In re Finley, Kumble, Wagner, Heine, et al.
| Decision Date | 29 October 1993 |
| Docket Number | Bankruptcy No. 88 B 10377. |
| Citation | 160 BR 882 |
| Parties | In re FINLEY, KUMBLE, WAGNER, HEINE, UNDERBERG, MANLEY, MYERSON & CASEY, Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
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E. Zujkowski, Emmet, Marvin & Martin, New York City, for J.D.B. Kimball, Trustee of the Finley, Kumble, Wagner, Heine, Underberg, Manley, Myerson & Casey Amended and Restated Defined Benefit Plan ("Pension Trustee").
J. Sarna, Esq., Togut, Segal & Segal, New York City, for Official Committee of Unsecured Creditors and F.H. Musselman ("Liquidation Trustee").
S. Birnbaum, M. Mora, Washington, DC, for Pension Benefit Guar. Corp. ("PBGC").
This contested matter1 is before us2 on an application for an order reclassifying, expunging, and disallowing certain claims, a cross motion for the imposition of a constructive trust and a corresponding motion for summary judgment. The issues presented concern the priority of certain minimum funding requirements and various statutory liabilities arising from the underfunding of debtor's pension plan qualified under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq. (1993). We hold that (1) minimum funding obligations arising postpetition under ERISA are prepetition contingent claims not entitled to an administrative priority; (2) claims for unpaid contributions and asset insufficiencies are disallowed to the extent that they are duplicative; and (3) the total funding deficiency shall be offset by the allowed amount of the minimum funding claim. Summary judgment is granted on all aforementioned issues, albeit with clarifications and limitations discussed below. Summary judgment is denied concerning the cross motion for a constructive trust.
On February 24, 1988 ("Petition Date"), bank creditors filed an involuntary Chapter 7 petition, 11 U.S.C. § 101 et seq.3, against Finley, Kumble, Wagner, Heine, Underberg, Manley, Myerson & Casey ("Debtor"), a large, nationally recognized law firm headquartered in New York.4 Bankruptcy Judge Abram converted Debtor's Chapter 7 case to Chapter 11 and appointed F.H. Musselman Chapter 11 Trustee ("Liquidation Trustee"). On March 9, 1989, Bankruptcy Judge Abram authorized the appointment of J.D.B. Kimball ("Pension Trustee") as trustee of Debtor's Amended and Restated Defined Benefit Trust ("Pension Plan").
Bankruptcy Judge Abram confirmed Debtor's Plan of Reorganization ("Plan") on December 12, 1991.5 The effective date of the Plan was March 19, 1992. The Plan created a Liquidating Trust and a Partner Settlement Trust from which Debtor has paid or will pay allowed claims.
Before the Petition Date, Debtor employed as many as 240 partners, 450 associates and attorneys of counsel, and 1000 support personnel.
On October 30, 1985, Debtor sponsored the Pension Plan to administer retirement income benefits to its nonattorney employees. The Pension Plan has 746 participants.6 By the Petition Date, substantially all of the Pension Plan participants were no longer in Debtor's employ.7
On May 17, 1991, Pension Trustee notified plan participants that Pension Trustee intended to terminate the Pension Plan effective August 1, 1991. See ERISA § 4041, 29 U.S.C. § 1341 (1993). Despite Pension Trustee's notice to the contrary, the Pension Plan remains active, albeit underfunded.8
In conjunction with the Pension Plan, Debtor maintained qualified individual defined benefit plans ("IDBs") on behalf of its partners. At least sixty-six of Debtor's unincorporated partners received benefits through IDBs.9 Shortly before the Petition Date, Debtor terminated most of its IDBs. Debtor then distributed vested accrued benefits and applicable surpluses to participating partners after the Petition Date.
Debtor's plan of reorganization created both a Liquidating Trust and a Partner Settlement Trust from which Debtor has paid or will pay allowed claims. Participating partners contributed funds to the Partner Settlement Trust in accordance with their respective net worths and earning potentials.10 The parties dispute whether contribution calculations included surpluses paid following termination of the relevant IDBs. The extent to which tax savings were calculated as part of the respective partners' net worths also remains unclear. We need not decide this factual dispute in our resolution of this summary judgment motion.
Pension Trustee and the Pension Benefit Guaranty Corporation ("PBGC") filed seven proofs of claim related to the Pension Plan and the IDBs.11 Four claims are relevant here. Pension Trustee seeks (1) $161,729 for postpetition minimum funding contributions ("Minimum Funding Claim") (this claim also includes a contingent claim estimated at $56,006 for postpetition premiums that Pension Trustee may owe to PBGC)12; (2) $1,366,885 for unpaid prepetition plan contributions ("Deficiency Claim")13; and (3) $190,613 for plan contributions due within 180 days of the Petition Date ("Priority Claim").14 In the fourth claim, PBGC seeks payment for Debtor's underfunded benefit liabilities (the "Underfunded Benefit Claim").15 Only PBGC's claim is unliquidated. Both PBGC and Pension Trustee argue that their claims for unpaid minimum annual contributions and unfunded benefit liabilities are entitled to administrative priority status under 11 U.S.C. §§ 503(b)(1)(A) and 507(a)(1).
On October 9, 1991, the Official Committee of Unsecured Creditors ("Committee") moved by order to show cause to reclassify, disallow, or expunge the various claims filed by PBGC and Pension Trustee. Committee argues that the relevant claims are not administrative priorities under § 503(b)(1)(A) because they arose from prepetition transactions with Debtor from which there was no resulting direct benefit to the estate and that PBGC's claim for unpaid contributions is duplicative of Pension Trustee's claims.
On June 8, 1992, Pension Trustee filed a notice of cross motion to impose a constructive trust on assets wrongfully distributed to IDB participants ("cross motion").16 Also on June 8, 1992, Liquidation Trustee, as successor to claims previously asserted by the Committee, filed a motion for summary judgment to deny the cross motion and to reclassify, disallow, or expunge the various claims filed by Pension Trustee and PBGC.
On May 4, 1993, a hearing was held regarding Liquidation Trustee's application to reclassify or disallow the claims and Liquidation Trustee's motion for summary judgment. Following oral argument, we reserved decision.
After we reserved decision, the parties engaged in a verbose volley of correspondence concerning whether three vacated decisions maintain persuasive authority in this district. All three decisions present issues similar to those presented here. See, e.g., LTV Corp. v. Pension Benefit Guar. Corp. (In re Chateaugay Corp.), 115 B.R. 760 (Bankr.S.D.N.Y. 1990), aff'd, 130 B.R. 690 (S.D.N.Y.1991) (). No formal pleadings or briefs were filed. Notwithstanding our strong dislike for letter pleadings, the lack of briefs may ultimately be for the best because, as we discuss below, the vacatur issue merits little more than academic attention in the resolution of the matters now before us.17
The primary purpose of granting summary judgment is to avoid unnecessary trials where no genuine issue of material fact is in dispute. A fact is considered material if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).
The moving party bears the burden of showing that there is an absence of evidence to support the nonmovant's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). In determining whether the movant has met its burden, the evidence is considered in a light favorable to the party opposing the motion. Similarly, the inferences to be drawn from the underlying facts must be viewed in a light favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 599, 106 S.Ct. 1348, 1362, 89 L.Ed.2d 538 (1986) (White, J., dissenting). Our responsibility in considering a motion for summary judgment is not to resolve issues of fact but to assess whether there are factual issues to be tried. Cartier v. Lussier, 955 F.2d 841, 845 (2d Cir.1992).
When a motion for summary judgment is made and supported by the movant, Fed.R.Civ.P. 56(e) requires the nonmoving party to set forth specific facts demonstrating that genuine issues of material fact remain for trial. Matsushita Elec. Indus. Co., Ltd., supra, 475 U.S. at 586-87, 106 S.Ct. at 1355. The nonmovant must set forth the disputed facts in supporting materials, including affidavits, rather than defer to the pleadings alone. As the Supreme Court has noted, the nonmoving party must do more than show mere metaphysical doubt as to the material facts to defeat the motion. Id., 475 U.S. at 586, 106 S.Ct. at 1355-56.
Applying the above standards, we find no material facts in dispute concerning Liquidation Trustee's motion to reclassify, disallow, or expunge the relevant claims. We note, however, that the dollar amounts of certain claims remain in dispute pending resolution at trial and the completion of actuarial calculations.
We first direct our attention to the Minimum Funding Claim for mandatory postpetition statutory contributions...
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