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Our next case is Call Henry Inc.

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versus United States 16-17-32.

[00:00:24] Speaker 01:
Mr. Koji?

[00:00:25] Speaker 01:
Yes, Your Honor.

[00:00:34] Speaker 01:
You reserve two minutes for rebuttal, is that correct?

[00:00:37] Speaker 02:
That is correct.

[00:00:39] Speaker 01:
Did I pronounce your name correctly?

[00:00:40] Speaker 02:
Koji, yes, sir.

[00:00:41] Speaker 01:
All right, you may proceed.

[00:00:43] Speaker 02:
Your Honor, please, the court, my name is Brian Koji.

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I'm here on behalf of Call Henry, Incorporated.

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The issue in this case is whether the government was required by the Contractual Price Adjustment Clause to compensate Call Henry for increased costs that it incurred in providing mandated pension benefits, even though the increased costs took the form of withdrawal liability in this case.

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We submit that the Price Adjustment Clause does require reimbursement of the withdrawal liability and that the court federal claims erred by dismissing and focusing on whether or not

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The expense was, the withdrawal liability was statutorily required.

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Did the NASA contract require you to negotiate with the Teamsters contract or to join their board, the pension plan?

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The NASA requirement solicitation incorporated the fringe benefits and wages pursuant to the Service Contract Act.

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We were required to recognize the Teamsters.

[00:01:43] Speaker 01:
But all NASA did was require you to pay

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wages at a certain level.

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Wages and fringe benefits, including pension benefits.

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We had to provide... You didn't require anything other than that.

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Any other fringe benefits in the contract, severance, vacation pay, holiday pay, but in this issue, obviously, it's only pension benefits that are issued.

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They didn't require that you have pension benefits through a particular group.

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For example, the team... No, you're absolutely correct, Your Honor.

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The Service Contract Act provides that you have to provide a commensurate level of pension benefits that the predecessor contractor provided.

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In this particular case, Carl Henry chose to do that by agreeing to the same Teamsters plan that the predecessor was in.

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But you didn't have to do that.

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They could have selected another plan and provided the same level of benefits.

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So these different plans, did they involve different costs?

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Did they involve different costs to manage?

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Under the Regulations of Service Contract Act, if Call Henry wanted to provide a different pension benefit, it had to provide a commensurate level as per its cost.

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They could have provided a cash differential, but it wouldn't have.

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But do the costs of a plan to Call Henry, do they increase or decrease according to whichever plan you choose?

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The cost that Call Henry would have been required to enter to a plan with similar costs at the time.

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projecting into the future, different plans could have different costs.

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They could have lower, they could have had a greater cost in this one.

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The fact in this case is that's the plan that they chose to get into, and that's the plan that is incorporated with each anniversary year as the new wage determination.

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So by the time you get past the three-year base period, the Call Henry plan with the Teamsters one is the wage determination.

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They chose to get into that.

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Just as in the health insurance case, we cite to the Lear-Sigler case,

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which this court said, if you have health insurance and the cost of the health insurance goes up, price adjustment is appropriate.

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In that particular case, contractor.

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In this case, when the cost of the pension benefits went up because the fund recognized that it was underfunded and charged you more to make up for that, the government compensated you for that, didn't they?

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They did partially.

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They compensated us for the increased hourly contribution.

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The difference between hourly contributions and withdrawal of liability is one of timing.

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If Call Henry had not been forced, through no fault zone out of the plan, it would continue to make increased hourly contributions, and the government would have continued to reimburse that.

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Had it cured the deficiency, we would have received the price adjustments for the full underfunded amount.

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So then after you left Teamsters, you went to a different organization and got those fringe benefits and paid for those, and had those with the different entity increase, then the government would have paid for that, right?

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I presume.

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It's the hourly increase.

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I understand that once you left Teamsters, you had to go to another organization in order to have those fringe benefits, or no?

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Because you were kicked out of the country.

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Under the labor law, when the Teamsters were decertified,

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the employees voluntarily elected to bring in the IAM.

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At that particular case, what occurred in this case is that the IAM and Call Henry now had an obligation to negotiate a new pension plan.

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It never reached the end of that negotiation, never entered into the IAM, of course, wanting them to join their multi-employment pension plan in the hiatus period under the National Labor Relations Act.

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Call Henry was required to continue to provide the pension benefits of the old plan.

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So they continue to make those contributions while also negotiating with the IM.

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Had we negotiated and gotten into another plan with the IM, which never occurred in this case, but had we done so, then yes, we would then be reimbursed for whatever plan the IM.

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And that pension plan would have had to have equivalent benefits cost as a teamsters plan.

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But the withdrawal liability, is there a requirement on asset to reimburse that, if he hadn't paid that?

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In our position, there absolutely is a requirement for them to reimburse it.

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There is a requirement for them to reimburse us for the cost of providing the pension benefits.

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And that is by statute.

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The definition of statute of withdrawal liability is that is Paul Henry's allocable share of already vested accrued benefits.

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So it's no different than the hourly contribution against one of time.

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We would have continued to pay our share through the hourly contributions the employees elected to

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kick out the teamsters, bring in the IAM, and that requires us to withdraw from the plan.

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We now have that accelerated so that all those hourly contributions, which were reimbursed, now are due right now through withdrawal liability.

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We think the Court of Federal Claims erred by looking at it from the perspective of, is the withdrawal liability statutorily required?

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Is that a fringe benefit?

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We don't disagree that the withdrawal liability is not a fringe benefit.

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Employees are not getting any of that money.

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Just as they don't get health insurance premiums that the employer is paying, the fringe benefit in this case is the pension.

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We had an obligation once we chose pursuant to the Service Contract Act to get into that Teamsters Plan way back 2003, we had an obligation to provide those pension benefits.

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The government's obligation was to provide us for any increases in costs as a result of providing those benefits.

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The withdrawal liabilities, same as the hourly contributions,

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are increasing costs.

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The hourly contributions are statutory as well.

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I think when you look at the treatment, the Court of Federal Claims logic falls apart, because they looked at it as it's statutory to have withdrawal liability.

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And that's true.

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You can be sued if you don't pay your withdrawal liability.

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That's what occurred in this case.

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But if Call Henry, once they've entered into that union contract, there is a section, section 29 USC 1145, that says,

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The hourly contributions are now statutory.

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We can be sued if we don't do our hourly contributions.

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Of course, Carl Henry did all of their hourly contributions, was not sued for that, and the government reimbursed for that.

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So in our view, it's not unlike the Lear-Siegler case, where you have a contractor elected, a defined benefit plan, in this case, health insurance.

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They could have elected any plan on the market, as long as it was not lesser than the one that the predecessor contractor

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What if you had lost the government contract and then entered into doing business with a private company?

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And then at that point, the union was decertified.

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I mean, who would have had to pay the withdrawal cost then?

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So make sure I understand the question.

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Had we went through, there was no withdrawal liability.

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We're out of the government contract, and then we have to withdraw.

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And there's withdrawal liability because it's underfunded.

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Well, in our view, that's still a price adjustment clause.

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It's similar to the severance pay cases.

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That's exactly what happens.

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So even 20 years down the road, if somehow you change pension plans, you think the government is liable for withdrawal costs?

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If it's for accrued vested benefits, they're accrued certainly during the time of the contract.

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Now, if they continue in on private business and they're accruing additional benefits, I think we will not

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be here saying you're on the hook for that.

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But you can be on the hook for that allocable share that accrued during the term of the government contract.

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In this particular case, in the severance benefits cases, illustrate that union contract is entered into.

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They don't know if they're going to have severance benefits because it's

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It's determined at the end of the contract when we decide, employees, do they get picked up by the new contractor or not?

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If they get picked up by the new contractor, a typical union contract says you don't have to pay severance benefits.

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Once they're picked up by the new, if they're not picked up on a new contractor, though, then severance benefits kicked in.

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The contract's over.

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And the Arktek case, he's come from the board, Contract Appeals of the Armed Services, BCA.

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And the government contract and resources case, both relying on the Lyra Sigler case that

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Yes, that's associated with the terms of the government contract.

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It was mandated by the Service Contract Act.

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Even though you can't tell if you're going to have that liability until the end of the government contract, government's on the hook for it.

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That's the quid pro quo.

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Here what we're doing, Call Henry, is simply providing pension benefits that are required by the Service Contract Act.

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The flip side of the coin is we are not, when we're bidding on this, we're told the Teamsters contract, that's where you look.

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for your wages and your fringe benefits.

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We look and we see there's pension benefits.

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We need to decide, do we get in that plan or do a commensurate plan?

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We choose that plan.

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It's now the union contract is the wage determination going forward with each anniversary year.

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We are not allowed by the price adjustment clause to factor in any kind of contingencies in case the plan goes south, things of that nature.

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We would not do that.

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We're not allowed to do that.

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Is this a foreseeable contingency?

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I don't even know if that matters.

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But I understand the policy that you're explaining here for why it is that

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the contracts operate that way.

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But it seems like it's more remote withdrawal liability as opposed to increase in price.

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And the question, as the court below said, the withdrawal liability wasn't incurred as a cost of complying with the CBAs.

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Instead, it was incurred because of the withdrawal from the Teamsters and then the statutory provision providing that there's this withdrawal liability when you do that.

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Whether foreseeable or not, in our view, is not a relevant issue.

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It's not imposed by the Service Contract Act or the Price Adjustment Clause.

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But it is foreseeable.

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It's not foreseeable in that you can calculate a specific amount, any more than the severance is.

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But any time you enter into a multi-employer pension plan, you know there's a possibility if it's not funded, stock market crashes.

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It's all time.

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Had Carl Henry withdrawn before 2006, when the stock market's booming, there is no withdrawal liability.

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But unfortunately here, the union was decertified in the midst of the downturn, which is what kills their pension plan.

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Carl Henry, unable to price that contingency into it, has done nothing but provide the benefits that Service Contract Act requires them to do.

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It cannot price into contingencies.

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And now it's left holding the bag for carrying out the purposes of both Service Contract Act and Price Act.

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That's exactly what the price adjustment clause is for.

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These kinds of benefits that I think are foreseeable, even if unforeseeable, caused us to increase prices so that we can pay the benefits that the government requires us to pay.

[00:12:46] Speaker 01:
Aren't those circumstances different or apart from any change in the wage determination?

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This scenario that the downturn and now you're in a different, you talk about the timing and all, that has

[00:13:05] Speaker 01:
It seems to me that that doesn't have anything to do with the wage determination obligation under the NASA contract.

[00:13:11] Speaker 01:
It just tells you you need to pay at a certain level.

[00:13:17] Speaker 02:
Well, respectfully, we disagree.

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I think this is exactly what the price adjustment policy is.

[00:13:21] Speaker 01:
Well, I guess I'm asking you to respond to that.

[00:13:23] Speaker 02:
I'm not staying on something.

[00:13:24] Speaker 02:
No, I understand.

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The health insurance in Lear-Siegler is another example of that.

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What happens with the health insurance, same as with pension plans, is you have to have periodic actuaries that try and ballpark what it's going to take to provide that benefit.

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Sometimes they're close.

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Sometimes they're wrong.

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Sometimes, because of investment experience, they're dramatically wrong to where you have to increase funding.

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So the wage determination is, every annual anniversary year here, wage determination is incorporating the pension, the pension benefits.

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Then once you've been providing the pension benefits pursuant to that wage termination, which is just the union contract for your benefits... That's all that the NASA contract addresses, right?

[00:14:09] Speaker 02:
It only... It requires... I'm sorry?

[00:14:12] Speaker 01:
Go ahead.

[00:14:12] Speaker 01:
It only ties you into the wage... It creates an obligation with respect, for NASA's part, with respect to wage determinations.

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But the wage determination under Section 4C of the Service Contract Act, that is...

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Call Henry's Teamster contract, the fringe benefits, and the wage provisions.

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That is the wage determination.

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So here, once we decided we're going to get into this particular pension plan every time there is a wage determined, every annual anniversary year, they're reincorporating the pension benefits in Call Henry's Teamster's contract.

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So here, there's no question in this case that that contract requires Call Henry to pay the pension benefits in the Teamster's plan.

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All we're saying here is that since the union contract, which is the wage determination, requires us to pay these pension benefits, price adjustment has to pay for the cost of it, regardless of what you call it, the hourly contribution or the withdrawal liability.

[00:15:10] Speaker 02:
Here, the Court of Federal Claims focused on the fact that it's statutorily required.

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But looking at the language in the Service Contract Act, it says,

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The fringe benefits shall include medical or hospital care, pensions on retirement or death, compensation for injuries, illness, vacations, holidays, that sort of thing.

[00:15:36] Speaker 02:
The provision that they're citing says, and other bona fide fringe benefits not otherwise required by federal, state, and local law.

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The focus is on the benefits, not the cost of the benefits.

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The benefits by that section says the pension benefits.

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So we had an obligation under the Service Contract Act to provide these pension benefits.

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Multi-floor Pension Plan Protection Amendments Act does not require this pension.

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It only governs and regulates us once you make that decision.

[00:16:02] Speaker 01:
It appears I let you run.

[00:16:03] Speaker 01:
I'm sorry.

[00:16:04] Speaker 01:
That's OK.

[00:16:05] Speaker 01:
We'll put you back in two minutes.

[00:16:06] Speaker 02:
Thank you.

[00:16:07] Speaker 02:
I appreciate it.

[00:16:09] Speaker 01:
Mr. Norway.

[00:16:10] Speaker 03:
May I please support?

[00:16:11] Speaker 03:
This case really boils down to what is provided for.

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in the collective bargaining agreement that's applied.

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The terms of the collective bargaining agreement are what are in the wage determination.

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And this goes back to the Aleman Food Services case that's cited in the brief, 994 Fed sub second, 819.

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And the determinative question in that case, just like this case,

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what is provided for in the collective bargaining agreement.

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And in Article 23 of the collective bargaining agreement here, the only legally enforceable obligation that Paul Henry entered into was to pay fixed contributions to a pension plan.

[00:16:58] Speaker 03:
That is the scope of fringe benefits that are required under the Service Contract Act.

[00:17:05] Speaker 03:
And you can go through the Department of Labor regulations, 29 CFR Part IV in 4.163 subparagraph I. That explains that the successor's obligations are governed by the terms of the collective bargaining agreement.

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Going back further on, 4.171A.

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the bona fide fringe benefits are the legally enforceable obligations in the written collective bargaining agreement.

[00:17:35] Speaker 03:
It's one of the criteria.

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So I find this confusing.

[00:17:39] Speaker 04:
If the collective bargaining agreement had a provision in it that said if a company chooses to not negotiate with the teamsters anymore or the union decertifies, employees decertify from the union, they're liable for these

[00:17:58] Speaker 04:
contribution costs, the make-up costs, would it then be allowable under the cost clause?

[00:18:05] Speaker 04:
I mean, if it was, there's a long way of saying, if what they're asking for was mandated by the collective bargaining agreement, not a federal statute, would the government be required to pay it under the cost reimbursement clause?

[00:18:19] Speaker 03:
Perhaps.

[00:18:20] Speaker 03:
And I'm wavering on that, Your Honor, because it's in the collective bargaining agreement.

[00:18:24] Speaker 03:
Once it is in the collective bargaining agreement under the Service Contract Act, if it is at substantial variance with the fringe benefits that are provided, then the agency can challenge that collective bargaining agreement.

[00:18:39] Speaker 03:
So the first step is getting it in the collective bargaining agreement.

[00:18:42] Speaker 03:
And then there are provisions in the SCA which will allow, for instance, if it's not an armed claims transaction.

[00:18:50] Speaker 03:
Sure.

[00:18:50] Speaker 04:
But I mean, I don't see how you'd have any legitimate basis for challenging

[00:18:54] Speaker 04:
that here because it's an obligation imposed by the federal government.

[00:18:58] Speaker 04:
It's certainly not they're giving benefits that are not commensurate with the rest of workers in the country because every pension plan is required to do this.

[00:19:07] Speaker 03:
And I think the basis of your question is, Your Honor, is if it's in the collective bargaining agreement, that's the fringe benefit.

[00:19:13] Speaker 03:
And that is our position here.

[00:19:15] Speaker 03:
If it's in the collective bargaining agreement, required by the collective bargaining agreement, it would be

[00:19:20] Speaker 03:
Part of the fringe benefits provided that are the minimum requirements under the Service Contract Act.

[00:19:26] Speaker 04:
Can I ask you a factual question?

[00:19:27] Speaker 04:
Because I don't think the records really developed on this because it wasn't really agreed this way.

[00:19:31] Speaker 04:
Is there any question of whether all of what they're asking for is eligible to the employees that work for the government during a time period when all these pension issues arose?

[00:19:45] Speaker 03:
So that is

[00:19:47] Speaker 03:
Much more complicated question, Your Honor.

[00:19:50] Speaker 03:
The employees for Call Henry were all at this facility.

[00:19:54] Speaker 03:
So those employees were definitely under this contract.

[00:19:57] Speaker 03:
However, how a withdrawal liability is calculated is much more complicated.

[00:20:04] Speaker 03:
There are actually four statutory methods.

[00:20:06] Speaker 03:
Three of them are based on the pro rata share of the contributions that were being paid at a particular snapshot in time.

[00:20:16] Speaker 03:
That can impact how much a particular employer that withdraws would actually pay for the unallocated vested benefits of its employees when it leaves.

[00:20:30] Speaker 03:
So you could have a situation where, for instance, you have one employer, not the government contractor, who is actually paying 90% of the contributions to a fund.

[00:20:41] Speaker 03:
It goes bankrupt.

[00:20:43] Speaker 03:
It does not pay its withdrawal liabilities.

[00:20:46] Speaker 03:
Title IV of ERISA, the pension plan is required to continue paying that level of benefits.

[00:20:53] Speaker 03:
So that employer goes away and then the government contractor several years later withdraws.

[00:21:00] Speaker 03:
That government contractor, even though during many parts of the years it was maybe 1% or 2% of that contribution to its funds, its basis, its withdrawal liability is

[00:21:15] Speaker 03:
can be the pro rata share of the contributions at the time it withdraws, or actually the end of this period.

[00:21:21] Speaker 04:
So it might be forced to make up for other parties that didn't meet up to their obligations.

[00:21:30] Speaker 03:
Yes, Your Honor.

[00:21:31] Speaker 03:
That is exactly the purpose of the withdrawal liability.

[00:21:36] Speaker 04:
So I assume that's your argument about why this isn't part of the normal wages and benefits determination required either at the contract,

[00:21:45] Speaker 04:
it's not necessarily tied to the wages and benefits paid to these employees.

[00:21:50] Speaker 04:
It could be due to wages and benefits paid on private employers with other union employees.

[00:21:59] Speaker 03:
Correct, Your Honor.

[00:22:00] Speaker 03:
And you can see, you can think of hypothetical examples where it becomes very difficult to parse out what work was performed under a government contract and what work was performed under contracts with private parties.

[00:22:13] Speaker 03:
For instance, if it was

[00:22:14] Speaker 03:
supplier for steel that supplies steel for building public bridges and at the same time for building buildings, it can become very difficult to parse out what are those benefits are for which particular contracts.

[00:22:30] Speaker 03:
I did want to point out one thing, Your Honor, when it came to the contributions

[00:22:35] Speaker 03:
And my colleague said that contributions are, it didn't matter that they're contractual obligations.

[00:22:42] Speaker 03:
And in fact, in this area of the law, it does matter.

[00:22:46] Speaker 03:
And the remedies available are different based on the source of the duty to contribute.

[00:22:55] Speaker 03:
And I'll direct Your Honor's attention to the Laborers Health and Welfare Trust versus Advanced Lightweight Concrete.

[00:23:02] Speaker 03:
And this case is not cited in the briefs, Your Honor.

[00:23:05] Speaker 03:
It's 484, United States 539.

[00:23:09] Speaker 03:
And it goes specifically to the factual scenario that my colleague suggested that happened here, where they continued to pay the contributions

[00:23:25] Speaker 03:
after the expiration of the CBA while negotiations for a new CBA were in part.

[00:23:30] Speaker 03:
And that case says that the remedy in Title I of ERISA for the contractual obligation to contribute to a union is provided by USC 291132.

[00:23:45] Speaker 03:
But if the employer should choose not to continue paying those, the remedy is not to go into district court

[00:23:54] Speaker 03:
But they have to go to the National Labor Relations Board.

[00:23:58] Speaker 03:
And so the remedy available to the employer is different based on the source of the obligation.

[00:24:07] Speaker 03:
And that is analogous to what we're asking for here.

[00:24:12] Speaker 03:
If there are no questions, Your Honor, for these and the reasons we present in our brief.

[00:24:17] Speaker 01:
Thank you very much.

[00:24:24] Speaker 01:
We've got two minutes, Mr. Corden.

[00:24:26] Speaker 02:
Thank you, Your Honor.

[00:24:29] Speaker 02:
I'll be brief.

[00:24:30] Speaker 02:
The issue of what is in the union contract, the government has taken a position that all that the union contract provides is an obligation to contribute hourly.

[00:24:42] Speaker 02:
That is incorrect.

[00:24:43] Speaker 02:
In our brief, we cite what it says in the union contracts is the, after providing for the contributions, the agreed payment set forth by the employer

[00:24:52] Speaker 02:
shall be used by the pension fund to provide retirement benefits for eligible employees in accordance with the pension plan of the fund as determined by the trustees of the pension fund.

[00:25:03] Speaker 02:
The employer agrees to become a party to the agreement and declaration of trust established in the Teamsters pension fund and to be bound by all the terms and provisions thereof.

[00:25:12] Speaker 02:
This is standard language in union contract.

[00:25:14] Speaker 02:
What that is saying is we are bound by the trust fund of the Teamsters, which sets forth the schedule of benefits.

[00:25:21] Speaker 02:
This is not simply

[00:25:22] Speaker 02:
We contribute $2 an hour, and that's the sole obligation.

[00:25:26] Speaker 02:
We are contractually obligated to provide these pension benefits.

[00:25:29] Speaker 02:
And this is a factual issue.

[00:25:30] Speaker 02:
We're on a motion to dismiss.

[00:25:32] Speaker 02:
If there's some ambiguity in that language, it should go back to the Court of Federal Claims to determine what the intent of the parties was.

[00:25:40] Speaker 02:
We feel pretty comfortable we can show that we are required by that language to provide specific pension benefits as outlined in that trust document.

[00:25:50] Speaker 02:
We don't dispute that the union contract controls.

[00:25:54] Speaker 02:
We view it much more broadly than the government does.

[00:25:58] Speaker 02:
That may be a factual dispute.

[00:26:03] Speaker 02:
I will only address a couple of things.

[00:26:04] Speaker 02:
The definition under the Multi-Employer Pension Protection Amendments Act specifically defines our withdrawal liabilities, our allocable share of the benefits that are vested.

[00:26:19] Speaker 02:
So we're not on the hook through a withdrawal liability for some other employees or for future unvested benefits.

[00:26:26] Speaker 02:
We're on the hook for what the actuary says are vested benefits at that point in time.

[00:26:33] Speaker 02:
On the last issue with the NLRB, I haven't had a chance to review that particular case.

[00:26:38] Speaker 02:
But there are some NLRB cases that provide a different remedy when an employer refuses to continue to pay into a pension plan after withdrawal liability because they have

[00:26:48] Speaker 02:
an obligation or labor law to maintain the status quo.

[00:26:51] Speaker 02:
If they don't, then the union can go after them for that.

[00:26:54] Speaker 02:
That's completely separate and different from the case.

[00:26:57] Speaker 02:
Here, our issue is we had to provide these pension benefits.

[00:27:03] Speaker 02:
We paid to provide them.

[00:27:05] Speaker 02:
It was accelerated by withdrawal.

[00:27:07] Speaker 02:
The government should have given us a price adjustment.

[00:27:10] Speaker 01:
Thank you.

[00:27:10] Speaker 01:
Thank you.