Blogging Employee Benefits

March 13, 2006

Withdrawal Liability Claim Against Barbados Subsidiary Revived

Filed under: Litigation, Multiemployer Plans — Fuguerre @ 7:32 pm

Central States, Southeast and Southwest Areas Pension Fund is permitted to conduct discovery regarding general personal jurisdiction over a Barbados subsidiary of a bankrupt U.S. corporation that withdrew from the pension fund without making withdrawal liability payments required by ERISA, according to a 7th Circuit decision reversing a district court ruling. Central States should also be granted reasonable time to properly serve the Barbados firm with its complaint. [Central States v. Phencorp Reinsurance, No. 05-2058]

Phencorp Reinsurance Company, a Barbados corporation, was a wholly-owned subsidiary of Philip Services Corporation (PSC), which until 2003 was subject to a collective bargaining agreement requiring contributions to be made to the Central States pension fund. After its bankruptcy and withdrawal from the pension fund in 2003, PSC and its controlled group failed make withdrawal liability payments to Central States as required under ERISA. Central States brought suit against Phencorp to recover withdrawal liability payments, serving its complaint upon a U.S. resident who it incorrectly believed to be a Phencorp director, based on misleading information provided by PSC.

Phencorp filed for dismissal, claiming that its only U.S. contact – its parent PSC – was insufficient to establish the “minimum contacts” required to give the district court personal jurisdiction. Phencorp also claimed that Central States’ service of process was insufficient, since the individual served by the pension fund was not affiliated with Phencorp at the time he was served. Central States responded with requests for discovery concerning the personal jurisdiction issue and extension of time to effect service. The district court granted Phencorp’s motion to dismiss and denied Central States’ motions.

The appellate court found that the district court erred by considering only specific personal jurisdiction, failing to address whether general personal jurisdiction existed or might have been supported by additional discovery. Although Central States had not yet met its burden of demonstrating the existence of general personal jurisdiction, it had succeeded in making a prima facie case for personal jurisdiction, hence deserved the opportunity to conduct discovery on the matter. The appellate court further reversed the district court’s denial of Central States’ motion for an extension of time to serve Phencorp with its complaint.

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