January 27, 2012

Federal Circuit affirms lower court’s decision in pension transfer case.

On January 26, the United States Court of Appeals for the Federal Circuit issued an opinion in the case of The DirectTV Group, Inc. v. United States, affirming the decision of the U.S. Court of Federal Claims in favor of DirectTV with respect to the application of government accounting regulations when a segment of a company is sold, and the sale includes the transfer of surplus assets in defined benefit pension plans. Willkie represented General Electric Co. as amicus curiae in this decision.

The decision clears DirectTV from a U.S. claim that it owed $80 million from pension surpluses it kept when it sold off its government contract units and certain employee pensions to The Boeing Co. and defense contractor Raytheon Co. The Court held that the government’s share of the sold segment’s pension surplus was satisfied by reductions in pension costs that the buyer charged the government as the result of the pension surplus transfers.

In the decision, the Court of Appeals wrote that "The Government does not adequately explain how its proposal for additional payment from DIRECTV avoids providing a prohibited wind-fall to the Government. The Court of Federal Claims correctly held that such a windfall is prohibited by the CAS statute." Additionally, the Court noted that the trial court’s affirmed decision was based entirely on a ruling in favor of GE, another seller, in General Electric Co. v. United States, 84 Fed. Cl. 129 (2008), a case handled by Willkie. The GE case, where the government originally sought hundreds of millions of dollars from GE, is awaiting further proceedings in the trial court.

The matter was handled by partners Richard Bernstein and Antonio Yanez and associates Matthew Edwards, Malvika Bahadaran, Montgomery Engel, Emily Rap and Frank Scaduto (former associate).



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