AMERICAN ARBITRATION ASSOCIATION

Multiemployer Pension Plan Arbitration Tribunal

In the Matter of the Arbitration between AAA No. 56-631-0001-85

FRASER SHIPYARDS, INC.

and

I.A.M. NATIONAL PENSION FUND.

_________________________________/

OPINION OF THE ARBITRATOR

November 28, 1986

After a Hearing Held September 25, 1986

In the AAA Conference Room at Minneapolis, Minnesota

For the Fund: For the Company:

Robert T. Osgood, Esq.
Manager, Legal Services, and
Joseph P. Martocci, Jr., Esq.
Assistant Manager, Legal Services
1150 17th St., N.W., Ste. 501
Washington, D.C. 20036
Carolyn S. Nestingen
Felhaber Larson, Fenlon and Vogt, P.A.
900 Conwed Tower
444 Cedar Street
St. Paul, Minnesota 55101
 I. Decision

Fraser Shipyards, Inc. ("Company") withdrew from the I.A.M. National

Pension Fund ("Fund") under circumstances which constituted a partial

withdrawal within the meaning of ERISA Sec 4205.1 The Fund assessed

withdrawal liability in accordance with ERISA Secs 4206 and 4219, and the

Company requested arbitration under ERISA Sec 4221. A hearing was held

September 25, 1986, in Minneapolis, Minnesota, under the auspices of the

American Arbitration Association ("AAA"). At the close of the Company's

case, the Fund moved for decision based upon the Company's failure to show

that the Fund's determination was unreasonable or clearly erroneous as required

by ERISA Sec 4221(a)(3)(A).2 The Arbitrator reserved decision on the Fund's

motion because a large number of exhibits had been entered, which the

Arbitrator had not had the opportunity to review and copies of which had not yet

been prepared for the Arbitrator. Upon receipt of the hearing transcript and

copies of the exhibits, the Arbitrator reviewed them, and now grants the Fund's

motion.

II. Arbitration Procedures

ERISA Sec 4221(a)(2) requires that " [a]n arbitration proceeding under

1
The acronym, ERISA, will be used for The Employee Retirement Income Security Act of 1974, PL 93-406, 88
Stat 832. ERISA is codified in scattered sections of 5, 26 and 29 USC. The principal portions relevant here may be
found in 29 USC Sec 1001 et seq, especially Secs 1381-1405. Unless otherwise indicated, "ERISA" refers to the
Act as amended through the present.
2
Tr 95 ("Tr" denotes the hearing transcript).

2
this section shall be conducted in accordance with fair and equitable procedures

to be promulgated by the corporation."3 However, PBGC regulations governing

the arbitration of withdrawal liability disputes (29 CFR Part 2641) were not

published until August 27, 1985 (50 FR 34679) and provide that " [t]his part

applies to arbitration proceedings initiated pursuant to section 4221 of the Act

and this part on or after September 26, 1985." This arbitration was initiated by a

Submission Agreement between the Company and the Fund, dated July 3, 1985.

Thus, PBGC regulations do not apply. Nevertheless, the Arbitrator deems it

imprudent to stray beyond their pale. As an interim measure pursuant to

MPPAA Sec 405,4 the parties agreed to utilize the Multiemployer Pension Plan

Arbitration Rules, effective June 1, 1981, sponsored by the International

Foundation of Employee Benefit Plans ("IFEBP") and administered by AAA

("IFEBP/AAA Rules") [Submission Agreement].5

Neither the IFEBP/AAA Rules nor PBGC regulations expressly provide

for a FRCP 50-type motion, an omission of some significance because the

parties have not had the opportunity to file briefs. The IFEBP/AAA Rules

mention briefs only in passing (Section 30), but the PBGC regulations provide:
3
According to ERISA Sec 4001(a)(4), " 'corporation' * * * means the Pension Benefit Guaranty Corporation
established under section 4002." The corporation's name is abbreviated PBGC.
4
"MPPAA" denotes The Multiemployer Pension Plan Amendments Act of 1980, PL 96-364, 94 Stat 1208, which
principally amended Title IV of ERISA. Unless otherwise indicated, sections of MPPAA will be referenced by
their ERISA section numbers.
5
These rules are reproduced in 358 Pen Rptr (BNA) R-3 (September 7, 1981). The rules, as revised to comport
with PBGC regulations, are reproduced in 2 Pen Plan Guide (CCH) Par 10,311E and remain a viable alternative
to PBGC regulations, 50 FR 38046 (September 19, 1985).

3
 Each party may file a written statement of facts and argument supporting
the party's position. The parties' briefs are due not later than 30 days after
the close of the hearing. Within 15 days thereafter, each party may file a
reply brief concerning matters contained in the opposing brief. The
arbitrator may establish a briefing schedule and may reduce or extend
these time limits. 29 CFR Sec 2641.5(g).

Notwithstanding the putative right to file briefs under PBGC regulations, I

conclude that under Section 33 of the IFEBP/AAA Rules (and under 29 CFR

Sec 2641.10), the parties waived their right to file briefs by failing to object

when the Arbitrator stated on the record that he would take the Fund's motion

under advisement. This conclusion comports with the articulated goal for the

IFEBP/AAA Rules, of "prompt, practical and inexpensive settlement of disputes

between multiemployer pension plans and withdrawing employers."

III. Background

The Company is a subsidiary of Ruben Johnson & Son and operates a

shipyard in Superior, Wisconsin [Tr 11-13].6 The parent bought the Company in

1977 [Tr 11-12], at which time the Company operated two machine shops, one

in the shipyard proper ("Machine Shop") and another perhaps a half-mile away,

known as the Northern Engineering Works division ("Division") [Tr 11-12].

Although machinists at both locations engaged in similar marine work for the

same customers and were represented by the International Association of

6
Neither party raised any controlled group issues, so I assume there are none. Cf. Robbins v Pepsi-Cola
Metropolitan Bottling Co, 636 F Supp 641(ND Ill, 1986).

4
Machinists and Aerospace Workers, A.F.L.- C.I.O. ("Union"), there were

separate collective bargaining agreements covering the Machine Shop and the

Division [FX U at 2].7 Both collective bargaining agreements required

Company contributions to the Fund [Notice of Arbitration], which is a

multiemployer pension plan within the meaning of ERISA Sec 4001(a)(3)

[Submission Agreement]. A new agreement covering the Machine Shop was

negotiated in 1978 [Tr 14-15], which ran from July 1, 1978 to June 30, 1981

[CX 1 at 31].8 It later was extended through July 31, 1982, by agreement

between the Company and the Union [Tr 15-16].

The Company's business began to decline precipitously during 1982 so

that by the winter of T83-T84, the Company had only supervisory personnel on

duty in the shipyard [Tr 13-14]. Business was down by as much as 90% [TR

19]. The work force in the shipyard fell from a peak of 500 to nearly zero [Tr

13-14]; at all times, machinists comprised only a small fraction of the shipyard

work force [TR 14-15,22]. Employment of machinists in the Division declined

similarly, from 20 to only 3 [Tr 12].

Both the Company and the Union served timely notices to negotiate a

new Machine Shop contract [FX U at 2]. The first bargaining session was held

on July 20, 1982 [FX U at 3]. The parties next met on August 4, 1982, shortly
7
"FX" denotes Fund exhibit.
8
"CX" denotes Company exhibit.

5
after the contract expired, at which time the Company announced plans to close

the Machine Shop by September 1 [FX U at 5]. The Company confirmed its

intention by letter to the Union, dated August 5, 1982, which stated in pertinent

part:

This is to confirm the information given to you by our company

negotiators at the meeting on August 4, 1982. The company does plan to
permanently close its machine shop for economic reasons. Closure will
take place by September 1, 1982. CX 2jj = FX R.

The Machine Shop closed on schedule; indeed, the last work performed

by shipyard machinists was completed in June or July of 1982 [TR 44-45].

Following the announcement of the Machine Shop's closing, the Company and

the Union met only twice, once on October 12, 1982 [Tr 68-70] and for the last

time on January 13, 1983 [Tr 76-79]. The labor dispute which ensued over the

closing of the Machine Shop continued late into 1983 [CX 2a & b] and

culminated with a Decision and Order of the National Labor Relations Board

("NLRB"), dated September 28, 1984, in favor of the Company [FX T; Tr 24-

25, 34-35, 81-82]. 1984-85 CCH NLRB Par 16,739. Throughout the dispute, the

Company continued to make contributions to the Fund, covering Division

machinists [FX G].

IV. Pre-Arbitration Proceedings under ERISA Sec 4219

When the Company stopped making contributions to the Fund for

6
shipyard machinists, the Fund sent a notice of delinquency [FX A].9 In

response, the Company wrote the Fund:

The Company discontinued its Machinists Bargaining Unit in September

of 1982 and has not had any machinists employed since that time. This is
the reason they are no longer making contributions to the Fund. FX A.

This letter of January 26, 1983 seems to have led to some confusion.

By letter dated April 19, 1984, the Fund made a 30-day request for

information, pursuant to ERISA Sec 4219(a) [FX B]. When the Company did

not reply, the Fund sent a demand for payment of withdrawal liability in the

amount of $20,841, pursuant to ERISA Sec 4219(b)(1) [Tr 90-92; FX C].

Presumably on the basis of the Company's letter of January 26, 1983, the Fund

treated the event as a complete withdrawal under ERISA Sec 4203, rather than

as a partial withdrawal under ERISA Sec 4205.

The distinction between a complete and a partial withdrawal is made in

the Act itself. ERISA Sec 4203(a) provides:

For purposes of this part, a complete withdrawal from a multiemployer

plan occurs when an employer --

(1) permanently ceases to have an obligation to contribute under the

plan, or

9
Technically, the plan sponsor is responsible for the administrative aspects of withdrawal liability; e.g., see
ERISA Sec 4202. The sponsor of a multiemployer plan usually is a joint labor-management board of trustees
appointed pursuant to 29 USC Sec 186(c)(5)(B), consisting of equal numbers of representatives from both labor
and management. ERISA Sec 4001(a)(10); Connolly v PBGC, 89 L Ed 2d 166, 184 [7 EBC 1001] (1986)
[separate opinion of O'Connor, J]. The Fund in this case is governed by such a board [FX E, Q], which will be
referred to as the "Board of Trustees", or as the "Board", and its members will be referred to as "Trustees".
Whenever precision is unimportant, it is convenient to refer simply to the plan or fund.

7
 (2) permanently ceases all covered operations under the plan.

The partial withdrawal provisions, ERISA Secs 4205(a) and (b), are

substantially more complicated:

(a) Except as otherwise provided in this section, there is a partial

withdrawal by an employer from a plan on the last day of a plan year if
for such plan year --

(1) there is a 70-percent contribution decline, or

(2) there is a partial cessation of the employer's contribution

obligation.

(b) For purposes of subsection (a) -- * * *

(2)(A) There is a partial cessation of the employer's contribution

obligation for the plan year if during such year --

(i) the employer permanently ceases to have an obligation

to contribute under one or more but fewer than all collective bargaining
agreements under which the employer has been obligated to contribute
under the plan but continues to perform work in the jurisdiction of the
collective bargaining agreement of the type for which contributions were
previously required or transfers such work to another location, or

(ii) an employer permanently ceases to have an obligation

to contribute under the plan with respect to work performed at one or
more but fewer than all of its facilities, but continues to perform work at
the facility of the type for which the obligation to contribute ceased.

(B) For purposes of subparagraph (A), a cessation of obligations

under a collective bargaining agreement shall not be considered to have
occurred solely because, with respect to the same plan, one agreement
that requires contributions to the plan has been substituted for another
agreement.

Liability for a partial withdrawal is computed as a fraction of the liability for a

8
complete withdrawal. ERISA Sec 4206(a).

Within the 90 days permitted by ERISA Sec 4219(b)(2)(A), the

Company made a request for a review of the Fund's initial determination,

explaining:

Fraser Shipyards, Inc. requests review of the determination that a

complete withdrawal has taken place. The following facts are offered
with regard to the nature of the withdrawal. At all times material, Fraser
Shipyards, Inc. has had a wholly-owned division (not separately
incorporated) known as Northern Engineering Works. Northern
Engineering Works has been and is under collective bargaining
agreement with a local of the International Association of Machinists
calling for contributions to the IAM National Pension Fund. * * * Fraser
Shipyards continues to make contributions to the IAM National Pension
Fund under this agreement and, therefore, requests that these facts be
considered in determining withdrawal liability. FX D.

Based on this new information furnished by the Company, the Fund's Trustees

reversed the Fund's original determination regarding a complete withdrawal [FX

E]. At the same time, the Company requested from the Fund information

relevant to the Company's withdrawal liability, as it had the right to do under

ERISA Sec 4221(e).

In its reversal letter, the Fund expressed its intention to refund, with

interest, the quarterly payments for a complete withdrawal, which the Company

had commenced in accordance with ERISA Secs 4219(c)(2) and (3).10 The

10
Some complaints have been voiced over ERISA's lack of clarity with respect to compulsory interim withdrawal
liability payments. United Retail & Wholesale Employees Teamsters Union Local No 115 Pension Plan v Yahn &
McDonnell, Inc, 787 F2d 128, 132-134 n 7 (CA 3, 1986); Robbins v Pepsi-Cola Metropolitan Bottling Co, 636 F
Supp 641, 680-685 (ND Ill 1986); Republic Industries, Inc v Teamsters Joint Council No. 83 of Virginia Pension

9
Fund promptly repaid the Company's money, under authority granted in ERISA

Secs 403(c)(2)(A)(ii), (4) and 29 CFR Sec 2644.2(d) [FX F].11

The Fund made another Section 4219(a) request for information, this

time about a partial withdrawal, in its reversal letter. The Company responded

with the following certification [FX G]:

I, Maxine Thompson, Corporate Secretary of Fraser Shipyards,

Inc., hereby certify that the information contained below is true and

Fund, 718 F.2d 628, 641-642 (CA 4, 1983), cert den 467 US 1259 (1984); Republic Industries, Inc v Central
Pennsylvania Teamsters Pension Fund, 693 F2d 290, 296-297 n 5 (CA 3, 1982). See generally Note, "Trading
Fairness for Efficiency: Constitutionality of the Dispute Resolution Procedures of the Multiemployer Pension
Plan Amendments Act of 1980, 71 Geo LJ 161, 169-170 n 71 (1982) ["Georgetown Note"]. Any cloudiness
results from focusing too narrowly upon ERISA Sec 4221(b) and insufficiently upon other overriding sections of
the statute, such as ERISA Secs 4202 and 4219(c)(2), which provide:

When an employer withdraws from a multiemployer plan, the plan sponsor, in accordance with this part,
shall --

(1) determine the amount of the employer's withdrawal liability,

(2) notify the employer of the amount of the withdrawal liability, and

(3) collect the amount of the withdrawal liability from the employer.

ERISA Sec 4202 (emphasis supplied).

Withdrawal liability shall be payable in accordance with the schedule set forth by the plan sponsor under
subsection (b)(1) beginning no later than 60 days after the date of the demand notwithstanding any
request for review or appeal of determinations of the amount of such liability or of the schedule. ERISA
Sec 4219(c)(2) (emphasis supplied).

All of the relevant sections, ERISA Secs 4202; 4219(b)(1), (c)(1)(A)(i), (c)(2); 4221(b)(1), (2), (d);
4301(a)(1), (b), read together as part of "a comprehensive and reticulated statute," Nachman Corp v PBGC, 446
US 359, 361 (1980), compel the conclusion that a multiemployer plan has a cause of action to collect withdrawal
liability payments, notwithstanding the pendency of a review, arbitration, or even litigation, over a determination
of that liability. See also Republic Industries, Inc v Central Pennsylvania Teamsters Pension Fund, 693 F.2d 290,
298 (CA 3, 1982); 126 Cong Rec S10111 (daily ed, July 29, 1980), reprinted in 4 Pen Plan Guide (CCH) Par
15,689.10.
11
Based only upon ERISA Sec 4221(d), some doubt has been cast upon authority to order full reimbursement of
interim payments if a determination of liability is overturned. Robbins v Pepsi-Cola Metropolitan Bottling Co, 636
F Supp 641, 682 n 9 (ND Ill, 1986); Republic Industries, Inc v Central Pennsylvania Teamsters Pension Fund,
693 F2d 290, 296-297 n 3 (CA 3, 1982). However, ERISA Secs 403(c)(2)(A)(ii) and (4) permit such a refund, and
PBGC regulations 29 CFR Sec 2644.2(d) compel it. See also Textile Workers Pension Fund v Standard Dye &
Finishing Co, 725 F2d 843, 854 (CA 2, 1984), cert den sub nom Sibley, Lindsay & Curr Co v Bakery,
Confectionary & Tobacco Workers, 467 US 1259; 29 CFR Sec 2641.7(a)(2).

10
 correct:

Fraser Shipyards, Inc. formerly operated two machine shops, one a

marine shop in the Superior harbor and one a distance away from the
lake. The former was closed down in 1982. The latter is still operated by
Northern Engineering Works. The two machine shops were covered
under separate collective bargaining agreements.

Northern Engineering Works is a division of Fraser Shipyards, Inc.

It is not a separate corporation. Northern Engineering Works' contract
with District Lodge No. 133 of the International Association of
Machinists and Aerospace Workers, AFL-CIO, effective January 1, 1982
for a term of three (3) years, provided that Northern Engineering as
employer would make payments to the IAM National Pension Fund at a
rate of $4.80 per day, but not to exceed $24.00 per week per employee.
Under that agreement, the employer agreed to remit regular payments to
the IAM National Pension Fund in the manner prescribed by that Fund's
trustees. Northern Engineering has been making these contributions
under this contract and continues to do so to the present.

With respect to the employees of Fraser Shipyards, Inc. who were

not employed by Northern Engineering division, the machine shop at the
shipyards where such employees worked was closed down in 1982. The
reason for the shutdown and termination of employees was the decline in
shipyard business on the Great Lakes, specifically in the iron ore
industry. None of the employees terminated by Fraser Shipyards, Inc.
was moved to the machine shop operated by its division Northern
Engineering. There was no increase at that time in the number of
employees of Northern Engineering.

/s/ Maxine Thompson

Maxine Thompson
Corporate Secretary
Fraser Shipyards, Inc.

Dissatisfied that this certification did not address the Fund's specific

inquiries, by letter dated December 18, 1984, the Fund cautioned that if it did

not receive specific answers, it would proceed to assess liability for a partial

11
withdrawal under ERISA Sec 4205(b)(2)(A) [FX H]. The Company requested

additional time to prepare a response [FX I], which the Fund was loathe to grant

[FX J]. Under cover of January 22, 1985, the Fund assessed the Company

$70,550 for a partial withdrawal [FX L].12

The Company next sought additional information about the partial

withdrawal determination [FX M], which the Fund supplied [FX N]. The

Company then requested a review of the Fund's determination, which had been

based on the provisions of ERISA Secs 4205(a)(2),(b)(2) dealing with a partial

cessation of an employer's contribution obligation, arising out of the closing of

the Machine Shop in 1982, and submitted its own calculation based on the 70%

contribution decline provisions of ERISA Secs 4205(a)(1), (b)(1), resulting

from the Company's overall decline in employment during 1983. It is out of this

exchange that the current controversy arose.

At their April 1985 meeting, the Fund's Trustees reviewed the Fund's

withdrawal liability determination and concluded that it was correct [FX P, Q].

The letter of explanation, dated May 6, 1985, emphasized that the Fund's

determination was based on a partial cessation of contributions in 1982, rather

than a contribution decline in 1983 [FX Q]. The Company responded with a

12
The seeming discrepancy between the initial assessment of $20,841 for a complete withdrawal and the
subsequent assessment of $70,550 for only a partial withdrawal can be explained by the omission of Division
participants from the Fund's initial calculations. See ERISA Secs 4211(b)(2)(E)(ii), (3)(B) and (4)(D)(ii).

12
Notice of Arbitration, and the Company and the Fund entered into a Submission

Agreement within the 60 days allowed by ERISA Sec 4221(a)(1).13

V. The Issues before the Arbitrator

The Notice of Arbitration was drafted by the Company and is narrowly

drawn. It states in pertinent part:

Clearly, the dispute centers around the year in which the partial
withdrawal of the Employer occurred and the reason for the partial
withdrawal. If the withdrawal was by reason of a 70% contribution
decline, it occurred in 1983. If the withdrawal occurred by reason of
ERISA Sec 4205(b) [2], the withdrawal occurred in 1982 and the
assessment by the Pension Fund is correct.

In opening statement, the Company sought to expand the scope of the hearing to

include a dispute over the amounts of the Company's contributions during 1980-

82 [Tr 4], but the Fund timely objected [Tr 5-6], and the Fund's objection was

sustained on procedural grounds [Tr 7-8]. IFEBP/AAA Rules, Sec 8; see also 29

CFR Sec 2641.1(d).

VI. The Standard of Arbitral Review

After a hearing held September 25, 1986, the matter is now before the

Arbitrator for decision. The first major legal issue with which we must grapple

is the standard which an arbitrator must apply when reviewing a withdrawal

liability determination made by the sponsor of a multiemployer pension plan.

13
Following execution of the Submission Agreement July 3, 1985, the Company on August 2, 1985 sought
reconsideration of the Fund's determination [FX S], but the Trustees did not reconsider their decision [TR 93-94].
They were not required to do so. ERISA Secs 4219(b), 4221(a)(1).

13
ERISA Sec 4221(a)(3) provides:

(A) For purposes of any proceeding under this section, any

determination made by a plan sponsor under sections 4201 through 4219
and section 4225 is presumed correct unless the party contesting the
determination shows by a preponderance of the evidence that the
determination was unreasonable or clearly erroneous.

(B) In the case of the determination of a plan's unfunded vested

benefits for a plan year, the determination is presumed correct unless a
party contesting the determination shows by a preponderance of evidence
that --

(i) the actuarial assumptions and methods used in the

determination were, in the aggregate, unreasonable (taking into account
the experience of the plan and reasonable expectations), or

(ii) the plan's actuary made a significant error in applying the

actuarial assumptions or methods.

At the outset, let me confess that the meaning of these provisions is

unclear. In general, it has been noted that "the precise scope of arbitral and

judicial review in this area is far from clear,"14 and we all may take solace in the

Supreme Court's admission that even the meaning of "clearly erroneous" in

FRCP 52(a) is "not immediately apparent," Anderson v City of Bessemer City,

North Carolina, 84 L Ed 2d 518, 528 (1985). The uncertainty arises (at least on

my part) from a need to distinguish between review of findings of fact and

review of conclusions of law, and results from ERISA's lack of responsiveness

to that need.
14
United Retail & Wholesale Employees Teamsters Local No 155 Pension Plan v Yahn & McDonnell, Inc, 787
F2d 128, 147 n 5 (CA 3, 1986) [Seltz, J, dissenting in part].

14
 It is hornbook law that different standards exist for an appellate court's

review of findings of fact and conclusions of law. Because the principal function

of an appellate court is to interpret the law, its review of a trial court's

conclusions of law is de novo. However, deference is shown to the trial court's

findings of fact for at least two reasons: (1) the trial court's greater familiarity

with the evidence and (2) considerations of judicial economy. If each stage of

appellate review were de novo, there would be little functional distinction

between courts, and already seemingly endless litigation would be protracted

endlessly. Historically, deference has been afforded a trial court's findings of

fact because of "the opportunity of the trial court to judge the credibility of the

witnesses," although, more recently, deference has been afforded out of

considerations for judicial economy. Anderson v City of Bessemer City, North

Carolina, 84 L Ed 2d 518, 528-530 (1985); see generally FRCP 52, Notes of

Advisory Committee on Rules, in Federal Civil Judicial Procedure and Rules

(West 1986) at 126-128.

Dual standards also are utilized when a court reviews a determination of a

claim for benefits made by an employee benefit plan under ERISA Sec 503.

However, these standards, unlike those for arbitral review of withdrawal

liability, are not statutory but are judicially engrafted onto ERISA as part of

federal common law. See Mahan v Reynolds Metal Co, 569 F Supp 482 (ED

15
Ark, 1983); Dennard v Richards Group, Inc, 681 F2d 306, 313 (CA 5, 1982);

Murphy v Heppenstall Co, 635 F2d 233, 237 (CA 3, 1980), cert den 454 US

1142 (1982); Textile Workers Union v Lincoln Mills, 353 US 448, 456-457

(1957); City of Milwaukee v Illinois, 451 US 304, 313-314 (1981); Note, "The

Federal Common Law", 82 Harvard L Rev 1512, 1522 (1969). A decision of a

plan fiduciary will not be set aside unless it is "arbitrary and capricious." United

Mine Workers of America Health and Retirement Funds v Robinson, 455 US

562, 573 (1982). Such a standard prevents excessive judicial intervention in

trust operations and fosters judicial economy. Rehmar v Smith, 555 F2d 1362,

1371 (CA 9, 1976); Mahan v Reynolds Metal Co, 569 F Supp 482, 487 (ED

Ark, 1983).

The formulation of the arbitrary and capricious standard which separates

it conveniently into factual and legal components has become known as the

Danti Standard in the Ninth Circuit. Rehmar v Smith, 555 F2d 1362, 1371 (CA

9, 1976). It has been suggested that the "arbitrary and capricious" standard had

its genesis in Danti. Wardle v Central States, Southeast and Southwest Areas

Pension Fund, 627 F2d 820, 824 (CA 7, 1980); cert den 449 US 1112 (1981).

Although Rehmar was decided under LMRA,15 555 F2d 1366, the Ninth Circuit

holds that the standard of review under ERISA is the same as under LMRA.
15
The Labor Management Relations Act of 1947 (also known as The Taft-Hartley Act), PL 80-101, 61 Stat 136,
29 USC Sec 141 et seq, as amended.

16
Elser v IAM National Pension Fund, 684 F2d 648, 654 (CA 9, 1982); cert den

464 US 813 (1983); see also Wardle v Central States, Southeast and Southwest

Areas Pension Fund, 627 F2d 820, 824 n 6 (CA 7, 1980); cert den 449 US 1112

(1981). However, in Rehmar and other cases, the otherwise helpful Danti

Standard is misstated confusingly as:

(1) arbitrary, capricious or made in bad faith,

(2) not supported by substantial evidence, or
(3) erroneous on a question of law.

Cf. Aitken v IP & GCU-Employer Retirement Fund, 604 F2d 1261, 1264 (CA 9,

1979).

In Danti, the standard actually is expressed as:

"whether the Trustees have acted arbitrarily, capriciously or in bad faith;

that is, is the decision of the Trustees supported by substantial evidence
or have they made an erroneous decision on a question of law." Danti v
Lewis, 312 F2d 345, 348 (CA DC, 1962) (footnote omitted; emphasis
supplied).

To the Arbitrator, the Danti formulation (substantial evidence or error of law), is

far and away the most, and perhaps the only really, useful formulation of the

arbitrary and capricious standard.16 Under it, a court reviewing a decision of a

plan fiduciary must uphold the decision unless

16
Other formulations, consisting of concatenations of supposedly equivalent phrases, are not particularly helpful,
e.g., Aquin v Bendix Corp, 637 F Supp 657 (ED Mich, 1986). Unchecked, one arrives at a rubber stamp standard,
which provides for almost no review at all. See, for example, Helms v Monsanto Co, 558 F Supp 928, 930-931
(ND Ala, 1982); rev'd 728 F2d 1416 (CA 11, 1984). The difficulty with chain formulations is that, like chain
cites, any standard can be transformed into any other by linking together phrases each of which is only
imperceptibly different from the adjacent ones.

17
 (a) it is unsupported by substantial evidence, or

(b) it is based on an error of law.

If a determination under ERISA Sec 503 is made by an arbitrator, then it

is entitled to the greater deference usually afforded to decisions in arbitration.

Mahan v Reynolds Metal Co, 569 F Supp 482, 487 (ED Ark, 1983). An

arbitrator's decision will not be overturned so long as it derives its essence from

the collective bargaining agreement. United Steelworkers of America v

Enterprise Wheel and Car Corp, 363 US 593, 596-597 (1960). This has been

interpreted to mean that an arbitrator's decision must be upheld unless

(1) it has no foundation in fact, or

(2) it exhibits a manifest disregard for law.

See generally, Kaden, "Judges and Arbitrators: Observations on the Scope of

Judicial Review," 80 Colum L Rev 267, 268-277 (1980). The reasons variously

given for this greater deference to an arbitrator's decision are public policy in

promoting labor peace and a desire for finality in the resolution of disputes.

United Steelworkers of America v Warrior & Gulf Navigation Co, 363 US 574,

577-578 (1960); United Steelworkers of America v Enterprise Wheel and Car

Corp, 363 US 593, 599 (1960).

From the foregoing, it is reasonable to expect that the standard for an

arbitrator's review of a plan sponsor's determination regarding withdrawal

18
liability should consist of a two-part test, one for findings of fact and the other

for conclusions of law. Unfortunately, the language with which Congress

expressed the ERISA Sec 4221(a)(3) standard does not admit of easy division.

When Congress wanted to refer explicitly to "findings of fact", it had

absolutely no difficulty doing so in haec verba. ERISA Sec 4221(c) [court

review of arbitrator's decision]. It is, therefore, most curious that Congress did

not do so in ERISA Sec 4221(a)(3). Instead, Congress used the word,

"determination", which has connotations of both fact and law. It seems agreed

that a determination regarding withdrawal liability intrinsically involves issues

of fact and of law. United Retail & Wholesale Employees Teamsters Union

Local No 115 Pension Plan v Yahn & McDonnell, Inc, 787 F2d 128, 141 n 18

(CA 3, 1986) ["[T]rustees must frequently make complex legal and factual

determinations."], Republic Industries, Inc v Teamsters Joint Council No. 83 of

Virginia Pension Fund, 718 F2d 628, 634-635 (CA 4, 1983), cert den 467 US

1259 (1984) ["a nice question of fact and law"]; Keith Fulton & Sons, Inc v New

England Teamsters and Trucking Industry Pension Fund, Inc, 762 F2d 1137,

1149 (CA 1, 1985) [Aldrich, SJ, dissenting] ("[T]he trustees are performing ***

quasi-judicial decision-making."); Robbins v Pepsi-Cola Metropolitan Bottling

Co, 636 F Supp 641, 674-675 (ND Ill, 1986), citing Georgetown Note at 166-

167. Indeed, I do not see how anyone could possibly wade through the ERISA

19
provisions on partial withdrawal liability relevant here and be left with the

impression that such a "determination" is a mere exercise in number crunching.

Rather, some very deep and difficult legal issues are involved.17 Thus, whenever

an arbitrator reviews a withdrawal liability determination, he is, either explicitly

or implicitly, reviewing both factual findings and legal conclusions. The

language Congress chose to express his task does not make that task an easy

one.

In precise terms, facts are established by evidence and law by argument.

Despite the situation that a determination regarding withdrawal liability has both

factual and legal components, Congress expressed the burden of proof in

evidentiary terms ("shows by a preponderance of the evidence").18

Congressional imprecision may be attributed to colloquialism, as the phrase,

"burden of proof," customarily is used to encompass the broader concept of

"burden of persuasion." Thus, when it is said that the plaintiff bears the burden

of proof, frequently what is meant is that not only must the plaintiff present

sufficient evidence to prove the facts of his case, but he also must convince the

adjudicator that the law is in his favor as well. I conclude that the phrase, "the

party contesting the determination shows by a preponderance of the evidence,"

17
The generalization contained in the introductory pages of the IFEBP/AAA Rules is apropo: "[T]he operation of
employee benefit trust funds is an area of legal complexities."
18
In Senate remarks, the shorter phrase, "burden of proof," is used. See, e.g., 126 Cong Rec S10111 (daily ed,
July 29, 1980), reprinted in 4 Pen Plan Guide (CCH) Par 15,689.10.

20
as used in ERISA Secs 4221(a)(3)(A) and (B), places the burden of persuasion

as to fact and law on the party contesting the determination.19 Republic

Industries, Inc v Teamsters Joint Council No 83 of Virginia Pension Fund, 718

F2d 628, 641 (CA 4, 1983), cert den 467 US 1259; Keith Fulton & Sons, Inc v

New England Teamsters and Trucking Industry Pension Fund, 762 F2d 1124,

1133, 1136-1137 (CA 1, 1984), rev'd en banc on other grounds 762 F2d 1137,

1145-1146 [6 EBC 1641] (1985); Georgetown Note at 173.

Separate standards of review for findings of fact and conclusions of law,

if they are to be found in the language of ERISA itself, must be found in the

phrase, "unreasonable or clearly erroneous", contained in ERISA Sec

4221(a)(3)(A). The meaning of "clearly erroneous" is too familiar to admit of

much dispute.20 Georgetown Note at 174. Under FRCP 52(a), findings of fact

shall not be set aside unless the reviewer on the entire evidence is left with the

definite and firm conviction that a mistake has been committed. United States v

United States Gypsum Co, 333 US 364, 395 (1948); see generally Annotation,

19
Interpreted literally, the phrase, "proves by a preponderance of the evidence that the determination was * * *
clearly erroneous," is virtual nonsense, as the following heuristic exercise in probability illustrates. Suppose
proving a fact by a preponderance of the evidence means proving that the probability of the occurrence of an event
is greater than ½, and suppose further that the occurrence of an event is "clear" only if the probability of its
occurrence exceeds ⅔. Then proving "by a preponderance" that an event is "clear" should mean proving only that
the probability of its occurrence is greater than ½ × ⅔ = ⅓, which makes little sense when translated back into
legalese. Unfortunately, evidence is not measured in pounds nor the scales of justice calibrated in kilograms, else
our task would be far easier. See generally Tyree, "Proof and Probability in the Anglo-American Legal System,"
23 Jurimetrics J L, Science and Tech 89 (Fall 1982).
20
"Where Congress uses terms that have accumulated settled meaning * * *, a court must infer, unless the statute
otherwise dictates, that Congress means to incorporate the established meaning of these terms. See Perrin v United
States, 444 U.S. 37, 42-43." NLRB v Amax Coal Co, 453 US 322, 329 (1981).

21
"Supreme Court's Views as to What Constitutes Factual Issue under 'Clearly

Erroneous' Standard of Federal Rule of Civil Procedure 52(a), Providing that

Findings of Fact Shall Not Be Set Aside unless Clearly Erroneous," 72 L Ed 2d

890 (1983). If the foregoing be correct, then simple elimination dictates that the

standard for review by an arbitrator, of a plan sponsor's legal conclusions, is a

"reasonableness" standard; i.e., a plan sponsor's legal conclusions must be

upheld unless the party contesting them successfully argues that they are

unreasonable. This deduction brings us, of course, to the meaning of

"unreasonable."

After a somewhat unscientific survey of authorities, I have decided that a

plan sponsor's conclusions of law are unreasonable if:

(1) they are against controlling law, or

(2) if no law is controlling, then they do not represent intelligent choices

of legal principles.

A choice of legal principles is "intelligent" if it is (or can be) supported by a

coherent argument. The standard therefore can be reduced to:

(a) against controlling law, or

(b) unsupported by coherent argument.

With this formulation, the discussion of the standard of review can be

summarized as follows: An arbitrator can overturn a plan sponsor's

determination regarding withdrawal liability only if the party contesting the

22
determination

(A) proves, definitely and firmly, on the basis of the entire evidence, that
a mistake has been committed, or

(B) convinces that the determination is against controlling law or is

unsupported by a coherent legal argument.

The foregoing explication of the standard of arbitral review is not

altogether satisfactory because it seems somewhat forced, but it is the best I can

do, given MPPAA's imprecise language and sparse statutory history.

Georgetown Note at 170, 176. At least the explication leaves us with workable

standards by which we can review a plan sponsor's findings of fact and

conclusions of law. Moreover, these standards are in line with the Danti

Standard (substantial evidence/error of law) by which a court reviews a decision

of a plan fiduciary, and afford an acceptable level of deference to the

determination of the plan sponsor, which we have been led to expect, United

Retail & Wholesale Employees Teamsters Union Local No. 115 Pension Plan v

Yahn & McDonnell, Inc, 787 F2d 128, 135 n 9 (CA 3, 1986).

The only authority which has addressed the standard of review issue

head-on is Georgetown Note at 173-176, but in the Note, no attempt was made

to reconcile "unreasonable" and "clearly erroneous" with findings of fact and

conclusions of law. As indicated, there is no other reasonable interpretation of

"clearly erroneous" than that given to the phrase in FRCP 52(a). Anyone

23
contending that "unreasonable" and "clearly erroneous," as used in ERISA Sec

4221(a)(3)(A), both refer to findings of fact is faced with the task of providing

examples of factual findings which are one or the other but not both, and that is

a challenge indeed. Although the Georgetown Note does not distinguish

between "unreasonable" and "clearly erroneous," the Note does agree, with

reference to ERISA Sec 4221(a)(3)(B), that "[f]indings of fact include what

assumptions and calculations the plan used and with what result, whereas

conclusions of law are whether the assumptions and calculations were

reasonable in the aggregate," Georgetown Note at 178, which is precisely the

result we reach when we apply our definitions from ERISA Sec 4221(a)(3)(A)

to ERISA Sec 4221(a)(3)(B).21 Thus, our standard of arbitral review seems

consistent with the thinking of the only authority that has considered the issue.

Having selected our measuring stick, let us size up the matter before us.

VII. Fraser Shipyards v I.A.M. National Pension Fund

The Company contends that the Fund failed to give proper effect to

21
In other words, Congress used "unreasonable" in ERISA Sec 4221(a)(3)(B)(i) in the same sense as in (A). The
same term, when used to describe the same legislative concerns in the same statutory title, should have a single
meaning. Northcross v Board of Education, 412 US 427, 428 (1973) [per curiam]. According to our interpretation,
"unreasonable" in both instances refers to conclusions of law, and the Georgetown Note agrees that
"unreasonable" in ERISA Sec 4221(a)(3)(B)(i) refers to conclusions of law (regarding actuarial assumptions and
methods in the aggregate).
The only thing that the phrase, "significant error," in ERISA Sec 4221(a)(3)(B)(ii), adds to the notion of
"clearly erroneous" found in ERISA Sec 4221(a)(3)(A), is to limit an arbitrator's authority to overturn a plan
sponsor's determination of a plan's unfunded vested benefits for a plan year (on the ground that the arbitrator is left
with the definite and firm conviction that an error has been committed) to those situations in which the plan
actuary has made a "significant" error in applying the actuarial assumptions or methods. Neither the statute nor the
legislative history gives any clue as to what dollar amount or percentage error is "significant."

24
ERISA Sec. 4218 and thus erred in determining that a partial withdrawal

occurred in 1982 [Tr 3-4; FX S]. In support of its position, the Company cites

Time-DC, Inc v NY Teamsters Pension Fund, 5 EBC 1097 (ND NY, 1984) and

Sunstar Foods, Inc v United Food/Commercial Workers Pension Fund, 5 EBC

1349 (D Minn, 1984) [FX S]. ERISA Sec. 4218 provides in pertinent part:

Notwithstanding any other provision of this part, an employer shall not be

considered to have withdrawn from a plan solely because * * * an
employer suspends contributions under the plan during a labor dispute
involving its employees. (Emphasis supplied).

I conclude that this matter is controlled by Robbins v McNicholas

Transportation Co, 6 EBC 1777 (ND Ill, 1985) and that the cases cited by the

Company are distinguishable on their facts.

Robbins was a suit by pension fund trustees for withdrawal liability

payments pending arbitration.22 Teamsters Local Union No. 800 struck

McNicholas' Pittsburgh terminal. The strike at this one facility so affected the

company's business that it suspended its road operations throughout its entire

system, effective September 28, 1982. As a result of this termination, all of the

McNicholas employees who were participants in the Teamsters' pension fund

were put out of work and the company ceased making contributions to the

pension fund. The district court wrote:

[T]he sole question presented to this court is whether the Trustees'

22
See note 10, supra.

25
 demand for interim withdrawal liability payments is proper in light of the
fact that McNicholas has ceased its road operations and its pension
payments for two and one-half years. The court concludes that the
Trustees' demand is appropriate and proper under the statute and that
withdrawal liability payments must be made by McNicholas pending a
determination of the issue of withdrawal in the arbitration hearing. * * *

Contrary to McNicholas' argument, the court does not find this to

be a case where an employer has suspended contributions during a labor
dispute. Two and one-half years have passed since operations have
ceased. The purpose of 29 U.S.C. Sec. 1398 was to permit an employer to
suspend temporarily its contributions during a labor dispute. Sunstar
Foods, Inc. v United Food/Commercial Workers Pension Fund, 5 EBC
1349, 1352 (D. Minn. 1984). In I.A.M. National Pension Fund v Schulze
Tool and Die Co., 564 F. Supp. 1285 [4 EBC 2097] (N.D. Cal. 1983), the
court found that Section 1398 applied only to a suspension or a
temporary interruption because of a labor dispute. In this case,
McNicholas has failed to demonstrate that there are any ongoing labor
negotiations. The record before the court indicates a deadlocked position
between labor and management with little or no movement on either side
for nearly thirty months. Congress did not intend to require that a
cessation last forever in order to be permanent. 6 EBC 1779.

In the instant matter, the Fund did not submit a bill for partial withdrawal

liability until January 22, 1985, over 28 months after the Company announced

that it was permanently closing the Machine Shop. By the date of the hearing,

over four consecutive years had elapsed without a single pension contribution

being made on behalf of Machine Shop employees. On the record before me, I

cannot say that the Fund's implicit refusal to apply ERISA Sec 4218(2) is

unreasonable.

26
 VIII. Constitutional Issues

VIII. A. Current Cases

Under ordinary circumstances, the opinion would be concluded at this

point. However, pending before the Supreme Court is an appeal, 55 USLW

3128 (August 26, 1986), in the case of United Retail & Wholesale Employees

Teamsters Union Local No 115 Pension Plan v Yahn & McDonnell, Inc, 787

F.2d 128 (CA 3, 1986) ["Yahn & McDonnell"], in which the Third Circuit has

declared ERISA's arbitral standard of review to be unconstitutional as deficient

in procedural due process. The Third Circuit has been joined by the district

court in Robbins v Pepsi-Cola Metropolitan Bottling Co, 636 F Supp 641 (ND

Ill, 1986) ["Robbins"]. A panel of the First Circuit initially reached the same

conclusion, Keith Fulton & Sons, Inc v New England Teamsters and Trucking

Industry Pension Fund, 762 F2d 1124 (CA 1, 1984) ["Keith Fulton 1"], but the

full court reversed, 762 F2d 1137 ["Keith Fulton 2"]. The Second, Textile

Workers Pension Fund v Standard Dye & Finishing Co, 725 F.2d 843 (CA 2,

1984) ["Standard Dye"]; cert den sub nom Sibley, Lindsay & Curr Co v Bakery,

Confectionary & Tobacco Workers, 467 US 1259 (1984), the Fourth, Republic

Industries, Inc v Teamsters Joint Council No. 83 of Virginia Pension Fund, 718

F2d 628 (CA 4, 1983); cert den 467 US 1259 (1984) ["Republic Industries"],

the Ninth, Board of Trustees of the Western Conference of Teamsters Pension

27
Trust Fund v Thompson Building Materials, Inc, 749 F2d 1369 (CA 9, 1984);

cert den 85 L Ed 2d 481 (1985) ["Thompson"], and the D.C. Circuits,

Washington Star Co v International Typographical Union Negotiated Pension

Plan, 729 F2d 1502 (CA DC, 1984) ["Washington Star"], concur with the full

First. The Supreme Court noted those cases upholding constitutionality, in

Connolly v PBGC, 89 L Ed 2d 166, 176 n 6 (1986).

PBGC regulations require:

In reaching his decision, the arbitrator shall follow applicable law,

as embodied in statutes, regulations, court decisions, interpretations of the
agencies charged with the enforcement of the Act, and other pertinent
authorities. 29 CFR Sec 2641.4(a)(1) [emphasis supplied].

Although an arbitrator may have no authority to rule on constitutional issues in

the first instance,23 once a court has declared unconstitutional a statute which

impacts the arbitrator's decision, the arbitrator, under PBGC mandate, has no

choice but to consider the implications of unconstitutionality. This is especially

so when what has been declared unconstitutional is the very standard of review

under which the arbitrator must function. Thus we proceed to analyze the
23
Republic Industries, Inc v Central Pennsylvania Teamsters Pension Fund, 693 F2d 290, 296 (CA 3, 1982).
This is an excellent discussion of the exhaustion doctrine as applied to the arbitration of disputes over withdrawal
liability. As noted by the Third Circuit, arbitration may be the appropriate arena in which to construct a "factual
matrix for judicial review" in virtually all withdrawal liability cases, including those involving the constitutional
applicability of legislation. 693 F2d at 295-297; see also Terson Co v Bakery Drivers and Salesmen Local 194 and
Industry Pension Fund, 739 F2d 118, 121 (CA 3, 1984) [per curiam]. Even in cases which present facial
challenges to constitutionality, avenues along which legislation can be upheld on statutory grounds may be
uncovered in arbitration, as a result of the arbitrator's familiarity with the legislation. Cf. Nachman Corp v PBGC,
446 US 359, 368 (1980). But see Robbins, 636 F Supp at 679 n 53, in which the court remarked that all of the
constitutional and statutory issues before it were "beyond the purview of the arbitrator's authority and expertise,"
citing Republic Industries. I respectfully submit that the arbitrator's limitation may be not so much one of expertise
as of authority.

28
impact of Yahn & McDonnell and Robbins; see also Georgetown Note at 179-

192, which influenced the courts in these two cases.

VIII. B. Statutory Bias

The basis for invalidating the arbitral standard of review in ERISA Sec

4221(a)(3) is the perceived bias of plan trustees in making determinations of

withdrawal liability. Yahn & McDonnell, 787 F2d at 138-140; Robbins, 636 F

Supp at 671-673; Keith Fulton 1, 762 F2d at 1133-1135; see also Keith Fulton

2, 762 F2d at 1142-1143 (majority), 1148-1150 (Aldrich, SJ, dissenting);

Georgetown Note at 168-169, 186-189. This bias is thought to be rooted in the

fiduciary liability provisions of Title I of ERISA, especially Section 404(a)(1).

The authorities that vote for unconstitutionality draw heavily on the Supreme

Court's opinion in NLRB v Amax Coal Co, 453 US 322 (1981).

If I have a quarrel with those who question ERISA's constitutionality, it is

that they have not heeded the basic canons of statutory construction:

"[T]he starting point for interpreting a statute is the language of the

statute itself. Consumer Product Safety Comm'n v GTE Sylvania, Inc, 447
US 102, 108 (1980). "The statutory language is the most reliable
indicator of congressional intent." Central States, Southeast and
Southwest Areas Pension Fund v Bellmont Trucking Co, 788 F2d 428,
433 (CA 7, 1986). "A statute is passed as a whole and not in parts or
sections . . . . Consequently, each part or section should be construed in
connection with every other part or section so as to produce a harmonious
whole . . . . [I]t is not proper to confine interpretation to the section to be
construed." 2A Sutherland, Statutory Construction Sec 46.05 at 90 (4th
Ed 1984). See Robbins, 636 F Supp at 654, 659-660, 656.

29
Of all the authorities that have considered the Act's constitutionality, not one has

cited the single most important section dealing with fiduciary duties under Title

IV:

Notwithstanding any other provision of this Act, a fiduciary of a plan to

which section 4021 applies24 is not in violation of the fiduciary's duties as
a result of any act or of any withholding of action required by this title.
ERISA Sec 4023 (emphasis supplied; footnote by arbitrator).

Beyond peradventure, in enacting MPPAA, Congress carefully and

methodically excepted from the proscriptions of Title I all of those actions and

inactions required by Title IV, including the determination of withdrawal

liability:

ERISA
MPPAA Section
Section Affected Effect
402(a)(5) 4023 Excepts Title IV responsibilities from Title I
fiduciary duties
104(2) 4219(a)(2)(B) Requires plan sponsor to conduct reasonable review
of withdrawal liability determination
104(2) 4219(d) Exempts any action required or permitted under Part
I of Subtitle E of Title IV (withdrawals from
multiemployer plans) from ERISA Sec 406(a)
[prohibited transactions]
104(2) 4221(e) Requires plan sponsor to honor employer's request
for information
308 408(b)(10) Exempts from prohibited transactions rules any
transaction required or permitted by Part I of Subtitle
E of Part IV
310, 402(b)(2), 403(c)(2)(A) Permits refund of withdrawal liability payments
410(a), 411(c) made under a mistake of fact or law

24
ERISA Sec 4021 restricts PBGC insurance coverage to qualified or formerly qualified plans. ERISA Secs
4021(a), 4022(a) [single-employer plan benefits guaranteed], 4022A(a) [multiemployer plan benefits guaranteed].
Although there is no ERISA requirement that a multiemployer plan be qualified within the meaning of Section
401(a) of the Internal Revenue Code [ERISA Sec 4001(a)(3)(C)], it would be anomalous for a multiemployer plan
not to be qualified. See also LMRA Sec 302(c)(5).

30
 310, 402(b)(2), 403(c)(4) Permits refund of over payments of withdrawal
410(a), 411(c) liability

This list is merely illustrative and by no means exhaustive. Even in its limited

form, it vividly demonstrates that Congress did not enact MPPAA in a vacuum

but rather was acutely aware of possible inconsistencies between a fiduciary's

narrow duties to plan participants and their beneficiaries under Title I and the

fiduciary's broader administrative responsibilities under Title IV. In each case in

which Congress perceived a potential conflict, it removed the fiduciary's Title

IV responsibility from the restrictions imposed by Title I.25

Indeed, Congress even amended the principal fiduciary duty section of

ERISA:

Subject to sections 403(c) * * *, a fiduciary shall discharge his

duties with respect to a plan solely in the interest of the participants and
beneficiaries and --

(A) for the exclusive purpose of:

(i) providing benefits to participants and their beneficiaries; and

(ii) defraying reasonable expenses of administering the plan;

(B) with the care, skill, prudence, and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and familiar
with such matters would use in the conduct of an enterprise of a like
character and with like aims;

(C) by diversifying the investments of the plan so as to minimize the risk

25
For an overview of the various titles, see Nachman Corp v PBGC, 446 US 359, 361-362 n 1 (1980); PBGC v
RA Gray & Co, 467 US 717, 720-725 (1984).

31
 of large losses, unless under the circumstances it is clearly prudent not to
do so; and

(D) in accordance with the documents and instruments governing the

plan insofar as such documents and instruments are consistent with the
provisions of this title or Title IV.

ERISA Sec 404(a)(1) [emphasis supplied].

It should be noted that this is a prudent man, not a doting parent standard and

that a fiduciary cannot violate Title IV with impunity, even if plan documents

are to the contrary.

In addition to ignoring the numerous statutory exceptions to the fiduciary

duties imposed by Title I, the authorities that have argued against

constitutionality have focused upon the cause of action for breach of fiduciary

duty, created by ERISA Sec 502, Yahn & McDonnell, 787 F2d at 139, citing

Massachusetts Mutual Life Insurance Co v Russell, 87 L Ed 2d 96 (1985); Keith

Fulton 2, 762 F2d at 1148 (Aldrich, SJ, dissenting), to the exclusion of the

controlling cause of action created by MPPAA Sec 104(2):

A plan fiduciary, employer, plan participant, or beneficiary, who is

adversely affected by the act or omission of any party under this subtitle
with respect to a multiemployer plan, or an employee organization which
represents such a plan participant or beneficiary for purposes of collective
bargaining, may bring an action for appropriate legal or equitable relief,
or both. ERISA Sec 4301(a)(1) [emphasis supplied].

Under this provision, a plan trustee that denies an employer his MPPAA rights

can be sued by the employer. Cf. Robbins, 636 F Supp at 683, citing Trustees of

32
the Retirement Fund of the Fur Manufacturers Industry v Lazar-Wisotzky, Inc,

550 F Supp 35, 37-38 (SD NY, 1982); aff'd 738 F2d 419 (CA 2, 1984). If

ERISA is read as the "comprehensive and reticulated statute" which Congress

intended, it is impossible to conclude that a plan trustee, in making a

determination regarding withdrawal liability, suffers from statutorily induced

bias. A trustee exhibits bias only at the risk of litigation.

Nor does NLRB v Amax Coal Co, 453 US 322 (1981) provide any basis

for bias under ERISA Title IV. As posed by the Supreme Court,

[t]he question at issue is whether the employer-selected trustees of a trust

fund created under Section 302(c)(5) are "representatives" of the
employer "for the purposes of collective bargaining or the adjustment of
grievances" within the meaning of Section 8(b)(1)(B). 453 US at 325.

According to the Supreme Court's own classification, Amax was a LMRA, not a

MPPAA, case. Although Amax contains some strong dicta on the subject of

fiduciary duty under Title I of ERISA, the Supreme Court did not have before it

the question of a plan sponsor's duty under ERISA Title IV, so the holding must

be limited accordingly. See Keith Fulton 2, 762 F2d at 1142 n 5, moderating

Amax.

VIII.C. Plan Sponsor Discretion

Suspicions of bias arise also from misconceptions about a plan sponsor's

discretion in making withdrawal liability calculations. A plan sponsor does not

have discretion to select a method for computing withdrawal liability under

33
ERISA Sec 4211, on a case-by-case basis. Keith Fulton 2, 762 F2d at 1141;

Yahn & McDonnell, 787 F2d at 145 (Seitz, J, dissenting in part). After initial

selection, the method can be changed only by plan amendment.26 In the matter

before me, the presumptive method of ERISA Sec 4211(b) was selected in 1981

[FX B, C, K]. Similarly, the plan sponsor does not have discretion in choosing

actuarial methods and assumptions. Keith Fulton 2, 762 F2d at 1141 n 3;

Republic Industries, 718 F2d at 640-641 n 13; Yahn & McDonnell, 787 F2d at

145-146 (Seitz, J, dissenting in part). The clear Congressional intent is for the

plan actuary to make these choices. ERISA Sec 4213.27 Moreover, the actuary

himself is regulated by the Federal Government.28 Again, to argue that a plan

sponsor has unbridled discretion in calculating withdrawal liability is to ignore

26
ERISA Sec 4211 sets forth four methods for allocating unfunded vested benefits to a withdrawing employer:
(1) The presumptive method, described in Section 4211(b),
(2) The modified presumptive method, described in Section 4211(c)(2),
(3) The rolling-5 method, described in Section 4211(c)(3), and
(4) The direct attribution method, described in Section 4211(c)(4).
29 CFR Sec 2642.5(a). The Act also provides for any other alternative method approved by PBGC. ERISA Sec
4211(c)(5). In the absence of an express designation, the presumptive method must be used by default. ERISA
Secs 4211(a), (b)(1), (c)(1); 29 CFR Sec 2642.5(a). No change in method can be applied retroactively without an
affected employer's consent. ERISA Sec 4214(a).
Legislative history regarding selection of one of these methods, HR Rep No 869, Part I, 96th Cong, 2d
Sess 67 (1980), reprinted in US Code Cong & Admin News at 2935, frequently is quoted out of context. See Yahn
& McDonnell, 787 F2d at 145-146 n 2 (Seitz, J, dissenting in part). This passage means only that if a fiduciary
selects rules which reduce or eliminate withdrawal liability, the fiduciary may take into consideration a variety of
interests. However, a fiduciary may have no input into the matter, as the rules may be laid down in collective
bargaining. Cf. United Mine Workers of America Health and Retirement Funds v Robinson, 455 US 562 (1982).
27
See Woodward Sand Co and Operating Engineers Pension Trust, 3 EBC 2351 (Arb, 1982), cited in Keith
Fulton 2, 762 F2d at 1141 n 3, in which the arbitrator held that it was unreasonable for a plan sponsor to reject the
plan actuary's selection of actuarial methods and assumptions. Yahn & McDonnell, 787 F2d at 146 n 3 (Seitz, J,
dissenting in part). Although I generally agree with Judge Seitz' insightful dissent, I must respectfully point out
that actuarial assumptions appropriate for the calculation of withdrawal liability may not be appropriate for valuing
a plan on an ongoing basis. See 787 F2d at 146.
28
ERISA Sec 3041 provides for the establishment of the Joint Board for the Enrollment of Actuaries which,
pursuant to ERISA Sec 3042, "shall, by regulations, establish reasonable standards and qualifications for persons
performing actuarial services with respect to plans to which this Act applies * * *." See generally 20 CFR Ch VIII,
Part 901.

34
Congress' "comprehensive and reticulated" scheme of regulation.

Some of the allegations of institutional bias on the part of pension plan

trustees are so utterly absurd as to exhibit the gaseous quality of

pronouncements on procreation by the uninitiated. The Fourth Circuit noted that

"allegations of trustee bias are little more than 'generalized assumptions of

possible interest' unsupported by any evidence other than a description of the

institutional role of the trustees." Republic Industries, 718 F2d at 640 n 13. If we

must engage in speculations about trustee behavior, which one court labeled,

"too remote to be dispositive," Yahn & McDonnell, 787 F2d at 138-139 n 14, let

us conjecture that trustees subscribe to an ethic which may be expressed

variously as the Golden Rule,29 there but for the grace of God go I,30 or more

tritely, what goes around, comes around. See Keith Fulton 2, 762 F2d at 1142.

With respect to the calculation of withdrawal liability, I agree with the Second

(Standard Dye), D.C. (Washington Star), and the First (Keith Fulton 2) Circuits

which concluded:

[T]he trustees here are required by law * * * to compute the employer's

withdrawal [liability] according to certain detailed and explicit statutory
guides. 725 F2d at 855. We conclude that the trustees' fiduciary duties
require them to act neutrally and reasonably in making withdrawal
liability determinations. 729 F2d at 1511. Thus, we can not say that an
institutional bias on the part of the trustees makes unconstitutional the

29
The Home Book of Proverbs, Maxims and Familiar Phrases (MacMillan 1948) at 2016.
30
Id. at 1017-1018.

35
 MPPAA's procedure for calculating withdrawal liability. 762 F2d at
1143.

VIII.D. Particular Bias

Even though there is no statutory or institutional bias on the part of plan

trustees, in any given case, there may be actual bias. If so, "the employer could

also challenge the trustees' determination by showing how bias in a particular

case affected the decisionmaking process and produced a result that was

unreasonable." Keith Fulton 2, 762 F2d at 1143.

In the matter before me, there has been no charge of bias, and I have seen

no evidence of any. When the Company challenged the Fund's determination of

a complete withdrawal, the Fund promptly and fully refunded the Company's

payments together with interest, in the amount of $12,448.19 [FX F]. In making

its calculations, the Fund employed a Congressionally designed method for

allocating unfunded vested benefits, which was selected six years ago. No

complaint is raised over the actuarial methods or assumptions utilized; indeed,

the Company appears to have used these same methods and assumptions in its

own calculations [FX O]. Overall, the system seems to have worked.

There was no bias in this case, and the Fund's review procedures were

quite sufficient to avoid the appearance of bias. "The adequacy of the Plan's

review is a question for arbitration." Yahn & McDonnell, 787 F2d at 132 n 3.

Initial determinations about withdrawal liability were handled by the Fund

36
Manager [TR 88]. Requests for review under ERISA Sec 4219(b)(2) were

referred to the full Board [FX E, Q]. When the Company pointed out

inaccuracies in the Fund's determinations, they were corrected. The Fund

responded promptly to each and every one of the Company's letters, except the

one sent after the Arbitration Agreement, to which no response was required

outside of arbitration. The Company's lone complaint, if it properly can be so

labeled, was that "[n]o explanation of the basis for that partial withdrawal was

given in the Letter of Assessment" [Notice of Arbitration]. If this is a complaint,

it is without merit, because the fund in two previous letters had made explicit

reference to ERISA's partial cessation provisions [FX H, J]. On the whole, the

Fund's review procedures were more than adequate to satisfy due process

requirements.

VIII.E. The Scope of Arbitration

The Fund argues for a very narrow scope to these arbitration proceedings

[Tr 5-7], but support for such a position cannot be found in ERISA itself and

certainly not in PBGC regulations, 29 CFR Part 2641. Typically, a plan's review

procedure is informal and consists primarily of a perusal of documents,

particularly correspondence between the company and plan sponsor; rarely will

any type of hearing be held. At most, the plan's actuary or attorney may be

consulted before the trustees make their decision. Thus, the arbitration hearing

37
probably is the employer's first opportunity to make a full-blown presentation of

his case.

On their face, PBGC regulations seem to anticipate a far-ranging inquiry

into a plan sponsor's determination of withdrawal liability. The parties may call

witnesses, 29 CFR Sec 2641.5(e)(3), who can be subpoenaed if necessary,

ERISA Sec 4221(b)(3); 9 USC Sec. 7. "The arbitrator may on his own initiative

call expert witnesses on any issue raised in the arbitration." 29 CFR Sec

2641.5(e)(3). This authority to call expert witnesses sua sponte suggests that an

arbitrator is not to sit idly by if he senses injustice in a plan sponsor's

determination of withdrawal liability. In general, "[t]he arbitrator shall establish

the procedure for presentation of claim and response in such a manner as to

afford full and equal opportunity to all parties for the presentation of their

cases." 29 CFR 2641.5(e)(2) [emphasis supplied].

Although PBGC regulations do not contain an express exhaustion

provision, a fair reading of ERISA Sec 4219(b)(2) and 29 CFR Sec 2641.2(d)

suggests that arbitration is limited to those issues raised in the request for review

under ERISA Sec 4219(b)(2)(A). Cf. Wardle v Central States, Southeast and

Southwest Areas Pension Fund, 627 F2d 820, 824 (CA 7, 1980); cert den 449

US 1112 (1981).31 The issues may be narrowed further by agreement between

31
But see Wolf v National Shopmen Pension Fund, 728 F2d 182 (CA 3, 1984), in which the court held that only
claim exhaustion, not issue or theory exhaustion, is required under ERISA Sec 502(a). Wolf has been criticized as

38
the parties. 29 CFR 2641.2(d). However, I cannot agree that the scope of

arbitration is limited to consideration of the evidence before the plan trustees at

the time of their review under ERISA Sec 4219(b)(2).

Wardle v Central States, Southeast and Southwest Areas Pension Fund,

627 F2d 820, 824 (CA 7, 1980); cert den 449 US 1112 (1981) involved a

challenge to a denial of benefits by trustees of a multiemployer pension plan.

The Seventh Circuit opined:

A federal court is to focus on the evidence before the trustees at the time
of their final decision and is not to hold a de novo factual hearing on the
question of the applicant's eligibility. As a general matter a court should
not resolve the eligibility question on the basis of evidence never
presented to a pension fund's trustees but should remand to the trustees
for a new determination. 627 F2d to 824 (citations and footnote omitted).

Similar sentiments can be found in the Georgetown Note, quoted in Robbins,

636 F Supp at 675:

These statutory presumptions transform the arbitration from a de novo

adjudication to a limited review of the pension plan's determinations. In
operation, this scheme places the pension plan in the role of a jury, a trial
judge, or an administrative agency, and the arbitrator in the role of an
appellate judge. This unusual allocation of functions is suspect because
the plan, an interested party, possesses none of the characteristics of
juries, judges or agencies that justify deference to their findings.

Although the standard for arbitral review of factual findings under ERISA Sec

undermining the claims and review procedures mandated by ERISA Sec. 503. See "Pension Issues in Collective
Bargaining," 10 MI Tax LJ 13, 18-19 (Oct-Dec 1984). As noted in the article, the problem can be avoided by an
express plan provision requiring issue and theory exhaustion of administrative remedies as a prerequisite to filing
suit under ERISA Sec 502(a).

39
4221(a)(3) may be the same as the appellate standard under FRCP 52(a), arbitral

review is qualitatively and quantitatively different.

An appellate court reviews a record made below, whereas an arbitrator

makes a record for review. There is nothing in the literal language of ERISA or

its regulations that precludes examination of evidence not previously presented

to the plan sponsor; indeed, virtually all of the witnesses probably will testify for

the first time at the arbitration hearing, and the arbitrator's evaluation of their

credibility is likely to be the first. Perhaps most importantly, the arbitrator will

have the opportunity to evaluate the effects of time on the trustees'

determination. There is no test of actuarial assumptions like time.32 The

arbitrator has the advantage of viewing the plan sponsor's determination in the

light of subsequent events. This opportunity can prove invaluable in a case such

as this in which one of the issues is whether the Company "permanently" ceased

32
Several writers have commented on an apparent discrepancy between the interest rate of 7.5% actually used in
the calculations in Keith Fulton, and the 14.5% rate suggested by "experts." Keith Fulton 2, 762 F2d at 1150; Yahn
& McDonnell, 787 F2d at 140; Robbins, 636 F Supp at 674. I have two observations on this phenomenon. First,
time is the great test of interest assumptions. When Judge Aldrich penned his dissent in Keith Fulton 2, he
remarked that 7.5% was "an interest rate unheard of in my memory in a decade." As I write this opinion, short-
term rates have fallen below 6% and mortgage rates are hovering just above 9%. Actuaries, not judges or
arbitrators, should project interest rates. See ERISA Sec 4213.
Second, the 14.5% rate probably was the going rate charged by insurance companies for single premium
annuities. This rate might be relevant if an employer paid his withdrawal liability in a lump sum and the money
was used to purchase annuities. Typically, neither event occurs. Although an employer has the right to pay his
withdrawal liability off at any time, ERISA Sec 4219(c)(4), he is much more likely to amortize it under ERISA
Secs 4219(c)(1) and (3). Even if the employer did pay his withdrawal liability in a lump sum, it is unlikely that the
proceeds would be used to buy annuities. Like all contributions to defined benefit, multiemployer pension plans,
withdrawal liability payments are pooled together with all other plan resources; indeed, it would be virtually
impossible to allocate withdrawal liability payments to a particular group of participants (even to employees of the
withdrawing employer), because withdrawal liability has components arising from non-specific groups of
participants. See, for example, ERISA Secs 4211(b)(1)(C), (4)(B).
In the single-employer case, the result is more in line with intuition. There, as a rule, plan assets are
utilized to purchase annuities. See generally 29 CFR Ch XXVI, Part 2617.

40
to have an obligation to contribute on behalf of a group of Fund participants,

within the meaning of ERISA Sec 4205(a)(2)(A). I have the benefit of knowing

that no contributions have been made to the Fund on behalf of Machine Shop

employees for over 48 straight months; I cannot believe that Congress intended

for me to ignore such a compelling fact. I conclude that an arbitrator's decision

as to whether a plan sponsor's determination of withdrawal liability is

unreasonable or clearly erroneous is to be based on all of the evidence available

at the time of arbitration.33

In arbitration over withdrawal liability, ERISA places the burden of proof

on the party contesting the plan sponsor's determination, but this burden is

lightened substantially by the permissible bulk of countervailing evidence which

the contesting party is permitted to proffer. Only one court has questioned

Congress' authority to allocate the burden of proof. In Keith Fulton 1, the First

Circuit originally reasoned as follows:

We begin our analysis by noting that this evidentiary burden in the

MPPAA is rather unique. In a normal civil suit, the burden is on the
plaintiff, the one who wants to change the status quo by taking something
from the defendant, to prove his entitlement to it in every way by a
preponderance of the evidence. In a criminal suit, the government must
prove beyond a reasonable doubt its entitlement to change the status quo
by taking away a man's liberty. In Santosky v. Kramer, 455 U.S. 745, 102
S.Ct. 1388, 71 L.Ed.2d 599 (1982), the Supreme Court held that a state

33
For a discussion of the rule that the reasonableness of a restrictive covenant must be measured as at the time of
trial rather than as of the time of contracting, see Section XI.C of "Supreme Court, Legislature Say 'Yes' To
Michigan's Trade Secrets" (preprint August 1, 1985; to appear in U Det L Rev, January 1987).

41
 could not change the status quo by permanently depriving a parent of the
company of a child unless it proved permanent neglect through clear and
convincing evidence.

In all of these situations, the applicable burden of proof requires

the party who desires to change the status quo to prove his right to do so
by showing a more than 50% right to what is at stake; the status quo is
not presumed to be changed merely by the prosecuting party asking for it
to be. Moreover, the law applies the same standard of proof to determine
not only the existence of liability, but also the extent of that liability.
Society is just as concerned that the government prove beyond a
reasonable doubt whether a man is guilty of first degree murder, second
degree murder or manslaughter. Similarly, in a civil trial, the plaintiff not
only must prove that the defendant is liable to him for some reason, but
the plaintiff must also prove by a preponderance of the evidence the
amount of money or the remedy to which he is entitled. 762 F2d at 1133-
1134.

This reasoning rests on a misconception of the status quo.

The status quo which exists at the time of an employer's withdrawal from

a multiemployer pension plan is a situation which the employer has been

making contributions to the plan, sufficient at least to satisfy ERISA's minimum

funding standards. ERISA Sec 302. An interruption in this flow of payments

would represent a change in the status quo, at least until such time as all vested

benefits are funded. ERISA Sec 4219(c)(8). It is necessary for the flow to

continue uninterrupted because, "owing to the termination of plans before

requisite funds have been accumulated, employees and their beneficiaries have

been deprived of anticipated benefits * * *." Nachman Corp v PBGC, 446 US

359, 362 (1980), quoting ERISA Sec 2(a); see also Connolly v PBGC, 89 L Ed

42
2d 166, 172 (1986). Even MPPAA's critics sense the need for withdrawal

liability payments:

* * * I do not object insofar as the MPPAA merely filled a loophole to

assure the employees' ultimate receipt of their promised payments.
Employers have had the benefit of offering their employees so-called
vested pension rights, and I do not quarrel with Congress' power to call
on them to make fully good. Keith Fulton 2, 762 F2d at 1147 (Aldrich,
SJ, dissenting).

The amount of annual payments required is consistent with the withdrawing

employer's contribution history. ERISA Sec 4219 (c)(1)(C)(i).

Since imposition of withdrawal liability does not change the status quo in

which the employer was funding vested pension benefits, there is no reason for

doubts about Congress' authority to alter and allocate the burden of proof. In any

event, "* * * when Congress creates a statutory right, it clearly has the

discretion, in defining that right, to create presumptions, or assign burdens of

proof, or prescribe remedies; it may also provide that persons seeking to

vindicate that right must do so before particularized tribunals created to perform

the specialized adjudicative tasks related to that right." Northern Pipeline

Construction Co v Marathon Pipe Line Co, 458 US 50, 83 (1983) [opinion of

Brennan, J]. The important point here is that an employer laboring under his

newly-imposed burden has the right to a plenary evidentiary hearing.34

34
The critics charge that ERISA's presumptions deprive a withdrawing employer of a hearing de novo. However,
once Congress' authority to place the burden of proof on the employer is acknowledged, it is not so clear that the
employer is being deprived of a hearing de novo. Anytime that the "conventional" burden of proof is reversed,

43
 VIII.F. The Standard of Judicial Review

To address the last of the current constitutional contentions, it is

necessary to consider the standard by which a court reviews an arbitrator's

decision on withdrawal liability. ERISA Secs 4221(b) and (c) provide in

pertinent part:

(2) Upon completion of the arbitration proceedings in favor of one

of the parties, any party thereto may bring an action, no later than 30 days
after the issuance of an arbitrator's award, in an appropriate United States
district court in accordance with section 4301 to enforce, vacate, or
modify the arbitrator's award.

(3) Any arbitration proceedings under this section shall, to the

extent consistent with this title, be35

conducted in the same manner,

subject to the same limitations,
carried out with the same powers (including subpoena power),
and enforced in United States courts

as an arbitration proceeding carried out under title 9, United States

Code.36

ERISA Secs. 4221(b)(2), (3) [emphasis supplied].

(c) In any proceeding under subsection (b), there shall be a presumption,

there logically and legally must be a default or threshold value against which to measure failure or success.
Suppose that A claims B owes him money. In conventional court, A would be required to prove the amount of the
debt. If, however, the burden of proof is placed on B, then a default value is needed to determine the outcome in
the event B does not meet his burden of proof. Such a default value might be set in mediation. In the case of
withdrawal liability, the plan sponsor sets the default value. As has been noted, "If there is a liability, someone has
to fix it." Keith Fulton 2, 762 F2d at 1140 (citation omitted). Once an employer has shown that a plan sponsor's
determination is clearly erroneous, nothing in ERISA prevents the arbitrator from making his own determination
about withdrawal liability and, indeed, PBGC regulations seem to encourage it. See 29 CFR 2641.5(e)(3);
Woodward Sand Co and Operating Engineers Pension Trust, 3 EBC 2351 (Arb, 1982).
35
ERISA Sec 4221(b)(3) is parsed in accordance with the Arbitrator's interpretation; see discussion, infra.
36
9 USC Sec 1 et seq constitute The United States Arbitration Act of 1925, PL 68-401, 43 Stat 883, as amended
("USARBA").

44
 rebuttable only by a clear preponderance of the evidence, that the
findings of fact made by the arbitrator were correct. ERISA Sec. 4221(c).

The authorities are divided over the impact of these provisions.

The Third Circuit would not read the omission of any reference to the

arbitrator's legal conclusions "as suggesting that the district court has plenary

review over the arbitrator's findings of law." Yahn & McDonnell, 787 F2d at

135 n 9. On the other hand, the Ninth Circuit feels to the contrary:

* * * Congress has created a system of substantive federal rights and

responsibilities and has delegated to arbitrators the power to make limited
factual findings in an area within which they possess special expertise.
Only these factual findings are presumed correct, 29 U.S.C. Sec. 1401(c),
and therefore the district court may review de novo all conclusions of
law. Thompson, 749 F2d at 1405-1406.

The Fourth Circuit wrote:

We do not think, as Republic argues, that an employer cannot

obtain effective judicial review of an arbitrator's legal rulings. It is true
that Section 1401(b)(3) provides that any arbitration proceedings shall "to
the extent consistent with [the 1980 Act]" be conducted subject to the
same limitations, carried out with the same powers, and enforced in
United States Courts, as arbitration proceedings carried out under 9
U.S.C. Secs. 1 et seq., and that 9 U.S.C. Sec. 10 prohibits judicial review
of legal or factual disputes voluntarily submitted to an arbitrator. The
clear authorization of Section 1401(b)(2) for judicial review "to enforce,
vacate, or modify the arbitrator's award" gives a right to review an
arbitrator's legal rulings. Since 9 U.S.C. Sec. 10 is not consistent with
Section 1401(b)(2), the latter prevails. Republic Industries, 718 F2d at
641.

Finally, the Georgetown Note, after a similar analysis of USARBA, reached the

opposite conclusion:

45
 The most reasonable reconciliation of MPPAA's two provisions
concerning judicial review of the arbitrator's decision is that the scope of
review is restricted to the arbitrator's findings of fact--that is, to the data
on which the arbitrator based his conclusion that the plan's determinations
were or were not unreasonable or clearly erroneous. The arbitrator's
conclusion itself, a finding of law, is not reviewable under the title 9
standards specified by MPPAA and the Act includes no other provisions
specifying otherwise. It is unlikely that Congress intended that a court
review the arbitrator's legal conclusions. Georgetown Note at 178
(footnotes omitted).

An analysis of USARBA and considerations of public policy lead me to

believe that a court should review an arbitrator's legal conclusions de novo.

USARBA contains separate sections for the enforcement (Section 9,

confirmation), vacation (Section 10), and modification (Section 11,

modification or correction) of an arbitration award; see also Section 13. ERISA

Sec 4221(b)(3) calls for only enforcement as per USARBA, thereby leaving

vacation and modification to be governed by ERISA Sec 4221(b)(2) which

places no USARBA restrictions on a court's authority to vacate or modify an

award. A court unrestrained by USARBA Secs 10 and 11 could vacate or

modify an arbitrator's award if it disagreed with the arbitrator's conclusions of

law. Thus this issue, too, seems resolvable on statutory grounds.

In Thompson, the Ninth Circuit reached the same result without any

analysis of USARBA, and was motivated by a concern that an employer have at

least the purely legal aspects of his case decided by an article III court. 749 F2d

at 1404-1406. It is not perfectly clear to me, as a matter of constitutional law,

46
that no deference can be afforded an arbitrator's conclusions of law so that a

court must review them de novo, but I do believe that this is the better result,

based upon considerations of public policy.37

MPPAA is one of the most unpopular enactments of our day; no law in

recent memory has been assailed so frequently and so passionately, and with

some justification.38 PBGC v RA Gray & Co, 467 US 717, 728 n 7 (1984).

MPPAA so changed the rules of the game that an employer no longer can figure

his pension costs on a simple cents-per-hour basis; he must now contend with

the specter of withdrawal liability over and above his obligations under the

collective bargaining agreement. See Connolly v PBGC, 89 LEd2d 166 (1986).

Under these circumstances, it might be adding insult to injury to deprive

an employer of a de novo hearing before a "real" judge. Sometimes judicial

function is more important than judicial economy. Let the employer have his

day in court; literally millions of dollars may be at stake.39 He may despise the

law, but let him respect the system. From the perspective of fairness, I submit

that the better policy is to permit a court to review de novo all of an arbitrator's

37
Public policy is for courts to decide. WR Grace & Co v Local Union 759, International Union of the United
Rubber, Cork, Linoleum & Plastic Workers of America, 461 US 757, 766 (1983).
38
Let me contribute from my own collection to the litany of MPPAA horror stories. I recently became acquainted
with a plan from which a small company withdrew only to be assessed $250,000 in withdrawal liability, far more
than the company had contributed during its entire participation in the plan. Moreover, company employees had
almost no vested benefits; see Connolly v PBGC, 89 L Ed 2d 166, 186 (1986) [separate opinion of O'Connor, J].
Another employer spent $250,000 in legal fees unsuccessfully contesting a $450,000 withdrawal liability
assessment.
39
See, e.g., Robbins, 636 F Supp at 652.

47
conclusions of law regarding a plan sponsor's determination of withdrawal

liability. Such a result is consistent with Congress' express desire for uniformity

at both the plan and national levels. See ERISA Secs 4214(b) and 514.

IX. Fraser Shipyards v. I.A.M., Reaffirmed

We have taken this lengthy excursion through constitutional law and

statutory construction in order to make an intelligent choice about "applicable

law," as required by PBGC regulations. Let us apply the lessons learned from

our journey to the matter at hand.

The Company does business in the Seventh Circuit, the hearing was held

in the Eighth Circuit, and the Fund is administered in the D.C. Circuit. See

ERISA Secs 4221(b)(2), 4301(d). Neither the Seventh nor the Eighth Circuit has

passed on the constitutionality of ERISA Sec 4221(a)(3). I choose to follow the

holding of the D.C. Circuit in Washington Star, 729 F2d at 1511. For the

reasons previously indicated, I am convinced that MPPAA is not procedurally

defective. I, therefore, reaffirm my initial decision. After reviewing the entire

evidence, I neither am left with a definite and firm conviction that a mistake has

been committed nor am persuaded that the Fund's determination is against

controlling law or unsupported by coherent argument.

X. Fraser Shipyards v. I.A.M., De Novo

In reaffirming my decision, I am not unmindful that I may be mistaken

48
about the constitutionality of the MPPAA standard for arbitral review; some

learned judges have reached just the opposite conclusion. Out of an abundance

of caution, let me remark that if I were to decide this matter de novo, I would

make the same decision as the Fund.

The Company's defense based on ERISA Sec 4218(2) seems something

of an afterthought, because it was not until August 2, 1985 that the Company

interjected Section 4218 into the debate [FX S]. In all of the cases which might

support the Company's position, e.g., TIME-DC, Inc v NY Teamsters Pension

Fund, 580 F Supp 621 (ND NY, 1984), aff'd 735 F2d 60 (CA 2, 1984) [per

curiam]; TIME-DC, Inc v IAM National Pension Fund, 597 F Supp 256 (D DC,

1984); Sunstar Foods, Inc v United Food/Commercial Workers Pension Fund, 5

EBC 1349 (D Minn, 1984), the employers early and consistently urged

application of the labor dispute exception. Here, however, the Company made

numerous categorical, unequivocal declarations that it closed the Machine Shop

permanently for economic reasons, and time indisputably has borne out their

truth. Indeed, the Company President testified that the Machine Shop would

have been closed regardless of any concessions the Union might have offered in

an effort to keep it open [Tr 59]. There simply is no evidence in the record to

support the contention that the Company suspended contributions to the Fund

"solely because" of a labor dispute. Rather, the Company permanently closed

49
the Machine Shop and its closing precipitated a lengthy labor dispute.

Even if there were evidence to support a labor dispute exception, there is

not enough to support a finding that the dispute ended in 1983, as the Company

contends. The Company and Union were litigating before the NLRB well into

1984 and the Company President pointed specifically to the NLRB's decision as

marking the end of the dispute [Tr 24-25, 33-34]. Thus, if the labor dispute

exception applies at all, it moves the Company's partial withdrawal under

ERISA Sec 4205(a)(2) into 1984.

Implicit in the Company's reasoning is the supposition that partial

withdrawals under ERISA Secs 4205(a)(1) [contribution decline] and (2)

[cessation of contributions] are mutually exclusive. However, ERISA expressly

contemplates multiple withdrawals (ERISA Sec 4206(b); see Robbins, 636 F

Supp at 652) and it well may be the case that the Company experienced a partial

withdrawal in 1982 under ERISA Sec 4205(a)(2), due to the closing of the

Machine Shop, and another in 1983 under Section 4205(a)(1), due to an overall

decline in business. Again, if ERISA Sec 4218(2) were applicable, it might

serve only to move the partial withdrawal under ERISA Sec 4205(a)(2) forward

into 1984. What the Company in effect has proved is that there were two partial

withdrawals, one in 1983 due to a 70% contribution decline, and another in

1982 or '84, depending upon the applicability of the labor dispute exception.

50
 For these reasons, if I were to decide this matter de novo, I would

conclude that a partial withdrawal within the meaning of ERISA Sec 4205(a)(1)

occurred, and find that it occurred in plan year 1983, and that another occurred

under ERISA Sec 4205(a)(2) in 1982. I would follow Robbins v McNicholas

Transportation Co, 6 EBC 1777 (ND Ill, 1985) and not apply the labor dispute

exception.

XI. Findings of Fact and Conclusions of Law

The findings of fact and conclusions of law required by 29 CFR Sec

2641.7(a)(1) are included in this opinion. Costs are to be divided equally

because the Company appears to be correct in its contention that a partial

withdrawal within the meaning of ERISA Sec 4205(a)(2) occurred in 1983. See

Wilson Chevrolet Co and National Industrial Group Pension Plan, 7 EBC

1475, 1490-1491 (Arb, 1985).

Dated: November 28, 1986 _______________________

E. FRANK CORNELIUS

51