Nemeth v. Clark Equipment Co.

James Nemeth (plaintiff) and 17 other employees (employees) lost their jobs when their employer, Clark Equipment Company (Clark) (defendant), closed its construction-machinery plant in Benton Harbor, Michigan. Clark, which operated three plants before the closure, had determined that it risked bankruptcy if it did not reduce overhead. One of Clark’s plants could not be closed because it was in Canada, and duty restrictions would prevent Clark from competing in the Canadian market if Clark did not maintain manufacturing capacity there. Clark conducted a series of plant-capacity studies to determine whether closing one of the other plants would preserve the company’s financial viability. Based on these studies, Clark decided to close the Benton Harbor plant, leaving its Asheville, North Carolina, plant operational. Over the five-year period studied, Clark calculated that the difference in operating costs between the two plants was $26.9 million, approximately one-fifth of which was attributable to pension costs. Paul Schultz, former manager of the Benton Harbor plant, stated that “the pension costs were killing us.” Nevertheless, no single item or expense was determinative, and Clark focused on the bottom line in making its decision to close the Benton Harbor plant. As a result of the plant closing, the employees, all of whom were nearing retirement age, lost the right to qualify for full retirement benefits. The employees filed suit, alleging that Clark’s decision to close the Benton Harbor plant violated § 510 of the Employee Retirement Income Security Act of 1974 (ERISA) because it was motivated by a desire to prevent the employees from obtaining their full retirement benefits.