The Pension Benefit Guaranty Corporation settled a long-standing lawsuit with a Japanese company that called into question the authority the PBGC, and U.S. courts, have over foreign companies with U.S. operations.
Asahi Tec Corp, headquartered in Japan, agreed to pay PBGC $39.5 million.
The Japanese metal casting company bought Metaldyne, a chassis manufacturer based in Plymouth, Mich., in 2007 for $1.2 billion.
Two years later, Metaldyne went bankrupt. PBGC asked Asahi Tec to take on the pensions of Metaldyne’s 10,000 workers, and also requested Asahi cover the terminated plan’s $200 million in liabilities.
In October 2013, a U.S. District Court in Washington, D.C., affirmed its jurisdiction over the foreign company, and said Asahi Tec was liable for the unfunded benefits and the termination premiums of its bankrupt subsidiary.
Asahi argued that because it did not make any decisions with respect to Metaldyne’s pension plan, it had no obligation to assume the liabilities.
The court ruled that was irrelevant, and emphasized in its decision that Asahi extensively reviewed Metaldyne’s pension obligations before completing the acquisition.
Prior to that ruling, which allowed PBGC’s $175 million suit against Asahi to proceed, foreign corporate parents of U.S.-based subsidiaries operated under the assumption that they were not responsible for subsidiary pensions, according to a post on McDermott, Will & Emory.
“We believe that this case affirms that foreign companies are responsible for the pension obligations of American companies they acquire,” said Sanford Rich, PBGC’s Chief of Negotiations and Restructuring.
“We will continue to press this issue when appropriate.”
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