CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, а pension trust, and HOWARD MCDOUGALL, trustee, Plaintiffs-Appellees, Cross-Appellants, v. MIDWEST MOTOR EXPRESS, INC., a North Dakota corporation, MME, INC., MIDNITE EXPRESS, INC., and EXPRESS CARTAGE, INC., Defendants-Appellants, Cross-Appellees.
Nos. 98-2512, 98-2588
United States Court of Appeals, Seventh Circuit
Argued February 11, 1999. Decided June 9, 1999
181 F.3d 799
Before CUMMINGS, BAUER, and EVANS, Circuit Judges.
TERENCE EVANS, Circuit Judge.
The defendants, primarily attacking with broad constitutional principles, are here contesting a huge bill they received in this ERISA case. The plaintiffs not only defend the big bill but seek to jack it up a tad or two. We start by introducing the parties and explaining the intricacies of their claims and defenses.
Midwest Motor Express, Inc. and its affiliates, MME, Inc., Midnite Express, Inc., and Express Cartage, Inc. (collectively Midwest), withdrew from the Central States, Southeast and Southwest Areas Pension Fund (Central States) in April 1994. Central States then sued Midwest under the Employment Retirement Security Act (ERISA),
Midwest, a North Dakota trucking corporation, participated in the Cеntral States pension plan from 1958 to 1994. Central States is a multiemployer pension plan that provides pension benefits to employees whose employers have collective bargaining agreements with the International Brotherhood of Teamsters. In a multiemployer pension plan, trustees appointed by the parties to the union contracts, advised by actuarial experts, set the level of contributions that employers must pay. The trustees also set a certain level of benefits to be paid to emplоyees if they remain employed for specified periods. Central States is administered by eight trustees, four from management and four from the Teamsters.
Midwest began contributing to Central States in 1958 and made all required contributions until it withdrew in 1991. Until 1990 Midwest dealt with Central States through Regional Carriers, Inc., an association of trucking employers that Midwest made its agent for collective bargaining with the Teamsters. Midwest never appointed its own trustee to the Central States board of trustees but was represented by the management trustees appointed by Regiоnal Carriers. In 1990 Midwest withdrew from Regional Carriers in order to negotiate a separate, single-employer agreement with the Teamsters. One of the contested issues was whether to continue to participate in the Central States plan from which Midwest wished to withdraw. The contract negotiations were not successful. Unionized Midwest employees struck in August 1991. Negotiations continued, but in October 1991 Midwest legally hired permanent replacements for some of the strikers. In April 1994 Midwest’s employees decertified the Teamsters as their reprеsentative and the strike ended. The decertification also ended Midwest’s obligation to contribute to Central States.
The statutory framework governing relations between the parties is the MPPAA, an amendment to ERISA. ERISA was enacted in 1974 to protect employee pensions from termination because of underfunding among other risks.
The main relevant features of the MPPAA are that (1) it created mandatory withdrawal liability for withdrawing employers, who must immediately begin to pay a fixed debt to the plan in which they had participated, Pieck v. Pension Benefit Guaranty Corp., 724 F.2d 1247, 1255 (7th Cir. 1983);
On April 26, 1994, Central States issued an assessment of withdrawal liability and a demand for payment in the amount of $2,546,439.39, listing Midwest’s “pre-1980 pool liability” as $1,814,856.36 and its “post-1979 pool liability” as $731,582.94. The “pre-1980 pool liability” is the retroactive withdrawal liability imposed by the MPPAA, effective from 1980, the year specified in the amendment. On the same day that Central States issued the assessment and demand for payment (April 29, 1994) Central States sued Midwest on this liability in the United States District Court for the Northern District of Illinois. Midwest received that notice and demand on the following day. In May Midwest sued Central States in federal district court in the District of North Dakota, seeking a declaration that the assessment of retroactive withdrawal liability was unconstitutional and that any collection should be enjoined. The case was transferred to the Northern District оf Illinois on Central States’ motion. Midwest appealed the transfer to the Eighth Circuit, which affirmed, and to the Supreme Court, which denied certiorari. Midwest agreed in September 1996 to make interim payments of $31,000 a month, which it has done.
Midwest requested arbitration in October 1994, and the parties agreed that the arbitrator would answer stipulated factual questions. Midwest does not contest the actuarial soundness of the assessment or the amount in question, but only whether Midwest can be constitutionally held to any retroactive withdrawal liability. The arbitrator’s decision and award of May 20, 1997, made the following findings: (1) Midwest is a pre-ERISA employer, that is, its participation in Central States, beginning in 1958, antedates the enactment of ERISA in 1974; (2) Midwest’s withdrawal from Central States was involuntary; (3) Central States is a defined benefit pension plan covered by Title IV of ERISA rather than a defined contribution plan, and while it is not a hybrid Taft-Hartley pension plan within the meaning of ERISA, it is a “hybrid plan” in the sense intended in Justice O’Connor’s concurrence in Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 232-236 (1986); and (4) that Midwest had little, but some, control over the benefit and contribution levels and other factors that produced unfunded vested benefits from 1973 to Midwest’s withdrawal in 1991.
Against this background, the district court decided cross-motions for summary judgment in favor of Central States. The parties cross-appeal as explained. We review a district court’s grant of summary judgment de novo, applying the same standards as the court below and viewing the record and all reasonable inferences to be drawn from it in the light most favorable to the nonmoving party. Fulk v. United Transp. Union, 160 F.3d 405, 407 (7th Cir. 1998). Summary judgment is appropriate if there are no genuine issues of material fact in dispute. Mills v. Health Care Serv. Corp., 171 F.3d 450, 453 (7th Cir.1999);
Furthermore, even if there were jurisdiсtional problems when Central States filed its initial complaint, Central States remedied them when it filed a second amended complaint, by which time Midwest was clearly refusing to pay. See Ford v. Neese, 119 F.3d 560, 563 (7th Cir. 1997) (jurisdictional defects can be cured by amending complaint).
For its part, Central States argues that Midwest waived the challenge by not raising it in arbitration. Any objection to an MPPAA withdrawal liability assessment not raised by the employer in the arbitration is waived. See Central States, Southeast & Southwest Areas Pension Fund v. Slotky, 956 F.2d 1369, 1373 (7th Cir. 1992). In the instant case, however, the parties agreed in 1996 that they would develop only the facts of thе case at arbitration. The arbitrator specifically declared that by stipulation of the parties he would not address any legal issue, and the district court knew all along that Midwest was simply holding off on its constitutional challenge until after the arbitration. Therefore, Midwest did not waive its constitutional challenge to withdrawal liability.
Central States also contends that Midwest’s constitutional challenge is time-barred because Midwest failed to file suit in district court to “enforce, vacate, or modify the arbitrator’s award” within 30 days as the MPPAA requires. Seе
Midwest’s central argument on appeal is that the MPPAA as appliеd is unconstitutional because it violates substantive due process. As the district court put it, a party challenging an economic regulation on substantive due process grounds faces “an uphill climb.” This may be a bit of an understatement. The courts review economic regulations with a strong presumption of constitutionality. The challenger must show that a legislature has acted in an arbitrary and irrational way. See Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 729 (1984). Congress, of course, is not obligated to choose the legislative scheme that a reviewing court would find to be the best or fairest means to the legislative end, but simply one that is rationally related to that end. See National R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451, 477 (1985). The Supreme Court has not invalidated any economic regulation on substantive due process grounds since 1938, and we have remarked that it “may be right” that “merely ’economic’ regulations can never flunk the test of rationality.” Central States, Southeast & Southwest Areas Pension Fund v. Lady Baltimore Foods, Inc., 960 F.2d 1339, 1343 (7th Cir. 1992).
Midwest argues that the MPPAA violates its substantive due process rights because the statute imposes a retroactive liability that Midwest never agreed to assume and never could have anticipated. But even where, as herе, a question of retroactivity is involved, “legislative Acts adjusting the burdens and benefits of economic life come to the Court with a presumption of constitutionality, and . . . the burden is on the one complaining of a due process violation to establish that the legislature has acted in an arbitrary and irrational way.” In re Gifford, 688 F.2d 447, 453 (7th Cir. 1982) (en banc) (quoting Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15 (1976)); see also Brach v. Amoco Oil Co., 677 F.2d 1213, 1224-1225 (7th Cir. 1982). Economic regulation will be upheld, even without any express findings or legislative history, if there is “any reasonably conceivable state of facts that could provide a rational basis” for the legislation. FCC v. Beach Communications, Inc., 508 U.S. 307, 313 (1993).
That would normally more than end the matter, but Midwest cites Justice O’Connor’s concurrences in Connolly, 475 U.S. at 228 (joined by Justice Powell), and Concrete Pipe, 508 U.S. at 647. Justice O’Connor emphasized that the issue of whether the MPPAA might be defeated in an “as applied” challenge was not resolved in either case:
[T]he Court’s opinion should not be read to imply that employers may be subjected to retroactive withdrawal liability simply because “pension plаns [have] long been subject to federal regulation.” Surely the employer that joined a multiemployer plan before ERISA had been promulgated—before Congress made employers liable for unfunded benefits—might have a strong constitutional challenge to retroactive withdrawal liability.
Concrete Pipe, 508 U.S. at 649 (O’Connor, J., concurring). Justice O’Connor envisions a case where there is absolutely no rational connection between conduct by the employer and the detriment to pension beneficiaries that Congress is trying to avoid. In general, pension plans fall into two categories: defined benefit plans and defined contribution plans. MPPAA imposes withdrawal liability only on employers participating in defined benefits plans. Essentially, the Act treats the defined benefits as promises for which the employer is responsible.
The problem is that many multiemployer plans like the one in the instant case have both defined contributions and defined benefits. Employers like Midwest and their unions bargain for a specified level of contributions by the employer. But neither the employer nor the union has a direct say in determining the level of benefits. The plan trustees (appointed equally by the employers and the union) determine the level of benefits according to actuarial assessments of the plan’s value and future performance. When these assessments are too conservative, the plan ends up with a surplus that can be applied to future benefits. When the assessments are too optimistic, unfunded benefits result.
Who should be responsible for the unfunded benefits? Congress has said through the MPPAA that withdrawing employers are responsible for their proportionate share of existing unfunded benefits when they leave. Justice O’Connor is concerned that in some cases the connection between the actions of a given employer and the unfunded benefits can be so attenuated that holding them liable for it could amount to an arbitrary, irrational action by Congress.
The issue in the instant case, then, is whether holding Midwest responsible for a proportionate share of the unfunded benefits is irrational. Multiemployer plans like the one at issue here try to be all things to all pеople. They promise employers that they will only have to pay specified contributions, and they promise employees defined benefits. Because performance predictions cannot be perfect, there will always be shortfalls and surpluses. Inevitably, someone is not going to get what they expected out of the plan. Congress has decided that protecting employee pension benefits is more important than respecting the expectations of employers. Placing the burden of protecting the employee benefits on withdrawing employers may not be the wisest or even the fairest course of action. Congress could have decided to insure pension plans with taxpayer dollars, for example. Imposing withdrawal liability on Midwest is, however, a perfectly reasonable means of securing Congress’ legitimate legislative goal of protecting the pension benefits of the Central States beneficiaries. Considering the extremely deferential view that a majority of the Supreme Court still takes toward economic regulation, Midwest’s substantive due process argument must fail.
A somewhat more promising basis for a constitutional challenge to economic regulation is provided by the Takings Clause: “[N]or shall private property be taken for public use without just compensation.”
Midwest stakes its claim on the first factor in the traditional analysis, “substantial economic impact.” Although Midwest asserts that it satisfies all three conditions, it only really argues that the first applies. Arguments not developed in any meaningful way are waived. See Bratton v. Roadway Package Sys., Inc., 77 F.3d 168, 173 n.1 (7th Cir. 1996). We do not address here whether a failure to make a showing under all three factors would doom a regulatory takings claim, but since Midwest fails to carry its burden under аny of them, including the one it actually argues, its challenge must certainly fail.
The Supreme Court uses a two-step analysis of “substantial economic impact” in retroactive liability cases. The first is whether there is a “considerable financial burden.” Eastern Enterprises, 118 S. Ct. at 2149. It is not evident that Midwest has cleared this bar. While the roughly $1.8 million in challenged liability is a lot of money, for some firms that sum would not involve a considerable financial burden. The loss at issue must be compared to something in order to assess its impact—the net worth of the company or its total payments undеr the plan might be good places to start. Midwest, however, has not done this.
The second step in assessing whether there is “substantial impact” is to examine whether the liability imposed is out of proportion “to [the employer’s] experience with the plan.” Eastern Enterprises, 118 S. Ct. at 2149 (quoting Connolly, 475 U.S. at 226; Concrete Pipe, 508 U.S. at 645). Here, Midwest’s reliance on Eastern Enterprises is misplaced. In that successful Takings Clause challenge to retroactive liability under the 1992 Coal Act, the employer ceased its coal mining operations in 1965 and “[its] obligations under the Act depend[ed] solely on its roster of employees some 30 to 50 years before the stаtute’s enactment, without any regard to responsibilities that Eastern had accepted under any benefit plan the company itself adopted.” Eastern Enterprises, 118 S. Ct at 2150. In contrast, Midwest, like the employers who unsuccessfully challenged the MPPAA in Concrete Pipe and Connolly, remained in business throughout the entire period in question, “voluntarily negotiated and maintained a pension plan which was determined to be within the strictures of ERISA,” id. at 2149 (internal citations omitted), and its obligations depend on its employment roster both before and after the enactment of the challenged provision.
The Supreme Court has stated that participation in a defined ERISA benefit plan in Connolly and Concrete Pipe made the employers’ liability proportionate to their experience with the plans because, in virtue of that participation, “the statutory liability was linked to the employers’ conduct.” Eastern Enterprises, 118 S. Ct. at 2150. In some extraordinary case there may be an exception to this rule, but Midwest has not shown that this is such a case. The fact that Midwest’s pre-1979 retroactive liability is about two and a half times its post-1980 prospective liability does not suggest substantial disproportionality. That rеtroactive liability was incurred over a period about one and a half times as long as the period in which it acquired its prospective liability. The relevance of the fact that Midwest’s retrospective liability is a higher proportion of its contributions to the Central States fund than its prospective contributions is unclear. Midwest cites no authority suggesting that such a ratio indicates “substantial disproportionality.” Midwest’s challenge thus fails under the traditional test.
Finally, Midwest again invokes Justice O’Connor’s Connolly and Concrete Pipe concurrences, here to argue for an unconstitutional taking rather than a substantive due process violation. Midwest in effect asks us to adopt these concurrences as the law of regulatory takings in this circuit. We decline, in part to avoid complicating a difficult area of law and in part because it would make no difference if we did. Imposing retroactive withdrawal liability upon Midwest would not violate Justice O’Connor’s concerns. First, there existed the “basis in the employer’s conduct that would make it rational to treat the employees’ expectations of benefits under the plan as the еmployer’s responsibility,” Concrete Pipe, 508 U.S. at 647 (O’Connor, J., concurring) (quoting Connolly, 475 U.S. at 229) (same)). The district court found that Midwest exercised enough control or influence over the course of events by provoking the strike and lawfully replacing unionized employees, precipitating the process which led to Midwest’s involuntary withdrawal from the Central States pension plan. Reviewed as a factual causal claim or an application of law to fact, this is not clearly erroneous, see Jos. Schlitz Brewing Co., 3 F.3d at 999 (standard of review); even reviewed de novo as a legal claim, “given the heavy burden of showing [a statute] to be unconstitutional,” the district court’s finding is correct. Turner Elkhorn Mining Co., 428 U.S. at 44.
Second, the occurrence of the unfunded vested liability was not “a result of events over which an employer has no control,” Connolly, 475 U.S. at 234 (O’Connor, J., concurring). The district court, following the arbitrator, found that Midwest had some control over benefit levels, contribution rates, or other factors that produced unfunded vested benefits liability. Since Midwest agreed to the promised pension benefit levels, ratified the decisions of the Central States trustees, and was represented on thе Central States board through the employers’ association, this finding is not clearly erroneous. Midwest cannot succeed even under Justice O’Connor’s concurrence.
Central States, for its part, has two quibbles about the damage award. The first concerns the interest rate Midwest should pay on its contributions. Under the statute, Midwest should be charged the rate “provided under the plan.”
The second quibble concerns an offset or reduction in the judgment for Central States. The district court ordered Central States to release, in accordance with its agreement with Midwest, certain liens it held on real estate owned by Midwest that secured the outstanding balance of the contested withdrawal liability. Central States refused to comply, and the district court held that Midwest should accordingly be credited about a month’s interest on the amount of the liens that should have been released ($547,000 at the prime rate). The district court also awarded Midwest attorneys fees of $12,093.26 and costs connected with litigation over the release of the liens.
These adjustments are entirely justified, and it is hard to see why Central States appeals them. Central States complains that Midwest had not shown that it was damaged by the refusal to release the liens, but the real point is that Central States was not damaged by the award of the month’s interest, since it retained the valuable liens for that period. Moreover, Central States escaped the potentially serious sanctions it might have faced for refusing to obey a court order to release the liens. To have to pay a month’s interest on their value and to have to reimburse Midwest for its attorneys feеs and costs in connection with that refusal is getting off easy.
Affirmed.