Chateaugay Corp., In re

• Decision Date: 09 March 1993
• Docket Number: No. 759,D,759
• Citation: 988 F.2d 322
• Parties: Bankr. L. Rep. P 75,161 In re CHATEAUGAY CORPORATION, Reomar, Inc., and LTV Corporation, Inc., et al., Debtors. OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF LTV AEROSPACE AND DEFENSE CO. INC., Appellant, v. OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF LTV STEEL CO., INC., Chateaugay Corporation, Reomar, Inc., et al., Pension Benefit Guaranty Corporation, LTV Corporation, et al., Official Parent Creditors' Committee of the LTV Corporation, Appellees. ocket 92-5056.
• Court: U.S. Court of Appeals — Second Circuit

Page 322

988 F.2d 322

Bankr. L. Rep. P 75,161

In re CHATEAUGAY CORPORATION, Reomar, Inc., and LTV

Corporation, Inc., et al., Debtors.

OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF LTV AEROSPACE AND DEFENSE CO. INC., Appellant, v. OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF LTV STEEL CO.,

INC., Chateaugay Corporation, Reomar, Inc., et al., Pension

Benefit Guaranty Corporation, LTV Corporation, et al.,

Official Parent Creditors' Committee of the LTV Corporation,

Appellees.

No. 759, Docket 92-5056.

United States Court of Appeals, Second Circuit.

Argued Jan. 6, 1993.

Decided March 9, 1993.

Max O. Truitt, Jr., Washington, DC (William J. Perlstein, Stephen M. Cutler, Anne D. Bolling, Gregory S. Lane, Wilmer, Cutler & Pickering, Washington, DC, Carla E. Craig, Steven M. Schwartz, Hertzog, Calamari & Gleason, New York City, on the brief), for appellant.

Brian M. Cogan, New York City (Mark S. Wintner, Mark A. Speiser, Leslie Payson, David Simonetti, James McGovern, Stroock & Stroock & Lavan, Harold S. Novikoff, Wachtell, Lipton, Rosen & Katz, New York City on the brief), for appellee Official Committee of Unsecured Creditors of LTV Steel Co., Inc.

Lewis B. Kaden, New York City (Karen E. Wagner, Lawrence J. Portnoy, Davis Polk & Wardwell, Michael J. Crames, Kaye, Scholer, Fierman, Hays & Handler, New York City on the brief), for appellees LTV Corp. and LTV Steel Co., Inc. James J. Armbruster, Asst. Gen. Counsel, Pension Benefit Guar. Corp., Washington, DC (Carol Connor Flowe, Gen. Counsel, William G. Beyer, Deputy Gen. Counsel, Pension Benefit Guar. Corp., Charles G. Cole, Nancy K. Hayes, Sara E. Hauptfuehrer, Carina J. Campobasso, Steptoe & Johnson, Washington, DC, on the brief), for appellee Pension Benefit Guar. Corp.

Thomas E. Biron, Philadelphia, PA (Raymond L. Shapiro, Blank, Rome, Comisky & McCauley, Philadelphia, PA, on the brief), for appellee Official Parent Creditors' Committee of the LTV Corp.

Before: KEARSE, WINTER, and WALKER, Circuit Judges.

KEARSE, Circuit Judge:

The Official Committee of Unsecured Creditors of LTV Aerospace and Defense Co. ("Aerospace Committee" or "Committee") appeals from an order of the United States District Court for the Southern District of New York, David N. Edelstein, Judge, dismissing its appeal from a November 5, 1991 order of the United States Bankruptcy Court for the Southern District of New York, Burton R. Lifland, Chief Judge, which, inter alia, authorized the payment of funds from the estate of LTV Steel Co. ("LTV Steel") to a pension plan through the end of September 1992. The district court dismissed Aerospace Committee's appeal on the ground that the Committee lacked standing to attack the bankruptcy court's order. See In re Chateaugay Corp., 141 B.R. 794 (S.D.N.Y.1992). On appeal, the Committee challenges the district court's standing ruling. For the reasons below, we conclude that the present appeal is moot, and we accordingly vacate the district court's order and remand with instructions to dismiss the Committee's appeal to the district court on the ground of mootness.

I. BACKGROUND

In July 1986, LTV Corporation ("LTV") and 66 of its subsidiary and affiliated companies (collectively "debtors"), including LTV Steel and LTV Aerospace and Defense Co. ("Aerospace"), filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. § 1101, et seq. (1988) ("Code"). The individual cases were consolidated for procedural, though not substantive, purposes and are being jointly administered.

A. Proposed Settlement of LTV Steel's Pension Fund Liabilities

At the time of the Chapter 11 filings, LTV Steel was the sponsor of four pension plans administered by LTV, including the Jones & Laughlin Hourly Pension Plan ("J & L Hourly Plan" or "Plan"). The Pension Benefit Guaranty Corporation ("PBGC") at first terminated these plans and took over their assets and liabilities. It subsequently reinstated the J & L Hourly Plan and two others, see generally Pension Benefit Guaranty Corp. v. LTV Corp., 496 U.S. 633, 640-44, 110 S.Ct. 2668, 2672-75, 110 L.Ed.2d 579 (1990), returning responsibility for their administration and funding to LTV, see generally In re Chateaugay Corp., 973 F.2d 141, 142 (2d Cir.1992).

Since both Aerospace and LTV Steel are subsidiaries of LTV, Aerospace is a member of LTV Steel's "controlled group" for purposes of the Employee Retirement Income Security Act ("ERISA") and is jointly and severally liable with LTV and other LTV subsidiaries for claims made against the LTV Steel pension plans upon termination. See 29 U.S.C. § 1362(a) (1988 & Supp. I 1989); In re Chateaugay Corp., 973 F.2d at 142. Accordingly, PBGC filed proofs of claim against Aerospace, as well as against LTV Steel and the remaining controlled group members, for the amount by which the terminated plan and the three restored plans were underfunded--a total of more than $3 billion. With respect to the restored pension plans, the PBGC claims are, in effect, contingent claims to be pressed if one or more of those plans terminates prior to the confirmation of a reorganization plan.

Any reorganization of the debtors' estates will have to resolve these claims in a manner acceptable to PBGC. To this end, the debtors filed a proposed joint plan of

                reorganization in May 1991, the catalyst for which was a tentative settlement between the debtors and PBGC with respect to the pension obligations.   The debtors' Disclosure Statement Pursuant to § 1125 of the Bankruptcy Code, dated May 1, 1991, described the proposed plan as "dependent to a great extent upon [the debtors'] reaching final agreement with the PBGC substantially in accordance with the terms of the tentative Pension Settlement," and stated that one of the chief goals of the tentative settlement was to have the debtors provide sufficient funds to the plans to "ensure that beneficiaries of the restored pension plans will be paid in full."
                

B. The Orders for Interim Funding of the J & L Hourly Plan

During the reorganization proceedings, the J & L Hourly Plan was continuing to pay benefits to its participants, though it was not receiving postpetition contributions from the debtors. In May 1991, the debtors estimated that the Plan's liquid assets would be exhausted by the end of July 1991. Seeking to avoid a mandatory termination of the plan under § 4042(a) of ERISA, 29 U.S.C. § 1342(a) (1988 & Supp. I 1989), and to preserve the tentative settlement with PBGC, the debtors sought authorization from the bankruptcy court for the "immediate payment by LTV to the J & L Hourly Plan of an amount equal to the benefit payments expected to be due under such plan for July, August and September, 1991, but not exceeding $40 million." (Application in Support of Order Authorizing Payments to J & L Hourly Pension Plan, dated May 13, 1991, at 9.) Over the objections of certain creditor committees, the bankruptcy court entered an order in June 1991 authorizing the immediate payment by LTV Steel to the J & L Hourly Plan of $27 million, representing two months of benefit payments. The Official Committee of Unsecured Creditors of LTV Steel Company, Inc. ("Steel Committee"), and Cold Spring Management, Inc., a creditor of Aerospace and then-chair of an unofficial Aerospace creditors' committee, appealed that order. Their appeals were subsequently withdrawn pursuant to an accord in which the two appellants agreed not to oppose any application by the debtors to fund the J & L Hourly Plan through November 30, 1991, and the debtors agreed not to seek authorization for any additional funding beyond that date without the consent of the two appellants.

On October 30, 1991, the Steel Committee, having also reached a tentative settlement with PBGC, sought an order authorizing the immediate payment by LTV to the J & L Hourly Plan of an amount equal to three months' benefits and, subject to the occurrence of certain events, any additional monthly payments necessary thereafter to provide sufficient funding through June 1992. Following a hearing, the bankruptcy court issued an order on November 5, 1991 ("November 1991 Order") granting the request, finding that additional payments to the J & L Hourly Plan were "necessary to the process of developing a plan of reorganization for The LTV Corporation and its affiliates." Accordingly, the November 1991 Order authorized and directed LTV Steel (a) to make an immediate payment to the J & L Hourly Plan sufficient to fund three months' benefits, providing a "Three-Month Cushion," and (b) thereafter to make monthly contributions to the Plan from December 1991 through September 1992 of amounts "sufficient to fund benefits in each month and thereby replenish the Three-Month Cushion." November 1991 Order at 2. The order also provided, inter alia, that these payments would constitute a dollar-for-dollar offset against any ultimate distributions to the J & L Hourly Plan or the other restored plans, or to PBGC with respect to any of the plans pursuant to a plan of reorganization.

The Aerospace Committee timely appealed from the November 1991 Order. It did not, however, request a stay pending appeal. Its appeal remained pending until July 7, 1992.

In the meantime, LTV Steel made the required payments to the J & L Hourly Plan; by September 30, 1992, its payments totaled approximately $163 million. All of these funds have been paid out as pension benefits to the Plan's participants.

In addition, after lengthy negotiations, LTV Steel and the United Steelworkers of America reached an agreement governing their continued relationship ("Collective Bargaining Agreement"). A key provision of this agreement is LTV Steel's commitment "to continue the funding of the J & L Hourly Pension Plan through the earlier of the effective date of the Plan of Reorganization or September 5, 1993." In an order dated August 12, 1992 ("August 1992 Order"), the bankruptcy court approved the Collective Bargaining Agreement,...