Originally from Dispute Resolution Journal

LABOR—MPPAA—RETROACTIVITY—CONSTITUTIONALITY— ATTORNEYS' FEES

Arbitration of withdrawal liability was not required before employers could proceed in court challenging the constitutionality of retroactive application of the Multiemployer Pension Plan Amendments Act. The Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001 et seq., created a system under which the Pension Benefit Guaranty Corporation (PBGC) administers a plan of termination insurance to protect employees whose pension plans fail or terminate due to insufficient funds. Employers who withdrew from multiemployer plans, therefore, incurred a contingent liability not to exceed thirty percent of the employer's net worth. At PBGC's suggestion that such a contingent liability might encourage employers to withdraw from ailing plans. Congress enacted the Muitiemployer Pension Plan Amendments Act of 1980 (MPPAA], Publ.L. No. 96-364, 94 Stat. 1208. MPPAA made withdrawal liability absolute rather than contingent, and such liability is proportional to the employer's share of the difference between (he present value of vested benefits and the plan's assets. This provision, which could result in a liability far greater than thirty percent, was made retroactive. Shelter Framing and G & R Roofing, two construction contractors, withdrew from the Carpenters Pension Trust for Southern California in 1980 when collective bargaining broke down between the two employers and the union. Thus, Shelter Framing incurred a liability of about one hundred eighty percent of its stockholder equity, and G & R's liability amounted to about forty percent of its stockholder equity. Both employers refused to make payment, and filed separate suits challenging the constitutionality of the retroactive application of MPPAA. The suits were consolidated into one action. The trial court enjoined efforts by the trustees to collect withdrawal liability, and also stayed mandatory arbitration of the disputed amount of liability. Arbitration to resolve disputes over the amount of withdrawal liability is mandatory under MPPAA. PBGC, which had been monitoring the progress of the case, then sought to intervene, arguing that exhaustion of the arbitration procedure was required before constitutional challenges could be pursued in court.