MT High Court Upholds Award in Exec Pension Plan Case

October 16, 2009 (PLANSPONSOR.com) - The Montana Supreme Court has upheld a $21.4 million award in a case filed by 15 retired Montana Power Co. executives whose supplemental retirement benefits were cut off in 2005 without notice.

With a purchase agreement between NorthWestern Corp. of South Dakota and Montana Power Co. in 2002, NorthWestern Corp. assumed responsibility for the supplemental pensions offered to some Montana Power employees for taking early retirement, the Associated Press reports. However, after NorthWestern emerged from bankruptcy reorganization in late 2004, its board of directors decided to stop paying the supplemental pensions, without telling retirees.

According to the AP, in January 2005, NorthWestern notified the retirees it was going to file a motion in bankruptcy court to terminate the extra retirement benefits, but by then the company's bankruptcy reorganization was substantially complete and the retirees were not included as creditors in the bankruptcy filing, so the bankruptcy court said it did not have jurisdiction. The retirees filed a lawsuit for breach of contract and sought compensatory and punitive damages, arguing that NorthWestern wrongly filed its motion in bankruptcy court as leverage to get them to accept shares of stock in the newly reorganized NorthWestern Corp. in place of the retirement benefits.

Northwestern and its executives argued the move was taken in the best interest of the company without any malice toward the retirees. It started making the supplemental retirement payments again in November 2005, and made back payments and interest, hoping to negate the lawsuit, the news report said.

However, in February 2007, a state District Court jury awarded the retirees $17.4 million in compensatory damages and $4 million in punitive damages for the emotional and financial stress the retirees suffered.

Rebecca Moore
editors@plansponsor.com