Japanese Company May Be Liable for Terminated U.S. Pension

The U.S. District Court for the District of Columbia found the Pension Benefit Guaranty Corporation (PBGC) made a prima facie, showing that Asahi Tec Corporation purposefully directed activity towards the United States in connection with the acquisition of Metaldyne and the attendant assumption of controlled group pension liability, and that the claims in the complaint arise directly out of that specific conduct.  

As the D.C. Circuit has explained, “[w]hether the exercise of jurisdiction is consistent with the Constitution turns on whether a defendant has sufficient contacts with the nation as a whole to satisfy due process,” U.S. District Judge Amy Berman Jackson wrote in her opinion. In order to comport with due process, a defendant must have “certain minimum contacts with [the forum] such that maintenance of the suit does not offend traditional notions of fair play and substantial justice.”   

The court found that Asahi Tec not only acquired Metaldyne but did so with its eyes wide open. The complaint alleges and the jurisdictional discovery revealed the defendant undertook the acquisition after probing and being specifically informed about the possibility of controlled group liability. Prior to the acquisition, “Asahi Tec learned about the Pension Plan, that the Pension Plan had unfunded benefit and other pension-related liabilities and that, as a member of Metaldyne’s controlled group, it would be jointly and severally liable with Metaldyne and other affiliates, for the Pension Liability under the Pension Plan.” The documents produced in discovery confirmed the defendant hired Mercer Human Resource Consulting to conduct due diligence about the nature and scope of Metaldyne’s employee benefit and compensation program.  

According to the court opinion, the documents also show that based on the results of the due diligence, the defendant specifically incorporated the fact that it was assuming controlled group status–and thus, could ultimately be held liable for an underfunded plan–into the negotiated purchase price.

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Asahi Tec argued that the court lacks specific jurisdiction because the company had no involvement in the termination of Metaldyne’s pension plan; there is no connection between any activity undertaken by Asahi Tec and the PBGC’s claims.   

However, the court agreed with the PBGC–which did not dispute that Asahi Tec played no role in the plan termination decision–that the claim does not seek to impose liability for the act of termination, or for something wrongful about the termination, or even the act of funding the pension plan, but the action seeks to enforce the controlled group members’ obligations, which attached at the time of purchase.   

Berman Jackson noted that her conclusion that specific jurisdiction exists for the limited purpose of hearing the Employee Retirement Income Security Act (ERISA) claims does not necessarily mean that Asahi Tec will ultimately be responsible for the pension liability. Rather, specific jurisdiction is proper because Asahi Tec is potentially liable for the pension by virtue of the acquisition.    

“In other words, defendant’s actions in acquiring Metaldyne and its pension obligations are enough to put defendant in the position of being subjected to litigation on that issue,” Berman Jackson wrote.  

Click here for the court opinion.