Pension Ben. Guar. Corp. v. Greene

• Decision Date: 16 March 1983
• Docket Number: Civ. A. No. 80-688.
• Citation: 570 F. Supp. 1483
• Parties: The PENSION BENEFIT GUARANTY CORPORATION, as Trustee of the Bollinger Corporation Salaried Employees Pension Plan and the Bollinger Corporation Union Employees Pension Plan and as Trustee of the Portersville Equipment Company Union Employees Pension Plan and the Portersville Equipment Company Salaried Employees Pension Plan, Plaintiff, v. Morton J. GREENE and Thomas R. Allen, Jr., as individuals and as former trustees of the Bollinger Corporation Salaried Employees Pension Plan, the Bollinger Corporation Union Employees Pension Plan, the Portersville Equipment Company Union Employees Pension Plan, and the Portersville Equipment Company Salaried Employees Pension Plan, and Economy Industrial Properties, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

570 F. Supp. 1483

The PENSION BENEFIT GUARANTY CORPORATION, as Trustee of the Bollinger Corporation Salaried Employees Pension Plan and the Bollinger Corporation Union Employees Pension Plan and as Trustee of the Portersville Equipment Company Union Employees Pension Plan and the Portersville Equipment Company Salaried Employees Pension Plan, Plaintiff, v. Morton J. GREENE and Thomas R. Allen, Jr., as individuals and as former trustees of the Bollinger Corporation Salaried Employees Pension Plan, the Bollinger Corporation Union Employees Pension Plan, the Portersville Equipment Company Union Employees Pension Plan, and the Portersville Equipment Company Salaried Employees Pension Plan, and Economy Industrial Properties, Defendants.

Civ. A. No. 80-688.

United States District Court, W.D. Pennsylvania.

March 16, 1983.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Asst. U.S. Atty. Craig R. McKay, Pittsburgh, Pa., and Pension Ben. Guar. Corp., Washington, D.C., for plaintiff.

William A. Hoffman, B.A. Karlowitz, Pittsburgh, Pa., for defendants.

MEMORANDUM OPINION

BLOCH, District Judge.

Plaintiff, the Pension Benefit Guaranty Corporation (hereinafter referred to as "PBGC"), is the government body created by the Employee Retirement Income Security Act of 1974 (hereinafter referred to as "ERISA") to administer the Mandatory Pension Plan Termination Program.¹ Defendants Morton Greene (hereinafter referred to as "Greene") and Thomas R. Allen, Jr. (hereinafter referred to as "Allen") are residents of Pennsylvania. At all times relevant to this action, Greene and Allen were trustees under four pension plans and general partners in defendant Economy Industrial Properties (hereinafter referred to as "Economy"). This Court has jurisdiction under ERISA, 29 U.S.C. § 1132.

The plaintiff's principal task under ERISA is to guarantee the payment of pension benefits to participants of terminated pension plans. The two individual defendants, Greene and Allen, were officers in five related Pennsylvania corporations and trustees of the trusts established to fund the four pension plans of those corporations. The pension plans were all terminated in 1976, and plaintiff was subsequently appointed as statutory trustee of the plans. Plaintiff brings this action to recoup certain monies from the defendants as follows: principal and interests on loans which the pension plans allegedly made to the corporations while the individual defendants were trustees; uncollected employee contributions; rental payments paid by two of the plans to Economy pursuant to, what plaintiff contends was, an illegal lease agreement; and certain interest payments from a plan investment which were sent to defendant Greene and which defendant Greene allegedly converted to his own use.

The defendants all deny any liability to plaintiff and assert two counterclaims of their own. First, defendant Economy alleges that the lease agreement between the plans and Economy was valid and demands the balance of the rental payments owed. Second, the defendants Greene and Allen claim that, in 1976, they requested that plaintiff provide them with a statement of their vested benefits pursuant to 29 U.S.C. § 1025(a).² Defendants Greene and Allen further claim that plaintiff has failed and refused to provide the requested information and that this makes plaintiff liable to defendants Greene and Allen for $100 per day from the date of such refusal or failure pursuant to 29 U.S.C. § 1132(c).³

At the pretrial conference, the parties indicated to the Court that the matter could be decided on motions for summary judgment. The Court agreed, and the parties have filed cross motions for summary judgment.

The parties have stipulated to the facts of this case, and that stipulation is attached to this Opinion as an exhibit. However, in order to enhance the comprehensibility of this Opinion, the Court summarizes the major facts at this point. The plaintiff is a wholly-owned United States government corporation created by ERISA, 29 U.S.C. § 1302, to administer the mandatory pension plan to termination insurance program created by Title IV of ERISA.

This action involves the following four Pennsylvania corporations: (1) Kincaid Industries, Inc. (hereinafter referred to as "Kincaid"); (2) Bollinger Corporation (hereinafter referred to as "Bollinger"); (3) Portersville Equipment Company (hereinafter referred to as "Portersville"); and (4) Superior Wall Products Company (hereinafter referred to as "Superior"). Moreover, it also involves four pension plans, namely: (1) the Bollinger Corporation Union Employees Pension Plan (hereinafter referred to as the "Bollinger Union Plan"); (2) the Bollinger Corporation Salaried Employees Pension Plan (hereinafter referred to as the "Bollinger Salaried Plan"); (3) the Portersville Equipment Company Union Employees Pension Plan (hereinafter referred to as the "Portersville Union Plan"); and (4) the Portersville Equipment Salaried Employees Pension Plan (hereinafter referred to as the "Portersville Salaried Plan.").

At all times relevant to this action, Greene was a director, officer, or shareholder of Kincaid, Bollinger, and Portersville, and a half-partner in Economy, and Allen was a director, officer, or shareholder of Kincaid, Bollinger, and Portersville, and a half-partner in Economy. Superior was a wholly-owned subsidiary of Kincaid. Greene and Allen became trustees of the trusts for the two Bollinger plans in the mid-1960's, and of the trusts for the two Portersville plans in 1970. They attempted to resign their trusteeships in 1974, but, as will be discussed at a later point in this Opinion, their attempted resignations were not successful. It must also be noted that Greene, Allen, Kincaid, Bollinger, and Superior were all parties in interests with respect to the two Bollinger plans pursuant to 29 U.S.C. § 1002(14), and Greene, Allen, Kincaid, Portersville, and Superior were all parties in interests with respect to the two Portersville plans pursuant to the same section.

All four corporations suffered financial difficulties in the early to middle 1970's, and Bollinger filed for bankruptcy in March of 1976. Portersville also filed for bankruptcy in April of 1976.

The Bollinger Union Plan terminated in December, 1976, and the Bollinger Salaried Plan terminated in February, 1977. Likewise, the Portersville Union and Salaried Plans terminated in July, 1976. The plaintiff subsequently became statutory trustee of all plans.

In addition to the stipulation of facts, the parties have filed affidavits, depositions, and a 644-page appendix that contains 62 joint exhibits, which the Court refers to in this Opinion. The Court, after carefully considering the motions, the stipulated facts and submitted materials, and the briefs of the parties, hereby grants the plaintiff's motion for summary judgment and denies defendants' motion.

The plaintiff's claim contains both pre-ERISA and ERISA violation. Accordingly, the Court deems it appropriate to discuss the pre-ERISA and ERISA violations separately below. Moreover, as stated above, the defendants assert counterclaims which will also be discussed in a separate section of this Opinion.

A. Pre-ERISA Claims

The plaintiff alleges that Greene and Allen violated their fiduciary responsibilities as trustees of the trusts in the 1971-74 period in violation of Pennsylvania trust law.⁴ In response to these claims, the defendants assert two major defenses. First, the defendants assert that the provisions of ERISA are inapplicable to most of the plaintiff's claims.⁵ Second, the defendants contend that the six-year statute of limitations, under either Pennsylvania law⁶ or ERISA,⁷ bars any claim against them which arises from conduct that occurred prior to May 22, 1974.⁸ The Court deems it appropriate to dispose of defendants' contentions before addressing the merits of plaintiff's pre-ERISA claims because resolution of these two contentions at this point will help facilitate orderly discussion and understanding of the pre-ERISA claims.

It appears that defendants' first contention — that the provisions of ERISA are inapplicable to several of plaintiff's claims — is acceptable to plaintiff since plaintiff bases its claims for pre-1975 conduct on state law. However, the Court deems it necessary to address the issue because of the jurisdictional question which it raises.

Title 29 U.S.C. § 1144(b)(1) provides that ERISA "shall not apply with respect to any cause of action which arose, or any act or omission which occurred, before January 1, 1975." In Martin v. Bankers Trust Co., 565 F.2d 1276 (4th Cir.1977), the plaintiff brought an action in federal court alleging an ERISA violation for acts which occurred before the effective date of ERISA. The Fourth Circuit held that ERISA's substantive provisions did not apply to the claim. The Third Circuit has also held that the language of 29 U.S.C. § 1144(b)(1) compels the conclusion that acts or omissions which occurred prior to the effective date of ERISA are not controlled by that Act. Reuther v. Trustees of Trucking Employees of Passaic and Bergen County Welfare Fund, 575 F.2d 1074, 1078 (3d Cir.1978). Thus, plaintiff's claims that arise from acts or omissions that occurred prior to the effective date of ERISA are controlled by state law, and not by ERISA. This gives rise to the question of whether state law claims can be heard in the same case as ERISA claims.

The answer to this question is found in a Second Circuit opinion and a decision of this Court relying upon that Second Circuit decision. In Morrissey v. Curran, 567 F.2d 546 (2d Cir.1977), the defendants improperly administered a pension plan by: (1) misappropriating funds for personal use, (2) improvidently investing over $1 million in a foreign venture, and (3) paying a large sum to the administrator of the plan. Id. at 547. The district court dismissed the suit finding that all acts complained of...