Keith Fulton & Sons, Inc. v. New England Teamsters and Trucking Industry Pension Fund, Inc., 83-1804

• Decision Date: 23 May 1985
• Docket Number: No. 83-1804,83-1804
• Citation: 762 F.2d 1137
• Parties: , 53 USLW 2618, 6 Employee Benefits Ca 1641, 18 Fed. R. Evid. Serv. 391 KEITH FULTON & SONS, INC., Plaintiff, Appellant, v. NEW ENGLAND TEAMSTERS AND TRUCKING INDUSTRY PENSION FUND, INC., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 1137

762 F.2d 1137

78 A.L.R.Fed. 639, 53 USLW 2618, 6

Employee Benefits Ca 1641,

18 Fed. R. Evid. Serv. 391

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

No. 83-1804.

United States Court of Appeals First Circuit.

Argued Dec. 5, 1984.

Decided May 23, 1985.

Anthony M. Feeherry, Boston, Mass., with whom Joseph L. Cotter, Susan K. Hoffman, Henry C. Dinger, 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.

Mitchell L. Strickler, Deputy Gen. Counsel, Washington, D.C., with whom Henry Rose, General Counsel, Baruch A. Fellner, Associate Gen. Counsel, J. Stephen Caflisch, Sp. Counsel, Peter H. Gould, Deputy Asst. Gen. Counsel, Terence G. Craig, David F. Power, Washington, D.C., and Louise E. Cayne, Nathan Lewin, Martin D. Minsker and Miller, Cassidy, Larroca & Lewin, were on brief for Intervenor Pension Ben. Guar. Corp.

Before CAMPBELL, Chief Judge, ALDRICH, COFFIN, BOWNES, BREYER and TORRUELLA, Circuit Judges.

COFFIN, Circuit Judge.

Appellant Keith Fulton & Sons, Inc. (Fulton) originally challenged the constitutionality of the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), 29 U.S.C. Secs. 1381, et seq., Pub.L. No. 96-364, 94 Stat. 1208 (1980), on a number of grounds. A panel of this court upheld most of the act, but found that certain presumptions in the statute, 29 U.S.C. Sec. 1401(a)(3), deprived employers of procedural due process. Because of the importance of the issue, the unanimous authority of other circuits against the panel's view, ¹ and the questions raised by the parties following the panel decision, we decided to reconsider whether the prescribed method of assessing withdrawal liability, with its statutory presumptions, is constitutional. After a careful review of the statute, its legislative history, and the opposing arguments, we have concluded that the statute does meet the requirements of procedural due process.

I. BACKGROUND

The facts surrounding Fulton's withdrawal from the New England Teamsters and Trucking Industry Pension Fund (the Fund) are set out in the opinion of the panel at 762 F.2d 1124 (1st Cir.1984). Although that opinion also describes the history of the MPPAA and some of its provisions, we believe it necessary to review certain aspects of that discussion as background for this decision.

The MPPAA was enacted as an amendment to the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Secs. 1001, et seq., and was designed, in part, to strengthen multiemployer pension plans financially by discouraging employers from withdrawing and leaving a plan with unfunded liabilities. H.R.Rep. No. 869, 96th Cong., 2d Sess. 67, reprinted in 1980 U.S.Code Cong. & Ad.News 2918, 2935 [hereinafter House Report]. It does so by requiring a withdrawing employer to pay its share of the shortfall; this payment is known as the "withdrawal liability". The statute provides that the amount of withdrawal liability is calculated by the trustees of the pension plan. If an employer disputes either the amount or the fact of liability, it can negotiate with the pension plan and, if there is no resolution, the dispute must be arbitrated. 29 U.S.C. Sec. 1401(a)(1). Either party to the arbitration may appeal that decision to a district court. 29 U.S.C. Sec. 1401(b)(2).

The constitutional objections which we consider at this time focus on the method of calculating the withdrawal liability and the deference accorded that calculation. Fulton argues that it is a violation of due process for the trustees to determine an employer's withdrawal liability in the first instance, since their goal always would be to maximize the amount in order to swell the pension fund's coffers. The trustees' natural bias is compounded, it is argued, by the statutory presumptions of correctness given to that initial determination. Subsection A of 29 U.S.C. Sec. 1401(a)(3) provides that, for purposes of arbitration proceedings under the MPPAA, "any determination made by a plan sponsor under sections 1381 through 1399 of this title and section 1405 of this title [all relating to calculation of withdrawal liability] is presumed correct unless the party contesting the determination shows by a preponderance of the evidence that the determination was unreasonable or clearly erroneous." Subsection B of Sec. 1401(a)(3) provides that:

"In the case of the determination of a plan's unfunded vested benefits for a plan year, the determination is presumed correct unless a party contesting the determination shows by a preponderance of evidence that--

(i) the actuarial assumptions and methods used in the determination were, in the aggregate, unreasonable (taking into account the experience of the plan and reasonable expectations), or

(ii) the plan's actuary made a significant error in applying the actuarial assumptions or methods."

A district court reviewing the arbitrator's award must then presume the arbitrator's findings of fact to be correct unless they are rebutted by "a clear preponderance of the evidence." 29 U.S.C. Sec. 1401(c). Fulton contends that these presumptions make the trustees' determinations "virtually unassailable", and they argue that the inability to meaningfully challenge the initial calculation is a denial of due process.

II. DISCUSSION

We begin our analysis with the recognition that:

" '[i]t 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. See, e.g., Ferguson v. Skrupa, 372 U.S. 726 [83 S.Ct. 1028, 10 L.Ed.2d 1347] (1963); Williamson v. Lee Optical Co., 348 U.S. 483, 487-488 [75 S.Ct. 461, 464, 99 L.Ed. 563] (1955).' " Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15, 96 S.Ct. 2882, 2892, 49 L.Ed.2d 752 (1976).

Fulton's argument that 29 U.S.C. Sec. 1401(a)(3) is unconstitutional must, therefore, receive rigorous scrutiny. In determining whether due process is satisfied, we are required to balance the private interest that will be affected, the risk of error inherent in the challenged procedure, and the government's interest in using the procedure, Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 903, 47 L.Ed.2d 18 (1976), but we also "are mindful that 'due process is flexible and calls for such procedural protections as the particular situation demands,' " Republic Industries v. Teamsters Joint Council, 718 F.2d 628, 640, (quoting Morrissey v. Brewer, 408 U.S. 471, 481, 92 S.Ct. 2593, 2600, 33 L.Ed.2d 484 (1972)). Thus, our inquiry is not whether there is a fairer method for assessing withdrawal liability, but only whether the method Congress chose is fair enough. The statute can not be arbitrary, but it need not be perfect.

In a sense, Fulton takes issue with two separate aspects of the MPPAA arbitration procedures: the use of a non-neutral party, the fund trustees, to calculate the liability in the first instance, and the use of presumptions to support that initial calculation. While statutory presumptions are not uncommon and have been upheld frequently, ² the original panel in this case was concerned about the due process implications of granting the presumptions on behalf of apparently non-neutral trustees. Although we recognize that the trustees come to their task of calculating withdrawal liability with a bias, we do not believe that their lack of neutrality, even when aided with the statutory presumptions, deprives Fulton and other employers of due process. We do not minimize the hardship to Fulton, a sole stockholder corporation assessed a withdrawal liability of $468,637 when it withdrew from the Fund after the City of Cambridge acquired its land in a federally subsidized taking for a public transportation project. We simply rule that the action Congress took was within its discretion.

We emphasize first that we do not perceive the trustees to be performing an adjudicatory role when they calculate the withdrawal liability, and so we do not believe we in any way mar the purity of the judicial process in deciding that their bias is not of constitutional dimension. Rather than serving as judicial decisionmakers, the trustees are simply part of an administrative procedure set up by Congress for reaching an initial determination of withdrawal liability which is then challengeable in arbitration and in court. "If there is a liability, someone has to fix it", Shelter Framing Corp. v. Carpenters Pension Trust, 543 F.Supp. 1234, 1244 (C.D.Cal.1982), aff'd in part and rev'd in part on other grounds, 705 F.2d 1502 (9th Cir.1983), rev'd sub nom. Pension Benefit Guaranty Corp. v. R.A. Gray & Co., --- U.S. ----, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984), and Congress simply assigned the duty to the persons with the most information. See Republic Industries, 718 F.2d at 640 n. 13. The trustees, moreover, do not have unbridled discretion in fixing the amount of liability. They are required to compute the employer's debt according to "detailed and explicit statutory guides", Textile Workers Pension v. Standard Dye & Finishing, 725 F.2d at 855.

A brief description of how the trustees determine withdrawal liability underscores the difference between their work and that of a judge. The trustees must use an accepted actuarial method for computing the unfunded vested liability of a plan, 29 U.S.C. Sec. 1393(a), which is the total amount owed to participating employees at the time of the withdrawal. ³ The Act also sets out four methods which may be used for allocating this amount among employers. 29 U.S.C. Sec. 1391(c). Although the trustees unquestionably are...