Appeals court: Findlay Industries' successors can be sued for pensions


COLUMBUS — The successors to the now-closed Findlay Industries, Inc. can be sued to cover the company’s pension obligations to its former workers, a federal appeals court ruled Tuesday.

In reversing a lower court ruling, a three-judge panel of the Cincinnati-based U.S. 6th Circuit Court Appeals found that companies created by one of the sons of Findlay’s founder, Philip D. Gardner — essentially on the ashes of the prior business — could be on the hook for some $30 million in pension liabilities.

“Refusing to apply successor liability would allow employers to fail to uphold promises made to employees and then engage in clever financial transactions to leave (the Pension Benefit Guaranty Corporation) paying out millions in pension liabilities,” Judge Martha Craig Daughtrey wrote.

She wrote that holding employers responsible is a “common sense answer” as the court sent the lawsuit back to U.S. District Court in Toledo for trial.

Findlay Industries, an auto parts manufacturer, went bankrupt in 2009 in the midst of the Great Recession and left behind $18 million in unfunded pension liabilities for its former workers. With interest and fines, that amount has ballooned to $30 million.

In 1986, Findlay transferred two pieces of property to the founder, Philip Gardner, who later transferred the land to an irrevocable trust that named his two sisters, now deceased, and then his two sons as beneficiaries.

From 1993 to the company’s demise in 2009, the trust leased the land on which Findlay operated to the company. The court found that this trust was an extension of the business enterprise.

Later in 2009, F I Asset Acquisition LLC paid $2.2 million to acquire the equipment, inventory, and receivables from Findlay’s two plants and $1.2 million for assumed trade debt. Those assets were then transferred to companies entirely owned by Michael Gardner — the founder’s son, owner of 45 percent of Findlay’s stock, and Findlay’s CEO until shortly before the company’s assets were sold.

The court noted that the two new companies, September Ends and Back in Black, each established a plant on one of the old Findlay lots, rehired many of Findlay’s former employees, and sold to Findlay’s biggest customer.

“Michael paid only $3.4 million for the company,” Judge Daughtrey wrote. “Strikingly, between May 2009 and December 2013, the net income — or bottom line — of Back in Black and September Ends was $11.9 million, more than triple the amount Michael had paid.

“A cynic might observe that Michael was, indeed, ‘back in the black’,” she wrote.

The successor companies were, for all intents and purposes, under common control with Findlay and should be considered a trade or business successor to the original company, the court found.

The court noted this was an unusual case.

“All that we decide today is that when there is a sale that is not conducted at arm’s length, successor liability can apply,” Judge Daughtrey wrote. “And although we are reluctant to impose successor liability to reorganizations of failing businesses, that principle cannot be stretched so far as to demand judicial approval of deals that are not above board.”

The companies’ Dayton attorney, Caroline H. Gentry, could not be reached for comment.

The judicial panel was unanimous in finding that the PBGC can go after the trust, but Judge David W. McKeague disagreed that the two companies set up by Michael Gardner could also be on the hook. He wrote that Congress deliberately chose not to impose liability on such successors.

“It is true that several Circuits have imposed common-law successor liability in cases dealing with multi-employer (pension) plans — in contrast to the single-employer plan here — and the lack of a uniform rule would be somewhat awkward,” Judge McKeague wrote.

“But Congress created this awkward situation,” he wrote. “It should be the one to fix it.”

Contact Jim Provance at or 614-221-0496.