British packaging major Rexam plc is suing Berry Plastics Corp. following a deal the two companies finalized last year.
Rexam alleges that Berry is reneging on some pension obligations resulting from Berry Plastics' purchase of Rexam's healthcare caps and closures business.
Rexam filed the suit Jan. 29 in Delaware Chancery Court. Neither Rexam nor Berry would comment, indicating it is contrary to policy for pending lawsuits.
Rexam alleges Berry is not accepting transfer of some pension responsibilities for employees at a Pennsylvania manufacturing plant, according to legal news website Law360.
Berry acquired former Rexam healthcare cap and closure plants in Brookville, Pa.; Franklin, Ind.; Battleboro, N.C.; Washington, N.J., and Greenville, S.C., as well as factories in Mexico, France and India.
The suit alleges Berry decided not to honor its pension obligations for the Pennsylvania facility after Rexam asked government agency Pension Benefit Guaranty Corp. to look into the issue. PBGC decided it would not bring any legal or administrative proceeding against Berry.
“Berry suddenly and inexplicably declared the PBGC notification to be evidence of a pending or threatened legal or administrative action,” the lawsuit stated, according to Law360. “Berry now claims that it was exercising its option to refuse to accept the pension plan transfer as had been previously agreed and planned.”
Rexam is asking the court to require Berry to accept the pension obligations transfer or to pay damages.
Rexam and Berry each separately announced in June 2014 that they had completed the sale of the healthcare unit's containers and closures division. Berry paid $135 million in cash “subject to customary closing adjustments,” Rexam stated in a June 2 news release.
PBGC began its inquiry just before the parties finalized their deal in June 2014, according to the Law360 report. The companies agreed to defer the pension transfer until after PBGC concluded its inquiry or until six months had elapsed. Although PBGC said it would not take any action on the issue, Berry decided not to accept the transfer when the six month waiting period ended Dec. 2.
“Such conduct is a direct violation and breach of the purchase agreement,” Rexam alleged in the lawsuit.
The two companies already had a history of deal making as well as meeting in court.
In 2011 Berry bought Rexam's specialty and beverage closures business for $360 million.
Three years prior to that, Berry and Rexam Closures & Containers Inc. settled a lawsuit over Berry's hiring of former Rexam official John Whitehead. Whitehead was sales director for Rexam's closures and containers division. Rexam claimed Whitehead breached his contract, shared trade secrets and recruited Rexam employees for Berry after he joined Berry in early 2008. Specifics for the legal settlement were not disclosed.
Rexam's healthcare caps and closures business had sales in 2013 of about $262 million. It employed about 1,500 at its eight global plants.
“The U.S. portion of the [Rexam caps and closures business] has a highly synergistic fit with our current health care product portfolio, while the facilities located outside the United States will allow us to increase our presence in the attractive global health care market segment,” Berry Chairman and CEO Jonathan Rich noted in a news release in March 2014, when the two firms first announced their sale agreement.
The sale of the caps and closures business completed Rexam's divestiture of its three healthcare businesses so that it could concentrate on its global beverage can business.
