Summary
The Eleventh Circuit held that a dissolved corporation can remain the "constructive sponsor" of an ERISA pension plan under federal common law, allowing the PBGC to hold other companies in the same controlled group liable for the plan's termination liabilities. The court ruled that where a plan sponsor dissolves under state law but continues to authorize payments and is not replaced, it persists as the sponsor for ERISA purposes, preventing a plan from existing without a responsible entity. This decision affirms that federal law, not state corporate dissolution law, determines sponsor identity in this context to further ERISA's goals of protecting beneficiaries and ensuring uniformity.
Topics
Practice areas
Questions Presented
- Whether Liberty remained the contributing sponsor of the pension plan under ERISA after its dissolution under state law, such that other companies owned by its sole stockholder are liable for the plan's termination liabilities.
- What is the effect of a dissolved corporation's continued administration of an ERISA plan on its status as plan sponsor?
Holdings
- Where the sponsor of an ERISA plan dissolves under state law but continues to authorize payments to beneficiaries and is not supplanted as the plan's sponsor by another entity, it remains the constructive sponsor such that other members of its controlled group may be held liable for the plan's termination liabilities.
Key quotations
“The answer to a seemingly simple but surprisingly complex question controls our disposition: Did the Liberty Lighting Company exist in July 2012?” (2)
“Concluding that, in the unusual circumstances of this case, Liberty still existed in 2012 sufficiently to act as the plan's sponsor under ERISA, we affirm the district court.” (2)
“Ruling for the Companies would mean holding that an extant pension plan may be left without a sponsor for decades, which could have vast ripple effects across even unrelated provisions of ERISA.” (12-13)
Factual background
Liberty Lighting Co. was an Illinois corporation that went bankrupt and dissolved in the 1990s. Joseph Wortley, its sole owner, continued to act as the plan administrator after dissolution, signing forms authorizing pension payments. The pension plan continued to operate. In 2012, the plan's funds ran low, and PBGC was notified. PBGC sued other companies owned by Wortley, alleging they were part of a controlled group liable for the plan's unfunded liabilities. The district court granted summary judgment to PBGC.
Procedural history
The district court denied the defendants' motion to dismiss and granted summary judgment to PBGC. The defendants appealed.