A federal appeals court in Florida has backed the Pension Benefit Guaranty Corp. in its legal bid to go after the owner of a company that took more than two decades to shut down its pension plan.
"From the confluence of bankruptcy, employee benefits and corporations law comes this most unusual case," wrote Judge Richard C. Tallman for the 11th Circuit U.S. Court of Appeals in Miami in the Nov. 24 order upholding a U.S. District Court's 2019 judgment for the PBGC.
The PBGC filed the case in July 2018 to collect unfunded benefit liabilities it was owed when the Liberty Lighting Co. Inc. Pension Plan for IBEW Employees, Chicago, was terminated and taken over by the agency, and for premiums owed to PBGC because of the termination. The lawsuit also sought to recover any property fraudulently transferred while Liberty and other companies owned by Joseph Wortley were winding down.
According to the PBGC, Liberty Lighting never notified the agency that the plan was at risk for termination, while the remaining companies said in court documents that "nobody ... knows if this is actually true; too much time has passed."
Liberty Lighting became sponsor and administrator of the plan in 1989 but by 1991 was forced into bankruptcy and in 1992 it was administratively dissolved by the state of Illinois. Mr.Wortley later filed for personal bankruptcy.
According to court documents, the pension plan has assets of $4.56 million and accrued liabilities of $3.54 million as of Jan. 1, 2002, the last 5500 filed. Pension benefits were paid until plan assets were depleted, and the plan was terminated in July 2012 when the PBGC became aware of the situation.
"PBGC's theory of the case under ERISA is simple: with Liberty unable to meet its ERISA obligations to its former employees, (Mr.) Wortley's other companies must foot the bill," Mr. Tallman said in the ruling, citing federal law that dictates that other companies owned by Liberty's owner may be held liable for the unfunded liability. "In the unusual circumstances of this case, Liberty still existed in 2012 sufficiently to act as the plan's sponsor under ERISA," said Mr. Tallman.
Officials at the PBGC could not be immediately reached for comment.