Opinion ID: 421651
Heading Depth: 1
Heading Rank: 4

Heading: Composition of the Ouimet Group

Text: 25 The Ouimet Group next argues that the Supreme Court's holding in United States v. Vogel Fertilizer Co., 455 U.S. 16, 102 S.Ct. 821, 70 L.Ed.2d 792 (1982), has altered the composition of the controlled group as originally determined by the district court in its first opinion. Specifically, the Group maintains that the Emil R. Ouimet Wareham Trust (Trust), which had been included in the controlled group because of its brother-sister relationship with other Ouimet companies, Ouimet, 470 F.Supp. at 947-49, should no longer be included in the Group. The exclusion of Trust and its net worth would reduce the Group's termination liability by at least $6,000. 26 I.R.C. § 1563(a)(2), in pertinent part, defines a brother-sister relationship as existing between two corporations when five or fewer persons own at least eighty percent of the voting power of each corporation. 10 In invalidating a Treasury regulation promulgated under this section the Court in Vogel Fertilizer held that each person whose stock is considered in applying the eighty percent test must own at least one share of stock in each corporation. Vogel Fertilizer, 455 U.S. at 22-35, 102 S.Ct. at 826-32. The Ouimet Group maintains that this requirement has not been met with respect to Trust because Emil Ouimet, who is the sole owner of Trust, owns just under eighty percent of Ouimet Stay & Leather Company, a corporation which along with Ouimet Corporation had originally been held to have had a brother-sister relationship with Trust. 27 This argument misreads Vogel Fertilizer. Under that case's holding, if Emil Ouimet did indeed own less than eighty percent of Ouimet Stay & Leather then that company would not be a member of the controlled group. Trust and Ouimet Corporation would remain in a brother-sister relationship as defined in Vogel Fertilizer because Emil Ouimet owned at least eighty percent of each of them. More importantly, we find that the controlled group as originally defined by the district court satisfies the Vogel Fertilizer requirement because Emil Ouimet in fact owned at least eighty percent of Ouimet Stay & Leather. 28 The principles of I.R.C. § 1563(a)(2) are relevant to controlled group plan termination liability because ERISA defines an employer in terms of the regulations promulgated under I.R.C. § 414(c). 29 U.S.C. § 1301(b)(1) (Supp. V 1981); see supra note 6 (text of provision). I.R.C. § 414(c) and the related regulations define controlled groups of businesses using the principles of the I.R.C. § 1563 definitions. See generally Comment, Extending ERISA Liability for Pension Plan Terminations to Controlled Group Members: Pension Benefit Guaranty Corp. v. Ouimet Corp., 61 B.U.L.Rev. 477, 491-02 (1981) (suggesting that the difference between section 1563 and section 414 is that the latter encompasses unincorporated as well as incorporated entities in the controlled group definitions and thus includes Trust). The family attribution rules set forth in the section 414(c) regulations operate to increase Emil Ouimet's ownership percentage in Ouimet Stay & Leather to over eighty percent. 11 Under Temporary Treas.Reg. § 11.414(c)-4(b)(5) (1975), Emil Ouimet is deemed to own his wife's six shares and under Temporary Treas.Reg. § 11.414(c)-4(b)(3) (1975), he is deemed to own almost seven shares from his father's estate. These shares are sufficient to push his ownership interest in Ouimet Stay & Leather to over eighty percent without even considering the indications in the record that Emil Ouimet actually owns some more shares which are in the names of others. Thus, the same shareholder owns at least eighty percent of Trust, Ouimet Stay & Leather, and Ouimet Corporation and these entities are in a brother-sister relationship as defined in Vogel Fertilizer. Therefore, for the purpose of imposing termination liability the Ouimet Group includes Trust and remains as originally defined by the district court. 29