White Motor Corp. v. Malone, No. 3-75 Civ. 162.

CourtUnited States District Courts. 8th Circuit. United States District Court of Minnesota
Writing for the CourtALSOP
Citation412 F. Supp. 372
PartiesWHITE MOTOR CORPORATION and White Farm Equipment Company, Plaintiffs, v. E. I. MALONE, Commissioner of Labor and Industry for the State of Minnesota, Defendant.
Decision Date19 March 1976
Docket NumberNo. 3-75 Civ. 162.

412 F. Supp. 372

WHITE MOTOR CORPORATION and White Farm Equipment Company, Plaintiffs,
v.
E. I. MALONE, Commissioner of Labor and Industry for the State of Minnesota, Defendant.

No. 3-75 Civ. 162.

United States District Court, D. Minnesota, Third Division.

March 19, 1976.


412 F. Supp. 373

Curtis L. Roy, and Peter Hendrixson, Dorsey, Marquart, Windhorst, West & Halladay, Minneapolis, Minn., together with Frank C. Heath, Jones, Day, Reavis & Pogue, Cleveland, Ohio, for plaintiffs.

Warren Spannaus, Atty. Gen., State of Minnesota by James P. Gerlach, Richard S. Slowes, and Kathryn A. Rush, Sp. Asst. Attys. Gen., St. Paul, Minn., for defendant.

MEMORANDUM AND ORDER

ALSOP, District Judge.

This matter is presently before the court on motions by all parties. Plaintiffs are seeking a summary judgment, or in the alternative, a preliminary injunction on Count I of the Amended Complaint; defendant is requesting the court to abstain. Plaintiffs have brought this action challenging the constitutionality of the Minnesota Private Pension Benefits Protection Act, Minn.Stat. § 181B.01 et seq. (1974) (hereinafter the "Minnesota Pension Act").

Plaintiff White Motor Corporation (hereinafter "White Motor") is an Ohio corporation with its principal place of business in Cleveland, Ohio. White Farm Equipment Company (hereinafter "White Farm") is a Delaware corporation with its principal place of business in Oakbrook, Illinois and is a wholly owned subsidiary of White Motor.

The defendant, E. I. Malone, is the Commissioner of Labor and Industry for the State of Minnesota and is obligated to perform certain duties under the Minnesota Pension Act.

The facts giving rise to the dispute between the parties are lengthy. In 1962, White Motor organized a subsidiary, Minneapolis-Moline, Inc. Minneapolis-Moline, Inc. on January 1, 1963 acquired the assets of Motec Industries, Inc. (formerly called the Minneapolis-Moline Company) which had operated farm manufacturing plants at Hopkins, Minnesota and Minneapolis, Minnesota, on Lake Street. In 1969 Minneapolis-Moline, Inc. changed its name to White Farm. White Farm still operates the Hopkins plant but closed the Lake Street plant in June, 1972.

In 1950, a pension plan was established for the employees of the predecessor of White Farm. This pension plan was carried forward in some form in each of the subsequent years that collective bargaining agreements were entered into: 1954, 1959, 1962, 1965, 1968 and 1971. Since 1955, the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America and certain of its local

412 F. Supp. 374
unions (hereinafter collectively referred to as the "UAW") have been the bargaining representatives for production and maintenance employees and clerical employees at the Lake Street and Hopkins plants.1 Pension benefits resulting from collective bargaining agreements continued to increase after the purchase of Motec Industries by White Motor in 1963

The 1971 version of the pension plan is the plan pertinent to this action. The 1971 plan contained a provision, first inserted in the 1968 plan, requiring the funding of unpaid past service liability. Unpaid past service liability is at any given time, the excess of the accrued liability of the pension fund over the present value of the assets of the fund. The 1971 plan provided:

Section 9.05
The unfunded net deficiency as of January 1, 1971 shall be amortized over a thirty-five (35) year period from January 1, 1971. The deficiencies resulting from benefit increases effective January 1, 1972 and January 1, 1973 shall be funded uniformly over a thirty-five (35) year period from January 1, 1972 and January 1, 1973 respectively.

Deferred funding of past service liability is a common feature of pension plans. In essence, past service liability is met by continued business operations and continued contributions by the employer to the pension fund. If the plan is terminated, the pension fund will not be increased and as a result some past service liability will remain unfunded.

In language unchanged since the 1950 pension plan, the 1971 plan provided for the payment of pensions as follows:

Section 6.09 — Source of Pensions
Pensions shall be payable only from the Fund and rights to pensions shall be enforceable only against the Fund.
* * * * * *
Section 6.17 — No Other Benefits
No benefits other than those specifically provided for are to be provided under this Plan. No employee shall have any vested right under the Plan prior to his retirement and then only to the extent specifically provided herein.
* * * * * *
Section 9.04 — Rights of Employees in the Fund
No employees, participant or pensioner shall have any right to, or interest in, any part of any Trust Fund created hereunder, upon termination of employment or otherwise, except as provided under this Plan and only to the extent therein provided. All payments of benefits as provided for in this Plan shall be made only out of the Fund or Funds of the Plan and neither the Company nor any Trustee nor any Pension Committee or Member thereof shall be liable therefor in any manner or to any extent.

During the 1968 and 1971 negotiations with UAW, Pension Guarantees applicable to the Lake Street and Hopkins plants were given by White Motor. These Guarantees provided that, upon termination of the pension plan, benefits were guaranteed by White Motor at a designated benefit level. By giving the Guarantees, White Motor assumed a direct liability of approximately $7,000,000.

After suffering substantial losses from 1969 to 1971 at its Minneapolis-Moline Division, White Motor in January, 1972 informed the UAW that it intended to close its Minneapolis-Moline plants. Operations at the Lake Street plant were terminated in June 1972 and the plant was closed and the building subsequently razed. Operations at the Hopkins plant have continued.

Section 10.02 of the pension plan provided that "the Company shall have the sole right at any time to terminate the entire Plan." Relying on this language, White Motor attempted to terminate the pension plan on June 30, 1972. The UAW challenged White Motor's attempt to terminate

412 F. Supp. 375
the plan prior to expiration of the collective bargaining agreement. An arbitrator's award and subsequent litigation upholding that award determined that the plan could not be terminated until the expiration of the collective bargaining agreement on May 1, 1974.2 The pension plan was thereafter terminated on May 1, 1974

At the time the Lake Street plant was closed, the pension fund was only partially funded and there was a net deficiency in the fund of approximately $14,000,000.

As of January 1, 1975 there were 981 retirees under the pension plan and 233 persons eligible for deferred pensions by reason of having attained age 40 and 10 years of service at the time of the termination of their employment with White Farm. In addition there were 44 terminated employees who at the time of the termination of their employment had 10 years of service but had not attained the age of 40. Ten years of continuous service is the minimum number of years an employee must have worked for White Motor before becoming eligible for benefits under the plan, but to be so eligible, he must also have attained the age of 40. As of January 1, 1975 there were 260 active employees at the Hopkins plant who were participants in the plan.

On April 10, 1974, the Minnesota Pension Act, Minn.Stat. § 181B.01 et seq., was enacted into law. The title of the Act describes it as

"an act relating to private pensions; imposing an obligation upon certain employers who terminate pension plans; providing for the enforcement and method of payment of such obligations." Minn. Laws 1974, ch. 437.

Minn.Stat. §§ 181B.03-.06 impose a "pension funding charge" directly against any employer who ceases to operate a place of employment or a pension plan. Such charge shall be equal in amount to the vested and nonvested benefits described in the statutory provisions. These sections essentially provide that any employee who has completed ten or more years of credited service under a pension plan has, upon termination of that plan or of his place of employment, an automatically vested right to all pension benefits he would have received had the particular plan not been terminated or had the place of business not been closed.

Minn.Stat. §§ 181B.09-.12 provide that the Commissioner of Labor and Industry, after investigation, shall certify amounts owing by an employer. That certified amount is declared, under § 181B.11, to "be a lien upon the employer's assets." The pension funding charge is used to purchase an annuity payable to the employee when he reaches normal retirement age.

Pursuant to the provisions of the Pension Act, Malone notified White Motor and White Farm on August 18, 1975 that they owed a pension funding charge of $19,150,053.

Plaintiffs contend that the Pension Act conflicts with the pension plan in the following manner: (1) the Act provides employees vested rights to pension benefits which would not be available under the plan. Compare §§ 181B.03-.06 with Sections 6.17 and 9.04 of the plan; (2) to the extent of any deficiency in the pension fund, the Act requires satisfaction of pension benefits from the general funds of the employer. §§ 181B.03-.06. The pension plan provides that benefits shall be paid only out of the pension fund and that the Company shall not be liable to any extent. Sections 6.09 and 9.04 of the plan; and (3) the Act completely changes the consequences of terminating the pension plan.

PROCEDURAL POSTURE

Plaintiffs filed their original complaint in May, 1975 alleging that the Minnesota Pension Act is unconstitutional on several grounds. In July, 1975 plaintiffs amended their complaint to include an allegation that the Act is in conflict with the provisions and policies of the National Labor Relations Act, 29 U.S.C. § 151 et...

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8 practice notes
  • Raybestos-Manhattan, Inc. v. Glaser, RAYBESTOS-MANHATTA
    • United States
    • New Jersey Superior Court
    • 5 Agosto 1976
    ...a recent opinion and judgment by the United States District Court for the District of Minnesota. In White Motor Corp. v. E. I. Malone, 412 F.Supp. 372 (D.C.Minn.1976), the court ruled adversely to the position Page 195 taken by plaintiff herein on the same argument directed to a similar sta......
  • DeRoche v. All American Bottling Corp., Civ. No. 98-675 (JRT/RLE).
    • United States
    • United States District Courts. 8th Circuit. United States District Court of Minnesota
    • 5 Noviembre 1998
    ...as their bargaining agent. See, San Diego Building Trades Council v. Garmon, supra at 246, 79 S.Ct. 773; White Motor Corp. v. Malone, 412 F.Supp. 372, 378 (D.Minn.1976), rev'd. on other grounds, 545 F.2d 599 (8th Cir.1976). In so holding, the Garmon Court explained: "Our concern is with del......
  • Malone v. White Motor Corporation, No. 76-1184
    • United States
    • United States Supreme Court
    • 3 Abril 1978
    ...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 ......
  • Bell v. Employee Sec. Ben. Ass'n, No. 77-4066.
    • United States
    • United States District Courts. 10th Circuit. United States District Courts. 10th Circuit. District of Kansas
    • 22 Agosto 1977
    ...(S.D.N.Y. 1976); aff'd 553 F.2d 93 (2d Cir. 1977), cert. denied, ___ U.S. ___, 98 S.Ct. 71, 54 L.Ed.2d 82; White Motor Corp. v. Malone, 412 F.Supp. 372, 380 n. 6 (D.Minn.), rev'd on other grounds 545 F.2d 599 (8th Cir. 1976); Fleck v. Spannaus, 412 F.Supp. 366, 368 (D.Minn.1976); Note, Insu......
  • Request a trial to view additional results
8 cases
  • DeRoche v. All American Bottling Corp., Civ. No. 98-675 (JRT/RLE).
    • United States
    • United States District Courts. 8th Circuit. United States District Court of Minnesota
    • 5 Noviembre 1998
    ...as their bargaining agent. See, San Diego Building Trades Council v. Garmon, supra at 246, 79 S.Ct. 773; White Motor Corp. v. Malone, 412 F.Supp. 372, 378 (D.Minn.1976), rev'd. on other grounds, 545 F.2d 599 (8th Cir.1976). In so holding, the Garmon Court explained: "Our concern is with del......
  • Raybestos-Manhattan, Inc. v. Glaser, RAYBESTOS-MANHATTA
    • United States
    • New Jersey Superior Court
    • 5 Agosto 1976
    ...a recent opinion and judgment by the United States District Court for the District of Minnesota. In White Motor Corp. v. E. I. Malone, 412 F.Supp. 372 (D.C.Minn.1976), the court ruled adversely to the position Page 195 taken by plaintiff herein on the same argument directed to a similar sta......
  • Malone v. White Motor Corporation, No. 76-1184
    • United States
    • United States Supreme Court
    • 3 Abril 1978
    ...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 ......
  • Bell v. Employee Sec. Ben. Ass'n, No. 77-4066.
    • United States
    • United States District Courts. 10th Circuit. United States District Courts. 10th Circuit. District of Kansas
    • 22 Agosto 1977
    ...(S.D.N.Y. 1976); aff'd 553 F.2d 93 (2d Cir. 1977), cert. denied, ___ U.S. ___, 98 S.Ct. 71, 54 L.Ed.2d 82; White Motor Corp. v. Malone, 412 F.Supp. 372, 380 n. 6 (D.Minn.), rev'd on other grounds 545 F.2d 599 (8th Cir. 1976); Fleck v. Spannaus, 412 F.Supp. 366, 368 (D.Minn.1976); Note, Insu......
  • Request a trial to view additional results

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