Pension Ben. Guar. Corp. v. LTV Corp.
| Citation | 875 F.2d 1008 |
| Decision Date | 12 May 1989 |
| Docket Number | D,Nos. 695 and 696,s. 695 and 696 |
| Parties | , 111 Lab.Cas. P 11,200, 16 Fed.R.Serv.3d 400, 19 Bankr.Ct.Dec. 913, 10 Employee Benefits Ca 2425 PENSION BENEFIT GUARANTY CORPORATION, Plaintiff-Appellant, Cross-Appellee, David H. Miller and William W. Shaffer, Intervenors-Appellants, v. The LTV CORPORATION and LTV Steel Company, Inc., Defendants-Appellees, Official Committee of Unsecured Creditors of LTV Corporation, Subcommittee of Parent Creditors of the Official Committee of Unsecured Creditors of LTV Corporation, LTV Bank Group, Official Committee of Equity Security Holders, BancTexas Dallas, N.A., Fifth Third Bank, Huntington National Bank and Citibank, N.A., Intervenors-Appellees, The LTV Bank Group, Intervenor-Appellee, Cross-Appellant. 1ockets 88-6244, 88-6246 and 88-6252. |
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
Gary M. Ford, Gen. Counsel, Pension Ben. Guar. Corp., Washington, D.C. (Carol Connor Flowe, Deputy Gen. Counsel, Jeanne K. Beck, Asst. Gen. Counsel, James J. Armbruster, Paula J. Connelly, Pension Ben. Guar. Corp., Philip W. Tone, Jenner & Block, E. Calvin Golumbic, Arent, Fox, Kintner, Plotkin & Kahn, Washington, D.C., of counsel), for plaintiff-appellant Pension Benefit Guar. Corp. R.A. King, Pittsburgh, Pa. (Kenneth R. Bruce, Janet R. Thompson, Buchanan Ingersoll, Pittsburgh, Pa., Stuart Cotton, Mound Cotton & Wollan, New York City, of counsel), for intervenors-appellants David H. Miller and William W. Shaffer.
Lewis B. Kaden, New York City (Karen E. Wagner, Sharon Katz, Joan Greco, Davis Polk & Wardwell, New York City, of counsel), Michael J. Crames, New York City (Herbert S. Edelman, Marc Abrams, Levin & Weintraub & Crames, New York City, of counsel), Frank Cummings, Leboeuf, Lamb, Leiby & MacRae, Washington, D.C., on the brief, for defendants-appellees LTV Corp. and LTV Steel Co., Inc.
Brian Cogan, New York City (Lawrence M. Handelsman, Stroock & Stroock & Lavan, Leonard E.M. Rosen, Theodore Gewertz, Harold Novikoff, Wachtell, Lipton, Rosen & Katz, New York City, of counsel), for intervenor-appellee Official Committee of Unsecured Creditors.
Geoffrey M. Kalmus, New York City (Joel Zweibel, Peter V. Pantaleo, Kramer, Levin, Nessen, Kamin & Frankel, New York City, of counsel), for intervenor-appellee LTV Bank Group.
Claude D. Montgomery, New York City (Edgar H. Booth, Peter D. Wolfson, Sara L. Chenetz, Myerson & Kuhn, New York City, of counsel), for intervenor-appellee Official Committee of Equity Security Holders.
Kathryn C. Mallory, Dallas, Tex. (Robin E. Phelan, Haynes and Boone, Dallas, Tex., of counsel), for intervenor-appellee BancTexas Dallas, N.A.
Carl B. Frankel, Paul V. Whitehead, Karin S. Feldman, United Steelworkers of America, Pittsburgh, Pa., Bruce H. Simon, Richard M. Seltzer, Babette A. Ceccotti, Sophia E. Davis, Cohen, Weiss and Simon, New York City, on the brief, for amicus curiae, United Steelworkers of America.
G. Stewart Webb, Jr., William D. Quarles, Warren W. Hamel, Venable, Baetjer, Howard and Civiletti, Washington, D.C., on the brief, for amici curiae, Armco, Bethlehem Steel Corp., Inland Steel Industries, Inc., Nat. Steel Corp. and USX Corp.
Before VAN GRAAFEILAND, MESKILL and MINER, Circuit Judges.
This is an appeal from a September 12, 1988 judgment of the United States District Court for the Southern District of New York, Sweet, J., that denied a motion for summary judgment by plaintiff Pension Benefit Guaranty Corporation (PBGC), vacated PBGC's Notice of Restoration of several pension plans that were maintained and administered by defendants The LTV Corporation and LTV Steel Company, Inc. and ordered entry of judgment in favor of LTV. The district court's opinion is reported as In re Chateaugay Corp., 87 B.R. 779 (S.D.N.Y.1988).
We affirm the judgment of the district court and remand the matter to PBGC.
The Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Secs. 1001-1461 (1982 & Supp. IV 1986), as amended by the Single-Employer Pension Plan Amendments Act of 1986 (SEPPAA), Pub.L. No. 99-272, 100 Stat. 237, 2 governs the maintenance and administration of employee pension plans. PBGC is a wholly owned United States government corporation which serves as a national insurer of pension plans. It was created under ERISA section 4002, 29 U.S.C. Sec. 1302, "(1) to encourage the continuation and maintenance of voluntary private pension plans ..., (2) to provide for the timely and uninterrupted payment of pension benefits to [plan] participants and beneficiaries ..., and (3) to maintain premiums established by the corporation ... at the lowest level consistent with carrying out its obligations."
Under ERISA, single-employer pension plans may be voluntarily terminated under certain circumstances by plan administrators under ERISA section 4041, 29 U.S.C. Sec. 1341. They also may be involuntarily terminated by PBGC under ERISA section 4042, 29 U.S.C. Sec. 1342, for various reasons such as the employer's inability to adequately fund the benefit programs. PBGC is required to guarantee payment of non-forfeitable benefits under terminated plans, subject to certain limitations. See ERISA sections 4022, 4022B, 4061, 29 U.S.C. Secs. 1322, 1322b, 1361. To finance the payment of these benefits, PBGC uses funding obtained from two sources: (1) the annual insurance premiums paid by the administrators of covered plans pursuant to sections 4006 and 4007 of ERISA, 29 U.S.C. Secs. 1306, 1307, and (2) the employer liability payments collected under section 4062 of ERISA, 29 U.S.C. Sec. 1362, which makes employers whose plans terminate with insufficient assets liable to PBGC for part of the terminated plan's unfunded guaranteed benefits, see 29 U.S.C. Sec. 1362(b).
Section 4047 of ERISA, 29 U.S.C. Sec. 1347, provides for the restoration of plans that have been terminated. Specifically, section 4047 provides, in pertinent part:
In the case of a plan which has been terminated under section 1341 or 1342 of this title [PBGC] is authorized in any such case in which [PBGC] determines such action to be appropriate and consistent with its duties under this subchapter, to take such action as may be necessary to restore the plan to its pretermination status, including, but not limited to, the transfer to the employer or a plan administrator of control of part or all of the remaining assets and liabilities of the plan.
Whether PBGC properly exercised this restoration authority is the focal point of the instant dispute.
The LTV Corporation is a Delaware corporation whose subsidiaries include LTV Steel Company, Inc., which was created by the merger of the Jones & Laughlin Steel Company, Youngstown Sheet & Tube Company and Republic Steel Corporation. LTV Corporation and LTV Steel Company, Inc. will hereinafter be referred to collectively as "LTV." LTV maintained numerous pension benefit plans for its employees, including the three plans that are the subject of the instant dispute, the Jones & Laughlin Hourly Pension Plan (J & L Hourly Plan), the Jones & Laughlin Retirement Plan (J & L Salaried Plan), and the Pension Plan of Republic Steel Corporation Dated and Effective as of March 1, 1950 (Republic Hourly Plan) (collectively "the Plans"). The Plans were subject to the minimum funding standards found in section 302 of ERISA, 29 U.S.C. Sec. 1082, and section 412 of the Internal Revenue Code, 26 U.S.C. Sec. 412 (1982) (amended 1986), both of which required LTV to make contributions to them.
When LTV began experiencing financial difficulty in 1985, it applied for and received from the Internal Revenue Service (IRS) a waiver of its minimum funding requirement for the 1984 plan year pursuant to section 412(d) of the Internal Revenue Code, 26 U.S.C. Sec. 412(d). According to the terms of the waiver, LTV was permitted to amortize over a fifteen year period the 1984 contribution due under the plans. In 1986, LTV, still experiencing financial difficulty, sought waivers of the amount it owed for the 1985 plan year and the amount due under the amortization agreement for the 1984 plan year. In November 1986, the IRS denied the request and revoked LTV's waiver of the 1984 payment obligation, making LTV immediately liable for the contributions for the two years.
On July 17, 1986, LTV and most of its subsidiaries filed petitions for reorganization under Chapter 11 of the Bankruptcy Code, 11 U.S.C. Secs. 1101-1174 (1982 & Supp. V 1987). On December 16, 1986, LTV sent a letter to PBGC stating that "because LTV is currently in reorganization under Chapter 11 of the Bankruptcy Code, LTV cannot and will not make contributions to the Plans to eliminate the accumulated funding deficiencies arising upon the denial of the funding waivers," and also that "LTV does not intend, and is not
likely to have the ability, to fund the Plans for future years."
On January 12, 1987, PBGC brought an action under section 4042 of ERISA, 29 U.S.C. Sec. 1342, to terminate the Plans and to be appointed statutory trustee. LTV agreed to the terminations and the United States District Court for the Southern District of New York, Owen, J., entered consent orders terminating the Plans as of January 13, 1987. The United Steelworkers of America (the Union) filed an unsuccessful motion to vacate the consent orders. We affirmed the district court's order denying that motion. Jones & Laughlin Hourly Pension Plan v. LTV Corp., 824 F.2d 197 (2d Cir.1987). Pursuant to the consent orders and the guarantee found in ERISA section 4022, 29 U.S.C. Sec. 1322, PBGC became liable for funding the payment of the non-forfeitable benefits under the Plans. Payment of benefits was reduced to the extent they were not guaranteed by PBGC. Benefits not guaranteed by PBGC, such as certain early retirement, disability and...
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