Nachman Corporation v. Pension Benefit Guaranty Corporation

PETITIONER: Nachman Corporation
RESPONDENT: Pension Benefit Guaranty Corporation
LOCATION: Rincon Island

DOCKET NO.: 78-1557
DECIDED BY: Burger Court (1975-1981)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 446 US 359 (1980)
ARGUED: Jan 07, 1980
DECIDED: May 12, 1980

ADVOCATES:
Henry Rose - on behalf of the Respondent
M. Jay Whitman - on behalf of Respondent UAW
Robert W. Gettleman - on behalf of the Petitioner

Facts of the case

Question

Media for Nachman Corporation v. Pension Benefit Guaranty Corporation

Audio Transcription for Oral Argument - January 07, 1980 in Nachman Corporation v. Pension Benefit Guaranty Corporation

Warren E. Burger:

We will hear arguments next in Nachman Corporation v. Pension Benefit Guaranty Corporation.

Robert W. Gettleman:

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

My name is Robert Gettleman and I am the attorney for the petitioner, Nachman Corporation.

This case presents one of the first opportunities for this Court to examine the Employee Retirement Income Security Act of 1974, known by its acronym ERISA, and the first occasion directly involving interpretation of specific exceptions to that statute.

Significantly, it involves the operation of ERISA at its initial stages.

The Nachman Corporation was an employer which terminated a pension plan in December of 1975, and which under the terms of that plan was not required to continue to fund any more payments under the terminated plan.

Prior to ERISA, Nachman was governed by the Internal Revenue Code and the common law of contracts, and those laws allowed an employer to do just what Nachman did, terminate a plan and under its terms not be liable for further contributions.

The issue in the case is whether ERISA prior to 1976 changed the rules to require an employer such as Nachman to continue to fund the plan.

The case requires an examination both of the terms of ERISA itself and of the various provisions of the plan.

And first I would like to just briefly describe ERISA.

That statute was enacted in September of 1974 as an attempt by Congress to cure many of the problems which were plaguing private pensions in this country at that time.

Among those problems was the issue involved when a plan terminated with insufficient funds to pay all the benefits under the plan.

In Titles I and II of ERISA, and it was a four-title Act, the statute prescribes for the first time that a plan must provide a certain minimum level of benefits and that these benefits have to be what was defined in the Act as non-forfeitable benefits.

That means unconditional and legally enforceable benefits.

It also provided that the employer must undertake to fund those benefits.

In Title IV of the Act, ERISA established a termination insurance program to be operated by the Pension Benefit Guaranty Corporation, the respondent in this case today.

Warren E. Burger:

Do you equate that statutory language legally enforceable to mean legally collectable?

Robert W. Gettleman:

Under the facts of this case, I think that they are synonymous because the rights under the particular plan that Nachman had with its employees were not enforceable or collectable because of the various provisions of the plan which made -- which precluded further employer liability, which allocated benefits on termination in a particular type of order, and benefits that are at issue in this litigation, Mr. Chief Justice, are those benefits which were not funded.

There were benefits which were funded under the Nachman plan and to that extent we are not in litigation.

We are only talking about the unfunded benefits.

They were neither collectable nor enforceable nor unconditional and they did not meet the statutory term of non-forfeitable or the statutory definition of that term.

And it is important to remember that the PBGC guarantees under Title IV only non-forfeitable benefits under the terms of a plan.

And it is also important to recognize, as this Court has done, that Congress when it enacted ERISA paid great attention to the types of problems which would be created by the new requirements of this statute.

It did not make the entire statute effective immediately but provided grace periods during which certain provisions would be phased on before compliance was required.

Among those provisions was the minimum benefit provisions of Titles I and II and the non-forfeitability requirement of Titles I and II.

Those provisions did not take effect until plan years beginning in January 1976.

William H. Rehnquist:

Mr. Gettleman, is it your position that after January 1, 1976, an employer and a union could not negotiate a plan in which disclaimed personal liability on the part of the employer --

Robert W. Gettleman:

Basically, yes.

The Internal Revenue Service has dealt with types of limitation clauses which might be permissible even after 1976.

There is no question that the type of clauses in the Nachman plan would not have been permitted after 1976.