Pension Benefit Guaranty Corp. v. Findlay Industries, Inc.
The Pension Benefit Guaranty Corporation (PBGC) insures uninterrupted payment of benefits under terminated private-sector pension and health plans subject to ERISA, 29 U.S.C. 1001–1461. PBGC is funded by insurance premiums paid by sponsoring companies and from assets acquired from terminated plans and recovered from underfunded plan sponsors in bankruptcy. The plan's sponsor and “trades or businesses” related to the sponsor through common ownership are jointly and severally liable for those liabilities. PBGC sued to collect $30 million in underfunded pension liabilities from Findlay Industries following its 2009 shutdown and looked to hold liable a trust started by Findlay’s founder, Philip Gardner, and to apply the federal-common-law doctrine of successor liability to hold Michael, Philip’s son, liable. Michael, a 45 percent shareholder and former CEO of Findlay, had purchased Findlay’s assets and started his own companies using the same land, hiring many of the same employees, and selling to Findlay’s largest customer. The district court ruled against PBGC. The Sixth Circuit reversed. An entity that owns land and leases it to an entity under common control should be considered, categorically, a “trade or business” under ERISA, to recognize the differences between ERISA and the tax code, satisfy the purposes of ERISA, and be consistent with other circuits. Refusing to apply successor liability here would allow Findlay to fail to uphold its promises to employees, then engage in clever financial transactions that leave PBGC to pay millions in pension liabilities. View "Pension Benefit Guaranty Corp. v. Findlay Industries, Inc." on Justia Law