July 20, 2012
In Pension Benefit Guaranty v. Asahi Tec Corporation, the United States District Court for the District of Columbia found that a Japanese parent company may be legally responsible for the pension-related liabilities of its American subsidiary.
Under U.S. law, if a pension plan is terminated and underfunded, a member of what is legally known as a controlled group, which includes the parent company and subsidiaries, may be held accountable.
Although there has been no finding of liability by the court yet, the decision is reason for unease, lawyers say. "Based on prior case law, companies would have thought they were not exposed. Here the court says there is jurisdiction," said Lynne Lacoursière.
"Canadian companies looking to acquire U.S. companies with defined benefit pensions should pay attention to this," said Lynne.