Pension Ben. Guar. Corp. v. United Air Lines, Inc.
| Decision Date | 13 June 2006 |
| Docket Number | No. 06 C 1222.,06 C 1222. |
| Citation | 436 F.Supp.2d 909 |
| Parties | PENSION BENEFIT GUARANTY CORPORATION, Plaintiff, v. UNITED AIR LINES, INC., as Plan Administrator for the United Airlines Pilot Defined Benefit Pension Plan, Defendant, and Air Line Pilots Association, International, United Retired Pilots Benefit Protection Association, Roger D. Hall, Dennis D. Dillon, Gerard Terstiege, Eugene M. Cummings, Raymond P. Fink, James M. Krasno and William L. Rutherford, Intervenors. |
| Court | U.S. District Court — Northern District of Illinois |
Paula Connelly, Jeffrey B. Cohen, Nancy Heermans, Shannon L. Novey, Washington, DC, Christopher Todd Sheean, Wildman Harrold Allen & Dixon LLP, Matthew Charles Luzadder, Kelley, Drye & Warren, Chicago, IL, for Plaintiff.
Chad John Husnick, David Richard Seligman, James J. Mazza, Jr., James Howard Mandell Sprayregen, Michael B. Slade, Kirkland & Ellis LLP, Chicago, IL, for Defendant.
Jack J. Carriglio, Eric E. Newman, James Gregory Argionis, Jennifer Jean Pomaranski, Meckler Bulger & Tilson LLP, Chicago, IL, Frank Cummings, Lebeoeuf, Lamb, Greene & MacRae, LL, Washington, DC, Babette A. Ceccotti, Zachary N. Leeds, Cohen, Weiss and Simon LLP, New York, NY, for Intervenors.
This case arises from the decision of the Pension Benefit Guarantee Corporation ("PBGC") to seek a judicial decree authorizing the involuntary termination of a pension plan sponsored by United Airlines, Inc. ("United"). The court referred this matter to the bankruptcy court, where United's Chapter 11 bankruptcy was pending in front of the Honorable Eugene R. Wedoff. Following a trial, this matter has returned to this court accompanied by the bankruptcy court's proposed findings of fact and conclusions of law. The bankruptcy court recommended finding that PBGC met its burden of establishing that termination of the United Airlines Pilot Defined Benefit Pension Plan was necessary to avoid an unreasonable increase in PBGC's liability under Title IV of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1342(c), with an effective termination date of December 30, 2004. Also before the court are the objections of PBGC, the Airline Pilots Association ("ALPA"), International, and the United Retired Pilots Benefit Protection Association ("RPA") to the bankruptcy court's proposed findings of fact and conclusions of law. For the reasons stated below, the court accepts the recommendations of the bankruptcy court as modified.
Although the parties are abundantly familiar with the events leading up to the present decision, for the sake of completeness, the court will provide a brief recapitulation of the background of this case.
Pursuant to a collective bargaining agreement between United and Airline Pilots Association, International, the exclusive collective bargaining representative of United's pilots, United maintained the United Airlines Pilot Defined Benefit Pension Plan (the "Pilot Plan") and served as the plan sponsor and administrator.
United and twenty-seven related corporations filed voluntary Chapter 11 cases in the bankruptcy court on December 9, 2002. Thereafter, United entered into negotiations with ALPA regarding the Pilot Plan. United and ALPA ultimately reached an agreement to modify the collective bargaining agreement to eliminate the pension plans created by the collective bargaining agreement. On December 17, 2004, United filed a Motion to Approve Letter of Agreement Modifying Their Collective Bargaining Agreement with ALPA. The bankruptcy court denied this initial motion but later approved a modified version of the agreement. Both versions of the agreement provided, inter alia, that ALPA would not "oppose the Company's efforts to terminate the A Plan under 29 U.S.C. § 1341(c)" as long as United did not seek to terminate the Pilot Plan before May 2005. Both versions further provided that the Pilot Plan would "remain in full force and effect" until United met the requirements for a distress termination under 29 U.S.C. § 1341, and that nothing in the Letter of Agreement "shall be construed, deemed or characterized by UAL or the Company as any agreement of any form by the Association that the A Plan should be terminated."
The United Retired Pilots Benefit Protection Association ("URPA"), which is an Illinois not-for-profit corporation created to protect the benefits of United's retired pilots, had attempted to participate in the negotiations, but United did not permit URPA's participation. URPA filed a motion in the bankruptcy court which asked for the appointment of an authorized representative to represent United's retired pilots and their pension benefits. The bankruptcy court denied this motion, which both the district court, per Judge Darrah, and the Seventh Circuit Court of Appeals upheld on appeal.
PBGC is a federal corporation established under 29 U.S.C. § 1302(a) to administer the insurance program for defined benefit pension plans created under Title IV of ERISA, 29 U.S.C. §§ 1301-1461. PBGC guarantees certain benefits under ERISA pension plans and has authority pursuant to ERISA to terminate under funded pension plans. See 29 U.S.C. § 1342.
In December of 2004, PBGC determined that the Pilot Plan should be terminated in order to avoid an unreasonable increase in PBGC's liability. United refused to consent to a termination of the Pilot Plan. On December 29, 2004, the Executive Director of PBGC issued a Notice of Determination, which provided
[T]he Pension Benefit Guaranty Corporation ("PBGC") has determined, under section 4042(a)(4) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1342(a)(4), that the United Airlines Pilot Defined Benefit Pension Plan ("Plan") must be terminated because the possible long-run loss of the corporation with respect to the Plan may reasonably be expected to increase unreasonably if the Plan is not terminated. PBGC further determined, under ERISA § 4042(c), 29 U.S.C. § 1342(c), that the Plan must be terminated in order to avoid any unreasonable increase in the liability of the fund. Accordingly, PBGC intends to proceed under ERISA § 4042, 29 U.S.C. § 1342, to have the Plan terminated and PBGC appointed as statutory trustee, and under ERISA § 4048, 29 U.S.C. § 1348, to have December 30, 2004, established as the Plan's termination date.
That same day, PBGC sent the Notice of Determination to United and ALPA via overnight mail, which ALPA received on December 30, 2004. Also on December 30, the Notice of Determination was published nationally in USA Today and in newspapers serving United's hubs, including The Chicago Tribune, The Washington Post, The Los Angeles Times, The San Francisco Chronicle, The Denver Post, and The Rocky Mountain News. Additionally, PBGC, United, and ALPA published press releases on their websites announcing PBGC's decision to seek termination of the Pilot Plan.
On December 30, 2004, PBGC filed a complaint in this court against United as administrator of the Pilot Plan, seeking a decree of termination of the Pilot Plan pursuant to § 1342(c) of ERISA.
On January 4, 2005, United filed an Emergency Motion to Confirm Automatic Referral to the United States Bankruptcy Court for the Northern District of Illinois Pursuant to Internal Operating Procedure 15(a), arguing that PBGC's complaint fell within the bankruptcy court's "related to" jurisdiction under 28 U.S.C. § 157(a) and requesting that the case be assigned to the bankruptcy court overseeing United's Chapter 11 proceedings. In opposing United's emergency motion, PBGC argued that the bankruptcy court did not have jurisdiction over PBGC's complaint because the structure of ERISA's pension plan termination provisions and the language of 29 U.S.C. § 1342(c) provided for exclusive jurisdiction in "the appropriate United States District Court."
On January 25, 2005, this court granted United's emergency motion and transferred the case to the bankruptcy court. The bankruptcy court subsequently granted the motions to intervene of ALPA, URPA, and certain individual retired pilots. PBGC moved this court to reconsider the referral to the bankruptcy court or, in the alternative, for a certification to file an interlocutory appeal.1
On April 13, 2005, the bankruptcy court determined that it would permit discovery beyond PBGC's administrative record. PBGC moved for summary judgment on June 6, 2005, arguing that its decision to seek a termination of the Pilot Plan was entitled to judicial deference and that its decision to initiate termination had not been arbitrary or capricious. PBGC further argued that the notice provided to the plan participants was sufficient to set the termination date as of December 30, 2004. United, ALPA, and URPA opposed PBGC's motion for summary judgment.
The bankruptcy court issued a preliminary ruling on PBGC's motion for summary judgment on August 25, 2005. The bankruptcy court subsequently issued an Amended Memorandum of Decision on Motion for Summary Judgment on October 26, 2005, ruling that PBGC's adversary proceeding was a core proceeding. As a consequence, the bankruptcy court entered a final judgment. In this judgment, the bankruptcy court held that a trial was required as to whether PBGC established the propriety of terminating the Pilot Plan by a preponderance of the evidence; that § 1342(c) required a de novo determination of the appropriateness of the Pilot Plan termination, and not a deferential review under the Administrative Procedure Act; and that the constructive notice to the Pilot Plan participants was sufficient to establish a termination date of December 30, 2004.
Following a bench trial, the bankruptcy court issued a Memorandum of Decision, holding that PBGC had showed that continued operation of the...
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In re Ual Corp. (Pilots' Pension Plan Termination)
...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 benefit......