Predecessor Employer Defeats Proposed Class Action Challenging Spin Off’s Decision To Cut Benefits

Jackson Lewis P.C.

In Bellon v. PPG Emp. Life & Other Benefits Plan, PPG Industries, Inc. & the PPG Plan Administrator, the Northern District of West Virginia recently addressed whether a predecessor company may be held liable for a decision made by its corporate successor to terminate retiree life insurance coverage and related benefits following spin-off.

The retiree plaintiffs asserted that company-provided life insurance coverage was wrongly terminated after their former employer, defendant PPG, spun off its commodity chemicals division (to which they once belonged) into a separate public entity called Axiall Corp. Axiall assumed responsibility for certain benefits of PPG’s retirees and later terminated those benefits.

Rejecting that argument, the court granted summary judgment for defendant employer, PPG, its plan, and the plan administrator on all counts, finding plaintiffs’ claims for benefits, discrimination, interference, breach of fiduciary duty, refusal to furnish information, and common law breach of contract failed as a matter of law.

In so holding, the court recognized that taking necessary steps to complete a business transaction—here, predecessor PPG transferring benefits liabilities for its commodity chemicals division to a separate, newly created successor entity, Axiall Corp.—does not trigger PPG’s general fiduciary duties under ERISA, nor create liability for PPG where the terminated benefits were unvested, and where PPG was no longer associated with the plan.

The court also recognized that defendants could not be liable to retiree plaintiffs and their surviving spouses for benefits because defendants were not responsible for the benefits termination decision (the successor Axiall Corp. was) and plaintiffs were not participants in PPG’s plan when their retiree benefits terminated (they were participants in Axiall’s plan).

The court likewise rejected retiree plaintiffs’ arguments that their life insurance benefits vested under predecessor PPG’s plan so they could not be transferred or terminated, reiterating that an employer’s commitment to vest benefits must be stated in clear and express plan language.  Accordingly, the court found that plan language stating only that, “[t]his coverage is provided by the Company” could not establish a promise of lifetime benefits provided by the predecessor.

In denying plaintiffs’ claims, the court also reaffirmed that ERISA does not prohibit an employer from terminating or modifying benefits not vested nor does it prevent an employer from pursuing its business interests as employer when not administering the plan or making investments.

The case is Bellon et al. v. PPG Emp. Life & Other Benefits Plan, PPG Industries, Inc. & the PPG Plan Administrator, No. 5:18-cv-00114 (N.D. W.Va. June 28, 2021).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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