Opinion ID: 465260
Heading Depth: 2
Heading Rank: 2

Heading: Statutory Interpretation--29 U.S.C. Sec. 1405(a) or 29 U.S.C. Sec. 1405(b)

Text: 9 In this case of first impression for an appellate court, we find ourselves faced with three different interpretations of the provisions of 29 U.S.C. Sec. 1405. 10 Geltman contends that the arbitrator misinterpreted the scope of Sec. 1405(a) by restrictively interpreting that section to apply only when there is a sale of assets, but no insolvency. Geltman further argues that the arbitrator was erroneous in finding that this was an insolvency liquidation, and, therefore, that Sec. 1405(b) applied. Geltman finds fault with the arbitrator's preclusive interpretation of Sec. 1405(a) because (1) it contradicts the clear language of the statute; (2) it is inconsistent with legislative intent and the underlying policy of ERISA and MPPAA; and (3) it renders Sec. 1405(a)'s limitation virtually meaningless when read in conjunction with Sec. 1405(b). 11 A slightly different interpretation is advanced in an amicus brief submitted by the Pension Benefit Guaranty Corporation (PBGC). The PBGC argues that Sec. 1405(b) is inapplicable unless an employer is determined to be insolvent under Sec. 1405(d)(1) and that insolvency cannot be determined unless the reduction in withdrawal liability provided for in Sec. 1405(a) is first applied. PBGC argues, in the alternative, that even if the prerequisites of Sec. 1405(b) are met (i.e., Geltman is insolvent under Sec. 1405(d)(1)), Sec. 1405(b) does not preclude the application of Sec. 1405(a). The PBGC's interpretation gives the withdrawing employer the ability to choose that section which produces the lowest withdrawal liability. 12 The Fund argues that the plain language of Sec. 1405 mandates the application of Sec. 1405(b) and precludes the application of Sec. 1405(a) in insolvency liquidations. Therefore, according to the Fund, there is no choice for insolvent employers between the application of Sec. 1405(a) and Sec. 1405(b). The Fund contends that the application of Sec. 1405(b) to insolvency liquidation is consistent with legislative history and the context and purpose of the statute. The Fund further contends that Sec. 1405(d)(1) refers and applies to Sec. 1405(b) and because Sec. 1405(b) and Sec. 1405(a) are mutually exclusive, there is no need to determine the insolvency of the employer by first applying Sec. 1405(a). 13 We find the Fund's interpretation to be most consistent with the structure and plain language of the statute. Therefore, the proper analysis to be used in applying the various sections of 29 U.S.C. Sec. 1405 involves the following two-step process. First, it must be decided whether the employer is an insolvent employer. This is done by looking to the provisions of Sec. 1405(d)(1) without regard to Sec. 1405(a). Second, if the employer is insolvent, then it is necessary to go to the provisions of Sec. 1405(b) to determine any limitations on the employer's withdrawal liability. If, and only if, the employer is not insolvent, do the limitations in Sec. 1405(a) apply. Under this analysis, we find that Geltman was insolvent and, as a consequence, Sec. 1405(b) applies. Therefore, the district court was correct in its confirmation of the arbitration award in favor of the Fund. 14 We find support for our analysis in the plain language and the structure of the statute, as well as the underlying policies of ERISA and MPPAA. The plain language of 29 U.S.C. Sec. 1405, 1 indicates that both Sec. 1405(a) and Sec. 1405(b) could apply to the liquidation or dissolution of an employer. Section 1405(a)(2) refers to the liquidation or dissolution value of the employer after a sale or exchange to determine the unfunded vested benefits allocable to that employer. To qualify for the limitation provisions of Sec. 1405(a), there need only be a bona fide sale of all or substantially all of the employer's assets in an arms-length transaction to an unrelated party. Initially, it would appear that Geltman qualifies for Sec. 1405(a) limitations. However, it is clear that Sec. 1405(b) also applies to liquidations and dissolutions. This is apparent from the opening sentence which states, [i]n the case of an insolvent employer undergoing liquidation or dissolution.... (Emphasis added). But, this section is more specific. It states that [i]n the case of an insolvent employer ..., any limitations on withdrawal liability will be determined differently from those determined in Sec. 1405(a). Fundamental maxims of statutory construction require that a specific statutory section qualifies a more general section and will govern, even though the general provisions, standing alone, would encompass the same subject. Monte Vista Lodge v. Guardian Life Ins. Co. of America, 384 F.2d 126, 129 (9th Cir.1967), cert. denied, 390 U.S. 950, 88 S.Ct. 1041, 19 L.Ed.2d 1142 (1968). See also Markair, Inc. v. C.A.B., 744 F.2d 1383, 1385 (9th Cir.1984) (specific terms of statute override general terms). The fact that both Secs. 1405(a) and 1405(b) begin with in the case of is further evidence that the sections are to operate exclusive of each other and cover separate and distinct situations. Furthermore, while Sec. 1405(b) specifically mentions insolvency liquidations, Sec. 1405(a) makes no such reference. Therefore, if an employer is insolvent, the provisions of Sec. 1405(b) apply. If the employer is not insolvent, and the other conditions of Sec. 1405(a) are met, the provisions of that section apply. 15 There is implicit support for this analysis in Granada Wines v. New England Teamsters & Trucking, 748 F.2d 42 (1st Cir.1984). In that case it was held that Sec. 4225(b) [Sec. 1405(b) ] governs only liquidations, and Sec. 4225(a) [Sec. 1405(a) ] governs sales of assets ... Id. at 45. Also, in Dorn's Transp., Inc. v. I.A.M. Nat. Pension Fund, 578 F.Supp. 1222 (D.D.C.1984), aff'd, 753 F.2d 166 (D.C.Cir.1985), it was held that [C]ongress further saw fit to balance the burdens to be assumed by the plans and the withdrawing employers, where an employer withdrawal was caused by insolvency (29 U.S.C. Sec. 1405(b)); or by a sale of assets (29 U.S.C. Sec. 1405(a)); ... Id. at 1230. (Emphasis added). 16 Deciding that insolvent employers must proceed under the provisions of Sec. 1405(b) does not end the analysis. Now it must be decided whether or not Geltman was an insolvent employer. We find that under the plain language of Sec. 1405(d)(1), Geltman is an insolvent employer. This section states that an employer is insolvent if the liabilities of the employer, including withdrawal liability under the plan (determined without regard to subsection (b) of this section [Sec. 1405(b) ], exceed the assets of the employer (determined as of the commencing of the liquidation or dissolution), ... (Emphasis added). 2 According to the undisputed facts, Geltman's assets, after paying off all its liabilities, not including the withdrawal liability, included $98,000 in cash and a note worth $140,000 after 10 years of payments at $2,000 per month. These assets were exceeded by Geltman's withdrawal liability of $416,508.12. Thus, Geltman was insolvent under the plain language of Sec. 1405(d)(1).