Beck v. PACE International Union - Oral Argument - April 24, 2007

Beck v. PACE International Union

Media for Beck v. PACE International Union

Audio Transcription for Opinion Announcement - June 11, 2007 in Beck v. PACE International Union

Audio Transcription for Oral Argument - April 24, 2007 in Beck v. PACE International Union

John G. Roberts, Jr.:

We'll hear argument next in Case 05-1448, Beck versus PACE International Union.

Mr. Baker.

M. Miller Baker:

Thank you, Mr. Chief Justice, and may it please the Court:

After filing for bankruptcy, Crown Vantage decided to terminate 12 over-funded pension plans.

By terminating these pension plans, Crown was able to provide its plan participants with 100 percent of their accrued benefits and at the same time recover almost $5 million in surplus plan assets for the benefits of both Crown's creditors as well as plan members who made individual contributions to those pension plans.

After Crown made the decision to terminate these pension plans, it received a merger proposal from the PACE union to merge the pension plan into the PACE multi-employer pension plan.

Crown rejected that proposal.

The Ninth Circuit held that Crown breached its fiduciary duty by not sufficiently considering that merger proposal.

This Court should reverse the Ninth Circuit for two separate and independent reasons.

First, merger is a nonfiduciary plan sponsor function and Crown could not have had a fiduciary duty to consider the merger proposal by PACE.

A series of this Court's decisions beginning with Curtiss-Wright and continuing with Lockheed, Hughes aircraft and Pegram hold that decisions to create, to modify, to terminate, or to amend pension plans are sponsor functions, settlor functions under trust law, that are not subject to ERISA fiduciary duties.

Ruth Bader Ginsburg:

I could understand that if the plan is being set up or if there's going to be a change to the multiemployer plan while the business is ongoing.

But in this situation, you, you say if the employer elects to have an annuity, then choosing which insurance company is going to supply the annuity, that would be a fiduciary function.

Well, this is, the termination, the merger that's proposed here, is instead of having an annuity we'll put the assets into this other plan.

It's quite different from choosing a form for an ongoing operation and saying, we're out of it and we're now going to try to distribute the assets in the way that will best protect the beneficiaries.

M. Miller Baker:

Justice... Justice Ginsburg, that's not correct.

The answer to that question is that a decision to terminate a plan or a decision to merge a plan requires that a plan sponsor consider as a threshold matter several factors.

First, what will the plan form be of the acquiring plan?

And PACE's proposal would have required the merger into a multiemployer plan as opposed to a single employer plan.

That goes to the form of the plan.

PACE's proposal would have resulted in a new plan sponsor and a new plan administrator.

It would have resulted in a new dispute resolution mechanism.

That goes to the content of the plan.

And finally, most importantly, the PACE proposal would have gone to the level of benefits provided by the plan and the level of benefits, as this Court has repeatedly recognized is a decision that is a plan sponsor decision.

Anthony M. Kennedy:

Well if you're correct and this was a sponsor decision, not a fiduciary decision, let me ask you when you're wearing, when the company is wearing its sponsor hat and says we're going to terminate this plan, does it have a duty to consider the best interests and the security of the employees, number one, when it picks an insurance company?

It can't pick some flaky insurance company if there is a much more solid insurance company, can it?

M. Miller Baker:

Justice Kennedy, it depends upon the function at issue.

If the function is the selection of an insurance company to provide the annuity, that is a plan administrator function and it is subject to ERISA fiduciary duties.

But you is to analyze it from--

Anthony M. Kennedy:

But if have this duty to consider the interest of the employees in selecting the, the insurance company, in selecting the amount of the annuity, etcetera, if you have that duty it seems to me that that's a fiduciary duty.