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Lockheed Martin Corporation, On Its Own Behalf and As Plan v. Retail Holdings

April 26, 2011

LOCKHEED MARTIN CORPORATION, ON ITS OWN BEHALF AND AS PLAN SPONSOR, PLAN ADMINISTRATOR AND NAMED FIDUCIARY OF THE LOCKHEED MARTIN CORPORATION RETIREMENT INCOME PLAN III, PLAINTIFF-COUNTER-DEFENDANT-APPELLEE,
v.
RETAIL HOLDINGS, N.V., DEFENDANT-COUNTERCLAIMANT-CROSS-CLAIMANT-APPELLANT, METROPOLITAN LIFE INSURANCE COMPANY INC., MELLON INVESTOR SERVICES LLC, DEFENDANTS-CROSS-DEFENDANTS.



Appeal from a judgment of the United States District Court for the Southern District of New York (Griesa, J.) determining that the contract at issue did not transfer a certain pension plan from Appellee's predecessor to Appellant's predecessor, and that Appellee is therefore entitled to the disputed assets associated with the plan.

The opinion of the court was delivered by: Barrington D. Parker, Circuit Judge

09-2766-cv

Lockheed Martin Corporation v. Retail Holdings, N.V.

Argued: April 12, 2010

Before: WINTER, LEVAL, and B.D. PARKER, Circuit Judges.*fn1

REVERSED.

Appellant Retail Holdings, N.V. (together with its predecessors, "New Singer") appeals from a judgment of the United States District Court for the Southern District of New York (Griesa, J.), entered in favor of Appellee Lockheed Martin Corporation (together with its predecessors, "Old Singer") after a bench trial. The dispute revolves around the interpretation of a 1986 Reorganization and Distribution Agreement (the "Spin-Off Agreement") between Appellee's predecessor, The Singer Company, and Appellant's predecessor, SSMC Inc. At issue is whether the Spin-Off Agreement transferred a particular pension plan, the Executive Office Foreign Service Retirement Plan (the "EOFS Plan" or "Plan"), from Old Singer to New Singer.

The Plan is overfunded, and the party with legal rights to it will gain control of approximately $6 million in cash and stock. The district court, relying on extrinsic evidence, concluded that the Spin-Off Agreement did not transfer the EOFS Plan to New Singer, and accordingly ruled that Old Singer is entitled to the disputed assets. Because we conclude that the contract admits of only one reasonable interpretation, which is that the Plan was transferred to New Singer, we reverse.

BACKGROUND

The EOFS Plan The background of this controversy is complicated. As of the 1950s, Old Singer was engaged in the manufacture of Singer sewing machines and furniture. It was an international operation, with thousands of employees and numerous pension plans. In 1957, Old Singer established the EOFS Plan, a pension plan that covered certain Old Singer employees working overseas.*fn2

To satisfy its obligations under the Plan, Old Singer purchased Group Annuity Contract No. 365F ("GAC 365F") from the Metropolitan Life Insurance Company ("MetLife"), a nominal defendant. GAC 365F required MetLife to pay pension benefits to EOFS Plan participants once they retired. The Plan was funded by contributions from Old Singer and participating employees. Pursuant to GAC 365F, MetLife deposited these contributions into an account called the Annuity Purchase Payment Reserve (the "APPR"). Significant for purposes of this dispute, Section 11.2 of the EOFS Plan provides that upon termination, any "residual assets" of the Plan not required to be distributed to participants and beneficiaries in accordance with ERISA § 4044(d) would revert to Old Singer.

In 1972, the EOFS Plan was "frozen"--i.e., closed to new participants--and another plan was initiated to provide retirement benefits to Old Singer's overseas employees. However, existing EOFS Plan participants were permitted to continue participating in the EOFS Plan.

Accordingly, the EOFS Plan continued to provide benefits to already-retired participants and, over time, to new retirees who had been covered by the EOFS Plan when it was closed.

The Spin-Off Agreement During the 1970s, Old Singer expanded into new fields, including aerospace technology, and in the 1980s, decided to focus exclusively on its aerospace pursuits and to spin off its sewing and furniture businesses. Old Singer carried out this plan in 1986 by executing the Spin-Off Agreement with New Singer (then a subsidiary of Old Singer known as SSMC Inc.). Pursuant to the Agreement, Old Singer was split into two entities: New Singer, which acquired the sewing and furniture businesses, and Old Singer, which retained the aerospace technology businesses.

Articles II and IV of the contract contain broad asset and liability transfer provisions designed to effectuate the spin-off. The principal such ...


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