Federal claims against Augsburg Fortress in pension case dismissed

A federal judge has dismissed claims that Augsburg Fortress Publishers violated federal labor law when it moved to dissolve its pension plan so that nearly 500 current and former employees will receive less than originally promised.

U.S. District Judge Michael Davis found the retirement plan is a "church plan," exempt from the Employee Retirement Income and Security Act of 1974 (ERISA).

"We're pleased with the result," said Charles Knapp, an attorney for Augsburg Fortress. "But it's a regrettable situation all the way around. If Augsburg Fortress hadn't terminated it, the plan would have run out of money in five years. It was fairer to terminate and allow for a more equitable distribution to a broader group [over time]."

Davis, in ruling on the motion of Augsburg Fortress and the Evangelical Lutheran Church of America (ELCA) to dismiss the case, also tossed out a claim of consumer fraud.

However, Davis said the plaintiffs case may proceed on related state-law claims. The plaintiffs allege that Augsburg Fortress was controlled by the deeper-pockets ELCA, which along with Augsburg Fortress, violated their fiduciary responsibilities to properly fund the pension plan on behalf of about 175 retirees and 300 current and former employees.

"The judge said we can at least take a shot at the ELCA in this case, and it has vastly deeper pockets than Augsburg Fortress and basically controls Augsburg Fortress," said attorney Dick Lockridge, who is moving to have the case declared a class action, on behalf of all affected employees and retirees. "We knew [the federal claims were] a long shot."

In late 2009, Augsburg Fortress CEO Beth Lewis said the traditional defined-benefit plan of Augsburg Fortress, which publishes hymnals and other works for Lutherans and congregations, was insolvent, with only $1 in assets for every $3 in long-term liabilities. There was no hope of reviving it because sales were trending downward.

The pension decision got angry employees on Facebook pages grousing about how Augsburg Fortress has broken faith.

With the decision that the pension plan isn't subject to federal labor law, Lockridge will now assert that the ELCA broke faith when it took over operations of the Lutheran, the ELCA magazine, a move that cost slumping Augsburg Fortress up to $12 million annually in revenue. Meanwhile, the suit asserts, Augsburg Fortress purposely underfunded the pension plan annually going back to 2001, breaking its contract with employees to add sufficient funds every year.