WEBVTT 00:00:00.000 --> 00:00:03.339 Case of this early morning session, Inray Yellow 00:00:03.339 --> 00:00:18.039 Corporation, appellate number 25 -1421. Good 00:00:18.039 --> 00:00:19.960 morning, Judge Schwartz. You may please the court. 00:00:20.239 --> 00:00:22.539 Derek Schaefer here on behalf of Appellants to 00:00:22.539 --> 00:00:26.390 argue the SFA funds regulation issue. my friend 00:00:26.390 --> 00:00:29.390 Mr. Hicks will be addressing the contract issue 00:00:29.390 --> 00:00:32.009 separately. I will endeavor with the court's 00:00:32.009 --> 00:00:34.189 permission to reserve four minutes of my time 00:00:34.189 --> 00:00:36.990 for rebuttal. And that will be granted. Your 00:00:36.990 --> 00:00:39.429 honors, this appeal is about following the chain 00:00:39.429 --> 00:00:42.189 of command and adhering to Congress's statutory 00:00:42.189 --> 00:00:45.329 prescription in the face of a purportedly reasonable 00:00:45.329 --> 00:00:49.469 agency regulation that palpably conflicts. Otherwise, 00:00:49.890 --> 00:00:53.219 an agency will have done what it cannot do. claiming 00:00:53.219 --> 00:00:55.759 statutory authorization that Congress has withheld 00:00:55.759 --> 00:00:58.539 and legislating, or Congress has not. But in 00:00:58.539 --> 00:01:01.479 this case, hasn't Congress pretty clearly legislated 00:01:01.479 --> 00:01:07.060 permission to the BPGC under sections 1302, 1432? 00:01:07.549 --> 00:01:10.930 meaning both from ERISA and from the ARPA. Judge 00:01:10.930 --> 00:01:14.230 Schwartz, we are not challenging those delegations 00:01:14.230 --> 00:01:17.650 of interstitial authority for the agency to regulate 00:01:17.650 --> 00:01:19.709 reasonably within the lines of what Congress 00:01:19.709 --> 00:01:22.269 has laid down in statutory prescription. Our 00:01:22.269 --> 00:01:24.890 respectful submission is it's flying in the face 00:01:24.890 --> 00:01:27.569 of clear on -point prescription from Congress. 00:01:28.439 --> 00:01:31.920 focused the court on 29. You said it do not contesting 00:01:31.920 --> 00:01:33.519 there's clear authority to do it but it flies 00:01:33.519 --> 00:01:35.500 in the face of other clear authority to do it. 00:01:35.859 --> 00:01:38.180 That's forgive me for being an artful if that's 00:01:38.180 --> 00:01:40.560 what I said Judge Ford's. What I meant is they 00:01:40.560 --> 00:01:43.519 have authority to regulate reasonably between 00:01:43.519 --> 00:01:46.620 the lines of the statute not to contradict the 00:01:46.620 --> 00:01:48.340 statutes. How do they contradict the statute? 00:01:48.780 --> 00:01:50.500 I'm sorry. How do they contradict the statute? 00:01:51.120 --> 00:01:54.040 1393 Judge Ambrose. Congress clearly and expressly 00:01:54.040 --> 00:01:57.159 prescribed how unfunded vested benefits are meant 00:01:57.159 --> 00:01:59.420 to be calculated for purposes of determining 00:01:59.420 --> 00:02:01.680 an employer's withdrawal liability. How is that 00:02:01.680 --> 00:02:05.099 done? Plan assets must be deducted from non -forfeitable 00:02:05.099 --> 00:02:08.419 benefits. And that ties in with 29 USC Section 00:02:08.419 --> 00:02:14.490 1391A, which is a... providing employers' statutorily 00:02:14.490 --> 00:02:18.129 vested right. Here's what 1391A says, the amount 00:02:18.129 --> 00:02:21.250 of the unfunded vested benefits allocable to 00:02:21.250 --> 00:02:24.490 an employer that withdraws from a plan shall 00:02:24.490 --> 00:02:27.270 be determined in accordance with the ensuing 00:02:27.270 --> 00:02:30.689 subsections, all of which revolve around unfunded 00:02:30.689 --> 00:02:32.789 vested benefits. And there are choices a plan 00:02:32.789 --> 00:02:34.550 can make. What's the purpose of the regulation? 00:02:35.370 --> 00:02:40.189 Are you talking about both? Phase in or the withdrawal 00:02:40.189 --> 00:02:42.810 or just one at the moment, but I think that the 00:02:42.810 --> 00:02:44.889 one is derivative of the other So I think that 00:02:44.889 --> 00:02:48.189 the no receivables regulation is basically There 00:02:48.189 --> 00:02:50.909 to aid implementation of the phase in regulation 00:02:50.909 --> 00:02:54.250 so that you don't have a run on withdrawals Just 00:02:54.250 --> 00:02:58.189 as the first payment is coming from but you know 00:02:58.189 --> 00:02:59.810 between that period of time when the application 00:02:59.810 --> 00:03:01.930 has been granted and the payments have been made 00:03:01.930 --> 00:03:04.250 and Congress's right to guard against that right 00:03:04.250 --> 00:03:07.180 well Judge Ambrose, I would say this. I don't 00:03:07.180 --> 00:03:10.599 think Congress specifically addressed any different 00:03:10.599 --> 00:03:13.139 treatment of SFA funds as compared to other plan 00:03:13.139 --> 00:03:14.840 assets that are available to pay benefits. Right 00:03:14.840 --> 00:03:18.740 in the statute, the ARPA that in part allowed 00:03:18.740 --> 00:03:21.740 these funds to be issued specifically told the 00:03:21.740 --> 00:03:24.659 PBGC to... dealt to come up with regulations 00:03:24.659 --> 00:03:27.199 on the withdrawal liability point specifically. 00:03:27.439 --> 00:03:29.319 Relating to withdrawal liability, that's true, 00:03:29.419 --> 00:03:30.900 Judge Ford, but I don't think, for instance, 00:03:31.139 --> 00:03:34.280 that the agency could have said that now non 00:03:34.280 --> 00:03:38.539 -forfeitable, that rather forfeitable benefits, 00:03:38.900 --> 00:03:40.860 unvested benefits would count in the form. Well, 00:03:40.900 --> 00:03:42.300 that's what we're talking about. Go ahead, Judge. 00:03:42.300 --> 00:03:47.580 What do you do with 29 USDA 1002M that deals 00:03:47.580 --> 00:03:51.330 with the planned assets? Planned assets? defined 00:03:51.330 --> 00:03:53.449 by regulation as the Secretary may prescribe? 00:03:53.949 --> 00:03:56.169 Well, I do think that you have it from Congress 00:03:56.169 --> 00:04:02.449 specifically in 1432 that these are planned assets, 00:04:02.650 --> 00:04:04.969 Judge Montgomery -Reeves. I mean, that is laid 00:04:04.969 --> 00:04:09.930 down specifically in L. that they are to be segregated 00:04:09.930 --> 00:04:12.509 from other plan assets. So that's clear treatment 00:04:12.509 --> 00:04:15.490 of these funds as plan assets. And in particular, 00:04:15.629 --> 00:04:18.670 beyond that, it specifies that these shall be 00:04:18.670 --> 00:04:21.269 available or may be available to make benefit 00:04:21.269 --> 00:04:24.009 payments. So they're plan assets in exactly that 00:04:24.009 --> 00:04:27.050 substantive sense that these are funds that are 00:04:27.050 --> 00:04:30.269 meant to be available to pay vested benefits. 00:04:30.610 --> 00:04:34.629 So to take them out of the calculation of what 00:04:34.629 --> 00:04:37.920 constitute the unfunded vested benefits is in 00:04:37.920 --> 00:04:40.079 our view, to contravene the will of Congress. 00:04:40.399 --> 00:04:42.980 Judge Ambrose, if Congress had wanted to address 00:04:42.980 --> 00:04:45.420 this and said we're concerned about employers' 00:04:45.779 --> 00:04:48.060 incentives to withdraw too soon, I think you 00:04:48.060 --> 00:04:50.300 would have expected Congress to address the bankruptcy 00:04:50.300 --> 00:04:52.300 side. They would have said there's a different 00:04:52.300 --> 00:04:54.759 policy concern when we're talking about bankruptcy 00:04:54.759 --> 00:04:57.600 and involuntary withdrawals because you don't 00:04:57.600 --> 00:04:59.939 have the same concern about incentives. Congress 00:04:59.939 --> 00:05:05.480 seemed to draw lines between what the PVGC could 00:05:05.480 --> 00:05:09.519 do and couldn't do. And I think Judge Schwartz 00:05:09.519 --> 00:05:15.439 began noting 1432 says includes conditions relating 00:05:15.439 --> 00:05:18.160 to the allocation of plan assets and withdrawal 00:05:18.160 --> 00:05:22.300 liability. At the same time, they set demarcations 00:05:22.300 --> 00:05:26.279 as to what it cannot do. It cannot regulate plan 00:05:26.279 --> 00:05:28.959 personnel, plan governance, the funding and accounting 00:05:28.959 --> 00:05:32.500 of plans in endangered or critical status. So 00:05:32.500 --> 00:05:35.600 where did they miss the boat? Where did Congress 00:05:35.600 --> 00:05:37.810 miss the boat? Did the PBGC miss the boat? Well, 00:05:37.810 --> 00:05:39.889 I don't think Congress did, because I think Congress 00:05:39.889 --> 00:05:42.490 could safely assume that you wouldn't have an 00:05:42.490 --> 00:05:45.250 agency under auspices of reasonable regulation 00:05:45.250 --> 00:05:48.029 changing the statutory formula under Section 00:05:48.029 --> 00:05:51.110 1393. I don't think that you can assume that 00:05:51.110 --> 00:05:54.629 Congress was assuming that the agency would override, 00:05:54.629 --> 00:05:57.189 you know, related congressional prescription 00:05:57.189 --> 00:05:59.490 by the way that had been in place since 1980. 00:06:00.189 --> 00:06:02.949 That's the statutory law that the agency is bound 00:06:02.949 --> 00:06:07.329 to follow. And in progenitors of the major questions 00:06:07.329 --> 00:06:11.569 cases, cases like MCI v. AT &T, utility air regulatory 00:06:11.569 --> 00:06:13.970 group v. EPA, the Supreme Court had been clear 00:06:13.970 --> 00:06:17.290 that agencies that have reasonable regulatory 00:06:17.290 --> 00:06:19.810 authority do not have authority that allows them 00:06:19.810 --> 00:06:22.949 to upend on -point statutory prescription. If 00:06:22.949 --> 00:06:25.990 major questions was your major point, why was 00:06:25.990 --> 00:06:28.149 it not at the beginning of your brief? Well, 00:06:28.149 --> 00:06:29.790 I don't know that it's our major point. I think 00:06:29.790 --> 00:06:31.930 it's a tougher issue for the court to deal with 00:06:31.930 --> 00:06:35.629 as opposed to just enforcing the statutory prescription 00:06:35.629 --> 00:06:38.730 from Congress. The statute is clear. Major questions 00:06:38.730 --> 00:06:40.870 is a statutory interpretation tool. We don't 00:06:40.870 --> 00:06:42.589 need to turn to that if the statute's clear, 00:06:42.610 --> 00:06:44.350 correct? That's how I see it, Judge Schwartz. 00:06:44.370 --> 00:06:45.949 And I think that that's how the Supreme Court 00:06:45.949 --> 00:06:48.509 was doing things in these cases before it had 00:06:48.509 --> 00:06:52.550 the major questions doctrine as kind of a companion 00:06:52.550 --> 00:06:56.009 or an evolution of these cases that are about 00:06:56.009 --> 00:06:58.300 how do we read statutes. relative to regulations. 00:06:59.699 --> 00:07:08.620 Doesn't the statute give the PVGC to make actual 00:07:08.620 --> 00:07:10.740 assumptions and other things when they're calculating? 00:07:11.259 --> 00:07:15.100 And can it be fair to look at this more as a 00:07:15.100 --> 00:07:18.120 direction on how to value an asset? I don't think 00:07:18.120 --> 00:07:20.439 it is judgeable. If it is. If it is. That is 00:07:20.439 --> 00:07:22.540 within their authority as part of that actuarial 00:07:22.540 --> 00:07:24.319 sort of authority to figure out how to value 00:07:24.319 --> 00:07:26.560 things. Am I right? So I'm going to give you 00:07:26.560 --> 00:07:28.980 a yes and a no. A yes that they absolutely have 00:07:28.980 --> 00:07:31.459 that authority to tweak actuarial assumptions 00:07:31.459 --> 00:07:34.319 and to specify, for instance, what should those 00:07:34.319 --> 00:07:36.740 assumptions be as they've done under other regulations. 00:07:36.899 --> 00:07:39.379 We're not questioning that. What you have here 00:07:39.379 --> 00:07:43.540 is a categorical exclusion. of something that 00:07:43.540 --> 00:07:45.620 is unquestionably, I don't think the other side 00:07:45.620 --> 00:07:48.680 denies, that SFA funds are planned assets that 00:07:48.680 --> 00:07:51.579 are thereby designed to fund benefits. It's not 00:07:51.579 --> 00:07:54.189 categorically excluded, it's just... phased in 00:07:54.189 --> 00:07:55.870 over time, depending on when withdrawal happens. 00:07:55.970 --> 00:07:57.990 Well, I don't think they deny that they would 00:07:57.990 --> 00:08:00.149 have the authority, part and parcel of the phased 00:08:00.149 --> 00:08:02.250 -in authority, to say that it is excluded on 00:08:02.250 --> 00:08:05.269 day one, or as of the application being granted, 00:08:05.389 --> 00:08:08.069 it is categorically excluded from consideration, 00:08:08.410 --> 00:08:10.910 even though any accountant and any actuarial 00:08:10.910 --> 00:08:13.230 assumption would say billions of dollars in funds 00:08:13.230 --> 00:08:15.689 need to be accounted for. Only as a receivable 00:08:15.689 --> 00:08:19.649 for the time being, but once it's in the account, 00:08:20.000 --> 00:08:22.379 Isn't your real fight on the phase -in part? 00:08:22.699 --> 00:08:25.259 Because we're talking usually just a matter of 00:08:25.259 --> 00:08:27.259 weeks between application and release of funds, 00:08:27.579 --> 00:08:29.519 as I understand, at least the one example in 00:08:29.519 --> 00:08:32.659 the record. Well, but to take the disconnect, 00:08:32.659 --> 00:08:34.720 if we may, between the congressional prescription 00:08:34.720 --> 00:08:37.039 and what the agency does with the phase -in regulations, 00:08:37.519 --> 00:08:39.799 the statute is equally clear that the funds are 00:08:39.799 --> 00:08:43.929 paid lump -sum in a single payment. So that's 00:08:43.929 --> 00:08:47.070 the reality that is dictated by Congress. And 00:08:47.070 --> 00:08:49.690 then you have an agency saying, notwithstanding 00:08:49.690 --> 00:08:51.490 that, we're going to treat those funds as though 00:08:51.490 --> 00:08:53.690 they're not there in large part for a period 00:08:53.690 --> 00:08:56.009 of years. And that, I think, just underlines 00:08:56.009 --> 00:08:58.450 the disconnect. And I would emphasize, when we're 00:08:58.450 --> 00:09:00.769 talking about withdrawal liability, we are talking 00:09:00.769 --> 00:09:03.250 about congressional prescription relative to 00:09:03.250 --> 00:09:05.970 employers. You argue that the regulations are 00:09:05.970 --> 00:09:09.190 not conditions on the plans. I'm trying to understand 00:09:09.190 --> 00:09:13.759 how any of the regulations would not be conditions 00:09:13.759 --> 00:09:17.139 on the employers under your reasoning? Well let 00:09:17.139 --> 00:09:21.259 me explain that. When we look at 1391, that is 00:09:21.259 --> 00:09:23.960 a shell command of Congress that is specifically 00:09:23.960 --> 00:09:26.820 directed at employers and their withdrawal liabilities 00:09:26.820 --> 00:09:29.659 and what they will need to pay in. The plans 00:09:29.659 --> 00:09:31.419 have to calculate the withdrawal liability. That 00:09:31.419 --> 00:09:34.379 is absolutely true, but it is a ministerial function 00:09:34.379 --> 00:09:37.899 and Congress, through force of law, is saying 00:09:37.899 --> 00:09:40.019 through the statute what employers will owe. 00:09:40.299 --> 00:09:43.379 So if an agency or if a plan strays from that, 00:09:43.679 --> 00:09:45.519 there are rights that the employer has to take 00:09:45.519 --> 00:09:48.370 that up in arbitration. via these regulations 00:09:48.370 --> 00:09:50.509 that purport to have force of law relative to 00:09:50.509 --> 00:09:53.429 employers. Essentially, it's been told to employers 00:09:53.429 --> 00:09:56.169 that your withdrawal liability is different from 00:09:56.169 --> 00:09:58.269 what it would otherwise be, which means bottom 00:09:58.269 --> 00:10:01.889 line, you were paying much more money into a 00:10:01.889 --> 00:10:03.970 supposedly underfunded plan. That is operating 00:10:03.970 --> 00:10:05.889 against the employer directly. Are you saying 00:10:05.889 --> 00:10:08.190 the regulations increase the amount of your withdrawal 00:10:08.190 --> 00:10:11.519 liability or do they just simply? hold it to 00:10:11.519 --> 00:10:14.460 what it was before the ARPA funds came in. Judge 00:10:14.460 --> 00:10:16.299 Ambrow, I think that they are increasing the 00:10:16.299 --> 00:10:18.059 withdrawal liability relative to what you have 00:10:18.059 --> 00:10:20.860 from the statute, relative to what you have with 00:10:20.860 --> 00:10:23.759 SFA funds being made available. And I'd say the 00:10:23.759 --> 00:10:26.899 same if the argument went, well, now employers 00:10:26.899 --> 00:10:29.139 are going to be treated as needing to contribute 00:10:29.139 --> 00:10:32.620 more to insolvent plans that are categorized 00:10:32.620 --> 00:10:37.019 as endangered or in critical status. If you said 00:10:37.019 --> 00:10:39.960 we're going to disregard the SFA funds for that 00:10:39.960 --> 00:10:42.539 purpose. which presumably would be no less available 00:10:42.539 --> 00:10:45.360 to the agency, you would be making employers 00:10:45.360 --> 00:10:49.620 pay more into endangered plans and disregarding 00:10:49.620 --> 00:10:52.720 the fact that the SFA funds are there for the 00:10:52.720 --> 00:10:55.580 express purpose of paying benefits. So you would 00:10:55.580 --> 00:10:57.960 be treating plans as underfunded. In fact, they 00:10:57.960 --> 00:11:02.399 can only pay benefits or expenses, right? That's 00:11:02.399 --> 00:11:06.860 correct. Well, I want to say that is the bankruptcy 00:11:06.860 --> 00:11:09.639 judge's theory of it. It's a made statement in 00:11:09.639 --> 00:11:12.039 the statute. They are available for those purposes 00:11:12.039 --> 00:11:15.779 explicitly. It is not a specification that they're 00:11:15.779 --> 00:11:17.559 not available for any other purpose. But wouldn't 00:11:17.559 --> 00:11:20.779 that just be contrary to the whole purpose of 00:11:20.779 --> 00:11:24.220 these monies was to ensure that planned beneficiaries 00:11:24.220 --> 00:11:26.539 are benefited, not the employers? And also counter 00:11:26.539 --> 00:11:28.440 to the argument you previously made this morning. 00:11:28.720 --> 00:11:31.220 Well, I don't think so, Judge Ambrow. What I 00:11:31.220 --> 00:11:32.580 mean to say is you have cleared... That'll answer 00:11:32.580 --> 00:11:36.220 her question. Okay. Sorry. What I mean to say 00:11:36.220 --> 00:11:38.559 is this. I think that you do not have the same 00:11:38.559 --> 00:11:41.059 clarity in that sub -provision as you do with 00:11:41.059 --> 00:11:43.700 respect to employer's withdrawal liability, a 00:11:43.700 --> 00:11:45.820 shell command that it shall be calculated per 00:11:45.820 --> 00:11:48.299 the formula, and the specification that plan 00:11:48.299 --> 00:11:51.960 assets are the core component of that calculation. 00:11:52.080 --> 00:11:53.919 And I think even... The Judge Ambrow's question. 00:11:54.059 --> 00:11:56.899 And for Judge Ambrow, I would say this. The fact 00:11:56.899 --> 00:12:00.269 that the statute says... these assets are available 00:12:00.269 --> 00:12:04.009 to pay benefits. I think tells you, as an inexorable 00:12:04.009 --> 00:12:07.110 corollary of that, that in Congress's view, these 00:12:07.110 --> 00:12:09.490 count as plan assets in an equation that's trying 00:12:09.490 --> 00:12:12.049 to determine, after all, is a plan underfunded. 00:12:12.389 --> 00:12:15.649 It is a counterfactual or counter statutory assumption 00:12:15.649 --> 00:12:18.789 to then pass a regulation that says disregard 00:12:18.789 --> 00:12:21.710 those funds that are there for the express purpose 00:12:21.710 --> 00:12:24.610 of paying these... These regulations had notice 00:12:24.610 --> 00:12:28.679 and comment. Did they not? They didn't. And they 00:12:28.679 --> 00:12:32.500 even had a listening tour around the country, 00:12:32.659 --> 00:12:34.899 which is sometimes done in order to get various 00:12:34.899 --> 00:12:38.419 views in terms of setting the balance correctly, 00:12:38.679 --> 00:12:41.080 or what they think is correct. Well, that's true. 00:12:41.139 --> 00:12:42.860 I think it was a little bit of a deviation from 00:12:42.860 --> 00:12:44.899 what I'd think of normal notice and comment because 00:12:44.899 --> 00:12:46.600 of the listening tour aspect. But you're absolutely 00:12:46.600 --> 00:12:48.620 right, Judge Amber. There was that listening 00:12:48.620 --> 00:12:51.919 tour. Did you folks participate in any of that 00:12:51.919 --> 00:12:53.700 and lodge any comments during the rulemaking 00:12:53.700 --> 00:12:57.259 process? Because if you didn't, Maybe we can't 00:12:57.259 --> 00:12:59.639 consider your objections now if you didn't object 00:12:59.639 --> 00:13:01.360 during rulemaking. Well, I think we can rely 00:13:01.360 --> 00:13:03.440 upon the comments that were made and addressed 00:13:03.440 --> 00:13:05.779 by the agency. And in particular, they wound 00:13:05.779 --> 00:13:08.360 up making this, I think, concededly unsupported 00:13:08.360 --> 00:13:10.899 assumption about the extent to which employers 00:13:10.899 --> 00:13:13.059 would be withdrawing early. But you're saying 00:13:13.059 --> 00:13:15.580 that even though none of the plans involved in 00:13:15.580 --> 00:13:18.179 this matter participated in the notice and comment 00:13:18.179 --> 00:13:21.360 process, simply because others articulated similar 00:13:21.360 --> 00:13:23.570 positions, you're allowed to now object. I think 00:13:23.570 --> 00:13:27.149 that's right, Your Honor, because I don't know 00:13:27.149 --> 00:13:28.929 that I have it in the brief, but I do have it 00:13:28.929 --> 00:13:30.850 available if the court would like to see it cited, 00:13:31.129 --> 00:13:33.529 because the agency's obligation is to engage 00:13:33.529 --> 00:13:36.509 and reason. reason decision -making and to show 00:13:36.509 --> 00:13:38.570 its work to the court. And so they purported 00:13:38.570 --> 00:13:40.529 to justify these regulations. We don't think 00:13:40.529 --> 00:13:43.269 they did that. But I also emphasize that the 00:13:43.269 --> 00:13:45.990 statutory conflict is one that this court, I 00:13:45.990 --> 00:13:47.669 think in terms of chain of command and who's 00:13:47.669 --> 00:13:50.529 the captain, it's Congress. It's Congress that's 00:13:50.529 --> 00:13:52.610 the captain. And if the agency is departed from 00:13:52.610 --> 00:13:54.789 that, I think it decides the case, Your Honor. 00:13:54.909 --> 00:13:56.610 Two questions for you about the assumption you 00:13:56.610 --> 00:13:59.629 just mentioned. Why isn't that the type of predictive 00:13:59.629 --> 00:14:02.769 judgment that we should? rely on the agency for, 00:14:02.970 --> 00:14:05.389 who may or may not withdraw. And then my second 00:14:05.389 --> 00:14:08.389 question was, why doesn't that just make common 00:14:08.389 --> 00:14:11.710 sense and that support the PBGC's position? Okay, 00:14:12.090 --> 00:14:14.309 so I think that Congress obviously trumps to 00:14:14.309 --> 00:14:16.889 the extent that they've arrived at their policy 00:14:16.889 --> 00:14:18.909 judgment. And I think if Congress was wrestling 00:14:18.909 --> 00:14:22.370 with this question of should SFA funds be treated 00:14:22.370 --> 00:14:24.470 as something other than a plan asset, I think 00:14:24.470 --> 00:14:26.309 they would have addressed the bankruptcy context 00:14:26.309 --> 00:14:28.789 and said then we should have different rules 00:14:28.789 --> 00:14:31.429 because we don't have the same incentives operating 00:14:31.429 --> 00:14:34.149 and we have concerns that you're going to have 00:14:34.149 --> 00:14:36.889 unfunded plans that don't have SFA funds. The 00:14:36.889 --> 00:14:39.360 whole point of these funds were to avoid these 00:14:39.360 --> 00:14:41.440 entities going belly -up, including the employers 00:14:41.440 --> 00:14:43.500 who participated. So it's not surprising that 00:14:43.500 --> 00:14:45.919 the bankruptcy context wasn't specifically identified. 00:14:46.279 --> 00:14:48.539 And in addition, there probably is no difference 00:14:48.539 --> 00:14:51.379 between a voluntary withdrawal and an involuntary 00:14:51.379 --> 00:14:53.620 withdrawal when the whole concept is, do we have 00:14:53.620 --> 00:14:55.980 the funds to pay the employees? Judge Fortes, 00:14:56.580 --> 00:14:58.779 I agree with some of that. Here's what I disagree 00:14:58.779 --> 00:15:00.559 with. We're talking about the employer who's 00:15:00.559 --> 00:15:02.809 gone bankrupt. Not the plan that's gone bankrupt. 00:15:03.690 --> 00:15:05.190 I understand that. But that's the whole point. 00:15:05.250 --> 00:15:06.909 They were trying to keep everything afloat. If 00:15:06.909 --> 00:15:08.990 the employers are going bankrupt, then there's 00:15:08.990 --> 00:15:11.570 not monies to put in. And then the plan has its 00:15:11.570 --> 00:15:14.830 problems. So I don't understand this. They should 00:15:14.830 --> 00:15:18.129 have spoken about bankruptcy so specifically. 00:15:18.649 --> 00:15:20.990 Here's all I need. That employers don't have 00:15:20.990 --> 00:15:23.509 the same voluntary decision making. Am I going 00:15:23.509 --> 00:15:25.490 to withdraw from a multi -employer plan when 00:15:25.490 --> 00:15:27.690 they go bankrupt and they're just not able to 00:15:27.690 --> 00:15:31.129 pay out monies anymore? So you don't have the 00:15:31.129 --> 00:15:34.029 election of an employer for reasons specific 00:15:34.029 --> 00:15:36.070 to the multi -employer plan that I'm going to 00:15:36.070 --> 00:15:38.129 choose to withdraw early. And it's a calculated 00:15:38.129 --> 00:15:40.129 decision. And to answer the other aspect of your 00:15:40.129 --> 00:15:42.809 question, Judge Montgomery Reeves, I just think 00:15:42.809 --> 00:15:45.629 that we're talking about unfunded plans. And 00:15:45.629 --> 00:15:48.409 some of those unfunded plans don't have SFA funds 00:15:48.409 --> 00:15:51.330 at all. And if you have an employer in the position 00:15:51.330 --> 00:15:53.909 of yellow that's being made to pay more money, 00:15:54.580 --> 00:15:57.559 gratuitously as a windfall into a plan that's 00:15:57.559 --> 00:15:59.879 fully funded once you consider the SFA funds, 00:15:59.899 --> 00:16:03.120 you will have other plans that do not have the 00:16:03.120 --> 00:16:06.320 SFA funds that are not fully funded that will 00:16:06.320 --> 00:16:08.840 look to an employer like Yellow for a greater 00:16:08.840 --> 00:16:11.100 contribution and that money will not be there 00:16:11.100 --> 00:16:13.879 because we're talking about a very limited pie 00:16:13.879 --> 00:16:16.779 in the context of a bankruptcy. That's probably 00:16:16.779 --> 00:16:20.360 a good segue to how we calculate then, correct? 00:16:20.899 --> 00:16:23.120 Yes. So maybe that's what the next person coming 00:16:23.120 --> 00:16:27.039 up. Okay. Thank you, Your Honors. I will see 00:16:27.039 --> 00:16:39.360 you on rebuttal. Good morning. Good morning. 00:16:39.740 --> 00:16:41.500 Thank you, Your Honor, and may it please the 00:16:41.500 --> 00:16:43.559 Court, George Hicks, for the debtors, Yellow 00:16:43.559 --> 00:16:45.860 Corporation, and on behalf of all appellants, 00:16:46.279 --> 00:16:48.879 I'm going to address the separate dispute over 00:16:48.879 --> 00:16:51.320 withdrawal liability with the New York and Western 00:16:51.320 --> 00:16:53.500 Pennsylvania Teamsters, and I've reserved two 00:16:53.500 --> 00:16:56.639 minutes for rebuttal. What did you agree with 00:16:56.639 --> 00:16:59.919 initially to pay? I'm sorry, Your Honor? What 00:16:59.919 --> 00:17:03.860 did Yellow agree with initially to pay? I believe 00:17:03.860 --> 00:17:08.579 that back in 2013, what Yellow agreed to was 00:17:08.579 --> 00:17:14.700 to be under Schedule G, which was a deviation 00:17:14.700 --> 00:17:18.009 from It was an amendment to the plan, but that 00:17:18.009 --> 00:17:21.470 is what it was a 25 % contribution that would 00:17:21.470 --> 00:17:25.069 be required to be made under that plan. So that's 00:17:25.069 --> 00:17:27.150 what the agreement was. That was the benefit 00:17:27.150 --> 00:17:29.670 it got. I'm sorry again. That was the benefit 00:17:29.670 --> 00:17:34.369 it got. I believe the benefit was at the time 00:17:34.369 --> 00:17:39.410 that that it would be allowed to contribute to 00:17:39.410 --> 00:17:42.609 the plan that it would not go into immediate. 00:17:42.710 --> 00:17:47.220 They negotiated a separate deal. with in 2013 00:17:47.220 --> 00:17:49.980 and what was the benefit it got and what was 00:17:49.980 --> 00:17:53.420 the consequence if it didn't comply? I believe 00:17:53.420 --> 00:17:56.160 your honor that at the time the benefit was that 00:17:56.160 --> 00:17:58.559 it would not have immediate withdrawal liability 00:17:58.559 --> 00:18:03.000 at that time. It also got a reduced rate from 00:18:03.000 --> 00:18:04.940 what it had been making before to real -time 00:18:04.940 --> 00:18:08.319 contributions and it was the contract said that 00:18:08.319 --> 00:18:10.319 however if you withdraw we're going to use the 00:18:10.319 --> 00:18:13.250 rate you're obligated to, correct? Your Honor, 00:18:13.369 --> 00:18:15.450 we don't dispute that any of that happens. But 00:18:15.450 --> 00:18:19.029 what we are arguing is that if there is an agreement 00:18:19.029 --> 00:18:21.769 like that, that it still has to be approved by 00:18:21.769 --> 00:18:27.109 the PBGC, because it is a deviation from the 00:18:27.109 --> 00:18:29.410 presumptive method that is set out in the statute. 00:18:29.630 --> 00:18:31.890 And it's very clear in the statute that when 00:18:31.890 --> 00:18:35.869 you have, quote, any other alternative method, 00:18:36.240 --> 00:18:38.680 for calculating withdrawal liability, you must 00:18:38.680 --> 00:18:41.180 obtain PBGC's approval. How is that an alternative 00:18:41.180 --> 00:18:43.619 method? All it is is changing one of the numbers 00:18:43.619 --> 00:18:47.680 that the parties agree to to make up for the 00:18:47.680 --> 00:18:50.279 kind of largesse that the plan gave. I'm not 00:18:50.279 --> 00:18:52.240 sure there's a different calculation method. 00:18:52.940 --> 00:18:54.319 Well, Your Honor, I guess I would respectfully 00:18:54.319 --> 00:18:57.619 disagree when the statute says that the presumptive 00:18:57.619 --> 00:19:00.980 method, which is what the plan is claiming to 00:19:00.980 --> 00:19:04.589 have been used, requires using, quote, the contributions 00:19:04.589 --> 00:19:07.950 required to be made under the plan. Under this 00:19:07.950 --> 00:19:11.450 plan, what was required to be made were contributions 00:19:11.450 --> 00:19:15.450 at the 25 % level. And yet, they're using 100 00:19:15.450 --> 00:19:18.269 % contributions when calculating withdrawal liability. 00:19:18.410 --> 00:19:20.109 I mean, I don't think that's any different than 00:19:20.109 --> 00:19:22.390 if I have a recipe for a chocolate cake that 00:19:22.390 --> 00:19:25.930 says flour, water, eggs, and cocoa, and then 00:19:25.930 --> 00:19:28.289 I use vanilla instead of cocoa. I don't have 00:19:28.289 --> 00:19:29.849 a chocolate cake anymore. I didn't follow the 00:19:29.849 --> 00:19:32.059 method. for creating that doesn't matter what 00:19:32.059 --> 00:19:34.680 the input changes that's the method and when 00:19:34.680 --> 00:19:40.019 the statute says quotes any other alternative 00:19:40.019 --> 00:19:43.740 method any is a capacious word and it all holds 00:19:43.740 --> 00:19:46.980 together i mean you you can do these things a 00:19:46.980 --> 00:19:49.039 plan can do these things it simply has to get 00:19:49.039 --> 00:19:51.859 pbgc but you weren't you you were taking the 00:19:51.859 --> 00:19:54.480 benefit that you got from the 2013 agreement 00:19:54.910 --> 00:19:58.029 And you weren't complaining in 2014 or 2015 and 00:19:58.029 --> 00:20:01.269 thereafter until you went into bankruptcy that 00:20:01.269 --> 00:20:04.829 somehow this was not allowed, right? Well, Your 00:20:04.829 --> 00:20:08.109 Honor, I guess I take a little bit of issue with 00:20:08.109 --> 00:20:10.289 the idea that it's a purely one -sided benefit 00:20:10.289 --> 00:20:12.930 here. I mean, the... No, you get some... You 00:20:12.930 --> 00:20:14.670 wouldn't have done the deal in 2013 if you didn't 00:20:14.670 --> 00:20:18.200 get some benefit, correct? Presumably not, but 00:20:18.200 --> 00:20:21.700 all of that is, I think, a separate contract 00:20:21.700 --> 00:20:24.099 issue. I don't think it addresses the statutory 00:20:24.099 --> 00:20:29.099 question we have here. And it's that it holds 00:20:29.099 --> 00:20:32.380 together if you have the PVGC approval requirement, 00:20:32.500 --> 00:20:35.420 which is that plans can do these... But you didn't 00:20:35.420 --> 00:20:39.599 say in 2013 or 2014 that we should get PVGC approval. 00:20:40.880 --> 00:20:42.880 If you're on the other side, basically what you're 00:20:42.880 --> 00:20:44.700 saying is you're taking a heads -eye -wind, tails 00:20:44.700 --> 00:20:49.539 -you -lose argument. And courts have dealt with 00:20:49.539 --> 00:20:51.799 this before, like the Seventh Circuit and artistic 00:20:51.799 --> 00:20:53.980 carton, in which they say, okay, there's a difference 00:20:53.980 --> 00:20:56.420 between an elaboration and a novation. In other 00:20:56.420 --> 00:21:00.039 words, an elaboration is you have some type of 00:21:00.039 --> 00:21:02.960 amendment, but you're not completely doing things 00:21:02.960 --> 00:21:05.059 where you, a novation means you step into the 00:21:05.059 --> 00:21:09.799 shoes of somebody else. And this is an elaboration. 00:21:09.900 --> 00:21:12.539 This is not a novation. How would you distinguish? 00:21:13.379 --> 00:21:15.660 artistic carton from this case. Any other cases 00:21:15.660 --> 00:21:18.059 that follow artistic carton? Your Honor, I would 00:21:18.059 --> 00:21:19.880 distinguish artistic carton in many ways. First 00:21:19.880 --> 00:21:22.759 of all, this novation elaboration, all of that 00:21:22.759 --> 00:21:25.660 was in dicta in that portion of artistic carton, 00:21:25.720 --> 00:21:27.380 but there's nothing in the statute... There's 00:21:27.380 --> 00:21:28.880 other cases that have followed that, correct? 00:21:30.039 --> 00:21:32.940 Not that I've seen my friends on the other side 00:21:32.940 --> 00:21:36.059 cite. I have not seen anything that cites artistic 00:21:36.059 --> 00:21:38.359 carton for this novation elaboration requirement, 00:21:38.420 --> 00:21:39.859 and I think... Well, the Seventh Circuit and 00:21:39.859 --> 00:21:41.839 another decision by Judge Cuddy I thought did. 00:21:43.120 --> 00:21:46.619 If that's the decision that I think my friends 00:21:46.619 --> 00:21:48.880 have cited saying is a completely different method, 00:21:49.619 --> 00:21:51.539 there's nothing – I mean, that case did not address 00:21:51.539 --> 00:21:54.140 what a completely different method is, and that's 00:21:54.140 --> 00:21:56.460 not what the statute requires. The statute requires 00:21:56.460 --> 00:21:59.839 any other alternative method. Let's assume we 00:21:59.839 --> 00:22:04.000 follow that. Why is this not an elaboration, 00:22:04.259 --> 00:22:08.029 but rather a – in effect, a novation? Well, Your 00:22:08.029 --> 00:22:09.990 Honor, accepting the premise that there actually 00:22:09.990 --> 00:22:11.890 is a statutory distinction between the two, which 00:22:11.890 --> 00:22:13.750 I don't think there is and I don't think artistic 00:22:13.750 --> 00:22:15.789 heart and supports because it was also dealing 00:22:15.789 --> 00:22:18.130 with the direct attribution method. It wasn't 00:22:18.130 --> 00:22:21.029 dealing with the presumptive method. But even 00:22:21.029 --> 00:22:23.890 taking that, I think that when you have the statute 00:22:23.890 --> 00:22:27.470 saying that, quote, the proportional share of 00:22:27.470 --> 00:22:30.930 allocable UVBs is, quote, the contributions required 00:22:30.930 --> 00:22:34.910 to be made under the plan and then you use something 00:22:34.910 --> 00:22:37.400 that is not the contributions required to be 00:22:37.400 --> 00:22:41.240 made, I don't think it gets any more stark that 00:22:41.240 --> 00:22:43.980 you have deviated from the statute. If that's 00:22:43.980 --> 00:22:47.400 not something that requires PBGC approval, I'm 00:22:47.400 --> 00:22:49.299 not sure what is, and I'm not sure what's left 00:22:49.299 --> 00:22:51.420 of the approval requirement at that point. And 00:22:51.420 --> 00:22:53.960 the same thing holds for the annual payment determination, 00:22:54.539 --> 00:22:58.000 which also didn't follow. And that requires the 00:22:58.000 --> 00:23:00.980 employer to, I'm sorry, the plan to use the CBUs 00:23:00.980 --> 00:23:03.019 and the contribution rate at which the employer, 00:23:03.019 --> 00:23:06.779 quote, had an obligation to contribute. And again, 00:23:07.119 --> 00:23:09.559 that's not what was used here when it's determining 00:23:09.559 --> 00:23:11.380 withdrawal liability. And we're not saying that 00:23:11.380 --> 00:23:15.140 can't be done, but it has to be done with PBGC 00:23:15.140 --> 00:23:17.779 approval. And I think why that's important is 00:23:17.779 --> 00:23:21.240 because the PBGC is there as it's set forth in 00:23:21.240 --> 00:23:24.519 the statute and in the regulation to make sure 00:23:24.519 --> 00:23:28.160 that if you have these side agreements that they 00:23:28.160 --> 00:23:30.519 aren't messing with the system. I was just messing 00:23:30.519 --> 00:23:33.180 with the system though. The agreement says For 00:23:33.180 --> 00:23:34.960 a period of time, we're going to contribute an 00:23:34.960 --> 00:23:38.059 X amount. And then it says, if something happens, 00:23:38.220 --> 00:23:40.900 the withdrawal liability amount will be what 00:23:40.900 --> 00:23:43.859 it used to be. Nothing has really changed in 00:23:43.859 --> 00:23:46.619 the plan. It simply sort of changed when the 00:23:46.619 --> 00:23:48.599 payments are being almost like a balloon payment. 00:23:48.720 --> 00:23:50.980 It's the best way I can think of it is that there 00:23:50.980 --> 00:23:52.460 was an agreement to a balloon payment. It's not 00:23:52.460 --> 00:23:55.720 changing what was owed. The yellow got temporary 00:23:55.720 --> 00:23:58.200 dispensation to allow it to try to financially 00:23:58.200 --> 00:24:02.529 rehabilitate. With the understanding that, Should 00:24:02.529 --> 00:24:05.650 this not work? We can't let the employees and 00:24:05.650 --> 00:24:08.410 beneficiaries plan suffer as a result You're 00:24:08.410 --> 00:24:10.109 gonna have to pay that which you have always 00:24:10.109 --> 00:24:12.369 owed. We just gave you a payment plan Why can't 00:24:12.369 --> 00:24:14.569 we review it like that? Well, I guess to your 00:24:14.569 --> 00:24:16.410 friends one specific this and one more general 00:24:16.410 --> 00:24:19.990 one on specific to this Yeah, I don't know if 00:24:19.990 --> 00:24:23.279 it's quote kicking the can down the road is necessarily 00:24:23.279 --> 00:24:25.599 something that's good for the system because 00:24:25.599 --> 00:24:29.200 you never know if an employer is or a plan, you 00:24:29.200 --> 00:24:31.019 know, if they are going to go belly up. I mean, 00:24:31.039 --> 00:24:32.900 obviously there have been a number of issues 00:24:32.900 --> 00:24:35.259 in this sphere. Whether it's good for the system 00:24:35.259 --> 00:24:37.480 or not, why isn't that what precisely what happened? 00:24:38.079 --> 00:24:40.480 Well, I think to me that goes to my second more 00:24:40.480 --> 00:24:43.890 general point, which is You can imagine the mischief 00:24:43.890 --> 00:24:46.549 that could occur if all of these side agreements 00:24:46.549 --> 00:24:48.930 can take place without PBGC approval. And I'll 00:24:48.930 --> 00:24:51.390 give you an example from this specific case, 00:24:51.849 --> 00:24:53.609 which is that my friends on the other side point 00:24:53.609 --> 00:24:57.670 to appendix 143, and they point to language that 00:24:57.670 --> 00:25:01.670 says if there's a temporary termination or cessation, 00:25:01.849 --> 00:25:04.930 the employer's contributions shall be imputed 00:25:04.930 --> 00:25:08.309 for that period, which shall be treated as contributions 00:25:08.309 --> 00:25:11.309 required to be made. before Schedule G. So now 00:25:11.309 --> 00:25:14.569 we have a situation where a plan is saying, and 00:25:14.569 --> 00:25:17.990 there's an agreement, that literally no contributions 00:25:17.990 --> 00:25:20.609 can be made, but we're still going to count it 00:25:20.609 --> 00:25:23.970 as 100 % towards withdrawal liability. And I 00:25:23.970 --> 00:25:25.869 think that that is an absolute blueprint for 00:25:25.869 --> 00:25:25.990 mischief. The fact that we just answered Judge 00:25:25.990 --> 00:25:29.950 Schwartz's question is to, you get this benefit 00:25:29.950 --> 00:25:35.410 in 2013, and it's basically, you pay some now, 00:25:35.490 --> 00:25:38.890 you may have to pay, what you should have paid 00:25:38.890 --> 00:25:44.450 later if you're in default. So is that illegal 00:25:44.450 --> 00:25:47.450 without PBGC approval? If it was, why did you 00:25:47.450 --> 00:25:49.609 enter into the deal without getting PBGC approval? 00:25:49.809 --> 00:25:52.829 Well, Your Honor, number one, it's not our obligation 00:25:52.829 --> 00:25:55.650 to get PBGC approval. That is the plan's obligation 00:25:55.650 --> 00:25:57.329 under the statute. But you would think from your 00:25:57.329 --> 00:25:59.970 perspective, if you got a benefit in 2013, which 00:25:59.970 --> 00:26:03.529 carried on for a number of years, Wouldn't you 00:26:03.529 --> 00:26:06.130 want to have the support of PBGC approval if 00:26:06.130 --> 00:26:08.210 you somehow think that perhaps it's illegal if 00:26:08.210 --> 00:26:11.569 you don't get that approval? Your honor, I don't 00:26:11.569 --> 00:26:14.670 think I dispute that someone should have sought 00:26:14.670 --> 00:26:17.750 PBGC approval, but the plan was getting a benefit 00:26:17.750 --> 00:26:20.230 out of this as well. And the plan has the obligation 00:26:20.230 --> 00:26:22.769 under the statute to do that. And just to circle 00:26:22.769 --> 00:26:25.809 back, I don't think there's any authority in 00:26:25.809 --> 00:26:29.930 the statute to allow these side agreements that 00:26:29.930 --> 00:26:32.740 permit parties to violate this. You're right, 00:26:32.960 --> 00:26:35.559 and PBGC had to approve this and didn't. Contracts 00:26:35.559 --> 00:26:37.400 voided. We're going back to what you owed in 00:26:37.400 --> 00:26:40.140 2013, pre -2013, right? No, Your Honor, I think 00:26:40.140 --> 00:26:42.279 we're not arguing. No one's arguing for rescission 00:26:42.279 --> 00:26:43.960 of the contract. All we're saying is that... 00:26:43.960 --> 00:26:45.480 You're just saying it's an unapproved contract. 00:26:45.700 --> 00:26:47.500 No, I know no one's asking for the equitable 00:26:47.500 --> 00:26:51.180 concept of rescission. But the position you're 00:26:51.180 --> 00:26:54.460 advocating for is this didn't have PBGC approval. 00:26:55.039 --> 00:26:58.420 As a result, that should mean it's unenforceable. 00:26:59.469 --> 00:27:02.069 Then we go back to the way the plan existed, 00:27:02.549 --> 00:27:06.829 which was calculating based on pre -distress 00:27:06.829 --> 00:27:10.309 schedule, schedule G numbers. So we can do the 00:27:10.309 --> 00:27:12.230 calculation. We end up back in the same place, 00:27:12.450 --> 00:27:14.809 no? Your Honor, actually, I take issue with the 00:27:14.809 --> 00:27:16.450 idea that what we're saying is that it's then 00:27:16.450 --> 00:27:18.650 unenforceable. What we're saying is what you 00:27:18.650 --> 00:27:21.250 have to do when calculating the withdrawal liability, 00:27:21.390 --> 00:27:24.289 which is where we are now, is you have to use 00:27:24.509 --> 00:27:26.930 quote, the contributions required to be made 00:27:26.930 --> 00:27:28.670 under the plan. The only part of this agreement 00:27:28.670 --> 00:27:31.809 is going to be okay without PBGC approval, wink 00:27:31.809 --> 00:27:34.069 wink, but not the part that hits you on withdrawal 00:27:34.069 --> 00:27:37.109 liability, right? We're using what the statute 00:27:37.109 --> 00:27:40.089 requires, Your Honor. The statute requires under 00:27:40.089 --> 00:27:42.230 the presumptive method, which is what the plan 00:27:42.230 --> 00:27:45.869 is using and professes to be using, the contributions 00:27:45.869 --> 00:27:48.849 required to be made, the CBUs and the contribution 00:27:48.849 --> 00:27:51.309 rate that the employer had an obligation to contribute. 00:27:51.589 --> 00:27:54.089 If you don't want to do that, you have to get 00:27:54.089 --> 00:27:57.369 PBGC approval. That's what we follow the statute, 00:27:57.589 --> 00:27:59.609 and that's what the statute requires. And I haven't 00:27:59.609 --> 00:28:02.329 seen anything by my friends on the other side 00:28:02.329 --> 00:28:04.029 that takes a dispute with that, which is why 00:28:04.029 --> 00:28:06.930 I think they're arguing that there just wasn't 00:28:06.930 --> 00:28:08.710 any change in the first place. Now, we disagree 00:28:08.710 --> 00:28:11.829 with that. And I think that there are plenty 00:28:11.829 --> 00:28:13.890 of reasons for that laid out in our brief. But 00:28:13.890 --> 00:28:17.029 I think that when it comes to the actual, does 00:28:17.029 --> 00:28:19.519 the statute even allow for this? I don't think 00:28:19.519 --> 00:28:21.579 it does. And to go back, I think Artistic Harten 00:28:21.579 --> 00:28:24.740 is actually the best case on that. It actually 00:28:24.740 --> 00:28:27.799 contemplates that the parties do have to seek 00:28:27.799 --> 00:28:30.480 PBGC approval. Now, it said that we don't have 00:28:30.480 --> 00:28:32.960 to address this, but it certainly contemplated 00:28:32.960 --> 00:28:34.779 that that was the case if there was actually 00:28:34.779 --> 00:28:36.700 a change in the method. If there's the equivalent 00:28:36.700 --> 00:28:40.240 of a novation but not the equivalent of an elaboration. 00:28:40.460 --> 00:28:42.420 Correct. I'm sorry, Your Honor. If there's the 00:28:42.420 --> 00:28:44.480 equivalent of a novation but not the equivalent 00:28:44.480 --> 00:28:48.200 of an elaboration. If you were to take the Seventh 00:28:48.200 --> 00:28:50.509 Circuit's elaboration, novation, distinction, 00:28:50.650 --> 00:28:53.269 which again was in addressing a different type 00:28:53.269 --> 00:28:55.329 of method that has a little bit more wiggle room, 00:28:56.009 --> 00:28:59.109 we would still say that this is a novation, because 00:28:59.109 --> 00:29:01.769 again, it's quote, any other alternative method. 00:29:02.289 --> 00:29:04.170 I actually don't think the elaboration, novation, 00:29:04.410 --> 00:29:08.289 distinction really even works with that statutory 00:29:08.289 --> 00:29:12.210 requirement, which is why it was dicta. But if 00:29:12.210 --> 00:29:14.720 you're looking at this text of the statute, Which 00:29:14.720 --> 00:29:16.680 was says yeah, I mean what you what you see in 00:29:16.680 --> 00:29:19.920 artistic carton on 1353 and 1354 essentially 00:29:19.920 --> 00:29:22.079 is a trying judge easterbrook trying to make 00:29:22.079 --> 00:29:26.259 sense Out of what's being argued and he's coming 00:29:26.259 --> 00:29:29.319 up with that particular method of analysis Do 00:29:29.319 --> 00:29:31.920 you disagree with the method of analysis? I disagree 00:29:31.920 --> 00:29:35.279 that there is an elaboration novation distinction 00:29:35.279 --> 00:29:39.359 when it comes to determining whether Under the 00:29:39.359 --> 00:29:43.849 presumptive method there has been quote any other 00:29:43.849 --> 00:29:45.630 alternative method. I think that you look at 00:29:45.630 --> 00:29:47.829 the word any, and I think that you look at what 00:29:47.829 --> 00:29:50.109 the Supreme Court has said about the word any. 00:29:50.430 --> 00:29:53.890 I look at the fact that this isn't some small 00:29:53.890 --> 00:29:56.730 sort of ministerial miscalculation. This is what 00:29:56.730 --> 00:29:58.630 the statute requires. This isn't even a regulation. 00:29:58.970 --> 00:30:00.170 This is what the statute requires. So your theme 00:30:00.170 --> 00:30:05.250 throughout is we made a deal in 2013 for my time, 00:30:05.309 --> 00:30:08.430 in this case, your time. We got the benefit of 00:30:08.430 --> 00:30:14.009 it and when there was a condition that caused 00:30:14.009 --> 00:30:19.789 the moneys or the amount that should be 100 % 00:30:19.789 --> 00:30:22.470 liability comes into play, that is you go into 00:30:22.470 --> 00:30:26.349 bankruptcy, forget about it because it was illegal 00:30:26.349 --> 00:30:28.690 to begin with. It really goes back to Judge Forch's 00:30:28.690 --> 00:30:31.450 question, right? That's your theme. Our theme 00:30:31.450 --> 00:30:33.450 is that you follow the statute, Your Honor, and 00:30:33.450 --> 00:30:35.710 what the statute requires. The theme is that 00:30:35.710 --> 00:30:39.059 by following the statute means Is what she said 00:30:39.059 --> 00:30:42.859 and what I just said incorrect? I don't if that 00:30:42.859 --> 00:30:44.539 means following the statute that I think you 00:30:44.539 --> 00:30:46.359 are so then you should never have gotten the 00:30:46.359 --> 00:30:50.519 benefit for nine or ten years of The deal that 00:30:50.519 --> 00:30:53.019 you cut in 2013. No, I don't disagree with that 00:30:53.019 --> 00:30:54.900 because again I think we're saying all we're 00:30:54.900 --> 00:31:00.400 saying is that this agreement to to be held to 00:31:00.400 --> 00:31:04.259 schedule G is you know, it is an agreement that 00:31:04.259 --> 00:31:07.740 exists and on its face is enforceable, but then 00:31:07.740 --> 00:31:09.779 you have to, when you are actually calculating 00:31:09.779 --> 00:31:11.859 the withdrawal liability, when it comes time 00:31:11.859 --> 00:31:15.000 to do that, and that's what the statute lays 00:31:15.000 --> 00:31:19.240 out in 1391, when you do that, you have to follow 00:31:19.240 --> 00:31:23.079 one of four laid out methods, or you have to 00:31:23.079 --> 00:31:25.720 get permission from the PBGC to do something 00:31:25.720 --> 00:31:30.779 different. When that time comes, and that time 00:31:30.779 --> 00:31:36.109 came, and I think that that's why you are seeing 00:31:36.109 --> 00:31:38.990 the arguments by the other side but really not 00:31:38.990 --> 00:31:41.349 defending the bankruptcy court's decision reliance 00:31:41.349 --> 00:31:43.930 on artistic garden and instead saying well this 00:31:43.930 --> 00:31:45.950 this didn't even work need any approval in the 00:31:45.950 --> 00:31:48.150 first place because it didn't rise to that level 00:31:48.150 --> 00:31:51.109 we disagree with that because if you're violating 00:31:51.109 --> 00:31:53.150 the statute i don't i think it doesn't get more 00:31:53.150 --> 00:31:56.170 straightforward that you need pbgc approval at 00:31:56.170 --> 00:31:58.849 that point which is again the entire reason why 00:31:58.849 --> 00:32:00.609 you have that approval requirement in the first 00:32:00.609 --> 00:32:02.650 place we're not saying you can't do these things 00:32:02.940 --> 00:32:05.140 Just have to get the agency's approval, which 00:32:05.140 --> 00:32:08.759 is exactly what is required in the statute Thank 00:32:08.759 --> 00:32:30.539 you Thank you Good morning your honors may please 00:32:30.539 --> 00:32:33.349 court Brad Berliner on behalf of Central States 00:32:33.349 --> 00:32:37.069 Southeast and Southwest areas pension fund your 00:32:37.069 --> 00:32:40.589 honor Part of the problem your honor is part 00:32:40.589 --> 00:32:43.170 of the problems with part of the problem with 00:32:43.170 --> 00:32:45.650 appellants perspective when they look at the 00:32:45.650 --> 00:32:50.369 conditions Upon multi -employer plans is that 00:32:50.369 --> 00:32:53.430 they're viewing this as a wind the special financial 00:32:53.430 --> 00:32:56.890 assistance as a windfall to the plants But that 00:32:56.890 --> 00:33:01.549 really miss comprehends the nature of multi -employer 00:33:01.549 --> 00:33:05.289 plans in general. The plans are not -for -profit 00:33:05.289 --> 00:33:08.329 trusts that operate exclusively for the participants 00:33:08.329 --> 00:33:12.890 and beneficiaries. And in that sense, they preserve 00:33:12.890 --> 00:33:16.549 and protect the assets for the benefit of the 00:33:16.549 --> 00:33:19.049 participants and beneficiaries. And that's how 00:33:19.049 --> 00:33:25.809 this needs to be viewed. Just as in 1382, 29 00:33:25.809 --> 00:33:31.910 USC 1382 and 29 USC 1399. These are commands 00:33:31.910 --> 00:33:35.230 to the pension funds on behalf of their participants 00:33:35.230 --> 00:33:39.029 and beneficiaries to collect, to determine, withdraw 00:33:39.029 --> 00:33:42.609 liability, to send the employer a notice in demand 00:33:42.609 --> 00:33:46.099 and to do so as soon as practicable. And if the 00:33:46.099 --> 00:33:49.220 plan doesn't do that, it's not acting in its 00:33:49.220 --> 00:33:51.460 fiduciary capacity. So it's your view these are 00:33:51.460 --> 00:33:54.259 conditions on the plan, these regulations, not 00:33:54.259 --> 00:33:56.819 on the employer, am I right? Correct. What is 00:33:56.819 --> 00:34:00.480 the Article 1 power the Congress used to authorize 00:34:00.480 --> 00:34:03.519 the statutes that allowed the PBGC to promulgate 00:34:03.519 --> 00:34:05.400 these regulations? The briefing had spending 00:34:05.400 --> 00:34:08.940 clause, conversations, there's also the necessary 00:34:08.940 --> 00:34:10.900 and proper clause. What is your position on that 00:34:10.900 --> 00:34:17.710 point? Appellants have acknowledged that Congress 00:34:17.710 --> 00:34:20.409 has the authority under the Necessary and Properties 00:34:20.409 --> 00:34:27.889 Clause to enact conditions related to money that 00:34:27.889 --> 00:34:33.110 they've appropriated. And so, in fact, in their 00:34:33.110 --> 00:34:37.349 brief they've acknowledged that Congress can 00:34:37.349 --> 00:34:40.670 condition the receipt of federal funds on them 00:34:40.670 --> 00:34:44.079 being used as Congress designates. Well, Congress 00:34:44.079 --> 00:34:48.840 did exactly that in 1432. Congress said that 00:34:48.840 --> 00:34:53.139 these special financial assistance funds can 00:34:53.139 --> 00:34:57.019 be used to pay plan benefits and plan expenses. 00:34:57.760 --> 00:35:00.820 Now, my colleagues on the other side would say, 00:35:01.219 --> 00:35:05.820 well, no, Congress said may, not shall. But of 00:35:05.820 --> 00:35:09.690 course, there's the option that these multi -employer 00:35:09.690 --> 00:35:12.309 plans can first use whatever funds they have 00:35:12.309 --> 00:35:15.369 remaining before receiving special financial 00:35:15.369 --> 00:35:20.489 assistance to pay plan benefits and plan expenses 00:35:20.489 --> 00:35:23.789 and hold on to that special financial assistance. 00:35:24.530 --> 00:35:27.369 The corollary is not that, oh, you can use some 00:35:27.369 --> 00:35:31.309 of this money for the benefit of employers. That's 00:35:31.309 --> 00:35:34.090 just not how the statute is read. In fact, you 00:35:34.090 --> 00:35:40.480 know, Appellants consistently talk about appellants 00:35:40.480 --> 00:35:45.199 rights but an employer excuse me employers rights 00:35:45.199 --> 00:35:49.199 under the statute, but as we've seen in I think 00:35:49.199 --> 00:35:53.679 what they're saying See this if you agree that 00:35:53.679 --> 00:35:55.900 the calculation of withdrawal liability is a 00:35:55.900 --> 00:35:59.300 statutory matter Do you agree with that the calculation 00:35:59.300 --> 00:36:02.099 of withdrawal liability is a statute or statutory 00:36:02.099 --> 00:36:05.659 command and then they're claiming that the PBGC 00:36:05.880 --> 00:36:10.619 in effect, amended the statute. And you can't 00:36:10.619 --> 00:36:13.739 do that. Do you agree with that? No, I do not. 00:36:13.940 --> 00:36:20.340 Because? Because all the PBGC has done is say 00:36:20.340 --> 00:36:24.119 with respect to a very unique situation, Congress 00:36:24.119 --> 00:36:28.619 providing special financial assistance to these 00:36:28.619 --> 00:36:32.679 severely underfunded and sometimes insolvent, 00:36:32.679 --> 00:36:40.139 multi -employer plans that you have to phase 00:36:40.139 --> 00:36:42.780 in that special financial assistance. They haven't 00:36:42.780 --> 00:36:45.400 changed the formula for calculating withdrawal 00:36:45.400 --> 00:36:49.639 liability, but to be clear, the PBGC has always 00:36:49.639 --> 00:36:55.519 had that authority under 1393 to implement methods, 00:36:56.639 --> 00:37:00.099 actuarial assumptions and methods. And whereas 00:37:00.099 --> 00:37:04.070 the courts have, you know, whereas 1393 makes 00:37:04.070 --> 00:37:08.250 clear that when the plan's actuary comes up with 00:37:08.250 --> 00:37:11.449 these actuarial assumptions and methods, they 00:37:11.449 --> 00:37:14.670 have to be reasonable in the aggregate. No such 00:37:14.670 --> 00:37:19.409 reasonable modifier is applied to the PBGC's 00:37:19.409 --> 00:37:22.329 actuarial assumptions and methods. And really, 00:37:22.570 --> 00:37:25.550 they've always had that authority. That authority 00:37:25.550 --> 00:37:29.489 was amplified or that authority was extended. 00:37:29.869 --> 00:37:36.010 in 1432 when Congress said the corporation has 00:37:36.010 --> 00:37:39.010 to give special financial assistance to the funds, 00:37:39.489 --> 00:37:43.030 and the funds can use the money for paying benefits 00:37:43.030 --> 00:37:46.789 and plan expenses. I just want to be clear on 00:37:46.789 --> 00:37:49.769 my understanding. As I understand it, they say 00:37:49.769 --> 00:37:52.530 there was a way to calculate withdrawal liability. 00:37:53.090 --> 00:37:55.869 There was an understanding of how you define 00:37:55.869 --> 00:37:59.989 plan assets. The PBGC regulations... fundamentally 00:37:59.989 --> 00:38:02.170 change how you define assets. Do you agree with 00:38:02.170 --> 00:38:05.829 that? I don't agree with that because actually 00:38:05.829 --> 00:38:10.349 it's never been plan assets that's been, there's 00:38:10.349 --> 00:38:13.130 no definition of plan assets. It's actually the 00:38:13.130 --> 00:38:15.730 statute talks about the value of plan assets 00:38:15.730 --> 00:38:18.389 and there are two ways to calculate the value 00:38:18.389 --> 00:38:21.929 of plan assets. One, the plan actuary does that 00:38:21.929 --> 00:38:25.570 and two, the PBGC can do that. Would you agree 00:38:25.570 --> 00:38:28.500 that before these regulations or absent these 00:38:28.500 --> 00:38:30.579 regulations, this money would be considered a 00:38:30.579 --> 00:38:36.199 plan asset? Well, I don't think anyone's disputing 00:38:36.199 --> 00:38:39.519 that the special financial assistance is a plan 00:38:39.519 --> 00:38:44.320 asset. But you dispute that the definition, if 00:38:44.320 --> 00:38:46.360 you will, and I recognize it's not specifically 00:38:46.360 --> 00:38:49.159 defined, as you're saying, but you dispute that 00:38:49.159 --> 00:38:53.670 the definition is changed, a plan asset? The 00:38:53.670 --> 00:38:57.369 PBGC could always, even under their existing 00:38:57.369 --> 00:39:02.349 powers, under 1302, the PBGC has always had the 00:39:02.349 --> 00:39:05.389 authority to further the purpose of MEPA, to 00:39:05.389 --> 00:39:08.030 discourage withdrawals. And in doing so, they 00:39:08.030 --> 00:39:11.110 were given the power to implement regulations 00:39:11.110 --> 00:39:15.210 in 1302 B3 to further the statutory purpose. 00:39:15.530 --> 00:39:20.969 And then in 1393, the PBGC was given the authority 00:39:20.969 --> 00:39:24.699 to implement. actuarial assumptions and methods 00:39:24.699 --> 00:39:27.960 that are separate from what a plan actuary may 00:39:27.960 --> 00:39:30.019 determine is reasonable. So in this instance 00:39:30.019 --> 00:39:32.719 are you saying that the regulation is consistent 00:39:32.719 --> 00:39:37.440 with 1393 because it allows an actuarially assumption 00:39:37.440 --> 00:39:42.079 such as the value of a particular asset to be 00:39:42.079 --> 00:39:44.679 part of the calculation. So you're saying that's 00:39:44.679 --> 00:39:48.449 the authority to while the funds might be an 00:39:48.449 --> 00:39:50.849 asset on your books for general accounting purposes 00:39:50.849 --> 00:39:55.269 is it your position that 1393 because the PDGC 00:39:55.269 --> 00:39:57.590 is given by Congress this authority on actual 00:39:57.590 --> 00:40:00.849 area assumptions could enact a regulation that 00:40:00.849 --> 00:40:03.449 tells it how to value a particular plan asset 00:40:03.449 --> 00:40:06.409 in this instance the SFA funds. That's correct. 00:40:06.869 --> 00:40:10.329 That's correct. And it you know to be clear here 00:40:10.329 --> 00:40:13.369 there's not a single employer whose withdrawal 00:40:13.369 --> 00:40:17.369 liability will be increased. as a result of the 00:40:17.369 --> 00:40:19.809 special financial assistance. At most, it will 00:40:19.809 --> 00:40:24.750 stay the same. For the vast majority of employers, 00:40:25.070 --> 00:40:27.530 their withdrawal liability will actually decrease 00:40:27.530 --> 00:40:31.269 as the special financial assistance is phased 00:40:31.269 --> 00:40:34.610 in. I see my time is up. Before you sit down, 00:40:34.610 --> 00:40:38.510 just one quick question on the 20 -year cap waiver. 00:40:39.750 --> 00:40:42.690 Do you understand any party to be challenging 00:40:42.690 --> 00:40:45.030 that bankruptcy court ruling that the 20 -year 00:40:45.030 --> 00:40:48.489 cap applies? even if withdrawal liability is 00:40:48.489 --> 00:40:51.590 accelerated? Yes, sir. I saw it in two of the 00:40:51.590 --> 00:40:57.190 eight briefs, brief and only almost obliquely. 00:40:58.889 --> 00:41:01.889 I'm sorry, I didn't hear. I didn't see it argued 00:41:01.889 --> 00:41:05.949 in any brief, but for two of the eight that were 00:41:05.949 --> 00:41:11.230 filed, that somehow, is there a challenge to 00:41:11.230 --> 00:41:14.730 the 20 -year cap waiver? Your Honor, because 00:41:14.730 --> 00:41:21.309 of the procedural issues in the case, the pension 00:41:21.309 --> 00:41:24.250 funds believe that issue is preserved because 00:41:24.250 --> 00:41:29.449 of the fact that you can't, the only reason to 00:41:29.449 --> 00:41:32.489 ignore the 20 -year limitation on payments would 00:41:32.489 --> 00:41:36.269 be if there is a default. Upon reconsideration, 00:41:36.389 --> 00:41:38.730 the bankruptcy court, after first determining 00:41:38.730 --> 00:41:41.449 that there was a default and saying the 20 -year 00:41:41.449 --> 00:41:44.829 limitation did apply, the bankruptcy court issued 00:41:44.829 --> 00:41:47.570 an amended opinion in which it said, wait a minute, 00:41:47.670 --> 00:41:51.070 there is not a default. And given the bankruptcy 00:41:51.070 --> 00:41:53.269 court's determination, there wasn't a default. 00:41:53.269 --> 00:41:55.570 There's not a default because why? The bankruptcy 00:41:55.570 --> 00:41:57.889 court determined that there wasn't a default, 00:41:58.110 --> 00:42:05.659 one, because The primary issue appears to be 00:42:05.659 --> 00:42:11.500 that the court determined that none of the plans 00:42:11.500 --> 00:42:14.599 had approved and issued their withdrawal liability 00:42:14.599 --> 00:42:17.960 assessments prior to Yellow having filed for 00:42:17.960 --> 00:42:26.440 bankruptcy. Of course, the plans disputed the 00:42:26.440 --> 00:42:29.619 determination. The bankruptcy court also appeared 00:42:29.619 --> 00:42:38.880 to determine that the bankruptcy in and of itself 00:42:38.880 --> 00:42:41.579 would not have triggered the default mechanisms, 00:42:42.199 --> 00:42:48.219 notwithstanding 29 USC 1399 C5. Of course, it's 00:42:48.219 --> 00:42:51.360 the plan's position that, indeed, there was a 00:42:51.360 --> 00:42:54.300 default for multiple reasons, including because 00:42:54.300 --> 00:42:57.539 the plans were insecure as Congress envisioned 00:42:57.539 --> 00:43:04.010 under 1399 C5. And in particular, Central States, 00:43:04.030 --> 00:43:08.090 as it stands, had already made the determination 00:43:08.090 --> 00:43:12.329 that debtors were in default before, excuse me, 00:43:12.389 --> 00:43:14.809 I should say yellow was in default, before yellow 00:43:14.809 --> 00:43:18.230 even filed for bankruptcy. However, because Central 00:43:18.230 --> 00:43:21.289 States Dex Board of Trustees meeting wasn't until 00:43:21.289 --> 00:43:24.829 right after yellow filed for bankruptcy, it actually 00:43:24.829 --> 00:43:27.710 wasn't approved until after the bankruptcy filing. 00:43:28.010 --> 00:43:31.329 but it is our position that there was a default 00:43:31.329 --> 00:43:38.269 and but that issue has not been um that issue 00:43:38.269 --> 00:43:42.050 has has not yet been finalized though is the 00:43:42.050 --> 00:43:48.769 20 -year cap issue currently before us it is 00:43:48.769 --> 00:43:53.210 not it has not yet been uh finally decided the 00:43:53.210 --> 00:43:56.550 the default issue has not been finally decided 00:43:56.860 --> 00:44:00.539 and rendered to an appealable order by the bankruptcy 00:44:00.539 --> 00:44:04.780 court. So the 20 -year cap waiver issue is not 00:44:04.780 --> 00:44:08.420 before us? Correct. Okay. That's all I need to 00:44:08.420 --> 00:44:10.260 know. Thank you very much, counsel. Thank you, 00:44:10.260 --> 00:44:28.210 Your Honors. Good morning, your honors and may 00:44:28.210 --> 00:44:29.929 it please the court. My name is Andrew Philip 00:44:29.929 --> 00:44:31.989 Walker appearing on behalf of the pension benefit 00:44:31.989 --> 00:44:34.389 guarantee corporation to start I just want to 00:44:34.389 --> 00:44:36.130 say that we agree with the arguments raised by 00:44:36.130 --> 00:44:39.010 mr. Berliner and I'd like to emphasize Point 00:44:39.010 --> 00:44:41.230 in particular though and that is that when Congress 00:44:41.230 --> 00:44:43.769 acted to assist struggling multi -employer pension 00:44:43.769 --> 00:44:46.869 plans It didn't simply open the Treasury doors 00:44:46.869 --> 00:44:49.190 start writing the checks and then throw up its 00:44:49.190 --> 00:44:51.050 hands and say whatever happens if this money 00:44:51.050 --> 00:44:54.949 happens Rather at the same time Congress authorized 00:44:54.949 --> 00:44:58.179 SFA funds to go to multi -employer plans. It 00:44:58.179 --> 00:45:01.099 also gave specific instructions concerning these 00:45:01.099 --> 00:45:05.380 funds in 1432. So 1432 is your statute, or is 00:45:05.380 --> 00:45:11.179 it also 1302? Well, 1302 is Congress's general 00:45:11.179 --> 00:45:14.380 delegation of authority in ERISA for PVGC to 00:45:14.380 --> 00:45:19.739 make regulations. And that also, we argue, authorizes 00:45:19.739 --> 00:45:22.619 the rule. We think Congress specifically spoke 00:45:22.800 --> 00:45:26.320 to PBGCs and specifically delegated authority. 00:45:26.480 --> 00:45:28.559 It was more specific in delegating authority 00:45:28.559 --> 00:45:32.239 to regulate SFA funds in 1432M. And what was 00:45:32.239 --> 00:45:35.239 the Article 1 authority Congress was relying 00:45:35.239 --> 00:45:38.280 on to authorize that statute to authorize the 00:45:38.280 --> 00:45:40.360 PBGC to act? I ask this only because there was 00:45:40.360 --> 00:45:42.820 a lot of briefing on... what constitutional provision 00:45:42.820 --> 00:45:44.980 in Article 1 we're going to rely on here. So 00:45:44.980 --> 00:45:49.079 what do you say it is? I think to take a step, 00:45:49.239 --> 00:45:51.360 if it's okay to take a step back as to why there 00:45:51.360 --> 00:45:53.360 was a lot of constitutional authority. I don't 00:45:53.360 --> 00:45:59.750 believe Apple has raised a challenge to... to 00:45:59.750 --> 00:46:03.730 the constitutionality of it, but rather the constitutional 00:46:03.730 --> 00:46:05.989 precedent was used below by Judge Goldblatt to 00:46:05.989 --> 00:46:08.469 speak to an issue of statutory interpretation. 00:46:08.730 --> 00:46:10.469 And I think your adversaries, I understood, were 00:46:10.469 --> 00:46:14.050 trying to use it to suggest that Congress couldn't 00:46:14.050 --> 00:46:19.969 allow some event to impact a third party, i .e., 00:46:19.969 --> 00:46:23.570 you know, and as a result, there seems to be 00:46:23.570 --> 00:46:25.230 a little dispute. So I just want to know from 00:46:25.230 --> 00:46:27.699 the PBGC's perspective. What does the Article 00:46:27.699 --> 00:46:30.000 1 power lie on? Spending clause, necessary and 00:46:30.000 --> 00:46:33.139 proper? We think that Congress had authority 00:46:33.139 --> 00:46:34.960 under both the spending clause and necessary 00:46:34.960 --> 00:46:37.559 and proper clause. Judge Goldblatt below was 00:46:37.559 --> 00:46:39.719 looking on that term condition specifically. 00:46:39.900 --> 00:46:41.880 Under spending clause authority, a condition 00:46:41.880 --> 00:46:44.559 can only be on a fund recipient. We do think 00:46:44.559 --> 00:46:49.639 his analysis there was correct. Apple has looked 00:46:49.639 --> 00:46:52.159 at cases in black letter law concerning necessary 00:46:52.159 --> 00:46:55.000 and proper authority. but which doesn't speak 00:46:55.000 --> 00:46:57.480 specifically to the spending clause cases that 00:46:57.480 --> 00:47:00.719 Judge Goldblatt himself relied on, Philpott and 00:47:00.719 --> 00:47:04.000 others. Justice Alito recently summarizing Philpott, 00:47:04.079 --> 00:47:06.260 I'm going to loosely or closely paraphrase, right, 00:47:06.340 --> 00:47:09.539 says Philpott and other such cases stand, he 00:47:09.539 --> 00:47:11.320 identifies them as spending clause cases and 00:47:11.320 --> 00:47:12.920 says they stand for the proposition that the 00:47:12.920 --> 00:47:15.559 federal, they support the federal government's 00:47:15.559 --> 00:47:19.079 ability to, protect federal monies from being 00:47:19.079 --> 00:47:21.239 used for purposes other than those intended by 00:47:21.239 --> 00:47:23.960 Congress. So that protective purpose over the 00:47:23.960 --> 00:47:27.519 funds, even if that condition is on a fund recipient, 00:47:27.719 --> 00:47:32.800 can operate to stop funds from misuse. What I 00:47:32.800 --> 00:47:37.219 would also say here is that we fully support, 00:47:37.239 --> 00:47:38.780 and I'm happy to answer further questions on 00:47:38.780 --> 00:47:42.559 Sabri, Philpott, and other cases, the best argument 00:47:42.559 --> 00:47:46.070 that this is indeed a condition on the fund pursuant 00:47:46.070 --> 00:47:47.949 to the statutory language is the most straightforward 00:47:47.949 --> 00:47:50.210 one, which is that the text of the regulation 00:47:50.210 --> 00:47:52.909 itself is directed towards the funds. It's tasking 00:47:52.909 --> 00:47:55.869 the funds to do a particular calculation. And 00:47:55.869 --> 00:47:58.190 this isn't just some cute work around. This is 00:47:58.190 --> 00:48:00.369 consistent with the structure laid out in ERISA 00:48:00.369 --> 00:48:04.349 itself. 1382, Congress tasks the funds with preparing 00:48:04.349 --> 00:48:07.570 the calculations, collecting the monies. And 00:48:07.570 --> 00:48:11.119 do you think it's so clear then? Do you agree 00:48:11.119 --> 00:48:13.119 that we don't even need to turn to the major 00:48:13.119 --> 00:48:15.880 questions doctrine because that's a tool of statutory 00:48:15.880 --> 00:48:18.619 construction. And if there's clarity, no need 00:48:18.619 --> 00:48:20.800 to go there. Yes, absolutely. And I think the 00:48:20.800 --> 00:48:22.760 facts of those cases make that abundantly clear. 00:48:22.840 --> 00:48:25.340 Things like student loan forgiveness affecting 00:48:25.340 --> 00:48:27.880 a third of discretionary funding, major political 00:48:27.880 --> 00:48:29.579 questions that have been debated for decades, 00:48:29.940 --> 00:48:31.440 elephants and mouse holes. No, I think here when 00:48:31.440 --> 00:48:33.639 Congress acted to delegate authority, it did 00:48:33.639 --> 00:48:35.239 so at the same time it introduced these funds. 00:48:35.260 --> 00:48:38.269 And it did so. specifying with, you know, it 00:48:38.269 --> 00:48:40.110 says withdrawal liability specifically in the 00:48:40.110 --> 00:48:43.230 statute. I think Congress also, again, was clear 00:48:43.230 --> 00:48:46.449 about its purpose for these funds in 1432L, right, 00:48:46.809 --> 00:48:48.670 specifies there to pay benefits and expenses. 00:48:49.030 --> 00:48:53.110 And not just in 1432L, though, 1432J1 also kind 00:48:53.110 --> 00:48:55.110 of gives the period of time that these funds 00:48:55.110 --> 00:48:59.070 are for through 2051. Is the calculation of withdrawal 00:48:59.070 --> 00:49:03.750 liability a statutory matter? Your Honor, I believe 00:49:03.750 --> 00:49:07.789 it's made with reference to the statute, but 00:49:07.789 --> 00:49:11.070 I think an important point is that that statute 00:49:11.070 --> 00:49:14.610 needs to be constructed consistent with Congress's 00:49:14.610 --> 00:49:18.750 more specific instructions in 1432. There's been 00:49:18.750 --> 00:49:22.260 argument over... the term of assets here, right, 00:49:22.659 --> 00:49:25.239 or discussion, that's flagged. Mr. Berliner correctly 00:49:25.239 --> 00:49:27.860 identified that valuation of the assets is kind 00:49:27.860 --> 00:49:30.539 of the central issue here. PBGC has argued and 00:49:30.539 --> 00:49:33.400 stands by its argument that in a vacuum, its 00:49:33.400 --> 00:49:38.099 regulation is consistent with 1393. See, but 00:49:38.099 --> 00:49:40.960 we're not in a vacuum. We're in we're in a world 00:49:40.960 --> 00:49:43.599 where when Congress introduced these funds It 00:49:43.599 --> 00:49:48.360 also spoke in 1432 L 1432 J 1 and explicitly 00:49:48.360 --> 00:49:52.500 delegated PBGC authority in 1432 M to regulate 00:49:52.500 --> 00:49:55.840 SFA funds with respect to withdrawal liability 00:49:55.840 --> 00:50:01.980 What is a plan asset? a plan asset It's something 00:50:01.980 --> 00:50:04.500 of value to the to the plan, but when Congress 00:50:05.760 --> 00:50:09.599 past MEPA, it was not anticipating the introduction 00:50:09.599 --> 00:50:13.239 of something like SFA funds, taxpayer monies 00:50:13.239 --> 00:50:16.739 paid in a lump sum in order to provide benefits 00:50:16.739 --> 00:50:21.539 through 2051. And so again, PBGC's regulation 00:50:21.539 --> 00:50:27.380 values SFA funds over time. It does provide an 00:50:27.380 --> 00:50:30.000 accurate and reasonable reflection over the period 00:50:30.000 --> 00:50:32.300 of which SFA is likely to be spent down by the 00:50:32.300 --> 00:50:36.900 plans. PBGC's regulation also furthers Congress's 00:50:36.900 --> 00:50:39.500 purpose. Looking to the language from Brown and 00:50:39.500 --> 00:50:43.179 Williamson, which Judge Goldblatt quoted below, 00:50:43.599 --> 00:50:45.880 again, closely paraphrasing here, the specific 00:50:45.880 --> 00:50:48.420 policy embedded in the later statute necessarily 00:50:48.420 --> 00:50:50.760 controls the construction of an earlier statute, 00:50:51.260 --> 00:50:53.320 even when that earlier statute hasn't been expressly 00:50:53.320 --> 00:50:56.409 amended. And so we think the application of 1393 00:50:56.409 --> 00:51:00.389 C here to bar PBGC's regulation would be inconsistent 00:51:00.389 --> 00:51:04.829 with Congress's more specific language in 1432. 00:51:04.989 --> 00:51:07.510 It's not a chain of command issue. It's Congress 00:51:07.510 --> 00:51:09.769 speaking generally and then Congress speaking 00:51:09.769 --> 00:51:12.750 later and more specifically. Basic principles 00:51:12.750 --> 00:51:15.909 of statutory interpretation then weigh against 00:51:15.909 --> 00:51:21.469 applying 1393 C in the manner argued for by appellants 00:51:21.469 --> 00:51:24.030 today. So Jambro asked you about calculations. 00:51:24.849 --> 00:51:28.789 So I'm going to ask you about 1391 and the fact 00:51:28.789 --> 00:51:31.849 that there are reportedly four formulas that 00:51:31.849 --> 00:51:35.010 are to be applied. Pick one, make sure you comply 00:51:35.010 --> 00:51:36.889 with it unless you have approval from the PBGC. 00:51:37.230 --> 00:51:41.010 Yes. So does this go to the additional briefing? 00:51:42.969 --> 00:51:45.650 So I should say as to that, PBGC doesn't consider 00:51:45.650 --> 00:51:48.769 itself a party to that. I'm aware of that, but 00:51:48.769 --> 00:51:51.130 you are the PBGC. Since I'm standing up here 00:51:51.130 --> 00:51:54.989 today, yes, I am prepared to speak. But we might 00:51:54.989 --> 00:51:57.070 hit up against the limits of my knowledge here. 00:51:57.070 --> 00:51:59.369 And I'd like to offer that we are happy to file 00:51:59.369 --> 00:52:02.610 it. And Amika's brief, if helpful. But PBGC stands 00:52:02.610 --> 00:52:05.309 behind its opinion expressed in opinion letter 00:52:05.309 --> 00:52:08.780 89 -8, because a plan and employer are free to 00:52:08.780 --> 00:52:11.119 contract for modification of the plan's regular 00:52:11.119 --> 00:52:14.960 statutory method for allocating UVBs that allocates 00:52:14.960 --> 00:52:17.980 more UVBs to an employer if it withdraws. PBGC 00:52:17.980 --> 00:52:21.099 is not, approval is not required in those instances. 00:52:21.920 --> 00:52:24.219 The purpose of the requirement of PBGC approval 00:52:24.219 --> 00:52:27.650 is as reflected in the statute to ensure. that 00:52:27.650 --> 00:52:30.010 a plan does not adopt an alternative allocation 00:52:30.010 --> 00:52:31.969 method that would significantly increase the 00:52:31.969 --> 00:52:34.250 risk of loss to plan participants and beneficiaries 00:52:34.250 --> 00:52:37.130 for the corporation. Would the argument then 00:52:37.130 --> 00:52:40.929 be here that you don't need BBGC approval because 00:52:40.929 --> 00:52:47.349 it's not an increase but it's a decrease in liability? 00:52:47.829 --> 00:52:50.650 I believe that that is the opinion endorsed by 00:52:50.650 --> 00:52:53.969 the opinion letter. I am not accepting to make 00:52:53.969 --> 00:52:57.099 an argument that goes beyond... That though, 00:52:57.219 --> 00:52:58.860 again, would be happy to provide further briefing. 00:52:58.880 --> 00:53:01.760 I don't think I'd follow you. You're saying that 00:53:01.760 --> 00:53:05.340 I know you're not in a position to opine on any 00:53:05.340 --> 00:53:08.340 particular specific agreement, but pretend it's 00:53:08.340 --> 00:53:10.539 a hypothetical. There's an agreement to modify 00:53:10.539 --> 00:53:13.300 a contribution rate during a particular period 00:53:13.300 --> 00:53:14.920 of time that's less than what would otherwise 00:53:14.920 --> 00:53:17.900 be owed for whatever reason. But let's say it's 00:53:17.900 --> 00:53:20.659 to enable the employer to have a moment to kind 00:53:20.659 --> 00:53:22.659 of catch its breath, because maybe it's under 00:53:22.659 --> 00:53:26.070 some financial distress. And so the parties agree 00:53:26.070 --> 00:53:28.530 that the actual rate of contribution during that 00:53:28.530 --> 00:53:31.710 period will be less than what it had been. With 00:53:31.710 --> 00:53:33.989 the understanding that if there is a withdrawal, 00:53:35.389 --> 00:53:38.530 the rate for calculation purposes would be that 00:53:38.530 --> 00:53:43.190 which existed before this financial benefit was 00:53:43.190 --> 00:53:47.969 given. Is that permissible without PBGC approval? 00:53:48.530 --> 00:53:52.119 Because it's not increasing. the amount of contribution 00:53:52.119 --> 00:53:55.179 due or liability, rather liability amount, but 00:53:55.179 --> 00:53:58.519 rather ensuring the amount due is actually paid. 00:53:59.719 --> 00:54:02.519 Can you say that last phrase, sorry? Is it to 00:54:02.519 --> 00:54:05.320 ensure that the amount actually due is actually 00:54:05.320 --> 00:54:07.699 paid as the withdrawal liability? Because you 00:54:07.699 --> 00:54:09.280 said something in response, I'll tell you why 00:54:09.280 --> 00:54:11.019 I'm asking this. You said something in response 00:54:11.019 --> 00:54:14.440 to Judge Ambrow about if there's a decrease in 00:54:14.440 --> 00:54:17.909 liability. Is there if there's a if there's a 00:54:17.909 --> 00:54:21.429 allocation in more rather more UVBs to to the 00:54:21.429 --> 00:54:30.530 employer if it withdraws Your honor my impulse 00:54:30.530 --> 00:54:33.389 is to say yes to your hypothetical, but I can't 00:54:33.389 --> 00:54:35.869 answer that question authoritatively today again, 00:54:35.869 --> 00:54:40.409 what did they worth? Giving us a supplementary 00:54:40.409 --> 00:54:45.519 memo on your position on this We would be happy 00:54:45.519 --> 00:54:46.719 to provide that if it would be helpful. Is that 00:54:46.719 --> 00:54:49.960 okay? Whatever the panel would like. Okay. Well, 00:54:50.079 --> 00:54:52.820 we're going to give me a moment just to ask you 00:54:52.820 --> 00:54:54.139 a different question, just to see if that should 00:54:54.139 --> 00:54:56.860 also be it. Let's assume there is an agreement 00:54:56.860 --> 00:54:59.199 the parties entered that lacked PVGC approval. 00:55:00.320 --> 00:55:04.619 And what would be the consequence of that? I 00:55:04.619 --> 00:55:07.079 would assume it's not enforceable if it requires 00:55:07.079 --> 00:55:11.659 approval. Am I correct? If it required approval... 00:55:13.119 --> 00:55:15.139 Think this again would be preliminary thoughts 00:55:15.139 --> 00:55:17.500 and better addressed in in the memo itself I 00:55:17.500 --> 00:55:20.420 think that if if the statute airtight required 00:55:20.420 --> 00:55:23.039 approval, then the statute would need to be enforced 00:55:23.039 --> 00:55:29.579 by the opinion you cite 89 -8 Is that the one 00:55:29.579 --> 00:55:31.980 that judge Easterbrook relied on an artistic 00:55:31.980 --> 00:55:37.119 heart? I Don't recall you might want to include 00:55:37.119 --> 00:55:43.449 that in your memo Give us the fact that so we 00:55:43.449 --> 00:55:55.429 can talk about scheduling sure Okay, this is 00:55:55.429 --> 00:55:57.289 the the plan so everybody gets a chance to be 00:55:57.289 --> 00:55:59.650 heard we'd ask that within ten days of today 00:55:59.650 --> 00:56:07.929 on the PBGC give us Oops What would that make 00:56:07.929 --> 00:56:12.340 it make it okay? How we feeling about July? Let's 00:56:12.340 --> 00:56:15.360 go with, I know that July 8th is a Tuesday. We're 00:56:15.360 --> 00:56:18.480 gonna go with July 8th. By July 8th, if you could 00:56:18.480 --> 00:56:22.480 give us a submission not to exceed 2 ,500 words 00:56:22.480 --> 00:56:24.679 on the issues that we've just discussed, limited 00:56:24.679 --> 00:56:26.900 to that. We'll give anybody else who wants to 00:56:26.900 --> 00:56:31.599 be heard. 10 days later to respond, that's July 00:56:31.599 --> 00:56:36.960 18th. Try to coordinate your letters so we don't 00:56:36.960 --> 00:56:40.440 get more than one from everybody. For those who 00:56:40.440 --> 00:56:41.920 are on the side of the appellees, if you want 00:56:41.920 --> 00:56:44.079 to just say me too, we're good. Don't feel the 00:56:44.079 --> 00:56:48.380 need to respond in a duplicative fashion. We 00:56:48.380 --> 00:56:51.860 will tell you if we need replies. OK? Thank you. 00:56:52.800 --> 00:56:54.719 Let me just see if Judge Montgomery, do you have 00:56:54.719 --> 00:56:56.320 any questions for the questions? Judge Ambrose? 00:56:56.420 --> 00:56:58.159 July 8th works because he doesn't want to file 00:56:58.159 --> 00:57:00.179 anything by July 4th anyway. Well, I wouldn't 00:57:00.179 --> 00:57:01.760 want him to do that. We've got a birthday party 00:57:01.760 --> 00:57:05.599 to celebrate for the USA. All right. Anything 00:57:05.599 --> 00:57:07.300 further, Judge Ambrose, for counsel? All right, 00:57:07.300 --> 00:57:22.079 you can be seated. Thank you. Edward Meehan from 00:57:22.079 --> 00:57:24.980 the Groom Law Group here on behalf of the New 00:57:24.980 --> 00:57:27.179 York State Teamsters Pension and Conference Fund 00:57:27.179 --> 00:57:30.559 on what MFN's council called the contract issue. 00:57:31.260 --> 00:57:34.559 To be clear about one thing, I am not here representing 00:57:34.559 --> 00:57:36.860 the Western Pennsylvania Teamsters at one time. 00:57:36.880 --> 00:57:39.300 They were in our group at MFN in the aftermarket, 00:57:39.440 --> 00:57:42.559 acquired that claim. Hopefully now this won't 00:57:42.559 --> 00:57:47.860 be a little after. after the reference to the 00:57:47.860 --> 00:57:50.039 briefing. This won't be a little bit in the sense 00:57:50.039 --> 00:57:52.239 of academic, but I do have a few points that 00:57:52.239 --> 00:57:53.800 it would be helpful, I think, for the court to 00:57:53.800 --> 00:57:56.860 consider before we get that additional briefing. 00:57:57.900 --> 00:58:00.519 It is appropriate to consider this a contract 00:58:00.519 --> 00:58:06.380 issue. There was no focus whatsoever in the briefing 00:58:06.380 --> 00:58:09.639 that came from the appellants, but we did point 00:58:09.639 --> 00:58:12.360 out some factual background material to which 00:58:12.360 --> 00:58:14.219 they've never responded, which is probably helpful 00:58:14.219 --> 00:58:17.150 to keep in mind here. This was a contract that 00:58:17.150 --> 00:58:21.550 was heavily negotiated. It was negotiated between 00:58:21.550 --> 00:58:24.909 a very sophisticated employer, one of the largest 00:58:24.909 --> 00:58:27.989 trucking companies in the country at that time. 00:58:28.519 --> 00:58:31.519 who was seeking to avoid filing for bankruptcy 00:58:31.519 --> 00:58:33.659 and being concerned it would have to go out of 00:58:33.659 --> 00:58:37.699 business at that time because it was able to 00:58:37.699 --> 00:58:40.860 enter into the agreement with the New York State 00:58:40.860 --> 00:58:43.400 Teamsters Fund and some other funds. It was able 00:58:43.400 --> 00:58:46.539 to avoid liquidating well over a decade ago. 00:58:46.840 --> 00:58:48.719 And they received all the benefits of remaining 00:58:48.719 --> 00:58:51.579 in business during that time. And it was negotiated 00:58:51.579 --> 00:58:57.599 by that trucking company by the partner. of the 00:58:57.599 --> 00:59:00.099 individual who's representing the debtors here 00:59:00.099 --> 00:59:02.219 today. Very sophisticated. Even if that's the 00:59:02.219 --> 00:59:05.800 case though, there's still the statutory language 00:59:05.800 --> 00:59:08.099 that says when we're calculating withdrawal liability, 00:59:08.199 --> 00:59:11.019 it shall be calculated consistent with what the 00:59:11.019 --> 00:59:13.760 provision, in this case, the presumptive method 00:59:13.760 --> 00:59:17.539 states. So whether it was agreed to or not, you 00:59:17.539 --> 00:59:20.079 still have superimposed upon that, especially 00:59:20.079 --> 00:59:23.360 as the plan, these obligations under ERISA, correct? 00:59:24.869 --> 00:59:27.730 Yes, except to the extent that the parties are 00:59:27.730 --> 00:59:31.769 always free to enter into a contract that is 00:59:31.769 --> 00:59:35.289 not inconsistent, and by inconsistent does not 00:59:35.289 --> 00:59:37.730 undermine the purposes of the statute. The statute 00:59:37.730 --> 00:59:40.369 has many purposes, including to protect other 00:59:40.369 --> 00:59:42.789 employers so that other employers don't have 00:59:42.789 --> 00:59:46.570 to pick up the excess liability that would otherwise 00:59:46.570 --> 00:59:50.750 go unpaid. And in this context, the trustees 00:59:50.750 --> 00:59:52.989 of the New York State Teamsters Fund were faced 00:59:52.989 --> 00:59:55.829 with a situation where their second largest employer 00:59:55.829 --> 00:59:59.530 in the fund was facing, by their own position, 00:59:59.869 --> 01:00:02.090 going out of business. It was in the interest 01:00:02.090 --> 01:00:03.809 of the fund to try to help them preserve their 01:00:03.809 --> 01:00:06.130 business. It was also very directly in the interest 01:00:06.130 --> 01:00:08.809 of the employer. As some of the questions earlier 01:00:08.809 --> 01:00:13.250 pointed out, it really was a question of now 01:00:13.250 --> 01:00:15.869 having obtained all those benefits for well over 01:00:15.869 --> 01:00:19.369 a decade. the employer wants to come in and spurn 01:00:19.369 --> 01:00:21.809 the obligation that it had. How is the method 01:00:21.809 --> 01:00:24.469 of calculating liability if the contract exists 01:00:24.469 --> 01:00:28.230 different from if it didn't exist when we have 01:00:28.230 --> 01:00:31.769 this statute? In this case, we don't view it 01:00:31.769 --> 01:00:35.150 as a change in the method at all. The New York 01:00:35.150 --> 01:00:37.949 State Teamsters Fund has always used the presumptive 01:00:37.949 --> 01:00:40.429 method. It continues to use the presumptive method. 01:00:40.730 --> 01:00:43.250 We do view this consistent with some of the comment 01:00:43.250 --> 01:00:46.820 earlier as really, I'd put it as a tweak. It 01:00:46.820 --> 01:00:51.400 is a data input. And it is very specific in Schedule 01:00:51.400 --> 01:00:57.159 G of the agreement here, which was signed by 01:00:57.159 --> 01:01:01.300 Yellow, that in the event of a later withdrawal, 01:01:01.320 --> 01:01:05.920 which has happened now, that the required contribution 01:01:05.920 --> 01:01:08.960 is the contribution rates that were paid prior 01:01:08.960 --> 01:01:10.719 to the entry of the Schedule G. Was there discussion 01:01:10.719 --> 01:01:14.400 in 2013, to the extent you know, was there discussion 01:01:14.400 --> 01:01:20.400 in 2013 of attempting to get PBGC approval? There 01:01:20.400 --> 01:01:22.820 was no discussion whatsoever. And in fact, there 01:01:22.820 --> 01:01:25.320 was a deposition that was taken of the Kirkland 01:01:25.320 --> 01:01:29.099 partner who led this restructuring. And that's 01:01:29.099 --> 01:01:33.559 at the supplemental appendix in the case. At 01:01:33.559 --> 01:01:37.519 157 to 58, there are some excerpts where I deposed 01:01:37.519 --> 01:01:40.239 her. And she acknowledged that at the time, she 01:01:40.239 --> 01:01:43.059 viewed the agreement as binding. She represented 01:01:43.059 --> 01:01:45.909 it. to the Council for the New York State Teamsters 01:01:45.909 --> 01:01:49.030 as being binding. She's never retracted that 01:01:49.030 --> 01:01:52.969 dirt, her knowledge no one ever has. So there 01:01:52.969 --> 01:01:55.650 was a very clear understanding between the parties 01:01:55.650 --> 01:01:58.010 that what they were negotiating would benefit 01:01:58.010 --> 01:02:01.329 both, would hopefully preserve Yellow from filing 01:02:01.329 --> 01:02:03.530 for bankruptcy and going out of business, which 01:02:03.530 --> 01:02:05.610 it accomplished for this long period of time, 01:02:06.010 --> 01:02:09.590 and no discussion about it had to be conditioned 01:02:09.590 --> 01:02:13.010 upon anything. It was, in the words of counsel, 01:02:13.309 --> 01:02:15.650 in writing, and under oath recently, reaffirming 01:02:15.650 --> 01:02:19.250 it, binding. Data input. You use that language, 01:02:19.369 --> 01:02:22.170 data input. The presumptive method applies. It 01:02:22.170 --> 01:02:24.489 only tweaks, quote, the data input. Is it fair 01:02:24.489 --> 01:02:27.690 to say that that's what the plan and an employer 01:02:27.690 --> 01:02:29.929 does is they come up with data inputs? Like, 01:02:29.969 --> 01:02:33.590 what's the dollar amount? What's the CBU? And 01:02:33.590 --> 01:02:36.190 all this does is just change that. It's not changing 01:02:36.190 --> 01:02:38.369 the method of calculation. Am I understanding 01:02:38.369 --> 01:02:40.739 your argument? Correct. Okay, great. Let me just 01:02:40.739 --> 01:02:42.179 see if my colleagues have any further questions. 01:02:42.679 --> 01:02:44.659 Okay, thank you for your argument. Thank you 01:02:44.659 --> 01:02:47.940 very much. Appreciate it. With your counsel on 01:02:47.940 --> 01:02:53.059 the bottom. Thank you, Your Honors. Hello again. 01:02:53.780 --> 01:02:55.739 Judge Montgomery Reeves, you were going through 01:02:55.739 --> 01:02:58.739 our thesis as to what you have with 1391 and 01:02:58.739 --> 01:03:03.639 1393, a clear congressional command for withdrawal 01:03:03.639 --> 01:03:06.269 liability. relative to employers and how that 01:03:06.269 --> 01:03:08.489 is to be calculated. And I really don't think 01:03:08.489 --> 01:03:11.530 there's much denying. No one does seem to deny 01:03:11.530 --> 01:03:14.349 that plan assets need to be part of that equation. 01:03:14.449 --> 01:03:17.309 They need to be subtracted from the non -forfeitable 01:03:17.309 --> 01:03:20.030 benefits. That's how you arrive at the correct 01:03:20.030 --> 01:03:22.329 answer. Nor is there any dispute that when we 01:03:22.329 --> 01:03:24.530 talk about SFA funds, billions of dollars of 01:03:24.530 --> 01:03:27.750 them, those are plan assets by any fair objective 01:03:27.750 --> 01:03:30.920 measure. Thus... our straightforward statutory 01:03:30.920 --> 01:03:33.679 argument that that congressional command specifically 01:03:33.679 --> 01:03:36.219 operating as to employers and their bottom line 01:03:36.219 --> 01:03:40.360 liability cannot be altered under auspices of 01:03:40.360 --> 01:03:43.500 reasonable agency regulation imposing a reasonable 01:03:43.500 --> 01:03:46.019 condition on the plans. That's our argument and 01:03:46.019 --> 01:03:47.980 I think you have it from Congress as well as 01:03:47.980 --> 01:03:53.039 from us. Now there is acknowledged agency discretion 01:03:53.039 --> 01:03:56.820 judge wards to decide what are reasonable actuarial 01:03:56.820 --> 01:03:58.780 assumptions that go into this. That's on the 01:03:58.780 --> 01:04:00.980 margins. That's interstitial, and it's driving 01:04:00.980 --> 01:04:04.539 at what is the correct calculation of plan assets. 01:04:04.619 --> 01:04:07.900 There's no categorical disregard of acknowledged 01:04:07.900 --> 01:04:10.340 plan assets. It operates there. And I would commend 01:04:10.340 --> 01:04:12.699 to your honors the concrete pipe decision of 01:04:12.699 --> 01:04:16.579 the U .S. Supreme Court at 508 U .S. at 509 .10. 01:04:16.860 --> 01:04:19.760 We cite that in our reply. And what the The court 01:04:19.760 --> 01:04:21.840 observed there is that the assumptions are used 01:04:21.840 --> 01:04:25.500 to objectively calculate the value of assets 01:04:25.500 --> 01:04:28.619 and liabilities to determine the present value 01:04:28.619 --> 01:04:31.019 of the plan's liability for vested benefits. 01:04:31.039 --> 01:04:32.920 It sounds like a pretty objective calculation. 01:04:33.719 --> 01:04:36.500 You got a chunk of money. The regulation says 01:04:36.500 --> 01:04:40.019 it can be X dollar amount, however you would 01:04:40.019 --> 01:04:42.900 calculate that. If certain events happen during 01:04:42.900 --> 01:04:45.599 certain years, no matter how far you're out from 01:04:45.599 --> 01:04:47.760 receiving the funds, it's objective. There's 01:04:47.760 --> 01:04:51.409 no... subjective valuation, like, oh, that's 01:04:51.409 --> 01:04:54.489 such a wonderful portrait of Judge Garth. It's 01:04:54.489 --> 01:04:57.449 priceless, Janee. That's not what's going on 01:04:57.449 --> 01:04:59.750 here. And yes, Judge Garth is the gentleman in 01:04:59.750 --> 01:05:01.289 the middle, and he was from New Jersey and he 01:05:01.289 --> 01:05:03.130 sat in my court. It's a wonderful portrait. You 01:05:03.130 --> 01:05:06.210 have my subjective opinion on that. But I would 01:05:06.210 --> 01:05:07.889 respectfully submit the opposite of what Your 01:05:07.889 --> 01:05:11.389 Honor just said. When you have a categorical 01:05:11.389 --> 01:05:15.730 exclusion from the equation of acknowledged billions 01:05:15.730 --> 01:05:18.949 of dollars in monies appropriated from the U 01:05:18.949 --> 01:05:21.269 .S. Treasury. The U .S. government is good for 01:05:21.269 --> 01:05:24.690 it, and it's to be paid in a single lump sum 01:05:24.690 --> 01:05:27.829 right at the outset to say that that is worth 01:05:27.829 --> 01:05:31.730 zero dollars. Zero dollars on day one is not 01:05:31.730 --> 01:05:35.150 objective. That is not reasonable. That is not 01:05:35.150 --> 01:05:38.230 what any actuary would do valuing any other plan 01:05:38.230 --> 01:05:41.610 asset that is on the sheet. That kind of begs 01:05:41.610 --> 01:05:46.289 the question that I asked earlier. Do the regulations 01:05:46.289 --> 01:05:49.090 increase the amount of your withdrawal liability 01:05:49.090 --> 01:05:53.670 or merely hold it to what it was before the ARPA 01:05:53.670 --> 01:05:56.230 funds came in? Well, Judge Ambrow, I think if 01:05:56.230 --> 01:05:59.030 we take the moment in time when Congress passed 01:05:59.030 --> 01:06:02.550 the statutory authorization for the SFA funds, 01:06:02.889 --> 01:06:05.409 it increases because they did that against the 01:06:05.409 --> 01:06:10.150 backdrop of what you have in 1391 and 1393 that 01:06:10.150 --> 01:06:13.570 said... that plan assets, all plan assets, would 01:06:13.570 --> 01:06:15.969 be factored into the calculation of employer 01:06:15.969 --> 01:06:18.110 withdrawal liability. So the agency relative 01:06:18.110 --> 01:06:20.929 to what Congress did has massively increased 01:06:20.929 --> 01:06:24.030 employer's withdrawal liability. And it's no 01:06:24.030 --> 01:06:25.570 different, Judge Schwartz, than if the agency 01:06:25.570 --> 01:06:28.650 had said, objectively, just add a billion dollars. 01:06:28.809 --> 01:06:31.610 Just add a billion dollars to what is the amount 01:06:31.610 --> 01:06:34.130 of unfunded vested benefits that factor into 01:06:34.130 --> 01:06:36.349 the employer's withdrawal liability. That might 01:06:36.349 --> 01:06:38.590 be, in some sense, objective, but it's not an 01:06:38.590 --> 01:06:41.349 objective or reasonable actuarial assumption 01:06:41.349 --> 01:06:44.230 that reflects fidelity to the congressionally 01:06:44.230 --> 01:06:47.309 prescribed statutory formula. And I'd also comment, 01:06:47.389 --> 01:06:49.949 Your Honor, as the MCI... Maybe the analogy might 01:06:49.949 --> 01:06:56.190 be, let's say, a... bond coupon if a bond coupon 01:06:56.190 --> 01:07:01.389 is expired is the item more expensive or is it 01:07:01.389 --> 01:07:05.130 just to pay it off is full price doesn't increase 01:07:05.130 --> 01:07:09.210 it's just you go back to paying full price Judge 01:07:09.210 --> 01:07:11.510 Ambrose, I don't think that that's the analog, 01:07:11.610 --> 01:07:13.929 because of course the terms of it would be there 01:07:13.929 --> 01:07:16.070 from Congress in issuing. I think what you're 01:07:16.070 --> 01:07:18.190 saying is the bond. I don't think an agency would 01:07:18.190 --> 01:07:20.849 be able to change that. But I also think that 01:07:20.849 --> 01:07:24.050 this is an easier case, because the agency has 01:07:24.050 --> 01:07:27.349 said, pursuant to its exercise of rulemaking 01:07:27.349 --> 01:07:30.690 authority, it is not valued as a plan asset on 01:07:30.690 --> 01:07:32.550 day one. You could have all sorts of different 01:07:32.550 --> 01:07:37.349 views of how you value it for purposes of the 01:07:37.349 --> 01:07:40.329 overall equation. what you cannot do is say it's 01:07:40.329 --> 01:07:43.090 excluded from the equation, or there'll be some 01:07:43.090 --> 01:07:45.889 phase in that is divorced from the actual present 01:07:45.889 --> 01:07:49.150 value of the money. And just the MCI and EPA 01:07:49.150 --> 01:07:53.670 cases, MCI is 512 U .S. at 218, the EPA case 01:07:53.670 --> 01:07:58.329 373 U .S. 302, those were addressing FCC and 01:07:58.329 --> 01:08:01.949 EPA regulations that one, under auspices of modifying 01:08:01.949 --> 01:08:04.349 a statutory framework, fundamentally altered 01:08:04.349 --> 01:08:06.510 it. The Supreme Court said you cannot do that. 01:08:06.710 --> 01:08:09.139 The same thing for EPA, where you had a specified 01:08:09.139 --> 01:08:12.780 statutory threshold and the agency massively 01:08:12.780 --> 01:08:16.539 changed that under auspices of its rulemaking 01:08:16.539 --> 01:08:19.060 discretion. Those things were contravening statutes. 01:08:19.119 --> 01:08:20.800 That's what you have here. There's one other 01:08:20.800 --> 01:08:22.340 question from the court that I would like to 01:08:22.340 --> 01:08:25.199 address, which is, so then what is the reasonable 01:08:25.199 --> 01:08:28.220 condition on a plan relating to withdrawal liability 01:08:28.220 --> 01:08:31.420 that we acknowledge the agency has statutory 01:08:31.420 --> 01:08:34.720 authorization to promulgate? And there are plenty 01:08:34.720 --> 01:08:37.279 of those. One of them is what you have. as far 01:08:37.279 --> 01:08:40.000 as approval of settlement. of employer withdrawal 01:08:40.000 --> 01:08:42.000 liability, that relates, and that's operating 01:08:42.000 --> 01:08:45.340 against the plans. Another is the actuarial assumptions 01:08:45.340 --> 01:08:47.100 that we were discussing, just kind of on the 01:08:47.100 --> 01:08:49.560 margins of how exactly these actuarial assumptions 01:08:49.560 --> 01:08:51.859 get applied. It's not a categorical exclusion, 01:08:52.319 --> 01:08:54.380 but what likes which you have here. And last, 01:08:54.560 --> 01:08:57.199 plans have discretion about employer withdrawal 01:08:57.199 --> 01:08:59.359 liability on the margins. What's called a de 01:08:59.359 --> 01:09:01.600 minimis exception that may be raised if an employer 01:09:01.600 --> 01:09:04.859 owes between $50 ,000 and $100 ,000, the plan 01:09:04.859 --> 01:09:08.600 may decide to forgive that. subject to its exercise 01:09:08.600 --> 01:09:12.140 of statutory discretion, and another is basically 01:09:12.140 --> 01:09:14.600 if the employer's tenure is less than five years, 01:09:14.899 --> 01:09:17.479 then the agency can forgive withdrawal liability. 01:09:18.239 --> 01:09:22.399 You could have reasonable regulations that attach 01:09:22.399 --> 01:09:25.380 to SFA funds that say, okay, plans, you're not 01:09:25.380 --> 01:09:28.520 going to offer that sort of forgiveness to employers. 01:09:28.899 --> 01:09:31.399 The withdrawal liability will be calculated irrespective 01:09:31.399 --> 01:09:33.239 of that. That would all be fine and fair, Your 01:09:33.239 --> 01:09:36.640 Honors. What you can't have is disregard of plan 01:09:36.640 --> 01:09:38.779 assets that belong in the statutory equation. 01:09:38.939 --> 01:09:40.520 That's our respectful submission to Your Honors. 01:09:40.640 --> 01:09:50.560 Thank you very much, Counsel. Thank you, Your 01:09:50.560 --> 01:09:52.659 Honor. Just a few points in rebuttal. Number 01:09:52.659 --> 01:09:56.489 one, in response to Judge Schwartz's questions 01:09:56.489 --> 01:09:59.069 to both PBGC Council and the New York Teamsters 01:09:59.069 --> 01:10:03.229 Council about whether ultimately if PBGC approval 01:10:03.229 --> 01:10:05.890 was required, I believe they both ultimately 01:10:05.890 --> 01:10:09.670 answered yes, PBGC approval would be required 01:10:09.670 --> 01:10:13.149 if there was a change in method. PBGC Council 01:10:13.149 --> 01:10:14.489 said, well, I'm not sure if there's a change 01:10:14.489 --> 01:10:16.890 in method, and I guess we'll have some briefing 01:10:16.890 --> 01:10:19.409 about that. New York Teamsters Council said, 01:10:20.409 --> 01:10:24.159 yes, but only if it's not inconsistent. And I 01:10:24.159 --> 01:10:27.640 think that what we have here is an inconsistent 01:10:27.640 --> 01:10:31.380 situation because you have any other alternative 01:10:31.380 --> 01:10:34.420 method when you have contributions required to 01:10:34.420 --> 01:10:37.340 be made and when calculating withdrawal liability, 01:10:37.500 --> 01:10:40.000 they were not using contributions required to 01:10:40.000 --> 01:10:42.100 be made. The second point... Whenever they submit 01:10:42.100 --> 01:10:44.260 by the 8th, you've got until the 18th to reply 01:10:44.260 --> 01:10:48.520 to it. But I think the PBGC Council did want 01:10:48.520 --> 01:10:51.220 more time in order to assess the issue. And I'm 01:10:51.220 --> 01:10:56.529 not so sure that... What you're saying is is 01:10:56.529 --> 01:10:59.890 it Directly contradictory to what the New York 01:10:59.890 --> 01:11:02.409 Teamsters Council said. Well, I think that in 01:11:02.409 --> 01:11:04.869 the end your honor I think everyone recognizes 01:11:04.869 --> 01:11:07.670 that at some point PBGC approval is required 01:11:07.670 --> 01:11:09.670 in some way and I want to make clear as another 01:11:09.670 --> 01:11:11.550 one I'm not so sure that that's what they said. 01:11:11.569 --> 01:11:14.689 Yeah Well, I guess I would make the point then 01:11:14.689 --> 01:11:17.390 that our position is actually the narrow position 01:11:17.390 --> 01:11:21.050 and it's the pro beneficiary and pro PBGC position 01:11:21.239 --> 01:11:23.760 When you calculate withdrawal liability, you 01:11:23.760 --> 01:11:26.260 have to follow one of the four statutory methods 01:11:26.260 --> 01:11:29.779 or else get PBGC approval. And you can do that 01:11:29.779 --> 01:11:31.800 for private agreements for different methods, 01:11:31.840 --> 01:11:34.439 but the plan still has to get PBGC approval in 01:11:34.439 --> 01:11:38.020 order to ensure against the risk of something 01:11:38.020 --> 01:11:40.600 going wrong, which is exactly why PBGC is there. 01:11:41.020 --> 01:11:43.699 I keep coming back to the question asked before. 01:11:43.939 --> 01:11:45.800 If somebody on the other side says, wait a minute, 01:11:46.399 --> 01:11:49.720 heads I get an advantage, tails I get no disadvantage, 01:11:49.819 --> 01:11:52.750 your response is, Well, your honor number one, 01:11:52.789 --> 01:11:55.229 I want to point out that this statute actually 01:11:55.229 --> 01:11:59.310 provides a 29 USC 1085 E1 B that there can be 01:11:59.310 --> 01:12:01.689 alternative contribution structures So as a matter 01:12:01.689 --> 01:12:04.109 of contract, it's okay to have an alternative 01:12:04.109 --> 01:12:06.270 contribution structure in a distress situation 01:12:06.270 --> 01:12:10.689 But I don't think it's a situation where I mean 01:12:10.689 --> 01:12:13.590 parties can agree privately to I mean parts could 01:12:13.590 --> 01:12:15.630 agree privately to say that if we have any dispute 01:12:15.630 --> 01:12:17.409 We're gonna take it directly to the Third Circuit, 01:12:17.810 --> 01:12:19.609 but that doesn't mean that when the time comes 01:12:19.789 --> 01:12:21.310 They can take it directly to the Third Circuit. 01:12:21.409 --> 01:12:23.369 The statute says you can't do that. You don't 01:12:23.369 --> 01:12:25.689 have jurisdiction. So it doesn't just mean that 01:12:25.689 --> 01:12:27.649 any time you've got an agreement, whatever the 01:12:27.649 --> 01:12:29.529 benefits or the cost to each side might have 01:12:29.529 --> 01:12:32.210 been, that you can simply ignore what the statute 01:12:32.210 --> 01:12:33.789 expresses. Is there any discussion do you know 01:12:33.789 --> 01:12:38.350 of in 2013 on your side to getting PBGC approval? 01:12:39.170 --> 01:12:41.590 I am not aware of anything in the record about 01:12:41.590 --> 01:12:44.949 our asking or checking about whether PBGC approval 01:12:44.949 --> 01:12:47.010 is required. That is the plan's responsibility 01:12:47.010 --> 01:12:48.729 and the plan's obligation under the statute. 01:12:50.060 --> 01:12:54.420 Thank you We thank everybody and there are teams 01:12:54.420 --> 01:12:57.260 for all the work that went in to this case on 01:12:57.260 --> 01:12:59.420 the court will take the matter under advisement 01:12:59.420 --> 01:13:02.739 We would like the parties to split the cost of 01:13:02.739 --> 01:13:05.840 a transcript of this oral argument so the sides 01:13:05.840 --> 01:13:08.119 could split that and I'm just going to repeat 01:13:08.119 --> 01:13:11.170 the the deadlines, because I do want to have 01:13:11.170 --> 01:13:15.270 a time of day also. So by July 8th, the PVGC 01:13:15.270 --> 01:13:18.609 will submit its brief, not to exceed 2 ,500 words. 01:13:18.989 --> 01:13:22.489 By noon, we'd like it submitted. And then anybody 01:13:22.489 --> 01:13:24.930 who wants to respond, no greater than 2 ,500 01:13:24.930 --> 01:13:28.510 words per response, also do July 18th at noon. 01:13:28.609 --> 01:13:30.770 We'd really ask council to coordinate so that 01:13:30.770 --> 01:13:33.430 we can avoid redundant briefing on the issues. 01:13:33.729 --> 01:13:36.090 So with that in mind, this panel is going to 01:13:36.090 --> 01:13:38.550 take a quick break. and you will be back for 01:13:38.550 --> 01:13:39.350 another case shortly.