The Supreme Court today rejected the pensioners' appeal of a lower court ruling that threw out a lawsuit claiming that Murdock violated his financial duty to safeguard the company pension plan.
Murdock, now chairman of Dole Food Co., had invested the pension plan's assets with Executive Life Insurance Co., which was seized by California regulators in 1991. Its policy holders, including 12,000 in Hawaii, are still awaiting the end of a lengthy liquidation which is expected to get them back about 92 cents for each dollar they invested.
The case marks the second time in the past month that the Supreme Court has refused to second-guess an appeals court ruling about a company's decision to invest pension money with Executive Life.
The two cases, however, came to opposite conclusions: Last month, the high court refused to review a different appeals court's decision that ordered Unisys Corp. to stand trial in a separate lawsuit claiming the company wasn't careful enough when it picked Executive Life for investments from a worker retirement plan.
Executive Life became insolvent after investing more than 60 percent of its assets in junk bonds.
The Murdock lawsuit involved his selection of Executive Life for an annuity that was purchased to cover future pension costs by retirees from Cannon Mills.
Murdock bought the company and the company town of Kannapolis, N.C., in 1982, and later sold its bath and bedding operations to Fieldcrest Mills, which was renamed as Fieldcrest Cannon Inc. The transaction took place in 1985, a few months after Murdock came up with the money to save financially troubled Dole (then Castle & Cooke Inc.) and was named its chairman.
In connection with the transaction, Murdock terminated Cannon Mills' pension plan, which controlled more money than was needed to provide the pensions that had been promised workers. Murdock bought an Executive Life annuity to meet the pension plan's obligations, and kept about $25 million in excess plan assets.
In their lawsuit, the pensioners said Murdock should have known that Executive Life was on shaky financial ground. The financier selected Executive Life, they charged, only because it was the cheapest available annuity, which let Murdock pocket a larger surplus than he would have by buying a safer, more-expensive annuity to cover pension obligations.
Murdock countered that a committee of independent experts examined various options, studied financial information about all bidders, and took every step needed to meet the company's responsibility to pensioners. Problems with Executive Life, Murdock said, didn't bring the company down until five years after the annuity was purchased.
While the Executive Life failure initially cut Cannon Mills pensions by as much as 30 percent, Murdock said all workers have now gotten every penny to which they're entitled.
After Executive Life's collapse, the North Carolina Life and Health Insurance Guaranty Association, a state-created fund to guarantee pension payments, said it would make up any shortfall.