In re Wheeling-Pittsburgh Steel Corp., Civ. A. No. 87-355

• Decision Date: 05 July 1989
• Docket Number: Civ. A. No. 87-355,Adv. No. 88-19.,Bankruptcy No. 85-793 PGH
• Citation: 103 BR 672
• Parties: In re WHEELING-PITTSBURGH STEEL CORP., et al., Debtor. UNITED STEELWORKERS OF AMERICA, AFL-CIO-CLC, and Wheeling-Pittsburgh Steel Corporation, et al., Plaintiffs, v. PENSION BENEFIT GUARANTY CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

103 B.R. 672 (1989)

In re WHEELING-PITTSBURGH STEEL CORP., et al., Debtor UNITED STEELWORKERS OF AMERICA, AFL-CIO-CLC, and Wheeling-Pittsburgh Steel Corporation, et al., Plaintiffs, v. PENSION BENEFIT GUARANTY CORPORATION, Defendant.

Civ. A. No. 87-355, Bankruptcy No. 85-793 PGH, Adv. No. 88-19.

United States District Court, W.D. Pennsylvania.

July 5, 1989.

COPYRIGHT MATERIAL OMITTED

Carol Connor Flowe and Charles G. Cole, Washington, D.C., for Pension Benefit Guar. Corp.

Baruch Fellner, William J. Kilberg, Washington, D.C., and Bruce McCullough, Pittsburgh, Pa., for debtor.

Peter Shinovar, New York City, and Paul Whitehead, Pittsburgh, Pa., for United Steelworkers of America.

Joel Walker, Pittsburgh, Pa., and Dennis Cronin, New York City, for informal committee of bank creditors.

Robert G. Sable, and Lawrence M. Handelsman, Pittsburgh, Pa., for Official Committee of Unsecured Creditors.

ORDER DENYING PRELIMINARY INJUNCTION AND GRANTING TEMPORARY RELIEF

SIMMONS, District Judge.

This 5th day of July, 1989, upon consideration of the record and the recommended findings of fact and conclusions of law submitted by the Bankruptcy Court in connection with Plaintiffs' Motion for Summary Judgment and Plaintiffs' Motion for Preliminary Injunction, and after hearing argument of counsel, it is ORDERED as follows:

1. The MOTION FOR PRELIMINARY INJUNCTION filed by the plaintiff, United Steelworkers of America, AFL-CIO-CLC (the "Union"), and plaintiff/debtors, Wheeling-Pittsburgh Steel Corporation and its wholly owned subsidiaries, Pittsburgh-Canfield Corporation and Monessen Southwestern Railway Company, (collectively "Wheeling-Pittsburgh") filed June 8, 1989, shall be, and it hereby is, denied;

2. Preliminarily and temporarily, pending a final determination of Civil Action No. 87-355, plaintiffs' EMERGENCY MOTION FILED WITH THIS COURT JULY 5, 1989 FOR PRELIMINARY, DECLARATORY AND INJUNCTIVE RELIEF IS GRANTED.

3. Plaintiffs, the Union and Wheeling-Pittsburgh, are free to implement the proposed USWA-Wheeling-Pittsburgh Steel Corporation Employees Supplemental Retirement Plan (Exhibit K to the Massco Declaration), and Wheeling-Pittsburgh Steel Corporation Salaried Employees Supplemental Retirement Plan (Exhibit L to the Massco Declaration) (the "Follow-On Programs");

4. Such implementation appears to be consistent with Title IV of the Employee Retirement Income Security Act of 1974, as amended, the Termination Agreement among the Union, Wheeling-Pittsburgh and the Pension Benefit Guaranty Corporation ("PBGC"), the Termination Agreement between Wheeling-Pittsburgh and the PBGC, and all other applicable law; and

5. On the facts of record in the above matter, the PBGC is without the statutory authority to, and may not, restore in whole or in part Wheeling-Pittsburgh's terminated defined benefit pension plans or the assets and liabilities thereof, solely on the basis of implementation of the USWA-Wheeling-Pittsburgh Steel Corporation Supplemental Retirement Plan (the Union Follow-On Plan — Exhibit K to the Massco Declaration) and/or the Wheeling-Pittsburgh Steel Corporation Salaried Employees Supplemental Retirement Plan (the Salaried Follow-On Plan-Exhibit L to the Massco Declaration).

6. Payments of Follow-On Plan benefits shall be deemed to be made pursuant to an order of the United States District Court in accordance and compliance with the terms of paragraph 3 of the Termination Agreements.

7. The within order shall terminate upon the issuance of a final judicial order concluding Civil Action No. 87-355, in this District Court.

UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

June 30, 1989.

WARREN W. BENTZ, Bankruptcy Judge.

                                           TABLE OF CONTENTS
                                                                         Page
                       OPINION                                            676
                        (i) Issues                                        676
                       (ii) Jurisdiction                                  676
                      (iii) Facts                                         677
                       (iv) Discussion                                    679
                         I. DECLARATORY RELIEF — SUMMARY JUDGMENT         679
                            A. PBGC AND TITLE IV OF ERISA                 679
                            B. FINANCIAL DIFFICULTIES                     680
                            C. THE MERITS                                 681
                               1. PBGC Action                             681
                               2. Summary Judgment                        681
                

                               3. The Follow-On Plans under ERISA         682
                               4. Voluntary or Involuntary Termination    684
                               5. PBGC's Concern                          685
                               6. PBGC Arguments                          686
                               7. Re-termination                          688
                            D. MOTION FOR PRELIMINARY INJUNCTION          688
                        II. APPROVAL OF PBGC SETTLEMENT                   690
                       III. OBJECTIONS TO IRS PROOFS OF CLAIM             691
                            A. PRELIMINARY STATEMENT                      691
                            B. CASE SUMMARY                               691
                            C. ISSUES PRESENTED                           692
                            D. THE MERITS                                 692
                               1. Revocation of Waivers                   692
                               2. Assessments — 1984 and 1985             693
                               3. Correction                              694
                        IV. CONCLUSIONS                                   695
                

OPINION

Recommended Findings and Conclusions

(i) Issues

The above combined causes present the following issues:

(a) Whether implementation of the supplementary or "Follow-On" defined contribution pension plans bargained for by Wheeling-Pittsburgh and the Union, which follow termination of underfunded defined benefit pension plans, constitutes a sufficient basis for PBGC to restore (or de-terminate) the terminated pension plans, thereby reimposing on Wheeling-Pittsburgh the full liability of the terminated plans.

(b) Whether the court should grant the Motion for Preliminary Injunction filed by the Union and Wheeling-Pittsburgh on June 9, 1989, seeking an order prohibiting PBGC from taking any action to restore the terminated pension plans pending a final determination of the above issue, so as to allow interim benefit payments to be made under the temporary VEBA programs, to retirees and other beneficiaries notwithstanding the agreement of the Union and Wheeling-Pittsburgh not to make such payments.

(c) Whether the agreement between PBGC and Wheeling-Pittsburgh settling the proofs of claim filed by PBGC in the above bankruptcy should be approved by the court. (Excluded from the settlement are (1) the "Follow-On" program litigation, and the motion for preliminary injunction related thereto, (2) PBGC's rights as a holder of Series A and Series B Preferred Stock of Wheeling-Pittsburgh, and (3) the excise tax claims of the IRS related to pension plan underfunding.)

(d) Whether the objection of Wheeling-Pittsburgh to the proofs of claim of the U.S.A., Internal Revenue Service, should be sustained in whole or in part, where the claim is for "excise taxes" imposed because of Wheeling-Pittsburgh's failure to properly fund the now terminated defined benefit pension plans.

(ii) Jurisdiction

The District Court has jurisdiction of Civil Action No. 85-355 (action for declaratory relief — the "Follow-On" Plan Litigation) pursuant to:

(a) § 4003(f) of the Employee Retirement Income Security Act of 1974 (ERISA) as amended by the Single Employer Pension Plan Amendments Act of 1986, 29 U.S.C. § 1303(f), and

(b) §§ 1331, 1337 and 2201 of the Judicial Code, 28 U.S.C. §§ 1331, 1337 and 2201.

The Bankruptcy Court has jurisdiction of Civil Action No. 85-355 (the "Follow-On" Plan Litigation) pursuant to the special order of reference of the District Court dated January 7, 1988, but only to make proposed findings of fact and conclusions of law,¹ subject to de novo review by the District Court as to those matters to which any party has timely and specifically objected.

The matter of the PBGC proofs of claim filed in the above bankruptcy appear also to be encompassed by said order of reference, and is, in any event, so intimately related to the other matters in that action, that the question of the approval of the settlement agreement between those parties is also a matter for recommended findings and conclusions.

The objections of the debtor to the proofs of claim of the IRS are within Bankruptcy Court jurisdiction as core matters under 28 U.S.C. § 157(b)(2)(B), and the General Order of Reference of October 16, 1984, but the facts, the issues and the practical impact on the debtor and its creditors are so closely related to the other issues herein, that it is appropriate that they be resolved together. Hence, we limit ourselves to the making of recommended findings and conclusions.

(iii) Facts

On November 8, 1985, seven defined benefit pension plans covering employees of plaintiffs/debtors, Wheeling-Pittsburgh Steel Corporation, and its wholly owned subsidiaries, Pittsburgh-Canfield Corporation and the Monessen Southwestern Railway Company (collectively, "Wheeling-Pittsburgh"), were terminated with the approval of the court. The pension plan terminations followed a three month strike by plaintiff, the United Steelworkers of America, AFL-CIO-CLC (the "Union"). The strike had been precipitated when Wheeling-Pittsburgh imposed wage reductions on July 21, 1985 following a lengthy trial after which the Bankruptcy Court permitted the existing collective bargaining agreements to be "rejected" under § 1113 of the Bankruptcy Code upon a finding, inter alia, that such rejection was necessary in order to achieve a reorganization. The pension plans were tied to the rejected collective bargaining agreements. In the 1985 (Strike) Settlement Agreement, reached on October 15, 1985, Wheeling-Pittsburgh and the Union agreed to an...