122 F.3d 559 (8th Cir. 1997), 96-3027, Rabushka ex rel. United States v. Crane Co.

Docket Nº:96-3027.
Citation:122 F.3d 559
Party Name:Stanley D. RABUSHKA, ex rel. UNITED STATES of America; Stanley D. Rabushka, Appellants, v. CRANE COMPANY, Appellee.
Case Date:August 11, 1997
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

Page 559

122 F.3d 559 (8th Cir. 1997)

Stanley D. RABUSHKA, ex rel. UNITED STATES of America;

Stanley D. Rabushka, Appellants,

v.

CRANE COMPANY, Appellee.

No. 96-3027.

United States Court of Appeals, Eighth Circuit

August 11, 1997

Submitted March 13, 1997.

Rehearing and Suggestion for Rehearing En Banc Denied Sept.

16, 1997.

Page 560

Robert L. King, St. Louis, MO, argued (Rex Carr, on the brief), for Appellants.

Paul Dodyk, New York City, argued (David W. Harlan, on the brief), for Appellee.

Before WOLLMAN, MAGILL, and BEAM, Circuit Judges.

WOLLMAN, Circuit Judge.

Stanley Rabushka's qui tam suit under the False Claims Act (FCA) against the Crane Company is before us for the third time. After dismissing the first appeal, we reversed the district court's dismissal of Rabushka's suit and remanded the case for further proceedings. United States ex rel. Rabushka v. Crane Co., 40 F.3d 1509 (8th Cir.1994) (Rabushka I ). Rabushka appeals from the district court's 1 judgment in favor of Crane. We affirm.

I.

A.

This suit stems from Crane's spin-off of its subsidiary CF & I Steel Corp. to Crane shareholders in 1985. CF & I was a profitable company until 1982, when it began suffering economic difficulties. CF & I maintained for its employees the "CF & I Pension Plan" (the plan), a single-employer defined benefit plan. Crane became concerned in the early 1980s about significant underfunding of the CF & I plan and Crane's potential liability for those unfunded pension obligations should CF & I file for bankruptcy. Unable to find a buyer for CF & I, Crane spun off CF & I to Crane shareholders on May 28, 1985.

We summarized CF & I's financial condition at the time of the spin-off and its subsequent financial history in Rabushka I:

At that time [1985] CF & I's unfunded pension liability was stated at approximately $46 million. CF & I's financial condition worsened after the spinoff, in large part because of its burgeoning unfunded pension obligation. In November 1990, with an estimated $140 million unfunded pension liability, CF & I filed for bankruptcy. In March 1992, when the unfunded pension liability had grown to approximately $270 million, the Pension Benefit Guaranty Corporation [PBGC] terminated CF & I's pension plan and assumed those plan obligations that were protected by the Employee Retirement Income Security Act [ERISA], 29 U.S.C. §§ 1001 et seq.

40 F.3d at 1511.

The PBGC terminated CF & I's plan on March 19, 1992, on the grounds that the plan had not met the minimum funding standards and would be unable to pay benefits when due and because the possible long-run loss to the PBGC could reasonably be expected to increase unreasonably if the plan was not terminated. The PBGC stated that it was terminating the plan "in order to protect the interests of the participants, to avoid any unreasonable deterioration of the financial condition of the Plan, and to avoid any unreasonable increase in the liability of the fund." At the time of the plan's termination, CF & I had not made any funding contributions since July 1990. Its contributions were $39 million in arrears; the plan had $35 million in assets and was paying out $18 million in benefits per year and would run out of money within two years; and the PBGC projected an increase in its exposure of $16 million per year if the plan was not immediately terminated.

B.

Rabushka, a former Crane shareholder, filed a four-count complaint asserting a qui tam action under the FCA, alleging that Crane spun off CF & I with the intent of wrongfully shifting its liability for CF & I's

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unfunded pension obligations to the PBGC. 2 Count I alleged that Crane submitted false or fraudulent pension benefit claims to the PBGC, or caused CF & I to do so, in violation of 31 U.S.C. § 3729(a)(1). Count II alleged that Crane submitted false statements to the PBGC, or caused CF & I to do so, in order to get false or fraudulent pension benefit claims paid by the PBGC, in violation of 31 U.S.C. § 3729(a)(2). Count III alleged a "reverse false claim," alleging that Crane made false statements, or caused CF & I to do so, to the PBGC to conceal Crane's obligation to pay money to the PBGC, in violation of 31 U.S.C. § 3729(a)(7). Count IV alleged that Crane conspired with CF & I and its employees to "defraud[ ] the PBGC by getting the PBGC to pay the false or fraudulent claims for unfunded, PBGC-insured benefits," in violation of 31 U.S.C. § 3729(a)(3). Rabushka's theory is that to avoid being saddled with CF & I's unfunded pension liability, Crane spun off CF & I, knowing that it was bankrupt and would not survive. Crane hoped that CF & I would survive long enough so that when it did go bankrupt--and the PBGC was forced to terminate CF & I's plan and assume its liabilities--Crane could not be held liable for those obligations.

When a single-employer plan such as CF & I's is terminated, the PBGC assumes responsibility for insured pension benefits. See 29 U.S.C.A. §§ 1322, 1361 (West 1985). 3 For transactions effective before January 1, 1986, the PBGC could assert a subrogation claim against an employer who failed to fund a pension plan, or any trade or business under common control with that employer at the time of termination. In those circumstances, the employer could be held liable for the plan's unfunded obligations or for thirty percent of the employer's net worth, whichever was less. See 29 U.S.C.A. §§ 1301(b)(1), 1362 (West 1985). Crane does not dispute that had the PBGC terminated CF & I's plan at the time of the spin-off, Crane could have been held liable for CF & I's unfunded pension liabilities.

In a notice-of-reportable-event letter dated June 28, 1985, the CF & I plan administrator reported the spin-off to the PBGC as a "transaction involving a transfer of ... an ownership interest in a contributing sponsor," pursuant to 29 C.F.R. § 2515.23(a)(1)(ii) (1985). 4 Rabushka contends that Crane had a duty to report to CF & I's plan administrator that CF & I's spin-off was a transaction to implement CF & I's liquidation under 29 C.F.R. § 2615.22(a) (1985). 5 The CF & I plan administrator would then have been obligated to report this to the PBGC within thirty days, see 29 U.S.C.A. § 1343(a) (West 1985); 29 C.F.R. § 2615 (1985), 6 and thus the PBGC would have known at the time of the spin-off or shortly thereafter that the transaction was really one to effect CF & I's liquidation, not the spinning-off of a viable company. Rabushka argues that had the PBGC known the true nature of the transaction and the true extent of CF & I's unfunded pension liabilities (also allegedly misrepresented), it would have immediately terminated CF & I's plan in order to avoid an increase in the PBGC's future liabilities and would have held Crane responsible for the unfunded liabilities. See 29 U.S.C.A. §§ 1342(a)(4), 1362 (West 1985). Thus, the alleged false claims in this case are the payment of the CF & I plan beneficiaries' claims out of the PBGC's funds rather than out of funds that Crane would otherwise have been required to advance to cover the plan's unfunded liabilities.

C.

The district court granted Crane's motion for judgment on the pleadings on count III, which alleged that Crane could be held liable under the reverse false claims provision of the FCA, 31 U.S.C. § 3729(a)(7). The district court noted that the 1986 amendments to the FCA expressly allowed the government

Page 562

to assert reverse false claims, but concluded that the amendments did not apply retroactively to transactions occurring before their effective date.

The district court granted summary judgment to Crane on counts I, II, and IV. The court concluded that Crane did not prepare or submit any documents to the PBGC about CF & I's plan; that Crane had no duty under ERISA to report any information to the PBGC or to pay for CF & I's unfunded pension liabilities; that Crane could not be held liable under "predecessor liability" or "sham transaction" theories advanced by Rabushka; and that there was no basis for piercing CF & I's corporate veil and holding Crane liable as an alter ego corporation. The court denied Rabushka's subsequent Rule 59(e) motion to alter or amend the judgment.

II.

We review a grant of summary judgment de novo, applying the same standard as the district court: whether the record, viewed in a light most favorable to the non-moving party, shows that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. See Earnest v. Courtney, 64 F.3d 365, 366-67 (8th Cir.1995). We recently explained the standard the non-moving party must meet to avoid summary judgment:

After the moving party points out the absence of evidence to support the nonmoving party's case, the nonmoving party "must advance specific facts to create a genuine issue of material fact for trial." Rolscreen Co. v. Pella Prods., Inc., 64 F.3d 1202, 1211 (8th Cir.1995); see Celotex [Corp. v. Catrett, 477 U.S. 317, 323-25, 106 S.Ct. 2548, 2552-54, 91 L.Ed.2d 265 (1986) ]. A genuine issue of material fact exists if the evidence is sufficient to allow a reasonable jury to return a verdict for the nonmoving party. See Anderson[v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986) ]. However, the mere existence of a scintilla of evidence in favor of the nonmoving party's position is insufficient to create a genuine issue of material fact. See Anderson, 477 U.S. at 252, 106 S.Ct. at 2512; Devine v. Stone, Leyton & Gershman, P.C., 100 F.3d 78, 81-82 (8th Cir.1996), cert. denied, --- U.S. ----, 117 S.Ct. 1694, 137 L.Ed.2d 821 (1997); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) (explaining that nonmovant "must do more than simply show that there is some metaphysical doubt as to the material facts"). After adequate time for...

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