## Facts

- Avon Sole Co. sponsored a collectively bargained defined-benefit pension plan for its hourly workers.
- Avon and its wholly owned subsidiary, Tenn-ERO, ceased operations in 1975 and entered bankruptcy.
- On termination, the plan was substantially underfunded (over $500,000), and Avon and Tenn-ERO had no positive net worth on the relevant valuation date.
- Avon and Tenn-ERO were part of a larger set of related companies and entities under common ownership/control (the “Ouimet Group”), several of which had substantial net worth.
- PBGC determined that the entire commonly controlled group constituted the “employer” for ERISA Title IV termination liability and sought recovery subject to ERISA’s statutory cap (generally the lesser of the unfunded guaranteed benefits or 30% of net worth).
- The district court granted partial summary judgment for PBGC, ruling that all members of a commonly controlled group are treated as a single employer and are jointly and severally liable; it remanded for determination of group net worth.
- Defendants pursued an interlocutory appeal challenging application of controlled-group treatment and joint-and-several liability to Title IV termination liability.

## Issues

1. Whether ERISA requires trades or businesses under common control to be treated as a single “employer” for PBGC termination liability.
2. Whether each member of a commonly controlled group may be held jointly and severally liable for the group’s termination liability, subject to the statutory net-worth cap.

## Decision

- The First Circuit affirmed the district court’s interpretation of ERISA.
- The court held that trades or businesses under common control are treated as a single employer for Title IV termination liability.
- The court approved joint and several liability across the commonly controlled group for PBGC’s claim, subject to the statutory limitation keyed to net worth.
- The case was remanded for further proceedings to determine the controlled group’s net worth and the amount recoverable.

## Legal Principles

- ERISA’s controlled-group rule (treating trades or businesses under common control as a single employer) applies to Title IV termination liability when the statute imposes liability on the “employer.”
- When a controlled group is treated as one employer, members of the group may be held jointly and severally liable for the employer’s termination liability, subject to ERISA’s statutory cap.
- ERISA’s structure and purpose support imposing termination liability on the economically integrated enterprise to prevent avoidance of pension obligations through corporate fragmentation.

## Conclusion

The court held that, for ERISA plan termination liability owed to PBGC, all trades or businesses under common control are treated as one employer and each member is jointly and severally liable up to the statute’s net-worth-based limit, with the amount to be determined on remand.


Pension Benefit Guaranty Corp. v. Ouimet Corp., 630 F.2d 4 (1st Cir. 1980)