In re Ual Corp. (Pilots' Pension Plan Termination)

• Decision Date: 25 October 2006
• Docket Number: No. 06-1867.,No. 06-2714.,No. 06-2662.,No. 06-2843.,06-1867.,06-2843.,06-2662.,06-2714.
• Citation: 468 F.3d 444
• Parties: In the Matter of UAL CORPORATION (PILOTS' PENSION PLAN TERMINATION). Appeals of: United Airlines, Inc.; Pension Benefit Guaranty Corporation; Air Line Pilots Association, International; and United Retired Pilots Benefit Protection Association, et al.
• Court: U.S. Court of Appeals — Seventh Circuit

468 F.3d 444

In the Matter of UAL CORPORATION (PILOTS' PENSION PLAN TERMINATION).

Appeals of: United Airlines, Inc.; Pension Benefit Guaranty Corporation; Air Line Pilots Association, International; and United Retired Pilots Benefit Protection Association, et al.

No. 06-1867.

No. 06-2843.

No. 06-2662.

No. 06-2714.

United States Court of Appeals, Seventh Circuit.

Argued September 26, 2006.

Decided October 25, 2006.

Rehearing Denied November 13, 2006.

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David R. Seligman (argued), James J. Mazza, Jr., Kirkland & Ellis, Chicago, IL, for Appellant.

Jack J. Carriglio, Eric E. Newman, Meckler, Bulger & Tilson, Chicago, IL, for United Retired Pilots Benefits Protection Association, et al.

Babette A. Ceccotti (argued), Cohen, Weiss & Simon, New York, NY, for Appellee, Air Line Pilots Association, International.

Matthew C. Luzadder, Kelley, Drye & Warren, Chicago, IL, Jeffrey B. Cohen (argued), Paula Connelly, Pension Benefit Guaranty Corporation, Office of the General Counsel, Washington, DC, for Pension Benefit Guaranty Corporation.

Chad J. Husnick, Kirkland & Ellis, Chicago, IL, for United Airlines, Incorporated.

Before BAUER, POSNER, and EASTERBROOK, Circuit Judges.

EASTERBROOK, Circuit Judge.

Earlier this year we held that United Airlines and its unionized pilots had reached a valid bargain in which the pilots' union, in order to improve United's chance of successful reorganization in bankruptcy, agreed not to oppose its termination of its defined-benefit pension plan. In re UAL Corp. (URPBPA), 443 F.3d 565 (7th Cir. 2006) (URPBPA I). In exchange for their acquiescence, the active pilots stood to receive $550 million in convertible notes in the reorganized firm, plus a new defined-contribution pension plan.

This agreement contemplated that United would maintain the defined-benefit plan through the end of June 2005, though without making additional monthly contributions to the plan's trust fund. During those months, pilots' accrued benefits would rise because of additional work credits, and an annual cost-of-living increase would kick in. When the defined-benefit plan ended, all pilots (active and retired) would continue to receive reduced monthly benefits. "Termination" of a plan does not end anyone's right to receive vested benefits; it just prevents an increase in those benefits, which will be paid from the trust and, to the extent that fund is insufficient, by the Pension Benefit Guaranty Corporation. (What the PBGC can pay is limited by 29 U.S.C. § 1322(b)(3), so vested benefits of well-paid retirees such as airline pilots are not fully insured.) Because the funds in trust for the pilots' plan at United were insufficient to pay the promised benefits, termination required the PBGC to step in with a hefty federal subsidy.

The PBGC was unwilling to underwrite the extra benefits that would become vested during the first six months of 2005, benefits that the district court valued at approximately $84 million. It filed an adversary action in the bankruptcy proposing to terminate the plan at the end of 2004. Meanwhile United proposed to end the payment of supplemental retirement benefits, from its corporate funds, that exceeded what could be offered through a tax-qualified pension plan—which is to say, a plan the benefits of which are taxed to employees as they are paid after retirement, rather than when the work is performed and wages earned. (The parties refer to these payments as "non-qualified benefits," but that's a misnomer. Pension plans, and contributions to them, may or may not be "qualified" in the sense of deferring income tax from the time wages are earned until the pensions are disbursed; particular benefit payments always are taxable income when distributed. We therefore refer to the benefits as "supplemental," meaning supplemental to the tax-qualified pension plan, rather than as "non-qualified.") The Union (the Air Line Pilots Association, International, or ALPA) acknowledged that these benefits would end as soon as the defined-benefit pension plan terminated—for a plan's termination limits pension benefits to their vested and insured level—but the parties' agreement of January 2005 (the "Letter Agreement" for short) stipulated that this meant continuation until a court formally terminated the agreement. ALPA insists that this means the date of judicial decision, not the date of the plan's termination.

After a considerable delay caused by assignment of the PBGC's action to Chief Bankruptcy Judge Wedoff, followed by District Judge Darrah's decision (after a trial had been held in the bankruptcy court) that only a district judge could act on that non-core subject, the matter came to rest with District Judge Lefkow. She thought that $84 million would be an "unreasonable increase" in the PBGC's liability; under 29 U.S.C. § 1342(a)(4), that conclusion justified termination of the pension plan at the end of 2004. 436 F.Supp.2d 909 (N.D.Ill.2006). But Judge Lefkow did not release this decision until June 2006. Judge Wedoff, whose authority over the supplemental pension benefits was secure under 28 U.S.C. § 157(b)(1) because United's request for relief was a core proceeding, concluded in February 2005 that it must continue paying while he, then Judge Darrah, and finally Judge Lefkow, mulled over the PBGC's request to set a termination date in 2004. In October 2005 United renewed its request to cease paying—for by then the pension plan would have ended even had the PBGC not sought an earlier termination date. Judge Wedoff again denied this request but allowed United to put the supplemental retirement benefits for October and later months in a segregated account while the PBGC's suit continued. United appealed to Judge Darrah. See 28 U.S.C. § 158(a). He dismissed the appeal as "unripe" because final decision in the PBGC's adversary proceeding lay ahead.

We have consolidated four appeals from these decisions. The PBGC, the ALPA, and a group of retired pilots (the United Retired Pilots Benefit Protection Association, or URPBPA) have appealed from Judge Lefkow's order. United has appealed from Judge Darrah's refusal to decide whether it must pay supplemental benefits for October 2005. Judge Wedoff entered a separate order requiring United to pay supplemental retirement benefits through February 1, 2006, when its plan of reorganization took effect; the plan, Judge Wedoff held, superseded the Letter Agreement and allowed United to stop paying at last, even though Judge Lefkow still had not decided whether the pension plan's termination date would be in December 2004 or June 2005. United appealed that decision to Judge Darrah, who affirmed on the ground that, by not taking an interlocutory appeal under 28 U.S.C. § 158(a)(3) from Judge Wedoff's order in February 2005, United had forfeited any entitlement to further review of its obligations with respect to supplemental benefits. United has filed a notice of appeal (No. 06-3489) from that decision, and both ALPA and URPBPA have filed cross-appeals (Nos. 06-3548 & 06-3559) to argue that even the confirmation of the plan did not end United's obligation to pay supplemental benefits. We have stayed briefing in those three appeals until the other appeals have been resolved, as our handling of the October 2005 supplemental benefits may well resolve the controversy about payment for ensuing months too.

Of the four appeals, the PBGC's has the distinction of not seeking any relief—for the PBGC prevailed in the district court. It proposed a termination date of December 30, 2004; the court ruled in its favor. The PBGC's nose is out of joint because the court held a trial and made its own judgment about how much extra it would have cost to keep the plan in force until the end of June 2005, and whether that amount (which the court fixed at $84.2 million, about $17 million less than the PBGC's calculation) would be an "unreasonable increase" in federal liability. The PBGC does not want to go through such a procedure again and asks us to hold that, instead of conducting an independent inquiry, the court should have limited review to the administrative record and deferred to the PBGC's evaluation. Appellate courts do not, however, review language in district judges' opinions—we review judgments, see Jordan v. Duff & Phelps, Inc., 815 F.2d 429, 439 (7th Cir.1987), and this judgment gave the PBGC everything it wanted. A litigant that prevails at trial may not appeal to contend that it should have won faster or cheaper on summary judgment; nor may the winner at trial protest what it deems (in retrospect) to have been needless discovery or rounds of briefing en route. What the PBGC wants from us—a remand directing the district judge to write a different opinion but enter the same judgment—is not within the judicial power under Article III. Fiddling with explanatory language, when the judgment is fixed, would be advisory.

This is not to say that a prevailing litigant must abandon its views on intermediate legal questions. A winner may defend its judgment on any ground preserved in the district court, without need for a cross appeal. See, e.g., Massachusetts Mutual Life Insurance Co. v. Ludwig, 426 U.S. 479, 96 S.Ct. 2158, 48 L.Ed.2d 784 (1976). The PBGC takes this as a fallback position, even if Article III precludes a remand with instructions to rewrite the opinion while reentering the same judgment. So our first question is whether review should have been deferential, for if the answer is yes then we may affirm (on ALPA's and the retired pilots' appeals) without further ado.

Deference is appropriate when agencies wield delegated interpretive or adjudicatory power—the former usually demonstrated by rulemaking and the latter by administrative adjudication (which also may yield rules in common-law fashion). See United States v. Mead Corp., 533 U.S. 218, 229-30, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001). The PBGC did...