No High Court Review of Case Extending Pension Liability to Common Companies

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Jan. 12 — The U.S. Supreme Court announced that it won't wade into the debate over how a company can become liable for the pension obligations of a different company under common ownership.

The case comes from the U.S. Court of Appeals for the Seventh Circuit, which has issued more significant rulings on pension plan withdrawal liability than any other appellate court over the past several years.

In the case, the Seventh Circuit found several companies jointly liable for a $1.3 million withdrawal liability assessment, because the companies were majority-owned by one individual and therefore under common control.

That common control caused the companies with no multiemployer pension plan obligations to become jointly liable under the Multiemployer Pension Plan Amendments Act for the withdrawal liability assessment of one company that had stopped making required pension contributions, the court said.

The U.S. District Court for the Northern District of Illinois also found the companies jointly liable in its 2012 opinion.

Controlling Interest 

Both the district and the appellate court found that the defendant companies were under common ownership because one individual, George Cibula, satisfied the MPPAA's requirement of holding an 80 percent controlling interest in each company.

This was true even though Cibula only owned 73 percent of the shares in the company subject to the withdrawal liability assessment, the Seventh Circuit said, because he also held the right to vote the remaining 27 percent of the shares and to demand the release of those shares from escrow.

In their petition for Supreme Court review, the companies asked the justices whether the Seventh Circuit erred in ruling for the pension fund when there was evidence that the companies were neither under common control nor engaged in a trade and business as to be subject to withdrawal liability. They also asked the justices to consider their right to a jury trial and whether the district court wrongfully assessed fees and costs.

The Supreme Court announced its decision Jan. 12.

The petition for review was filed by Cassiday Schade LLP.

Text of the Seventh Circuit's opinion is at http://www.bloomberglaw.com/public/document/CENTRAL_STATES_SOUTHEAST_AND_SOUTHWEST_AREAS_PENSION_FUND_and_ART/2.