Appeals court rules lawsuit over Acme Brick retirement plans can proceed

A lawsuit filed by the former chief financial officer of Acme Brick against parent Berkshire Hathaway over changes made to retirement plans can move forward, a federal appeals court ruled this week.

In a 13-page decision, the Fifth Circuit Court of Appeals in New Orleans ruled that Berkshire Hathaway did not have legal authority to cause Acme Brick to reduce company contributions to 401(k) retirement plans and freeze the company’s pension.

The court upheld a district court decision to dismiss claims against Acme, but reversed its dismissal of the claims against Berkshire. The case was remanded back to the U.S. District Court in Fort Worth.

The lawsuit, filed two years ago by plaintiffs including Judy Hunter, then Acme’s chief financial officer, alleged that Berkshire, the Nebraska-based conglomerate run by billionaire Warren Buffett, used “strong-arm tactics” to force the Fort Worth-based brick company to reduce retirement plan benefits. Hunter retired earlier this year.

Specifically, the suit alleged that Berkshire executives warned that Acme would be divested if the benefit reductions were not made.

According to the lawsuit, Acme’s 401(k) plan provided a 50 percent company match on employee contributions when it was acquired by Berkshire in 2000. But beginning in 2006, Berkshire began proposing reductions, including a “hard freeze” that would eliminate future accruals of benefits for pension plan participants and preclude future employees from participating.

Retirement plan committees fought attempts to reduce benefits and heard nothing more until 2012, when Acme discovered that its officers had “mistakenly reduced” the 401(k) plan match to 25 percent in 2010 and 2011, the lawsuit states. Berkshire’s chief financial officer Marc Hamburg directed Acme not to return the match for 2012 and 2013, the lawsuit says. In 2014, Acme froze the pension after CEO Dennis Knautz was given an ultimatum from Berkshire executives, the lawsuit says.

In its decision, the court ruled that the merger agreement between Acme and Berkshire “imposes a limitation on Berkshire in that Berkshire may not cause Acme to reduce enumerated benefits. But that provision does not restrict Acme itself from reducing future Pension Plan benefit accruals or 401(k) Plan employer contributions if Acme acts independently.”

As precedent, it cited a case involving Halliburton and Dresser Industries, involving an attempt by Halliburton to make changes to Dresser retiree health benefits. The court ruled it could not do so unless it made similar changes to Halliburton plans.

This story was originally published July 15, 2016 at 1:24 PM with the headline "Appeals court rules lawsuit over Acme Brick retirement plans can proceed."