1
IN THE UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MISSOURI
SOUTHEASTERN DIVISION
In re: ) Chapter 11
)
BRIGGS & STRATTON )
CORPORATION, et al.,1 ) Case No. 20-43597-399
)
) (Jointly Administered) Debtors. )
) Hearing Date: May 12, 20221
) Hearing Time: 10:00 a.m. (Central Time) ) Hearing Location: Courtroom 5 North ) 111 S. 10th St., St. Louis, MO 63102 RESPONSE OF PENSION BENEFIT GUARANTY CORPORATION
TO PLAN ADMINISTRATION TRUSTEE’S SIXTEEN OMNIBUS OBJECTION TO CLAIMS ON THE GROUNDS THAT SUCH CLAIMS
ARE DUPLICATIVE (PENSION) (DKT. NOS. 1666 AND 1667)
In the Sixteen Omnibus Objection (Dkt. Nos. 1666 and 1667) (“Objection”), the Plan Administration Trustee (“Plan Administration Trustee”) objects to claims (“No Liability Claims”) identified in Exhibit A of the Objection. At Exhibit A, the Plan Administration Trustee identifies claims filed by, or on behalf of, certain employees with regards to amounts asserted for pension benefits under the Briggs and Stratton Pension Plan (the “Pension Plan”).
The Pension Benefit Guaranty Corporation (“PBGC”)2 files this Response to the No Liability Claims that may be related to the Pension Plan. PBGC does not oppose the relief sought
1 The Wind-Down Debtors in these Chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number are: Briggs & Stratton Corporation (2330), Billy Goat Industries, Inc. (4442), Allmand Bros., Inc. (4710), Briggs & Stratton International, Inc. (9957), and Briggs & Stratton Tech, LLC (2102). The location of the Plan Administration Trustee’s service address for purposes of these chapter 11 cases is: Halperin Battaglia Benzija LLP, 40 Wall Street, 37th Floor, New York, New York, 10005.
2 Capitalized terms not otherwise defined herein are defined as in the Debtors’ Second Amended Joint Plan (Docket No. 1434).
in the objection with regards to the No Liability Claims because under the applicable law and for the reasons set forth below, the claimants identified in the Objection, all of whom are participants in the Pension Plan, must look exclusively to PBGC for any benefits they may be entitled to under the terminated Pension Plan.
BACKGROUND A. PBGC and ERISA’s Statutory Provisions
PBGC is a wholly owned United States government corporation, and an agency of the United States, that administers the defined benefit pension plan termination insurance program under Title IV of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). 29 U.S.C. §§ 1301-1461 (2018).
PBGC guarantees the payment of certain pension benefits upon the termination of a single-employer pension plan covered by Title IV of ERISA. When an underfunded pension plan terminates, PBGC generally becomes trustee of the pension plan and, subject to certain statutory limitations, pays the pension plan’s unfunded benefits with its insurance funds. See 29 U.S.C. §§ 1321-1322, 1342, 1361.
Title IV of ERISA provides the exclusive means to terminate a defined benefit pension plan, and PBGC regulates such terminations. See 29 U.S.C. §§ 1341, 1342. An employer may terminate a pension plan in a “standard” termination if the pension plan is fully funded, or the employer may seek termination in a “distress” termination if the employer and each member of its controlled group demonstrate that they meet certain requirements relating to their financial
viability. When an underfunded pension plan terminates in a distress or PBGC-initiated
termination, PBGC typically becomes trustee of the pension plan and assumes an unconditional obligation to pay participants and beneficiaries their lifetime Title IV benefits. See 29 U.S.C. §§ 1322, 1361. The employer, however, is not relieved of its liability for the benefits it promised
to its employees. Instead, under ERISA, the employer and each member of its controlled group become jointly and severally liable as follows: (1) to PBGC for the “amount of unfunded benefit liabilities” of the pension plan pursuant to 29 U.S.C. §§ 1362(a) and (b); (2) to the pension plan for unpaid minimum funding contributions owed under to 26 U.S.C. §§ 412 and 430 pursuant to 29 U.S.C. §§ 1082, 1342, and 1362 (a) and (c); and (3) to PBGC for any unpaid premiums owed pursuant to 29 U.S.C. § 1307. If a pension plan terminates in a distress termination pursuant to 29 U.S.C. §§ 1341(c)(2)(B)(ii) or (iii) or in an involuntary termination under 29 U.S.C. § 1342, the plan sponsor is liable to PBGC for termination premiums at the rate of $1,250 per pension plan participant per year for three years. See 29 U.S.C. § 1306(a)(7), as amended.
Where the employer is in bankruptcy, PBGC files claims so that it can receive its share of any distributions made to similarly situated creditors. See 11 U.S.C. § 1123(a)(4).
B. The Debtors’ Pension Plan
On July 20, 2020, Briggs & Stratton Corporation, the former sponsor of the Pension Plan, and each of the other Debtors filed a petition for relief under Chapter 11 of the Bankruptcy Code through this proceeding in this Court.
As it does in other bankruptcy proceedings where a debtor sponsors a defined benefit pension plan covered by Title IV of ERISA, PBGC timely filed proofs of claim and statements in support in this proceeding related to the Pension Plan on October 1, 2020: for $202,400,000.00 for unfunded benefit liabilities under 29 U.S.C. §§ 1362 and 1368 (Claim Nos. 20, 21, 59, 105, 984); and for $18,517,500.00 for termination premiums under 29 U.S.C. § 1306(a)(7) (Claim Nos. 19, 20, 58, 104, 985) (collectively, the “PBGC Claims”).
The Pension Plan terminated effective September 20, 2020. By an agreement between PBGC and the administrator of the Pension Plan dated October 5, 2020, PBGC became statutory trustee of the Plan pursuant to 29 U.S.C. § 4042(b)(3). At the time of its termination, the Plan had
4,938 participants. This includes the 172 participants and/or beneficiaries seeking to recover benefits under the Pension Plan from their respective employers, who are the subject of this Objection. See Ex. A. Dkt. Nos. 1666 and 1667. As statutory trustee, PBGC is administering the Pension Plan and has, with respect to the Pension Plan, all the rights and powers of a trustee specified by ERISA or otherwise granted by law. See 29 U.S.C. § 4042(d). PBGC is paying or will pay pension benefits to participants, including the claimants/participants asserting No Liability Claims.3
ARGUMENT
To the extent any Pension Plan participants and beneficiaries seek payment for unpaid Pension Plan benefits through their own proofs of claim in this proceeding, such claims should be disallowed because PBGC has the exclusive right under ERISA to recover the Pension Plan’s unfunded benefit liabilities from Debtors. Courts have held that pension plan participants cannot recover monies directly from their employer’s bankruptcy estate for the benefits of their
terminated pension plan. See, e.g., United Steelworkers of Am. v. United Eng’g, Inc., 52 F.3d 1386, 1393 (6th Cir. 1995); Ricke v. Armco, Inc., 882 F. Supp. 896, 899 (D. Minn. 1995), order aff’d and remanded by, 92 F. 3d 720 (8th Cir. 1996); In re Lineal Group, Inc.226 B.R. 608, 613-14 (Bankr. M.D. Tenn. 1998); Adams Hard Facing Co. V. AHF Corp., 129 B.R. 662, 663 (W.D. Okla. 1991).
In United Steelworkers of America, the Sixth Circuit held that ERISA preempts
employees’ direct actions against employers to recover pension benefits. 52 F.3d at 1393. To hold otherwise would allow participants to recover their pension benefits from both PBGC and their employer, and it would force the employer’s bankruptcy estate to pay the identical claim to
3 Participants in the Pension Plan can find additional information at
both PBGC and to the participants. Id. As another court stated, “it would be counterproductive indeed to find that the employer would, following a distress termination, be liable not only to the PBGC but also remain liable to the plan participants and beneficiaries.” Int’l Ass’n of Machinists and Aerospace Workers v. Rome Cable Corp., 810 F. Supp. 402, 407 (N.D.N.Y. 1993).
Here, 172 Pension Plan participants are seeking to recover benefits under the Pension Plan from their respective employers.4 Their No Liability Claims should be disallowed, as to hold otherwise would result in a double recovery by the participants and a double payment by Debtors, the Pension Plan’s former sponsor. Participants would recover benefits from both Debtors and PBGC, and Debtors would pay the same claim twice – once to the participants and once to PBGC.
On these grounds, this Court should disallow and expunge the No Liability Claims.
CONCLUSION
PBGC requests this Court disallows and expunges the No Liability Claims because PBGC has the exclusive right to recover Pension Plan claims from Debtors’ bankruptcy estate under the law.
4 PBGC is aware that at least one of the 172 claimants listed as a No Liability Claim has responded to the Objection,
asserting that his claim is not for ERISA guaranteed pension benefits but is made in the context of a different pension plan maintained by Debtors (Dkt. No. 1702). PBGC has been informed by Debtors’ counsel that his response is correct, and that he should not have been included in the list of No Liability Claims. PBGC’s Response to the Objection relates only to those individuals listed who are participants or beneficiaries in the terminated Pension Plan; PBGC takes no position with respect to those claimants, if there are any others, whose claims do not relate to the terminated Pension Plan, except to say that they should not have been included in the instant Objection.
Respectfully Submitted, Dated: May 5, 2021
Washington, D.C. /s/ Mai Lan G. Rodgers
F. Russell Dempsey, General Counsel Kartar Khalsa, Deputy General Counsel John A. Menke, Assistant General Counsel Mai Lan G. Rodgers, Attorney
(admitted pro hac vice)
Erin Kim, Attorney (admitted pro hac vice)
Kem Tae M. Lynch, Attorney (admitted pro hac vice)
PENSION BENEFIT GUARANTY CORPORATION
Office of the General Counsel 1200 K Street, N.W.
Washington, D.C. 20005 Telephone: (202) 229-3946 Facsimile: (202) 326-4138
E-mail: [email protected] and [email protected]
Attorneys for Pension Benefit Guaranty Corporation
CERTIFICATE OF SERVICE
I hereby certify, that on this 5th day of May, 2021, the Response of Pension Benefit Guaranty Corporation to Plan Administration Trustee’s Sixteen Omnibus Objection to Claims on the Grounds that such Claims are Duplicative (Pension)(Dkt. Nos. 1666 and 1667) were
electronically filed using the Court’s NextGen system and served on all parties registered to receive notice from the Court’s NexGen system on this case and on the following parties:
Lauren Z. Alexander Corey D. Berman Edward Soto
Weil, Gotshal & Manges LLP 1395 Brickell Avenue Miami, FL 33131 [email protected] [email protected] [email protected] Debtors’ Counsel
Via Electronic Mail
Ronit J. Berkovich Eli Blechman Andrew Citron Debora A. Hoehne
Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 [email protected] [email protected] [email protected] [email protected] Debtors’ Counsel
Via Electronic Mail
Scott Ian Davidson
King & Spalding LLP
1185 Avenue of the Americas New York, NY 10036
Debtors’ Counsel
Via Electronic Mail
Alan D. Halperin Julie D Goldberg
Halperin Battaglia Benzija LLP 40 Wall Street, 37th Floor New York, NY 10005 [email protected] [email protected]
Debtors’ Counsel
Via Electronic Mail
Timothy C. Mohan
Foley & Lardner LLP 600 17th Street, Suite 2020S Denver, CO 80202
Debtors’ Counsel
Via Electronic Mail
Scott P Vaughn
King & Spalding LLP
1700 Pennsylvania Avenue, NW, 2nd Floor Washington, DC 20006-4707
Debtors’ Counsel
Andrew M. Carty
Brown Rudnick LLP 7 Times Square New York, NY 10036 [email protected]
Counsel for Official Unsecured Creditors Committee
Via Electronic Mail
Gregory D Willard
Doster Ullom & Boyle LLC
16150 Main Circle Drive, Suite 250 St Louis, MO 63017
Counsel for Official Unsecured Creditors Committee
Via Electronic Mail
/s/ Mai Lan G. Rodgers Mai Lan G. Rodgers
