Keith Fulton & Sons, Inc. v. New England Teamsters and Trucking Industry Pension Fund

• Decision Date: 06 August 1984
• Docket Number: No. 83-1804,83-1804
• Parties: , 5 Employee Benefits Ca 1761 KEITH FULTON & SONS, INC., Plaintiff, Appellant, v. NEW ENGLAND TEAMSTERS AND TRUCKING INDUSTRY PENSION FUND, et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 1124

762 F.2d 1124

39 Fed.R.Serv.2d 898, 5 Employee Benefits Ca 1761

KEITH FULTON & SONS, INC., Plaintiff, Appellant, v. NEW ENGLAND TEAMSTERS AND TRUCKING INDUSTRY PENSION FUND, et

al., Defendants, Appellees.

No. 83-1804.

United States Court of Appeals, First Circuit.

Argued Jan. 4, 1984.

Decided Aug. 6, 1984.

Anthony M. Feeherry, Boston, Mass., with whom Joseph L. Cotter, Susan K. Hoffman, and Goodwin, Procter & Hoar, Boston, Mass., were on brief, for plaintiff, appellant.

James T. Grady, Boston, Mass., with whom Gabriel O. Dumont, Jr., and Grady, Dumont & Dwyer, Boston, Mass., were on brief, for defendants, appellees.

J. Stephen Caflisch, Sp. Counsel, Washington, D.C., with whom Henry Rose, Gen. Counsel, Baruch A. Fellner, Associate Gen. Counsel, Peter H. Gould, Terence G. Craig, and David F. Power, Attys., Washington, D.C., were on brief, for Pension Benefit Guaranty Corp., amicus curiae.

Before CAMPBELL, Chief Judge, ALDRICH, Circuit Judge, and PETTINE, ^* Senior District Judge.

PETTINE, Senior District Judge.

In this case plaintiff/appellant Keith Fulton & Sons, Inc., is challenging the constitutionality of certain provisions of the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) as applied to it. The MPPAA amended various provisions of the Employee Retirement Security Act of 1974 (ERISA), 29 U.S.C. Sec. 1001 et seq. The district court below granted summary judgment on all counts in favor of the defendants. We affirm in part and reverse in part.

I. BACKGROUND

The MPPAA was enacted in 1980 to cure certain perceived problems in ERISA as it applied to multiemployer pension plans. Under ERISA, the Pension Benefit Guaranty Corporation (PBGC), a government corporation, protects employees covered by pension plans by insuring their benefits against the fund failing or terminating with insufficient funds. The PBGC's program is funded by premiums collected from pension funds. 29 U.S.C. Sec. 1307. Under ERISA as it was originally enacted, an employer who withdrew from a plan incurred a contingent liability. If a pension plan terminated, all the employers of that plan who had contributed to it at any time within the five years preceding its termination were collectively liable to the PBGC for the amounts the PBGC expended.

Each individual employer's liability could not exceed 30% of its net worth. If the fund did not terminate within the five years after the employer ceased contributing, that employer had no further liability.

Congress directed the PBGC to prepare a report on the impact of the insurance program on multiemployer plans and their impact on the program itself. The PBGC reported that ERISA's contingent liability provisions gave employers an incentive to withdraw from multiemployer plans to avoid liability if the plan terminated in the future. Moreover, the PBGC told Congress that about 2% of the multiemployer plans, covering about 5% of all the participants in multiemployer plans, were in danger of terminating within five years and that 10% of the plans, covering about 15% of all the participants in multiemployer plans, might terminate within ten years. The PBGC concluded that the premiums paid to it were insufficient to cover its expected liabilities under the scheme.

Congress responded by enacting the MPPAA in 1980. The MPPAA sought to discourage voluntary withdrawals from multiemployer plans, and to reduce the possible liability of the PBGC, by imposing a mandatory liability on all withdrawing employers. This liability is a portion of the plan's unfunded vested liability (which is the difference between the present value of the fund's vested benefits and the value of its assets). The MPPAA was signed into law on September 26, 1980; however, a retroactive provision imposed the MPPAA's withdrawal liability on any employer which ceased contributing to a multiemployer pension plan on or after April 29, 1980.

II. FACTS

Keith Fulton & Sons, Inc. (Fulton) was a heavy equipment hauler and railroad car unloader located in Cambridge, Massachusetts. On November 10, 1980, the City of Cambridge acquired Fulton's land in a federally subsidized taking for a public transportation project. After looking for a new location, Mr. Keith Fulton, the corporation's sole stockholder, decided to cease all of Fulton's business operations on December 31, 1980. Mr. Fulton has consistently alleged that his business was profitable and that its cessation was involuntary.

For many years, Fulton had entered into collective bargaining agreements with Teamster Local 379. As a part of these contracts, Fulton was a contributor to the New England Teamsters and Trucking Industry Pension Fund (the Fund), a multiemployer pension plan. At the time that Fulton last renewed its contract with the Teamsters, the Fund's Trust Agreement stated that "[t]he financial liability of any Employer shall in no event exceed the obligation to make contributions as set forth in its applicable collective bargaining agreement with the Union or Unions." Agreement and Declaration of Trust, art. VI, Sec. 7, quoted in Stipulation of Undisputed Facts at 3, App. at 594.

Since Fulton withdrew from the Fund after April 29, 1980, the effective date of MPPAA withdrawal liability, the Fund sent Fulton a letter on September 1, 1981, which demanded that Fulton pay a withdrawal liability of $468,637. This demand was based on the MPPAA which was signed into law three months before Fulton closed its business and a month and a half before Fulton's land was taken. The $468,637 was payable in 61 "easy" monthly installments of $9,508 and a final installment of $1,298, for a total including interest of $581,286.

Fulton filed this suit on October 28, 1981. Judge Skinner granted the Fund's motion for summary judgment on August 3, 1983. This appeal followed.

III. SUBSTANTIVE DUE PROCESS

Fulton's primary claim is that the application of the MPPAA's withdrawal liability to it violates its substantive due process rights. Fulton bases this argument on two distinct lines of reasoning. First, Fulton urges us to invalidate this application of the MPPAA under a contract clause-type of due process analysis discussed by the Seventh Circuit in Nachman Corp. v. Pension Benefit Guaranty Corp., 592 F.2d 947 (7th Cir.1979), aff'd 446 U.S. 359, 100 S.Ct. 1723, 64 L.Ed.2d 354 (1980) (affirmed by Supreme Court on statutory grounds only). Second, Fulton urges that this application of the Act also does not pass constitutional muster under the more traditional standard of due process review found in Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 96 S.Ct. 2882, 49 L.Ed.2d 752 (1976).

The contract clause applies only to state legislation. However, in Nachman, the plaintiff contended that fifth amendment due process and the contract clause had similar reaches. Noting that "several authorities have suggested that the analysis employed in Contract Clause cases is also relevant to judicial scrutiny of Congressional enactments under the Due Process Clause," and that "[b]oth employ a means-end rationality test," the Seventh Circuit analyzed Nachman's due process claim under contract clause cases. The court explicitly did not decide that the heightened scrutiny of the contract clause was appropriate for due process analysis; it stated that "since we are convinced that ERISA withstands the scrutiny employed under the Contract Clause cases, we need not decide whether the two clauses in fact impose identical restraints on legislative impairment of contracts." Nachman, 592 F.2d at 959. See Peick v. Pension Benefit Guaranty Corp., 724 F.2d 1247, 1263, 1264 n. 22 (7th Cir.1983). Fulton's brief contends that this court adopted Nachman 's analysis in Pension Benefit Guaranty Corp. v. Ouimet Corp., 630 F.2d 4, 12 (1st Cir.1980), cert. denied 450 U.S. 914, 101 S.Ct. 1356, 67 L.Ed.2d 339 (1981).

In the Ouimet case, this court did not adopt the analysis used in Nachman. Indeed, on the page of Ouimet which Fulton cites, this court refused to accept Ouimet Corporation's contention that its due process challenge to ERISA should be analyzed under contract clause cases. Ouimet, 630 F.2d at 12 (rejecting the contract clause analysis of Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 98 S.Ct. 2716, 57 L.Ed.2d 727 (1978) and the Lochner era due process analysis of Railroad Retirement Board v. Alton Railroad Co., 295 U.S. 330, 55 S.Ct. 758, 79 L.Ed. 1468 (1935), in favor of Turner Elkhorn ).

Since oral argument in this case, the Supreme Court has unanimously rejected the use of contract clause-type analysis in due process challenges to federal legislation. Pension Benefit Guaranty Corp. v. R.A. Gray & Co., --- U.S. ----, ----, 104 S.Ct. 2709, 2718, 81 L.Ed.2d 601 (1984). After noting that the contract clause applies only to the states and that the Constitutional Convention rejected a similar restraint on the federal government, id. at ---- n. 9, 104 S.Ct. at 2719 n. 9 (citing 5 Elliot's Debates 546 (2nd ed. 1876); 2 The Records of the Federal Convention of 1787, at 619 (M. Farrand 1911)), the Court stated:

We have never held, however, that the principles embodied in the Fifth Amendment's Due Process Clause are coextensive with prohibitions existing against state impairments of pre-existing contracts. See, e.g., Philadelphia, Baltimore & Washington Railroad v. Schubert, 224 U.S. 603 [32 S.Ct. 589, 56 L.Ed. 911] (1912). Indeed, to the extent that recent decisions of the Court have addressed the issue, we have contrasted the limitations imposed on States by the Contract Clause with the less searching standards imposed on economic legislation by the Due Process Clauses. See United States Trust Co. v. New Jersey, 431 U.S. 1, 17, n. 13 [97 S.Ct. 1505, 1515, n. 13, 52 L.Ed.2d 92] (1977). And, although we have noted that retrospective civil legislation may offend due process if it is "particularly 'harsh and oppressive,' " ibid. (quoting Welch v. Henry, 305 U.S. 134, 147 [59 S.Ct. 121, 126, 83...