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MALONE v. WHITE MOTOR CORP. ET AL.

decided: April 3, 1978.

MALONE, COMMISSIONER OF LABOR AND INDUSTRY FOR MINNESOTA
v.
WHITE MOTOR CORP. ET AL.



APPEAL FROM THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT.

White, J., delivered the opinion of the Court, in which Marshall, Rehnquist, and Stevens, JJ., joined. Stewart, J., post, p. 515, and Powell, J., post, p. 516, filed dissenting opinions, in which Burger, C. J., joined. Brennan and Blackmun, JJ., took no part in the consideration or decision of the case.

Author: White

[ 435 U.S. Page 499]

 MR. JUSTICE WHITE delivered the opinion of the Court.

A Minnesota statute, the Private Pension Benefits Protection Act, Minn. Stat. § 181B.01 et seq. (1976) (Pension Act), passed in April 1974, established minimum standards for the funding and vesting of employee pensions. The question in this case is whether this statute, which since January 1, 1975, has been pre-empted by the federal Employee Retirement Income Security Act of 1974 (ERISA),*fn1 was pre-empted prior to that time by federal labor policy insofar as it purported to override or control the terms of collective-bargaining agreements negotiated under the National Labor Relations Act (NLRA). A Federal District Court held that it was not, 412 F.Supp. 372 (Minn. 1976), but the Court of Appeals for the Eighth Circuit disagreed and held the Pension Act invalid. 545 F.2d 599 (1976). Because the case fell within our mandatory appellate jurisdiction pursuant to 28 U. S. C. § 1254 (2), we noted probable jurisdiction. 434 U.S. 813. We reverse.

I

In 1963, White Motor Corp. and its subsidiary, White Farm Equipment Co. (hereafter collectively referred to as appellee),

[ 435 U.S. Page 500]

     purchased from another company two farm equipment manufacturing plants, located in Hopkins, Minn., and Minneapolis, Minn. (on Lake Street). The employees at these plants, represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), were covered by a pension plan established through collective bargaining.

Under the 1971 collective-bargaining contract, the Pension Plan provided that an employee who attained the age of 40 and completed 10 or more years of credited service with the company was entitled to a pension. The amount of the pension would depend upon the age at which the employee retired. In language unchanged since 1950, the 1971 Plan provided that "[pensions] shall be payable only from the Fund, and rights to pensions shall be enforceable only against the Fund." App. 155.*fn2 The Plan, however, was to be funded in part on a deferred basis. The unpaid past service liability -- the excess of accrued liability over the present value of the assets of the Fund -- was to be met through contributions by the employer from its continuing operations.*fn3

[ 435 U.S. Page 501]

     Section 10.02 of the Plan provided that "[the] Company shall have the sole right at any time to terminate the entire plan." During the 1968 and 1971 negotiations, however, the UAW obtained from appellee guarantees that, upon termination, pensions for those entitled to them would remain at certain designated levels, though lower than those specified in the Plan.*fn4 By virtue of these guarantees, appellee assumed a direct liability for pension payments amounting to $7 million above the assets in the Fund.

Appellee exercised its contractual right to terminate the Pension Plan on May 1, 1974.*fn5 A few weeks before, however, the Pension Act had been enacted. This statute imposed "a pension funding charge" directly against any employer who ceased to operate a place of employment or a pension plan. This charge would be sufficient to insure that all employees with 10 or more years of service would receive whatever pension benefits had accrued to them, regardless of whether their rights to those benefits had "vested" within the terms of

[ 435 U.S. Page 502]

     the Plan. The funds obtained through the pension funding charge would then be used to purchase an annuity payable to the employee when he reached normal retirement age. Although the Pension Act did not compel an employer to adopt or continue a pension plan, it did guarantee to employees with 10 or more years' service full payment of their accrued pension benefits.

Pursuant to the Pension Act, the appellant, Commissioner of Labor and Industry of the State of Minnesota, undertook an investigation of the pension plan termination here involved and later certified that the sum necessary to achieve compliance with the Pension Act was $19,150,053. Under the Pension Act, a pension funding charge in this amount became a lien on the assets of appellee. Appellee promptly filed this suit in Federal District Court.

Appellee's complaint, as amended, asserted violations of the Supremacy Clause, the Contract Clause, and the Due Process and Equal Protection Clauses of the Fourteenth Amendment of the United States Constitution. The Supremacy Clause claim was based on the argument that the Pension Act was in conflict with several provisions of the NLRA,*fn6 as amended, 29 U. S. C. § 151 et seq., because it "interferes with the right of Plaintiffs to free collective bargaining under federal law and . . . vitiates collective bargaining agreements entered into under the authority of federal law, by imposing upon Plaintiffs obligations which, by the express terms of such collective bargaining agreements, Plaintiffs were not required to assume." App. A-9 -- A-10. Appellee moved for partial summary judgment or, alternatively, for a preliminary injunction based on the pre-emption claim.

Distinguishing Teamsters v. Oliver, 358 U.S. 283 (1959), and relying on evidence of congressional intent contained in

[ 435 U.S. Page 503]

     the federal Welfare and Pension Plans Disclosure Act (Disclosure Act), 72 Stat. 997, as amended, 76 Stat. 35, 29 U. S. C. § 301 et seq., the District Court held that the Pension Act was not pre-empted by federal law. 412 F.Supp. 372 (Minn. 1976). On appeal, the Court of Appeals for the Eighth Circuit held that the Pension Act was pre-empted by federal labor law, and reversed the District Court. 545 F.2d 599 (1976). The reason was that the Pension Act purported to override the terms of the existing pension plan, arrived at through collective bargaining, in at least three ways: It granted employees vested rights not available under the pension plan; to the extent of any deficiency in the pension fund, it required payment from the general assets of the employer, while the pension plan provided that benefits shall be paid only out of the pension fund; and the Pension Act imposed liability for post-termination payments to the pension fund beyond those specifically guaranteed. This, the court ruled, the State could not do; for if, under Machinists v. Wisconsin Employment Relations Comm'n, 427 U.S. 132 (1976), "states cannot control the economic weapons of the parties at the bargaining table, a fortiori, they may not directly control the substantive terms of the contract which results from that bargaining." 545 F.2d, at 606. Further, as the court understood the opinion in Oliver, supra, "a state cannot modify or change an otherwise valid and effective provision of a collective bargaining agreement." 545 F.2d, at 608. Finally, the Court of Appeals found that the pre-emption disclaimer in the Disclosure Act relied on by the District Court related only

"to state statutes governing those obligations of trust undertaken by persons managing, administrating or operating employee benefit funds, the violation of which gives rise to civil and criminal penalties. Accordingly, no warrant exists for construing this legislation to leave to a state the power to change substantive terms of pension plan agreements." Id., at 609.

[ 435 U.S. Page 504]

     II

It is uncontested that whether the Minnesota statute is invalid under the Supremacy Clause depends on the intent of Congress. "The purpose of Congress is the ultimate touchstone." Retail Clerks v. Schermerhorn, 375 U.S. 96, 103 (1963). Often Congress does not clearly state in its legislation whether it intends to pre-empt state laws; and in such instances, the courts normally sustain local regulation of the same subject matter unless it conflicts with federal law or would frustrate the federal scheme, or unless the courts discern from the totality of the circumstances that Congress sought to occupy the field to the exclusion of the States. Ray v. Atlantic Richfield Co., ante, at 157-158; Jones v. Rath Packing Co., 430 U.S. 519, 525, 540-541 (1977); Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947). "We cannot declare pre-empted all local regulation that touches or concerns in any way the complex interrelationships between employees, employers and unions; obviously, much of this is left to the States." Motor Coach Employees v. Lockridge, 403 U.S. 274, 289 (1971). The Pension Act "leaves much to the states, though Congress has refrained from telling us how much. We must spell out from conflicting indications of congressional will the area in which state action is still permissible." Garner v. Teamsters, 346 U.S. 485, 488 (1953). Here, the Court of Appeals concluded that the Minnesota statute was invalid because it trenched on what the court considered to be subjects that Congress had committed for determination to the collective-bargaining process.

There is little doubt that under the federal statutes governing labor-management relations, an employer must bargain about wages, hours, and working conditions and that pension benefits are proper subjects of compulsory bargaining. But there is nothing in the NLRA, including those sections on which appellee relies, which expressly forecloses all state regulatory power with respect to those issues, such as pension

[ 435 U.S. Page 505]

     plans, that may be the subject of collective bargaining. If the Pension Act is pre-empted here, the congressional intent to do so must be implied from the relevant provisions of the labor statutes. We have concluded, however, that such implication should not be made here and that a far more reliable indicium of congressional intent with respect to state authority to regulate pension plans is to be found in § 10 of the Disclosure Act. Section 10 (b) provided:

"The provisions of this Act, except subsection (a) of this section and section 13 and any action taken thereunder, shall not be held to exempt or relieve any person from any liability, duty, penalty, or punishment provided by any present or future law of the United States or of any State affecting the operation or administration of employee welfare or pension benefit plans, or in any manner to authorize the operation or administration of any such plan contrary to any such law."

Also, § 10 (a), after shielding an employer from duplicating state and federal filing requirements, makes clear that other ...


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