Judge Keeps Illinois Health Plan Funding Case Alive

July 8, 2005 (PLANSPONSOR.com) - A long-running battle by employees of a now-defunct boat building company over whether the employer should be held responsible for not funding its health plan is still alive after a federal judge pared down the case but refused to throw it out entirely.

>The latest development in the fight by former employees of the Waukegan, Illinois manufacturing and production facility of Outboard Marine Corporation (OMC) came when US District Judge Robert Gettleman of the US District Court for the Northern District of Illinois dismissed most of the plaintiffs’ improper benefits denial claims.

However, Gettleman ruled that the workers may be able to prove their charges that company officials breached their duties under the Employee Retirement Income Security Act (ERISA) by not funding the company health plan.    The Waukegan plant closed on December 21, 2000, and OMC filed for bankruptcy the following day, leading to OMC’s termination of its employee health plan, according to court documents.

In his latest ruling, Gettleman also turned aside demands by former OMC directors David Jones and Roger Fix to dismiss claims against them after rejecting the defenses raised by the two men.  Fix asserted that he wasn’t involved with the company when theWaukegan plant was shut down while Jones claimed he had just become a corporate officer shortly before the shutdown.  Jones could still potentially be held responsible for the health plan funding decisions even if he was a “relative latecomer” to OMC, Gettleman ruled.

The trial court’s latest ruling came after an earlier Gettleman decision had thrown out the allegations against individual OMC directors on the grounds that they were not acting as ERISA fiduciaries.

The US 7 th Circuit Court of Appeals subsequently reversed that decision as it related to the failure-to-fund claims.  Appeals judges, however, rejected plaintiffs’ pleas to reinstate their assertions that the economically faltering company had a responsibility under ERISA to inform workers that the health plan would likely be shut down.

“Under the facts alleged, the failure to disclose the likelihood of bankruptcy and plan termination may have been an innocent byproduct of the company’s efforts to keep from its creditors and competitors information it had no duty to disclose,” appeals judges wrote.

>The 7 th  Circuit opinion is  here .