Raybestos-Manhattan, Inc. v. Glaser

• Citation: 365 A.2d 1,144 N.J.Super. 152
• Decision Date: 05 August 1976
• Docket Number: INC,RAYBESTOS-MANHATTA
• Parties: , a corporation of the State of New Jersey, Plaintiff, v. Sidney GLASER, Director of the Division of Taxation of New Jersey, et al., Defendants, and John Leogrande, et al., Intervening-Defendants.
• Court: Superior Court of New Jersey

Page 152

144 N.J.Super. 152

365 A.2d 1

RAYBESTOS-MANHATTAN, INC., a corporation of the State of New Jersey, Plaintiff, v. Sidney GLASER, Director of the Division of Taxation of New Jersey, et al., Defendants and John Leogrande, et al., Intervening-Defendants.

Superior Court of New Jersey Chancery Division.

Aug. 5, 1976.

Robert P. Hazlehurst, Jr., and Joseph S. Fortunato, Morristown, for plaintiff (Pitney, Hardin & Kipp, Morristown, attorneys; Kenneth Perko, of the New York Bar, New York City, of counsel).

Michael E. Goldman, Deputy Atty. Gen., for defendants (William F. Hyland, Atty. Gen., attorney).

Pat DiIanni, Clifton, for the intervening defendants (Steven Gilson, Union, of counsel and on the brief).

LENOX, J.S.C.

In this declaratory judgment action plaintiff, Raybestos-Manhattan, Inc. challenges the constitutional validity of the Private Nonvested Pension Benefits Protection Tax Act, L.1973, c. 124 ('the act') under the Constitutions of New Jersey and the United States.

The act, which after a one-year extension expired July 1, 1975, imposed upon certain employers ceasing operations at a place of employment in New Jersey a tax 'equal to the total amount of nonvested pension benefits' of employees who had 'completed 15 years of covered service under the pension plan of the employer' prior to the cessation of operations. Pursuant to the act the Director of the Division of Taxation determined that plaintiff was liable for taxes in the amount of $13,474,357.29. Plaintiff disputed its liability and instituted the present action seeking a judicial declaration of the invalidity of the act.

All parties seek judgment upon the basis of the operative facts which have been stipulated by a pleading filed for that purpose incorporating by reference many voluminous documents. This stipulation was supplemented by other facts submitted upon offers of proof under an agreement admitting the truth of the facts contained in the offers but raising a dispute as to their evidential admissibility. The court has ruled upon the objections interposed, and those offers which survived the objections now also form a part of the factual record.

Plaintiff is a New Jersey corporation which for many years had owned and operated a manufacturing facility in Passaic, producing a wide range of industrial rubber products distributed in a number of states and foreign countries. The genesis of this litigation was a public announcement by plaintiff on October 27, 1972 of its intention to close its Passaic facility and cease the manufacture and sale of industrial rubber products in the United States by June 15, 1973, with the consequence that plaintiff would no longer maintain a place of employment in New Jersey. As of October 27, 1972 plaintiff employed approximately 1,270 persons at its Passaic plant, of which number approximately 1,070 were members of the noncontributory Raybestos-Manhattan Inc. Employee Retirement Plan ('pension plan') executed in 1968 by plaintiff and the two labor unions which represented plaintiff's employees, the Manhattan Rubber Workers Independent Union, Inc. and District 15 of the International Association of Machinists and Aerospace Workers, AFL--CIO ('unions').

The pension plan provided for employee pensioned retirement at age 60 after 30 years of service or at age 65 after 20 years of service. When plaintiff closed its Passaic facility on June 15, 1973, approximately 880 of the 1,070 members of the pension plan did not qualify for pensioned retirement under the terms thereof.

On November 6, 1972 plaintiff negotiated and executed a termination agreement with the unions, wherein plaintiff agreed to provide termination payments and temporary insurance coverage to terminated employees not eligible for pensioned retirement under the pension plan. Plaintiff since has paid over $1,500,000 to its former employees pursuant to this agreement.

On November 20, 1972, 24 days after the announcement of the closing of the Passaic operation, there was introduced in the General Assembly Assembly Bill 1563, entitled 'An Act Imposing a Tax Upon Certain Employers for the Benefit of Employees with Nonvested Pension Rights' and cited as 'The Emergency Pension Act of 1972' ('Assembly bill'). The Assembly bill assessed a tax upon every employer of 50 or more persons within the State of New Jersey who ceases to operate a place of employment in the State, said tax being the lesser of (1) the highest weekly payroll at the place of employment during the calendar year next preceding the date of cessation of operations, and (2) the 'amount of all nonvested pensions of all persons employed by such employer during the year prior to the date the employer ceases to operate such place of employment.'

The Senate Committee on Labor, Industry and Professions, after considering the Assembly bill, on February 22, 1973 voted out a substitute entitled 'An Act Imposing a Tax Upon Certain Employers, Providing for the Assessment and Collection thereof, and Providing for Disposition of the Revenues Therefrom' and cited as 'The Private Nonvested Pension Benefits Protection Tax Act' which was passed by the Senate on March 19, 1973 and by the General Assembly on March 29, 1973. This statute, which is the subject of this litigation, provides in essence that a tax be assessed upon every employer of 500 or more persons within the State who 'ceases to operate a place of employment' in the State, said tax being equal to the

* * * total amount of nonvested pension benefits of such employees of the employer who have completed 15 years of covered service under the pension plan of the employer and whose employment was or will be terminated because of the employer's ceasing to operate a place of employment within this State and whose nonvested pension benefits have been or will be forfeited because of such termination of employment, less the amount of such nonvested pension benefits which are compromised or settled to the satisfaction of the commissioner (of Labor and Industry) as provided in this act.

The act defines 'ceases to operate a place of employment' as

* * * either the complete termination of operations at a place of employment or a substantial reduction in the number of employees at a place of employment as part of a plan or in connection with an intent to move the business operations at such place of employment outside of the State.

The act further provides that each employee who has completed 15 years of covered service under the pension plan 'shall be entitled to make a claim * * * for an immediate payment of the current value of his nonvested pension benefits or a deferred pension benefit * * *.' The act provided that it was to take effect immediately upon signature by the Governor and expire and be inoperative after July 1, 1974, but was subsequently extended for one year by L.1974, c. 66, and finally expired on July 1, 1975.

The act became law on May 9, 1973, and one week later plaintiff, in compliance with the act, notified the Commissioner of Labor and Industry that it intended to close its Passaic plant and cease all business operations in New Jersey on June 15, 1973. On May 29, 1973 the Director of the Division of Taxation entered judgment against plaintiff by filing with the Clerk of the Superior Court a $12,000,000 certificate of debt reflecting his preliminary estimate of plaintiff's tax liability under the act. The Director notified plaintiff, on August 15, 1973, of its tax liability of $13,474,357.29 and that payment thereof was due within 15 days. Plaintiff having failed to pay the assessed amount, a second certificate of debt was filed on October 2, 1973 in the amount of $1,474,357.29, reflecting the tax liability due at that time.

The present action was commenced on June 27, 1973, seeking a declaratory judgment that the act is invalid under the Constitutions of New Jersey and the United States, or, if valid, that the act does not apply to plaintiff. By order of this court on November 2, 1973, the action was bifurcated so as to permit the counts of the complaint relating to the constitutionality of the act to proceed; the order further permitted 22 former employees of plaintiff to intervene as defendants. The parties have extensively briefed the constitutional issues presented and have submitted the matter to the court for decision on cross-motions for judgment upon the stipulated facts.

Plaintiff has mounted a broad-based constitutional attack upon the validity of the act, alleging the following infirmities:

I. The act contains a classification which is arbitrary and without rational basis, rendering it void as (A) special legislation, and (B) violative of the equal protection guarantees of the Constitutions of New Jersey and the United States.

II. The act is arbitrary and unreasonable, serves no legitimate public or governmental purpose sufficient to justify an exercise of the taxing or police powers, and constitutes a taking of private property without just compensation, in derogation of the Constitutions of New Jersey and the United States.

III. The act impairs the rights and obligations of plaintiff under its agreements with the unions in derogation of the Constitutions of New Jersey and the United States.

IV. The act constitutes an unlawful intrusion by the State into an area of labor relations which has been preempted by federal legislation, in violation of the Constitution of the United States.

V. The act unreasonably and unlawfully restricts the free flow of commerce, in violation of the Constitution of the United States.

VI. The act violates the requirement that all revenue-raising bills shall originate in the General Assembly under the Constitution of New Jersey.

Plaintiff presents a two-fold attack on the classification contained in the act, (A) that it is void as special legislation in contravention of N.J.Const. (1947), Art IV, § VII, pars. 8, 9 and (B) that it denies plaintiff equal protection of the...