Case of this early morning session, Inray Yellow
Corporation, appellate number 25 -1421. Good
morning, Judge Schwartz. You may please the court.
Derek Schaefer here on behalf of Appellants to
argue the SFA funds regulation issue. my friend
Mr. Hicks will be addressing the contract issue
separately. I will endeavor with the court's
permission to reserve four minutes of my time
for rebuttal. And that will be granted. Your
honors, this appeal is about following the chain
of command and adhering to Congress's statutory
prescription in the face of a purportedly reasonable
agency regulation that palpably conflicts. Otherwise,
an agency will have done what it cannot do. claiming
statutory authorization that Congress has withheld
and legislating, or Congress has not. But in
this case, hasn't Congress pretty clearly legislated
permission to the BPGC under sections 1302, 1432?
meaning both from ERISA and from the ARPA. Judge
Schwartz, we are not challenging those delegations
of interstitial authority for the agency to regulate
reasonably within the lines of what Congress
has laid down in statutory prescription. Our
respectful submission is it's flying in the face
of clear on -point prescription from Congress.
focused the court on 29. You said it do not contesting
there's clear authority to do it but it flies
in the face of other clear authority to do it.
That's forgive me for being an artful if that's
what I said Judge Ford's. What I meant is they
have authority to regulate reasonably between
the lines of the statute not to contradict the
statutes. How do they contradict the statute?
I'm sorry. How do they contradict the statute?
1393 Judge Ambrose. Congress clearly and expressly
prescribed how unfunded vested benefits are meant
to be calculated for purposes of determining
an employer's withdrawal liability. How is that
done? Plan assets must be deducted from non -forfeitable
benefits. And that ties in with 29 USC Section
1391A, which is a... providing employers' statutorily
vested right. Here's what 1391A says, the amount
of the unfunded vested benefits allocable to
an employer that withdraws from a plan shall
be determined in accordance with the ensuing
subsections, all of which revolve around unfunded
vested benefits. And there are choices a plan
can make. What's the purpose of the regulation?
Are you talking about both? Phase in or the withdrawal
or just one at the moment, but I think that the
one is derivative of the other So I think that
the no receivables regulation is basically There
to aid implementation of the phase in regulation
so that you don't have a run on withdrawals Just
as the first payment is coming from but you know
between that period of time when the application
has been granted and the payments have been made
and Congress's right to guard against that right
well Judge Ambrose, I would say this. I don't
think Congress specifically addressed any different
treatment of SFA funds as compared to other plan
assets that are available to pay benefits. Right
in the statute, the ARPA that in part allowed
these funds to be issued specifically told the
PBGC to... dealt to come up with regulations
on the withdrawal liability point specifically.
Relating to withdrawal liability, that's true,
Judge Ford, but I don't think, for instance,
that the agency could have said that now non
-forfeitable, that rather forfeitable benefits,
unvested benefits would count in the form. Well,
that's what we're talking about. Go ahead, Judge.
What do you do with 29 USDA 1002M that deals
with the planned assets? Planned assets? defined
by regulation as the Secretary may prescribe?
Well, I do think that you have it from Congress
specifically in 1432 that these are planned assets,
Judge Montgomery -Reeves. I mean, that is laid
down specifically in L. that they are to be segregated
from other plan assets. So that's clear treatment
of these funds as plan assets. And in particular,
beyond that, it specifies that these shall be
available or may be available to make benefit
payments. So they're plan assets in exactly that
substantive sense that these are funds that are
meant to be available to pay vested benefits.
So to take them out of the calculation of what
constitute the unfunded vested benefits is in
our view, to contravene the will of Congress.
Judge Ambrose, if Congress had wanted to address
this and said we're concerned about employers'
incentives to withdraw too soon, I think you
would have expected Congress to address the bankruptcy
side. They would have said there's a different
policy concern when we're talking about bankruptcy
and involuntary withdrawals because you don't
have the same concern about incentives. Congress
seemed to draw lines between what the PVGC could
do and couldn't do. And I think Judge Schwartz
began noting 1432 says includes conditions relating
to the allocation of plan assets and withdrawal
liability. At the same time, they set demarcations
as to what it cannot do. It cannot regulate plan
personnel, plan governance, the funding and accounting
of plans in endangered or critical status. So
where did they miss the boat? Where did Congress
miss the boat? Did the PBGC miss the boat? Well,
I don't think Congress did, because I think Congress
could safely assume that you wouldn't have an
agency under auspices of reasonable regulation
changing the statutory formula under Section
1393. I don't think that you can assume that
Congress was assuming that the agency would override,
you know, related congressional prescription
by the way that had been in place since 1980.
That's the statutory law that the agency is bound
to follow. And in progenitors of the major questions
cases, cases like MCI v. AT &T, utility air regulatory
group v. EPA, the Supreme Court had been clear
that agencies that have reasonable regulatory
authority do not have authority that allows them
to upend on -point statutory prescription. If
major questions was your major point, why was
it not at the beginning of your brief? Well,
I don't know that it's our major point. I think
it's a tougher issue for the court to deal with
as opposed to just enforcing the statutory prescription
from Congress. The statute is clear. Major questions
is a statutory interpretation tool. We don't
need to turn to that if the statute's clear,
correct? That's how I see it, Judge Schwartz.
And I think that that's how the Supreme Court
was doing things in these cases before it had
the major questions doctrine as kind of a companion
or an evolution of these cases that are about
how do we read statutes. relative to regulations.
Doesn't the statute give the PVGC to make actual
assumptions and other things when they're calculating?
And can it be fair to look at this more as a
direction on how to value an asset? I don't think
it is judgeable. If it is. If it is. That is
within their authority as part of that actuarial
sort of authority to figure out how to value
things. Am I right? So I'm going to give you
a yes and a no. A yes that they absolutely have
that authority to tweak actuarial assumptions
and to specify, for instance, what should those
assumptions be as they've done under other regulations.
We're not questioning that. What you have here
is a categorical exclusion. of something that
is unquestionably, I don't think the other side
denies, that SFA funds are planned assets that
are thereby designed to fund benefits. It's not
categorically excluded, it's just... phased in
over time, depending on when withdrawal happens.
Well, I don't think they deny that they would
have the authority, part and parcel of the phased
-in authority, to say that it is excluded on
day one, or as of the application being granted,
it is categorically excluded from consideration,
even though any accountant and any actuarial
assumption would say billions of dollars in funds
need to be accounted for. Only as a receivable
for the time being, but once it's in the account,
Isn't your real fight on the phase -in part?
Because we're talking usually just a matter of
weeks between application and release of funds,
as I understand, at least the one example in
the record. Well, but to take the disconnect,
if we may, between the congressional prescription
and what the agency does with the phase -in regulations,
the statute is equally clear that the funds are
paid lump -sum in a single payment. So that's
the reality that is dictated by Congress. And
then you have an agency saying, notwithstanding
that, we're going to treat those funds as though
they're not there in large part for a period
of years. And that, I think, just underlines
the disconnect. And I would emphasize, when we're
talking about withdrawal liability, we are talking
about congressional prescription relative to
employers. You argue that the regulations are
not conditions on the plans. I'm trying to understand
how any of the regulations would not be conditions
on the employers under your reasoning? Well let
me explain that. When we look at 1391, that is
a shell command of Congress that is specifically
directed at employers and their withdrawal liabilities
and what they will need to pay in. The plans
have to calculate the withdrawal liability. That
is absolutely true, but it is a ministerial function
and Congress, through force of law, is saying
through the statute what employers will owe.
So if an agency or if a plan strays from that,
there are rights that the employer has to take
that up in arbitration. via these regulations
that purport to have force of law relative to
employers. Essentially, it's been told to employers
that your withdrawal liability is different from
what it would otherwise be, which means bottom
line, you were paying much more money into a
supposedly underfunded plan. That is operating
against the employer directly. Are you saying
the regulations increase the amount of your withdrawal
liability or do they just simply? hold it to
what it was before the ARPA funds came in. Judge
Ambrow, I think that they are increasing the
withdrawal liability relative to what you have
from the statute, relative to what you have with
SFA funds being made available. And I'd say the
same if the argument went, well, now employers
are going to be treated as needing to contribute
more to insolvent plans that are categorized
as endangered or in critical status. If you said
we're going to disregard the SFA funds for that
purpose. which presumably would be no less available
to the agency, you would be making employers
pay more into endangered plans and disregarding
the fact that the SFA funds are there for the
express purpose of paying benefits. So you would
be treating plans as underfunded. In fact, they
can only pay benefits or expenses, right? That's
correct. Well, I want to say that is the bankruptcy
judge's theory of it. It's a made statement in
the statute. They are available for those purposes
explicitly. It is not a specification that they're
not available for any other purpose. But wouldn't
that just be contrary to the whole purpose of
these monies was to ensure that planned beneficiaries
are benefited, not the employers? And also counter
to the argument you previously made this morning.
Well, I don't think so, Judge Ambrow. What I
mean to say is you have cleared... That'll answer
her question. Okay. Sorry. What I mean to say
is this. I think that you do not have the same
clarity in that sub -provision as you do with
respect to employer's withdrawal liability, a
shell command that it shall be calculated per
the formula, and the specification that plan
assets are the core component of that calculation.
And I think even... The Judge Ambrow's question.
And for Judge Ambrow, I would say this. The fact
that the statute says... these assets are available
to pay benefits. I think tells you, as an inexorable
corollary of that, that in Congress's view, these
count as plan assets in an equation that's trying
to determine, after all, is a plan underfunded.
It is a counterfactual or counter statutory assumption
to then pass a regulation that says disregard
those funds that are there for the express purpose
of paying these... These regulations had notice
and comment. Did they not? They didn't. And they
even had a listening tour around the country,
which is sometimes done in order to get various
views in terms of setting the balance correctly,
or what they think is correct. Well, that's true.
I think it was a little bit of a deviation from
what I'd think of normal notice and comment because
of the listening tour aspect. But you're absolutely
right, Judge Amber. There was that listening
tour. Did you folks participate in any of that
and lodge any comments during the rulemaking
process? Because if you didn't, Maybe we can't
consider your objections now if you didn't object
during rulemaking. Well, I think we can rely
upon the comments that were made and addressed
by the agency. And in particular, they wound
up making this, I think, concededly unsupported
assumption about the extent to which employers
would be withdrawing early. But you're saying
that even though none of the plans involved in
this matter participated in the notice and comment
process, simply because others articulated similar
positions, you're allowed to now object. I think
that's right, Your Honor, because I don't know
that I have it in the brief, but I do have it
available if the court would like to see it cited,
because the agency's obligation is to engage
and reason. reason decision -making and to show
its work to the court. And so they purported
to justify these regulations. We don't think
they did that. But I also emphasize that the
statutory conflict is one that this court, I
think in terms of chain of command and who's
the captain, it's Congress. It's Congress that's
the captain. And if the agency is departed from
that, I think it decides the case, Your Honor.
Two questions for you about the assumption you
just mentioned. Why isn't that the type of predictive
judgment that we should? rely on the agency for,
who may or may not withdraw. And then my second
question was, why doesn't that just make common
sense and that support the PBGC's position? Okay,
so I think that Congress obviously trumps to
the extent that they've arrived at their policy
judgment. And I think if Congress was wrestling
with this question of should SFA funds be treated
as something other than a plan asset, I think
they would have addressed the bankruptcy context
and said then we should have different rules
because we don't have the same incentives operating
and we have concerns that you're going to have
unfunded plans that don't have SFA funds. The
whole point of these funds were to avoid these
entities going belly -up, including the employers
who participated. So it's not surprising that
the bankruptcy context wasn't specifically identified.
And in addition, there probably is no difference
between a voluntary withdrawal and an involuntary
withdrawal when the whole concept is, do we have
the funds to pay the employees? Judge Fortes,
I agree with some of that. Here's what I disagree
with. We're talking about the employer who's
gone bankrupt. Not the plan that's gone bankrupt.
I understand that. But that's the whole point.
They were trying to keep everything afloat. If
the employers are going bankrupt, then there's
not monies to put in. And then the plan has its
problems. So I don't understand this. They should
have spoken about bankruptcy so specifically.
Here's all I need. That employers don't have
the same voluntary decision making. Am I going
to withdraw from a multi -employer plan when
they go bankrupt and they're just not able to
pay out monies anymore? So you don't have the
election of an employer for reasons specific
to the multi -employer plan that I'm going to
choose to withdraw early. And it's a calculated
decision. And to answer the other aspect of your
question, Judge Montgomery Reeves, I just think
that we're talking about unfunded plans. And
some of those unfunded plans don't have SFA funds
at all. And if you have an employer in the position
of yellow that's being made to pay more money,
gratuitously as a windfall into a plan that's
fully funded once you consider the SFA funds,
you will have other plans that do not have the
SFA funds that are not fully funded that will
look to an employer like Yellow for a greater
contribution and that money will not be there
because we're talking about a very limited pie
in the context of a bankruptcy. That's probably
a good segue to how we calculate then, correct?
Yes. So maybe that's what the next person coming
up. Okay. Thank you, Your Honors. I will see
you on rebuttal. Good morning. Good morning.
Thank you, Your Honor, and may it please the
Court, George Hicks, for the debtors, Yellow
Corporation, and on behalf of all appellants,
I'm going to address the separate dispute over
withdrawal liability with the New York and Western
Pennsylvania Teamsters, and I've reserved two
minutes for rebuttal. What did you agree with
initially to pay? I'm sorry, Your Honor? What
did Yellow agree with initially to pay? I believe
that back in 2013, what Yellow agreed to was
to be under Schedule G, which was a deviation
from It was an amendment to the plan, but that
is what it was a 25 % contribution that would
be required to be made under that plan. So that's
what the agreement was. That was the benefit
it got. I'm sorry again. That was the benefit
it got. I believe the benefit was at the time
that that it would be allowed to contribute to
the plan that it would not go into immediate.
They negotiated a separate deal. with in 2013
and what was the benefit it got and what was
the consequence if it didn't comply? I believe
your honor that at the time the benefit was that
it would not have immediate withdrawal liability
at that time. It also got a reduced rate from
what it had been making before to real -time
contributions and it was the contract said that
however if you withdraw we're going to use the
rate you're obligated to, correct? Your Honor,
we don't dispute that any of that happens. But
what we are arguing is that if there is an agreement
like that, that it still has to be approved by
the PBGC, because it is a deviation from the
presumptive method that is set out in the statute.
And it's very clear in the statute that when
you have, quote, any other alternative method,
for calculating withdrawal liability, you must
obtain PBGC's approval. How is that an alternative
method? All it is is changing one of the numbers
that the parties agree to to make up for the
kind of largesse that the plan gave. I'm not
sure there's a different calculation method.
Well, Your Honor, I guess I would respectfully
disagree when the statute says that the presumptive
method, which is what the plan is claiming to
have been used, requires using, quote, the contributions
required to be made under the plan. Under this
plan, what was required to be made were contributions
at the 25 % level. And yet, they're using 100
% contributions when calculating withdrawal liability.
I mean, I don't think that's any different than
if I have a recipe for a chocolate cake that
says flour, water, eggs, and cocoa, and then
I use vanilla instead of cocoa. I don't have
a chocolate cake anymore. I didn't follow the
method. for creating that doesn't matter what
the input changes that's the method and when
the statute says quotes any other alternative
method any is a capacious word and it all holds
together i mean you you can do these things a
plan can do these things it simply has to get
pbgc but you weren't you you were taking the
benefit that you got from the 2013 agreement
And you weren't complaining in 2014 or 2015 and
thereafter until you went into bankruptcy that
somehow this was not allowed, right? Well, Your
Honor, I guess I take a little bit of issue with
the idea that it's a purely one -sided benefit
here. I mean, the... No, you get some... You
wouldn't have done the deal in 2013 if you didn't
get some benefit, correct? Presumably not, but
all of that is, I think, a separate contract
issue. I don't think it addresses the statutory
question we have here. And it's that it holds
together if you have the PVGC approval requirement,
which is that plans can do these... But you didn't
say in 2013 or 2014 that we should get PVGC approval.
If you're on the other side, basically what you're
saying is you're taking a heads -eye -wind, tails
-you -lose argument. And courts have dealt with
this before, like the Seventh Circuit and artistic
carton, in which they say, okay, there's a difference
between an elaboration and a novation. In other
words, an elaboration is you have some type of
amendment, but you're not completely doing things
where you, a novation means you step into the
shoes of somebody else. And this is an elaboration.
This is not a novation. How would you distinguish?
artistic carton from this case. Any other cases
that follow artistic carton? Your Honor, I would
distinguish artistic carton in many ways. First
of all, this novation elaboration, all of that
was in dicta in that portion of artistic carton,
but there's nothing in the statute... There's
other cases that have followed that, correct?
Not that I've seen my friends on the other side
cite. I have not seen anything that cites artistic
carton for this novation elaboration requirement,
and I think... Well, the Seventh Circuit and
another decision by Judge Cuddy I thought did.
If that's the decision that I think my friends
have cited saying is a completely different method,
there's nothing – I mean, that case did not address
what a completely different method is, and that's
not what the statute requires. The statute requires
any other alternative method. Let's assume we
follow that. Why is this not an elaboration,
but rather a – in effect, a novation? Well, Your
Honor, accepting the premise that there actually
is a statutory distinction between the two, which
I don't think there is and I don't think artistic
heart and supports because it was also dealing
with the direct attribution method. It wasn't
dealing with the presumptive method. But even
taking that, I think that when you have the statute
saying that, quote, the proportional share of
allocable UVBs is, quote, the contributions required
to be made under the plan and then you use something
that is not the contributions required to be
made, I don't think it gets any more stark that
you have deviated from the statute. If that's
not something that requires PBGC approval, I'm
not sure what is, and I'm not sure what's left
of the approval requirement at that point. And
the same thing holds for the annual payment determination,
which also didn't follow. And that requires the
employer to, I'm sorry, the plan to use the CBUs
and the contribution rate at which the employer,
quote, had an obligation to contribute. And again,
that's not what was used here when it's determining
withdrawal liability. And we're not saying that
can't be done, but it has to be done with PBGC
approval. And I think why that's important is
because the PBGC is there as it's set forth in
the statute and in the regulation to make sure
that if you have these side agreements that they
aren't messing with the system. I was just messing
with the system though. The agreement says For
a period of time, we're going to contribute an
X amount. And then it says, if something happens,
the withdrawal liability amount will be what
it used to be. Nothing has really changed in
the plan. It simply sort of changed when the
payments are being almost like a balloon payment.
It's the best way I can think of it is that there
was an agreement to a balloon payment. It's not
changing what was owed. The yellow got temporary
dispensation to allow it to try to financially
rehabilitate. With the understanding that, Should
this not work? We can't let the employees and
beneficiaries plan suffer as a result You're
gonna have to pay that which you have always
owed. We just gave you a payment plan Why can't
we review it like that? Well, I guess to your
friends one specific this and one more general
one on specific to this Yeah, I don't know if
it's quote kicking the can down the road is necessarily
something that's good for the system because
you never know if an employer is or a plan, you
know, if they are going to go belly up. I mean,
obviously there have been a number of issues
in this sphere. Whether it's good for the system
or not, why isn't that what precisely what happened?
Well, I think to me that goes to my second more
general point, which is You can imagine the mischief
that could occur if all of these side agreements
can take place without PBGC approval. And I'll
give you an example from this specific case,
which is that my friends on the other side point
to appendix 143, and they point to language that
says if there's a temporary termination or cessation,
the employer's contributions shall be imputed
for that period, which shall be treated as contributions
required to be made. before Schedule G. So now
we have a situation where a plan is saying, and
there's an agreement, that literally no contributions
can be made, but we're still going to count it
as 100 % towards withdrawal liability. And I
think that that is an absolute blueprint for
mischief. The fact that we just answered Judge
Schwartz's question is to, you get this benefit
in 2013, and it's basically, you pay some now,
you may have to pay, what you should have paid
later if you're in default. So is that illegal
without PBGC approval? If it was, why did you
enter into the deal without getting PBGC approval?
Well, Your Honor, number one, it's not our obligation
to get PBGC approval. That is the plan's obligation
under the statute. But you would think from your
perspective, if you got a benefit in 2013, which
carried on for a number of years, Wouldn't you
want to have the support of PBGC approval if
you somehow think that perhaps it's illegal if
you don't get that approval? Your honor, I don't
think I dispute that someone should have sought
PBGC approval, but the plan was getting a benefit
out of this as well. And the plan has the obligation
under the statute to do that. And just to circle
back, I don't think there's any authority in
the statute to allow these side agreements that
permit parties to violate this. You're right,
and PBGC had to approve this and didn't. Contracts
voided. We're going back to what you owed in
2013, pre -2013, right? No, Your Honor, I think
we're not arguing. No one's arguing for rescission
of the contract. All we're saying is that...
You're just saying it's an unapproved contract.
No, I know no one's asking for the equitable
concept of rescission. But the position you're
advocating for is this didn't have PBGC approval.
As a result, that should mean it's unenforceable.
Then we go back to the way the plan existed,
which was calculating based on pre -distress
schedule, schedule G numbers. So we can do the
calculation. We end up back in the same place,
no? Your Honor, actually, I take issue with the
idea that what we're saying is that it's then
unenforceable. What we're saying is what you
have to do when calculating the withdrawal liability,
which is where we are now, is you have to use
quote, the contributions required to be made
under the plan. The only part of this agreement
is going to be okay without PBGC approval, wink
wink, but not the part that hits you on withdrawal
liability, right? We're using what the statute
requires, Your Honor. The statute requires under
the presumptive method, which is what the plan
is using and professes to be using, the contributions
required to be made, the CBUs and the contribution
rate that the employer had an obligation to contribute.
If you don't want to do that, you have to get
PBGC approval. That's what we follow the statute,
and that's what the statute requires. And I haven't
seen anything by my friends on the other side
that takes a dispute with that, which is why
I think they're arguing that there just wasn't
any change in the first place. Now, we disagree
with that. And I think that there are plenty
of reasons for that laid out in our brief. But
I think that when it comes to the actual, does
the statute even allow for this? I don't think
it does. And to go back, I think Artistic Harten
is actually the best case on that. It actually
contemplates that the parties do have to seek
PBGC approval. Now, it said that we don't have
to address this, but it certainly contemplated
that that was the case if there was actually
a change in the method. If there's the equivalent
of a novation but not the equivalent of an elaboration.
Correct. I'm sorry, Your Honor. If there's the
equivalent of a novation but not the equivalent
of an elaboration. If you were to take the Seventh
Circuit's elaboration, novation, distinction,
which again was in addressing a different type
of method that has a little bit more wiggle room,
we would still say that this is a novation, because
again, it's quote, any other alternative method.
I actually don't think the elaboration, novation,
distinction really even works with that statutory
requirement, which is why it was dicta. But if
you're looking at this text of the statute, Which
was says yeah, I mean what you what you see in
artistic carton on 1353 and 1354 essentially
is a trying judge easterbrook trying to make
sense Out of what's being argued and he's coming
up with that particular method of analysis Do
you disagree with the method of analysis? I disagree
that there is an elaboration novation distinction
when it comes to determining whether Under the
presumptive method there has been quote any other
alternative method. I think that you look at
the word any, and I think that you look at what
the Supreme Court has said about the word any.
I look at the fact that this isn't some small
sort of ministerial miscalculation. This is what
the statute requires. This isn't even a regulation.
This is what the statute requires. So your theme
throughout is we made a deal in 2013 for my time,
in this case, your time. We got the benefit of
it and when there was a condition that caused
the moneys or the amount that should be 100 %
liability comes into play, that is you go into
bankruptcy, forget about it because it was illegal
to begin with. It really goes back to Judge Forch's
question, right? That's your theme. Our theme
is that you follow the statute, Your Honor, and
what the statute requires. The theme is that
by following the statute means Is what she said
and what I just said incorrect? I don't if that
means following the statute that I think you
are so then you should never have gotten the
benefit for nine or ten years of The deal that
you cut in 2013. No, I don't disagree with that
because again I think we're saying all we're
saying is that this agreement to to be held to
schedule G is you know, it is an agreement that
exists and on its face is enforceable, but then
you have to, when you are actually calculating
the withdrawal liability, when it comes time
to do that, and that's what the statute lays
out in 1391, when you do that, you have to follow
one of four laid out methods, or you have to
get permission from the PBGC to do something
different. When that time comes, and that time
came, and I think that that's why you are seeing
the arguments by the other side but really not
defending the bankruptcy court's decision reliance
on artistic garden and instead saying well this
this didn't even work need any approval in the
first place because it didn't rise to that level
we disagree with that because if you're violating
the statute i don't i think it doesn't get more
straightforward that you need pbgc approval at
that point which is again the entire reason why
you have that approval requirement in the first
place we're not saying you can't do these things
Just have to get the agency's approval, which
is exactly what is required in the statute Thank
you Thank you Good morning your honors may please
court Brad Berliner on behalf of Central States
Southeast and Southwest areas pension fund your
honor Part of the problem your honor is part
of the problems with part of the problem with
appellants perspective when they look at the
conditions Upon multi -employer plans is that
they're viewing this as a wind the special financial
assistance as a windfall to the plants But that
really miss comprehends the nature of multi -employer
plans in general. The plans are not -for -profit
trusts that operate exclusively for the participants
and beneficiaries. And in that sense, they preserve
and protect the assets for the benefit of the
participants and beneficiaries. And that's how
this needs to be viewed. Just as in 1382, 29
USC 1382 and 29 USC 1399. These are commands
to the pension funds on behalf of their participants
and beneficiaries to collect, to determine, withdraw
liability, to send the employer a notice in demand
and to do so as soon as practicable. And if the
plan doesn't do that, it's not acting in its
fiduciary capacity. So it's your view these are
conditions on the plan, these regulations, not
on the employer, am I right? Correct. What is
the Article 1 power the Congress used to authorize
the statutes that allowed the PBGC to promulgate
these regulations? The briefing had spending
clause, conversations, there's also the necessary
and proper clause. What is your position on that
point? Appellants have acknowledged that Congress
has the authority under the Necessary and Properties
Clause to enact conditions related to money that
they've appropriated. And so, in fact, in their
brief they've acknowledged that Congress can
condition the receipt of federal funds on them
being used as Congress designates. Well, Congress
did exactly that in 1432. Congress said that
these special financial assistance funds can
be used to pay plan benefits and plan expenses.
Now, my colleagues on the other side would say,
well, no, Congress said may, not shall. But of
course, there's the option that these multi -employer
plans can first use whatever funds they have
remaining before receiving special financial
assistance to pay plan benefits and plan expenses
and hold on to that special financial assistance.
The corollary is not that, oh, you can use some
of this money for the benefit of employers. That's
just not how the statute is read. In fact, you
know, Appellants consistently talk about appellants
rights but an employer excuse me employers rights
under the statute, but as we've seen in I think
what they're saying See this if you agree that
the calculation of withdrawal liability is a
statutory matter Do you agree with that the calculation
of withdrawal liability is a statute or statutory
command and then they're claiming that the PBGC
in effect, amended the statute. And you can't
do that. Do you agree with that? No, I do not.
Because? Because all the PBGC has done is say
with respect to a very unique situation, Congress
providing special financial assistance to these
severely underfunded and sometimes insolvent,
multi -employer plans that you have to phase
in that special financial assistance. They haven't
changed the formula for calculating withdrawal
liability, but to be clear, the PBGC has always
had that authority under 1393 to implement methods,
actuarial assumptions and methods. And whereas
the courts have, you know, whereas 1393 makes
clear that when the plan's actuary comes up with
these actuarial assumptions and methods, they
have to be reasonable in the aggregate. No such
reasonable modifier is applied to the PBGC's
actuarial assumptions and methods. And really,
they've always had that authority. That authority
was amplified or that authority was extended.
in 1432 when Congress said the corporation has
to give special financial assistance to the funds,
and the funds can use the money for paying benefits
and plan expenses. I just want to be clear on
my understanding. As I understand it, they say
there was a way to calculate withdrawal liability.
There was an understanding of how you define
plan assets. The PBGC regulations... fundamentally
change how you define assets. Do you agree with
that? I don't agree with that because actually
it's never been plan assets that's been, there's
no definition of plan assets. It's actually the
statute talks about the value of plan assets
and there are two ways to calculate the value
of plan assets. One, the plan actuary does that
and two, the PBGC can do that. Would you agree
that before these regulations or absent these
regulations, this money would be considered a
plan asset? Well, I don't think anyone's disputing
that the special financial assistance is a plan
asset. But you dispute that the definition, if
you will, and I recognize it's not specifically
defined, as you're saying, but you dispute that
the definition is changed, a plan asset? The
PBGC could always, even under their existing
powers, under 1302, the PBGC has always had the
authority to further the purpose of MEPA, to
discourage withdrawals. And in doing so, they
were given the power to implement regulations
in 1302 B3 to further the statutory purpose.
And then in 1393, the PBGC was given the authority
to implement. actuarial assumptions and methods
that are separate from what a plan actuary may
determine is reasonable. So in this instance
are you saying that the regulation is consistent
with 1393 because it allows an actuarially assumption
such as the value of a particular asset to be
part of the calculation. So you're saying that's
the authority to while the funds might be an
asset on your books for general accounting purposes
is it your position that 1393 because the PDGC
is given by Congress this authority on actual
area assumptions could enact a regulation that
tells it how to value a particular plan asset
in this instance the SFA funds. That's correct.
That's correct. And it you know to be clear here
there's not a single employer whose withdrawal
liability will be increased. as a result of the
special financial assistance. At most, it will
stay the same. For the vast majority of employers,
their withdrawal liability will actually decrease
as the special financial assistance is phased
in. I see my time is up. Before you sit down,
just one quick question on the 20 -year cap waiver.
Do you understand any party to be challenging
that bankruptcy court ruling that the 20 -year
cap applies? even if withdrawal liability is
accelerated? Yes, sir. I saw it in two of the
eight briefs, brief and only almost obliquely.
I'm sorry, I didn't hear. I didn't see it argued
in any brief, but for two of the eight that were
filed, that somehow, is there a challenge to
the 20 -year cap waiver? Your Honor, because
of the procedural issues in the case, the pension
funds believe that issue is preserved because
of the fact that you can't, the only reason to
ignore the 20 -year limitation on payments would
be if there is a default. Upon reconsideration,
the bankruptcy court, after first determining
that there was a default and saying the 20 -year
limitation did apply, the bankruptcy court issued
an amended opinion in which it said, wait a minute,
there is not a default. And given the bankruptcy
court's determination, there wasn't a default.
There's not a default because why? The bankruptcy
court determined that there wasn't a default,
one, because The primary issue appears to be
that the court determined that none of the plans
had approved and issued their withdrawal liability
assessments prior to Yellow having filed for
bankruptcy. Of course, the plans disputed the
determination. The bankruptcy court also appeared
to determine that the bankruptcy in and of itself
would not have triggered the default mechanisms,
notwithstanding 29 USC 1399 C5. Of course, it's
the plan's position that, indeed, there was a
default for multiple reasons, including because
the plans were insecure as Congress envisioned
under 1399 C5. And in particular, Central States,
as it stands, had already made the determination
that debtors were in default before, excuse me,
I should say yellow was in default, before yellow
even filed for bankruptcy. However, because Central
States Dex Board of Trustees meeting wasn't until
right after yellow filed for bankruptcy, it actually
wasn't approved until after the bankruptcy filing.
but it is our position that there was a default
and but that issue has not been um that issue
has has not yet been finalized though is the
20 -year cap issue currently before us it is
not it has not yet been uh finally decided the
the default issue has not been finally decided
and rendered to an appealable order by the bankruptcy
court. So the 20 -year cap waiver issue is not
before us? Correct. Okay. That's all I need to
know. Thank you very much, counsel. Thank you,
Your Honors. Good morning, your honors and may
it please the court. My name is Andrew Philip
Walker appearing on behalf of the pension benefit
guarantee corporation to start I just want to
say that we agree with the arguments raised by
mr. Berliner and I'd like to emphasize Point
in particular though and that is that when Congress
acted to assist struggling multi -employer pension
plans It didn't simply open the Treasury doors
start writing the checks and then throw up its
hands and say whatever happens if this money
happens Rather at the same time Congress authorized
SFA funds to go to multi -employer plans. It
also gave specific instructions concerning these
funds in 1432. So 1432 is your statute, or is
it also 1302? Well, 1302 is Congress's general
delegation of authority in ERISA for PVGC to
make regulations. And that also, we argue, authorizes
the rule. We think Congress specifically spoke
to PBGCs and specifically delegated authority.
It was more specific in delegating authority
to regulate SFA funds in 1432M. And what was
the Article 1 authority Congress was relying
on to authorize that statute to authorize the
PBGC to act? I ask this only because there was
a lot of briefing on... what constitutional provision
in Article 1 we're going to rely on here. So
what do you say it is? I think to take a step,
if it's okay to take a step back as to why there
was a lot of constitutional authority. I don't
believe Apple has raised a challenge to... to
the constitutionality of it, but rather the constitutional
precedent was used below by Judge Goldblatt to
speak to an issue of statutory interpretation.
And I think your adversaries, I understood, were
trying to use it to suggest that Congress couldn't
allow some event to impact a third party, i .e.,
you know, and as a result, there seems to be
a little dispute. So I just want to know from
the PBGC's perspective. What does the Article
1 power lie on? Spending clause, necessary and
proper? We think that Congress had authority
under both the spending clause and necessary
and proper clause. Judge Goldblatt below was
looking on that term condition specifically.
Under spending clause authority, a condition
can only be on a fund recipient. We do think
his analysis there was correct. Apple has looked
at cases in black letter law concerning necessary
and proper authority. but which doesn't speak
specifically to the spending clause cases that
Judge Goldblatt himself relied on, Philpott and
others. Justice Alito recently summarizing Philpott,
I'm going to loosely or closely paraphrase, right,
says Philpott and other such cases stand, he
identifies them as spending clause cases and
says they stand for the proposition that the
federal, they support the federal government's
ability to, protect federal monies from being
used for purposes other than those intended by
Congress. So that protective purpose over the
funds, even if that condition is on a fund recipient,
can operate to stop funds from misuse. What I
would also say here is that we fully support,
and I'm happy to answer further questions on
Sabri, Philpott, and other cases, the best argument
that this is indeed a condition on the fund pursuant
to the statutory language is the most straightforward
one, which is that the text of the regulation
itself is directed towards the funds. It's tasking
the funds to do a particular calculation. And
this isn't just some cute work around. This is
consistent with the structure laid out in ERISA
itself. 1382, Congress tasks the funds with preparing
the calculations, collecting the monies. And
do you think it's so clear then? Do you agree
that we don't even need to turn to the major
questions doctrine because that's a tool of statutory
construction. And if there's clarity, no need
to go there. Yes, absolutely. And I think the
facts of those cases make that abundantly clear.
Things like student loan forgiveness affecting
a third of discretionary funding, major political
questions that have been debated for decades,
elephants and mouse holes. No, I think here when
Congress acted to delegate authority, it did
so at the same time it introduced these funds.
And it did so. specifying with, you know, it
says withdrawal liability specifically in the
statute. I think Congress also, again, was clear
about its purpose for these funds in 1432L, right,
specifies there to pay benefits and expenses.
And not just in 1432L, though, 1432J1 also kind
of gives the period of time that these funds
are for through 2051. Is the calculation of withdrawal
liability a statutory matter? Your Honor, I believe
it's made with reference to the statute, but
I think an important point is that that statute
needs to be constructed consistent with Congress's
more specific instructions in 1432. There's been
argument over... the term of assets here, right,
or discussion, that's flagged. Mr. Berliner correctly
identified that valuation of the assets is kind
of the central issue here. PBGC has argued and
stands by its argument that in a vacuum, its
regulation is consistent with 1393. See, but
we're not in a vacuum. We're in we're in a world
where when Congress introduced these funds It
also spoke in 1432 L 1432 J 1 and explicitly
delegated PBGC authority in 1432 M to regulate
SFA funds with respect to withdrawal liability
What is a plan asset? a plan asset It's something
of value to the to the plan, but when Congress
past MEPA, it was not anticipating the introduction
of something like SFA funds, taxpayer monies
paid in a lump sum in order to provide benefits
through 2051. And so again, PBGC's regulation
values SFA funds over time. It does provide an
accurate and reasonable reflection over the period
of which SFA is likely to be spent down by the
plans. PBGC's regulation also furthers Congress's
purpose. Looking to the language from Brown and
Williamson, which Judge Goldblatt quoted below,
again, closely paraphrasing here, the specific
policy embedded in the later statute necessarily
controls the construction of an earlier statute,
even when that earlier statute hasn't been expressly
amended. And so we think the application of 1393
C here to bar PBGC's regulation would be inconsistent
with Congress's more specific language in 1432.
It's not a chain of command issue. It's Congress
speaking generally and then Congress speaking
later and more specifically. Basic principles
of statutory interpretation then weigh against
applying 1393 C in the manner argued for by appellants
today. So Jambro asked you about calculations.
So I'm going to ask you about 1391 and the fact
that there are reportedly four formulas that
are to be applied. Pick one, make sure you comply
with it unless you have approval from the PBGC.
Yes. So does this go to the additional briefing?
So I should say as to that, PBGC doesn't consider
itself a party to that. I'm aware of that, but
you are the PBGC. Since I'm standing up here
today, yes, I am prepared to speak. But we might
hit up against the limits of my knowledge here.
And I'd like to offer that we are happy to file
it. And Amika's brief, if helpful. But PBGC stands
behind its opinion expressed in opinion letter
89 -8, because a plan and employer are free to
contract for modification of the plan's regular
statutory method for allocating UVBs that allocates
more UVBs to an employer if it withdraws. PBGC
is not, approval is not required in those instances.
The purpose of the requirement of PBGC approval
is as reflected in the statute to ensure. that
a plan does not adopt an alternative allocation
method that would significantly increase the
risk of loss to plan participants and beneficiaries
for the corporation. Would the argument then
be here that you don't need BBGC approval because
it's not an increase but it's a decrease in liability?
I believe that that is the opinion endorsed by
the opinion letter. I am not accepting to make
an argument that goes beyond... That though,
again, would be happy to provide further briefing.
I don't think I'd follow you. You're saying that
I know you're not in a position to opine on any
particular specific agreement, but pretend it's
a hypothetical. There's an agreement to modify
a contribution rate during a particular period
of time that's less than what would otherwise
be owed for whatever reason. But let's say it's
to enable the employer to have a moment to kind
of catch its breath, because maybe it's under
some financial distress. And so the parties agree
that the actual rate of contribution during that
period will be less than what it had been. With
the understanding that if there is a withdrawal,
the rate for calculation purposes would be that
which existed before this financial benefit was
given. Is that permissible without PBGC approval?
Because it's not increasing. the amount of contribution
due or liability, rather liability amount, but
rather ensuring the amount due is actually paid.
Can you say that last phrase, sorry? Is it to
ensure that the amount actually due is actually
paid as the withdrawal liability? Because you
said something in response, I'll tell you why
I'm asking this. You said something in response
to Judge Ambrow about if there's a decrease in
liability. Is there if there's a if there's a
allocation in more rather more UVBs to to the
employer if it withdraws Your honor my impulse
is to say yes to your hypothetical, but I can't
answer that question authoritatively today again,
what did they worth? Giving us a supplementary
memo on your position on this We would be happy
to provide that if it would be helpful. Is that
okay? Whatever the panel would like. Okay. Well,
we're going to give me a moment just to ask you
a different question, just to see if that should
also be it. Let's assume there is an agreement
the parties entered that lacked PVGC approval.
And what would be the consequence of that? I
would assume it's not enforceable if it requires
approval. Am I correct? If it required approval...
Think this again would be preliminary thoughts
and better addressed in in the memo itself I
think that if if the statute airtight required
approval, then the statute would need to be enforced
by the opinion you cite 89 -8 Is that the one
that judge Easterbrook relied on an artistic
heart? I Don't recall you might want to include
that in your memo Give us the fact that so we
can talk about scheduling sure Okay, this is
the the plan so everybody gets a chance to be
heard we'd ask that within ten days of today
on the PBGC give us Oops What would that make
it make it okay? How we feeling about July? Let's
go with, I know that July 8th is a Tuesday. We're
gonna go with July 8th. By July 8th, if you could
give us a submission not to exceed 2 ,500 words
on the issues that we've just discussed, limited
to that. We'll give anybody else who wants to
be heard. 10 days later to respond, that's July
18th. Try to coordinate your letters so we don't
get more than one from everybody. For those who
are on the side of the appellees, if you want
to just say me too, we're good. Don't feel the
need to respond in a duplicative fashion. We
will tell you if we need replies. OK? Thank you.
Let me just see if Judge Montgomery, do you have
any questions for the questions? Judge Ambrose?
July 8th works because he doesn't want to file
anything by July 4th anyway. Well, I wouldn't
want him to do that. We've got a birthday party
to celebrate for the USA. All right. Anything
further, Judge Ambrose, for counsel? All right,
you can be seated. Thank you. Edward Meehan from
the Groom Law Group here on behalf of the New
York State Teamsters Pension and Conference Fund
on what MFN's council called the contract issue.
To be clear about one thing, I am not here representing
the Western Pennsylvania Teamsters at one time.
They were in our group at MFN in the aftermarket,
acquired that claim. Hopefully now this won't
be a little after. after the reference to the
briefing. This won't be a little bit in the sense
of academic, but I do have a few points that
it would be helpful, I think, for the court to
consider before we get that additional briefing.
It is appropriate to consider this a contract
issue. There was no focus whatsoever in the briefing
that came from the appellants, but we did point
out some factual background material to which
they've never responded, which is probably helpful
to keep in mind here. This was a contract that
was heavily negotiated. It was negotiated between
a very sophisticated employer, one of the largest
trucking companies in the country at that time.
who was seeking to avoid filing for bankruptcy
and being concerned it would have to go out of
business at that time because it was able to
enter into the agreement with the New York State
Teamsters Fund and some other funds. It was able
to avoid liquidating well over a decade ago.
And they received all the benefits of remaining
in business during that time. And it was negotiated
by that trucking company by the partner. of the
individual who's representing the debtors here
today. Very sophisticated. Even if that's the
case though, there's still the statutory language
that says when we're calculating withdrawal liability,
it shall be calculated consistent with what the
provision, in this case, the presumptive method
states. So whether it was agreed to or not, you
still have superimposed upon that, especially
as the plan, these obligations under ERISA, correct?
Yes, except to the extent that the parties are
always free to enter into a contract that is
not inconsistent, and by inconsistent does not
undermine the purposes of the statute. The statute
has many purposes, including to protect other
employers so that other employers don't have
to pick up the excess liability that would otherwise
go unpaid. And in this context, the trustees
of the New York State Teamsters Fund were faced
with a situation where their second largest employer
in the fund was facing, by their own position,
going out of business. It was in the interest
of the fund to try to help them preserve their
business. It was also very directly in the interest
of the employer. As some of the questions earlier
pointed out, it really was a question of now
having obtained all those benefits for well over
a decade. the employer wants to come in and spurn
the obligation that it had. How is the method
of calculating liability if the contract exists
different from if it didn't exist when we have
this statute? In this case, we don't view it
as a change in the method at all. The New York
State Teamsters Fund has always used the presumptive
method. It continues to use the presumptive method.
We do view this consistent with some of the comment
earlier as really, I'd put it as a tweak. It
is a data input. And it is very specific in Schedule
G of the agreement here, which was signed by
Yellow, that in the event of a later withdrawal,
which has happened now, that the required contribution
is the contribution rates that were paid prior
to the entry of the Schedule G. Was there discussion
in 2013, to the extent you know, was there discussion
in 2013 of attempting to get PBGC approval? There
was no discussion whatsoever. And in fact, there
was a deposition that was taken of the Kirkland
partner who led this restructuring. And that's
at the supplemental appendix in the case. At
157 to 58, there are some excerpts where I deposed
her. And she acknowledged that at the time, she
viewed the agreement as binding. She represented
it. to the Council for the New York State Teamsters
as being binding. She's never retracted that
dirt, her knowledge no one ever has. So there
was a very clear understanding between the parties
that what they were negotiating would benefit
both, would hopefully preserve Yellow from filing
for bankruptcy and going out of business, which
it accomplished for this long period of time,
and no discussion about it had to be conditioned
upon anything. It was, in the words of counsel,
in writing, and under oath recently, reaffirming
it, binding. Data input. You use that language,
data input. The presumptive method applies. It
only tweaks, quote, the data input. Is it fair
to say that that's what the plan and an employer
does is they come up with data inputs? Like,
what's the dollar amount? What's the CBU? And
all this does is just change that. It's not changing
the method of calculation. Am I understanding
your argument? Correct. Okay, great. Let me just
see if my colleagues have any further questions.
Okay, thank you for your argument. Thank you
very much. Appreciate it. With your counsel on
the bottom. Thank you, Your Honors. Hello again.
Judge Montgomery Reeves, you were going through
our thesis as to what you have with 1391 and
1393, a clear congressional command for withdrawal
liability. relative to employers and how that
is to be calculated. And I really don't think
there's much denying. No one does seem to deny
that plan assets need to be part of that equation.
They need to be subtracted from the non -forfeitable
benefits. That's how you arrive at the correct
answer. Nor is there any dispute that when we
talk about SFA funds, billions of dollars of
them, those are plan assets by any fair objective
measure. Thus... our straightforward statutory
argument that that congressional command specifically
operating as to employers and their bottom line
liability cannot be altered under auspices of
reasonable agency regulation imposing a reasonable
condition on the plans. That's our argument and
I think you have it from Congress as well as
from us. Now there is acknowledged agency discretion
judge wards to decide what are reasonable actuarial
assumptions that go into this. That's on the
margins. That's interstitial, and it's driving
at what is the correct calculation of plan assets.
There's no categorical disregard of acknowledged
plan assets. It operates there. And I would commend
to your honors the concrete pipe decision of
the U .S. Supreme Court at 508 U .S. at 509 .10.
We cite that in our reply. And what the The court
observed there is that the assumptions are used
to objectively calculate the value of assets
and liabilities to determine the present value
of the plan's liability for vested benefits.
It sounds like a pretty objective calculation.
You got a chunk of money. The regulation says
it can be X dollar amount, however you would
calculate that. If certain events happen during
certain years, no matter how far you're out from
receiving the funds, it's objective. There's
no... subjective valuation, like, oh, that's
such a wonderful portrait of Judge Garth. It's
priceless, Janee. That's not what's going on
here. And yes, Judge Garth is the gentleman in
the middle, and he was from New Jersey and he
sat in my court. It's a wonderful portrait. You
have my subjective opinion on that. But I would
respectfully submit the opposite of what Your
Honor just said. When you have a categorical
exclusion from the equation of acknowledged billions
of dollars in monies appropriated from the U
.S. Treasury. The U .S. government is good for
it, and it's to be paid in a single lump sum
right at the outset to say that that is worth
zero dollars. Zero dollars on day one is not
objective. That is not reasonable. That is not
what any actuary would do valuing any other plan
asset that is on the sheet. That kind of begs
the question that I asked earlier. Do the regulations
increase the amount of your withdrawal liability
or merely hold it to what it was before the ARPA
funds came in? Well, Judge Ambrow, I think if
we take the moment in time when Congress passed
the statutory authorization for the SFA funds,
it increases because they did that against the
backdrop of what you have in 1391 and 1393 that
said... that plan assets, all plan assets, would
be factored into the calculation of employer
withdrawal liability. So the agency relative
to what Congress did has massively increased
employer's withdrawal liability. And it's no
different, Judge Schwartz, than if the agency
had said, objectively, just add a billion dollars.
Just add a billion dollars to what is the amount
of unfunded vested benefits that factor into
the employer's withdrawal liability. That might
be, in some sense, objective, but it's not an
objective or reasonable actuarial assumption
that reflects fidelity to the congressionally
prescribed statutory formula. And I'd also comment,
Your Honor, as the MCI... Maybe the analogy might
be, let's say, a... bond coupon if a bond coupon
is expired is the item more expensive or is it
just to pay it off is full price doesn't increase
it's just you go back to paying full price Judge
Ambrose, I don't think that that's the analog,
because of course the terms of it would be there
from Congress in issuing. I think what you're
saying is the bond. I don't think an agency would
be able to change that. But I also think that
this is an easier case, because the agency has
said, pursuant to its exercise of rulemaking
authority, it is not valued as a plan asset on
day one. You could have all sorts of different
views of how you value it for purposes of the
overall equation. what you cannot do is say it's
excluded from the equation, or there'll be some
phase in that is divorced from the actual present
value of the money. And just the MCI and EPA
cases, MCI is 512 U .S. at 218, the EPA case
373 U .S. 302, those were addressing FCC and
EPA regulations that one, under auspices of modifying
a statutory framework, fundamentally altered
it. The Supreme Court said you cannot do that.
The same thing for EPA, where you had a specified
statutory threshold and the agency massively
changed that under auspices of its rulemaking
discretion. Those things were contravening statutes.
That's what you have here. There's one other
question from the court that I would like to
address, which is, so then what is the reasonable
condition on a plan relating to withdrawal liability
that we acknowledge the agency has statutory
authorization to promulgate? And there are plenty
of those. One of them is what you have. as far
as approval of settlement. of employer withdrawal
liability, that relates, and that's operating
against the plans. Another is the actuarial assumptions
that we were discussing, just kind of on the
margins of how exactly these actuarial assumptions
get applied. It's not a categorical exclusion,
but what likes which you have here. And last,
plans have discretion about employer withdrawal
liability on the margins. What's called a de
minimis exception that may be raised if an employer
owes between $50 ,000 and $100 ,000, the plan
may decide to forgive that. subject to its exercise
of statutory discretion, and another is basically
if the employer's tenure is less than five years,
then the agency can forgive withdrawal liability.
You could have reasonable regulations that attach
to SFA funds that say, okay, plans, you're not
going to offer that sort of forgiveness to employers.
The withdrawal liability will be calculated irrespective
of that. That would all be fine and fair, Your
Honors. What you can't have is disregard of plan
assets that belong in the statutory equation.
That's our respectful submission to Your Honors.
Thank you very much, Counsel. Thank you, Your
Honor. Just a few points in rebuttal. Number
one, in response to Judge Schwartz's questions
to both PBGC Council and the New York Teamsters
Council about whether ultimately if PBGC approval
was required, I believe they both ultimately
answered yes, PBGC approval would be required
if there was a change in method. PBGC Council
said, well, I'm not sure if there's a change
in method, and I guess we'll have some briefing
about that. New York Teamsters Council said,
yes, but only if it's not inconsistent. And I
think that what we have here is an inconsistent
situation because you have any other alternative
method when you have contributions required to
be made and when calculating withdrawal liability,
they were not using contributions required to
be made. The second point... Whenever they submit
by the 8th, you've got until the 18th to reply
to it. But I think the PBGC Council did want
more time in order to assess the issue. And I'm
not so sure that... What you're saying is is
it Directly contradictory to what the New York
Teamsters Council said. Well, I think that in
the end your honor I think everyone recognizes
that at some point PBGC approval is required
in some way and I want to make clear as another
one I'm not so sure that that's what they said.
Yeah Well, I guess I would make the point then
that our position is actually the narrow position
and it's the pro beneficiary and pro PBGC position
When you calculate withdrawal liability, you
have to follow one of the four statutory methods
or else get PBGC approval. And you can do that
for private agreements for different methods,
but the plan still has to get PBGC approval in
order to ensure against the risk of something
going wrong, which is exactly why PBGC is there.
I keep coming back to the question asked before.
If somebody on the other side says, wait a minute,
heads I get an advantage, tails I get no disadvantage,
your response is, Well, your honor number one,
I want to point out that this statute actually
provides a 29 USC 1085 E1 B that there can be
alternative contribution structures So as a matter
of contract, it's okay to have an alternative
contribution structure in a distress situation
But I don't think it's a situation where I mean
parties can agree privately to I mean parts could
agree privately to say that if we have any dispute
We're gonna take it directly to the Third Circuit,
but that doesn't mean that when the time comes
They can take it directly to the Third Circuit.
The statute says you can't do that. You don't
have jurisdiction. So it doesn't just mean that
any time you've got an agreement, whatever the
benefits or the cost to each side might have
been, that you can simply ignore what the statute
expresses. Is there any discussion do you know
of in 2013 on your side to getting PBGC approval?
I am not aware of anything in the record about
our asking or checking about whether PBGC approval
is required. That is the plan's responsibility
and the plan's obligation under the statute.
Thank you We thank everybody and there are teams
for all the work that went in to this case on
the court will take the matter under advisement
We would like the parties to split the cost of
a transcript of this oral argument so the sides
could split that and I'm just going to repeat
the the deadlines, because I do want to have
a time of day also. So by July 8th, the PVGC
will submit its brief, not to exceed 2 ,500 words.
By noon, we'd like it submitted. And then anybody
who wants to respond, no greater than 2 ,500
words per response, also do July 18th at noon.
We'd really ask council to coordinate so that
we can avoid redundant briefing on the issues.
So with that in mind, this panel is going to
take a quick break. and you will be back for
another case shortly.