Third Circuit Holds Post-petition Pension Fund Withdrawals Liability...

02/16/12

 

By: Brian Bergin
St. John’s Law Student
American Bankruptcy Institute Law Review Staff

            In a case of first impression, In re Marcal Paper Mills, Inc.,[1] the Third Circuit prorated the debtor’s pension fund withdrawal liability and gave administrative expense priority only to that portion related to the post-petition period. After filing its chapter 11 bankruptcy petition, Marcal Paper Mills, Inc. (“Marcal”) entered into a Memorandum of Understanding (the “MOU”) with certain unionized employees. The MOU required Marcal to continue making contributions to the union’s pension fund (the “Fund”) and required those unionized employees to continue working for Marcal. When Marcal sold its assets and terminated its distributing operation, Marcal’s ceased making contributions to the Fund.[2] The Fund filed an administrative claim against Marcal for $5,890,128 in withdrawal liability[3] on the basis of the Fund’s determination that Marcal had made a “complete withdrawal” [4] from the Fund under the meaning of Title IV of the Employee Retirement Income Security Act of 1974 (“ERISA”),[5] as amended by the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”).[6]  After Marcal objected to its claim, the Fund amended its claim and sought administrative priority for only the portion of the withdrawal liability attributable to post-petition services provided by the unionized employees.[7]

 

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