United States District Court, Northern District of Illinois, E. D
June 18, 1982
PENSION BENEFIT GUARANTY CORPORATION, PLAINTIFF,
ANTHONY COMPANY, ET AL., DEFENDANTS.
The opinion of the court was delivered by: Shadur, District Judge.
SUPPLEMENT TO MEMORANDUM OPINION AND ORDER
Pension Benefit Guaranty Corporation ("PBGC") sues Anthony
Company ("Anthony") and its parent company M. S. Kaplan Company
("Kaplan") under Section 4062 of the Employee Retirement Income
Security Act of 1974 ("ERISA"), 29 U.S.C. § 1362,*fn1 to
recover the vested but unfunded benefits under Anthony's
pension plan (the "Plan") as of the time of its termination.
This Court's April 27, 1982 memorandum opinion and order (the
"Opinion") denied Kaplan's motion for dismissal from the
Complaint and ordered Kaplan to respond to PBGC's partial
summary judgment motion. 537 F. Supp. 1048.
Kaplan then filed a very brief response, taking the position
that PBGC's motion was premature because of the open factual
issues identified in the Opinion. PBGC has filed its reply
memorandum in support of its own motion. For the reasons stated
in this memorandum opinion and order, PBGC's motion is denied.
This opinion is really a supplement to the Opinion because PBGC
essentially seeks to reargue the issues decided in the Opinion
under the guise of its motion. In the first instance it again
refers to "the economic benefits that naturally flow from such
ownership" of Anthony stock by Kaplan as the predicate for
summary judgment as to liability. That argument was not
bought by this Court when it wrote the Opinion, for this Court
held due process demanded direct financial benefit as the
price for imposing Section 1362 liability on Kaplan. Neither
party has yet addressed the issue of how much if any direct
financial benefit Kaplan has received. It would be a
contradiction in terms to grant PBGC summary judgment as to
liability when Kaplan's liability may be zero.
PBGC's other arguments are no more persuasive in the context of
its partial summary judgment motion than they were when this
Court held Section 1362 could be unconstitutional as applied to
Kaplan. Indeed PBGC is simplistic in lecturing the Court about
its proper role vis-a-vis Congress under such familiar cases as
Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 18-19, 96
S.Ct. 2882, 2894-2895, 49 L.Ed.2d 752 (1976), or about the
corresponding balance of function between federal courts and
state legislators under such cases as Williamson v. Lee
Optical Co., 348 U.S. 483, 488, 75 S.Ct. 461, 464, 99 L.Ed.
563 (1955). This Court is highly sensitive to its role in
determining whether any legislative judgment crystallized in a
statute is consistent with due process. It did not reach its
conclusion in the Opinion lightly or without full deliberation.
In fact PBGC would do well to note that Congress did not
mandate the result for which PBGC argues. It was rather the
Regulations authorized by Congress that did so, even though
the Regulations could have been drafted to avoid the due
process violation found by this Court. This is particularly
true in terms of the problem posed by this case: a corporate
acquisition taking place after a pension plan was already
adopted and before ERISA created a previously unknown and
unanticipated concept of personal liability for future
contributions. There would have been nothing to prevent the
Secretary of the Treasury, in whose expertise Congress reposed
its confidence, from defining parent corporation liability in
terms of parent company benefits. That would have been
responsive both to the congressional mandate and to the
constitutional due process mandate. Under the circumstances
PBGC cannot claim to wrap itself in the mantle of a Congress
unjustly subverted by a federal court.
Indeed, in terms of the statute we are confronted with two
provisions whose principal focus was not exactly the same, but
that are capable of interacting in a totally arbitrary and
unreasonable manner because of the flawed Regulations. Anyone
who has practiced in the ERISA field knows that the definition
of "employer" in Section 1301(b)(1) was expressed in broad form
primarily to prevent the then-familiar practice of
discriminating in pension plan coverage by creating separate
corporate entities — or put differently, to preclude companies
from the selective assignment of employees to different
corporations, though the employees were within the same
economic entity in real-world terms, in an effort to avoid the
requirement that highly-paid employees not be favored by such
plans. But the termination provision aims primarily at a
somewhat different problem: as stated more extensively in the
Opinion, to prevent premature termination of a plan by an
employee's real employer so as to frustrate the employee's
reasonable expectations as to pension benefits.
Those two goals may of course coincide in many circumstances,
but in many they do not. P.B.G.C. v. Dickens (see nn. 5 and
17 of the Opinion) illustrates the outrageous lengths to which
the Regulations as literally applied would go. It should be
emphasized again that Congress left the shaping — the fine
tuning — to the Secretary of the Treasury. It was the experts'
job to draft the Regulations in a way that would accomplish the
congressional goals without doing violence to reason in the way
discussed in the Opinion and exemplified by Dickens. Though
Dickens is paradigmatic, it only illustrates the problems
dealt with at length in the Opinion.
PBGC's motion for partial summary judgment is denied. As to its
alternative motion for certification under 28 U.S.C. § 1292(b),
PBGC has made no showing "that an immediate appeal from the
order may materially advance the ultimate termination of the
litigation." There is nothing in the record to justify a
piecemeal appeal. That motion is denied as well.