Court Opinion

ID: 8971182
Source: CourtListenerOpinion
Date Created: 2022-11-27 10:32:11.420364+00
Date Added: 2024-06-11T17:10:26.185516
License: Public Domain

HEANEY, Senior Circuit Judge,
dissenting.
The critical question in this case is whether Gerard Blohom was in effective control of Pako at the time Pako’s assets were dissipated. If he was, then clearly under the terms of the pension agreements he is personally liable for the plaintiffs’ pension benefits.1 In my view, he was in *645effective control of Pako at that time and at the time that the plaintiffs’ pension benefits were discontinued. Since this appeal comes from a grant of summary judgment for Gerard Blohorn, we need not go that far. All we need to find is that there is a material factual dispute over Gerard Blo-horn’s role, and there clearly is. I would reverse and remand for trial.2
BACKGROUND
The following facts are undisputed. In 1980, a French family through various shell corporations purchased a Minnesota company, Pako. Andre Blohorn was the equitable owner of the shell corporations. As the sole stockholder, he became personally liable for the pension obligations. He has since died. Pako’s pension obligations were also assumed by its successor corporation through a merger agreement negotiated and signed by Gerard Blohorn, Andre Blohorn’s son. The family’s business affairs with respect to Pako have always been conducted by Gerard Blohorn. Gerard Blohorn is also the president of all the shell companies, most of which have no employees. In essence, Andre Blohorn owned a variety of businesses, and Gerard managed them. Andre Blohorn’s heirs, including Gerard, are currently involved in a probate dispute over the ownership, while Gerard continues to run the companies.
During the 1980 fiscal year, Pako had sales of $87 million and employed 1,723 people. Gerard Blohorn became the President, a director and Chief Executive Officer of Pako. He moved to Minnesota and presided over the dismantling of Pako, selling $20 million in corporate divisions and assets through October, 1985. In December, Blohorn moved back to France. A new president was named, and Blohorn’s role in his selection is unclear. The new president suspended pension payments to the plaintiffs in early 1986, and subsequently placed the remaining operation in bankruptcy.
The plaintiffs are former management employees who spent most of their working lives with Pako. Their pensions were fixed by two agreements, one made before and one made after the merger. The agreements, the district court correctly found, “leave[] no question but that the parties intended individuals in control to he jointly and severally liable, along with the corporation, for the pension plan contributions.” Memorandum Opinion at 17 (emphasis added). The four plaintiffs are entitled to receive a total of approximately $70,000 per year. Gerard Blohorn continued to receive $250,000 a year in salary from Pako alone through 1986, in addition to a generous expense account, and is using a $225,000 defense fund set aside by Pako for this litigation.
DISCUSSION
The pension agreements were formally made between Pako and the plaintiffs. Usually, a contract cannot bind someone who is not a party to it. A third party can become liable, however, by adoption, guarantee or through an express undertaking. In this case, the evidence viewed most favorably to the plaintiffs shows that Gerard Blohorn became personally bound.
Gerard Blohorn was at various times the Chairman of the Board and the Chief Executive Officer of Pako. He has always been a director. He is also the President of all the shell corporations which in turn own Pako and run the family’s business affairs, Delbo Enterprises (Minnesota) Inc., Delbo Enterprises (Delaware) Inc., Delbo Netherlands B.Y., and Delbo Netherlands N.Y. Gerard Blohorn made all the important de*646cisions regarding Pako’s operation and dismantling. He negotiated Delbo’s acquisition of Pako which specifically provided for the assumption of the pension plan and individual liability. As a director, Gerard Blohorn voted for the second pension plan which made the controlling figures in Pako individually liable.
It is clear throughout the relevant time period that Gerard Blohorn has been in effective control of all the shell corporations and their subsidiaries, including Pako. In light of this evidence, it is apparent that a jury could reasonably find that Gerard Blohorn was in effective control and should be held liable. The district court concluded, however, that he cannot possibly be liable because he was not consulted about the suspension decision until after it was made. This is not a decisive fact for two reasons. First, the President might have had no alternative in light of Gerard Blo-horn’s decision to sell off almost all of Pako’s assets. Second, and crucially in my view, Gerard Blohorn admits that he was told of the decision to suspend pension payments soon after it was made, and admits that he had the power to reverse that decision. Deposition of Gerard Blohorn at 49 (April 9, 1987); Joint Appendix at 218.
Thus, in light of the language of the pension plans, the district court erred by requiring that Blohorn have made the initial suspension decision personally. Even if Blohorn is believed, he was aware of the suspension and by his own admission held the ultimate power to let it continue or to resume payments. This is sufficient under the language of the pension plans and merger agreement to trigger individual liability, for each agreement binds “all persons in control of the corporation * * Majority Op. at 639.
The majority adopts the district court’s reasoning that Blohorn also cannot be liable because in ratifying the pension agreements he was acting in an official capacity on behalf of Pako. Id. at 643, 644. He was thus giving Pako’s promise of his personal liability rather than his own. This argument is unconvincing. While the corporate shell might often protect a controlling person who gives the corporation’s promise, it does not protect a controlling person who makes what is expressly an individual promise. When Gerard Blohorn voted to approve the pension plan at the directors meeting with its unique individual liability provisions, he was giving his own assent, as well as that of Pako.3
CONCLUSION
The plaintiffs have put forth sufficient evidence to allow the jury to decide whether Gerard Blohorn controlled Pako. I dissent and would reverse the grant of summary judgment.

. I also agree with the district court that under ERISA an individual may be liable for employee pensions where he exercises substantial control over the running of the corporation. The majority’s more restrictive interpretation of ERISA does not accord with that statute’s purposes, Gambino v. Index Sales Corp., 673 F.Supp. 1450, 1454-56 (N.D.Ill.1987) (Shadur, J.), and makes *645it easier for ongoing businesses to be looted. Given the majority’s concern that corporate directors would be hesitant to approve pension plans were individual liability the rule, perhaps the scope of individual liability for controlling persons under ERISA should be limited to those occasions where deliberate acts are taken to avoid pension responsibilities or where a viable business is broken up for economic gain. Surefy, the intentional evasion of responsibility for employee pensions violates ERISA; otherwise, it becomes a social cost for which we all must pay.

. I agree that summary judgment was appropriate in favor of Kimberly.

. As an alternative, the district court believed that Gerard Blohorn would not be bound because he did not sign any writing as required by the statute of frauds. Minn.Stat. § 513.01(1) (agreements not performed within one year). I disagree because part performance is sufficient to remove the claim from the statute of frauds. Hartung v. Billmeier, 243 Minn. 148, 66 N.W.2d 784 (1954).