Durango-Georgia Paper Co., et al. v. H.G. Estate, LLC, et al.

Summarized by Lynn Hinson , Dean Mead Egerton Bloodworth Capouano & Bozarth PA
12 years 1 month ago

Citation:

11th Circuit Court of Appeals Case Number 11-15079 (will be published)

Tag(s):

Ruling:

The Court affirmed the District Court's entry of final judgment in favor of the defendants following the dismissal of the liquidating trustee's complaint for failure to state a claim for relief.

Procedural context:

Prior to filing bankruptcy, the debtor created and maintained a defined benefit pension benefit plan for its employees. The shareholders of the debtor sold the stock in the company to a company that was wholly owned by a parent company. There were subsequent sales of the stock prior to the date that the debtor filed bankruptcy. The creditors of the debtor filed an involuntary Chapter 7 case, which was converted to Chapter 11. The liquidating trustee filed suit against members of the controlled group, as defined in the Employee Retirement Income Security Act of 1974 ("ERISA"). The complaint alleged that the controlled group members were liable to the bankruptcy estate, and sought to recover a judgment in equity for indemnification, exoneration, or contribution. The District Court dismissed the case for failure to state a claim on the ground that the relief sought by the liquidating trustee was a money judgment rather than the equitable relief available under ERISA. The District Court entered final judgment in favor of the defendants. The liquidating trustee appealed the final judgment to the 11th Circuit Court of Appeals. The Court of Appeals affirmed the final judgment of dismissal on the basis that the funding requirements of ERISA were put in place for the benefit of plan beneficiaries, not for the protection of a bankrupt plan sponsor's unsecured creditors.

Facts:

In January,1999, a Deleware limited liability company organized a corporation and became its sole shareholder. Once organized, the corporation acquired a paper mill in Georgia, and created a defined benefit plan for its employees and former employees. Subsequently, the limited liability company sold all of its shares to another corporation, which was a wholly owned subsidiary. By operation o f law, those entities assumed the controlled group positions, and thereby became liable for funding the pension plan and for paying insurance premiums to the Pension Benefit Guaranty Corporation ("PBGC). In July,1999, the paper mill ceased production. On October 29, 2002, the creditors filed an involuntary Chapter 7 case, which was subsequently converted to Chapter 11. The PBGC filed suit and terminated the plan. The liqudating trustee then filed suit against members of the controlled group.

Judge(s):

Circuit Court Judges Tjoflat, Cox and Motz.

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