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A federal judge has approved a $36 million settlement that — subject to one condition — will require the McDonnell Douglas Corp. to compensate about 1,100 of its former employees for the pensions and other benefits they lost when the company shut down its Tulsa, Okla., plant. The outcome in Millsap v. McDonnell Douglas Corp., No. 94-CV-633-H, represents only the third time that employees have prevailed on a claim that a company violated the Employee Retirement Income Security Act (ERISA) by closing a plant with the intent to shed employees whose benefit costs were high or who were on the verge of vesting in pensions. The last such case was in 1992, according to a May 28 order entered by U.S. District Judge Sven Erik Holmes of the Northern District of Oklahoma, who presided over the McDonnell Douglas case. Holmes cited the long odds faced by the plaintiffs’ lawyers as one reason they were entitled to their requested fee of $8.75 million, which will be deducted from the settlement. Other reasons were the protracted nature of the litigation (it has been brewing since 1994) and the dedication of the plaintiffs’ lawyers to their clients’ interests. Holmes applauded the plaintiffs’ attorneys for working out a scheme that will compensate workers in proportion to their actual damages, as opposed to the more common pro rata distribution. Holmes found that the plaintiffs’ attorneys had had to overcome constant obstruction by McDonnell Douglas, echoing a 2001 ruling in which he castigated the company for withholding and destroying evidence and punished that conduct by denying the company the right to use the “business judgment rule” as a defense. Holmes went so far in 2001 as to say that “a culture of dishonesty existed at the company.” Finding the company’s explanations for the closing inconsistent and unconvincing, Holmes concluded that the true reason was that the Tulsa plant’s work force was, on average, older than at other plants. That ruling left only the issue of damages to be resolved. ON ONE CONDITION The plaintiffs, whose average age is now 59, and 50 of whom have died since the start of the litigation, will not see a penny of the settlement unless the 10th U.S. Circuit Court of Appeals agrees to consider a disputed question certified by Holmes. The question is whether courts can award “backpay” as a remedy for ERISA violations. In this case, backpay would be equivalent to what workers at the Tulsa plant would have earned from the time they were laid off until the present or until such time as the plant would have closed for legitimate reasons. Jack Walbran, vice president and counsel for the Boeing Co., which acquired McDonnell Douglas in 1997, said that a 2002 U.S. Supreme Court case, Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, conclusively established that backpay is not available in ERISA cases. That’s not a view shared by Holmes, who, last September, several months after Great-West was decided, gave plaintiffs’ lawyers the go-ahead to proceed to trial on the backpay issue, an inquiry that would require rather complicated and hotly contested testimony about what would have been the plant’s fate during a defense-industry downturn. If the 10th Circuit declines to rule on the issue, the settlement is void, leaving the plaintiffs free to go to trial on both benefits and backpay compensation. If the circuit court takes review, but rules against McDonnell Douglas, the plaintiffs can then litigate backpay while still keeping the $36 million settlement, an arrangement that Holmes described as “unique” in one of his May orders. Walbran explained this complex arrangement by saying that Boeing felt strongly that Holmes’ backpay ruling was in error and should be kept out of settlement talks. Plaintiffs’ lawyer Michael M. Mulder of Chicago’s Meites, Mulder, Burger & Mollica, would not hazard a guess as to whether the 10th Circuit would take review, but expects to know within six months. SPECIFIC INTENT Dana M. Muir, a law professor at the University of Michigan and an authority on ERISA litigation, said that recoveries are quite rare in challenges to plant closings because “ERISA requires plaintiffs to prove specific intent.” She said there remains controversy over whether Great-West allows backpay awards, primarily because a dissenting opinion by Justice Ruth Bader Ginsburg suggested a way to reconcile a damages remedy such as backpay with ERISA language favoring equitable remedies. Holmes acknowledged the difficulties of proving specific intent in one of his May orders. He noted that there were “smoking gun” documents directly proving intent in the two previous successful cases. Though documents damaging to McDonnell Douglas were found, Holmes suggested that the more decisive evidence was the company’s efforts to conceal a smoking gun that was never found. Mulder said that the company had to backtrack from claims that it never considered benefit costs after plaintiffs found proof to the contrary by subpoenaing its accounting firm. Walbran countered that “there is no evidence of an intent to deprive people of their benefits.”

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