Malone v. White Motor Corporation

Decision Date03 April 1978
Docket NumberNo. 76-1184,76-1184
Citation55 L.Ed.2d 443,98 S.Ct. 1185,435 U.S. 497
PartiesE. I. MALONE, Commissioner of Labor and Industry for Minnesota, Appellant, v. WHITE MOTOR CORPORATION and White Farm Equipment Company
CourtU.S. Supreme Court

The 1971 version of a pension plan negotiated by appellee company and the union representing its employees provided that pensions were to be payable only from a fund established under the plan. Funding of the pension plan was in part to be on a deferred basis; the excess of accrued liability of the fund's assets was to be met through contributions from the employer's continuing operations. Though the company had the right to terminate the plan, it guaranteed to pay benefits amounting to $7 million above the fund's assets. A few weeks before appellee, on May 1, 1974, exercised its termination right, Minnesota's Private Pension Benefits Protection Act (Pension Act) was enacted, which imposed "a pension funding charge" directly against any employer who ceased to operate a place of employment or a pension plan. After appellant state official had certified that appellee by application of the Pension Act owed a pension funding charge of over $19 million, appellee brought this suit in District Court, challenging the constitutionality of the Pension Act, inter alia, on the ground that it interfered with the process of collective bargaining sanctioned by the National Labor Relations Act (NLRA) and therefore was pre-empted by the NLRA. Section 10(b) of the federal Welfare and Pension Plans Disclosure Act (Disclosure Act) provided that the Disclosure Act shall not exempt any person from liability provided by any present or future federal or state law affecting the operation of pension plans. Section 10(a) provided that the Disclosure Act shall not be construed to prevent any State from obtaining additional information relating to a pension plan "or from otherwise regulating such plan." The District Court, having taken note of the § 10(b) disclaimer, found sufficient evidence of congressional intent that the Pension Act was not pre-empted by federal law, and ruled in favor of appellant. The Court of Appeals reversed, holding that by purporting to override the existing pension plan in several respects, the Pension Act encroached upon subjects that Congress had committed for determination to the collective-bargaining process. The court also concluded that § 10(b) of the Disclosure Act related only to state statutes governing those obligations of trust undertaken by persons managing employment benefit funds, the violation of which gives rise to criminal or civil penalties, and that therefore there was no basis for construing the Disclosure Act as leaving a State with power to change the substantive terms of pension plan agreements. Held :

1. The NLRA neither expressly nor by implication forecloses state regulatory power over pension plans that may be the subject of collective bargaining. Sections 10(b) and 10(a) of the Disclosure Act, together with the legislative history of that statute, indicate Congress' intention to preserve state regulatory authority over pension plans, including those resulting from collective bargaining. Congress was concerned not only with corrupt pension plans but also with the possibility that those that were honestly managed would be prematurely terminated by the employer, leaving employees without funded pensions at retirement age; and the Disclosure Act clearly anticipated a broad regulatory role for the States. Pp. 504-514.

2. That the Pension Act applies to pre-existing collective-bargaining agreements does not render it pre-empted, since it does not render it more or less consistent with congressional policy. Appellee's claim of unfair retroactive impact may be considered in the context of appellee's due process and impairment-of-contract claims, which are not before the Court and which the District Court will consider on remand. Pp. 514-515.

8 Cir., 545 F.2d 599, reversed.

Richard B. Allyn, St. Paul, Minn., for appellant.

Allan A. Ryan, Jr., Washington, D. C., for the United States, as amicus curiae, by special leave of Court.

Frank C. Heath, Cleveland, Ohio, for appellees.

Mr. Justice WHITE delivered the opinion of the Court.

A Minnesota statute, the Private Pension Benefits Protection Act, Minn.Stat. § 181B.01 et seq. (1976) (Pension Act), passed in April 1974, established minimum standards for the funding and vesting of employee pensions. The question in this case is whether this statute, which since January 1, 1975, has been pre-empted by the federal Employee Retirement Income Security Act of 1974 (ERISA),1 was pre-empted prior to that time by federal labor policy insofar as it purported to override or control the terms of collective-bargaining agreements negotiated under the National Labor Relations Act (NLRA). A Federal District Court held that it was not, 412 F.Supp. 372 (Minn.1976), but the Court of Appeals for the Eighth Circuit disagreed and held the Pension Act invalid. 545 F.2d 599 (1976). Because the case fell within our mandatory appellate jurisdiction pursuant to 28 U.S.C. § 1254(2), we noted probable jurisdiction. 434 U.S. 813, 98 S.Ct. 49, 54 L.Ed.2d 69. We reverse.


In 1963, White Motor Corp. and its subsidiary, White Farm Equipment Co. (hereafter collectively referred to as appellee) purchased from another company two farm equipment manufacturing plants, located in Hopkins, Minn., and Minneapolis, Minn. (on Lake Street). The employees at these plants, represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), were covered by a pension plan established through collective bargaining.

Under the 1971 collective-bargaining contract, the pension plan provided that an employee who attained the age of 40 and completed 10 or more years of credited service with the company was entitled to a pension. The amount of the pension would depend upon the age at which the employee retired. In language unchanged since 1950, the 1971 plan provided that "[p]ensions shall be payable only from the Fund, and rights to pensions shall be enforceable only against the Fund." App. 155.2 The Plan, however, was to be funded in part on a deferred basis. The unpaid past service liability—the excess of accrued liability over the present value of the assets of the Fund—was to be met through contributions by the employer from its continuing operations.3

Section 10.02 of the Plan provided that "[t]he Company shall have the sole right at any time to terminate the entire plan." During the 1968 and 1971 negotiations, however, the UAW obtained from appellee guarantees that, upon termination, pensions for those entitled to them would remain at certain designated levels, though lower than those specified in the Plan.4 By virtue of these guarantees, appellee assumed a direct liability for pension payments amounting to $7 million above the assets in the Fund.

Appellee exercised its contractual right to terminate the Pension Plan on May 1, 1974.5 A few weeks before, however, the Pension Act had been enacted. This statute imposed "a pension funding charge" directly against any employer who ceased to operate a place of employment or a pension plan. This charge would be sufficient to insure that all employees with 10 or more years of service would receive whatever pension benefits had accrued to them, regardless of whether their rights to those benefits had "vested" within the terms of the Plan. The funds obtained through the pension funding charge would then be used to purchase an annuity payable to the employee when he reached normal retirement age. Although the Pension Act did not compel an employer to adopt or continue a pension plan, it did guarantee to employees with 10 or more years' service full payment of their accrued pension benefits.

Pursuant to the Pension Act, the appellant, Commissioner of Labor and Industry of the State of Minnesota, undertook an investigation of the pension plan termination here involved and later certified that the sum necessary to achieve compliance with the Act was $19,150,053. Under the Pension Act, a pension funding charge in this amount became a lien on the assets of appellee. Appellee promptly filed this suit in Federal District Court.

Appellee's complaint, as amended, asserted violations of the Supremacy Clause, the Contract Clause, and the Due Process and Equal Protection Clauses of the Fourteenth Amendment of the United States Constitution. The Supremacy Clause claim was based on the argument that the Pension Act was in conflict with several provisions of the NLRA,6 as amended, 29 U.S.C. § 151 et seq., because it "interferes with the right of Plaintiffs to free collective bargaining under federal law and . . . vitiates collective bargaining agreements entered into under the authority of federal law, by imposing upon Plaintiffs obligations which, by the express terms of such collective bargaining agreements, Plaintiffs were not required to assume." App. A-9—A-10. Appellee moved for partial summary judgment or, alternatively, for a preliminary injunction based on the pre-emption claim.

Distinguishing Local 24, International Brotherhood of Teamsters v. Oliver, 358 U.S. 283, 79 S.Ct. 297, 3 L.Ed.2d 312 (1959), and relying on evidence of congressional intent contained in the federal Welfare and Pension Plans Disclosure Act (Disclosure Act), 72 Stat. 997, as amended, 76 Stat. 35, 29 U.S.C. § 301 et seq., the District Court held that the Pension Act was not pre-empted by federal law. 412 F.Supp. 372 (Minn.1976). On appeal, the Court of Appeals for the Eighth Circuit held that the Pension Act was pre-empted by federal labor law, and reversed the District Court. 545 F.2d 599 (1976). The reason was that the Pension Act purported to override the terms of the existing pension plan, arrived at through collective bargaining, in at least three ways: It granted...

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