[00:00:00] Speaker 01:
King versus United States.

[00:01:05] Speaker 01:
Okay, Mr. Messing.

[00:01:08] Speaker 04:
May it please the court.

[00:01:16] Speaker 04:
Every once in a while a case gives you a pretty clear indication that the decision below was wrong.

[00:01:20] Speaker 04:
One such indication is when the government, which won below, completely abandons the reasoning of the court that decided the opinion.

[00:01:26] Speaker 04:
That's what happened here.

[00:01:28] Speaker 01:
So your clients had a contract right to payments from the fund, right?

[00:01:34] Speaker 04:
That's correct.

[00:01:35] Speaker 01:
They don't have an interest in the underlying assets of the fund.

[00:01:39] Speaker 04:
They don't have an ownership stake, but they have a beneficial interest.

[00:01:45] Speaker 04:
It's deferred compensation that was paid each month from the work that they did into the fund.

[00:01:49] Speaker 01:
They had a contract right to that.

[00:01:51] Speaker 04:
They had a contract right to that, just like the bank in Louisville Bank, for instance, just like the lien holder in Armstrong.

[00:02:00] Speaker 01:
Actually, in Louisville, the Supreme Court says that they had an interest in the real property, and they distinguished it from a contract right as a creditor and said that's fundamentally different.

[00:02:15] Speaker 04:
What you just said is exactly what I...

[00:02:17] Speaker 04:
We may view the implications of that differently, but you noted that they had an interest in the property.

[00:02:23] Speaker 04:
My clients had an interest in the specific pool of funds.

[00:02:26] Speaker 04:
They didn't own it, just like the bank didn't own the house on which it had a mortgage.

[00:02:31] Speaker 04:
It had an interest.

[00:02:32] Speaker 01:
So what is the taking here?

[00:02:37] Speaker 01:
order that the contract right be transferred to somebody else?

[00:02:45] Speaker 01:
Is it that it was transferred to the government?

[00:02:47] Speaker 01:
What is the alleged taking?

[00:02:48] Speaker 04:
Thank you.

[00:02:49] Speaker 04:
Paragraph 104 of our second amended complaint specifies exactly what we allege.

[00:02:54] Speaker 04:
That's also in ECF 166, where we specify it in our summary judgment motion.

[00:02:59] Speaker 04:
There are several things that were taken.

[00:03:01] Speaker 04:
First, the exact

[00:03:03] Speaker 01:
What was taken?

[00:03:04] Speaker 01:
What I asked was, who got it?

[00:03:06] Speaker 04:
Oh, I'm just creating a record so you can find it when you want to see exactly what we alleged, because it's exactly what the CFC said.

[00:03:12] Speaker 04:
They had a vested right to receive a pension of a specific size from a specific source.

[00:03:19] Speaker 01:
My question is, where was the transfer?

[00:03:21] Speaker 01:
Was the government transferring that to a third party?

[00:03:23] Speaker 01:
Was it taking it for itself?

[00:03:25] Speaker 01:
What's the alleged answer?

[00:03:26] Speaker 04:
The government authorized the pension fund to appropriate that.

[00:03:30] Speaker 04:
And the fund did so.

[00:03:32] Speaker 04:
It quite literally deleted the language from the contract.

[00:03:35] Speaker 01:
So the idea is that it ordered a transfer of property to the pension fund?

[00:03:42] Speaker 04:
The transfer of property, it was the appropriation of property.

[00:03:48] Speaker 04:
The word transfer

[00:03:50] Speaker 04:
does it as a practical matter.

[00:03:52] Speaker 04:
That's what happened.

[00:03:53] Speaker 04:
But in practice, since they had a contractual right to payment.

[00:03:55] Speaker 01:
So it's not an argument that the government took the property for itself.

[00:03:59] Speaker 01:
It's that it ordered a transfer of the property to the pension fund.

[00:04:04] Speaker 04:
It authorized the pension fund to appropriate the property.

[00:04:08] Speaker 04:
And the fund did exactly that.

[00:04:11] Speaker 01:
OK.

[00:04:11] Speaker 01:
And so what case is there where a modification of a contract right by the government

[00:04:20] Speaker 01:
not a government contract, a third party contract has been held to be a taking.

[00:04:24] Speaker 01:
I've looked at all the cases that you cited.

[00:04:27] Speaker 01:
I didn't see that those cases involve contract rights per se.

[00:04:32] Speaker 01:
They all involve property.

[00:04:34] Speaker 04:
To be clear, the remedy was also deleted.

[00:04:37] Speaker 04:
I want to get to the private.

[00:04:40] Speaker 04:
As a practical matter, that's what happened in Brown.

[00:04:42] Speaker 04:
People submit deposits to a bank.

[00:04:44] Speaker 04:
They have a right to interest.

[00:04:45] Speaker 01:
But the Supreme Court held in Brown that there was an interest, a property interest, in the money, in the interest, not just a contract right.

[00:04:53] Speaker 01:
What case says that a government modification of a contract right is a per se taking?

[00:05:03] Speaker 04:
the transfer of interest in the property in the contract right so we that's we I don't understand how that's not right so Armstrong and Louisville Bank eliminated the remedy Brown and webs transferred the ownership right this case goes beyond those the there was a right it was quite literally involved in interest in property right just a contract

[00:05:30] Speaker 04:
If your honor's point is that this case goes further than any case that we've cited, that's true.

[00:05:37] Speaker 04:
In this case, there was a... Following the on-bank opinion that you wrote in Commonwealth Edison, there are basically two camps, rules of liability, which, as this court said, the government can impose taxes, no problem.

[00:05:51] Speaker 04:
Usage fees, no problem.

[00:05:53] Speaker 04:
Insurance mandate, no problem.

[00:05:55] Speaker 04:
But if you take the actual property right and appropriate it, then you cross the line.

[00:05:59] Speaker 01:
But that's the problem, that all these cases involve property rights, whereas you have your clients have a contract right.

[00:06:08] Speaker 04:
The court below found, after extensive briefing, that my clients did have a property right.

[00:06:14] Speaker 01:
We didn't have a property right in a contract, but it's not a property right.

[00:06:17] Speaker 01:
So this goes to exactly the line that your honor drew.

[00:06:20] Speaker 01:
Don't interrupt.

[00:06:22] Speaker 01:
Not a property right in the underlying assets of the fund.

[00:06:26] Speaker 04:
They do have a property interest in that.

[00:06:30] Speaker 04:
Their deferred compensation went into a fund that had well over a billion dollars in it.

[00:06:34] Speaker 04:
It was backed exactly at the language in Commonwealth Edison.

[00:06:37] Speaker 04:
And roughly 10 other cases that we cited where when there was a right backed by a specific pool of money or a specific asset, time and again, this court and the Supreme Court say that is.

[00:06:49] Speaker 01:
The plan here says specifically that they don't have an interest in the underlying assets of the fund, right?

[00:06:56] Speaker 04:
They have.

[00:06:58] Speaker 04:
You'd have to cite me a specific page, Your Honor.

[00:07:02] Speaker 04:
Because the entire point of the pension is you put money in its deferred compensation, and you get it out.

[00:07:07] Speaker 01:
Well, that's Article 94, paragraph 5.

[00:07:09] Speaker 01:
Neither employer or any other person shall have any right title of interest in or to the fund of state or any part thereof, except that they have a contract.

[00:07:17] Speaker 04:
My recollection of the trust document is, I don't know exactly which page you're citing, but immediately after that it says, except beneficiaries.

[00:07:25] Speaker 01:
Yeah, except the contract, right.

[00:07:26] Speaker 04:
But that's pretty important language, which is no one shall have a right in this except the exact people I'm representing as part of the class.

[00:07:34] Speaker 01:
The problem is that the Supreme Court cases have consistently distinguished, and Louisville being one of them, between a contract right, third party contract right, which can be modified, and an interest in an asset, which perhaps, under some circumstances, can result in a per se take.

[00:07:54] Speaker 04:
And the right itself is an asset.

[00:07:57] Speaker 04:
It's the equivalent of commercial paper.

[00:07:58] Speaker 04:
It's the equivalent of a private annuity backed by a specific fund.

[00:08:02] Speaker 04:
It's equivalent to being a trust beneficiary, where there's money there for your benefit.

[00:08:08] Speaker 01:
What's your best case?

[00:08:09] Speaker 01:
Brown.

[00:08:10] Speaker 01:
Brown?

[00:08:11] Speaker 01:
Yeah.

[00:08:12] Speaker 01:
But Brown, there was an interest in the money in the bank.

[00:08:16] Speaker 04:
It was both the principal and the interest in the money in the bank.

[00:08:22] Speaker 04:
And it was transferred to a third party, just like here, where my clients owned it and then suddenly it went to someone else.

[00:08:29] Speaker 04:
And nine to zero, the court said it's a per se taking.

[00:08:32] Speaker 04:
So again, I want to reiterate the Commonwealth Edison distinction.

[00:08:35] Speaker 04:
I urge the court to reread it.

[00:08:36] Speaker 04:
Of course, Judge Stike, you wrote it.

[00:08:37] Speaker 04:
You're intimately familiar with it.

[00:08:40] Speaker 04:
It creates two worlds.

[00:08:41] Speaker 04:
Is there a specific right backed by a specific pool of money or a specific piece of property?

[00:08:47] Speaker 04:
And your honor cited Webb's and Phillips for that proposition.

[00:08:50] Speaker 04:
And in that case, you move into Perse Land.

[00:08:52] Speaker 04:
By contrast, this court's given such a broad latitude to the government, pretty much anything else.

[00:08:57] Speaker 04:
You're imposing liability, no problem.

[00:08:59] Speaker 04:
You're appropriating an arbitration clause that says you get to arbitrate in North Korea, and you say, I really wanted to do that.

[00:09:06] Speaker 04:
I expected it.

[00:09:07] Speaker 04:
Tough luck.

[00:09:08] Speaker 04:
The government can take that away.

[00:09:09] Speaker 01:
You pay an insurance fee.

[00:09:10] Speaker 01:
In your theory, in A and D, would there have been a per se taking?

[00:09:14] Speaker 04:
There was no authorization.

[00:09:17] Speaker 04:
The government didn't authorize the car companies.

[00:09:21] Speaker 04:
What's that?

[00:09:21] Speaker 01:
It got worse?

[00:09:22] Speaker 04:
Well, I understand.

[00:09:23] Speaker 04:
And below, we argued, as alternative theories, the government's on the hook, even though it didn't end up with the property, because of authorization.

[00:09:31] Speaker 01:
What's the answer to my question?

[00:09:32] Speaker 01:
A and D, would it have been a per se taking?

[00:09:35] Speaker 04:
A and D would not have been a per se taking, unless it had been authorization.

[00:09:41] Speaker 01:
If the government had said... Because it was just coercion and not authorization?

[00:09:46] Speaker 04:
So we have something beyond A&D, Your Honor.

[00:09:49] Speaker 04:
If A&D was about a contractual right that wasn't backed by specific property, but pretend it said that the car dealers owned specific cars and had the right to those specific cars, had already prepaid for them, and had a property interest in it.

[00:10:04] Speaker 04:
And then A&D said, Congress said, we're going to allow Chrysler to void those agreements and reclaim those cars, even though there's a property interest in them.

[00:10:15] Speaker 04:
And then Chrysler goes ahead and says, ooh, great, we get to keep these for ourselves.

[00:10:21] Speaker 04:
And they literally changed the contract.

[00:10:23] Speaker 04:
So instead of dealers have a property interest in this, instead it now says Chrysler has a property interest in this.

[00:10:30] Speaker 04:
Then yes, we're in that realm, and that's exactly what happened here.

[00:10:33] Speaker 04:
So to be clear, the contract was literally rewritten, eliminating my client's vested property rights, and the remedy was eliminated.

[00:10:42] Speaker 00:
the property interest here as if the fund is a debtor to the plaintiffs?

[00:10:49] Speaker 04:
In a practical sense, yes.

[00:10:51] Speaker 04:
In a literal sense, it's a trust.

[00:10:53] Speaker 04:
It's money held in trust for their benefit.

[00:10:55] Speaker 00:
Right.

[00:10:56] Speaker 00:
And then I guess to try to understand the nature of whatever interest, the claims court talked about

[00:11:11] Speaker 00:
how whatever expectation there was of receiving payments, it was against the backdrop of certain things, certain limitations.

[00:11:20] Speaker 00:
For example, there's a termination clause in the plan.

[00:11:25] Speaker 00:
There's also ERISA, which itself talks about certain exceptions to the anti-cutback rule, one of them being a substantial business injury to the fund, then the fund needs to take exigent acts in order to save the fund.

[00:11:45] Speaker 00:
And so therefore, the court concluded that what happened here with the 2014 act is just a thematic extension of all these different limitations on

[00:12:02] Speaker 00:
on a pension holder's expectations of receiving a certain sum of payments.

[00:12:08] Speaker 00:
What would you say about that?

[00:12:10] Speaker 04:
That misreads Connolly and 100 years worth of case law.

[00:12:14] Speaker 04:
The contractual remedies for if there's not enough money, that's the point.

[00:12:20] Speaker 04:
My clients had an agreement that said, you will be paid this amount until the day you die, and it's absolutely ironclad unless A, B, or C. If there's not enough money to pay, if it's insolvent, then that goes away.

[00:12:32] Speaker 04:
And what Congress did is said, hmm, we'd like to broaden the situations in which we can take away that vested property right, backed by a specific fund.

[00:12:41] Speaker 04:
And we're going to say, it's not just when it's insolvent, it's when you're starting to get a little too close for comfort.

[00:12:46] Speaker 00:
Do you agree that this plan is subject to ERISA?

[00:12:49] Speaker 04:
Yes.

[00:12:49] Speaker 00:
Okay, so then it's subject to these exceptions, including

[00:12:56] Speaker 04:
And that specific exception is for, which the government cited, is not for vested pensions.

[00:13:03] Speaker 04:
That's for accrued benefits, which have not vested.

[00:13:05] Speaker 04:
And that's a very different level of protection in terms of the property interest.

[00:13:10] Speaker 00:
Right.

[00:13:10] Speaker 00:
And then here, getting back to one of Judge Dyck's questions, we seem to be in kind of an unusual situation, maybe a unique situation where

[00:13:22] Speaker 00:
What was the objective here?

[00:13:24] Speaker 00:
What was the congressional objective to have these funds cut back payments?

[00:13:35] Speaker 00:
In a way, it was to help protect these very plaintiffs and all similarly situated pension holders in order to have the funds survive.

[00:13:46] Speaker 00:
And it was apparently on its pathway, a one-way ticket to extinction.

[00:13:52] Speaker 00:
And so by making these choices and maneuvers, it allows the fund to live at least a few more decades.

[00:14:01] Speaker 00:
So again, I think this is consistent with Judge Dyck's question.

[00:14:06] Speaker 00:
We don't have a situation where the government is taking money, taking property interests, and moving it from person A to person B, or

[00:14:15] Speaker 00:
giving it to itself, the government, for some other purpose.

[00:14:19] Speaker 00:
Its objective is to help the plaintiffs themselves, in a way.

[00:14:23] Speaker 00:
Obviously, some of the plaintiffs won't be alive to see all the benefits down the road, to see the funds survive an extra couple decades.

[00:14:32] Speaker 00:
But nevertheless, the broader objective is to save these plaintiffs.

[00:14:38] Speaker 00:
So I'm just trying to understand, is there an example of a case where that was the situation,

[00:14:45] Speaker 00:
the courts nevertheless concluded, sorry, that's still a taking.

[00:14:48] Speaker 04:
Sure.

[00:14:48] Speaker 04:
This court did so in casitas.

[00:14:49] Speaker 04:
There wasn't enough water for everyone.

[00:14:52] Speaker 04:
One party at the plaintiff had a contractual right to a specific amount of water.

[00:14:57] Speaker 04:
Like money flowing to them, they had a right to exactly that amount.

[00:15:00] Speaker 04:
Did they own the water?

[00:15:01] Speaker 04:
No.

[00:15:02] Speaker 04:
Had they had possession of it?

[00:15:03] Speaker 04:
No.

[00:15:03] Speaker 04:
They had a right to it.

[00:15:04] Speaker 01:
Well, we did say they owned the water.

[00:15:06] Speaker 01:
They had a right to the water.

[00:15:07] Speaker 04:
They had a contractual right to the water.

[00:15:08] Speaker 01:
Well, no, but we didn't characterize it.

[00:15:10] Speaker 04:
It wasn't a riparian right, Your Honor.

[00:15:12] Speaker 04:
it was a contractual right.

[00:15:14] Speaker 04:
And that right was modified, the water was diverted elsewhere, and the court found it per se taking, and rightly so.

[00:15:20] Speaker 04:
So that's one example by this court, where the idea that there is a pool of water or money, where you have the right to a particular amount flowing to you, and then that gets cut off because of government action, it's awfully similar.

[00:15:33] Speaker 00:
But what was the purpose of that government action?

[00:15:35] Speaker 04:
So that there was enough water to achieve various important goals in other places.

[00:15:41] Speaker 00:
That's the point.

[00:15:43] Speaker 00:
other places here it's the chief goals for right here this this situation to save this plan from going bankrupt right this Louisville bank the it was during the depression and this court is at the Supreme Court is repeatedly warned

[00:15:59] Speaker 04:
We've heard all sorts of Pandora's box arguments, and oh no, what happens if we obliterate property rights?

[00:16:05] Speaker 04:
But, you know, isn't that dangerous?

[00:16:07] Speaker 04:
And the court says, let's look to see if there's a property right and protect it.

[00:16:10] Speaker 04:
Is it backed by a specific fund?

[00:16:11] Speaker 04:
Was it appropriated?

[00:16:13] Speaker 04:
If so, you've got a taking.

[00:16:14] Speaker 01:
And so Louisville then.

[00:16:15] Speaker 01:
OK, but you've got your problem with Louisville.

[00:16:16] Speaker 01:
It says specifically, it's true that the position of a secured creditor who has rights in a specific property differs fundamentally

[00:16:23] Speaker 01:
that from an unsecured creditor has not.

[00:16:26] Speaker 04:
I realize I don't get to ask the questions, but rhetorically, you don't think my clients, after working 30 years and having their compensation deferred and put in every month, have any rights in that fund when they have a specific right down to the penny for how much they get?

[00:16:41] Speaker 04:
I don't understand how that's different, respectfully, than Casitas or Brown, where, for instance, you haven't yet sold a property, but the money comes in in escrow, and then you have a right to the interest because it's for your benefit.

[00:16:53] Speaker 02:
If my colleagues will indulge me, I've got a few questions as well.

[00:16:56] Speaker 04:
I see that my time is up.

[00:16:59] Speaker 04:
Thank you.

[00:16:59] Speaker 04:
I appreciate it.

[00:17:00] Speaker 02:
Thank you.

[00:17:03] Speaker 02:
Judge Dyke, you said repeatedly this case goes beyond other cases.

[00:17:07] Speaker 02:
Did you mean that the governmental action here goes beyond

[00:17:11] Speaker 02:
other governmental actions that have been found as takings, or did you mean something different?

[00:17:15] Speaker 02:
Thank you.

[00:17:15] Speaker 04:
I don't mean the nature of the government action under Penn Central.

[00:17:19] Speaker 04:
I'm not referring to that crime.

[00:17:21] Speaker 04:
I'm talking in terms of per se.

[00:17:23] Speaker 02:
So in many cases... Are you asking us to go beyond takings?

[00:17:28] Speaker 02:
saying that the government has done something that goes beyond.

[00:17:31] Speaker 04:
I'm saying that this is an easier case than most because the government has gone beyond.

[00:17:34] Speaker 04:
For instance, in Louisville or Armstrong, the government impaired the creditor's right to enforce a contractual agreement.

[00:17:42] Speaker 04:
And even though they still had that clause, and it was blocked as a practical matter, they still had that right.

[00:17:47] Speaker 04:
Had the legislation been repealed, they could have pulled out the exact same contract and said, OK, we're back in business.

[00:17:52] Speaker 04:
We're enforcing it.

[00:17:53] Speaker 04:
Here, that right was removed.

[00:17:55] Speaker 04:
And as concerns your honor, Judge Dyke,

[00:17:57] Speaker 04:
in Pizell, the remedy was removed.

[00:17:59] Speaker 04:
Congress immunized the fund from the breach of contract claim and deleted a cause of action specified by statute.

[00:18:10] Speaker 04:
There's no cause.

[00:18:11] Speaker 02:
The MPRA expressly does that.

[00:18:13] Speaker 02:
It takes away... Absolutely.

[00:18:14] Speaker 02:
I can cite the statutes if you'd like, Your Honor.

[00:18:15] Speaker 02:
No, that's fine.

[00:18:16] Speaker 02:
A question about the plan documents, which are very complicated here, but as I understand them, even pre-MPRA, they allowed some modification

[00:18:26] Speaker 02:
in something like a financial red zone.

[00:18:28] Speaker 02:
If the fund was having some financial difficulty, short of insolvency, it wasn't quite insolvent, but it was in something akin to a financial red zone.

[00:18:37] Speaker 02:
Is that a fair reading of rights that the fund had prior to the statute?

[00:18:42] Speaker 02:
And if so,

[00:18:43] Speaker 02:
What did the statute allow them to do that they couldn't do before?

[00:18:46] Speaker 04:
I would need to look at the specific, it's a contract, and so there's specific remedies when specific things happen that is inconsistent, respectfully, Judge Stark, with my understanding of how it operated.

[00:18:56] Speaker 04:
You had to get into insolvency.

[00:18:59] Speaker 04:
Had it hit insolvency, my clients would have been miserable and unhappy, but the agreement would have specified you can get certain cuts.

[00:19:06] Speaker 01:
They had no rights to the payments and insolvency, right?

[00:19:10] Speaker 04:
They did have rights to payments in insolvency.

[00:19:12] Speaker 04:
It specifies what happens if there's not enough.

[00:19:14] Speaker 01:
It's like bankruptcy.

[00:19:15] Speaker 01:
But payments would be cut back, right?

[00:19:19] Speaker 04:
Possibly.

[00:19:20] Speaker 04:
It actually would depend largely on what UPS would do.

[00:19:23] Speaker 04:
UPS paid about 80% of the overall proceeds into it.

[00:19:27] Speaker 01:
Forget about the possibility of additional contributions to the fund.

[00:19:31] Speaker 01:
If the fund was the fund and it was insolvent, they suffered a pro rata reduction, right?

[00:19:37] Speaker 04:
if they're needed to be a reduction but if ups withdrew which it might very well ups would have either paid enough to continue paying them somewhere around seventy percent there's not been factual discovery our fact finding on exactly what percent but they would have received most of their benefit from ups staying in the fund or what would more likely have happened ups would have said

[00:19:58] Speaker 04:
This is a sinking ship.

[00:20:00] Speaker 04:
Let's get out of here."

[00:20:01] Speaker 04:
And then they would have had to pay withdrawal liability.

[00:20:03] Speaker 04:
They would have put well over a billion dollars in and it would have covered my clients way beyond their lifetime.

[00:20:08] Speaker 02:
They would have received a hundred cents on the dollar.

[00:20:16] Speaker 02:
That's correct your honor and one of the plaintiffs mr. Galutz has passed away since then so there's no dispute that he would

[00:20:35] Speaker 02:
Rather than enter judgment for you, we should remand because there's a dispute about which members of the class were damaged and maybe some that weren't even damaged overall because the government stepping in here increases the likelihood that folks are going to get paid.

[00:20:54] Speaker 02:
From your perspective, what if anything would be wrong with an outcome where we send it back for those damages findings, and you have to show that whatever value the government created by saving the fund, because now I think it's got 30 years of life on it, is somehow lesser than what you lost?

[00:21:18] Speaker 04:
Uh, for both the named plaintiffs and the 700 widows who got absolutely nothing, lost their husbands and the pension.

[00:21:25] Speaker 04:
That would be a wonderful resolution, your honor.

[00:21:30] Speaker 02:
And is there any authority that says this relative benefits doctrine, which the government refers to on those two pages of the red brief?

[00:21:38] Speaker 02:
Is there anything that says for a per se takings, the court cannot consider the relative benefits created by you?

[00:21:46] Speaker 02:
Thank you.

[00:21:46] Speaker 04:
Horn suggests, and Horn, that's the Raisins case, that you don't look at offsetting benefits.

[00:21:53] Speaker 04:
I want to acknowledge there are cases saying, yes, you look at them, even in the per se.

[00:21:58] Speaker 04:
This court has in the past.

[00:21:59] Speaker 01:
The Raisins case wasn't, they didn't.

[00:22:01] Speaker 01:
give them offsetting reasons.

[00:22:03] Speaker 01:
There were other benefits to the program in terms of the structure.

[00:22:08] Speaker 01:
I mean, you certainly have to consider what the value was under A&D of what was taken.

[00:22:14] Speaker 04:
But A&D was not a per se case, which goes to Judge Stark's case.

[00:22:18] Speaker 04:
In Horne, the court expressly rejected the premise.

[00:22:20] Speaker 04:
In your theory, it would have been a per se case.

[00:22:24] Speaker 04:
It would be a per se taking.

[00:22:25] Speaker 04:
Horne was a per se taking.

[00:22:27] Speaker 02:
And Judge Stark, to your- In a regulatory takings analysis,

[00:22:31] Speaker 02:
You can look at the offsets.

[00:22:47] Speaker 02:
Do you think there is law that would say I could not remand to the court of federal claims and say it's a per se taking, but you do have to consider the relative benefits?

[00:22:58] Speaker 04:
Horn would be the best case to cite, Your Honor.

[00:22:59] Speaker 04:
And almost an identical argument was rejected there that the government is making.

[00:23:03] Speaker 04:
The idea, and this goes to your point, Judge Dyke, it wasn't just these vague benefits.

[00:23:07] Speaker 04:
The whole idea is give us a big cut of your raisins, and then your prices will be higher, and you benefit.

[00:23:13] Speaker 04:
And the court said, with the analogy we used in our briefing, is it's like the government taking your car and saying, you're so lucky you don't have to pay for insurance or for repairs.

[00:23:23] Speaker 04:
And the court in Horn basically said, nah, we're not buying that.

[00:23:26] Speaker 01:
OK, I think we're out of time.

[00:23:28] Speaker 01:
Thank you.

[00:23:28] Speaker 01:
We'll give you two minutes.

[00:23:36] Speaker 01:
Mr. Wong?

[00:23:50] Speaker 03:
May it please the court.

[00:23:53] Speaker 03:
We do believe, to Your Honor Judge Jen's question, that it is relevant here and important to consider the extent to which Congress's actions here were taken to protect participants like these and the nation's multi-employer pension fund system more generally.

[00:24:07] Speaker 03:
This is not a directed action, but rather an attempt to shore up a system that was in deep trouble.

[00:24:12] Speaker 03:
It doesn't sound in taking its jurisprudence, partly for that reason and for a host of others as well.

[00:24:21] Speaker 02:
beyond which the government can't go under that reasoning.

[00:24:25] Speaker 02:
It seems like there is no line in, for example, the way the blue brief puts it.

[00:24:31] Speaker 02:
I'm sure you've seen these analogies.

[00:24:34] Speaker 02:
The Court of Federal Claims opinion, which you're endorsing on this point, would empower the government to transfer at its will to another party the rights of up to 50% of any retirees vested pensions.

[00:24:46] Speaker 02:
Do you deny that your position would allow the government to do that?

[00:24:52] Speaker 03:
Yes, we do, Your Honor.

[00:24:54] Speaker 03:
Yes, we do deny that.

[00:24:55] Speaker 03:
I apologize.

[00:24:57] Speaker 03:
Yes, we deny that.

[00:24:58] Speaker 03:
And the reason is that what I've just stated is an ultimate conclusion.

[00:25:01] Speaker 03:
But there are a series of analytical steps that we take to get there.

[00:25:04] Speaker 03:
And at each step, we believe that the Palin's arguments fall short.

[00:25:08] Speaker 03:
So we assert there's no property right here.

[00:25:10] Speaker 03:
And the reason why there's no property right is based on the specific structure of ERISA and the Internal Revenue Code as relates to multi-employer pension plans.

[00:25:19] Speaker 02:
And the fact that these... But if you're right that there is no property right here, then the government can step in and redirect 50% of their non-property right invested pension, correct?

[00:25:33] Speaker 03:
The government can modify an existing regulatory regime, and the bundle of rights that come with Plano's pension plan doesn't include... They have a contract right here, don't they?

[00:25:45] Speaker 03:
It is akin to a contract, right?

[00:25:47] Speaker 03:
It's a different body of law, but it's functionally the same.

[00:25:50] Speaker 01:
Under our cases, that's a form of property.

[00:25:52] Speaker 01:
And the question is whether that modifications to that third party contract right is going to be analyzed under the regulatory takings jurisprudence, which is where it's been analyzed for like 100 years, or whether it's going to be considered to be a per se taker.

[00:26:11] Speaker 01:
For the moment, that seems to be the critical question here.

[00:26:14] Speaker 01:
And I'm not aware of any cases where the modification of a contract right, per se, without an interest in the underlying property has been held to be a per se taking.

[00:26:27] Speaker 01:
It may be a regulatory taking, but it's not a per se taking.

[00:26:31] Speaker 01:
Isn't that the correct analysis?

[00:26:35] Speaker 03:
Yes, your honor.

[00:26:36] Speaker 03:
So if the court is inclined to find a property interest, and I can come back to that, but if the court is inclined to find a property interest, we agree, first of all, that Louisville Bank does not touch upon this sort of situation, because the property there was a secured interest in real property.

[00:26:49] Speaker 03:
And change to the bankruptcy code impaired the bank's ability to

[00:26:55] Speaker 03:
get its security in the event of bank default.

[00:26:58] Speaker 03:
And so that's very different from this case, where we're talking about a right that is based in a pension plan that is akin to a contract and as the Supreme Court held in Connolly and Concrete Pipe.

[00:27:09] Speaker 03:
that sounds in the court's regulatory takings jurisprudence.

[00:27:13] Speaker 03:
And for reasons we've explained, this is not a regulatory taking.

[00:27:17] Speaker 03:
The financial loss was not serious enough under this court's.

[00:27:19] Speaker 00:
The facts here are at least somewhat different from Connolly and Concrete Pipe in that what we have here is this specific identifiable interest in a quantified amount of money.

[00:27:38] Speaker 00:
worked for 20, 30 years.

[00:27:39] Speaker 00:
And all along the way, they were earning certain rights to a pension.

[00:27:44] Speaker 00:
And so they were accruing a certain amount.

[00:27:49] Speaker 00:
And then it vested.

[00:27:50] Speaker 00:
And then they retired.

[00:27:53] Speaker 00:
And they vested in that right to get those various payments, a very specific number.

[00:28:00] Speaker 00:
And that wasn't Connolly.

[00:28:03] Speaker 00:
I agree.

[00:28:05] Speaker 00:
pension funds more broadly speaking but here the nature of what we're looking at as the property interest could be understood as being something different than what the employers

[00:28:17] Speaker 00:
were dealing with when they had to pay some penalty to withdraw.

[00:28:21] Speaker 00:
So it comes down to really understanding what is the nature of this property interest.

[00:28:28] Speaker 00:
Just accept the idea that for purposes of this argument, the court thinks there's a property interest of some kind here, and we're trying to understand the nature of it.

[00:28:41] Speaker 00:
Why would it be wrong to think of this as a vested right into a sum certain for these people?

[00:28:50] Speaker 03:
Your Honor, I believe that Connolly and Concrete Pipe are not so different in the sense that the plaintiffs there were asserting that they were protected by contracts that they had with the pension plans that kept them from being required to pay in, I believe, withdrawal liability.

[00:29:06] Speaker 03:
So the nature of the right that they were claiming sounded in contract, just as it does here.

[00:29:11] Speaker 03:
Now, to an important point here,

[00:29:15] Speaker 03:
The plaintiffs, the appellants here have no right in the trust estate.

[00:29:18] Speaker 03:
I think that's established at this point.

[00:29:19] Speaker 03:
They only are paid what is provided by the plan.

[00:29:23] Speaker 03:
They have no access to that amount of money other than as the plan provides.

[00:29:29] Speaker 00:
So speaking on a broader level, and I'm speaking on a more granular level for these particular plaintiffs and what they believe they earned and what they believe that they were promised is particularly some certain.

[00:29:42] Speaker 00:
And I'd like you to try to focus

[00:29:44] Speaker 00:
on that a little bit and obviously your position as well there's still something wrong with that understanding of the property interest there's maybe strings attached to it or something like that but I need you to speak to that sure not more broadly about well these were all contracts so anything goes under Connolly I mean speak a little more specific to the facts at hand please sure so the specific

[00:30:09] Speaker 03:
amount of payments that are provided under the plan document after you've reached certain accrual points.

[00:30:16] Speaker 03:
Those are subject to amendment by the plan, by the fund.

[00:30:19] Speaker 03:
And so what these appellants were to receive was not ironclad.

[00:30:25] Speaker 03:
It was as subject to the fund, as the fund's plan document, which of course is based on ERISA, and ERISA provides a lot of protections to participants.

[00:30:35] Speaker 03:
But there were always...

[00:30:38] Speaker 03:
wrote the anti-cutback provision, which had exceptions before the passage of the MPRA.

[00:30:42] Speaker 03:
And now the MPRA adds an exception to the anti-cutback rule for failing plans that want to save themselves.

[00:30:49] Speaker 03:
But to your question, it's never been the case that there was a specific sum amount to which they were always entitled.

[00:30:56] Speaker 03:
Yes, the plan document inarguably calculates or provides formulas for calculation of what a given person will be entitled to.

[00:31:05] Speaker 03:
But that is changeable.

[00:31:07] Speaker 03:
And the fund can change.

[00:31:09] Speaker 03:
And any changes to the plan must be pursuant to ERISA and the Internal Revenue Code if the fund wants to maintain its tax return status.

[00:31:18] Speaker 03:
there can be changes.

[00:31:19] Speaker 03:
And so we agree that vesting is important.

[00:31:23] Speaker 03:
Clearly, that's an important right.

[00:31:24] Speaker 03:
It is an ability to claim whatever you do.

[00:31:28] Speaker 00:
Why is it permissible for this 2014 law to impact existing pension holders?

[00:31:42] Speaker 03:
So I think to answer that question, we look to the regulatory takings test.

[00:31:46] Speaker 03:
We ask about the extent of the financial harm, the reasonable and best-impact expectations, and the character of the government action.

[00:31:54] Speaker 03:
And we run it through that paradigm, and we submit that there's no way, considering those pencentral factors, to conclude that this amounts to regulatory taking.

[00:32:05] Speaker 03:
So I think really the case of this appeal really focuses in some ways on per se versus regulatory.

[00:32:11] Speaker 03:
And the reason why it's not a per se taking is, again, it's not like Brown.

[00:32:15] Speaker 03:
there hasn't been an appropriation of money owned by these individuals.

[00:32:19] Speaker 03:
But rather, there's been a frustration of what they expected to occur under an existing pension plan akin to a contract.

[00:32:26] Speaker 03:
And using the regulatory takings test, which Your Honor Joyce Dyke, I think, has suggested, has been the usual course, you can't conclude that there's been a taking here, particularly due to the lack of financial impact.

[00:32:40] Speaker 03:
These individuals, of course, have been repaid.

[00:32:42] Speaker 03:
But even without that repayment,

[00:32:44] Speaker 03:
we see that it was a 29% reduction.

[00:32:47] Speaker 03:
And assuming it was 29%, and there are problems with that assumption, that's not enough.

[00:32:51] Speaker 00:
You're doing a regulatory taking analysis right now.

[00:32:53] Speaker 00:
I am, Your Honor, yes.

[00:32:55] Speaker 00:
But I want to keep that to the side while we're still asking the first question, which is, why isn't this a per se taking?

[00:33:04] Speaker 03:
Perhaps misunderstood your question, Your Honor.

[00:33:06] Speaker 03:
So it's not a per se taking because all of the per se takings cases

[00:33:13] Speaker 03:
Focus on some piece of property that is owned by the takings plaintiff that has been appropriated by the government in some way and obviously a Taking a real property is sort of paradigmatic, but it can also be as we see a horn raisins personal property things like that Brown It was money

[00:33:32] Speaker 03:
There's only if the plaintiff's owned was taken.

[00:33:35] Speaker 03:
Here, the plaintiff's never owned anything other than this trade of promises.

[00:33:39] Speaker 02:
Which case says it has to be ownership as opposed to a contractual right in order to apply a per se takings test?

[00:33:46] Speaker 03:
Well, I think it needs to be appropriation of something.

[00:33:50] Speaker 02:
Why can't it be appropriation of a contract right?

[00:33:53] Speaker 02:
What case says it can't be that?

[00:33:56] Speaker 03:
I don't believe that I don't have a case that says precisely that.

[00:34:01] Speaker 03:
But I don't think it's possible to read Connelly and Concrete Pipe otherwise.

[00:34:05] Speaker 03:
I think those cases in argument, well, those cases stand for the proposition that where there's been an impairment in a commercial relationship, like a contract right, or here a pension plan.

[00:34:15] Speaker 02:
What can it be that even in a multi-employer pension plan, when we look from the employer side of things, an employer that wants to withdraw, has to pay a penalty,

[00:34:26] Speaker 02:
but can use any source of funds that it has access to to pay that penalty.

[00:34:31] Speaker 02:
OK, that's a regulatory taking.

[00:34:32] Speaker 02:
When we look at the same plan from the perspective of the employee who has this contractual interest to payments calculated according to the plan, for that, it's a per se test.

[00:34:47] Speaker 03:
Because, Your Honor, in both instances, the takings of plaintiffs are saying, I am protected from what the government has done by my existing exchange of promises with a third party.

[00:34:58] Speaker 02:
Are you saying the government's position is a contractual right, no matter how specific, no matter how vested, no matter how important to them, can never be a basis for a per se taking test?

[00:35:13] Speaker 03:
I am saying that I'm not aware of a case in which this court or the Supreme Court has held that that action would amount to a per se take.

[00:35:22] Speaker 03:
I'm sorry?

[00:35:22] Speaker 02:
You've also acknowledged, I think, there's no case that says that we couldn't so hold.

[00:35:28] Speaker 01:
Right.

[00:35:29] Speaker 01:
Well, I mean, Concrete Pipe says specifically contracts may create rights and property, but when the contracts deal with a subject matter that deals within the control of Congress, they have a congenital infirmity.

[00:35:42] Speaker 01:
Parties cannot remove their transactions from the reach of dominant constitutional power by making contracts about them.

[00:35:48] Speaker 01:
I mean, there's language in lots of cases saying that if it's a contract situation, it's not outside congressional power to deal with it.

[00:35:58] Speaker 01:
And it's not necessarily a taking.

[00:36:01] Speaker 01:
It's only a taking if it's a regulatory taking.

[00:36:04] Speaker 03:
yes you're right I did not have that language the top of my mind but that's right concrete pipe does say that and I think it goes to the nature of Congress's role here in balancing the benefits and burdens of economic life realizing that that's usually touched upon in the regulatory takings analysis but also considering

[00:36:22] Speaker 03:
that this is an area that Congress is regulating and it doesn't touch upon the sort of property interest that we traditionally see as the subject of taking, which for example might be based in traditional state law conceptions of property.

[00:36:38] Speaker 00:
What if the 2014 law was written differently and it went along the lines of

[00:36:45] Speaker 00:
For any fund, multi-employer pension fund, that is in real financial distress and is going to go insolvent within the next decade, we hereby call for those funds to reduce pension payments by 30%.

[00:37:11] Speaker 00:
Any and all payments that have been sent out in the past 365 days, the funds need to get 30% of those payments back.

[00:37:24] Speaker 03:
Right.

[00:37:24] Speaker 03:
So if the law had mandated reductions in repayment rather than making them voluntary, is that?

[00:37:30] Speaker 00:
That's one part.

[00:37:31] Speaker 00:
And then the second part is doing a clawback.

[00:37:35] Speaker 03:
Right.

[00:37:37] Speaker 00:
Because of the huge financial distress that the multi-employer pension fund is in.

[00:37:43] Speaker 03:
Right.

[00:37:45] Speaker 03:
Well, that would potentially raise what I'll call A&E questions.

[00:37:49] Speaker 03:
I think at that point, perhaps there's more of a coercion argument because it's being mandated.

[00:37:56] Speaker 03:
But more precisely to your question, I think our position would still be that this is a question of whether or not that is an act by Congress that constitutes a regulatory taking rather than a per se taking.

[00:38:13] Speaker 03:
Well, I should say.

[00:38:15] Speaker 03:
I apologize.

[00:38:16] Speaker 03:
It's a two-part question.

[00:38:16] Speaker 03:
If the money has already been paid to plaintiffs, I think that that's more like Brown.

[00:38:21] Speaker 03:
That is more like a situation where you've come into ownership through contractual performance, and you're being required to repay some amount.

[00:38:29] Speaker 03:
So I think that that would be a more problematic situation than the looking forward reduction.

[00:38:36] Speaker 00:
When the money hits the pension holder's bank account, then it's untouchable.

[00:38:40] Speaker 03:
That for as long as it's in the fund and there's an obligation to pay it out Anything goes I guess Well, it's not that anything goes it's that the pension plan provides for future painting goes But that it's subject to a regulatory takings amount right and it's a question of the funds future expected

[00:39:02] Speaker 03:
performance rather than, OK, this take his plaintiff owns this money.

[00:39:06] Speaker 03:
And Brown, I think, tells us that if you take money that a plaintiff owes, then that's person taking.

[00:39:12] Speaker 03:
It's different when you're talking about some sort of expected future performance under a contract or a pension plan.

[00:39:21] Speaker 02:
That's one quick question.

[00:39:24] Speaker 02:
The appellants emphasize that what happened here is unprecedented, that MPRA allowed

[00:39:31] Speaker 02:
you know, taking like a thousand dollars a month from vested pensions that were already in payment status.

[00:39:37] Speaker 02:
Is that disputed or do you agree that that is unprecedented?

[00:39:40] Speaker 03:
So it's not unprecedented.

[00:39:43] Speaker 03:
There are other intermediate measures that funds can take to avoid insolvency.

[00:39:47] Speaker 03:
But the

[00:39:49] Speaker 03:
Our primary point on that is that if the fund fails, then these participants' benefits are cut to the level of the PBGC guarantee, or potentially, which is, as we pointed out in the briefs, a dramatic reduction, 81% for one of these appellants.

[00:40:03] Speaker 03:
And so that is always a danger that is there.

[00:40:06] Speaker 03:
And that is, inarguably, part of the ERISA and IRC regulatory scheme.

[00:40:12] Speaker 03:
the benefit that participants see from that is that the pension benefit insurance fund protects them and at least gives them the PBGC guarantee.

[00:40:22] Speaker 03:
So it's not unprecedented because there's always the backdrop of fund insolvency in addition to the intermediate sort of exceptions to the anti-cutback rule.

[00:40:32] Speaker 03:
If there are no further questions, we respectfully ask that you refer.

[00:40:39] Speaker 01:
Mr. Madison, you've got two minutes.

[00:40:41] Speaker 04:
Well, I don't care you used it up You're lucky to have two minutes I appreciate the time My friend said that this was not unprecedented the 36 30b6 deponent for Treasury stated on appendix 5559 quote reducing benefits that are in pay status and

[00:41:05] Speaker 04:
something that has not happened before it's unprecedented my friend said that quote obviously they've been repaid the name plaintiffs have more than 1,100 people haven't including 700 widows they lost a lot they didn't get it back the idea that it's all been repaid is just wrong my friend said that he was unable to cite specific cases we for two propositions one

[00:41:28] Speaker 04:
that ownership is required, and two, that a per se taking can't arise out of a contract.

[00:41:33] Speaker 04:
We cited seven for each, including three that have both.

[00:41:37] Speaker 04:
Casitas had both.

[00:41:39] Speaker 04:
They didn't own the water, the plaintiffs, and it arose out of a contract, and yet the per se taking applied.

[00:41:45] Speaker 04:
Webbs, money was placed in Interpleter.

[00:41:47] Speaker 04:
There was a fight over who owned it.

[00:41:50] Speaker 04:
The interest itself arose under a contract.

[00:41:52] Speaker 04:
So there was a contract there.

[00:41:54] Speaker 04:
Did they own the money?

[00:41:55] Speaker 04:
That was still in dispute.

[00:41:57] Speaker 04:
That was still being battled over, and the money arose out of a contract, and yet the per se taking test applied.

[00:42:03] Speaker 04:
Derby development, that's a little bit different, but Your Honor dissented on the authorization question, Judge Dyke.

[00:42:10] Speaker 04:
But didn't dissent, as I understand it, on the question of whether the underlying action would constitute a per se taking.

[00:42:17] Speaker 04:
That arose out of a lease agreement.

[00:42:19] Speaker 04:
There are numerous other lease agreements where there's no ownership.

[00:42:22] Speaker 04:
General Motors, for instance, where the government appropriated property under a lease.

[00:42:28] Speaker 04:
There was no ownership and it arose under a contract.

[00:42:30] Speaker 04:
So between General Motors, Casitas, and Webbs, you have three cases that individually, just any of those, shoot down both of the government's alternative theory to the CFC's theory, which we've shot down in our brief, and the government doesn't even try to defend.

[00:42:48] Speaker 01:
OK.

[00:42:48] Speaker 01:
Thank you.

[00:42:48] Speaker 01:
Thank you, Your Honor.