In re Amcast Indus. Corp.

• Decision Date: 12 March 2007
• Docket Number: Bankruptcy No. 04-40504.,Adversary No. 05-3515.
• Citation: 365 B.R. 91
• Parties: In re AMCAST INDUSTRIAL CORPORATION, et al., Debtors-in-Possession. Liquidating Trustee of the Amcast Unsecured Creditor Liquidating Trust, Plaintiff, v. James K. Baker, et al., Defendants.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

365 B.R. 91

In re AMCAST INDUSTRIAL CORPORATION, et al., Debtors-in-Possession.

Liquidating Trustee of the Amcast Unsecured Creditor Liquidating Trust, Plaintiff, v. James K. Baker, et al., Defendants.

Bankruptcy No. 04-40504.

Adversary No. 05-3515.

United States Bankruptcy Court, S.D. Ohio, Western Division at Dayton.

March 12, 2007.

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Ronald E. Gold, Cincinnati, OH, for Plaintiff.

Gerald V. Weigel, Jr., Jan H. Steinher, James E. Burke, Jason V. Stitt, Robert G. Sanker, Keating Muething & Klekamp PLL, Cincinnati, OH, Ronald S. Pretekin, Coolidge Wall Co. LPA, Dayton, OH, for Defendants.

DECISION OF THE COURT GRANTING, IN PART, AND DENYING, IN PART, DEFENDANTS' MOTIONS TO DISMISS

LAWRENCE S. WALTER, Bankruptcy Judge.

The court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157(a) and 1334, and the standing General Order of Reference in this District. This matter is before the court on the motion to dismiss filed by all defendants to this adversary proceeding except Leo W. Ladehoff and the separate motion to dismiss filed by Defendant Leo W. Ladehoff [Adv. Does. 21 and 22]. Plaintiff Mark Stickel, Liquidating Trustee of the Amcast Unsecured Creditor Liquidating Trust, filed a memorandum in response to the motions to dismiss [Adv. Doc. 28] and the Defendants filed replies [Adv. Does. 34 and 35].

PROCEDURAL AND FACTUAL BACKGROUND

On December 28, 2005, Mark Stickel, the Liquidating Trustee of the Amcast Unsecured Creditor Liquidating Trust ("Liquidating Trustee"), initiated an adversary proceeding against the Defendants, all of whom were identified in the Complaint as former officers and directors of Amcast Industrial Corporation ("Amcast") who served at different points during the years 2000 to 2005 (collectively "Defendants"). [Adv. Doc. 1, "Complaint," ¶¶ 12-29.] In general, the Liquidating Trustee asserts tort claims against the Defendants including breach of fiduciary duty, conversion, waste of corporate assets and deepening insolvency, among others. The claims relate to modifications approved by the Defendants to the structure and payment of retirement benefits to executives and, most significantly, to former Chief Executive Officer and Director, Leo W. Ladehoff, a named Defendant ("Ladehoff').

The following facts are as alleged in the Liquidating Trustee's Complaint and the documents attached thereto. The facts are assumed as true for purposes of the Defendants' motions to dismiss, but do not constitute the findings of the court.¹

A. Creation of the Liquidating Trust/Designation of Liquidating Trustee

On November 30, 2004, Amcast together with certain subsidiaries filed voluntary petitions for bankruptcy protection. [Complaint, ¶ 1.] On July 29, 2005, this court confirmed the Reorganized Debtors' Third Amended Joint Plan of Reorganization ("Plan"). [Complaint, ¶¶ 2 and 3.]

The Plan established a liquidating trust for purposes of receiving, liquidating and distributing the Creditor Trust Assets assigned to holders of general unsecured claims under the Plan ("Creditor Trust"). [Complaint, ¶ 10.] The Reorganized Debtors transferred the Creditor Trust Assets to the Creditor Trust on the Effective Date of the Plan and the assets were automatically and irrevocably vested in the Creditor Trust. [Id.]

The Creditor Trust Assets include "Creditor Trust Causes of Action" which are defined in the Plan as:

any and all claims and causes of action held by the Reorganized Debtors or the Estates (or claims of generalized harm to creditors as opposed to direct claims of individual creditors) related to any and all pre-petition rabbi trusts, pension plans (qualified and unqualified), supplemental executive plans, or similar claims with respect to the Reorganized Debtors' pension or retirement plans.

[Id.] The Plan grants authority to the Liquidating Trustee to take any action necessary to administer the liquidating trust. [Id.] Pursuant to the terms of the Plan, the Creditors Committee designated Mark Stickel of Bridge Associates L.L.C. as the Liquidating Trustee. [Complaint, ¶ 11.]

B. Liquidating Trust's Claims Against Defendants

The Liquidating Trustee alleges that the Defendants were officers and/or directors of Amcast at different points during the years 2000 through 2005. [Complaint, ¶¶ 12-29.] The Liquidating Trustee's claims against these Defendants arise from events beginning in 1995 related to the structuring and payment of executive retirement benefits and, more specifically, those of Ladehoff. [Complaint, ¶¶ 21 and 30-31.] Ladehoff was Chief Executive Officer and Chairman of the Board of Directors of Amcast during relevant periods between 1995 and 2000 and a Director of Amcast during relevant periods between 2001 and 2003. [Id.]

1. Ladehoff's Retirement and the Terms of His Executive Agreement

Prior to his retirement as Chief Executive Officer, Ladehoff entered into an employment/termination agreement dated March 3, 1995. [Complaint, ¶¶ 30 and 31.] The agreement was amended and restated as an Executive Agreement effective August 1, 1997 ("Executive Agreement"). [Complaint, ¶ 30] A copy of the Executive Agreement is attached to the Liquidating Trustee's Complaint as Exhibit A.

Section 6 of the Executive Agreement provided for payment of $7,000 per month ($84,000 per year) to Ladehoff for ten years following his retirement from Amcast as CEO. [Complaint, ¶ 31; Ex. A, Section 6(a).]

Section 6 further provided that Ladehoff would receive other benefits from Amcast in the form of enhancements to his already existing benefits from his participation in Amcast's Merged Pension Plan, a plan qualified under Section 401 of the Internal Revenue Code ("Pension Plan"). Additionally, he would receive enhancements to his already existing benefits from his participation in the Amcast Industrial Corporation Non-Qualified Supplementary Benefit Plan, also called the SERP, which was not qualified under Section 401 ("SERF"). [Complaint, ¶¶ 32 and 33; Ex. A, Section 6(b).] A copy of Amcast's Merged Pension Plan, as Restated Effective September 1, 1997 and as Further Amended Through December 31, 2001 is provided as Exhibit B to the Liquidating Trustee's Complaint and a copy of the SERF (July 1, 1999 and June 1, 2000 Restatements) is attached to the Liquidating Trustee's Complaint as Exhibit C.

The enhancements in the Executive Agreement were to be an annual amount equal to the difference between the yearly payments Ladehoff received from the Pension Plan and SERP and $210,000 per year so that Ladehoff's total payments would equal' $210,000 annually.² [Id.] "[T]he $210,000 annual additional retirement benefit paid to Ladehoff was comprised of ... approximately $49,524 to be paid from the Pension Plan ... and ... approximately $160,476 ... from funds from a nonqualified plan of Amcast." [Complaint, ¶ 32.] The "nonqualified plan ... was subject to the claims of creditors of Amcast and the Reorganized Debtors."³ [Id.]

Sections 10 and 11 of the Executive Agreement set up a method by which Ladehoff could receive accelerated payments of the amounts due under Section 6 and the SERP. [Complaint, ¶ 33 and Ex. A, Sections 10 and 11.] These sections required Amcast to establish a Rabbi Trust and, upon Ladehoff's election, Amcast was to fund the Rabbi Trust in the amount of the Net Present Value (as defined in Section 12 of the Executive Agreement). [Complaint, ¶¶ 35 and 36, and Ex. A, Sections 10, 11(a) and 11(b).]

Once funded, Section 11 provided for different scenarios that would allow Ladehoff to receive all or a portion of the Net Present Value of his benefits out of the Rabbi Trust. First, at any time between September of 1995 and September of 2005, Ladehoff could elect to receive an amount equal to the Net Present Value, as determined on the date this option would be exercised, less 12 percent of that amount. [Ex. A., Section 11(b).] Second, Section 11(c) of the Executive Agreement provides that if Amcast's debt to equity ratio exceeded 2 to 1, as derived from Amcast's quarterly report to its shareholders, then Amcast was to pay the Net Present Value with the determination date being the last day of the fiscal quarter on which this condition first existed. [Complaint, ¶ 34 and Ex. A, Section 11(c).]

2. The Rabbi Trust and Trust Agreement

Pursuant to the terms of Section 10 of the Executive Agreement, Amcast funded the Rabbi Trust in or about August of 2000 with an annuity purchased from Travelers Insurance Company. [Complaint, ¶ 36.] The Liquidating Trustee believes that the premium paid by Amcast to purchase the annuity was $1,535,482.50. [Id.]

The Rabbi Trust was governed by the Trust Agreement for the Amcast Industrial Corporation Non-Qualified Supplementary Benefit Plan and Executive Agreement with Leo W. Ladehoff ("Trust Agreement"). A copy of the Trust Agreement is attached to the Liquidating Trustee's complaint as Exhibit D. [Complaint, ¶¶ 35 and 36.] Important Sections of the Trust Agreement for purposes of this matter include the following:

1) Section 5.1 of the Trust Agreement provided for a Trustee to accept all cash contributions, contracts and other property delivered to the Trustee by Amcast. [Complaint, ¶ 37 and Ex. D, Section 5. 1.] All contributions received by the Trustee were to constitute the trust fund. [Id.]

2) Section 5.6 of the Trust Agreement adds that "[e]xcept as provided in Article VI and Section 13.1, [Amcast] shall have no right or power to direct Trustee to return to [Amcast] or divert to others any of the Trust assets before all payment of benefits have been made to [SERP] participants and their beneficiaries pursuant to the terms of the Plan(s)." [Complaint, ¶ 38 and Ex. D, Section 5.6.]

3) Sections 6.1 and 6.2 of the Trust Agreement provide that (i) the Rabbi Trust is a grantor Trust; (ii) all benefits of the Rabbi Trust are subject to the claims of creditors...