A worker at the now-shuttered Pacific Steel Casting plant in West Berkeley. Photo: Pete Rosos

Pacific Steel Casting, which shut down in October after 84 years in business, has reached a settlement to pay unpaid health and pension benefits to former workers, but it still owes about $1 million in severance pay to those who were recently laid off.

Pacific Steel, which Speyside Equity purchased in 2014, failed for six months in 2017 to make around $421,133 in health and pension payments to its workers, even though it had withheld health insurance funds from their paychecks, according to a lawsuit filed in August 2017 in federal court by the trustees overseeing the union’s pension and health plans. The company also owed the pension plan another $27,217.58 in interest and liquidated damages, according to the suit.

The steel company had stopped making the payments, which it was legally obligated to do, because it had started to lose money, according to Richard N. Hill, of Littler, the company’s attorney.

The parties recently settled the lawsuit out of court, according to court documents. Hill said they reached a “compromise settlement,” with Pacific Steel Casting paying about 50% of what it owed the workers’ pension and health funds.

“If it were in better financial condition, they would have agreed to pay more,” said Hill.

Conchita Lozano-Batista, the attorney for the health and pension funds, did not return a call to Berkeleyside.

While the outstanding payment for those funds has been resolved, Hill said he expects there will probably be future litigation between the company and the workers who were laid off in the last year over severance payments. He said Pacific Steel Casting admits it owes about $1 million, possibly a little less. The workers are represented by the Glass, Molders, Pottery, Plastics & Allied Workers International Union.

“The company doesn’t have the ability to pay 100% of the severance payment,” said Hill.

From 1934 to 2014, the Genger and Delsol families owned Pacific Steel Casting Company. The company filed for Chapter 11 bankruptcy in 2014 after it lost a class action lawsuit filed by its employees claiming they had not been paid for breaks and lunchtime. The company at the time owed the workers $5.4 million.

Speyside Equity, operating as the Speyside Fund LLC, bought the company for $11.3 million in July 2014 and spun it into a new entity, Pacific Steel Casting LLC. Speyside then leased the 11 buildings that the casting company used.

Pacific Steel Casting was generating $100 million in revenues before the bankruptcy filing, and employed around 430 people, according to court documents. For a time, Speyside appeared to be improving operations. But, starting in 2014, the prices of oil and gas dropped. Making castings for oil rigs was one of Pacific Steel Casting’s biggest markets, and the loss of business put the company on a downward financial trajectory from which it never recovered.

The attorneys for the pension plan accused Speyside in court documents of deliberately undermining Pacific Steel Casting’s business by funneling work from Berkeley to other non-union plants it owned, in violation of the union contract. The attorneys also argued in court documents that funds for the health and pension payments didn’t have to solely come from the “new” Pacific Steel Casting,” but could also come from Speyside Equity and its partners.

Speyside Equity argued in federal court that it really didn’t have anything to do with Pacific Steel Casting and shouldn’t be a party to the lawsuit or be responsible to make those health and pension payments. The equity funds’ partners claimed that the Speyside Fund was a minority investor in Pacific Steel Casting and the partners in Speyside Equity had no direct connection with Pacific Steel Casting LLC at all. (Yet Pacific Steel Casting is featured prominently on Speyside Equity’s website).

The question of whether Speyside owned Pacific Steel Casting or not and whether the fund’s partners have any financial obligation to the workers was not resolved since the lawsuit was settled out of court, said Hill.

“The people who invested in the new Pacific Steel Casting, they were not willing or able to pump unlimited amounts of money into the company,” said Hill.

While Pacific Steel Casting was wobbling, Speyside Equity spent $130 million it raised from investors on acquiring numerous other plants around the U.S.

The plant is now idle and the company is performing an environmental clean-up, said Hill.

Property now for sale; proceeds will be used to pay off creditors

The Pacific Steel property in West Berkeley is for sale. Photo: Melati Citrawireja

When the old Pacific Steel Casting Company filed for Chapter 11 to reorganize its debts, numerous companies filed creditor claims, leading to many owners for the land and buildings. The workers who won a class action lawsuit acquired a part interest in the property in lieu of the $5.4 million payment. The pension and health benefit funds also own part of the property, as do members of the families that once owned it.

Those owners, operating under Second Street Properties LLC, have put the property up for sale. Arch & Beam, the plan administrators for the Chapter 11 reorganization, is handling the sale, among other duties. That company has also asked the city of Berkeley to weigh in on what it wants for the site, which sprawls on both sides of Second Street in West Berkeley.

The city will hold a visioning session to solicit input in February.

One outstanding question is who will pay the more than $24 million in pension benefits still owed to former workers. When Speyside Equity acquired Pacific Steel Casting Company in 2014, it agreed to assume that liability. Now the company is shutting down and is pulling out of the multi-employer pension plan.  Under the agreement, Second Street Properties LLC remains “secondarily liable,” for that money, according to court documents.

Frances Dinkelspiel, Berkeleyside and CItyside co-founder, is a journalist and author. Her first book, Towers of Gold: How One Jewish Immigrant Named Isaias Hellman Created California, published in November...