Pension Benefit Guaranty Corp. v. R. A. Gray & Co.

PETITIONER: Pension Benefit Guaranty Corp.
RESPONDENT: R. A. Gray & Co.
LOCATION: Eleventh Judicial Circuit of Florida - Dade County

DOCKET NO.: 83-245
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 467 US 717 (1984)
ARGUED: Apr 16, 1984
DECIDED: Jun 18, 1984

ADVOCATES:
Baruch A. Fellner - on behalf of the Appellants
Baruch Fellner - for appellants
Thomas M. Triplett - on behalf of the Appellees

Facts of the case

Question

Media for Pension Benefit Guaranty Corp. v. R. A. Gray & Co.

Audio Transcription for Oral Argument - April 16, 1984 in Pension Benefit Guaranty Corp. v. R. A. Gray & Co.

Warren E. Burger:

We will hear arguments first this morning in Pension Benefit Guaranty Corporation against Gray and the consolidated case.

Mr. Fellner, you may proceed whenever you are ready.

Baruch A. Fellner:

Mr. Chief Justice, and may it please the Court, this case is on appeal from the Ninth Circuit holding an Act of Congress unconstitutional with respect to its brief retroactive period.

We submit that in making the statute in question retroactive, Congress met the rationality standard under the Turner Elkhorn case, and acted in accord with tax law precedent.

The statute at issue, the Multi-Employer Pension Plan Amendments Act of 1980 was passed after approximately a year and a half of Congressional deliberation in order to improve the financial stability of over 2,000 multi-employer plans covering approximately eight million participants.

Congress perceived that the greatest threat to plan stability was employer withdrawals, particularly in declining industries.

Such withdrawals cause what Congress called a downward spiral.

They reduce the amount of contributions which support retirement benefits, necessitating higher contributions from remaining employers, and thereby cauterizing their withdrawals from these plans, obviously jeopardizing the plan's solvency.

Now, Congress was aware of the fact that as of 1978, 10 percent of all plans covering about 1.3 million participants were experiencing financial difficulties, and therefore, in order to achieve the goal of overall multi-employer plan stability, Congress rationally sought to eliminate what it observed were the incentives encouraging the flight from plans, and to cushion the financial impact of such withdrawals.

The Multi-Employer Act assesses against a withdrawing employer a reasonable share of the costs of funding retirement benefits.

We submit--

William H. Rehnquist:

What do we mean, exactly, Mr. Fellner, by the term "withdrawing employer"?

Baruch A. Fellner:

--A withdrawing employer is an employer who has contributed to a multi-employer plan and chooses to, as defined under the statute, cease his obligations, cease contributing to a multi-employer plan.

William H. Rehnquist:

Well, now, how does that come about contractually?

The next time the collective bargaining agreement is up, the employer just says, I won't agree to make any contributions to the pension fund?

Baruch A. Fellner:

There are a variety of circumstances.

One, the expiration of the collective bargaining agreement.

A withdrawal can also be incurred as a result of simply closing a business or selling a business.

A variety of different and I dare say complex circumstances under which withdrawals do in fact occur under the statute, not necessarily linked to the collective bargaining agreement.

Now, Congress, we submit, rationally concluded that withdrawing employers should pay their fair share of the unfunded liabilities they leave behind rather than shifting those liabilities to remaining employers, to employers who continue to contribute to multi-employer plans.

Withdrawal liability therefore, we submit, was the cornerstone of the legislative recommendations submitted at the request of Congress by the Pension Benefit Guaranty Corporation on February 27, 1979.

From that date forward, every bill, every Committee report incorporated a retroactive date, and that was in order to eliminate the incentive to withdraw during the legislative process.

Indeed, I would submit that it was the very openness and thoroughness of the legislative process which necessitated the retroactive period.

Congress was rational in legislating retroactively where to do otherwise--

John Paul Stevens:

Mr. Fellner, may I ask one question?

It is a little bit like Justice Rehnquist's in a way.

Could you just, when it is convenient for you, kind of explain to me how the magnitude of the withdrawal liability is calculated?

Baruch A. Fellner:

--Withdrawal liability is calculated as follows, Justice Stevens.

It is a proportion of the unfunded vested benefits.

Unfunded vested benefits are defined as the actuarial present value of the retirement benefits that have to be paid over time.