STEELWORKERS PENSION TRUST v. THE RENCO GROUP, INC.
2:16-cv-00190
W.D. Pa.Jul 7, 2016Background
- Steelworkers Pension Trust (SPT) sued Renco and related entities asserting withdrawal liability under ERISA/MPPAA after RG Steel ceased operations and filed Chapter 11, allegedly triggering >$86M in liability.
- SPT alleges Renco transferred 24.5% of RG Steel to Cerberus pre-bankruptcy to fall below the 80% controlled-group threshold and thereby evade withdrawal liability; SPT contends the transaction should be disregarded under 29 U.S.C. §1392(c).
- SPT filed proofs of claim in the RG Steel bankruptcy that listed the withdrawal amount and actuarial support; those proofs were placed on the bankruptcy claims register and emailed to counsel appearing in the case.
- SPT moved to disqualify Proskauer Rose LLP (counsel for Renco) under Pennsylvania Rule of Professional Conduct 1.7, arguing Proskauer represents multiple multiemployer pension plans and that Renco’s legal positions here could create precedent adverse to Proskauer’s other plan clients.
- Proskauer submitted a sworn declaration listing nine pending withdrawal-liability matters for multiemployer plans and represented none present a risk of conflicting precedent (none filed in the Third Circuit or involve the same waiver/notice arguments); Proskauer did not produce conflict waivers.
- The magistrate judge found SPT had standing to move for disqualification, but denied disqualification after applying ABA Model Rule 1.7 Comment 24 factors, concluding SPT failed to show a significant risk of material limitation on Proskauer’s other representations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to move to disqualify Proskauer | SPT: non-client may move to disqualify (citing authority permitting opposing counsel to raise conflicts). | Renco: SPT lacks standing because it is not a current/former Proskauer client. | Court: SPT has standing—courts have authority and duty to police ethics; motion permitted. |
| Whether Proskauer has a disqualifying conflict under Pa. R. Prof. Conduct 1.7 | SPT: Proskauer represents many multiemployer plans; Renco’s defense could set precedent materially adverse to those clients; firm should produce waivers or be disqualified. | Proskauer: Although it represents multiemployer plans, its other matters do not press the same notice/waiver or “evade or avoid” arguments in the Third Circuit; no significant risk of material limitation. | Court: Denied disqualification—SPT did not show significant risk that Proskauer’s effectiveness would be materially limited. |
| Whether inconsistent positions across tribunals create conflict requiring consent | SPT: precedent adverse to plan clients would create conflict. | Proskauer: Mere potential for precedent adverse to other clients is insufficient; Comment 24 permits inconsistent positions absent significant risk of material limitation. | Court: Adopted Comment 24 analysis; mere possible precedent is not enough. |
| Remedy and degree of scrutiny for disqualification motions | SPT: seeks disqualification of Proskauer. | Renco: disqualification is drastic and disfavored; movant must clearly show impermissible representation. | Court: Disqualification is extreme and disfavored; movant bears a high burden—denied motion here. |
Key Cases Cited
- Pension Ben. Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717 (U.S. 1984) (Congress enacted MPPAA to protect multiemployer plans from employer withdrawals)
- Flying Tiger Line v. Teamsters Pension Trust Fund of Philadelphia, 830 F.2d 1241 (3d Cir. 1987) (describing MPPAA’s arbitration and enforcement scheme)
- Robbins v. Pepsi–Cola Metro. Bottling Co., 800 F.2d 641 (7th Cir. 1986) (describing contents/effects of withdrawal liability notice)
- In re Pressman-Gutman Co., Inc., 459 F.3d 383 (3d Cir. 2006) (discussing standing to seek attorney disqualification; courts have allowed non-client movants in some circumstances)
- Kevlik v. Goldstein, 724 F.2d 844 (1st Cir. 1984) (permitting opposing counsel to move for disqualification despite not representing the aggrieved client)
- Brown & Williamson Tobacco Corp. v. Daniel Int’l Corp., 563 F.2d 671 (5th Cir. 1977) (same)
- United States v. Miller, 624 F.2d 1198 (3d Cir. 1980) (court has inherent authority to disqualify counsel and supervise attorney conduct)
- Century Indem. Co. v. Congoleum Corp., 426 F.3d 675 (3d Cir. 2005) (counsel has an obligation to alert the court to ethical conflicts)