The opinion of the court was delivered by: SPRIZZO
Plaintiff, Textile Workers Pension Fund (the "Fund"), is a multiemployer pension plan trust established pursuant to written collective bargaining agreements between the Amalgamated Clothing and Textile Workers Union, AFL-CIO (the "Union") and various contributing employers in the dyeing, finishing and printing industry. The Fund administers various pension plans including the Mid-Atlantic Pension Plan (the "Plan"). Defendant, Standard Dye & Finishing Co. Inc. (the "Company"), a corporation which engaged in the business of processing and distributing dye and textile materials, contributed to the Fund pursuant to a series of collective bargaining agreements with the Union.
By early 1980 the Company's sales and profits had declined and a series of cost increases made it unlikely that the Company could continue to operate profitably. After exploring various alternatives, the Company's directors decided to cease operations and liquidate its assets. The bulk of these assets was liquidated on June 6, 1980 for approximately $1,000,000. All the Company's production workers were terminated by June 20, 1980, although several employees remained to perform clean-up work and to dismantle equipment. The last of these employees was terminated on October 31, 1980. The Company continued to make pension fund contributions on their behalf until their termination.
At the time the decision to cease operations and liquidate was made, the governing law, the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"), permitted an employer to withdraw from a multiemployer plan at any time without incurring liability unless the plan terminated within five years of the employer's withdrawal with insufficient assets to provide employee benefits at the level guaranteed by the Pension Benefit Guaranty Corporation ("PBGC"). Id. at §§ 1364, 1381. In the event that the plan did terminate, each employer who contributed to the plan during the five year period preceding termination incurred liability to the PBGC for its share of the funding insufficiency. However, each such contributing employer's liability was limited to 30% of its net worth. Id. at §§ 1362(b)(2), 1364.
On September 26, 1980, three months after the Company decided to liquidate its assets, the Multiemployer Pension Plan Amendments Act of 1980 (the "MPPAA"), was signed into law. It amended those provisions of ERISA governing withdrawal liability of an employer from an on-going multiemployer pension plan by providing that a withdrawing employer incurs unconditional liability on the date of withdrawal for a proportionate share of the unfunded vested liability of the plan. Id. at § 1381 (Supp. 1981). The MPPAA expressly provides that its withdrawal liability provisions are retroactive to April 29, 1980. Id. at § 1461(e)(2)(A) (Supp. 1981).
The Fund calculated the Company's withdrawal liability in accordance with the MPPAA. The assessment approaches $1,000,000. When the Company failed to make the required payments, the Fund commenced the instant action. Thereafter, the Company moved for summary judgment contending that retroactive application of the withdrawal liability provisions of the MPPAA deprives it of due process in violation of the fifth amendment.
Plaintiff contends that the Court need not reach defendant's constitutional argument since the MPPAA was applied to the Company prospectively and not retroactively. The Fund asserts that withdrawal liability under the MPPAA is triggered by either of two events: (1) the permanent cessation of an employer's obligation to contribute under the plan; or (2) the permanent cessation of all covered operations under the plan. Id. at § 1383 (Supp. 1981). Plaintiff argues that, since the Company was obligated to contribute to the Plan until October, 1980 and since it continued to employ various individuals until October, 1980, it did not withdraw within the meaning of the MPPAA until after the MPPAA was enacted.
The Company disputes plaintiff's contention and asserts that it withdrew from the Plan within the meaning of the MPPAA in June, 1980 when it stopped doing business and sold its assets, thereby ceasing all covered operations. The Company further maintains that, in determining whether a statute is retroactive, the significant date is the date when the Company made its decision to liquidate its operations in reliance on the provisions of ERISA. The Court agrees.
The fact that the process of liquidation may have extended beyond the date when the MPPAA was enacted is of no consequence. Pension fund liability cannot properly be imposed on the basis of acts incident to a process of liquidation. Similarly, the fact that the Company had a contractual obligation to contribute to the Plan until October of 1980 does not support the conclusion that the enactment of the MPPAA had no retroactive effect.
The decision to liquidate was made in reliance upon the then existing statutory scheme. It is that decision which forms the basis for the withdrawal liability which the Fund seeks to impose on the Company. The Court, therefore, must decide whether Congress, consistent with due process, could properly make the MPPAA applicable to a decision to liquidate made prior to its enactment and to thereby radically alter the pension fund liability consequences resulting from that decision. See Nachman Corp. v. Pension Benefit Guaranty Corp., 592 F.2d 947 (7th Cir. 1979), aff'd, 446 U.S. 359, 64 L. Ed. 2d 354, 100 S. Ct. 1723 (1980) (hereinafter referred to as "Nachman").
At the outset, it should be noted that a statute which readjusts economic burdens in the private sector in order to further a legitimate public purpose is not unconstitutional merely because it has some retroactive effect. See, e.g., Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 49 L. Ed. 2d 752, 96 S. Ct. 2882 (1976); Nachman, 592 F.2d 947.
The relevant due process inquiry is whether Congress acted rationally in selecting the means to achieve the desired end. Id. at 958. In Nachman, the Seventh Circuit developed an analysis for evaluating the rationality of a federal statute which retroactively impairs otherwise settled expectations. The Court stated:
Rationality must be determined by a comparison of the problem to be remedied with the nature and scope of the burden imposed to remedy that problem. In evaluating the nature and scope of the burden, it is appropriate to consider the reliance interests of the parties affected, whether the impairment of the private interest is effected in an area previously subjected to regulatory control, the equities of imposing the legislative burdens, and the inclusion of statutory provisions designed to limit and moderate the impact of the burdens. It must be emphasized that although these factors might improperly be used to express merely judicial approval or disapproval of the balance struck by Congress, they must only be used to determine whether the legislation represents a rational means to a legitimate end.
Id. at 960 (citations and footnotes omitted). Applying these precepts to the facts of this case, the Court concludes that Congress did not violate the Company's due process rights in enacting MPPAA.
To fully understand the problem which Congress sought to remedy in providing for retroactive withdrawal liability, it is essential to discuss Title IV of ERISA which established a system of termination insurance which requires the PBGC to pay certain non-forfeitable benefits if a pension plan fails or terminates with insufficient funds.
Unlike single employer plans, multiemployer plans were not immediately insured upon ERISA's enactment in 1974. 29 U.S.C. § 1381. Rather, the PBGC ...