Pension Ben. Guar. Corp. v. Republic Technologies

• Decision Date: 30 September 2003
• Docket Number: No. 5:02 CV 01116.,5:02 CV 01116.
• Citation: 287 F.Supp.2d 815
• Parties: PENSION BENEFIT GUARANTY CORPORATION Plaintiff v. REPUBLIC TECHNOLOGIES INTERNATIONAL, LLC., et al. Defendants
• Court: U.S. District Court — Northern District of Ohio

Page 815

287 F.Supp.2d 815

PENSION BENEFIT GUARANTY CORPORATION Plaintiff v. REPUBLIC TECHNOLOGIES INTERNATIONAL, LLC., et al. Defendants

No. 5:02 CV 01116.

United States District Court, N.D. Ohio, Eastern Division.

September 30, 2003.

Lawrence J. Baer, Martin J. Bienenstock, Weil, Gotshal & Manges, LLP, New York, NY, Sean D. Malloy, Tyler L. Mathews, Shawn M. Riley, McDonald, Hopkins, Burke & Haber, Cleveland, OH, for Republic Technologies International, LLC., Defendant.

Heather N. Yanak, William G. Beyer, Susan E. Birenbaum, Pension Benefit Guaranty Corporation, Office of the General Counsel, Washington, DC, James J. Keightlcy, Pension Benefit Guaranty Corporation, Office of the General Counsel, Washington, DC, Ralph L. Landy, Washington, D.C., for Pension Benefit Guaranty Corporation, Plaintiff.

Jason H. Ehrenberg, Gary M. Ford, Lonie A. Hassel, Groom Law Group, Chartered, Washington, DC, David M. Fusco, Schwarzwald & McNair, Cleveland, OH, David R. Jury, Pittsburgh, PA, Paul

Whitehead, Pittsburgh, PA, for United Steelworkers of America, AFL-CIO,CLC, Defendant/Intervenor.

MEMORANDUM OPINION AND ORDER

ECONOMUS, District Judge.

This matter is before the Court upon the following three motions: (1) the Motion of the United Steelworkers of America for Partial Summary Judgment Establishing the Date of Plan Termination (Dkt.# 52); (2) the Motion of Pension Benefit Guaranty Corporation for Summary Judgment (Dkt.# 54); and (3) Republic Technologies International, LLC's Motion for Interim Appointment of Trustee (Dkt.# 64).

I. STATUTORY OVERVIEW

A. The Employee Retirement Income Security Act of 1974

In 1974, Congress enacted the Employee Retirement Income Security Act ("ERISA"), Pub.L. No. 93-406, 88 Stat. 829, (codified, as amended, at 29 U.S.C. §§ 1001-1461 (2003)), inter alia, "to ensure that employees and their beneficiaries would not be deprived of anticipated retirement benefits by termination of pension plans before sufficient funds [had] been accumulated in the plans." Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 720, 104 S.Ct. 2709, 81 L.Ed.2d 601 (1984) (citing Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 361-62, 100 S.Ct. 1723, 64 L.Ed.2d 354 (1980)). See also 29 U.S.C. § 1001(a) (including among ERISA's congressional findings "that owing to the termination of plans before requisite funds have been accumulated, employees and their beneficiaries have been deprived of anticipated benefits"). As codified, ERISA has three principal subchapters. Subchapter I addresses the protection of employee pension benefit rights by establishing "rules for reporting and disclosure, participation and vesting, funding of pension trust, fiduciary responsibility, and administration and enforcement." A-T-O, Inc. v. Pension Benefit Guaranty Corp., 634 F.2d 1013, 1014 (6th Cir.1980); see 29 U.S.C. §§ 1001-1191. Subchapter II establishes the enforcement jurisdiction of various federal departments and agencies over the statute's provisions, as well as creates the joint pension task force. See 29 U.S.C. §§ 1201-1242. The final subchapter— Subchapter III—provides insurance coverage for pension benefits plans. See 29 U.S.C. §§ 1301-1461. As the instant action arises from Subchapter III's "comprehensive and reticulated" provisions, Nachman, 446 U.S. at 361, 100 S.Ct. 1723, a brief overview of the subchapter's structure and text will aid the further analysis of this case.

B. The Pension Benefit Guaranty Corporation

Subchapter III is the "key to the congressional plan," Page v. Pension Benefit Guaranty Corp., 968 F.2d 1310, 1311 (D.C.Cir.1992) (Ginsburg, J.), designed "to guarantee that `if a worker has been promised a defined pension benefit upon retirement—and if he has fulfilled whatever conditions are required to obtain a vested benefit—he actually will receive it,'" R.A. Gray & Co., 467 U.S. at 720, 104 S.Ct. 2709 (quoting Nachman, 446 U.S. at 375, 100 S.Ct. 1723). Toward this end, Congress created the Pension Benefit Guaranty Corporation ("PBGC")—"a wholly-owned United States government corporation within the Department of Labor, modeled after the Federal Deposit Insurance Company." Pension Benefit Guaranty Corp. v. LTV Corp., 496 U.S. 633, 636-37, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990) (citing Cong. Rec. 29950 (1974) (statement of Sen. Bentsen)); see also 31 U.S.C. § 9101(1), (3)(J) (listing PBGC among "wholly-owned Government corporation[s]"). Congress vested PBGC with the authority to enforce and administer a mandatory Government insurance program that currently protects the pension benefits of over 44 million private-sector American workers who participate in 32,500 defined benefit pension plans.¹ See generally 29 U.S.C. § 1302; (Dkt. # 62, Supplemental Aff. of Wayne McKinnon ("McKinnon Supplemental Aff.") ¶ 2 and Ex. # 1 attached thereto, ("2002 Annual Report") at 5) (providing the most current data as to the extent of PBGC's operations).

PBGC's Operations

The Secretaries of the Treasury, Commerce, and Labor comprise PBGC's board of directors (the "Board"). See 29 U.S.C. § 1302(d).² The Board must administer PBGC's operations in accordance with three purposes:

(1) to encourage the continuation and maintenance of voluntary private pension plans for the benefit of their participants,

(2) to provide for the timely and uninterrupted payment of pension benefits to participants and beneficiaries under plans ..., and

(3) to maintain premiums established by the corporation under section 4006 [29 U.S.C.S. § 1306] at the lowest level consistent with carrying out its obligations under this title.³

29 U.S.C. § 1302(a)(1),(2),(3) (bracketed material in the original).

PBGC's operations include collecting insurance premiums from covered pension plans and providing benefits to participants in those plans if the plan terminates with insufficient assets to support its guaranteed benefits. See 29 U.S.C. §§ 1322, 1361 (establishing the types of guaranteed benefits and PBGC's mandate to pay guaranteed benefits upon termination, respectively). PBGC derives financing for its operations from four sources: (1) the insurance premiums set by Congress and paid by sponsors of defined benefit plans; (2) assets from terminated pensions plans trusteed by PBGC; (3) investment income; and (4) recoveries from the companies formerly responsible from trusteed plans. See (McKinnon Supplemental Aff. ¶ 2 and 2002 Annual Report at 39); see also (Dkt. # 55, Mem. of Points and Authorities in Supp. of Mot. of Pension Benefit Guaranty Corp. for Summ. J. ("Pl.'s Mem. in Supp."), Ex. # 3 attached thereto at 2). Plan Terminations

PBGC's principal operations are to monitor and, under limited circumstances, initiate the termination of defined benefit plans where the plans have insufficient assets to satisfy their obligations to participants. In this situation, PBGC "becomes the trustee of the plan, taking over the plan's assets and liabilities." LTV, 496 U.S. at 637, 110 S.Ct. 2668. PBGC thereafter merges the remaining assets of the terminated plan with its own funds to "ensure payment of most of the remaining `non-forfeitable benefits.'"⁴ See 29 U.S.C. §§ 1301(a)(8), 1322(a) & (b); LTV, 496 U.S. at 638, 110 S.Ct. 2668. PBGC then pays benefits according to congressionally prescribed limits. See 29 U.S.C. § 1322(b)(3)(B).

Congress has entrusted PBGC with the authority to conduct both voluntary and involuntary terminations of defined benefit plans. See 29 U.S.C. §§ 1341-42. Voluntary terminations take two forms. First, a "standard termination" occurs when the employer has sufficient assets to pay all the benefit commitments of a terminated plan. See 29 U.S.C. § 1341(b); see also LTV, 496 U.S. at 639, 110 S.Ct. 2668. The second form of voluntary termination occurs when the company does not have sufficient funds to pay its obligations to the employees. See 29 U.S.C. § 1341(c). Under this latter form of termination, the employer must demonstrate financial distress to PBGC. See 29 U.S.C. § 1341(c).

Similarly, involuntary termination proceedings generally involve business entities that are experiencing severe financial difficulty. See 29 U.S.C. § 1342. Indeed, PBGC must initiate involuntary termination proceedings against a defined benefit plan when it determines that any of the following four factors are present:

(1) the plan has not met the minimum funding standard ... [;]

(2) the plan will be unable to pay benefits when due[;]

(3) the reportable event described in section 4043(c)(7) [29 USCS 1343(c)(7)] has occurred[;] or

(4) the possible long-run loss of the corporation with respect to the plan may reasonably be expected to increase unreasonably if the plan is not terminated.

29 U.S.C. § 1342(a)(1),(2),(3),(4) (brackets in original).

Where PBGC seeks involuntary termination, the statute authorizes the plan administrator⁵ and PBGC to select a mutually acceptable date for plan termination ("DOPT"). See 29 U.S.C. § 1348(a)(3). If the parties are unable to reach an agreement, the statute vests the court with the authority to select an appropriate DOPT. See 29 U.S.C. § 1348(a)(4).

II. FACTUAL HISTORY⁶

The instant action arises from the PBGC's initiation of involuntary termination proceedings against four defined benefit plans administered by the Defendant, Republic Technologies International, LLC ("RTI").

A. RTI

During all times relevant, RTI was a leading domestic producer of special bar quality ("SBQ") steel products. See (Dkt. # 1, Compl. ¶ 6; Dkt. # 11, Answer ¶ 6; A.R.⁷ 12, 185). RTI supplied SBQ steel products primarily to the automotive and industrial equipment industries. See (A.R.12, 185).

RTI is the surviving entity from several mergers and purchases of steel companies throughout the late 1980s and 1990s. RTI's emergence dates to 1989 when Republic Engineered Steels, Inc. ("RESI") was formed to operate the assets of the former Bar Division of LTV Steel Company, Inc. See (A.R.185). In 1998, RES...