Friday, August 11, 2006

The Seventh Circuit's Abominable Decision In The IBM Pension Plan Case.

August 11, 2006

Re: The Seventh Circuit’s Abominable Decision
In The IBM Pension Plan Case.

From: Dean Lawrence R. Velvel

Dear Colleagues:

As readers of this blog know, my view is that honesty is a supreme virtue, maybe the supreme virtue, because other virtues (e.g., competence) depend upon it. Correlatively, the dishonesty of our political and everyday lives strikes me as the supreme defect from which we suffer, because it leads to so many other problems.

Perhaps less known to readers is that my regard for the federal judiciary is very low. It is extremely unhappy to be compelled to believe that the Warren Court, the Court which existed from 1954-1968, was an aberration, was the only even half way liberal or progressive court in 230 years of Supreme Courts. It is equally unhappy to think that we were unable to depend in advance on the Supreme Court to curb an Executive which has repeatedly sought the kind of power Hindenburg ceded to Hitler in 1932, and still cannot depend on the Supreme Court to curb the Executive because the Court has thus far, in a cowardly way, only put its toe into the water, has given little in the way of specifics, has not dealt with the vast majority of the problems raised by the Bush/Cheney Hitlerian grab for power, and because the Supreme Court, like the lower federal courts too, is increasingly filled with right wing reactionaries, lately ones appointed by Bush, who may yet appoint more (and certainly will appoint many more reactimaries in the lower courts). Nor can we depend on the Senate to stop this since, with the help given to Republicans by conservative Democrats such as Joe I (It’s All About Me) Lieberman, the Senate has shown itself incapable of stopping the right wing takeover of the judiciary.

I don’t usually write about the semi-obscenity called the federal judiciary. Maybe this is because, after 40 years of watching the obscenity to one degree or another -- sometimes as a participant or close observer, sometimes intermittently -- its misconduct bores me, the more so since it’s expectable. Maybe it’s because the courts try to hide their misconduct in stilted writing and jargon that only a lawyer could love and in layer upon layer of logical complexities. Whatever the reason, this blogger does not write much about the abysmal federal judiciary.

There is, however, a junction at times between the dishonesty one reviles and the federal judiciary about which one rarely writes. This junction arises, for instance, when judges or Justices make up or virtually make up their own facts, when lawyers who worked on a case thus say they don’t recognize their case in a court’s opinion. Tony D’Amato of Northwestern University Law School has written about this. I have too. So have others. It is not a terribly infrequent occurrence. It is a technique of simple dishonesty that judges use to arrive at decisions they wish in advance to arrive at. If you want a simple analogous example from the political world that will make this really easy to understand, think WMDs -- that is, think the Bush/Cheney false claims about WMDs, false claims, invented facts, put forth to enable Bush/Cheney/Rumsfeld to accomplish their heart’s desire of invading Iraq.

Another example of the junction between dishonesty and the federal judiciary arises when courts allow parties to get away with dishonesty, sometimes truly gross dishonesty, and sometimes, by the way, make up facts in order to allow a party to get away with dishonesty -- a phenomenon which conjoins courts’ own dishonesty with allowing parties to get away with being dishonest.

My favorite all time example of allowing dishonesty was perpetrated roughly 40 years ago by a Second Circuit Court of Appeals judge named Henry Friendly. Henry Friendly was next to God in the pantheon created by the Harvard and other fancy pants lawyers of my generation. Or maybe he was above God. As a student he apparently had gotten one of the highest grade point averages (maybe even the highest GPA) anyone ever got at the Harvard Law School. He was regarded by his law clerks as a brilliant and wonderful man. (I was once, around 1970, in a meeting with him about a draft of a book on Presidential war powers written by a then Columbia Law School professor, later federal judge and top State Department lawyer, named Abe Sofaer; it was clear in the meeting that Friendly was in fact a very smart guy. But Friendly got it in mind once that the SEC had made a terrible mistake in charging some then unknown capitalist with crooked conduct of one sort or another. So he wrote an opinion in which he twisted and turned and invented and rationalized in the interest of supposedly showing why this character had been unjustly charged and was not guilty. The problem was: in a few years this character became infamous for the scope and nature of his dishonesty, and has been on the lam now for over 30 years, I think. His name is Robert Vesco.

Nice going, Henry. Way to let dishonesty off the hook.

Well, that is my all time favorite; perhaps in part because I was probably one of the few who said early-on that Friendly’s opinion was a pile of you know what.

But there are, of course, many other opinions that are themselves dishonest or reward the dishonesty of parties. Last year I wrote about the Arthur Andersen case, in which the Supreme Court wrote a ridiculous opinion letting Arthur Andersen off the hook for its dishonest misconduct. (The post is dated June 20, 2005, and is printed at p. 460 of Blogs From The Liberal Standpoint: 2004-2005.) I also wrote about the judicial approval of the government’s dishonest screwing over of soldiers who were told and thought they had signed up for the reserves for only a one year trial, but later were told that the fine print had them hooked for several years and so they were going to be sent to Iraq. (This post is dated December 6, 2004 and appears at p. 14 of Blogs From The Liberal Standpoint: 2004-2005.) And just a few days ago a case was decided by the Seventh Circuit Court of Appeals which rewarded dishonest misconduct being widely practiced in the corporate world.

Although I do not follow the federal courts closely these days, one has the subjective impression that there are some names that regularly seem to come up in the newspapers when one of the federal appellate courts delivers a particularly right wing, retrograde, or anti-civil liberties opinion. The names of two deep dyed conservatives judges spring to mind: the widely-thought-brilliant Frank Easterbrook of the Seventh Circuit, who with Richard Posner was long thought the intellectual star of that Circuit, and the name of political hack, friend – and - associate-of-Jesse Helms, Judge David Sentelle of the District of Columbia Court of Appeals. Thus it is that, just a few days ago, Easterbrook delivered an opinion that allows huge companies all over the country -- hundreds of them -- and smaller ones too, to dishonestly screw millions of older workers out of major portions of the pensions they expected to have when they retired. It is not enough, you see, that people who worked for a company for 20 or 30 years suddenly found themselves out of a job. Nor is it enough that companies’ pension plans for workers weren’t funded, or were funded with company stock that declined terribly in value, so that, while top executives escaped with tens of millions in golden parachutes or funded pensions, or stock options worth millions for bringing companies out of bankruptcy, ordinary workers found themselves with little or nothing by way of pensions when companies fell on hard times or went bust.

No, none of this was enough. So it was also necessary to screw workers by changing the nature of their pension plans after they had put in 20 or 30 years at a company, so that they would get a much smaller pension than they had been promised or been counting on, plans that could well have been the reason for staying at a company for such a long period of time.

This cheating, this defrauding, of older workers was accomplished by companies switching from so-called traditional types of pension plans to so-called cash balance pension plans. It is not worthwhile here to delve into the exact mathematical methods by which the switch in plans accomplished the fraud upon older workers; the accounting, the mathematics, the terminology are all far too complicated to make such an exercise fruitful here. Suffice to say that nobody, but nobody, denies that they ended up with pensions smaller, often much smaller, than they had been promised or were relying on. The Wall Street Journal -- not exactly a font of left wing liberalism -- said in its article on Easterbrook’s opinion (involving a tiny company called IBM, no less) that older workers “can end up with pensions that are 20% to 50% lower.” That’s right: the switch in plans approved by Easterbrook can cost older workers, who may have been at a company for decades, 20 to 50 percent of the pension they expected to receive and had sometimes worked for decades to get. This is what Easterbrook approved. He was joined by two other judges, one of whom is Daniel Manion. Manion was widely reviled as a reactionary -- his father Clarence, one notes, the Dean of Notre Dame Law School, had been a founder of the John Birch Society -- and he was a legal hack -- more than 40 law school deans said he was unfit for the job when he was nominated to the bench by Reagan 20 years ago, was supported by John R. Bolton -- yes, that John R. Bolton, who is now Ambassador to the U.N. -- and won only by dint of a 49 to 49 tie vote in the Senate, with Vice President George Bush casting a 50th vote in his favor. These, then, are the kinds of life tenured, amply pensioned judges (with pensions much like the ones they have let workers be screwed out of) who are allowing millions of ordinary workers to be deprived of desperately needed money that they worked decades to receive: a rank (even if brainy) conservative like Easterbrook and a reactionary hack like Manion. Revolution, anyone?

You know, it used to be said of Earl Warren that the question he would ask in a case was, “Is it fair?” You don’t think Easterbrook asked whether it was fair, do you? One would never expect a life tenured, amply pensioned, deeply-conservative, elitist federal judge to ask that question, would one? You don’t think he even asked if it was honest for companies to promise workers a given level of pension, for which the workers then worked for years, for decades, and to then withdraw the promise to the workers when they got older and could not start over again, do you? Of course, not.

Well, then, what did the brilliant Easterbrook say to justify this dishonest -- it is dishonest to obtain labor for decades by a promise and to then withdraw the promise - - screwing over of workers. Well, what he said does not bear repetition, is not worth the pain either of the writer trying to write it or the reader trying to understand it. But basically Easterbrook wrote a very complex opinion purporting to prove that the change from a traditional to a form of cash balance plan did not constitute age discrimination against older workers, but instead “is age-neutral” even though older workers were getting screwed in ways that would never occur to younger workers who are far closer to their starting dates than their ending dates. To ostensibly prove age-neutrality he sought to display intellectual pyrotechnics through complicated, often mathematical, discussions of the time value of money, imputed credits, interest rates, defined-benefit plans versus defined-contribution plans, benefit accruals, and other true arcana. But to quote Easterbrook himself when speaking somewhat snippily about arguments made by the older workers, “[all] of these propositions [may be] correct, and [all] of them are irrelevant.” The only relevant points are two that Easterbrook, his buddy Manion and a third judge chose to ignore, chose not even to mention or discuss: (1) The change in pension plans by IBM and hundreds of other companies was grossly unfair to older workers, who had no option to stay with the old plan and consequently lost a major share of pensions they had worked for for years. (By the way, isn’t this discrepancy between older and younger workers, with older ones losing promised benefits and younger ones not losing them, age discrimination in itself?) And (2) it was sheer dishonesty to promise people certain pension benefits, to use the promise to obtain their work for decades, and to then welsh on the promise and cheat the people.*

* This posting represents the personal views of Lawrence R. Velvel. If you wish to respond to this email/blog, please email your response to me at Your response may be posted on the blog if you have no objection; please tell me if you do object.

VelvelOnNationalAffairs is now available as a podcast. To subscribe please visit, and click on the link on the top left corner of the page. Dean Velvel’s podcast can also be found on Itunes or at