868 F. Supp. 2d 188
S.D.N.Y.2012Background
- Patrick LoPresti, as Trustee of the ALA-Lithographic Industry Pension Plan, sues Pace Press, DG3, PBS Litho, and individual Pace Press principals seeking withdrawal liability under ERISA after Pace Press withdrew and sold assets to DG3 in 2008.
- Pace Press default-judgment was previously entered in 2009 for $1,326,312.86 related to withdrawal liability, prompting further recovery actions.
- The sale of Pace Press assets to DG3 was negotiated amid Pace Press’s financial distress, secured by Merrill Lynch, and involved a wind-down with a $450,000 unsecured-creditor pool and other preferential treatment for creditors.
- Draft and final letters/agreements contemplated a Local 1 pension settlement and employment agreements for Pace Press principals; DG3 sought releases from withdrawal liability but ultimately structured the deal as an asset purchase.
- After the transaction, Pace Press dissolved with minimal assets, and the Plan did not receive proceeds from the $450,000 pool; Pace Press did not pay withdrawal liability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether evading withdrawal liability was a principal purpose of the sale | LoPresti asserts evasion/avoidance under §1392(c) was a principal purpose. | DG3 and Pace Press contend evasion was not a principal purpose; bankruptcy avoidance and business viability were primary. | Not proven; evasion not shown as a principal purpose. |
| Whether the asset-purchase structure (not assuming withdrawal debt) demonstrates evasion | Structure as asset purchase was designed to escape withdrawal liability. | Asset vs stock structure was chosen for business reasons; DG3 had no obligation to assume withdrawal liability. | Not proven; structure lacked evasion intent. |
| Whether conduct around the $50,000 plan offer and unsecured pool indicates evasion | Offering $50,000 to the Plan and excluding it from the pool signals evasion. | Offer was a good-faith attempt to settle potential claims; exclusion from the pool was rational given accrual timing. | Not proven; not indicative of principal evasion purpose. |
Key Cases Cited
- HOP Energy, L.L.C. v. Local 553 Pension Fund, 678 F.3d 158 (2d Cir. 2012) (defines evasion concept under §1392(c))
- Park S. Hotel Corp. v. N.Y. Hotel Trades Council, 851 F.2d 578 (2d Cir. 1988) (withdrawal liability principal purpose standard)
- ILGWU Nat’l Ret. Fund v. Levy Bros. Frocks, Inc., 846 F.2d 879 (2d Cir. 1988) (explains principal purpose concept in withdrawal liability)
- Santa Fe Pac. Corp. v. Cent. States, Se. & Sw. Areas Pension Fund, 22 F.3d 725 (7th Cir. 1994) (requires only a principal purpose, not sole purpose)
- Sherwin-Williams Co. v. N.Y. State Teamsters Conference Pension, Ret. Fund, 158 F.3d 387 (6th Cir. 1998) (discusses multiple principal purposes in a sale)
- Herrmann v. Mowers, 9 F.3d 1049 (2d Cir. 1993) (distinguishes cases where value diversion to individuals occurred)
- Centra v. Trucking Emps. of N. Jersey Welfare Fund, Inc.-Pension Fund, 983 F.2d 495 (3d Cir. 1992) (rejects argument that releases alone prove evasion)