Commissioner v. Keystone Consol. Industries, Inc.

PETITIONER: Commissioner
RESPONDENT: Keystone Consol. Industries, Inc.
LOCATION: White House

DOCKET NO.: 91-1677
DECIDED BY: Rehnquist Court (1991-1993)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 508 US 152 (1993)
ARGUED: Feb 22, 1993
DECIDED: May 24, 1993

Christopher J. Wright - on behalf of the Petitioner
Raymond P. Wexler - on behalf of the Respondent

Facts of the case


Media for Commissioner v. Keystone Consol. Industries, Inc.

Audio Transcription for Oral Argument - February 22, 1993 in Commissioner v. Keystone Consol. Industries, Inc.

William H. Rehnquist:

We'll hear argument first this morning in No. 91-1677, the Commissioner of Internal Revenue v. Keystone Consolidated Industries.

Mr. Wright.

Christopher J. Wright:

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

Under the funding rules established by ERISA, Keystone Consolidated Industries owed $9.6 million to the pension trust it sponsored in 1983.

Keystone lost $21 million that year and decided not to pay the pension trust in cash.

Instead, it contributed five truck terminals to fulfill its funding obligation to the pension trust.

The next year it contributed real estate to partly satisfy its funding obligation to the plan.

Now, Keystone recognized that these transfers of property were sales or exchanges for purposes of the income tax laws, but Keystone maintains that they are not sales or exchanges for purposes of 26 U.S.C. 4975(c)(1)(A).

Subsection (c)(1)(A), the provision at issue in this case, bars any direct or indirect sale or exchange between an employer and the pension plan it sponsors.

John Paul Stevens:

Mr. Wright, can I just get one question out of the way early?

Would the trustee of the fund have been empowered to refuse to accept that kind of payment and insisted on cash?

Christopher J. Wright:

Yes, the trustee could have.


John Paul Stevens:

So, this was acceptable to the trust to accept the assets in this form.

Christopher J. Wright:

--In this case, the trustee, who is also a director of Keystone Consolidated Industries, accepted the property.

John Paul Stevens:

You mentioned the director.

Is there any claim that the... I mean, does that make a difference in the legal issue whether the director is one who might not be totally independent or something like that?

Christopher J. Wright:


There might also be a fiduciary duty breach action in a case of this sort.

In fact, many such breaches were alleged and found by the district court in some related litigation, but this issue--

But do we... for the purpose--

Christopher J. Wright:

--the issue before this Court, did not focus on the--

John Paul Stevens:

--For the purpose of the legal issue we have, is it correct that we should assume, A, that the trustee has... is an independent person and, B, has the authority to refuse to take anything except cash?

Christopher J. Wright:


Yes, and it's probably the case that the trustee probably should have refused to accept this property.

John Paul Stevens:

That we shouldn't--

Christopher J. Wright:

But they did not.

Harry A. Blackmun:

--All right.

Mr. Wright, I take it there's no question of the valuation of these properties.

Christopher J. Wright: