HOT TOPIC 1: Nebraska Lemon Law
Click here to download the PDF by Nancy Wynner

HOT TOPIC 2: Law Firm Management Tech. Issues
Click here to download the Power Point by Bill Olson

HOT TOPIC 3:  BECK v. PACE INTERNATIONAL UNION
No. 05-1448 Supreme Court, June 11, 2007

FACTS:
            Crown Paper Company operated seven different paper mills and employed approximately 2,600 persons.  Pace International Union represented employees covered by seventeen of Crown’s defined benefit pension plans.  Crown administered these plans, none of which were part of a multi-employer pension plan.
            Crown filed for bankruptcy in March of 2000 and proceeded to liquidate assets.  Crown informed the Union that it was considering a standard termination of the plans, which would mean that the terminated plans would have sufficient assets to cover potential benefit liabilities.
            Pace proposed that Crown merge its plans into the Union’s multi-employer plan.  The Pace proposal was simple:  Crown would be required to convey all plan assets to its multi-employer plan, and Pace would be responsible for all plan liabilities. 
            Though Crown took the matter under advisement, it discovered that it could purchase annuities to cover its plan liabilities and retain a $5 million reversion for its other creditors, since the plans were over-funded.  Based upon this financial reasoning, Crown rejected the Pace proposal to merge the plan.

DECISION:
            In Beck v. Pace International Union, 551 U.S.             , 05-1448 (Sup. Crt. 2007), the Court ruled that Crown did not breach its fiduciary duties by refusing to consider the plan merger.  Its decision reversed that of the 9th Circuit Court of Appeals, which had ruled that the implementation of the termination decision was fiduciary in nature, and that merger was a permissible termination method. 

            The Supreme Court rejected this reasoning, holding that ERISA Section 1341(b)(3)(A) provides only two methods of terminating a single employer plan:  (1)  the purchase of irrevocable commitments from an insurer (annuities) to provide all benefit liabilities, or (2) a full payout of benefit liabilities in accordance with the plan terms. 
            Pace argued that the statutory language, “...otherwise fully provide all benefit liabilities under the plan” could be construed to require discussion of a plan merger.  The court placed great reliance on the PBGC’s Regulations, which basically conclude that a merger is an alternative to, rather than an example of, a plan termination. 
            The court found that three points were particularly persuasive.  First, terminating a plan through the purchase of annuities formally severs the applicability of ERISA to any plan assets and employer obligations.  Second, a standard termination allows the employer to recoup surplus funds, as Crown sought to do in this case.  However, ERISA prohibits employers to obtain a reversion of plan funds if there is not a plan termination. Third, the court concluded that the structure of ERISA, and the legislative history, amply demonstrated that the statutory provision in question does not include a merger as an option. 

            The court concluded its holding in part as follows:

“For all the foregoing reasons, we believe that the PBGC’s construction of the statute is a permissible one, and indeed the more plausible.  Crown did not breach its fiduciary obligations in failing to consider Pace’s merger proposal because merger is not a permissible form of termination.  Even from a policy standpoint, the PBGC’s choice is an eminently reasonable one, since termination by merger could have detrimental consequences for plan beneficiaries and plan sponsors alike.” 

IMPACT
            The court’s decision is a logical one, and is consistent with its past decisions calling for a strict interpretation of ERISA statutory provisions.  The decision may likely have an impact on future NLRB claims as well, clarifying any duty to bargain over these issues.  It is also difficult to fault under bankruptcy court standards, since the decision netted an additional  $5 million to be distributed to creditors. 

            The ruling is a benefit to employers that also serve as their own plan administrators, since it limits the scope of fiduciary duty.  The court’s deferral to PBGC regulations and its position is not surprising, given the fact that a merger would involve less PBGC oversight in the process.  Since ERISA matters are to be construed in the best interest of plan beneficiaries, and no one disputed that the annuities purchased by Crown were sufficient to satisfy its commitment to plan participants and beneficiaries, the court’s decision is both logical and consistent, and should not be a cause of alarm for any future similarly-situated plan beneficiaries.