Defense of Alter Ego/Single Employer Liability

When a group of related companies founded by Thomas J. Holt, Sr. fied for Chapter 11, , one of the  companies, NPR, was assessed ERISA withdrawal liability of over $19 million by two pension funds: the New York Shipping Association – International Longshoreman’s Association Pension Trust Fund (“ILA Fund”) and the Masters, Mates & Pilots Pension Trust Fund (“MM&P Fund”). The liability to the ILA Fund was subsequently paid by the Government Development Bank of Puerto Rico, under a Settlement Agreement resulting from the Puerto Rican government’s former ownership of NPR.

Under the Multiemployer Pension Plan Amendment Act of 1980 (MPPAA), an amendment to ERISA, an employer incurs statutory liability if it withdraws from a multi-employer pension plan without paying its actuarial share of accrued pension liability. Seeking to recover NPR’s withdrawal liability from other, non-debtor companies owned by related parties, both funds instituted lawsuits in the U.S. District Court for the Eastern District of Pennsylvania.

In ruling on a Motion to Dismiss filed by Dilworth, U.S. District Court Judge Mary A. McLaughlin held as an issue of first impression that ERISA permits a claim based upon the theory that defendants were the alter ego of the primarily liable employer, but not under the theory that defendants were the alter ego of other companies within the employer’s alleged controlled group (i.e. other Holt companies). The MM&P Fund trustees subsequently stipulated to place their case into civil suspense pending resolution of the summary judgment motions in the GDB case.

In moving for summary judgment in the GDB case, Dilworth argued that, notwithstanding several years of extensive discovery, no reasonable jury could conclude that Defendants and NPR functioned as a single employer or as alter egos of each other. Analyzing the evidence presented by the parties, the judge concluded that Plaintiffs could not support their position under either the “single employer” test derived from federal labor law or the common law “alter ego” test. The District Court held that no reasonable jury could find that NPR and the Defendants shared common operations, ownership, management, or centralized control of labor relations.

In September 2011, Dilworth won another victory when the trustees of the MM&P fund elected to dismiss all of their claims against the Firm’s clients voluntarily, based upon Judge McLaughlin’s summary judgment ruling in the related GDB case. If found liable, damages to Dilworth’s clients (including interest and attorneys’ fees) would have been well in excess of $20 million.