Washington Star Co. v. Intern. Typographical

• Citation: 582 F. Supp. 301
• Decision Date: 09 February 1983
• Docket Number: Civ. A. No. 82-1568.
• Parties: The WASHINGTON STAR COMPANY, Plaintiff, v. INTERNATIONAL TYPOGRAPHICAL UNION NEGOTIATED PENSION PLAN, Defendant.
• Court: U.S. District Court — District of Columbia

582 F. Supp. 301

The WASHINGTON STAR COMPANY, Plaintiff, v. INTERNATIONAL TYPOGRAPHICAL UNION NEGOTIATED PENSION PLAN, Defendant.

Civ. A. No. 82-1568.

United States District Court, District of Columbia.

February 9, 1983.

Lawrence D. Levien, David P. Callet, Betty Leach, Akin, Gump, Strauss, Hauer & Feld, Washington, D.C., for plaintiff.

Michael F. O'Toole, Robinson, Silverman, Pearce, Aronsohn & Berman, New York City, for defendant.

MEMORANDUM OPINION

JUNE L. GREEN, District Judge.

The plaintiff, the Washington Star Company (the Star), challenges the constitutionality of withdrawal liability provisions of the Multiemployer Pension Plan Amendments Act of 1980 (the Act or MPPAA). For the reasons stated below, the Court finds the challenged provisions constitutional. Defendant's motion for summary judgment is granted, and this action is dismissed.

I. Factual Background and Challenged Provisions of the Act

The defendant is the International Typographical Union Negotiated Pension Plan (the Plan). The Plan was created as a trust in September 1966 to administer an employee pension trust fund. It is funded by contributions of employers maintaining collective bargaining agreements with locals of the International Typographical Union (ITU). A board of trustees administers the Plan. Trustees are selected in equal numbers by the ITU Executive Council and by employers contributing to the trust. The Plan is a multiemployer plan, since more than one employer is required to contribute pursuant to a number of collective bargaining agreements between different locals of the ITU and various employers. See 29 U.S.C. § 1002(37) (Supp.1982) (definition of multiemployer plan).

In or about 1967, the Star began contributing to the Plan pursuant to the terms of a collective bargaining agreement with the Columbia Typographical Union, a local of the ITU. When the Star stopped publishing its newspaper and terminated all employees covered by the Plan on August 7, 1981, it ceased contributions and withdrew from the Plan. The Plan then assessed against the Star a withdrawal liability of $485,007, payable in six quarterly installments of $79,024 and a final quarterly installment of $51,843 (totaling $525,987 including interest).

The Multiemployer Pension Plan Amendments Act amended the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001 et seq., and portions of the Internal Revenue Code of 1954. One of those changes increased liability for employers withdrawing from multiemployer plans on or after April 29, 1980.

The Act permits the trustees of a multiemployer plan to choose one of three methods to calculate an employer's withdrawal liability. 29 U.S.C. § 1391(a) (Supp. 1982). The statutory presumptive method chosen by the Plan here makes a withdrawing employer who was contributing to the Plan on April 29, 1980 liable for its proportional share, based on the employer's percentage of total plan contributions, of all the unfunded vested benefits accumulated in the Plan prior to April 29, 1980. Id., § 1391(b)(1)(B). The withdrawing employer is also liable for its proportional share of the Plan's unfunded vested benefits for subsequent plan years in which the employer contributed. Id., § 1391(b)(1)(A).

After paying two quarterly installments, the Star filed this action against the Plan. On June 18, 1982, the Court denied plaintiff's request for a preliminary injunction to enjoin collection of the assessed liability until a ruling on the merits. On October 21, 1982, the Court stayed discovery pending decision on the Plan's motion for summary judgment.

The Star argues that the statutory presumptive method of calculating withdrawal liability, 29 U.S.C. § 1391(b) (Supp.1982), permits a taking of property without due process of law in violation of the Fifth Amendment to the United States Constitution because a withdrawing employer's liability is not limited to the amount necessary to fund its own employees' vested benefits. Stated in reverse, the Star asserts that the Constitution forbids placing liability on an employer withdrawing from a multiemployer plan for amounts attributable to the unfunded vested benefits of employees of other contributors.

Other provisions of the Act, the Star contends, violate procedural due process rights under the Fifth Amendment and the Seventh Amendment right to a jury trial. The Act provides that the trustees of a plan determine initially the liability of a withdrawing employer. 29 U.S.C. § 1399(b)(1) (Supp.1982). Disputes over the liability assessed must be taken to arbitration. To prevail, the withdrawing employer must show by a preponderance of the evidence that the plan's determination was unreasonable or clearly erroneous. Id., § 1401(a)(3). To overturn the arbitrator's findings in federal district court, the appealing party must show by a clear preponderance of the evidence that the findings were incorrect. Id., § 1401(c). The Star argues that the trustees' statutory obligation to preserve and enhance plan assets disqualifies them as impartial decisionmakers. Further, the absence of a right to jury trial offends the Seventh Amendment, according to the Star.

II. Multiemployer Pension Plans

Before assessing the background and constitutionality of the challenged provisions of the Act, it is relevant to explain briefly some characteristics of multiemployer pension plans.

In single employer pension plans, all contributions go toward benefits for employees of the sole contributing employer. In a multiemployer plan, all of the assets are pooled to pay benefits of all participants, without regard to which contributing employer the participant worked for.

The contributions of a particular employer do not match benefits paid to that employer's employees for several reasons. First, employees receive credit for service in the industry prior to their employer joining the plan. When the Star joined the Plan, for example, its employees received past service credit for years of continuous employment as journeymen before 1967. Some Star employees received past service credit from as early as 1941. This past service credit constituted an unfunded liability of the Plan since contributions had not been received to pay these credits. Affidavit of Carl Hatton, administrator of the Plan, in support of motion for summary judgment and motion to stay discovery, ¶ 9; Affidavit of Michael Kaplan, senior vice president of Martin E. Segal Company, actuaries for the Plan, June 15, 1982, ¶ 3. Second, the amount a participant receives as pension benefits depends on how long the pensioner lives and the age at which he retires or becomes disabled. Affidavit of Carl Hatton, supra, ¶ 9. Third, an employer may contribute on behalf of employees whose pension rights never become vested. These contributions are not returned to the employer; they are credited to the general assets of the plan. Id.

The assets of multiemployer plans are accumulated through employer contributions and earnings on investment of the trust fund. If the assets are sufficient to pay employee benefits when they become due, the plan is deemed fully funded. A plan has unfunded liability to the extent that the estimated future value of its assets is insufficient to meet the plan's estimated future payment obligations. 29 U.S.C. § 1393(c) (Supp.1982). The ITU Negotiated Pension Plan calculated its unfunded present value of vested benefits through December 31, 1980 to be $96,279,500. Affidavit of Michael O'Toole in support of motion for summary judgment and motion to stay discovery, ¶ 17; see 29 U.S.C. § 1391(b)(1)(A) and (B) (Supp.1982) (explaining calculation of unfunded benefits are based on plan years). The Plan's assets total over $200 million and its income in 1981 was over $20 million. Affidavit of Michael Kaplan, supra, ¶ 10.

The House Education and Labor Committee emphasized in its report accompanying the MPPAA bill that multiemployer plans have benefited employees by enabling them to move from one contributing employer to another without losing service credit. In addition, the Report noted that employees do not lose service credit if their employer ceases contributing to the plan. H.Rep. No. 96-869, Part I, 96th Cong., 2d Sess. 53 (1980) U.S.Code Cong. & Admin. News 1980, 2918. Multiemployer plans also give certain advantages to employers: the added stability of having many contributing employers, decreased administrative costs, and the ability to hire new, skilled employees who do not lose accrued pension benefits.

III. Background to the Act

The MPPAA was passed in large measure to preserve the financial integrity of multiemployer pension plans. Currently, about 2,000 multiemployer plans cover approximately 8,000,000 participants, workers, and retirees. Prior to the passage of ERISA in 1974, financial instability was not an identifiable problem because "participation in such plans and the industries they covered generally continued to grow in the 2½ decades before passage." H.Rep. No. 96-869, Part I, 96th Cong., 2d Sess. 54 (1980), U.S.Code Cong. & Admin. News 1980, p. 2922. In recent years,

external economic factors such as technological obsolescence in certain crafts such as printing ... have resulted in a significant decline in the number of contributors or the number of active employees in the contribution base, and an increasing proportion of retirees to active workers.

Id.

ERISA established a termination insurance program for single employer plans to insure plan participants against loss of benefits in the event their plan terminated with insufficient assets to pay benefits. The Pension Benefit Guaranty Corporation (PBGC) was formed as an independent corporation within the Department of Labor to administer the termination insurance program. See 29 U.S.C. § 1302. Congress did not make the PBGC insurance program effective immediately for multiemployer plans, but permitted the PBGC to insure them on a case by case...