Court Opinion

ID: 9473497
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:31:38.064994+00
Date Added: 2024-06-11T17:43:34.160961
License: Public Domain

BAILEY ALDRICH, Senior Circuit Judge,
dissenting.
Possibly it is pointless, and even presumptuous, to dissent, given that the court’s opinion accords with the conclusions of all other courts that have spoken on this issue. However, with respect, I am troubled. To put plaintiff’s claim baldly, he finds himself, without possibility of relief, in a boxing ring from which he had been told he might be exempt, the prize being his own money, in an uneven match, but assured by the referee that he would see to it that it was a fair fight. Although not put in exactly those terms, the justification offered for this is that it was his own fault for associating with people like that, and his opponent needs the money. I agree that some of plaintiffs contentions are incorrect. I do not feel they all are.
Translating, plaintiff was a contributor to a multiemployer ERISA pension fund pursuant to its collective bargaining agreements with Teamster Local 379. By the Fund’s Agreement and Declaration of Trust, Art. VI, § 7, “[t]he financial liability of any Employer shall in no event exceed the obligation to make contributions as set forth in its applicable collective bargaining agreement with the Union or Unions.” Under the original version of ERISA, to which this language was obviously subject, if the Fund were to terminate, all employers who had contributed at any time within the preceding five years were collectively liable to the Pension Benefit Guaranty Corporation (PBGC), the government corporation responsible for insuring against insufficiency *1147in the trust funds, in an amount not to exceed 30% of the employer’s net worth. In anticipation of this possibility, every withdrawing employer was required to furnish security, in one manner or another. If the Fund did not terminate in five years, the employer would receive its payment back; if the Fund did terminate, the employer would be entitled to a refund of any amount not needed to meet the Fund’s liabilities. 29 U.S.C. § 1363 (Pub.L. 93-406, Title IV, § 4063, Sept. 2, 1974, 88 Stat. 1030).
On November 10, 1980, plaintiff’s land adjoining the railroad tracks needed to carry on its activities was taken by eminent domain. Since no other usable land was available, plaintiff was promptly out of business. It, accordingly, ceased contributing to the Fund. In the meantime, on September 26, 1980, Congress had passed an amendment to ERISA, the MPPAA, which provided that all employers withdrawing from plans after April 29, 1980 were immediately subject to an assessment, payable in monthly installments over a period of five years. 29 U.S.C. §§ 1381-1405, 1461(e). Unlike the prior statutory scheme, this assessment was not refundable under any circumstances, regardless of how well the Fund fared. Hence plaintiff’s future contingent liability, if any, in an unknown amount, under the prior section 1363, was replaced by an absolute liability, commencing forthwith, under the MPPAA.
Nor was this an assessment required only in case of voluntary withdrawal, and hence one that could be avoided by remaining a Fund participant. While the legislative history shows that the 1980 amendment to ERISA was sparked by reports that employers were withdrawing from plans in such numbers as to threaten their future solvency — as employers then had a right to do, subject to the five year contingency assessments — so that legislation was desirable to put a halt to such conduct, the act as passed applied to all employers alike, even if withdrawal had been forced upon them. Although I mention this particular hardship to plaintiff, my dissent is not based upon it, but goes simply to the assessment procedure. Some might think, however, that it emphasizes the need of fairness, to the extent that fairness- was practicably achievable.
While substituting absolute liability for contingent liability would be an obvious violation of contract, were that the test, I agree that is not the test, and the case is governed by the less stringent requirements of due process. However, I cannot share the ease with which other judges are content to find such. To put the case bluntly, could Congress, deciding that ERI-SA plans were a great idea but, with inflation and all, insufficient, increase the benefits and require retroactive contributions? Obviously not, but to what extent, then, is Congress justified in substituting an absolute liability for a contingent one? That this is an increase in the burden a participating employer originally assumed would seem manifest from the primary reason Congressional leaders advanced for enacting the amendments — to discourage employers from, viz., to put a premium upon, voluntary withdrawal. H.R.Rep. No. 96-869, Part I, 96th Cong., 2d Sess. 54-55, reprinted in 1980 U.S.Code Cong. & Ad. News 2918, 2922-23; H.R.Rep. No. 96-869, Part II, 96th Cong., 2d Sess. 10, 15, reprinted in 1980 U.S.Code Cong. & Ad. News 2992, 3001, 3004. See also 29 U.S.C. § 1001a(a)(4).
However, even though more burdensome in both procedure and substance than the prior statutory scheme, I do not object insofar as the MPPAA merely filled a loophole to assure the employees’ ultimate receipt of their promised payments. Employers have had the benefit of offering their employees so-called vested pension rights, and I do not quarrel with Congress’s power to call on them to make fully good. Nor, although not without some reluctance, do I cavil against the fact that this obligation is averaged across the board, so that some withdrawing employers may be charged unevenly and not in accordance with their exact deserts. In the interests of practicality, some play may be allowed in “allocat[ing] to the [employer] an actual, mea*1148surable cost____” Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 19, 96 S.Ct. 2882, 2894, 49 L.Ed.2d 752 (1976). But this is far enough. My difficulty stems from a belief that when contracts are set aside and an agreed-upon insurance premium is increased retroactively, Congress cannot add the burden of having the amount of the premium determined by a body that is so seriously lacking in impartiality as to create a serious risk of a substantial overcharge. Further, although in the ordinary case an original factual determination may properly be buttressed on review by a presumption of correctness, according that presumption here has entrenched the unfairness.
As the court points out, the amount to be assessed against a withdrawing employer is determined in the first instance by the trustees of the Fund. If the employer is dissatisfied, he may negotiate with the trustees and, if still dissatisfied, he may obtain arbitration. 29 U.S.C. § 1401(a)(1). Either party may appeal the arbitrator’s decision to the district court. § 1401(b)(2). The employer reaches the arbitrator facing a finding by the trustees that “is presumed correct unless the [employer] shows by a preponderance of the evidence that the determination was unreasonable or clearly erroneous.” § 1401(a)(3)(A). Specifically, the actuarial calculation underlying the trustees’ finding “is presumed correct unless [the employer] shows by a preponderance of the evidence that (i) the actuarial assumptions and methods used ... were, in the aggregate, unreasonable ..., or (ii) the plan’s actuary made a significant error in applying the actuarial assumptions or methods.” § 1401(a)(3)(B). And, of course, the arbitrator’s decision carries similar weight in the district court. § 1401(c). At the base of all this procedure is a decision by trustees who are not disinterested, but who have, as the court concedes, a bias.
This is not a mere appearance of bias; it is a real, indeed multiple, bias, rooted both in the trustees’ statutory duty and in their personal circumstances. The trustees, as fiduciaries under 29 U.S.C. § 1002(21)(A), are subject to the duties imposed by 29 U.S.C. § 1104:
“[A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and—
(A) for the exclusive purpose of:
(1) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan.... ”
In spite of language in my brothers’ opinion, there appears no equal duty to an employer who has withdrawn from the plan. See NLRB v. Amax Coal Co., 453 U.S. 322, 329-30, 101 S.Ct. 2789, 2794, 69 L.Ed.2d 672 (1981). And, in any event, as between protecting employers who have abandoned the plan and protecting the solvency of a fund within their charge, could it be doubted where the trustees’ primary, and important interest lies? The trustees face potential civil liability if they breach these statutorily-imposed fiduciary obligations. 29 U.S.C. § 1109.
In addition, the trustees have personal interests in their decision beyond avoiding being charged for misfeasance. If, as the court suggests, they look ahead to possible future withdrawals on their own part, obviously the more solvent they make the fund today, at the withdrawing employer’s expense, the smaller the possible deficit they will be personally responsible for in the future. Even if they do not contemplate future withdrawal, augmenting the fund’s assets today could avert possible future pressure on them to increase contributions to meet unfunded liability. I cannot bring myself to believe that assigning a liability determination to decision-makers in this interested position comports with fundamental concepts of due process.
My brethren recognize the general impropriety of an interested decision-maker. See Gibson v. Berryhill, 411 U.S. 564, 578-79, 93 S.Ct. 1689, 1697-98, 36 L.Ed.2d 488 (1973); Ward v. Village of Monroeville, 409 U.S. 57, 93 S.Ct. 80, 34 L.Ed.2d 267 (1972); In re Murchison, 349 U.S. 133, 75 *1149S.Ct. 623, 99 L.Ed. 942 (1935); Turney v. Ohio, 273 U.S. 510, 47 S.Ct. 437, 71 L.Ed. 749 (1927); United Church of the Medical Center v. Medical Center Comm’n, 689 F.2d 693 (7th Gir.1982). They also recognize the trustees’ position, stating, “[T]he trustees are fiduciaries to the fund, and must consider the fund’s interest above all else____” They offer several answers. First, “[W]e do not perceive the trustees to be performing an adjudicatory role when they calculate the withdrawal liability____ Rather than serving as judicial decision-makers, the trustees are simply part of an administrative procedure set up by Congress for reaching an initial determination of withdrawal liability which is then challengeable in arbitration and in court.” This is a sequential account chronologically, but, with respect, it is a total non-sequitur so far as meeting the issue of bias is concerned. In what way are the trustees not performing an adjudicatory role? I am at a loss to understand that statement. And why is it any the less adjudicatory because it is subject to review? And particularly I ask this question when it carries a presumption of correctness.
Nor does it seem helpful to say, “Congress simply assigned the duty to the persons with the most information.” An administrative law judge who owns stock in a corporate employer might be the best informed as to what was going on in the company, but would his interest in a proceeding involving that company be acceptable because its decision could be reviewed by the NLRB and challenged in court?
The court then says that the trustees do not have “unbridled discretion.” The most biased judge does not have unbridled discretion; he is bound by the evidence and the rules of law. Even the need of uniformity, of which the court makes much (e.g., the sentence quoted from Dorn’s Transportation, Inc. v. I.A.M. National Pension Fund, 578 F.Supp. 1222, 1238 (D.D.C.1984): “[T]he precision of the Congressionally-prescribed standards cures the process of the innate taint of partiality.”), does not adequately cabin the trustees’ discretion. “The Congressionally-prescribed standards” certainly do not produce anything like the precision of an automatic computer printout. It is far from it. Great discretion resides in the trustees in calculating the amount of unfunded vested liability, in some cases the actual value of the fund assets, and in all cases the present value of vested accrued benefits. Indeed, the court’s objection to what it claims to be the employer’s objection to the presumption of correctness (which, standing alone apart from bias, the employer does not object to) is the wide range of possible alternative “reasonable” liability figures that could thereafter be pressed if there were no presumption to dampen litigation. In one breath the court says the trustees are not really deciding anything, and in the next it says there is so much room for disagreement that the trustees’ decision must be given the protection of a presumption of correctness. I cannot conclude that the trustees are performing merely “ministerial” calculations, as distinguished from quasi-judicial decision-making. See Marshall v. Jerrico, Inc., 446 U.S. 238, 243, 247, 100 S.Ct. 1610, 1613, 1615, 64 L.Ed.2d 182 (1980); Ward, ante, 409 U.S. at 62 n. 2, 93 S.Ct. at 84 n. 2.
Nor are the trustees’ decisions permanently “standardized.” Of enormous importance is the choice of interest rates for discounting, and surely that is not standardized for all time. Nor do I understand why standardization means that withdrawing employers get an impartial shake; the trustees’ standard assumptions may be uniformly harsh. Is not setting the size of the safety factor against possible future losses precisely the kind of decision as to which the decision-maker should not be engaged in protecting himself?
The court would answer this by saying that while “the trustees ... must consider the fund’s interest above all else, that does not mean always choosing the highest withdrawal liability____” It seems an odd principle to determine the permissibility of manifest bias by weighing the decision-maker’s conflicting interests in the scales of justice and finding which side predomi*1150nates. If there could be such a principle, the interests favorable to the party who must pay should outweigh those contrary, or at least there should be some balance. Neither is be the case here. The court suggests that the employer-half of the board’s membership would hesitate to set too high a standard, since such a standard ultimately might injure any of them who might later want to withdraw. I cannot believe that such forethought, were it engaged in, could begin to compete with the personal desirability of building up the fund in order to minimize the future deficit that employer-trustees might have to meet. Nor, as the court inferentially concedes, would the employee trustees — the other half of the board’s membership — feel any such possible ambivalence.
I agree it is possible that the trustees might give some thought to weighing the desirability of building up the Fund’s assets against the danger of scaring off potential future joiners, but, again, for the trustees the latter danger would hardly be likely to meet the immediacy of the calls in the former direction. Indeed, increasing the solvency of the Fund would seem to make joining more rather than less attractive. In sum, I must find the court’s small list of alleged contra interests speculative, and in no way comparable to the very real bias in favor of over-assessments.
Next, and this seems both its theme and its coda, the court says, “It also must be remembered that the trustees’ determination is not, in fact, irrebuttable____ [I]f an injustice does occur, the procedure provides for relief in arbitration or in federal court.” (ital. in orig.) To this I would add an exclamation point. What biased decision by any body that is subject to review cannot be reversed if unreasonable? With an antiseptic gesture the court has put an end to the whole disease of bias, root and branch.
Nor is the court justified in attacking plaintiff by charging it with seeking the “most reasonable” result. This is a totally unfair characterization of plaintiff’s objections to a decision made by a biased body that will be affirmed so long as it is within the confines of reasonableness. Plaintiff is not asking for the best; it is only asking for a fair shake. As we said in Marlboro v. Association of Independent Colleges, 556 F.2d 78, 82 (1st Cir.1977), “Decision by an impartial tribunal is an element of due process.” The court’s charge is but another way of saying that lack of an impartial tribunal does not count if it does not produce an unreasonable result.
Supplementing these arguments which I cannot find persuasive, the court seeks to distinguish on the facts the cases which point out the impropriety of biased tribunals. Thus Ward, ante, 409 U.S. 57, 93 S.Ct. at 80, where the deciding officer, the mayor, was disqualified because he had an interest in increasing town revenues, is found not applicable because “much [of the trustees’] task is ministerial in nature.” But, how “ministerial” is it for the trustees to select, as here, a discount rate of llk for determining future values, an interest rate unheard of in my memory in a decade, while the Fund’s actuary admitted the rate could reasonably have been set at 14¥2%? In Ward the mayor had no direct, or personal, interest, but only the general interest of adding to the town’s assets. Here the trustees had the interest of protecting a fund to which they had an affirmative fiduciary obligation. I add that in Ward a dissatisfied defendant could obtain a trial de novo, without the handicap of a presumption.
The court does not seek to distinguish Ward as being a criminal case, but if one did, I would ask what would one prefer to have decided by a biased decision-maker, a traffic fine or a $468,000 assessment? This is financial life.
The court says, “If there is a liability, someone has to fix it,” and accepts the statutory procedure because it discourages litigation. Both are quite true. I must concede that I cannot think of a better way of discouraging litigation than to erect a procedure by which a potential litigant knows it faces a biased tribunal whose decisions are backed by a presumption of *1151correctness. This is not, however, my conception of due process.
Finally, I find peculiarly specious, despite its superficial appeal, the court’s argument that any liability determination the trustees may make is acceptable so long as it is within reason because Congress could have made that choice to begin with. If Congress had enacted harsh standards, admittedly they would pass, if reasonable. But in that case a majority of the legislators would have made the selection. It is totally novel to me that possession of a discretionary power should include the power to delegate that discretion to a body not constituted to exercise it impartially, but has direct interests, in the particular case, conspicuously weighted against the payor. Such a principle would seem to have consequences far beyond this case.
What to do? The proper solution, accepting the general constitutionality of the MPPAA, would be for Congress to designate an impartial decision-maker. Until that be accomplished a make-do solution, by no means advocated as the most desirable one, would be to deny to trustees’ liability decisions the presumption of correctness presently contained in section 1401(a)(3), a presumption that under due process should not be accorded to the decisions of a body that lacks impartiality. Erasing that presumption would not affect the remainder of the MPPAA and would retain the arbitration proceeding provided for in § 1401(a) as the forum for the resolution of disputes over withdrawal liability in the first instance, subject to judicial review pursuant to § 1401(b). The knowledge and expertise of the trustees would not be lost, since the neutral arbitrator— which could itself be expert — would have the benefit of the trustees’ estimate and assumptions, as well as the withdrawing employer’s. If the arbitrator were permanent (like the NLRB), it should not produce the wildly inconsistent and divergent results feared by my brethren. Absent this, to return to my beginning, the referee has been fixed. I must respectfully dissent.
Circuit Judge TORRUELLA joins in this opinion.