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SOLAR v. PENSION BEN. GUAR. CORP.

January 6, 1981

Joseph SOLAR, Sidney Fisher, Bernard Kelly, Frank Alexander, Vincent Regan, James Horne and Michael Mangot, as Trustees of the District No. 15 Machinists' Pension Fund, Plaintiffs,
v.
PENSION BENEFIT GUARANTY CORPORATION and Kollsman Instrument Company, Defendants



The opinion of the court was delivered by: POLLACK

Defendant Kollsman Instrument Company ("Kollsman") has moved for summary judgment pursuant to Rule 56, Fed.R.Civ.P. dismissing Count I of the complaint. The motion is predicated on the resolution by the governmental agency, the defendant Pension Benefit Guaranty Corporation ("PBGC") of questions of motivation and credibility in favor of Kollsman on the basis of which the Agency applied the relevant provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. in favor of Kollsman. The latter is entitled to summary judgment in its favor accordingly on the application to this Court to confirm the results reached by the Agency unless there is any defect in its resolution of the facts.

The Trustees of an employees' pension fund filed this suit for declaratory judgment that Kollsman had "withdrawn" from the Pension Plan and requested a mandatory injunction directing PBGC to invoke the procedures set forth in ERISA § 4063(d), 29 U.S.C. § 1363(d) and to enforce Kollsman's alleged liability under ERISA.

 PBGC twice found in favor of Kollsman (on November 9, 1976 and August 11, 1977), ruling on the facts that it had not "withdrawn" from the Pension Plan. Were it to have "withdrawn", Kollsman would now be liable for a percentage of the Plan's liability to pensioners. At the Court's direction for specific findings on the issue of Kollsman's motivation for a change in its operations the Agency responded with express findings on September 5, 1980 that factually Kollsman was motivated by ordinary and proper business reasons in opening its Plainview repair facility with fewer employees and had no purpose to circumvent the statute, i. e., avoidance of the consequences of § 4063 of ERISA was not a factor in Kollsman's action.

 For the reasons shown hereafter Kollsman is entitled to summary judgment in its favor, dismissing Count I of the complaint.

 I.

 To focus attention on and for a quick appreciation of the issue before the Court, it may be briefly noted that ERISA calls for aliquot payments to a Pension Fund in a multi-employer set-up on the basis of the number of employees in a business operation and if an employer withdraws from the business covertly and in bad faith, the employer nonetheless remains liable for contributions to the Fund on a fixed and absolute basis. (ERISA § 4063, 29 U.S.C. § 1363).

 However, where sound business reasons for scaling down a business operation are found to be the motivation of the employer, such findings cannot be equated with a "withdrawal" from the business. The contributions to the Fund on the scaled-down count, being pursuant to an obligation running from a collective bargaining agreement, established here that Kollsman had not withdrawn from the Plan. The participant's protection by the PBGC was unaffected, under existing law, since guaranteed benefits of participants would be paid by the PBGC to the extent of a Plan insufficiency. (ERISA §§ 4022, 4061, 29 U.S.C. §§ 1322, 1361).

 II.

 The written Joint Stipulations of the parties filed on April 30, 1979 on which the case was submitted and the Exhibits herein establish the following:

 The plaintiffs are trustees and administrators of a pension fund known as the District No. 15 Machinists' Pension Fund. The defendant Pension Benefit Guaranty Corporation is a non-profit corporation established within the Department of Labor under section 4002(a) of ERISA, 29 U.S.C. § 1302(a), to administer Title IV of ERISA, 29 U.S.C. § 1301 et seq., which governs the termination of pension plans. The defendant Kollsman Instrument Company is a division of Sun Chemical Corporation. Since 1976 Kollsman has maintained its largest factory in New Hampshire.

 The Fund of which the plaintiffs are trustees is a collectively bargained, joint labor-management administered fund created in 1958 and operated under the District No. 15 Machinists' Pension Fund Pension Plan, also adopted in 1958. The Fund is maintained jointly by District No. 15 of the International Association of Machinists and Aerospace Workers, AFL-CIO, and by numerous employers whose collective bargaining agreements with District No. 15 require them to contribute to the Fund. The Fund provides pensions to persons represented by District No. 15 and employed by contributing employers.

 Since 1942 District No. 15 has been the collective bargaining representative for Kollsman's production and maintenance employees in New York City and Nassau and Suffolk Counties. District No. 15 does not represent Kollsman's employees in New Hampshire. Before 1968, Kollsman had maintained a pension plan of its own for its hourly employees. In 1968 Kollsman agreed to merge its own pension plan with the Fund. Since then, Kollsman has been obligated to contribute to the Fund under successive collective bargaining agreements with District No. 15, and it has so contributed.

 During the early 1970s, Kollsman operated its largest factory in Syosset, Long Island. In 1974 Kollsman considered transferring certain of its operations from Syosset to New Hampshire. In November 1974, Kollsman and District No. 15 negotiated severance rights for employees who might be terminated as a result of a relocation. Between November 1974 and March 1976, Kollsman phased out its major manufacturing operations in Syosset and transferred them to New Hampshire. Thereafter, between March 1976 and December 1976, Kollsman established a new facility at Plainview, Long Island, and transferred to it the few manufacturing operations remaining at the Syosset plant and the Service and Repair facility that had been maintained there. On about December 31, 1976, Kollsman sold the Syosset facility. Kollsman has participated steadily in the Fund since 1968, but the number of employees for whom it has contributed has declined, as shown in the following table: Kollsman Year Participants 1968 171 6 1969 1515 1970 1082 1971 1173 1972 1243 1973 1186 1974 901 1975 545 1976 20 1977 11 1978 16

 See Ex. 6. The sixteen employees for whom Kollsman continues to contribute to the Fund are production and maintenance employees at its Plainview, Long Island facility. Kollsman and District No. 15 during the pendency of these proceedings were negotiating new job classifications that would include approximately twenty additional employees.

 Under section 4063(a) of ERISA, 29 U.S.C. § 1363(a), upon "the withdrawal of a substantial employer" from a plan under which more than one employer makes contributions, the administrator of the plan must notify the PBGC. The PBGC then determines whether the plan has sufficient assets to pay all benefits guaranteed by the PBGC under Title IV of ERISA. If not, the PBGC applies one of four statutory measures. The first two measures require the withdrawing employer to post security for the liability that it would owe to the PBGC if the plan were to terminate within five years of the withdrawal without sufficient assets to pay benefits guaranteed by the PBGC. ERISA § 1363(c). Under the third measure in section 4063, the PBGC directs that the plan be partitioned. ERISA § 4063(d), 29 U.S.C. § 1363(d). The portion of the plan attributable to the withdrawing employer is separated from the rest of the plan and terminated immediately. The remainder of the plan then continues as a separate plan. The fourth measure under section 4063(e), 29 U.S.C. § 1363(e), authorizes the PBGC to waive the other requirements of section 4063 if it determines that the employers who participate in the plan have entered into an indemnity agreement that satisfies the purposes of the section and of section 4064, 29 U.S.C. § 1364.

 On January 15, 1976, the Trustees notified the PBGC that Kollsman had reduced its contributions to the Fund and requested that the PBGC partition the Fund under section 4063(d). The PBGC asked the Trustees and Kollsman to submit various information relating to the request by the Trustees. Based on those submissions, the PBGC determined that Kollsman was still a contributing ...


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