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Pension Benefit Guaranty Corp. v. 20 Se 3Rd ST LLC

United States District Court, S.D. Florida

November 22, 2019

PENSION BENEFIT GUARANTY CORPORATION, Plaintiff,
v.
20 SE 3RD ST LLC, et al., Defendants.

         ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT, GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AS TO THE AFFIRMATIVE DEFENSES, DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT, AND DENYING DEFENDANTS' MOTION IN LIMINE

          ROBIN L. ROSENBERG, UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on Plaintiff's Motion for Partial Summary Judgment [DE 114], Defendants' Motion for Summary Judgment [DE 112], Plaintiff's Motion for Summary Judgment as to Affirmative Defenses [DE 152], and Defendants' Motion in Limine [DE 116]. The Motions have been fully briefed. For the reasons set forth below, Plaintiff's Motions are granted and Defendants' Motions are denied.

         I. BACKGROUND AND INTRODUCTION

         This is a case about delay. When a company offers its employees a pension plan, certain federal requirements attach to the plan. One of those requirements is that in the event the company ceases to do business (or dissolves), the company must notify the Pension Benefit Guarantee Corporation-the Plaintiff in this case. Plaintiff is a government-sponsored agency that insures and administers pension plans for companies that have ceased to do business. In 1991, a company offering a pension plan-Liberty Lighting-began the process of liquidating and dissolving. Plaintiff brought this suit on the premise that Liberty Lighting never informed the Plaintiff of Liberty's dissolution. During the 1990s, Liberty Lighting finished its dissolution proceedings and the owner of Liberty Lighting, Mr. Joseph Wortley, went through a personal bankruptcy. During that time, and throughout the early 2000s, pensioners continued to collect pension payments, but the pension funds dwindled. Finally, in 2012, Plaintiff became aware of Liberty Lighting's dissolution in the 1990s. By the time Plaintiff learned of Liberty's dissolution, however, the funds in the pension were completely depleted. The Defendants before the Court are a collection of companies that Mr. Wortley owned when the pension plan terminated in 2012.

         The delay in this case is extreme. Twenty-one years passed from the time Liberty Lighting began to dissolve to the time its pension fund was depleted. Although it is unclear whether Liberty Lighting notified Plaintiff of its dissolution, someone must bear the cost of the delay of Plaintiff's takeover of the pension. If Defendants prevail, the costs associated with the delayed wind-up of the Liberty pension will be borne by active companies in the marketplace that pay pension insurance premiums to Plaintiff. If Plaintiff prevails, the costs associated with the delayed wind-up will be borne by non-parties who had very little, if any, connection to Liberty Lighting, as well as Mr. Wortley who, from his perspective, attempted to put Liberty Lighting behind him via bankruptcy many years ago. In all candor to the parties, the Court has found this to be a difficult case. The Court does not believe that a delay of twenty-one years was contemplated when the applicable federal laws were enacted. Nonetheless, the Court ultimately concludes that federal law compels it to enter summary judgment in favor of the Plaintiff.

         II. SUMMARY JUDGMENT STANDARD

         Summary judgment is appropriate if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The existence of a factual dispute is not by itself sufficient grounds to defeat a motion for summary judgment; rather, “the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). A dispute is genuine if “a reasonable trier of fact could return judgment for the non-moving party.” Miccosukee Tribe of Indians of Fla. v. United States, 516 F.3d 1235, 1243 (11th Cir. 2008) (citing Anderson, 477 U.S. at 247-48). A fact is material if “it would affect the outcome of the suit under the governing law.” Id. (citing Anderson, 477 U.S. at 247-48).

         In deciding a summary judgment motion, the Court views the facts in the light most favorable to the non-moving party and draws all reasonable inferences in that party's favor. See Davis v. Williams, 451 F.3d 759, 763 (11th Cir. 2006). The Court does not weigh conflicting evidence. See Skop v. City of Atlanta, 485 F.3d 1130, 1140 (11th Cir. 2007). Thus, upon discovering a genuine dispute of material fact, the Court must deny summary judgment. See id.

         III. FACTS

         In 1989, Liberty Lighting Company, Inc. became the sponsor and administrator of a pension plan. DE 115 at 1. That plan was subject to federal law and federal regulations: The Employee Retirement Income Security Act (“ERISA”). At some point between 1989 and 1991, Liberty Lighting experienced business problems significant enough to force it into bankruptcy. DE 113 at 2. After bankruptcy, Liberty Lighting was administratively dissolved by the State of Illinois in 1992. Id.

         ERISA requires companies that maintain pensions to notify the Plaintiff if a pension plan is at risk for termination because Plaintiff administers pension plans for companies that have ceased to do business. See 29 U.S.C. § 1302(a). A plan is at risk for termination if the company administering the plan enters bankruptcy or dissolves. Id. Although Liberty Lighting became bankrupt and dissolved, the parties dispute whether Liberty Lighting ever notified Plaintiff of the same. For its part, Plaintiff contends that Liberty Lighting never sent the required notice. DE 134-9. For their part, Defendants contend that “nobody . . . knows if this is actually true; too much time has passed.” DE 113 at 3. In any event, it is undisputed that Liberty Lighting did not terminate its pension plan liability pursuant to ERISA or otherwise resolve its obligation to pass the administration of the plan to Plaintiff. Instead, time passed.

         In 1993, the sole owner of Liberty Lighting, Mr. Wortley, filed for personal bankruptcy. DE 113 at 3. Mr. Wortley's assets (which were surrendered to the bankruptcy court) included Mr. Wortley's Liberty Lighting stock. Id. The bankruptcy court issued its final decree in 1998. Id. Mr. Wortley's Liberty Lighting stock was not sold during the bankruptcy and was instead “fully administered” property. DE 115 at 5.

         During Mr. Wortley's bankruptcy and in the years that followed, various pension plan documents were executed by Liberty Lighting and Mr. Wortley. In 1994, Mr. Wortley executed an amendment to the plan on behalf of Liberty Lighting. Id. at 2.[1] In 2002, Mr. Wortley filed a Department of Labor pension plan benefit form on behalf of Liberty Lighting. Id. at 2-3. In 2003, Mr. Wortley sent a letter on Liberty Lighting letterhead to a consulting organization regarding the benefits of the pension plan. Id. In 2004, Liberty Lighting entered into an Investment Management Agreement with a bank to manage the assets of the pension plan. Id. at 3. That agreement was signed by Mr. Wortley. Id.

         In 2012, the pension plan ran out of money and the bank administering the pension payments informed Plaintiff of the same. See DE 134-2; 134-9. After communications and negotiations between Plaintiff and Mr. Wortley, Liberty Lighting's pension plan was terminated and Plaintiff took over the administration of pension benefits. DE 115 at 3-4. The date of termination, an important date, was July 31, 2012. Id.

         Plaintiff subsequently filed the suit before this Court. Plaintiff did not file suit against Liberty Lighting, a long-dissolved entity with no assets. Instead, Plaintiff filed suit against Mr. Wortley and against various companies in which Mr. Wortley held an ownership interest on the date of plan termination, July 31, 2012. Defendants filed a motion to dismiss, and the Court referred the motion to the Honorable Magistrate Judge Bruce E. Reinhart for a Report and Recommendation. Defendants argued that Liberty Lighting could not be responsible for the pension plan in 2012 because of its earlier dissolution. In his Report, Judge Reinhart disagreed. Judge Reinhart concluded that ERISA was silent on the impact of corporate dissolution, that it was the responsibility of the federal courts to create common law on issues where ERISA was silent, and that the appropriate common law, consistent with the purposes of ERISA, was that Liberty Lighting's dissolution did not have the effect of removing Liberty Lighting from its status as the sponsor of an ERISA-governed pension plan. DE 86. This Court agreed and adopted Judge Reinhart's recommendation over Defendants' objections. DE 120. The parties subsequently briefed the cross motions for summary judgment before the Court, again arguing the legal significance of Liberty Lighting's dissolution. The issue is ripe for the Court's decision.

         IV. LEGAL ANALYSIS AND DISCUSSION

         Plaintiff has moved for partial summary judgment, arguing that it is entitled to judgment as a matter of law against some of the Defendants in this case.[2] Plaintiff's position is that ERISA imposes pension plan termination liability on the Defendant companies owned by Mr. Wortley on the day the pension plan was terminated in 2012. Defendants filed a cross motion for summary judgment, arguing that the same companies cannot be held liable as a matter of law.

         When a pension plan is terminated, ERISA imposes liability on certain parties pursuant to 29 U.S.C. § 1362. The date ERISA utilizes to impose liability is the date of plan termination (here July 31, 2012), [3] and the parties that are subject to liability are the contributing sponsor of the plan or a member of a contributing sponsor's controlled group:

In any case in which a single-employer plan is terminated in a distress termination under section 1341(c) of this title or a termination otherwise instituted by the corporation under section 1342 of this title, any person who is, on the termination date, a contributing sponsor of the plan or a member of such a contributing sponsor's controlled group shall incur liability under this section. The liability under this section of all such persons shall be joint and several.

§ 1362(a). It is undisputed that the contributing sponsor of the pension plan in this case was historically Liberty Lighting Company, Inc. DE 115 at 1. Liberty Lighting became the contributing sponsor as early as 1989. Id. What the parties dispute is: (A) whether Liberty Lighting could be considered the contributing sponsor as of the date of plan termination in 2012 and (B) the application of ERISA liability to “member[s] of [the] contributing sponsor's controlled group.” Each dispute is considered in turn before the court turns to (C) Defendants' affirmative defenses and motion in limine.

         A. Liberty Lighting's Role as the Pension ...


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