Local 144 Nursing Home Pension Fund v. Demisay Page 2

Local 144 Nursing Home Pension Fund v. Demisay general information

Media for Local 144 Nursing Home Pension Fund v. Demisay

Audio Transcription for Oral Argument - January 11, 1993 in Local 144 Nursing Home Pension Fund v. Demisay

Antonin Scalia:

What's your theory?

Henry Rose:

--Justice Scalia, our position is that section 302(c)(5) does not regulate the transfer of plan assets whatsoever.

Antonin Scalia:

Whatsoever, so long as the trust is... complies with the statute on its face.

I mean, on its face the trust has to comply with the statute.

Henry Rose:

That is correct.

Antonin Scalia:

But so long as it does on its face, if the officer... if the trustee violates the trust, and surreptitiously conveys money to union officials, you think you can only get at that under ERISA.

Henry Rose:

There... it might constitute criminal activity, also.

It might constitute a criminal violation either under State law or under Federal law independently, but you're right, I would relegate that to a regulation under ERISA, clearly.

David H. Souter:

So the subsection 302 regulates solely the conduct of the employer in making the payment in the first place.

Henry Rose:

That is its focus, absolutely.

As we've noted, the section 302(c)(5) requires employer contributions to be for the sole and exclusive benefit of employees, but those are for the employees of all of the contributing employers, and that is precisely what the petitioner funds have done.

John Paul Stevens:

I don't understand why it wouldn't violate subsection... Justice Scalia's hypothetical wouldn't violate 302(c)(5).

Because the funds were not held in trust for the purposes specified in the statute, but were given to the union official as a bribe, they wouldn't comply with the statute.

Henry Rose:

Oh, I think that... I'm sorry, I think that would violate it.

The money would have to be used for the benefits of contributing employers.

John Paul Stevens:

The statutory restrictions, and if it goes beyond that and it's a payoff to the union leader, why then, it would violate the statute.

Henry Rose:

Yes, I think that is correct.

That would be a criminal violation under 302, yes.

Sandra Day O'Connor:

Mr. Rose, there is a mechanism, is there not, whereby plan assets and corresponding liabilities could be transferred to a new plan, is there not?

Henry Rose:

There is under ERISA, yes, Your Honor.


Sandra Day O'Connor:

But the procedures for that were not followed here, I take it.

Henry Rose:

They clearly were not followed.

With regard to the pension plan here, the ERISA provisions are very clear.

The ERISA provisions bar a transfer unless certain statutory conditions are met.

One of them is review by the Pension Benefit Guarantee Corporation.

This was not done.

Furthermore, such a transfer is at the discretion of the transferor plan, and clearly the petitioners did not initiate the proposed transfer, and third, the... any such transfer would have to be a transfer not only of benefits or of assets, but of liabilities, and there is and there was proposed no transfer of liabilities.

There is no contention in this case that the contributions were used for purposes other than benefits or employees of contributing employers.

The Second Circuit--