Flanigan v. General Elec. Co.
| Decision Date | 29 March 2000 |
| Docket Number | No. 3:93CV516 (JBA).,3:93CV516 (JBA). |
| Citation | 93 F.Supp.2d 236 |
| Court | U.S. District Court — District of Connecticut |
| Parties | William G. FLANIGAN, et al., v. GENERAL ELECTRIC CO., et al. |
Mark S. Dichter, Morgan, Lewis & Bockius, Philadelphia, PA, John S. McGeeney, Patrick W. Shea, Jenifer Magyar Bologna, Paul, Hastings, Janofsky & Walker, Stamford, CT, for General Electric Co., Dale F. Frey, Michael J. Cosgrove, John H. Myers, Joel R. Wilson, Arthur S. Bahr, Alan M. Lewis, Eugene K. Bolton, Donald W. Torey, defendants.
Morgan D. Hodgson, Steptoe & Johnson, Washington, DC, for Lockheed Martin Corp., defendant.
RULING
In this litigation under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1101 et. seq., plaintiffs challenge certain aspects of Lockheed Martin's ("Martin") purchase of General Electric's Aerospace Division ("GE"). This large corporate transaction allegedly resulted in the displacement of thousands of employees, reductions in benefits for thousands more, and the premature retirement and/or resignation of a number of employees who did not transfer employment to Martin due to their uncertainties about the benefits to be provided. Martin and GE, for their part, argue that they have done everything ERISA requires and more in facilitating the purchase agreement. After two motions to dismiss resulted in a winnowing of the claims presented, this Court conditionally certified two sub-classes of plaintiffs. Both GE and Martin now seek summary judgment as to all plaintiffs' claims.
As part of the defense industry cut-backs prevalent in the early 90's, Martin acquired GE's aerospace division in a complex transaction that closed in early April 1993. Pursuant to the transaction agreement, Martin agreed to hire all GE Aerospace employees, and a certain portion of GE's pension assets was transferred to Martin to fund the pension obligations Martin assumed for those employees. Shortly before the closing, plaintiffs (then employees of GE) instituted this action, seeking a preliminary injunction to prevent the pension transfer. In April of 1993, however, the transfer proceeded without intervention by the court.
In ruling on GE and Martin's motions to dismiss, the Court eliminated plaintiffs' claims that they had an unconditional right to remain participants in the GE Plan notwithstanding the discontinuation of their employment, and that both the pension transfer itself and the amount of the transfer violated ERISA, in that plaintiffs were entitled to a pro rata share of the GE Plan's excess funding upon transfer. Upon Martin's second motion to dismiss, the Court also dismissed plaintiffs' claims that a partial plan termination occurred when Martin eliminated certain layoff benefits that had been part of GE's Plan, and that the discontinuation of these benefits violated ERISA. See Docs. # 144, # 160.
The Court then conditionally certified two sub-classes of plaintiffs to pursue the remaining claims. Sub-class One, defined as all former GE employees who retired or resigned from GE between the announcement of the sale and the closing, challenge the nature and timing of the information provided by GE and Martin regarding the benefits that Martin would offer the transferring employees post-closing (Count I). Sub-class Two, consisting of former GE employees who transferred their employment to Martin, challenges the procedure by which GE and Martin arranged the transfer of an initial $1 billion in pension plan assets from one plan to another (Count III). Sub-class Two also brings a claim against Martin alone, alleging that the sequence of consolidation and downsizing moves subsequent to the GE sale constituted a partial plan termination under ERISA (Count II).
The sale of GE's aerospace division to Martin was governed by a complex document known as the "Transaction Agreement" which required Martin to offer employment to all GE Aerospace employees and to create a successor pension plan for the transferring employees. Pl.Dep.Ex. 187 at LMC2510-13.1 The GE pension plan ("GE Plan") was a defined benefit plan, and the transaction agreement provided that GE employees who accepted Martin's offer of employment would cease to participate in or accrue further benefits under that plan; instead, they would become participants in a new plan established by Martin, and upon retirement would receive pension benefits paid solely by the Martin plan, but based on cumulative years of service with both GE and Martin. Pl.D.Ex. 187 at LMC2513-14. The transaction agreement required that as of the closing date, the GE Plan would transfer both the accrued pension benefit liabilities of all accepting employees and a defined amount of GE Plan assets to the new Martin plan. Sufficient assets to satisfy the requirements of ERISA and applicable IRS regulations were to be transferred, along with a portion of the GE Plan's surplus assets, as the GE Plan was over-funded at the time of the merger.
The amount of pension assets to be transferred was determined according to a complex formula set out in the transaction agreement. As GE and Martin would not know the number of employees who accepted Martin's offer until after the closing date, the parties could not calculate the exact amount of pension liabilities and assets that needed to be transferred until that point. Therefore, the transaction agreement provided that the asset transfer was to take place in two stages. An initial amount of $1 billion would be transferred immediately upon the closing, plus an amount adjusted in an agreed-upon manner to reflect the passage of time and interest earned on that amount since December 31, 1992, the date used to calculate assets and liabilities for ERISA reporting requirements. Bunt Dep. at 51-51, GE Ex. 5. Had a later date been chosen for the valuation, GE would have incurred significant expense and time re-calculating the asset amount, yet had the parties based their calculations on "rough estimates" premised on November 1992 figures, it would have "cause[d] tough sledding with the Govt." GE Ex. 85. Following the closing, the precise amount to be transferred would be calculated, based on the number of employees accepting Martin's offer, from which would be subtracted the initial transfer amount of $1 billion, and the "residual transfer amount" would then be transferred to the Martin plan. Pl.D.Ex. 187 at LMC 2513-14.
Given that the plan at issue was a defined benefit plan, the sponsoring employer bore the risk of gain or loss from the plan's investments. See Hughes Aircraft v. Jacobson, 525 U.S. 432, 119 S.Ct. 755, 761, 142 L.Ed.2d 881 (1999) (...
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Flanigan, et al. v. General Electric Co.
...extensive discovery, defendants moved for summary judgment. It was granted by the district court. See Flanigan v. Gen. Elec. Co., 93 F. Supp. 2d 236 (D. Conn. 2000) ("Flanigan III"). In its decision, the court first addressed the investment claim, and concluded that no fiduciary breach had ......
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Laboy v. Bd. of Trs. of Bldg. Serv. 32 BJ SRSP
...But, "[t]he ultimate outcome of an investment is not proof of imprudence or breach of fiduciary duties." Flanigan v. Gen. Elec. Co., 93 F. Supp. 2d 236, 254 (D. Conn. 2000) (citing Debruyne v. Equitable Life Assurance Co., 920 F.2d 457, 465 (7th Cir. 1990)). Decisions in which courts have a......
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Laboy v. Bd. of Trs. of Bldg. Serv. 32 BJ SRSP
...However, "the ultimate outcome of an investment is not proof of imprudence or breach of fiduciary duties." Flanigan v. Gen. Elec. Co., 93 F. Supp. 2d 236, 254 (D. Conn. 2000); see also In re Citigroup ERISA Litig., 662 F.3d 128, 140 (2d Cir. 2011) ("We cannot rely, after the fact, on the ma......