CASE ...............................-. —— 2

STATEMENT OF THE FACTS .............-00.0.-2.00.0...0.. 3

REASONS FOR GRANTING THE PETITION........ 7

ARGUMENT , Pats | , 9

I. THE DISTRICT COURT SHOULD HAVE DIS-

MISSED CENTRAL STATES’ ACTION FOR

LACK OF SUBJECT MATTER JURISDIC-

TION AND THE SEVENTH CIRCUIT IG-

NORED THIS COURT’S MANDATE IN BAY

AREA IN AFFIRMING THE DISTRICT

SUNSTEIN cotesiuiasshinabsessenntintineenisioas Pie AR te Si TS 9

Il. MPPAA VIOLATES THE SUBSTANTIVE

DUE PROCESS CLAUSE OF THE FIFTH

AMENDMENT AS APPLIED TO MIDWEST. 16

A. Midwest Joined Central States Before It

Could Possibly Have Anticipated Withdrawal

I ee akabueecnddnaiasedeeeks 19

B. Because Midwest’s Withdrawal From Cen-

tral States Was Involuntary, Midwest Should

Not Be Held Liable for Withdrawal Liabil-

TIE IE a CL NNT Oe ee 20

TABLE OF CONTENTS—Continued

C. Midwest Had No Control Over The Level Of

Benefits Or Any Other Factor That May

Produce Unfunded Vested Benefits for Cen-

RINGER errs hk: SLL T ee ae ee a

D. Midwest’s Withdrawal Has Not Caused Any

Harm To Retirees Or Beneficiaries In Cen-

I 8 a

E. Central States Is A “Hybrid Taft-Hartley”

Plan, Outside of Midwest’s Control ..............

III. MPPAA’S RETROACTIVE LIABILITY IS AN

UNCONSTITUTIONAL EX POST FACTO

IRENE cicnsinsanecestenasinsnasatachssesbistebedaantnieidcstiaadeabda

SINT. Sodisetuinniininarsrtcpnisecesdiaiubicbiniseluadalciaabiunsiaiatatietia

APPENDIX

Page

TABLE OF AUTHORITIES

CASES Page

Bay Area Laundry & Dry Cleaning Pension Trust

Fund v. Ferbar Corporation of California, Inc.,

es PR er Re ea passim

Bowen v. Georgetown Univ. Hospital, 488 U.S.

204 (1988) ....... Fp Rp ROT NE bo ROA ND EW TP MoO 16

Calder v. Bull, 3 Dall. 386, 1 L. Ed. 648 (1798).... 8, 28,

29, 30

Concrete Pipe v. Construction Laborers Pension

Trust Fund, 508 U.S. 602 (1998) 0.022.220.2222 passim

Connolly v. Pension Benefit Guaranty Corp., 475

Ue. SE OO 2k ea eo passim

Dash v. Van Kleeck, 7 Johns. 477 (N.Y. 1811)... 27

Delaware v. Van Arsdall, 475 U.S. 673 (1986).... 9

Eastern Enterprises v. Apfel, 524 U.S. 498

EINE snccsiniciinineiaeieceaidateet teen tee eet passim

Employee Sav. Plan of Mobil Oil Corp. v. Vickery,

99 F.R.D. 188 (S.D.N.Y. 1988) ............................. 14

General Motors Corp. v. Romein, 503 U.S. 181

5 | SANDRA OI ARCL ON a CONTAC MM ESE ots yh its odihe 28

Greenbriar, Ltd. v. City of Alabaster, 881 F.2d

See Gee Ge. SE cee a 11

Gustavson Drilling (1964) Ltd. v. Minister of Na-

tional Revenue, 66 D.L.R. 3d 449 (Can. 1975)... 27

Insurance Corporation of Ireland, Ltd. v. Com-

pagnie des Bauxites de Guinee, 456 U.S. 694

CRUD ecincicssldatinehiiapsiulatcasiaadicuietlin ee tee ira Saran ohh 15

Jos. Schlitz Brewing Co. v. Milwaukee Brewery

Workers’ Pension Plan, 3 F.3d 994 (7th Cir.

|_| er LE ene RAT ES A ay troe Narn Fe BC RT Lion uN 21

Kaiser Aluminum & Chemical Corp. v. Bonjorno,

Me TET, Te SOD. sisissiivncihsnetlatecdcbcinincccktesst cll 16

Midwest Motor Express, Inc. v. Central States,

Southeast and Southwest Areas Pension Fund,

70 PB 1014 (BG Cir. 100G) nnn cecccccccenccncennnse 14, 16

NLRB v. Amazx Coal Co., 453 U.S. 322 (1981)........ 22

Pension Benefit Guaranty Corp. v. R.A. Gray &

Cu, ST Uae Ta Ce) 17

Railroad Retirement Board v. Alton R. Co., 295

es SD eanstcendictlinaninelieaaeen ioe. 17

TABLE OF AUTHORITIES—Continued

Page

St. Clair v. City of Chico, 880 F.2d 199 (9th Cir.

ROD ncinnciscinnscstntnsitidebasinitiiaduamiabipi eee 11

Steel Co. v. Citizens For A Better Environment,

2138 GR Te Glee? cecccencntiienenaene 11, 12, 15

Usery v. Turner Elkhorn Mining Co., 429 U.S. 1

CRIED qsccctssssscutrininbscinneeinishtindimcenieesans nn 18

USM Corp. v. GKN Fasteners, Ltd., 578 F.2d 21

- 2 eee ee 14

Villas of Lake Jackson, Ltd. v. County of Leon,

796 F. Supp. 1477 (N.D. Fila. 1989) .................... 11

CONSTITUTIONAL PROVISIONS, STATUTES

AND REGULATIONS

United States Constitution, Article I, Section 9,

GEIBD ©]. cccccscctsccsiccsenimiecensinteiaemamianan ae

United States Constitution, Article ITI, § 2.0.0.0... 12

United States Constitution, Amendment V ........... . 1

28 U.S.C. § 1254(1) . 1

The Employee Retirement Income ‘Security Act of

1974 (29 U.S.C. $§ 1001-1368) .......20... i... passim

The Multiemployer Pension Plan Amendments Act

of 1980 (29 U.S.C. §§ 1381-1461) ...... sadmdnaeeniad passim

, Rit tee) See om tae

SD U.SG. © TRGAD | cninsrcstscisddiientaiondaanan

Bik ToR B Cle, its | een .

99 UG. 8 TGC) nmnncsmenunianadnn ae

kit Cee bt | ee Me 5

, Bit CR b) | | ee 3

RULES AND REGULATIONS

. © Me 2B.) fo) ee ee ee 11

oe Re ES SL ea 11

ee DD | a ke ee 7, 13,14

MISCELLANEOUS

Aarnio, Statutory Interpretation in Finland 151,

in Interpreting Statutes: A Comparative Study

(D. MacCormick & R. Summers eds. 1991)... 27

vii

TABLE OF AUTHORITIES—Continued

2 J. Story, Commentaries on the Constitution

§ 1398 p. 272 (Sth ed. 1981)... a. ENO

5A Federal Practice and Procedure, § 1350 at 204-

205 (Wright & A. Miller)

H. Broom, Legal Maxims 24 (8th ed. Saat

The French Civil Code, Preliminary Title, art. 2,

Page

9, 27

PETITION FOR WRIT OF CERTIORARI

Midwest Motor Express, Inc., MME, Inc., Midnite

Express, Inc., and Express Cartage, Inc. (collectively re-

ferred to hereafter as “Midwest”) petition for a writ of

certiorari to review the decision of the United States Court

of Appeals for the Seventh Circuit in this case.

OPINIONS BELOW

The opinion of the court of appeals (App. la-18a) is

reported at 181 F.3d 799. Neither the opinion of the

district court (App. 19a-50a) nor of the arbitrator (App.

5 1a-72a) was published.

JURISDICTION

The judgment of the court of appeals was entered on

June 9, 1999. App. 1a-18a. The jurisdiction of this

Court is invoked under 28 U.S.C. § 1254(1). Petitioner

states that 28 U.S.C. § 2403(a) may apply to this case.

The notification required by Rule 29.4(b) has been made.

Petitioners state further that the United States Court of

Appeals for the Seventh Circuit certified to the Attorney

General of the United States that the constitutionality of

an Act of Congress was drawn into question.

CONSTITUTIONAL PROVISIONS AND

STATUTES INVOLVED

1. Article I, Section 9, clause 3 of the United States

Constitution provides in pertinent part:

No bill of attainder or ex post facto law shall be

passed.

2. Amendment V of the United States Constitution

provides in pertinent part:

No person shall be held to answer for a capital, or

otherwise infamous crime, unless on a presentment

or indictment of a Grand Jury, except in cases aris-

ing in the land or naval forces, or in the militia,

when in actual service in time of war or public

danger; nor shall any person be subject for the same

offence to be twice put in jeopardy of life or limb;

nor shall be compelled in any criminal case to be a

witness against himself, nor be deprived of life, liberty,

or property, without due process of law; nor shall

private property be taken for public use, without just

compensation.

3. 29 U.S.C. § 1382(1)-(3). Determination and col-

lection of liability; notification of employer

When an employer withdraws from a multiemployer

plan, the plan sponsor, in accordance with this part

[29 USCS §$§ 1381 et seq.], shall—

(1) determine the amount of the employer’s

withdrawal liability,

(2) notify the employer of the amount of the

withdrawal liability, and

(3) collect the amount of the withdrawal lia-

bility from the employer.

STATEMENT OF THE CASE

This case presents both a critical issue of subject matter

jurisdiction under the Employee Retirement Income Secu-

rity Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001-1461,

as amended by the Multiemployer Pension Plan Amend-

ments Act of 1980 (“MPPAA”), 29 U.S.C. §§ 1381-

1461 and the question of whether retroactive liabilities

in a civil law should continue to be countenanced under

either the substantive due process clause of the Fifth

Amendment or the Ex Post Facto Clause of Article 1,

section 9, clause 3.

Specifically, this case concerns the impact of a multi-

employer pension plan filing suit against the employer

seeking the collection of interim payments of withdrawal

liability before the employer had received the plan’s Notice

and Demand for Withdrawal Liability, before the em-

ployer had defaulted on any payment, before the plan had

a cause of action as defined by this Court’s recent deci-

sion in Bay Area Laundry & Dry Cleaning Pension Trust

Fund v. Ferbar Corporation of California, Inc., 118 S.Ct.

542 (1997), before the plan had a cause of action as

provided in ERISA Section 4202, 29 U.S.C. § 1382 and

ERISA Section 4301(a), 29 U.S.C. § 1451(a), and be-

fore there was any injury in fact to the plan.

As a constitutional matter, this case presents this Court

with the question of whether a retroactive assessment of

withdrawal liability under MPPAA against a contributing

employer is constitutional when that employer joined the

pension fund before the enactment of ERISA or MPPAA,

when there is no employer conduct in the withdrawal

from the plan, when there is no control over any factor

that produces plan underfunding, when there is no detri-

ment to any retiree or beneficiary of the plan, and when

it would have economic suicide for the employer to volun-

tarily withdraw from the plan after the passage of the

MPPAA. This Court has not yet ruled on the constitu-

tionality of MPPAA in an “as applied” post-MPPAA con-

stitutional challenge where the Employer joined the plan

before the enactment of ERISA.

In addition, this case provides the Court with an oppor-

tunity to address the question raised by Justice Thomas

last term in Eastern Enterprises v. Apfel, 524 U.S. 498

(1998). In his concurrence, Justice Thomas stated that

the Court may, in the future, wish to revisit the Court’s

acceptance of the principle that the Ex Post Facto Clause

in Article 1, section 9 applies solely to the criminal law.

STATEMENT OF THE FACTS

Midwest is a North Dakota corporation with its head-

quarters in Bismarck, North Dakota. App. 2a. Beginning

no later than 1958, Midwest contributed to Central States

on behalf of its union-represented employees pursuant to

the terms of successive collective bargaining agreements.

Id. Between 1958 and 1991, Midwest made all of its

pension contributions to Central States. App. 22a.

Central States is and has been a multiemployer pension

plan, governed by a Board of Trustees (“trustees”) com-

prised of trustees appointed by the International Brother-

hood of Teamsters (“Teamsters”), and an equal number

of trustees appointed by management representatives.

App. 20a-21la. The trustees determine the level of bene-

fits paid to participants and beneficiaries. 7d. Plan actu-

aries advise the trustees on appropriate benefit levels in

light of the plan’s assets and income. /d. The plan actu-

aries also determine the level of contributions necessary

to support the benefits disbursed. Jd. When these assess-

ments are too conservative, the plan ends up with a sur-

plus that can be applied to future benefits. App. lla.

When the assessments are too optimistic, unfunded bene-

fits result. App. 11a.

In 1974, Congress enacted ERISA which provided

some protection for employees’ retirement income and

other benefits. In 1980, to address issues that arose under

ERISA regarding multiemployer pension plans such as

Central States, Congress enacted MPPAA. After with-

drawal liability was imposed on employers by MPPAA,

Midwest could have voluntarily withdrawn from Central

States, although to do so may have been economic suicide,

given Midwest’s economic circumstances. App. 42a.

Between 1958 and 1991, Midwest’s employees worked

under a series of collective bargaining agreements, each

of which provided for contributions by Midwest to Cen-

tral States. App. 2a. In March 1991, Midwest’s collec-

tive bargaining agreement expired, and by August 12,

1991, the union representing Midwest’s employees took

the employees out on strike. App. 3a.

In January, 1994, one of Midwest’s non-striking em-

ployees initiated and filed a petition with the National

Res EERE E IEE RECS pert

Labor Relations Board seeking the decertification of the

Teamsters as the bargaining agent representing Midwest's

employees. App. 55a. As the Arbitrator found, Midwest

took no action whatsoever to further the decertification

effort, as indeed it could not under federal labor law.

App. at 66a. The employees voted to decertify the Team-

sters. App. 22a. The National Labor Relations Board

certified the results of the election on April 15, 1994.

App. 22a.

On April 26, 1994, Central States filed this suit against

Midwest for collection of withdrawal liability. App. Sa.

On April 27, 1994, one day after Central States had filed

its suit, Midwest received Central States’ Notice and De-

mand for Payment of Withdrawal Liability, dated April

26, 1994, advising Midwest of Central States’ determina-

tion that Midwest had withdrawn from Central States

and, consequently, owed withdrawal liability. App. Sa.

The Notice and Demand further informed Midwest that

Midwest owed $2,546,439.30 in withdrawal liability, pay-

able in a lump sum. App. Sa. The retroactive pre-1980

portion of withdrawal liability was $1,814,856.36. App.

5a. The prospective post-1979 portion of withdrawal

liability was $731,582.94. App. Sa.

Midwest demanded arbitration to contest the validity of

the assessment on factual and statutory grounds pursuant

to 29 U.S.C. §§ 1399(b) and 1401(a). App. Sa.

The arbitrator held hearings on this matter on January

14 and 15, 1997, in Chicago, Illinois. App. 5la. On

May 20, 1997, the arbitrator issued his decision and award

in this case and corrected certain clerical errors therein

by means of a letter dated June 23, 1997. App. Sla

et seq. The decision and award establishes the factual

propositions necessary for Midwest to make its arguments

regarding the statutory and constitutional infirmities of

Central States’ efforts to collect withdrawal liability from

Midwest under the MPPAA.

The Arbitrator found the following: (1) Midwest is a

pre-ERISA employer that began to contribute to Central

States in 1958, well before the enactment of ERISA in

1974 which participation continued after the enactment

of ERISA (App. 65a-66a); (2) Midwest’s withdrawal

from Central States was involuntary (App. 66a); (3)

Central States is a defined benefit pension plan and is

therefore covered by Title IV of ERISA, but Central

States is a hybrid plan as that phrase ts used by Justice

O'Connor in Connolly vy. Pension Benefit Guaranty Corp.,

475 U.S. 211, 232-236 (1986) (O'Connor, J., concur-

ring) (App. 68a-69a); (4) Midwest had little control

over the level of contributions, the level of benefits, and

other factors that produced unfunded vested benefits for

Central States from the period between 1973 to the time

of Midwest’s withdrawal in 1994 (App. 70a); and (5) on

the record before the arbitrator, benefit increases by Cen-

tral States did not unduly add to Midwest’s withdrawal

liability. App. 71a.

Midwest moved several times for dismissal of the case

for lack of subject matter jurisdiction. The district court

overruled those motions and heard the case. Central

States brought this matter under sections 502(e), 502f,

and 4301(c) of ERISA, 29 U.S.C. §§ 1132(e), 1132(f),

145i(c). After the Arbitrator issued his decision Mid-

west and Central States each moved for summary judg-

ment in the Northern District of Illinois, the Honorable

Wayne R. Andersen presiding. The district court issued

its Memorandum Opinion and Order on March 30, 1998,

and entered judgment thereon on May 19, 1998. App. 50a.

Central States filed its Notice of Appeal on June 17,

1998, and Midwest filed its Notice of Appeal on June 18,

1998. By its own order, the Seventh Circuit consolidated

the two cases on July 9, 1998.

In its decision issued June 9, 1999, the Seventh Circuit

affirmed the District Court decision, finding that there

ep ee ee

was subject matter jurisdiction (App. 7a) and that, as

applied to Midwest, MPPAA did not violate the Fifth

Amendment guarantee of substantive due process (App.

12a), nor did MPPAA constitute an unconstitutional tak-

ing of private property without just compensation. App.

15a, 16a.

REASONS FOR GRANTING THE PETITION

This Court should grant this petition for several reasons.

First, the Seventh Circuit’s decision defies this Court’s

recent decision in Bay Area Laundry & Dry Cleaning

Pension Trust Fund v. Ferbar Corporation of California,

Inc., 552 U.S. 192 (1997) which held that a plan’s

interest in receiving withdrawal liability payments does

not ripen into a cause of action until the employer de-

faults on an installment due and payable under the plan’s

schedule. Federal courts are courts of strictly limited

jurisdiction. The district court did not have subject

matter jurisdiction over this action because Central States

filed its complaint before a federal claim accrued and

before there was any injury in fact to Central States.

In this case, Central States instituted this action against

Midwest before Midwest had received a notice and de-

mand for withdrawal liability and, consequently, before

Midwest had defaulted on an installment under the plan’s

schedule. The Seventh Circuit circumvented this Court's

decision in Bay Area by holding that the plan’s second

amended complaint cured this jurisdictional defect. By

misconstruing Rule 15(c) of the Federal Rules of Civil

Procedure, the lower court has created new federal sub-

ject matter jurisdiction and undermined Bay Area.

Another reason this Court should grant this petition is

that the district court erred in ignoring the clear mandate

of ERISA that collection efforts must follow, not precede

or coincide with, notification of an assessment of with-

drawal liability. ERISA Section 4202, 29 U.S.C. § 1382.

This is a case of first impression on the statutory mandate

of ERISA Section 4202.

Furthermore, this Court should grant this petition to

establish the parameters of permissive retroactivity in

civil laws under two clauses of the Constitution. First,

in her concurrences in Connolly v. PBGC, 475 U.S. 211

(1986) and Concrete Pipe v. Construction Laborers Pen-

sion Trust Fund, 508 U.S. 602 (1993), Justice O'Connor

stated that the constitutionality of MPPAA would be open

to serious question either in the absence of any rational

connection between the employer’s conduct and some

detriment to the beneficiaries of the plan or if withdrawal

liability were assessed against an employer who began

participation in a pension plan before ERISA was enacted

without any expectation that it must make good on any

plan underfunding. Midwest satisfies each of the criteria

established by Justice O’Connor and, indeed, presents

a stronger factual case than the one expressed by her

concerns. The application of Justice O’Connor’s factors,

the involuntary nature of Midwest’s withdrawal, the lack

of any employer conduct over factors that produce plan

underfunding and the lack of any harm to any plan bene-

ficiaries make the imposition of retroactive withdrawal

liability on Midwest irrational and, therefore, unconsti-

tutional under the Due Process Clause of the Fifth

Amendment.

This petition also presents the issue raised, but not

addressed, in the Eastern Enterprises case decided last

term, wherein Justice Thomas wrote a concurring opinion,

saying that the time may have arrived to revisit the prin-

ciple first enunciated by this Court in Calder v. Bull, 3

Dall. 386, 1 L. Ed. 648 (1798) that the Ex Post Facto

Clause applies only in the criminal law context. Justice

Thomas announced his willingness to reconsider Calder

in the light of the general principle of American juris-

prudence that “retrospective laws are, indeed, generally

iii ai a |

Pee a a a ee

unjust.” 2 J. Story, Commentaries on the Constitution

§ 1398 p. 272 (Sth ed. 1981). Justice Thomas stated

that he would be willing to consider that a case that

“passed muster” under the Takings Clause could be held

unconstitutional under the Ex Post Facto Clause. This

case, which the Seventh Circuit has found constitutional un-

der a Takings Clause analysis, presents such an opportunity.

ARGUMENT

I. THE DISTRICT COURT SHOULD HAVE DIS-

MISSED CENTRAL STATES’ ACTION FOR LACK

OF SUBJECT MATTER JURISDICTION AND THE

SEVENTH CIRCUIT IGNORED THIS COURT'S

MANDATE IN BAY AREA IN AFFIRMING THE

DISTRICT COURT

Central States brought suit against Midwest before any

claim for relief, as defined by this Court’s Bay Area

decision, had accrued to its benefit. Consequently, the

district court lacked subject matter jurisdiction over Cen-

: tral States’ claims against Midwest. The Seventh Circuit

ignored the Bay Area decision in affirming the district

court, basing its decision on factual and legal errors dis-

cussed infra at pp. 13-16.

Central States’ premature commencement of its suit

against Midwest deprived the district court of subject

matter jurisdiction. Federal courts are courts of strictly

limited jurisdiction. This Court has stated “{this Court]

wisely adopted a presumption that every federal court is

‘without jurisdiction’ unless ‘the contrary appears affirm-

atively from the record.’ That presumption is just as

inflexible in this Court as in any other federal court.”

Delaware v. Van Arsdall, 475 U.S. 673, 692 (1986)

(citations omitted). Central States cannot overcome that

presumption in this case.

The district court lacked subject matter jurisdiction

over Central States’ action to collect withdrawal liability

from Midwest because Central States filed its complaint

before a federal claim accrued in its favor. On April 26,

1994, Central States filed this suit against Midwest for

collection of withdrawal liability. App. Sa. On April 27,

1994, one day after Central States had filed its collection

suit, Midwest received Central States’ Notice and De-

mand for Payment of Withdrawal Liability, dated April

26, 1994, advising Midwest of Central States’ determina-

tion that Midwest had withdrawn from Central States

and, consequently, owed withdrawal liability. App. Sa.

According to the Notice and Demand for Payment of

Withdrawal Liability, the first payment to Central States

from Midwest was not due until May 1, 1994.

This Court held in Bay Area that a cause of action for

collection of withdrawal liability does not accrue until

such time as a withdrawing employer has been notified

of its obligation to pay withdrawal liability and failed to

make a payment demanded in the assessment. Bay Area,

522 U.S. 192 (1997). Justice Ginsberg, writing for a

unanimous Court stated:

In sum, we hold that the MPPAA does not give a

pension plan any claim for relief against an employer

on the date of withdrawal. The plan’s interest in

receiving withdrawal liability does not ripen into a

cause of action triggering the limitations period until

two events transpire. First, the trustees must calcu-

late the debt, set a schedule of installments, and

demand payment pursuant to § 1399(b)(1). Second,

the employer must default on an installment due and

payable under the trustees’ schedule. Only then has

the employer violated a duty owed the plan under

the Act.

Id. at 202. Only when an employer has violated a duty

to a plan under MPPAA may the plan sue the employer:

“{uJntil the employer fails to honor its obligation, the plan

cannot sue.” Id.

EAA eR la ME A

As of April 26, 1994, the date Central States filed its

complaint, Midwest had not yet received the assessment

of withdrawal liability from Central States, and had, thus,

not been notified of the debt or the schedule of payments,

and a fortiori, had not defaulted “on an installment due

and payable under the trustees’ schedule.” Jd. Under

the holding in Bay Area, then, Central States “cannot

maintain an action until the employer misses a scheduled

withdrawal liability payment. The statute of limitations

does not begin to run until that time.” Jd. at 200-01.

Central States lacked a claim for collection of with-

drawal liability against Midwest when it filed this ac-

tion, and several courts have found that the lack of a

ripe claim is a fatal defect that deprives federal courts

of subject matter jurisdiction. Greenbriar, Ltd. v. City of

Alabaster, 881 F.2d 1570, 1573 n.7 (11th Cir. 1989)

(questions concerning ripeness go to subject matter juris-

diction); St. Clair v. City of Chico, 880 F.2d 199, 201-02

(9th Cir. 1989) (“like other challenges to a court’s sub-

ject matter jurisdiction, motions raising the ripeness issue

are treated as brought under Rule 12(b)(1). .. .”);

Villas of Lake Jackson, Ltd. v. County of Leon, 796

F. Supp. 1477, 1480 (N.D. Fla. 1989) (premature suit

destroys federal question-jurisdiction). Greenbriar, Ltd.,

St. Clair, and Villas of Lake Jackson, lead to the inescapa-

ble conclusion that because Central States lacked a claim,

the district court lacked subject matter jurisdiction to

decide the case.1 The Seventh Circuit’s holding, therefore,

1The Supreme Court’s recent decision in Steel Co. v. Citizens

For A Better Environment, 118 S. Ct. 1003 (1998), is not to the

contrary. In that case, the petitioning company filed a motion to

dismiss under Fed. R. Civ. P. 12(b)(1) and (6) seeking dismissal

of a private enforcement action for declaratory and injunctive

relief filed under the citizen-suit provision of the Emergency Plan-

ing and Community Right-to-Know Act of 1986 (EPCRA), 42

U.S.C. § 11046(a)(1), after the company had corrected the alleged

deficiency. The Supreme Court vacated and remanded the Seventh

creates a conflict with the Ninth and Eleventh Circuits, as

well as disregarding the law prescribed in this Court's

recent decision in Bay Area.

Central States’ premature initiation of this action also

deprived the district court of subject matter jurisdiction,

Circuit’s decision allowing the case to proceed, reinstating the dis-

trict court’s dismissal of the complaint pursuant to petitioner's

motion to dismiss. As a threshold matter, the Supreme Court held

that the merits issue in this case, whether EPCRA permitted

citizen-suits for purely past violations, was not “jurisdictional” for

purposes of defeating the district court’s subject-matter jurisdic-

tion. While the Supreme Court found that a district court’s subject-

matter jurisdiction is not defeated by the absence of a valid (as

opposed to arguable) cause of action, 118 S. Ct. At 1007, the Court

reaffirmed its long-standing jurisdictional precedents holding that

an action may not proceed where the plaintiff does not have

standing to sue at the time the complaint is filed, because of the

absence of a case or controversy under Article III, § 2 of the Con-

stitution. 118 S. Ct. at 1016. The Court restated the three require-

ments for the “irreducible constitutional minimum of standing”

for subject-matter jurisdiction, including that, “[flirst and fore-

most, there must be alleged (and ultimately proven) an ‘injury in

fact’—a harm suffered by the plaintiff that is ‘concrete’ and ‘actual

or imminent,’ not ‘conjectural’ or ‘hypothetical.’ ”—(citation

omitted). 118 S. Ct. at 1016.

In the present case, Midwest has contended consistently through-

out the litigation that standing was lacking due to the prematurity

of the complaint. Of course, this jurisdictional argument could

even be raised by a reviewing court sua sponte. 118 S. Ct. at 1011,

1012-13. Central States suffered no “injury in fact”—the first

requirement of the standing test, 118 S. Ct. at 1016—at the time

it filed the complaint in this action, since the notice and demand

for withdrawal liability payment, that might have eventually re-

sulted in a default by Midwest, had been sent out simultaneously

with the filing of the present complaint, and, therefore, had not

even been received by Midwest, let alone defaulted on, at the time

the complaint was filed. For the same reason, the present case is

distinguishable from Steel Co. because it involved the anticipatory

filing of a cause of action, rather than, as in Steel Co., the filing of

a cause of action seeking to remedy a past, no-longer-existing com-

plaint. This distinction clearly denotes the “injury in fact” issue

in the present case, supporting the absence of subject-matter juris-

diction due to a lack of standing, from the threshold analysis in

Steel Co.

because it violated MPPAA’s mandatory withdrawal liabil-

ity provisions, which required that Central States sequen-

tially determined the amount of the withdrawal liability;

notify the employer of the amount of withdrawal liability;

and then, and only then, collect the withdrawal liability

from the employer. ERISA Section 4202, 29 U.S.C.

§ 1382. This court’s decision is Bay Area confirmed the

necessity for this sequential procedure: first, the trustees

must calculate the debt, set a schedule of installments and

demand payment pursuant to section 1399(b)(1).

Second, the employer must default on an installment due

and payable under the trustees’ schedule. Only then has

the employer violated a duty owed the plan under the Acct.

Bay Area, at 202.

The district court and the Seventh Circuit went to great

lengths to ignore the impact of Bay Area on Central

States’ case, despite vigorous arguments by Midwest. The

Seventh Circuit never referred to Bay Area in its deci-

sion (App. la-18a), and the district court provided only

a cursory citation without discussion. App. 27a. The

principal rationale relied upon by the Seventh Circuit

for finding subject matter jurisdiction was that the second

amended complaint cured any jurisdictional defect. This

holding has significant ramifications for ERISA and other

federal laws. It contravenes this Court’s holding in Bay

Area and is contrary to the Federal Rules of Civil Pro-

cedure. The Seventh Circuit admitted that “even if there

were jurisdictional problems when Central States filed

its complaint, Central States remedied them when it filed

a second amended complaint. . . .” App. 7a. This ra-

tionale fails because it ignores the clear directive of Rule

15(c)(2) of the Federal Rules of Civil Procedure which

provides that an amended complaint “relates back” to the

date on which the original complaint was filed, when the

claim arises out of the same transaction attempted to be

set forth in the original pleading. Fed. R. Civ. P. 15(c).

The general policy of Rule 15(c) is to allow relation back

where there is no prejudice to non-moving parties. Em-

ployees Sav. Plan of Mobil Corp. v. Vickery, 99

F.R.D. 138 (S.D.N.Y. 1983). It is intended to prevent

the statute of limitations from barring action on other

causes of action or against other parties, provided the

court had proper subject matter jurisdiction under the

original complaint. Rule 15(c) does not and cannot

create or extend federal court jurisdiction. USM Corp. v.

GKN Fasteners, Ltd., 578 F.2d 21 (1st Cir. 1978).

Since Central States’ withdrawal liability claim against

Midwest arose out of the same withdrawal, the amended

complaint “relates back” to April 26, 1994, a date on

which no claim would have arisen to benefit Central

States. Bay Area at 202. Contrary to the Seventh Cir-

cuit’s holding, the second amended complaint cannot cure

this jurisdictional defect.

The Seventh Circuit gave three other reasons for find-

ing federal subject matter jurisdiction. First, the Seventh

Circuit noted that the Eighth Circuit had rejected Mid-

west’s argument (App. at 7a). In fact, the Eighth Cir-

cuit merely transferred the case to the Northern District

of Illinois based on the first-filed rule and abstained from

ruling on the merits of Midwest’s contention that Central

States’ claim was premature and without jurisdiction: “if

the claims are legally infirm, we trust the Illinois court to

dismiss them.” Midwest Motor Express, Inc. v. Central

States, 70 F.3d 1014, 1017 (8th Cir. 1995).

The Seventh Circuit then stated, without benefit of

legal or factual support, that Midwest conceded in its

declaratory action in the District of North Dakota the

premise that would make Central States’ action ripe in

the Northern District of Illinois, i.e., that Midwest be-

lieved that it had no retroactive liability, gave the North-

ern District of Illinois subject matter jurisdiction of this

suit. Contrary to the Seventh Circuit’s excessively narrow

a eee

conception of defects in subject matter jurisdiction, de-

fects of subject matter jurisdiction cannot be cured by

consent of the parties or waived or ignored. See 5A C.

Wright & A. Miller, Federal Practice and Procedure,

§ 1350 at 204-205 (1990). As this Court has stated:

Subject-matter jurisdiction, then, is an Art. III as

well as a statutory requirement; it functions as a

restriction on federal power, and contributes to the

characterization of the federal sovereign. Certain

legal consequences directly follow from this. For

example, no action of the parties can confer subject-

matter jurisdiction upon a federal court. Thus, the

consent of the parties is irrelevant. California v.

LaRue, 409 U.S. 109 (1972), principles of estoppel

do not apply, American Fire & Casualty Co. vy. Finn,

341 U.S. 6, 17-18 (1951), and a party does not

waive the requirement by failing to challenge juris-

diction early in the proceedings. Similarly, a court,

including an appellate court, will raise lack of sub-

ject-matter jurisdiction on its own motion. “[T]he

rule, springing from the nature and limits of the judi-

cial power of the United States is inflexible and with-

out exception, which requires this court, of its own

motion, to deny its jurisdiction, and, in the exercise

of its appellate power, that of all other courts of the

United States, in all cases where such jurisdiction

does not affirmatively appear in the record.” Mans-

field, C. & L. M.R. Co. v. Swan, 111 U.S. 379, 382

(1884).

Insurance Corporation of Ireland, Ltd. v. Compagnie des

Bauxites de Guinee, 456 U. S. 694, 702 (1982) (foot-

note omitted). In addition, the jurisdictional argument

that standing was lacking due to the prematurity of the

complaint may be raised by a reviewing court sua sponte.

Steel Co. at 1011, 1012-13.

Third, the Seventh Circuit invoked the doctrine of

“judicial estoppel” to preclude Midwest from arguing that

federal jurisdiction was not present. Judicial estoppel

bars a party that has successfully taken a position in one

litigation from taking a different position in a subsequent

litigation. This rationalization is inapposite, because in

both circuits, Midwest’s position consistently has been

that the Northern District of Illinois did not have juris-

diction over Central States’ suit. 70 F.3d at 1017 and

App. at 7a. Midwest also did not succeed in its argu-

ment before the Eighth Circuit. Jd. Thus, judicial es-

toppel does not apply.

The Seventh Circuit is wrong on the law, and its error,

which was based on several factual errors, puts the Sev-

enth Circuit in conflict with the Ninth and Eleventh

Circuits. The Seventh Circuit, and other federal courts in

future decisions, should not be permitted to evade the

clear mandate of Bay Area by holding that a second

amended complaint can cure the lack of subject matter

jurisdiction.

II. MPPAA VIOLATES THE SUBSTANTIVE DUE

PROCESS CLAUSE OF THE FIFTH AMENDMENT

AS APPLIED TO MIDWEST

In Eastern Enterprises v. Apfel, this Court recently

invalidated a retroactive statute partially on the grounds

that retroactivity is of dubious constitutionality even when

the retroactive statute is the sort of economic regulatory

legislation that routinely survives challenges based on sub-

stantive due process. Eastern Enterprises v. Apfel, 524

U.S. 498, 118 S. Ct. 2131 (1998). The Supreme Court

found that: “[rJetroactivity is generally disfavored in the

law, Bowen v. Georgetown Univ. Hospital, 488 USS.

204, 208, 109 S. Ct. 468, 469-470, 102 L. Ed. 2d 493

(1998), in accordance with ‘fundamental notions of jus-

tice’ that have been recognized throughout history, Kaiser

Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827.

855. 110 S. Ct. 1570, 1586-1587, 108 L. Ed. 2d 842

(1990) (Scalia, J., concurring).” Jd. at p. 2151. The

Seventh Circuit noted the history that made it impossible

to responsibly contemplate finding a statute unconsti-

tutional on substantive due process grounds. However, the

power of that principle is attenuated because this case

perfectly reflects the logic of Justice O’Connor’s concur-

rence in Connolly and Concrete Pipe, and, indeed, presents

a stronger portrayal of Justice O’Connor’s concerns be-

cause: (1) there was no employer conduct in the with-

drawal of the employer from the plan by decertification by

the employees; (2) the record of both lower courts estab-

lished that the plan, through its actuaries. controlled the

level of pension benefits, which is the critical factor that

creates plan underfunding, and the plan also controlled the

level of pension contributions; (3) the liability is exclu-

sively retroactive, depriving the employer of access to any

of MPPAA’s ameliorating provisions; and (4) the retro-

activity is extreme, assessing liability in 1994, for a 1991

withdrawal to collect liability assessed because of the em-

ployer’s participation in the plan between 1975 and 1979.

The injustice is clear.

Justice O’Connor’s concurrence in Connolly under the

Due Process Clause provides the framework for the first

part of this constitutional challenge:

Our recent cases leave open the possibility that the

imposition of retroactive liability on employers for

the benefit of employees may be so arbitrary and

irrational in the absence of any connection between

the employer’s conduct and some detriment to the

employee. See Turner Elkhorn, supra, at 19, 24-26:

Pension Benefit Guaranty Corporation v. R.A. Gray

& Co., supra, at 733 (discussing Railroad Retirement

Board v. Alton R. Co., 295 U.S. 330 (1935)).

Connolly, 475 U.S. at 229 (O'Connor, J. concurring)

(emphasis added).

The imposition of MPPAA withdrawal liability on Mid-

west, which began participation in Central States, a

hybrid Taft-Hartley plan, 16 years before the enactment

of ERISA and 22 years before the enactment of MPPAA

is unconstitutional when the withdrawal is occasioned

by no act of Midwest and where there is no record evi-

dence that there has been any harm to the participants

or beneficiaries of the hybrid Taft-Hartley Plan. See gen-

erally, Connolly, 475 U.S. 211. (O’Connor, J. concur-

ring); Concrete Pipe, 508 U.S. 602. (O’Connor, J. con-

curring). There is no “employer conduct” in this case,

nor is there any “detriment to the employees.”

Midwest meets its burden of demonstrating that the

legislature acted in an arbitrary and irrational way in

this case. Connolly, 475 U.S. at 228-29 (O’Connor con-

curring) (citing Usery v. Turner Elkhorn Mining Co.,

429 US. 1, 15-16 (1976)). The Supreme Court has

never intimated that Congress possesses unlimited power

to ‘readjus[t] rights and burdens . . . [and] upse[t] other-

wise settled expectations.’ 7d. More recently, the Su-

preme Court, in reference to its opinions in Turner Elk-

horn, Connolly, and Concrete Pipe, stated:

Our decisions, however, have left open the possibility

that legislation might be unconstitutional if it im-

poses severe retroactive liability on a limited class

of parties that could not have anticinated the lia-

bility, and the extent of that liability is substantially

disproportionate to the parties’ experience.

Eastern Enterprises v. Apfel, 118 S. Ct. 2131, 2149

(1998). The retroactive liability is severe because Cen-

tral States assessed liability in 1994 for a 1991 with-

drawal seeking to collect liability incurred because of

Midwest’s participation in the plan between 1975 and

1979. Moreover, this retroactive liability also unfairly

singles out Midwest, since MPPAA requires multiemployer

plans to reduce their obligation as fully amortized in level

annual payments over 15 years, and therefore, no other

current contributing employer has any pre-1980 retro-

active liability. ERISA Section 4211(c)(2)(B), 29

U.S.C. § 1391(c)(2)(B).

On the issue of severe retroactivity, four members of

the plurality in Eastern Enterprises stated:

Even in areas in which retroactivity is generally toler-

ated, such as tax legislation, some limits have been

suggested. See e.g., United States v. Darusmont, 449

U.S. 292, 296, 297, 101 S.Ct. 549, 551-552, 66

L.Ed 2d 513 (1981) (per curiam) (noting Congress’

practice of confirming retroactive application of tax

provisions to ‘short and limited periods’).

118 S. Ct. at 2142. In contrast, Midwest’s retroactivity

is a 15 to 19 year reach-back to the retroactive period

of 1975 to 1979 from Central States’ Notice and Demand

for Withdrawal Liability issued in 1994.

A. Midwest Joined Central States Before It Could

Possibly Have Anticipated Withdrawal Liability

Midwest is a pre-ERISA employer, joining Central

States no later than 1958, a full 16 years before ERISA

was enacted and 22 years before MPPAA was enacted.

In her concurrence in Concrete Pipe, Justice O’Connor ex-

pressed a special concern with respect to employers such

as Midwest: “I agree that a withdrawing employer can

be held responsible for its statutory ‘share’ of unfunded

vested benefits if the employer should have anticipated the

prospect of withdrawal liability when it joined the plan.”

Concrete Pipe, 508 U.S. at 647. (O’Connor, J., concur-

ring). Justice O’Connor elaborated on this concern later

in the same opinion:

I also note that the Court’s opinion should not be

read to imply that employers may be subjected to

retroactive withdrawal liability simply because ‘pen-

sion plans [have] long been subject to federal regu-

lation.’ Surely the employer that joined a multi-

employer plan before ERISA had been promulgated

-—before Congress had made employers liable for

unfunded benefits—might have a strong constitu-

tional challenge to retroactive withdrawal liability.

Id. at 649.

Midwest is precisely the sort of employer Justice O’Con-

nor foresaw in her concurrence in Concrete Pipe. Mid-

west joined Central States in 1958 long before there was

any idea of withdrawal liability. App. 3a. In fact, Mid-

west could not have anticipated the possibility of with-

drawal liability when it joined Central States. The trust

agreements governing Midwest’s participation in Central

States made clear that the sum total of Midwest’s respon-

sibility to Central States was to pay the collectively bar-

gained contribution rate for concerned employees on time

and in full. Between 1958 and 1991, Midwest made all

of its pension contributions to Central States. App. 3a.

Sixteen years later in 1974, and then again in 1980, Con-

gress radically changed the legal relationship among Cen-

tral States and its contributing employers, among them,

Midwest. Midwest had no control over the events that

changed its obligations to Central States and had no

meaningful opportunity in 1974 to avoid the obligations

of ERISA. In the arbitration decision, the arbitrator

acknowledged that Midwest would have risked extinction

had it withdrawn from Central States in the early days

of MPPAA given Midwest’s economic circumstances.

App. 70a. Under the reasoning expressed by Justice

O’Connor, Midwest should not be held responsible for

retroactive withdrawal liability.

B. Because Midwest’s Withdrawal From Central States

Was Involuntary, Midwest Should Not Be Held

Liable for Withdrawal Liability

Employer conduct, leading employees to see the em-

ployer as the source of their benefits must, according to

Justice O’Connor, be a hallmark of constitutional impo-

sition of withdrawal liability on an employer:

In essence, my position is that the ‘imposition of this

type of retroactive liability on employers, to be con-

Stitutional, must rest on some basis in the employer’s

conduct that would make it rational to treat the

employees’ expectation of benefits under the plan as

the employer’s responsibility.” The Court does not

hold otherwise [in the majority opinion].

Concrete Pipe, 508 U.S. at 647 (quoting Connolly, 475

U.S. at 229). Arbitrator Pritzker ruled clearly that Mid-

west’s withdrawal was involuntary. App. 66a. Plainly,

the withdrawal itself, without more, cannot be conduct

within the scope of the “employer conduct” described by

Justice O’Connor in the quoted section above, because it

was not Midwest’s conduct, either in fact or law.

The district court found as a matter of law that Mid-

west exercised “sufficient influence and control over the

chain of events that culminated in the decertification.”

App. 39a. The district court cited neither facts nor

precedent in support of its legal conclusion. Not only is the

district court’s legal conclusion unsupported in either fact

or law, it is wrong, as is the Seventh Circuit decision af-

firming it. An arbitrator decides facts by a preponderance

and his findings of fact may be set aside only if clearly

erroneous. Jos. Schlitz Brewing Co. v. Milwaukee Brew-

ery Workers’ Pension Plan, 3 F.3d 994, 999 (7th Cir.

1993), aff'd, 513 U.S. 414 (1995). The district court

made a specific finding that “Midwest did not, and could

not, directly participate in the decertification decision.”

App. 39a. Nonetheless, the district court found that there

was “sufficient control” over the chain of events that cul-

minated in the decertification. Id. According to the dis-

trict court, Midwest took no part in the process, but none-

theless the conduct of its employees will be attributed to

its “influence and control” over events. This conclusion

lacks rationality. The Seventh Circuit’s repetition of the

district court’s irrational statement without examination

or explanation is equally without an appreciation for the

facts as found by the arbitrator. App. at 16a.

C. Midwest Had No Control Over The Level Of Bene-

fits Or Any Other Factor That May Produce Un-

funded Vested Benefits for Central States

The employees’ conduct in decertification is not the

only conduct over which Midwest had neither control nor

influence. The district court found that:

The Trustees determined the level of benefits paid to

participants and beneficiaries. Actuaries [of the Plan]

advise the Trustees on appropriate benefit levels in

light of the plan’s assets and income. The actuaries

also determine the level of contributions necessary to

support the benefits disbursed:

App. 21a. There is only one critical factor that creates

plan underfunding. This factor is the determination of

the level of pension benefits. Both in fact and in law, this

is solely a responsibility of the trustees of the plan. The

district court found that the trustees determine the level

of benefits for the plan. App. at 21a. The Seventh Cir-

cuit explained that underfunding is created when pension

benefits are promised at a higher level than can be sup-

ported by pension contributions. App. at lla. Under

this Court’s Amax Coal decision, the duty of a manage-

ment appointed trustee is “directly antithetical” to the

role of agent of the entity that appoints the trustee and

all trustees are required to discharge their duty solely in

the interests of the retirees and beneficiaries. NLRB v.

Amax Coal Co., 453 U.S. 322, 331-32 (1981). The

district court also agreed that Midwest was correct when

it pointed out that it had no control over the decisions

rendered by the Central States trustees because they must

act for the exclusive benefit of the beneficiaries, rather

than as agents of the employer or the union. App. 45a.

As te he 8 Webs

Atm A BR

Se FOODS ae See eS SO IS Oe

Thus, both factually and legally, Midwest had no control

over the establishment of the level of pension benefits.

The determination of pension contributions may be a

factor in the determination, as opposed to creation, of

plan underfunding because the determination of pension

contributions, together with return on investments, sets

the amount of income for the plan. And, the present

value of plan assets either is greater than or less than

vested benefits, which determines an employer’s share of

withdrawal liability. App. 30a-31a. However, the district

court’s recognition that plan actuaries determine the level

of contributions should be followed. App. 21a. More-

over, the determination of pension contributions is not a

factor in the creation of plan underfunding. That role

belongs to the plan actuaries who make the actuarial

assessments that create either plan surpluses or plan under-

funding. App. 11a.

Therefore, plan actuaries are responsible for (1) the

determination of the level of pension benefits (App. 21a):

(2) the determination of plan contributions (App. 21a);

and (3) the actuarial assessments that create either plan

surpluses or plan underfunding (App. 11a). Midwest

played no role in this entire process.

Nevertheless, in direct contradiction with its own find-

ings of fact, together with the facts above, the district

court held:

Moreover, Midwest exercised sufficient control over

the level of contributions, the collective bargaining

process, and other factors affecting Central States’

unfunc.:d vested benefit liabilities to satisfy the lenient

rational basis test. Midwest voluntarily chose to

appoint an employer association to handle its collec-

tive bargaining and knew that the contracts negoti-

ated on its behalf were binding. Significantly, Mid-

west admits that the collective bargaining agreements

as negotiated by the union and employer associations,

set the levels of contributions paid by the employers.

(Def. Reply in Support of SJ, p. 19). Additionally,

if Midwest was displeased with the terms of the col-

lective bargaining agreements negotiated by its em-

ployer association, Midwest could have withdrawn

from the association, as it did in late 1990, and nego-

tiate on its own behalf. Thus, as a matter of law, we

find that Midwest exercised little, but sufficient mean-

ingful control over the contribution levels it was re-

quired to pay, a factor affecting Central States’

unfunded vested benefits.

App. 46a. The Seventh Circuit accepted the district

court’s view of Midwest’s “control,” but emphasized that

Midwest had control over Central States’ trustees because

it was “represented on the Central States board through

the employer’s association.” App. 16a. The Seventh Cir-

cuit effectively reversed this Court’s determination in

Amax Coal that management trustees are required to

discharge their duties solely in the interests of the bene-

ficiaries of the plan. As a matter of law, Midwest had

no control over the Central States trustees.

However, both the district court and the Seventh Cir-

cuit missed the point of Justice O’Connor’s test which

required a connection between the employer’s conduct

and some detriment to the employee in order for the

statute to be constitutional. Giving the district court

every benefit of the doubt (whether justified by the law

or not), there still is no connection between this employer

conduct and any detriment to the retirees and benefici-

aries of the plan. As noted by the Seventh Circuit, the

critical element that creates plan underfunding is the

establishment of the level of pension benefits:

The plan trustees (appointed equally by the em-

ployers and the union) determine the level of benefits

according to actuarial assessments of the plan’s value

and future performance. When these assessments are

too conservative, the plan ends up with a surplus

that can be applied to future benefits. When the

assessments are too optimistic, unfunded benefits

result.

App. lla. This is solely a responsibility of the trustees.

Underfunding is created when pension benefits are prom-

ised at a higher level than can be supported by pension

contributions. Therefore, a determination by this Court

that trustees are responsible for plan surpluses or under-

funding would place responsibility on plan trustees.

The district court also misses the point when it finds

that Midwest could have withdrawn from the association,

and, therefore, as a matter of law, the district court found

that Midwest exercised little, but sufficient meaningful

control over the contribution levels it was required to

pay. If a strategic withdrawal from the association was

the only real control Midwest had, as found by the court,

such control is non-existent. The power to leave a rela-

tionship demonstrates the lack of power within the rela-

tionship. If Midwest’s only control was to leave the

association, then Midwest effectively had no control over

the internal aspects of the association.

D. Midwest’s Withdrawal Has Not Caused Any Harm

To Retirees Or Beneficiaries In Central States

Central States’ assets grew from $2.970 billion in 1980

to $11.801 billion in 1991. App. 21a. In 1980, Central

States’ vested benefits were valued at $7.206 billion. 7d.

By 1991, vested benefit liabilities amounted to $12.979

billion. 7d. During Midwest’s participation in Central

States following the passage of MPPAA from 1980 to

1991, the unfunded vested benefits of Central States were

reduced from $3.744 billion (52% of vested benefit lia-

bilities) to $1.76 billion (13.6% of vested benefit liabili-

ties). Id. Given the growth in assets of the plan, and

the decrease of unfunded vested benefit liabilities of the

Plan from 1980 to 1991, clearly there is no evidence that

Midwest’s withdrawal has caused any harm to active par-

ticipants or retirees in Central States.

E. Central States Is A “Hybrid Taft-Hartley” Plan,

Outside of Midwest’s Control

The district court adopted Arbitrator Pritzker’s finding

that Central States is a hybrid Taft-Hartley plan in the

sense used by Justice O’Connor in her concurring opinion

in Connolly. Connolly, 475 U.S. at p. 232. App. 48a.

The district court then stated that

Midwest’s circumstances fall outside of Justice

O’Connor’s constitutional concerns. Justice O’Con-

nor was concerned with employers who had ‘no con-

trol over the level of benefits promised.’ Because

Midwest exercised some control over the factors

affecting its withdrawal liability, application of the

MPPAA is rational and not arbitrary.

App. 48a (internal citations omitted). The district court

comments concerning Midwest control make no sense

because plan trustees set the level of benefits, and the

setting of the benefit level is the critical factor that creates

plan underfunding.

Ill. MPPAA’s RETROACTIVE LIABILITY IS AN UN-

CONSTITUTIONAL EX POST FACTO ENACTMENT

In Eastern Enterprises v. Apfel, this Court recently

made the following observation:

Retroactivity is generally disfavored in the law,

Bowen v. Georgetown Univ. Hospital, 488 U.S. 204,

208, 109 S. Ct. 468, 469-470, 102 L. Ed. 2d 493

(1988), in accordance with “fundamental notions of

justice” that have been recognized throughout history,

Kaiser Aluminum & Chemical Corp. v. Bonjorno,

494 U.S. 827, 855, 110 S. Ct. 1570, 1586-1587,

108 L. Ed. 2d 842 (1990) (Sca.ia, J., concurring).

Eastern Enterprises v. Apfel, 524 U.S. 498, 118 S. Ct.

2131, 2151 (1998). The Court further noted that “it is

a principle in the English common law, as ancient as the

law itself, that a statute, even of its omnipotent parlia-

ment, is not to have a retrospective effect.” Jd. quoting

Dash v. Van Kleeck, 7 Johns. 477, 503 (N.Y. 1811).

As this Court in Eastern Enterprises also noted “{rJetro-

spective laws are, as a rule, of questionable policy, and

contrary to the general principle that legislation by which

the conduct of mankind is to be regulated ought to deal

with future acts, and ought not to change the character

of past transactions carried on upon the faith of the then

existing law.” Jd. quoting H. Broom, Legal Maxims 24

(8th ed. 1911). As the Court noted, “{i]n his Commen-

taries on the Constitution, Justice Story reasoned, ‘{rJetro-

spective laws are, indeed, generally unjust; and, as has

been forcibly said, neither accord with sound legislation

nor with the fundamental principles of the social compact.’

Id. quoting 2 J. Story, Commentaries on the Constitution

§ 1398 (Sth ed. 1891). Nor, the Court noted, is this a

peculiarly American preoccupation:

{a] similar principle abounds in the laws of other

nations. See, e.g., Gustavson Drilling (1964) Ltd. v.

Minister of National Revenue, 66 D.L.R. 3d 449,

462 (Can. 1975) (discussing rule that statutes should

not be construed in a manner that would impair

existing property rights); The French Civil Code,

Preliminary Title, art. 2, p. 2 (‘Legislation only pro-

vides for the future; it has no retroactive effect’)

(J. Crabb trans., rev. ed. 1995); Aarnio, Statutory

Interpratetion in Finland 151, in Interpreting Stat-

utes: A Comparative Study (D. MacCormick & R.

Summers eds. 1991) (discussing prohibition against

retroactive legislation).

Id. The Court summed up its treatment of this issue as

follows: “ ‘Retroactive legislation,’ we have explained,

‘presents problems of unfairness that are more serious

than those posed by prospective legislation, because it can

deprive citizens of legitimate expectations and upset set-

tled transactions.’ General Motors Corp. v. Romein, 503

U.S. 181, 191, 112 S. Ct. 1105, 1112, 117 L. Ed. 2d

328 (1992).” Id.

In the instant case there is an employer who agreed no

later than 1958 to begin participation in a union-manage-

ment sponsored pension plan. Its obligation as a con-

tributing employer could be summed up fairly easily:

make all necessary contributions in full and on time. If

the employer did that, it had no further monetary obliga-

tions to the pension fund. Beginning in 1974, however,

and reaching a culmination in 1980 with the enactment

of MPPAA, this world changed in i manner that Mid-

west did not and could not have foreseen. From a date

preceding the enactment of MPPAA, Midwest would be

held responsible retroactively for its pro rata share of the

pension plan’s underfunding. The retroactivity of this

enactment meant that there was no way it could alter its

conduct so as to avoid the burdens imposed by the statute.

There is a ripe case here to determine whether, as Justice

Thomas suggested in his concurrence in Eastern Enter-

prises, there is a role for the ex post facto Clause regard-

ing legislation outside the criminal law:

I write separately to emphasize that the Ex Post

Facto Clause of the Constitution, Art. I, § 9, cl. 3,

even more clearly reflects principle that “[rJetro-

spective iaws are, indeed, generally unjust”. 2 J.

Story, Commentaries on the Constitution § 1398, p.

272 (5th ed. 1981). Since Calder v. Bull, 3 Dall.

386, 1 L.Ed. 648 (1798), however, this Court has

considered the Ex Post Facto Clause to apply only

in the criminal context. I have never been convinced

of the soundness of this limitation, which in Calder

was principally justified because a contrary interpre-

tation would render the Takings Clause unnecessary.

See id., 3 U.S., at 394 (opinion of Chase, J.). In an

appropriate case, therefore, I would be willing to

reconsider Calder and its progeny to determine

ee ae ee

whether a retroactive civil law that passes muster

under our current Takings Clause jurisprudence is

nonetheless unconstitutional under the Ex Post Facto

Clause.

Eastern Enterprises at 2154.

In addition, there are two statements within this Court’s

decision in Calder v. Bull, which suggest the merits of

Justice Thomas’ concerns. For example, Justice Chase

stated that:

The prohibition, ‘that no state shall pass any ex post

facto law,’ necessarily require some explanation; for

naked and without explanation, it is unintelligible,

and means nothing.

3 Dall 386, 390, 1 L. Ed. 648, 650. Justice Chase also

stated:

I am under a necessity to give a construction, or

explanation of the words ‘ex post facto laws,’ because

they have not any certain meaning attached to them.

3 Dall. 386, 395, 1 L. Ed. 648, 652. These statements

Suggest that Justice Chase was uncertain of his decision,

particularly in light of his statement earlier in his opinion

that:

Every law that takes away, or impairs, rights vested,

agreeable to existing laws is retrospective, and is

generally unjust, and may be oppressive; and it is a

good general rule that a law should have no retro-

spect; but there are cases in which laws may justly,

and for the benefit of the community, and also of

individuals, relate to a time antecedent to their com-

mencement; such as statutes of oblivion, or pardon.

3 Dall. at 391, 1 L. Ed. at 650.

Finally, a statement by Justice Iredell in Calder v. Bull

Suggests that the Eighteenth Century was preoccupied

(perhaps appropriately) with guarding against tyranny:

Still, however, in the present instance, the act or

resolution of the legislature of Connecticut, cannot

be regarded as an ex post facto law; for, the true

construction of the prohibition extends to criminal,

not to civil cases. It is only in criminal cases, indeed,

in which the danger to be guarded against, is greatly

to be apprehended.

3 Dall. 386, 399, 1 L. Ed. 648, 654.

The apparent uncertainty of this Court in its decision

in Calder v. Bull limiting the ex post facto clause to crimi-

nal cases, together with the Eighteenth Century’s pre-

occupation with guarding against tyranny, supports Justice

Thomas’ concerns that it is now time for this Court to

reexamine this issue and Calder v. Bull should be reviewed.

CONCLUSION

The petition for writ of certiorari should be granted.

Respectfully submitted,

HERVEY H. AITKEN, JR.*

Roy A. SHEETZ

TAYLOR THIEMANN & AITKEN, L.C.

908 King Street, Suite 300

Alexandria, VA 22314

(703) 836-9400

Attorneys for

Midwest Motor Express, Inc.

* Counsel of Record

APPENDICES

APPENDIX A

IN THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Nos. 98-2512 & 98-2588

CENTRAL STATES, SOUTHEAST AND SOUTHWEST

AREAS PENSION FUND, a pension trust, and

HowarpD McDouaaLt, trustee,

Plaintiffs-A ppellees, Cross-Appellants,

Vv.

MIDWEST Motor Express, INc., a North Dakota

corporation, MME, INc., MIDNITE EXPRESS, INC.,

and ExpRESS CARTAGE, INC.,

Defendants-A ppellants, Cross-Appellees.

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 94 C 2561—Wayne R. Andersen, Judge.

ARGUED FEBRUARY 11, 1999—DercwED JUNE 9, 19991

Before CUMMINGS, BAUER, and EVANS, Circuit Judges.

EvaANs, Circuit Judge. The defendants, primarily at-

tacking with broad constitutional principles, are here con-

1 Judge Cummings participated in the consideration of this case,

but he died before the decision was rendered.

testing a huge bill they received in this ERISA case. The

plaintiffs not only defend the big bill but seek to jack it

up a tad or two. We start by introducing the parties and

explaining the intricacies of their claims and defenses.

Midwest Motor Express, Inc. and its affiliates, MME,

Inc., Midnite Express, Inc., and Express Cartage, Inc.

(collectively Midwest), withdrew from the Central States,

Southeast and Southwest Areas Pension Fund (Central

States) in April 1994. Central States then sued Midwest

under the Employment Retirement Security Act (ERISA),

29 U.S.C. § 1001 ef seq., as amended by the Multiem-

ployer Pension Plan Amendments of 1980 (the MPPAA),

id. § 1381 et seq., for withdrawal liability of about $2.5

million dollars. On cross-motions for summary judgment

the district court sided with Central States. Midwest ap-

peals, arguing that the district court lacked subject matter

jurisdiction and, more boldly, that imposition of retroac-

tive withdrawal liability (to the tune of about $1.8 million

of the total) amounts to an unconstitutional taking and a

violation of economic substantive due process. Central

States cross-appeals, arguing that the district court had

jurisdiction over its ERISA claims but that Midwest had

waived its constitutional claims, which, Central States

urges, should be denied if they are to be heard at all, and

that the district court erred in several technical determi-

nations about the damages.

Midwest, a North Dakota trucking corporation, partici-

pated in the Central States pension plan from 1958 to

1994. Central States is a multiemployer pension plan that

provides pension benefits to employees whose employers

have collective bargaining agreements with the Interna-

tional Brotherhood of Teamsters. In a multiemployer pen-

sion plan, trustees appointed by the parties to the union

contracts, advised by actuarial experts, set the level of

contributions that employers must pay. The trustees also

| een

set a certain level of benefits to be paid to employees if

they remain employed for specified periods. Central States

is administered by eight trustees, four from management

and four from the Teamsters.

Midwest began contributing to Central States in 1958

and made all required contributions until it withdrew in

1991. Until 1990 Midwest dealt with Central States

through Regional Carriers, Inc., an association of trucking

employers that Midwest made its agent for collective bar-

gaining with the Teamsters. Midwest never appointed its

own trustee to the Central States board of trustees but

was represented by the management trustees appointed

by Regional Carriers. In 1990 Midwest withdrew from

Regional Carriers in order to negotiate a separate, single-

employer agreement with the Teamsters. One of the con-

tested issues was whether to continue to participate in

the Central States plan from which Midwest wished to

withdraw. The contract negotiations were not successful.

Unionized Midwest employees struck in August 1991.

Negotiations continued, but in October 1991 Midwest

legally hired permanent replacements for some of the

strikers. In April 1994 Midwest’s employees decertified

the Teamsters as their representative and the strike

ended. The decertification also ended Midwest’s obliga-

tion to contribute to Central States.

The statutory framework governing relations between

the parties is the MPPAA, an amendment to ERISA.

ERISA was enacted in 1974 to protect employee pensions

from termination because of underfunding among other

risks. “Congress wanted to guarantee that if a worker has

been promised a defined pension benefit . . . [which had

vested] he will actually receive it.” Concrete Pipe and

Products of Cal., Inc. v. Construction Laborers Pension

Trust for Southern Cal., 508 U.S. 602, 607 (1993) (in-

ternal citations omitted). Initially, under ERISA, multi-

employer plans were only guaranteed at the discretion of

the Pension Benefit Guaranty Corp. (PBGC), determina-

tions about payouts being made on a case-by-case basis.

29 U.S.C. § 1381(c)(1) (superseded). After 1978 the

guarantees were to be mandatory. Id. § 1381(c)(2)

(superseded). Employers withdrawing from an ongoing

multiemployer plan in that period thus incurred a con-

tingent liabiltiy. Congress, however, became concerned

about the stability of multiemployer plans and the cost of

the guarantee. It determined that “the possibility of liabil-

ity upon termination of a plan created an incentive for

employers to withdraw from weak multiemployer plans.”

Concrete Pipe, 508 U.S. at 608 (1993). Congress en-

acted the MPPAA to remedy this situation.

The main relevant features of the MPPAA are that (1)

it created mandatory withdrawal liability for withdrawing

employers, who must immediately begin to pay a fixed

debt to the plan in which they had participated, Pieck v.

Pension Benefit Guaranty Corp., 724 F.2d 1247, 1255

(7th Cir. 1983); 29 U.S.C. § 1381(a); (2) the liabiilty

is for a proportionate share of the plan’s unfunded vested

benefits, id. § 1381(b) and § 1391- (methods of com-

puting withdrawal liability); Concrete Pipe, 508 U.S. at

609; and (3) the MPPAA has a retroactive aspect, since

the withdrawal liability “imposes on the withdrawing em-

ployer a share of the unfunded vested liability propor-

tional to the employer’s share of contributions to the

plan during the years of its participation,” Concrete Pipe,

508 U.S. at 610, even if the “years of its participation” in

the plan preceded the effective date of the MPPAA ? or

the enactment of ERISA itself.

2The MPPAA is also retroactive in another way not relevant

here. See 29 U.S.C. § 1461(e)(2)(A) (making the effective date of

the statute 5 months prior to its enactment in order to discourage

strategic withdrawals during congressional debate during that

ee, ane ee Me TTT | j

On April 26, 1994, Central States issued an assessment

of withdrawal liability and a demand for payment in the

amount of $2,546,439.39, listing Midwest’s “pre-1980

pool liability” as $1,814,856.36 and its “post-1979 pool

liability” as $731,582.94. The “pre-1980 pool liability”

is the retroactive withdrawal liability imposed by the

MPPAA, effective from 1980, the year specified in the

amendment. On the same day that Central States issued

the assessment and demand for payment (April 29, 1994)

Central States sued Midwest on this liability in the United

States District Court for the Northern District of Illinois.

Midwest received that notice and demand on the following

day. In May Midwest sued Central States in federal

district court in the District of North Dakota, seeking

a declaration that the assessment of retroactive with-

drawal liability was unconstitutional and that any collec-

tion should be enjoined. The case was transferred to the

Northern District of Illinois on Central States’ motion.

Midwest appealed the transfer to the Eighth Circuit, which

affirmed, and to the Supreme Court, which denied cer-

tiorari. Midwest agreed in September 1996 to make in-

terim payments of $31,000 a month, which it has done.

Midwest requested arbitration in October 1994, and the

parties agreed that the arbitrator would answer Stipulated

factual questions. Midwest does not contest the actuarial

soundness of the assessment or the amount in question,

but only whether Midwest can be constitutionally held to

any retroactive withdrawal liability. The arbitrator’s deci-

sion and award of May 20, 1997, made the following find-

ings: (1) Midwest is a pre-ERISA employer, that is, its

participation in Central States, beginning in 1958, ante-

period). The constitutionality of this provision was upheld against

a substantive due process challenge in Pension Benefit Guaranty

Corp. v. R.A. Gray & Co., 467 U.S. 717 (1984).

dates the enactment of ERISA in 1974; (2) Midwest's

withdrawal from Central States was involuntary; (3) Cen-

tral States is a defined benefit pension plan covered by

Title IV of ERISA rather than a defined contribution plan,

and while it is not a hybrid Taft-Hartley pension plan

within the meaning of ERISA, it is a “hybrid plan” in the

sense intended in Justice O’Connor’s concurrence in Con-

nolly v. Pension Benefit Guaranty Corp., 475 U.S. 211,

232-236 (1986); and (4) that Midwest had little, but

some, control over the benefit and contribution levels and

other factors that produced unfunded vested benefits from

1973 to Midwest’s withdrawal in 1991.

Against this background, the district court decided

cross-motions for summary judgment in favor of Central

States. The parties cross-appeal as explained. We review

a district court’s grant of summary judgment de novo,

applying the same standards as the court below and view-

ing the record and all reasonable inferences to be drawn

from it in the light most favorable to the nonmoving

party, Fulk v. United Transp. Union, 160 F.3d 405, 407

(7th Cir. 1998). Summary judgment is appropriate if

there are no genuine issues of material fact in dispute.

Mills v. Health Care Serv. Corp., 1999 WL 144274 at *1

(7th Cir. Mar. 17, 1999); Fed. R. Civ. P. 56(c). An

arbitrator decides facts by a preponderance and his find-

ings of fact may be set aside only if clearly erroneous.

See Jos. Schlitz Brewing Co. v. Milwaukee Brewery Work-

ers’ Pension Plan, 3 F.3d 994, 999 (7th Cir. 1993) (in-

terpreting 29 U.S.C. § 1401(c)).* The same standard

holds for the arbitrator’s application of law to fact. Id.;

Chicago Truck Drivers Pension Fund v. Louis Zahn Drug

3 The substantive law of the case was affirmed on review in Mil-

waukee Brewery Workers’ Pension Plan v. Jos. Schlitz Brewing

Co., 513 U.S. 414 (1995), but the Supreme Court did not reach

the issue of the statutory standard of review.

Co., 890 F.2d 1405, 1409-1411 (7th Cir. 1989). The

. arbitrator’s legal conclusions are subject to de novo re-

view. Id.; Trustees of Iron Workers Local 473 Pension

Trust v. Allied Products Corp., 872 F.2d 208, 211-212

(7th Cir. 1989).

Each party raises questions about whether any federal

court may hear the arguments of the other side. Because

Central States sued before Midwest defaulted on the

withdrawal liability assessment, indeed before Midwest

had even received the assessment and demand for pay-

ment, Midwest contends that Central States’ claim is not

ripe. The Eighth Circuit rejected this argument, see

Midwest Motor Express, Inc. v. Central States Southeast

and Southwest Area Pension Fund, 70 F.3d 1014, 1017

(1996), and we concur. Here Midwest attempts to play a

double game, conceding in its declaratory judgment action

as plaintiff the premise that would make Central States’

action ripe, i.e., that Midwest believes that it has no retro-

active withdrawal liability and therefore need not pay,

while arguing in Central States’ MPPAA action as defen-

dant that this very predicate was not established. A

litigant may not take away with one hand what it gives

with the other. See DeGuiseppe v. Village of Bellwood, 68

F.3d 187, 191 (7th Cir. 1995) (judicial estoppel “pre-

vents a party who has successfully taken a position in one

litigation from taking the opposite position in a subse-

quent litigation”). Having prevailed on the jurisdictional

issue there, which is how it came to lose on the merits

here, Midwest cannot now say that federal jurisdiction is

wanting.

Furthermore, even if there were jurisdictional problems

when Central States filed its initial complaint, Central

States remedied them when it filed a second amended

complaint, by which time Midwest was clearly refusing to

pay. See Ford v. Neese, 119 F.3d 560, 563 (7th Cir.

1997) (jurisdictional defects can be cured by amending

complaint).

For its part, Central States argues that Midwest waived

the challenge by not raising it in arbitration. Any objec-

tion to an MPPAA withdrawal liability assessment not

raised by the employer in the arbitration is waived. See

Central States, Southeast & Southwest Areas Pension

Fund v. Slotky, 956 F.2d 1369, 1372 (7th Cir. 1992). In

the instant case, however, the parties agreed in 1996 that

they would develop only the facts of the case at arbitra-

tion. The arbitrator specifically declared that by stipula-

tion of the parties he would not address any legal issue,

and the district court knew all along that Midwest was

simply holding off on its constitutional challenge until

after the arbitration. Therefore, Midwest did not waive its

constitutional challenge to withdrawal liability.

Central States also contends that Midwest’s constitu-

tional challenge is time-barred because Midwest failed to

file suit in district court to “enforce, vacate, or modify the

arbitrator’s award” within 30 days as the MPPAA re-

quires. See 29 U.S.C. § 1401(b)(2). The district court,

however, correctly found that Midwest is not suing to “en-

force, vacate, or modify the arbitrator’s award” because

the arbitrator’s decision did not address the constitutional-

ity of the statute. And even if Midwest were time-barred

from raising its constitutional challenge as a plaintiff, the

30-day limit does not bar Midwest from raising these

claims as a defense when it is sued by Central States.

Both parties may therefore be heard in federal court. We

proceed to the merits.

Midwest’s central argument on appeal is that the

MPPAA as applied is unconstitutional because it violates

substantive due process. As the district court put it, a

party challenging an economic regulation on substantive

due process grounds faces “an uphill climb.” This may be

a bit of an understatement. The courts review economic

regulations with a strong presumption of constitutionality.

The challenger must show that a legislature has acted in

an arbitrary and irrational way. See Pension Benefit Guar-

anty Corp. v. R.A. Gray & Co., 467 U.S. 717, 729 (1984).

Congress, of course, is not obligated to choose the legisla-

tive scheme that a reviewing court would find to be the

best or fairest means to the legislative end, but simply

one that is rationally related to that end. See National

R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry.

Co., 470 U.S. 451, 477 (1985). The Supreme Court has

not invalidated any economic regulation on substantive

due process grounds since 1938, and we have remarked

that it “may be right” that “merely ‘economic’ regulations

can never fiunk the test of rationality.” Central States,

Southeast & Southwest Areas Pension Fund vy. Lady Balti-

more Foods, Inc., 960 F.2d 1339, 1343 (7th Cir. 1992).

Midwest argues that the MPPAA violates its substantive

due process rights because the statute imposes a retroac-

tive liability that Midwest never agreed to assume and

never could have anticipated. But even where, as here, a

question of retroactivity is involved, “legislative Acts ad-

justing the burdens and benefits of economic life come to

the Court with a presumption of constitutionality, and. . .

the burden is on the one complaining of a due process vio-

lation to establish that the legislature has acted in an

arbitrary and irrational way.” In re Gifford, 688 F.2d

447, 453 (7th Cir. 1982) (en banc) (quoting Usery v.

Turner Elkhorn Mining Co., 428 U.S. 1, 15 (1976) ); see

also Brach v. Amoco Oil Co., 677 F.2d 1213, 1224-1225

(7th Cir. 1982). Economic regulation will be upheld,

even without any express findings or legislative history,

10a

if there is “any reasonably conceivable state of facts that

could provide a rational basis” for the legislation. FCC v.

Beach Communications, Inc., 508 U.S. 307, 313 (1993).

With the MPPAA, Congress has set forth its reasons in

detail. “The purpose [of imposing withdrawal liability on

a withdrawing employer] is to relieve the funding burden

on remaining employers and to eliminate the incentive to

pull out of a plan which would result if liability were im-

posed only on a mass withdrawal by all employers.” H.R.

Rep. No. 96-869, at 67, reprinted in 1980 U.S.C.C.A.N.

2918, 2935. In view of this clearly legitimate aim, we

cannot say that the scheme is irrational or arbitrary. The

means chosen by [Congress are] “reasonably adapted to

the end permitted by the Constitution.’ It is not for us to

say whether the means chosen by Congress represent the

wisest choice.” Federal Energy Regulatory Comm'n v.

Mississippi, 456 U.S. 742, 758 (1982) (internal citations

omitted). Finally, the Supreme Court has repeatedly held

that the MPPA is constitutional on its face. See Concrete

Pipe, 508 U.S. at 646-647; Connolly, 475 U.S. at 228.

That would normally more than end the matter, but

Midwest cites Justice O’Connor’s concurrences in Con-

nolly, 475 U.S. at 228 (joined by Justice Powell), and

Concrete Pipe, 508 U.S. at 647. Justice O’Connor em-

phasized that the issue of whether the MPPA might be

defeated in an “as applied” challenge was not resolved in

either case:

[T]he Court’s opinion should not be read to imply

that employers may be subjected to retroactive with-

drawal liability simply because “pension plans [have]

long been subject to federal regulation.” Surely the

employer that joined a multiemployer plan before

ERISA had been promulgated-—before Congress

made employers liable for unfunded benefits—might

lla

have a strong constitutional challenge to retroactive

withdrawal liability.

Concrete Pipe, 508 U.S. at 649 (O’Connor, J., concur-

ring). Justice O’Connor envisions a case where there is

absolutely no rational connection between conduct by the

employer and the detriment to pension beneficiaries that

Congress is trying to avoid. In general, pension plans

fall into two categories: defined benefit plans and defined

contribution plans. MPPAA imposes withdrawal liability

only on employers participating in defined benefits plans.

Essentially, the Act treats the defined benefits as promises

for which the employer is responsible.

The problem is that many multiemployer plans like the

one in the instant case have both defined contributions

and defined benefits. Employers like Midwest and their

unions bargain for a specified level of contributions by the

employer. But neither the employer nor the union has a

direct say in determining the level of benefits. The plan

trustees (appointed equally by the employers and the

union) determine the level of benefits according to actu-

arial assessments of the plan’s value and future perform-

ance. When these assessments are too conservative, the

plan ends up with a surplus that can be applied to future

benefits. When the assessments are too optimistic, un-

funded benefits result.

Who should be responsible for the unfunded benefits?

Congress has said through the MPPAA that withdrawing

employers are responsible for their proportionate share of

existing unfunded benefits when they leave. Justice O’Con-

nor is concerned that in some cases the connection be-

tween the actions of a given employer and the unfunded

i benefits can be so attenuated that holding them liable for

it could amount to an arbitrary, irrational action by

Congress.

12a

The issue in the instant case, then, is whether holding

Midwest responsible for a proportionate share of the un-

funded benefits is irrational. Multiemployer plans like the

one at issue here try to be all things to all people. They

promise employers that they will only have to pay speci-

fied contributions, and they promise employees defined

benefits. Because performance predictions cannot be per-

fect, there will always be shortfalls and surpluses. Inevi-

tably, someone is not going to get what they expected out

of the plan. Congress has decided that protecting em-

ployee pension benefits is more important than respecting

the expectations of employers. Placing the burden of pro-

tecting the employee benefits on withdrawing employers

may not be the wisest or even the fairest course of action.

Congress could have decided to insure pension plans with

taxpayer dollars, for example. Imposing withdrawal lia-

bility on Midwest is, however, a perfectly reasonable

means of securing Congress’ legitimate legislative goal of

protecting the pension benefits of the Central States bene-

ficiaries. Considering the extremely deferential view that

a majority of the Supreme Court still takes toward eco-

nomic regulation, Midwest’s substantive due process argu-

ment must fail.

A somewhat more promising basis for a constitutional

challenge to economic regulation is provided by the Tak-

ings Clause: “[NJor shall private property be taken for

public use without just compensation.” U.S. Const.

amend. V, cl. 5. See National Paint & Coatings Ass’n v.

City of Chicago, 45 F.3d 1124, 1130 (7th Cir. 1995).

Midwest relies upon the Supreme Court’s plurality opinion

in Eastern Enterprises v. Apfel, 118 S. Ct. 2131 (1998),

striking down an employer’s liability for health benefits for

former employees under the Coal Act. The challenged

legislation, as applied to that employer, was an uncon-

stitutional taking because it “impose[d] severe retroactive

12a

liability on a limited class of parties that could not have

anticipated the liability, and the extent of that liability

[was] substantially disproportionate to the parties’ experi-

ence.” Eastern Enterprises, 118 S. Ct. at 2149. Midwest

claims that the MPPAA as applied to itself is an uncon-

stitutional taking for the same reasons.

We evaluate the Takings Clause challenge under the

standards for a “regulatory” taking rather than a perma-

nent physical occupation of real property. The Supreme

Court applied a “regulatory takings” analysis to ERISA

in Concrete Pipe, 508 U.S. at 643-644, and Connolly,

475 U.S. at 224-225. The Court eschews a set formula

for identifying a regulatory taking, looking instead to the

particular facts of the case. Id. at 224. The Court has,

however, identified three factors as being of “particular

significance”: (1) “the economic impact of the regulation

on the claimant”; (2) “the extent to which the regulation

has interfered with distinct investment-backed expecta-

tions”; and (3) “the character of the governmental ac-

tion”. Id. at 224-225: Penn Central Transp. Co. v. City

of New York, 438 U.S. 104, 124 (1978). Eastern Enter-

prises does not modify this traditional approach or suggest

a different test. See 118 S. Ct. at 2149 (“We... apply[ ]

the three factors that traditionally have informed our reg-

ulatory takings analysis.”). Applying the same analysis,

we reach a different result here.

Midwest stakes its claim on the first factor in the

traditional analysis,” “substantial economic impact.” AI-

though Midwest asserts that it satisfies all three condi-

tions, it only really argues that the first applies. Argu-

ments not developed in any meaningful way are waived.

See Bratton v. Roadway Package Sys., Inc., 77 F.3d 168,

173 n.l (7th Cir. 1996). We do not address here

whether a failure to make a showing under all three

14a

factors would doom a regulatory takings claim, but since

Midwest fails to carry its burden under any of them,

including the one it actually argues, its challenge must

certainly fail.

The Supreme Court uses a two-step analysis of “sub-

stantial economic impact” in retroactive liability cases.

The first is whether there is a “considerable financial

burden.” Eastern Enterprises, 118 S. Ct. at 2149. It is

not evident that Midwest has cleared this bar. While the

roughly $1.8 million in challenged liability is a lot of

money, for some firms that sum would not involve a

considerable financial burden. The loss at issue must be

compared to something in order to assess its impact—

the net worth of the company or its total payments under

the plan might be good places to start. Midwest, however,

has not done this.

The second step in assessing whether there is “substan-

tial impact” is to examine whether the liability imposed is

out of proportion “to [the employer’s] experience with the

plan.” Eastern Enterprises, 118 S. Ct. at 2149 (quoting

Connolly, 475 U.S. at 226; Concrete Pipe, 508 U.S. at

645). Here, Midwest’s reliance on Eastern Enterprises is

misplaced. In that successful Takings Clause challenge to

retroactive liability under the 1992 Act, the employer

ceased its coal mining operations in 1965 and “{its] obli-

gations under the Act depend[ed] solely on its roster of

employees some 30 to 50 years before the statute’s enact-

ment, without any regard to responsibilities that Eastern

had accepted under any benefit plan the company itself

adopted.” Eastern Enterprises, 118 S. Ct. at 2150. In

contrast, Midwest, like the employers who unsuccessfully

challenged the MPPAA in Concrete Pipe and Connolly,

remained in business throughout the entire period in

question, “voluntarily negotiated and maintained a pen-

15a

sion plan which was determined to be within the stric-

tures of ERISA,” id. at 2149 (internal citations omitted),

and its obligations depend on its employment roster both

before and after the enactment of the challenged provision.

The Supreme Court has stated that participation in a

defined ERISA benefit plan in Connolly and Concrete

Pipe made the employers’ liability proportionate to their

experience with the plans because, in virtue of that par-

ticipation, “the statutory liability was linked to the em-

ployers’ conduct.” Eastern Enterprises, 118 S. Ct. at

2150. In some extraordinary case there may be an excep-

tion to this rule, but Midwest has not shown that this is

such a case. The fact that Midwest’s pre-1979 retroactive

liability is about two and a half times its post-1980 pro-

spective liability does not suggest substantial dispropor-

tionaliy. That retroactive liability was incurred over a

period about one and a half times as long as the period

in which it acquired its prospective liability. The rele-

vance of the fact that Midwest’s retrospective liability is

a higher proportion of its contributions to the Central

States fund than its prospective contributions is unclear.

Midwest cites no authority suggesting that such a ratio

indicates “substantial disproportionality.” Midwest’s chal-

lenge thus fails under the traditional test.

Finally, Midwest again invokes Justice O’Connor’s Con-

nolly and Concrete Pipe concurrences, here to argue for

an unconstitutional taking rather than a substantive due

process violation. Midwest in effect asks us to adopt these

concurrences as the law of regulatory takings in this

circuit. We decline, in part to avoid complicating a diffi-

cult area of law and in part because it would make no

difference if we did. Imposing retroactive withdrawal

liability upon Midwest would not violate Justice O’Con-

nor’s concerns. First, there existed the “basis in the em-

l6a

ployer’s conduct that would make it rational to treat the

employees’ expectations of benefits under the plan as the

employer’s responsibility,” Concrete Pipe, 508 U.S. at 647

(O’Connor, J., concurring) (quoting Connolly, 475 U.S.

at 229) (same)). The district court found that Midwest

exercised enough control or influence over the course of

events by provoking the strike and lawfully replacing

unionized employees, precipitating the process which led

to Midwest’s involuntary withdrawal from the Central

States pension plan. Reviewed as a factual causal claim

or an application of law to fact, this is not clearly erron-

eous, see Jos. Schlitz Brewing Co., 3 F.3d. at 999 (stand-

ard of review); even reviewed de novo as a legal claim,

“given the heavy burden of showing [a statute] to be

unconstitutional,” the district court’s finding is correct.

Turner Elkhorn Mining Co., 428 U.S. at 44.

Second, the occurrence of the unfunded vested liability

was not “a result of events over which an employer has

no control,” Connolly, 475 U.S. at 234 (O’Connor, J.,

concurring). The district court, following the arbitrator,

found that Midwest had some control over benefit levels,

contribution rates, or other factors that produced un-

funded vested benefits liability. Since Midwest agreed to

the promised pension benefit levels, ratified the decisions

of the Central States trustees, and was represented on the

Central States board through the employers’ association,

this finding is not clearly erroneous. Midwest cannot suc-

ceed even under Justice O’Connor’s concurrence.

Central States, for its part, has two quibbles about the

damage award. The first concerns the interest rate Mid-

west should pay on its contributions. Under the statute,

Midwest should be charged the rate “provided under the

plan.” 29 U.S.C. § 1132(g)(2). The plan was amended

in 1997 to increase the interest rate by two points. The

17a

district court found that, because Midwest withdrew from

the plan in 1994, it should not have to pay the higher

rate. This is perfectly reasonable. Central States objects

that in the various collective bargaining agreements Mid-

west had prospectively ratified “all actions . . . to be

taken by the [Central States] Trustees within the scope of

their authority,” but does not explain how the trustees

were authorized to act for Midwest in any way after its

withdrawal from the plan.

The second quibble concerns an offset or reduction in

the judgment for Central States. The district court or-

dered Central States to release. in accordance with its

agreement with Midwest, certain liens it held on real

estate owned by Midwest that secured the outstanding

balance of the contested withdrawal liability. Central

States refused to comply, and the district court held that

Midwest should accordingly be credited about a month’s

interest on the amount of the liens that should have been

released ($547,000 at the prime rate). The district court

also awarded Midwest attorneys fees of $12,093.26 and

costs connected with litigation over the release of the liens.

These adjustments are entirely justified, and it is hard

to see why Central States appeals them. Central States

complains that Midwest had not shown that it was dam-

aged by the refusal to release the liens, but the real point

is that Central States was not damaged by the award of

the month’s interest, since it retained the valuable liens

for that period. Moreover, Central States escaped the

potentially serious sanctions it might have faced for refus-

ing to obey a court order to release the liens. To have to

pay a month’s interest on their value and to have to reim-

18a

burse Midwest for its attorneys fees and costs in connec-

tion with that refusal is getting off easy.

AFFIRMED.

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

PORE LEE DL NEE IS PNR TIE OIA oa Sol SOLS LAOREET Bin whet ye ote 8K

Rp ci ah a eR es ei Sain Gal pe ite:

19a

APPENDIX B

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

Case No. 94 C 2561

CENTRAL STATES, SOUTHEAST AND

SOUTHWEST AREAS PENSION FUND,

a pension trust, and Howard McDouaat, trustee,

Plaintiffs,

Mipwest Motor Express, INc.

MME, Inc., MipniTe Express, INC.

and Express CARTAGE, INC.,

North Dakota corporations,

Defendants.

MEMORANDUM OPINION AND ORDER

Plaintiffs bring this action under the Employment

Retirement Security Act of 1974, (“ERISA”), 29 U.S.C.

§ 1001 et seq., as amended by the Multiemployer Pension

Plan Amendments Act of 1980 (the “MPPAA”), 29

U.S.C. § 1381, et seq. Plaintiffs, Central States, South-

east and Southwest Areas Pension Fund (“Central States”)

and Howard McDougall, seek to collect withdrawal lia-

bility payments from Defendants, Midwest Motor Express,

Inc., MME, Inc., Midnite Express, Inc., and Express

Cartage, Inc. (collectively “Midwest”), under the terms

of the MPPAA. Midwest contends that the MPPAA, as

20a

applied, violates the Due Process Clause of the Fifth

Amendment of the United States Constitution.

Currently before the Court are the parties’ cross-motions

for summary judgment. Plaintiffs assert that the Court

should affirm the withdrawal liability assessment in the

principal amount of $2,546,439.30. Although it is well

settled that the MPPAA is constitutional on its face, De-

fendants claim that the instant case raises a matter of

first impression in an “as applied” constitutional challenge

because it joined Central States before Congress enacted

ERISA. For the reasons set forth below, Plaintiffs’ motion

for summary judgment is granted and Defendants’ motion

is denied.

I. BACKGROUND

The following facts, primarily taken from the parties’

12(m) and 12(n) statements, are undisputed unless other-

wise noted. Central States is a multiemployer pension

plan. Howard McDougall is one of Central States’

trustees. Midwest Motor Express, Inc. is a North Dakota

corporation. MME, Inc., Midnite Express, Inc., and Ex-

press Cartage, Inc. are trades or businesses under Mid-

west’s control. Midwest began contributing to Central

States in 1958 and continued to contribute to the plan

until it withdrew in 1991. Midwest signed various Trust

Agreements with Central States governing its participation

in the plan.

In a multiemployer pension plan, multiple employers

contribute to a single pension fund based on one or more

collective bargaining agreements. Central States provides

pension benefits to participants employed by the employ-

ers that have entered into collective bargaining agreements

with the Internationa! Brotherhood of Teamsters Union

(the “Teamsters” ).

2la

The parties to a collective bargaining agreement set the

level of contributions that employers, such as Midwest,

are required to pay to Central States. The employer con-

tributions are pooled in one fund and the individual

employee-participants do not have separate benefit ac-

counts. Rather, plan participants are promised certain

benefits if they achieve the periods of covered employment

defined in the plan documents. Thus, Central States is a

defined benefit pension plan.

Eight trustees jointly administer Central States, four

appointed by management representatives and four ap-

pointed by union representatives pursuant to the Taft-

Hartley Act, 29 U.S.C. § 186(c)(5). The Trustees deter-

mine the level of benefits paid to participants and bene-

ficiaries. Actuaries advise the Trustees on appropriate

benefits levels in light of the plan’s assets and income.

The actuaries also determine the level of contributions

necessary to support the benefits disbursed.

The value of the benefits promised to employees is the

principal liability of Central States. Central States’ vested

benefits were valued at $7.206 billion in 1980 and at

$12.979 billion in 1991. The assets of Central States have

grown from $2.970 billion in 1980 to $11.801 billion in

1991. In 1980 Central States’ unfunded vested benefits

were $3.744 billion, but by 1991, the unfunded vested

benefits were reduced to $1.764 billion.

During the years of Midwest’s participation in Central

States, the Trustees agreed several times to increase the

amount of benefits paid to employees and the level of

employer contributions increased several times pursuant to

collective bargaining agreements.

Midwest belonged to Regional Carriers, Inc., a regional

association of trucking industry employers that conducted

22a

multiemployer bargaining with the Teamsters. Midwest

appointed Regional Carriers, Inc.. as its agent for collec-

tive bargaining. Midwest never appointed its own trustee

to the Central States Board of Trustees. Rather, Midwest

was represented by management trustees appointed by em-

ployer associations.

In late 1990, Midwest withdrew from Regional Car-

riers, Inc. for the express purpose of negotiating a separate

1991-1994 contract as a single employer. Accordingly,

Midwest and the Teamsters commenced negotiations for a

contract solely between Midwest and the Teamsters. On

August 1, 1991, Midwest presented an initial contract

offer to the Teamsters. Although Midwest employees went

on strike on August 12, 1991, negotiations continued.

In October 1991, Midwest legally hired permanent re-

placements for some of the strikers. On April 15, 1994,

the National Labor Relations Board certified Midwest’s

employees decertification of the Teamsters and the strike

ended. Midwest did not participate in the employees’ de-

certification decision.

Between 1958 and 1991, Midwest made all of its

required contributions to Central States. Midwest’s contri-

bution obligation permanently ceased on April 15, 1994,

the day the strike ended. On April 26, 1994, Central

States issued to Midwest a notice of assessment of with-

drawal liability and a demand for payment of $2,546,-

439.30. The notice and demand listed Midwest’s “pre-

1980 pool liability” as $1,814,856.36 and its “post-1979

pool liability” as $731,582.94.

On April 26, 1994, Central States filed suit against

Midwest to collect the withdrawal liability in the United

States District Court for the Northern District of Illinois.

Midwest received Central States’ notice and demand on

April 27, 1994.

23a

In May 1994, Midwest filed suit against Central States

in the United States District Court for the District of

North Dakota requesting a declaration that the withdrawal

liability was unconstitutional and seeking ito enjoin Cen-

tral States from collecting any interim withdrawal liability

payments. Central States moved to transfer venue to the

Northern District of Illinois. The motion was granted.

The Eighth Circuit Court of Appeals affirmed the transfer

and Midwest unsuccessfully petitioned the United States

Supreme Court for certiorari.

Midwest requested arbitration on October 4, 1994.

On September 24, 1996, the parties agreed that Midwest

would make interim payments of $31,000 per month.

Midwest has made all required monthly payments.

Arbitrator Malcolm Pritzker held hearings on January

14-15, 1997. The parties agreed that Arbitrator Pritzker

would answer certain stipulated factual questions. Mid-

west never disputed the actuarial soundness of the with-

drawal liability assessment. Instead, Midwest claimed that

the withdrawal liability is unconstitutional as applied and,

therefore, it owes nothing. Accordingly, at the hearing

Midwest offered no testimony to dispute the amount of the

withdrawal liability claimed by Central States. In addi-

tion, Midwest offered no evidence to quantify the amount

of any withdrawal liability attributable to Midwest’s pre-

ERISA, i.e., pre-1974, participation in Central States.

Midwest also proffered no evidence to quantify any alleged

impact that the benefits increases had on Midwest’s with-

drawal liability or Central States unfunded vested benefits

level generally.

Arbitrator Pritzker issued his Decision and Award on

May 20, 1997 finding that:

1. Midwest is a pre-ERISA employer in that it

started to participate in the Central States Pen-

24a

sion Fund in 1958 well prior to the passage of

ERISA in 1974. Midwest continued to partici-

pate in the fund after the passage of ERISA until

it withdrew from the fund.

2. Midwest’s withdrawal from Central States was

involuntary.

3,5, 5A, 5B. Central States is not a hybrid Taft-

Hartley pension plan within the mean-

ing of ERISA or a defined contribu-

tion plan. Central States is a defined

benefit pension plan and is therefore

covered by Title IV of ERISA. Central

States is a hybrid plan as that phrase

is used by Justice O’Connor in Con-

nolly [v. Pension Benefit Guaranty

Corp., 475 U.S. 211, 232-236 (1986)

(O’Connor, J., concurring].

4. Midwest had little but some control over the level

of contributions, the degree of benefits or other

factors that produced unfunded vested benefits

for Central States from the period of 1973 to the

time [sic] Midwest’s withdrawal from Central

States.

6. On the basis of the Record before me, it is im-

possible to conclude that benefit increases by Cen-

tral States unduly added to Midwest’s withdrawal

liability.

(Arb. Op., p. 19).

Central States and Midwest now move for summary

judgment. Midwest contends that the imposition of with-

drawal liability under the MPPAA is unconstitutional as

applied to its particular circumstances. Central States dis-

25a

agrees and asserts that Midwest must pay the withdrawal

liability in accordance with the MPPAA.

II. DISCUSSION

A. Standard Of Review

Summary judgment is appropriate “if the pleadings,

depositions, answers to interrogatories, and admissions on

file, together with affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving

party is entitled to a judgment as a matter of law.” Fed.

R. Civ. P. 56(c); Salima v. Scherwood South, Inc., 38

F.3d 929, 932 (7th Cir. 1994). The moving party bears

the burden of demonstrating an absence of evidence to

support the position of the nonmoving party, Doe v. R.R.

Donnelley & Sons Co., 42 F.3d 439, 442-43 (7th Cir.

1994), and all reasonable inferences are drawn in favor

of the party opposing the motion. Associated Milk Pro-

ducers, Inc. v. Meadow Gold Dairies, Inc., 27 F.3d 268,

270 (7th Cir. 1994). The Court, however, is “not re-

quired to draw every conceivable inference from the rec-

ord [in favor of the non-movant]—only those inferences

that are reasonable.” Bank Leumi Le-Israel, B.M. v. Lee,

928 F.2d 232, 236 (7th Cir. 1991). To avert summary

judgment the plaintiff must “do more than simply show

there is some metaphysical doubt as to the material facts.”

Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp.,

475 U.S. 574, 586 (1986). The non-movant cannot rely

solely on its pleadings and must come forth with evidence

showing that a genuine issue of material fact exists for

trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323

(1986).

In making its determination, the court’s sole function

is to determine “whether there is any material dispute of

26a.

fact that requires a trial.” Waldridge v. American Hoechst

Corp., 24 F.3d 918, 920 (7th Cir. 1994). Credibility

determinations and weighing evidence are jury functions,

not those of a judge when deciding a motion for summary

judgment. Anderson v. Liberty Lobby, Inc., 477 US.

242, 255 (1986).

Even though the parties have filed cross motions for

summary judgment, the court need not grant summary

judgment for one side. Lac Courte Oreilles Band of Lake

Superior Chippewa Indians v. Voight, 700 F.2d 341, 349

(7th Cir. 1983), cert. denied, 464 U.S. 805 (7.983);

Intermatic Inc. v. Toeppen, 947 F. Supp. 1227, 1232

(N.D. Ill. 1996). The court must still assess whether a

material fact question exists. Id.

The arbitrator’s factual findings are presumed correct

and are rebuttable only by a clear preponderance of the

evidence. His resolution of “mixed questions of fact and

law” are also entitled to deference. 29 U.S.C. § 1401

(c); Central States, Southeast and Southwest Areas Pen-

sion Fund v. Cullum Co., 973 F.2d 1333, 1337 (7th

Cir. 1992). We review the arbitrator’s legal determina-

tions de novo. Id.

B. Jurisdictional Issues

1. This Court Has Jurisdiction Over Central States’ Law-

suit

Midwest rehashes its previously rejected argument that

this Court lacks subject matter jurisdiction over Central

States’ lawsuit. Midwest asserts that Central States filed

its lawsuit before Midwest refused to pay the withdrawal

liability assessed in the notice and demand. Thus, Mid-

west contends that Central States’ claims were legally non-

existent at the time it filed suit and, therefore, this Court

NE aA aR me ant Ret, GM iad LIA Not tC RSET UW a wk ee

27a

never acquired jurisdicton. The Eighth Circuit previously:

rejected this same argument and held that this Court had

subject matter jurisdiction over Central States claims. The

court held:

Midwest thus asks this court to weigh the merits of

the Illinois action in order to determine whether that

forum has jurisdiction. But this is a non sequitur.

‘A court may have jurisdiction over a case even

though the case is one to which there is no merit.

.. + The jurisdiction of the federal courts is depend-

ent on the subject matter if the action or the status

of the parties to it; it is not dependent on the merits

of the case.’

Midwest Motor Express, Inc. v. Central States Southeast

and Southwest Areas Pension Fund, 70 F.3d 1014, 1017

(8th Cir. 1996) (citing Charles A. Wright, Law and

Federal Courts 31 (5th ed. 1994)), cert. denied, 116

S. Ct. 1704 (1996). Likewise, this Court similarly re-

jected Midwest’s argument. (See Transcript of February

22, 1996 Hearing).

Moreover, Midwest’s North Dakota lawsuit is currently

before this Court and also concerns the propriety of the

withdrawal liability assessed in the notice and demand

issued by Central States. Neither party disputes that this

Court has jurisdiction over the North Dakota action.

Indeed, Midwest filed the North Dakota action after it

received the notice and demand and after Midwest re-

fused to pay its outstanding withdrawal liability by filing

its own lawsuit challenging the constitutionality of the

assessment. See Bay Area Laundry and Dry Cleaning

Pension Trust Fund v. Ferbar Corp. of Cal., 118 S. Ct.

542, 549 (1997).

Additionally, Midwest contends that Central States’

action did not accrue until after the arbitrator issued his

28a

decision. Midwest is wrong. Although arbitration under

the MPPAA, 29 U.S.C. § 1401, is mandatory, the re-

quirement is not a jurisdictional prerequisite. McDonald

v. Centra, Inc., 946 F.2d 1059, 1063 (4th Cir. 1991),

cert. denied, 504 U.S. 968 (1992). Therefore, the Court

will not dismiss Central States’ claims for lack of subject

matter jurisdiction.

2. Midwest’s Challenge To The Withdrawal Liability

Assessment Is Not Time Barred

Central States argues that Midwest’s challenge to the

withdrawal liability assessment is barred because Midwest

did not file a timely challenge to the arbitrator’s ruling.

Under 29 U.S.C. § 1401(b)(2), either party may bring

an action to enforce, modify, or vacate the arbitrator’s

award and any objections to the arbitartor’s award are

waived if not timely filed.

In its Second Amended Compiaint, Central States added

a claim to enforce and/or modify the arbitrator’s award

and Midwest filed its timely answer and affirmative de-

fenses. Midwest is not challenging the arbitrator’s award

nor the actuarial propriety of the assessed withdrawal lia-

bility. Thus, Midwest did not have to file a pleading

pursuant to 29 U.S.C. § 1401(b)(2) in order for this

Court to have jurisdiction over Midwest’s constitutional

claim.

Furthermore, because Midwest challenges the constitu-

tionality of the MPPAA as applied to its circumstances,

the arbitrator was not asked to and did not reach the

actuarial propriety of the withdrawal assessement. Rather,

he made findings of fact to questions presented by stipula-

tion of the parties. The arbitrator’s award, therefore,

provides the factual underpinnings to Midwest’s constitu-

tional claim. The arbitrato: Jid not decide, nor could he

29a

decide, the merits of Midwest’s constitutional challenge to

the withdrawal liability assessment. Thus, Midwest’s con-

Stitutional claim is properly before this Court.

C. The MPPAA As Applied To Midwest

1. Background On The MPPAA

Congress enacted ERISA in 1974 to “ ‘ensure that em-

ployees and their beneficiaries‘would not be deprived of

anticipated retirement benefits by the termination of pen-

sion plans before sufficient funds have been accumulated

in [them]. . . . Congress wanted to guarantee that if a

worker had been promised a defined benefit pension upon

retirement—and if he obtained a vested benefit—he

would actually receive it.’” Concrete Pipe and Products

of Cal., Inc. v. Construction Laborers Pension Trust for

Southern Cal., 508 U.S. 602, 607 (1993) (citation

omitted). Initially, ERISA did not unconditionally guar-

antee multiemployer pension plans because Congress

viewed multiemployer plans as more stable and secure

than single employer plans. Peick v. Pension Benefit

Guaranty Corp., 724 F.2d 1247, 1252 (7th Cir. 1983),

cert, denied, 467 U.S. 1259 (1984). Accordingly, multi-

employer plans were guaranteed solely at the discretion of

the Pension Benefit Guaranty Corporation (“PBGC”)

until January 1, 1978. “In the interim, the PBGC deter-

mined on a case-by-case basis whether it would pay a

terminating plan’s beneficiaries the difference between the

value of their guaranteed benefits and the value of the

plan’s assets on the termination date.” Jd.

In the late 1970’s, Congress determined that “the pos-

sibility of liability upon termination of a plan created an

incentive for employers to withdraw from weak multi-

employer plans.” Concrete Pipe, 508 U.S. at 608. Based

on its concern for the financial stability of multiemployer

30a

plans, Congress requested that the PBGC investigate and

report on multiemployer plans. Jd. The PBGC suggested

new rules that would require a withdrawing employer to

pay its share of the plan’s unfunded liabilities attributable

to that employer’s participation in the plan. Connolly,

475 U.S. at 216. In response, Congress enacted the

MPPAA on September 26, 1980 but established April 29,

1980 as the effective date of its withdrawal liability pro-

visions. 29 U.S.C. § 1461(e)(2)(A).

The MPPAA changed the rules governing an employ-

er’s withdrawal from a multiemployer plan. No longer

did an employer’s withdrawal “give rise, as it had under

ERISA, to a contingent liability payable to the PBGC.

Under [the] MPPAA, an employer who withdraws must

immediately begin to pay a fixed and certain debt owed

to the plan.” Peick, 724 F.2d at 1255. The MPPAA

provides that “[i]f an employer withdraws from a multi-

employer plan in a complete withdrawal or a partial with-

drawal, then the employer is liable to the plan in an

amount determined under this part to be the withdrawal

liability.” 29 U.S.C. § 1381(a). A complete withdrawal

from a multiemployer plan occurs “when an employer—

(1) permanently ceases to have an obligation to contrib-

ute under the plan, or (2) permanently ceases all covered

operations under the plan.” 29 U.S.C. § 1383. It is un-

disputed that Midwest’s obligations to contribute to Cen-

tral States permanently ceased when the employees of

Midwest decertified the Teamsters.

When an employer, such as Midwest, withdraws from

a multiemployer plan, it is liable for its proportionate

share of the plan’s unfunded vested benefits. 29 U.S.C.

§§ 1381, 1391. The employer’s share of the unfunded

vested benefits is measured by the difference between the

-curent value of the plan’s assets and the present value of

Benet ll rh bl li cane 0 Sela at i IR sean

ee ee ee ee eee

3la

the vested benefits. The vested benefits are the “benefits

that are currently being paid to retirees and that will be

paid in the future to covered employees who have already

completed some specific period of service.” Concrete

Pipe, 508 U.S. at 609 (citing 29 U.S.C. §§ 1053, 1381,

1391).

Under the MPPAA, the trustees of a multiemployer

plan are responsible for determining whether am employer

has withdrawn and, if so, determining the amount of the

employer’s withdrawal liability, notifying the employer of

the amount of that liability, and collecting that amount

from the employer. 29 U.S.C. § 1382. All disputes con-

cerning the amount of an employer’s withdrawal liability

must be resolved through arbitration. 29 U.S.C.

§ 1401(a)(1). Because the withdrawing employer must

“pay now and dispute later,” the employer must make

the contested withdrawal liability payment pending resolu-

tion of the dispute through arbitration. 29 U.S.C.

§ 1401(d); see Bay Area Laundry and Dry Cleaning Pen-

sion Trust Fund, 118 S. Ct. at 547. Any party to the

arbitration may file an action in the appropriate district

court to review the arbitrator’s decision. 29 U.S.C.

§ 140i(b) (2).

2. Substantive Due Process Standard Of Review

The MPPAA is a classic example of an economic reg-

ulation, a legislative effort to structure and accommodate

the burdens and benefits of economic life. See Pension

Benefit Guaranty Corp. v. R.A. Gray & Co., 467 US.

at 728; Usery v. Turner Elkhorn Mining Co., 428 U.S.

1, 15 (1976). A party challenging economic legislation

on substantive due process grounds faces a difficult uphill

climb. Indeed, since 1935 the Supreme Court has not in-

validated any federal economic regulation on substantive

due process grounds.

32a

Because the MPPAA is an economic regulation that

burdens no fundamental rights, it is subject to the mini-

mum scrutiny, rational basis test. R.A. Gray & Co., 467

U.S. at 729. “It is by now well established that legislative

Acts adjusting the burdens and benefits of economic life

come to the court with a presumption of constitutionality,

and that the burden is on one complaining of a due

process violation to establish that the legislature has acted

in an arbitrary and irrational way.” I/d.; see also Usery,

428 U.S. at 15. Although economic legislation must be

rational and not arbitrary, Congress is not obligated to

select a legislative scheme that a court would later find

to be the fairest means to the legislative end, but simply

one that is rational and not arbitrary. National R.R.

Passenger Corp. v. Atchison, Topeka & Santa Fe Ry.

Co., 470 U.S. 451, 477 (1985).

Moreover, legislation adjusting economic rights and

burdens is not unlawful solely because it upsets otherwise

settled expectations. This is true even if the legislation

imposes a new duty or liability based on past acts. R.A.

Gray & Co., 467 U.S. at 729-730. Nonetheless, the retro-

active aspects of the legislation must satisfy due process.

Id. at 730. “The burden to justify retroactivity in eco-

nomic legislation ‘is met simply by showing that the retro-

active application is itself justified by a rational legislative

purpose.’” Davon, Inc. v. Shalala, 75 F.3d 1114, 1123

(7th Cir.) (quoting R.A. Gray & Co., 467 U.S. at 730)),

cert. denied sub nom., Templeton Coal Co., Inc. v.

Shalala, 117 S. Ct. 50 (1996).

The main thrust of Midwest’s argument is that the

MPPAA is unconstitutional as applied because the statute

imposes a retroactive liability that Midwest never agreed

to assume and never anticipated. Midwest exclusively

relies on Justice O’Connor’s concurrences in Connolly and

Re aE neg eke victn awit Wem NY ‘

33a

Concrete Pipe in which she opined that the MPPAA

might be unconstitutional as applied to certain employers.

Significantly, other than Justice Powell who joined in the

Connolly concurrence, no court has adopted the rationale

contained in Justice O’Connor’s concurrences. In any

event, even if Midwest satisfied all of Justice O’Connor’s

criteria, it is uncertain that Justice O’Connor would find

for Midwest.

Specifically, Midwest contends that its facts and cir-

cumstances address all of Justice O’Connor’s concerns

and “present the best constitutional argument available:

The imposition of withdrawal liability under the MPPAA

(1) on a pre-ERISA employer, (2) who had no contrac-

tual obligation to pay benefit levels, and (3) who had

paid all its pension contributions, (4) for an involuntary

withdrawal (5) from a hybrid Taft-Hartley Plan (6)

where there has been no detriment to the participants and

retirees, and (7) where the employer has little control

over the level of contributions, the degree of benefits or

other factors that produce unfunded vested benefits for

the Plan, is so arbitrary and irrational as to violate the

due process clause of the Fifth Amendment.” (Def. Mem.

in Support of SJ, pp. 3-4).

3. Involuntary Withdrawals

a. The MPPAA Applies To Involuntary Withdrawals

Arbitrator Pritzker held that Midwest’s withdrawal

from Central States was involuntary. (Arb. Op., pp. 14,

19). Thus, Midwest contends that “[i]t is contrary to

the intent of Congress to require Midwest to pay with-

drawal liability because Midwest itself took no action to

effectuate the withdrawal from Central States.” (Def.

Mem. in Support of SJ, p. 16). Nonetheless, this fact

offers no aid to Midwest because the MPPAA does not

exempt involuntary withdrawals from liability.

34a

First, we must examine the language of the statute, the

most reliable indicator of Congressional intent. Central

States, Southeast and Southwest Areas Pension Fund y.

Bell Transit Co., 22 F.3d 706, 710 (7th Cir. 1994).

The court must ensure that the plain language of the stat-

ute is applied and not bypassed. Id. “Congress, not the

courts, decides what rules and exceptions to those rules

best achieve its goals.” Central States Southeast and

Southwest Areas Pension Fund v. Bellmont Trucking Co.,

Inc., 788 F.2d 428, 433 (7th Cir. 1986). “The enumera-

tion of specific exclusions from the operation of a statute

is an indication that the statute should apply to all cases

not specifically excluded.” In re Cash Currency Exchange.

762 F.2d 542, 552 (7th Cir.), cert. denied sub nom.,

Fryzel v. Cash Currency Exchange, 474 U.S. 904 (1985).

Midwest admits that the language of the MPPAA is

clear and unambiguous. A review of the MPPAA’s pro-

visions establishes that the statute contains no express

exemption for involuntary withdrawals. The MPPAA,

however, carves out specific exceptions to the generally

applicable rule, 29 U.S.C. § 1381(a), imposing liability

on an employer withdrawing from a pension plan. For

example, 29 U.S.C. § 1398 precludes withdrawal liability

if an employer ceases to exist due to specified changes in

corporate structure or if an emplover suspends contribu-

tions during a labor dispute. Other exceptions are listed

in 29 U.S.C. §§ 1383(b)-(d) (exceptions for construction

and entertainment industry) and 1384 (sale of assets).

Because Congress has mandated no such exemption, the

Court cannot carve out an exception for involuntary with-

drawals or for withdrawals occasioned by the employees’

decertification of their union. See Kariotis v. Navistar

‘Int'l Transp. Corp., 131 F.3d 672, 680 (7th Cir. 1997);

Bellmont Trucking Co., 788 F.2d at 433.

“sth. Pisin «

35a

Correctly, Midwest does not contend that it meets any

of the enumerated exceptions to withdrawal liability.

Instead, Midwest asserts that because it did not “volun-

tarily” withdraw to gain economic advantage, but rather

withdrew because its employees decertified the Teamsters,

Congress intended no withdrawal liability. We disagree.

Midwest cites the testimony of several witnesses appear-

ing before the pertinent House and Senate committees who

urged lawmakers to tailor the MPPAA to regulate only

voluntary withdrawals. For the same proposition, Mid-

west cites Senator Dole’s statement that “it is imperative

that this bill provide protections for employers, especially

smaller employers, so that they will not be irreparably

damaged by events over which they have no control.”

126 Cong. Rec. 20181 (1980). Midwest, however, ignores

the context of Senator Dole’s statement. The Senator was

not referring to involuntary withdrawals. Rather, he called

for safeguards to ensure the proper calculation of the

withdrawing employer’s share of the unfunded vested

benefits because “in many multiemployer plans it is im-

possible to trace the unfunded liability attributable to each

employer. Id. Significantly, Midwest fails to cite any

Congressional debate discussing any legislator’s desire or

requirement that involuntary withdrawals be exempted

from liability.

The MPPAA’s legislative history states that “[t]he pri-

mary purpose of the legislation is to protect retirees and

workers who are participants in such plans against the

loss of their pensions.” H.R. REP. 96-869(I)a, reprinted

in 1980 U.S.C.C.A.N. 2918, 2919. Moreover, “Congress

was concerned not only with reducing incentives to with-

draw from multiemployer plans, but also with offsetting

‘the burden otherwise shifted to the remaining employers

when a withdrawal nevertheless occurs.’ ” Bellmont Truck-

ing Co., Inc., 788 F.2d at 432 (rejecting employer’s argu-

36a

ment that the MPPAA did not apply to involuntary with-

drawal caused by employer’s bankruptcy). Additionally,

Congress did not intend withdrawal liability to attach as

a punishment for a withdrawing employer’s malice or

willfulness, but to protect the vested pension interests of

the employees. See 29 U.S.C. § 1001(c). Indeed, “[i]f

employers escaped liability merely because their with-

drawals were involuntary, a major protective feature of

the MPPAA would be undercut.” Board of Trustees of

the Western Conference of Teamsters Pension Trust

Fund v. Thompson Bldg. Materials, Inc., 749 F.2d 1396,

1407 (9th Cir. 1984) (union forced withdrawal subjected

employer to withdrawal liability), cert. denied, 471 U.S.

1054 (1985). When a withdrawing employer is assessed

its withdrawal liability, the pension plan is essentially

billing the employer for its fair share of the plan’s under

funding. “Congress therefore chose withdrawal liability

as a means to both deter withdrawals and to make the

employer liable for any damage caused by the with-

drawal.” Keith Fulton & Sons, Inc. v. New England

Teamsters and Trucking Indus. Pension Fund, 762 F.2d

1124, 1130 (1st Cir. 1984).

Had Congress wanted to limit the reach of the MPPAA

to voluntary withdrawals, such a restriction could have

easily been included in the statute. Although Midwest

relies on witnesses supporting liability exclusively for

voluntary withdrawals, Congress did not. Simply put,

nothing in the pertinent legislative history suggests that

Congress intended to exclude involuntary withdrawals

from the purview of the MPPAA. See H.R. Rep. No.

~$6-364-€1980), reprinted in 1980 U.S.C.C.A.N. 2918.

Accord Thompson Bldg. Materials, Inc., 749 F.2d at 1407

(stating “at the outset we rote that many, if not most,

employer withdrawals are involuntary to some degree, but

irk RRB

37a

no appellate court has found that factor relevant”); Cen-

tennial State Carpenters Pension Trust Fund v. Wood-

workers of Denver, Inc., 615 F. Supp. 1063, 1068 (D.

Colo. 1985) (granting summary judgment for the pension

plan even though the employer’s withdrawal was occa-

sioned by the employee’s decertification of their union);

Pacific Iron & Metal Co. v. Western Conference of

Teamsters Pension Trust Fund, 553 F. Supp. 523, 526

(W.D. Wash. 1982) (the MPPAA does not exclude in-

voluntary withdrawal due to employees’ vote to decertify

their union).

Congress also directed the PBGC to conduct a study

and report on “the necessity of adopting special rules in

cases of union-mandated withdrawal from a _ multi-

employer pension plan.” Multiemployer Pension Plan

Amendments Act of 1980 § 412(a)(1)(B), Pub. L. 96-

364 (codified at 29 U.S.C. § 1306). The Report defined

union mandated withdrawals as “an event that is triggered

by a union’s conduct.” (Union-Mandated Withdrawal

Study Report, submitéed by the Pension Benefit Guaranty

Corporation, March 1991, hereinafter “Report,” p. 11).

Although union conduct did not trigger Midwest’s with-

drawal, the report is instructive on the MPPAA’s treat-

ment of involuntary withdrawals.

The Report notes that “[a]llowing all ‘involuntarily’

withdrawing employers to escape liability, in whole or in

part, shifts the consequences of underfunding solely onto

other employers and participants. Remaining employers

would be forced to carry added funding burdens them-

selves, a fact that could create serious economic hardships

and eventually force more employer withdrawals.” (Re-

port, pp. 10-11). Additionally, the Report states that with-

drawal liability serves to protect “the financial integrity of

multiemployer plans.” Consistent with this purpose, Con-

38a

gress chose in 1980 to base the general withdrawal lia-

bility rules on events that normally result in a loss of the

plan’s contribution base and potentially harm the plan’s

integrity, rather than to make rules that were based on

fault or subjective factors.” (Report, pp. 18-19). The

PBGC recommended that the Congress make no statutory

modifications to accommodate union mandated with-

drawals. (Report, p. 25). Consistent with the Report,

Congress has not amended the MPPAA to exempt union

mandated withdrawals from withdrawal liability.

Thus, we conclude that Congress did not intend to

exempt from the MPPAA emplovers, such as Midwest,

that withdraw from a pension plan because their employ-

ees decertify their union. Furthermore, based on the

MPPAA’s express purpose and the legislative history, we

find that Congress’ decision to impose liability on employ-

ers for voluntarily and involuntarily withdrawals is ra-

tional and not arbitrary.

b. The MPPAA As Applied To Midwest Is Constitutional

Even Though Its Withdrawal Was Involuntary

Midwest also contends that imposition of withdrawal

liability violates its due process rights because it had no

control over the union decertification which caused Mid-

west’s wthdrawal. Although Arbitrator Pritzker specifi-

cally held that Midwest’s withdrawal from Central States

was involuntary, (Arb. Op. pp. 14, 19), he did not dis-

cuss the chain of events leading up to decertification.

Moreover he expressly “[l]eft to the Court the issue not

before me of whether [Midwest’s] conduct in this case

falls within the employer’s conduct described by Justice

O’Connor in Connolly, [475 U.S. at 229] when she wrote:

“¢ . . the imposition of retroactive liability on employers

for the benefit of employees may be arbitrary and irra-

39a

tional in the absence of any connection between the em-

ployer’s conduct and some detriment to the employee,’ ”

(Arb. Op., p. 14). Thus, we now turn to the facts and

circumstances leading to the decertification of the Team-

sters.

Although the underlying facts are uncontested, the

parties dispute whether, as a matter of law, Midwest had

sufficient control over the events culminating in the de-

certification to withstand Midwest’s constitutional chal-

lenge. Midwest did not, and could not, directly participate

in the decertification decision. Nevertheless, as a matter

of law, we find that Midwest exercised sufficient influence

and control over the chain of events that culminated in

the decertification.

In jate 1990, Midwest chose to leave its employer as-

sociation and negotiate a contract on its own with the

Teamsters. Although the negotiations continued, Mid-

west’s employees went on strike. Midwest’s offers and

tactics during the ensuing negotiations likely led to, or

perhaps prolonged, the strike. Moreover, Midwest hired

the replacement workers that, through no action of Mid-

west, chose to decertify the Teamsters. Midwest also re-

fused to displace the permanent replacement workers for

the striking employees, a significant issue for the Team-

sters. (Arb. Op., p. 4).

Furthermore, regardless of the reason Midwest with-

drew from Central States, Midwest’s failure to pay its fair

share of unfunded vested benefits would force the em-

ployers remaining in the plan to shoulder an extra burden.

This result is contrary to the express purpose of the

MPPAA. 29 U.S.C. §§ 1001(c), 1001la(c).

We agree with Midwest that its withdrawal from Cen-

tral States was involuntary in that the decertification

40a

caused Midwest's contribution obligation to cease. None-

theless, because, as a matter of law, Midwest had suffi-

cient influence or control over the events leading up to

the decertification, the imposition of withdrawal liability

passes constitutional muster. As such, the imposition of

withdrawal liability on Midwest is not arbitrary or irra-

tional.

4. Midwest’s Status As A Pre-ERISA And Pre-MPPAA

Employer Does Not Negate The Constitutionality Of

Its Withdrawal Liability

Midwest claims that its withdrawal liability is uncon-

Stitutional because “Midwest joined Central States before

it could possibly have anticipated withdrawal liability.”

(Def. Mem. in Support of SJ, p. 22). Midwest relies on

Justice O’Connor’s Concrete Pipe concurrence in which

she wrote:

the Court’s opinion should not be read to imply that

employers may be subjected to retroactive with-

drawal liability simply because ‘pension plans have

long been subject to federal regulation. Surely the

employer that joined a multiemployer plan before

ERISA had been promulgated—before Congress had

made employers liable for unfunded benefits—might

have a strong constitutional challenge to retroactive

withdrawal liability.

Id. at 649 (O’Connor, J., concurring) (emphasis added).

Relying on this rationale, Midwest asserts that ERISA

“radically changed the legal relationship among Central

States and its contributing employers such as Midwest.”

(Def. Mem. in Support of SJ, p. 23). Because it allegedly

had no control over the statutory rules that changed its

obligations to Central States. Midwest argues that it “had

no meaningful opportunity in 1974 to avoid the obliga-

4la

tions of ERISA and, short of economic suicide, no oppor-

tunity to avoid the additional obligations imposed by the

MPPAA in 1980.” (/d.). As discussed below, the case

law undermines Midwest's contentions.

It is well settled that “whether or to what extent a par-

ticular piece of legislation-dashes a parties’ economic ‘ex-

pectations’ generally poses no constitutional impediment

since all economic legislation—whether labeled prospec-

tive or retroactive—inherently disrupts someone's finan-

ciel expectations.” Templeton Coal Co., Inc. v. Shalala,

882 F. Supp. 799, 814 (S.D. Ind. 1995), Davon, Inc. v.

Shalala, 75 F.3d 1114, 1123 (7th Cir.), cert. denied,

Templeton Coal Co., Inc. v. Shalala, 117 S. Ct. 50

(1996). Midwest joined Central States in 1958, 16 years

before Congress enacted ERISA and 2 years before the

MPPAA. Although Midwest may not have anticipated

the prospect of withdrawal liability in 1958, “pension

plans . . . were the objects of legislative concern long be-

fore the passage of ERISA in 1974.” Connolly, 475 U.S.

at 226-227. Accord R.A.-Gray & Co., 467 U.S. at 732.

Indeed, multiemployer plans have been subject to federal

control since 1947. Board of Trustees of the Western

Conference of Teamsters Pension Trust Fund v. J.N.

Ceazan, 559 F. Supp. 1210, 1214 (N.D. Cal. 1983).

Moreover, Midwest voluntarily chose to continue par-

ticipating in Central States after ERISA altered the pen-

sion plan landscape. In 1974, ERISA required a with-

drawing employer to pay a contingent liability up to 30%

of its net worth. Concrete Pipe, 508 U.S. at 646: see 29

U.S.C. §§ 1362(b), 1364 (1976 ed.). Moreover, “in

1974 ... it was clear that if the PBGC exercised its dis-

cretion to pay benefits upon termination of a multiem-

ployer pension plan, employers who had contributed to

the plan during the preceding five years were liable for

their proportionate share of the plan’s contributions dur-

42a

ing that period.” Connolly, 475 U.S. at 227. Because

Midwest remained in Central States after ERISA was

enacted, Midwest could have “no reasonable expectation

that the legislative ceiling would never be lifted” or “that

it would not be faced with liability for promised benefits.”

See Concrete Pipe, 508 U.S. at 646; Connolly, 475 U.S.

at 227. Furthermore, Midwest presents no evidence to

show which portion of its total withdrawal liability, if

any, is attributable to its pre-ERISA participation in Cen-

tral States. (Arb. Op., pp. 14-15).

Additionally, once Congress learned that ERISA failed

sufficiently to guarantee that employees would receive the

pension benefits promised to them by employers, Con-

gress enacted the MPPAA. At that time “[p]rudent em-

ployers . . . had more than sufficient notice not only that

pension plans were currently regulated, but also that with-

drawal itself might trigger additional financial obliga-

tions.’ Connolly, 475 U.S. at 227. Thus, Midwest chose

to do business in a regulated field and “ ‘cannot object if

the legislative scheme is buttressed by subsequent amend-

ments to achieve the legislative end.’” Connolly, 475 U.S.

at 227 (citation omitted).

Although Midwest exercised no control over Congress,

it exercised complete control over its decision to continue

participating in Central States and the collective bargain-

ing agreemei:ts which required contributions to a multi-

employer plan. Significantly, Arbitrator Pritzker acknowl-

edged that even though it may have been “economic[]

suicid[e],” Midwest could have withdrawn from bargain-

ing and from the plan. (Arb. Op., pp. 17-18). Notwith-

standing ERISA and the MPPAA, Midwest determined

that remaining a party to the collective bargaining agree-

ments and, thus, a contributor to Central States, best

served Midwest’s interests. (Arb. Op., p. 17). Addi-

‘

;

+c 4

43a

tionally, “several times after the passage of ERISA and

[the] MPPAA [Midwest] ratified all decisions of the joint

union-management trustees.” (Arb. Op., p. 13). Thus,

like a Faustian pact, Midwest voluntarily chose to accept

the additional economic burdens imposed by ERISA, and

later the MPPAA. Therefore, Midwest cannot now com-

plain that it is not accountable for its choices.

Midwest also argues that the “sum total of Midwest’s

responsibility to Central States was to pay the collectively

bargained rate for covered employees on time and in

full,” and that “at no time did Midwest ever agree to

ensure that the benefits of Central States would be fully

funded.” (Def. Mem. in Support of SJ, p. 6). This argu-

ment presumes that the Due Process Clause prohibits Con-

gress from imposing obligations beyond those voluntarily

assumed by contract. Midwest’s assumption is erroncous.

See Davon, Inc., 75 F.3d at 1125.

“In rejecting a due process challenge to the retroactive

withdrawal liability provision of the MPPAA, the Supreme

Court in R.A. Gray & Co., stated that ‘legislation read-

justing rights and burdens is not unlawful solely because

it upsets otherwise settled expectations’ and that ‘this is

true even though the effect of the legislation is to impose

a new duty or liability based on past acts.’” Jd. Accord-

ingly, Midwest’s contractual obligations under the Trust

Agreements and collective bargaining agreements “in no

way define the outer limit of Congresses’ power to legis-

late consistently with the Due Process Clause.” Id.

Congress’ decision to require employers, like Midwest,

to fund the pension benefits they offered to thei employ-

ees is neither irrational nor inequitable. Midwest obtained

economic benefits from participating in Central States.

The pension benefits undoubtedly attracted experienced

44a

employees who chose to work for Midwest rather than for

another employer not participating in Central States.

Moreover, experienced Midwest employees may have

chosen to remain working for Midwest based on the of-

fered pension benefits. Therefore, compelling Midwest to

bear responsibility for meeting its employees’ legitimate

expectations to receive a pension at retirement is constitu-

tional. “At the time of its withdrawal, [Midwest] had —

fully received its benefits from offering the pension, but its

employees had not received full payment for their serv-

ices.” Thompson Bldg. Materials, Inc., 749 F.2d at

1402. Midwest’s employees rely and depend upon the

existence of a solvent pension plan at their retirement.

Thus, extending Midwest’s responsibility beyond its con-

tractual promises to ensure that the goals of ERISA and

the MPPAA are satisfied is rational and not arbitrary.

Accordingly, the imposition of withdrawal liability for the

time period before passage of the ERISA and _ the

MPPAA is not so harsh or oppressive as to violate Mid-

west’s Fifth Amendment rights.

5. Midwest Exerted Sufficient Control Over The Factors

Affecting Its Withdrawal Liability

Midwest claims that “there has been a retroactive im-

position of liability on [it] for the asserted benefit of

employees without any connection between Midwest’s con-

duct and any harm to the employees and beneficiaries of

the Plan.” (Def. Mem. in Support of S.J., p. 22). Again

Midwest relies on Justice O’Connor’s Connolly concur-

rence in which she wrote: “[o]ur recent cases leave open

the possibility that the imposition of retroactive liability

on employers for the benefit of employees may be arbitrary

and irrational in the absence of any connection between

the employer’s conduct and some detriment to the em-

45a

ployee.” Connolly, 475 U.S. at 228-229 (O'Connor, J.,

concurring). Central States argues that Midwest suffi-

ciently exercised control over the factors affecting its with-

drawal liability to remove Midwest from the concerns ex-

pressed by Justice O’Connor. We agree with Central

States.

Arbitrator Pritzker found that “through its authorized

Employer Association bargaining agent, Midwest had some

level of control over the level of contributions.” (Arb.

Op., p. 17) (emphasis added). He also held that,

“[t]hrough the employer trustees, Midwest had some level

of control over the benefits and other factors that im-

pacted on unfunded benefit liabilities and therefore Mid-

west’s withdrawal liability in that the Employer Trustees

as prudent men and women did not have to agree to

any benefit improvement or other factors which would

have increased Employer Withdrawal Liability.” (Jd.)

(emphasis added).

Midwest properly points out that it had no control

over the decisions rendered by the Central States Trustees

because they must act for the exclusive benefit of the

employee beneficiaries rather than as agents of the em-

ployers or the union. NLRB v. Amax Coal Co., 453

U.S. 322, 331-332 (1981). Nonetheless, Midwest repeat-

edly signed Trust Agreements in which Midwest agreed

to be bound by the decisions of the Trustees. (Arb.

Op., pp. 3, 17). Rather than disputing this fact, Mid-

west merely offers the unsupported conclusion that the

agreements were “models of contracts of adhesion” (Def.

Mem. in Opp. to Pls. Motion for SJ, p. 10).

Additionally, Midwest presented no actuarial evidence

to the arbitrator challenging the benefits decisions or any

other decisions rendered by the Trustees. The arbitrator’s

46a

factual conclusions are entitled to deference. We find that

Midwest has not presented evidence that the arbitrator's

factual conclusions were clearly erroneous. See 29 U.S.C.

§ 1401(c). Therefore, we concur with the Arbitrator

Pritzker’s finding that the Trustees’ actions did not “un-

duly” add to Midwest’s withdrawal liability. (Arb. Op.,

pp. 17-18). Accordingly, we find, as a matter of law,

that Midwest failed to meet its burden to show which

portion of the withdrawal liability, if any, resulted from

the Trustees’ decisions.

Moreover, Midwest exercised sufficient control over the

level of contributions, the collective bargaining process,

and other factors affecting Central States’ unfunded vested

benefit liabilities to satisfy the lenient rational basis test.

Midwest voluntarily chose to appoint an employer asso-

ciation to handle its collective bargaining and knew that

the contracts negotiated on its behalf were binding. Sig-

nificantly, Midwest admits that the collective bargaining

agreements as negotiated by the union and employer asso-

ciations, set the levels of contributions paid by employers.

(Def. Reply in Support of SJ, p. 19). Additionally, if

Midwest was displeased with the terms of the collective

bargaining agreements negotiated by its employer asso-

ciation, Midwest could have withdrawn from the asso-

ciation, as it did in late 1990, and negotiate on its own

behalf. Thus, as a matter of iaw, we find that Midwest

exercised little, but sufficient meaningful control over the

conntribution levels it was required to pay, a factor affect-

ing Central States’ unfunded vested benefits.

Midwest further relies on Arbitraor Pritzker’s determin-

ation that Central States is a “hybrid” Taft-Hartley plan

in the manner used by Justice O’Connor in her Connolly

concurrence. (Arb. Op., p. 16). According to Justice

O’Connor:

47a

Taft-Hartley plans are the product of joint negotia-

tion between employers and a union and are admin-

istered by trustees nominated in equal numbers by

employers and the union . . . most Taft-Hartley plans

‘possess the characteristics of both fixed contributions

and fixed benefits’. . . . Under these hybrid Taft-

Hartley plans it is the plans’ trustees not the employ-

ers and the union, who are ‘usually responsible for

determining the types of benefits to be provided . . .

and the level of benefits, although in some cases these

are set in the collective bargaining agreement.’

Connolly, 475 U.S. at 1030 (O’Connor, J., concurring )

(citations omitted). Based on her analysis of hybrid plans,

Justice O’Connor opined that:

. . Whatever promises a collectively bargained plan

makes with respect to benefits may not always be

rationally traceable to the employer’s conduct and

that it may sometimes be quite fictitious to speak of

some plans as ‘promising’ benefits at a specified level,

since to do so ignores express and bargained for con-

ditions on those promises. Where the plan’s fixed

contribution aspects were agreed to by employees

through their exclusive bargaining representatives,

and where employers had no control over the level of

benefits promised, employer responsibility for the

benefits specified by the plan is very much attenu-

ated, and employee expectations that these benefits

will in all events be paid, in the face of plain lan-

guage to the contrary, are not easily traceable to the

employer’s conduct.

Connolly, 475 U.S. at 235 (O’Connor, J., concurring)

(emphasis added).

48a

Although Midwest is a hybrid Taft-Hartley plan as

contemplated by Justice O'Connor, Midwest’s circum-

stances fall outside Justice O’Connor’s constitutional con-

cerns. Justice O’Connor was concerned with employers

who had “no control over the level of benefits promised.”

Id. Because Midwest exercised some control over the fac-

tors affecting its withdrawal liability, application of the

MPPAA is rational and not arbitrary.

Again relying on Justice O’Connor’s Connolly concur-

rence, Midwest contends that its withdrawal caused no

harm to active or retired participants because the assets

held by Central States have grown while its unfunded

vested benefits level has decreased from 1980 to 1991.

In 1991, the assets of Central States totaled $11.801

billion and its unfunded vested benefits totaled $1.764

billion.

Although Central States successfully decreased is un-

funded vested benefits level by the time Midwest with-

drew, a significant amount, $1.764 billion, remains. The

MPPAA assures that each withdrawing employer pays its

proportionate share of the unfunded vested benefits at the

time of its withdrawal so that present and future retirees

will receive their promised pension benefits. The statute,

however, does not exempt an employer from paying its

fair share of the unfunded vested benefits because the

pension plan is enjoying a period of financial strength.

To do so would be contrary to the express purpose of the

MPPAA. See 29 U.S.C. §§ 1001, 1001(a), 1381.

Midwest also states there is no record evidence demon-

strating that any retirees have not received their pension

benefits. Even though Midwest’s withdrawal caused no

immediate harm to current retirees, the imposition of with-

drawal liability ensures that the withdrawal does not harm

future retirees or future beiefits. By paying its withdrawal

49a

liability Midwest helps to guarantee, as the MPPAA in-

tended, that Central States’ assets are sufficient to meet

the present value of the benefits that Central States must

pay to Midwest's employees in the future. Moreover,

Midwest offers no evidence to establish that its past con-

tributions plus its allocable share of Central States’ earn-

ings exceed the present value of all benefits accrued by

Midwest's employees, i.e., Midwest’s withdrawal liability.

See Connolly, 475 U.S. at 1032 (O’Connor, J., concur-

ring). Accordingly, we find that Justice O’Connor’s con-

cerns are not applicable to Midwest.

In sum, Midwest has failed to demonstrate that the

MPPAA, as applied, is arbitrary or irrational. Other than

Justice "Connor’s concurring opinions in Connolly and

Concrete Pipe, there is no authority supporting Midwest

arguments. Thus, we find tht the imposition of with-

drawal liability does not violate Midwest’s Fifth Amend-

ment right to substantive due process.

Ill. CONCLUSION

For the foregoing reasons, we find that the imposition

of withdrawal liability under the MPPAA as applied to

Midwest violates no substantive constraint of the Fifth

Amendment. Because Midwest raised no actuarial chal-

lenge to the amount of liability imposed by Central States,

Midwest must pay the entire outstanding withdrawal lia-

bility, plus any accrued interest, less any interim payments

made pursuant to the parties’ September 24, 1996 stipu-

lation.

Central States’ motion for summary judgment is granted.

Midwest’s motion for summary judgment is denied.

Central States is hereby ordered to submit an affidavit

and schedule of the amount due as of the date of this

50a

ruling by April 17, 1998 so that a judgment may be

entered. Any response by Midwest must be filed by

April 24, 1998.

All other pending motions are denied as moot.

It is so ordered.

/s/ Wayne R. Andersen

WAYNE R. ANDERSEN

United States District Judge

Dated: March 30, 1998

Sla

APPENDIX C

AMERICAN ARBITRATION ASSOCIATION

Case No. 51 621 00577 94

IN THE MATTER OF ARBITRATION

between

MIDWEST MOTOR EXPRESS, INC.,

and

CENTRAL STATES SOUTHEAST AND SOUTHWEST

AREAS PENSION FUND.

OPINION AND AWARD

PROCEDURE:

Midwest Motor Express, Inc. (the “Company” or “Mid-

west”) was represented by Hervey H. Aitken, Esq. and

Roy A. Sheetz, Esq. of Taylor, Thiemann & Aitken.

Central States Southeast and Southwest Areas Pension

Fund (the “Fund” or “Central States”) was represented

by James P. Condon, Esq., Terence G. Craig, Esq. and

Ms. Helen N. Burke, Esq.

Prior to the hearing, which was held on January 14,

~ 1997, the parties the Arbitrator and the Administrator

exchanged several letters and had several telephone con-

ference calls to discuss various procedural matters. There

were a total of 79 exhibits submitted at the hearing by the

Fund. The Company submitted \11 exhibits. I received

52a

the initial briefs of the parties on April 8, 1997, and the

reply briefs of the parties on May 9, 1997.

ISSUES:

The parties stipulated at the hearing that the following

issues were before me:

1. whether Midwest is a pre-ERISA employer;

2. whether Midwest’s withdrawal from Central

States was involuntary;

3. whether Central States is a hybrid Taft-Hartley

pension plan;

4. whether Midwest has had any control over the

level of Central States’ benefits, contributions,

or other factors that produce unfunded vested

benefit liabilities for Central States for the

period 1973 to the time of Midwest’s with-

drawal from Central States;

5. whether Central States Pension Fund is a de-

fined benefit pension plan and is therefore

covered by and subject to Title IV of ERISA;

5A. whether Central States is a defined contribu-

tion plan (individual account plan) within the

meaning of ERISA;

5B. whether Central States is a hybrid plan within

the meaning of ERISA; and

6. whether benefit increases by Central States

have unduly added to Midwest’s withdrawal

liability.

FACTS:

Midwest was a member of a multi-employer bargaining

association called Regional Carriers, Inc., who bargained

53a

with the Teamsters Union on behalf of member companies

leading to a series of cs -acts between the Union and

the Association from %%5% to the contract expiring on

March 31, 1991.

While a member of the Association, Midwest made

contributions to the Fund. The Fund was established in

1955 as a Taft-Hartley Fund under the terms of Section

301 of the Labor Management Relations Act (“the Taft-

Hartley Act”) and has an equal number of union and

management trustees. Midwest did not appoint its own

management trustee as one of the management trustees,

but was represented by management trustees appointed by

Employer Associations. All contributions made by all

contributing employers go to the Fund and are used for

administrative and benefit purposes. No employee has

an individual separate account. The amount of pension

benefits employees receive is dependent on the amount

of negotiated employer contributions. Midwest started

to contribute to the Fund in 1958 and signed a series of

participation agreements agreeing to be bound by the

decisions of the Joint Trustees. During Midwest’s parti-

cipation in the Fund following the passage of the Multi-

Employer Pension Plan Amendments Act of 1980

(“MPPAA”) from 1980 to 1991, the unfunded vested

benefits of the Fund were reduced from 3.744 billion

(52% of vested benefit liabilities) to 1.76 billion (13.6%

of vested benefit liabilities). The June 1996 actuarial val-

uation shows an unfunded vested benefit liability of 2.051

million. The Fund’s amortization period as of June 1996

was 28.7 years and in the 1995 report it was 28.0 years.

In 1980, Central States vested benefits were valued at

7.206 billion. By 1991, vested benefit liabilities amounted

to 12.979 billion. The assets of the Fund grew from

$2.970 billion in 1980 to $11,801 billion in 1991. During

the years of Midwest’s participation, the Trustees of the

54a

Fund agreed on several occasions to increase the benefits

paid to Fund participants. During the years of Midwest’s

participation in the Fund, the level of employers’ con-

tributions to the Fund increased several times as the

result of settlements of the terms of successor collective

bargaining agreements.

On July 19, 1990, Midwest asked the Fund for an esti-

mate of its Employer Withdrawal Liability. The Fund

advised the Company that its Employer Withdrawal Lia-

bility was three million twenty-three thousand dollars.

On November 21, 1990, the Company notified the

Union that it was withdrawing from the Association and

for the first time wanted to negotiate a separate contract

with the Union.

On December 10, 1990, the Company again requested

that the Fund estimate its Employer Withdrawal Liability.

The Fund estimated that Midwest’s liability had not

changed since the Fund’s July estimate.

Midwest and the Teamsters Union commenced nego-

tiations for a contract solely between Midwest and the

Union early in 1991.

Midwest and the Union could not agree on the terms

of a successor contract during the 1991 negotiation be-

tween Midwest and the Union. and on August 12. 1991,

the emplovees of Midwest went out on strike. The Com-

pany’s final offer prior to the strike would have stonped

the Company’s contributions to the Fund and would have

substituted a 401k plan with Employer and Union split-

ting the contributions. In addition, Midwest was pro-

posing other cost concessions.

In October of 1991, Midwest started to hire permanent

ret'lacements for the strikers.

55a

On December 10, 1991, the Fund demanded the pay-

ment of two million five hundred forty-six thousand

dollars in Employer Withdrawal Liability.

Midwest during this period of time was selling or at-

tempting to sell various of its divisions.

On March 5, 1992, Midwest wrote to the Fund’s Ad-

ministrator and denied that it had withdrawn from the

Fund.

In May 1992, the parties agreed to a package of wage

concessions which would have kept Midwest in the Fund,

but could not agree on the retention by the Company of

replacement workers hired after the commencement of

the strike. Midwest took the position that it would not

displace the permanent replacements for the strikers. The

Union took the position that there could be no collective

bargaining agreement unless the Company agreed to do

so. The Union filed unfair labor practice charges against

the Company. The Company was not found by the NLRB

to have engaged in surface or otherwise illegal bargaining.

On March 5, 1992, Midwest appealed to the Trustees

and asked the Trustees to reconsider their initial deter-

mination of Employer Withdrawal Liability. Midwest

supplemented this appeal on April 9, 1992. In May 1992,

the Fund rescinded its Employer Withdrawal Liability

assessment against Midwest following the motion by Mid-

west for a court injunction.

In January 1991, a decertification petition was filed.

The votes by the majority of the eligible voters were

challenged. Th

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.