The Lamson & Sessions Co. v. Peters

Summarized by Laura Bartell , Wayne State University Law School
11 years 6 months ago

Citation:

No. 12-4193 (6th Cir. Aug. 13, 2014)

Tag(s):

Ruling:

Affirmed decision of District Court for the N.D. Ohio granting summary judgment to defendants on claims of breach of contract, tortious interference with contract and unjust enrichment.

Procedural context:

Appeal from District Court for the N.D. Ohio

Facts:

Plaintiff was the parent company of Youngstown Steel Door, a manufacturer of steel rail-car doors which had significant long-term retiree pension and healthcare obligations. Youngstown Steel Door (YSD) sold its business and assets to a new company, Youngstown Steel Door Industries, Inc., (YSDI) formed by its former executives, pursuant to a Purchase Agreement that explicitly excluded liability from a pending class action lawsuit brought by Youngstown Steel Door retirees. The pending class action lawsuit was then settled pursuant to Settlement Agreements obligating YSDI to continuing paying retirement and healthcare benefits for 15-22 years and providing for a guarantee of that obligation by YSD, and a guarantee of YSD's guarantee by Plaintiff. YSDI obtained a windfall 13 years later, and distributed most of the windfall to its shareholders. A year later it spun off a subsidiary to those shareholders. Early the next year YSDI intentionally defaulted on its retiree payments, and for the next year YSDI paid those obligations with funds loaned by Plaintiff. YSDI's major creditor then foreclosed on YSDI's assets and YSDI ceased to exist. From the proceeds of the sale, YSDI repaid the loans to Plaintiff, and Plaintiff assumed responsibility for the YSDI retiree benefits. Plaintiff then sued YSDI and its former shareholders in state court for breach of contract, fraudulent transfer, breach of fiduciary duty and unjust enrichment. A year later YSDI filed for chapter 7 bankruptcy protection. The suit was removed to bankruptcy court, and the district court withdrew the reference. The district court granted summary judgment in favor of the defendants on the breach of contract, tortious interference with contract and unjust enrichment claims. All other claims were dismissed after a settlement and the plaintiff appealed the grant of summary judgment. The Sixth Circuit affirmed, holding that there was no contract which obligated YSDI to make payments to plaintiff and therefore no breach of contract or interference with contract, and because YSDI repaid the loans made by plaintiff to enable YSDI to pay retiree benefits, there was no unjust enrichment.

Judge(s):

Batchelder, Griffin and Bell (District Judge for W.D. Mich. sitting my designation)

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