The opinion of the court was delivered by: FREDERICK J. SCULLIN, JR.
Memorandum-Decision and Order
The above-captioned case was initiated by the plaintiffs on July 3, 1991 with the filing of the complaint. The defendants have answered the complaint and now have filed a motion for summary judgment, to which the plaintiffs have responded. The Pension Benefit Guaranty Corporation [hereinafter referred to as "PBGC"], on November 12, 1992, filed an application to enter the lawsuit as amicus curiae while simultaneously providing a copy of the brief intended for the court. At oral argument on November 13, 1992, there being no objection by either party, the PBGC was granted leave to appear as amicus curiae and the amicus brief was ordered to be filed. The plaintiffs were given leave to submit a response to the brief filed by the PBGC, which they have since done. In addition, the defendants have filed their reply to the plaintiffs' response. Thus, this motion for summary judgment is now presented to this court for decision.
Rome Cable Corporation [hereinafter referred to as "Rome Cable"] maintained and sponsored two retirement plans for the benefit of its employees. The first was known as the Retirement Income Plan for Hourly Employees [hereinafter referred to as the "Hourly Plan"] and the second was the Pension Plan for Salaried Employees of Rome Cable Corporation [hereinafter referred to as the "Salaried Plan"]. See Plaintiffs' Memorandum of Law at 1.
The Hourly Plan, the plan to which this litigation relates, is a defined benefit pension plan subject to the regulatory oversight of the Internal Revenue Service, the PBGC and the United States Department of Labor. See White Affidavit at P 2.
On July 13, 1987, Rome Cable submitted to all participants, the Union, and the PBGC a formal Notice of Intent to Terminate the Hourly Plan under the distress termination provisions of the Employees Retirement Income Security Act (ERISA), more specifically, under the provisions of the Single Employer Pension Plan Amendments Act of 1978 [hereinafter referred to as "SEPPAA"], which is that portion of ERISA that is applicable to the first three causes of action alleged in the complaint. See id. at P 9 & Exhibit 10 annexed thereto.
Pursuant to section 4041(c)(2)(B)(iii)(I) of SEPPAA (codified as 29 U.S.C. § 1341(c)(2)(B)(iii)(I)), the submissions of Rome Cable were reviewed and the distress termination of the Hourly Plan was approved, effective September 14, 1987. See id. at PP 13, 14 & Exhibit 14 annexed thereto. At that time, the Hourly Plan was approximately $ 14.5 million underfunded.
As is mandated by section 4042 of SEPPAA, at the time the Hourly Plan was distress terminated, the PBGC was appointed the Plan's Trustee, a trustee commonly referred to as the "4042 Trustee." See id. It is the obligation of the PBGC to maintain and guarantee the plan with respect to its guaranteed benefits. The unguaranteed benefits are to be handled separately by another trustee appointed by the PBGC, the so-called "4049 Trustee," which, in this case, was not appointed until much later in the chronology of events.
Since the distress termination of the Hourly Plan, Rome Cable has continued its business operations and has continued to maintain the Salaried Plan.
On December 9, 1988, the PBGC, as 4042 Trustee, executed an Agreement with Rome Cable which contained the following provisions:
- the PBGC assumed all of the obligations of Rome Cable with respect to payment of guaranteed pension benefits to participants and beneficiaries (see Exhibit 16 at 2);
- Rome Cable transferred all assets of the Hourly Plan to the PBGC (see id. at 3 P 2);
- Rome Cable gave the PBGC a ten year Promissory Note in the amount of $ 3 million with accrued interest and secured by a blanket lien on Rome Cable's real and personal property, and a ten-year Profit Sharing interest in Rome Cable (see id. at 3-5 P 4);
- the PBGC accepted this consideration as full and complete satisfaction of all the obligations and liabilities of Rome Cable and of its officers, directors and shareholders areas, to the PBGC with respect to the Hourly Plan and the funding thereof under section 4062 of SEPPAA (29 U.S.C. §§ 1301 et seq.), and released Rome Cable from any and all claims which it may have had against Rome Cable, whether accrued, absolute, contingent or otherwise with respect to the Hourly Plan under sections 4062 and 4068 of SEPPAA (29 U.S.C. §§ 1362, 1368) (see id. at 12 P 14).
The plaintiffs commenced this lawsuit on July 3, 1991. In their complaint, the plaintiffs allege seven causes of action:
1) that during the period 1983 through 1987, the defendant Rome Cable failed to fund the Hourly Plan in accordance with terms of the Hourly Plan and with sections 302 and 412 of ERISA (29 U.S.C.§§ 1082 and 1192 respectively), for which they seek $ 15,009,000.00 together with interest thereon from the date of termination of the Hourly Plan plus costs and attorneys' fees;
2) that Rome Cable terminated the Hourly Plan without paying the funding deficiency then due in violation of section 4062 of SEPPAA (29 U.S.C. § 1362), for which they seek $ 5,600,821.00 together with interest thereon from the date of termination of the Hourly Plan plus costs and attorneys' fees;
3) that Rome Cable failed to pay the Hourly Plan the contributions required by the collective bargaining agreement so that the benefit commitments promised under the Hourly Plan could be met, as a violation of section 301 of the Labor-Management Relations Act [hereinafter referred to as "LMRA"], for which they seek $ 15,009,000.00 together with interest thereon from the date of termination of the Hourly Plan plus costs and attorneys' fees;
6) that the defendant fiduciaries failed to fulfill their obligations to act for the sole benefit of the Hourly Plan pursuant to section 404(a)(1) of ERISA in that they failed to take steps to correct their prior fiduciary breaches, for which they seek $ 12,500,000.00 together with interest from the date of termination of the Hourly Plan plus costs and attorneys' fees.
A local attorney was appointed the 4049 Trustee by the PBGC in July of 1992 to negotiate with and collect from Rome Cable the outstanding unguaranteed benefit commitments, if any, under the Hourly Plan on behalf of its participants and beneficiaries. See White Affidavit PP 16, 17. On September 11, 1992, the Section 4049 Trustee commenced an action in the Northern District of New York to collect the amounts owed by Rome Cable to the Hourly Plan as unguaranteed benefits. See Index No. 92-CV-1181(NPM).
The Hourly Plan here was maintained pursuant to the provisions of the Single Employer Pension Plan Amendments Act of 1978 (SEPPAA). SEPPAA, in this case, provides not only the procedural framework for the plan itself but also provides the procedural mechanism for the distress termination of the Hourly Plan, which is the gravamen of this motion and case.
In accomplishing a distress termination for a single employer pension plan, at the time of this plan termination, SEPPAA provides that after the requisite notices of termination are provided to the plan's participants and beneficiaries, and after the PBGC approves of the distress termination, the PBGC steps in and takes over the payments of the vested, guaranteed portion of the plan's benefits.
In this case, pursuant to the provisions of SEPPAA, the PBGC appointed itself the Section 4042 Trustee, so called because the trust is created pursuant to the provisions of section 4042 of SEPPAA, 29 U.S.C. § 1342. In appointing itself 4042 Trustee, the PBGC took over the administration of the vested, guaranteed portion of the plan. See Exhibit 14 annexed to White Affidavit. Subsequently, pursuant to its authority under 29 U.S.C. § 1367, the PBGC entered into a settlement agreement with the defendants whereby the defendants were released from all obligations and liabilities relative to the vested, guaranteed benefits. See Exhibits 14 & 16 annexed to White Affidavit.
The vested, unguaranteed benefits of the Hourly Plan amount to approximately $ 619,750. These benefits are not statutorily protected by the PBGC. Rather, it is the obligation of the Section 4049 Trustee to attempt to recoup those funds from the plan sponsor, Rome Cable. As stated, the 4049 Trustee has initiated an action against Rome Cable for that purpose. See 92-CV-1181.
The defendants have moved for summary judgment with respect to each of the causes of action alleged by the plaintiffs in their complaint, alleging various grounds for the relief sought. Each ground for summary ...