Pension Benefit Guaranty Corp. v. Ltv Corp.

496 U.S. 633 (1990)


P filed petitions for reorganization under Chapter 11 of the Bankruptcy Code. P was the sponsor of three defined benefit pension plans covered by Title IV of ERISA. Two of the Plans were the products of collective bargaining negotiations with the United Steelworkers of America. The plans had unfunded liabilities for promised benefits of almost $2.3 billion. Approximately $2.1 billion of this amount was covered by P insurance. P determined that the Plans should be terminated in order to protect the insurance program from the unreasonable risk of large losses. The Steelworkers then filed an adversary action against D in the Bankruptcy Court, challenging the termination and seeking an order directing D to make up the lost benefits. D and the Steelworkers negotiated an interim collective bargaining agreement that included new pension arrangements intended to make up benefits that plan participants lost as a result of the termination. Retired participants were thereby placed in substantially the same positions they would have occupied had the old Plans never been terminated. The new agreements respecting active participants were also designed to replace benefits under the old Plans that were not insured by P, such as early retirement benefits and shutdown benefits. P objected to these new pension agreements as follow on plans. D ignored P's objections to the new pension arrangements and asked the Bankruptcy Court for permission to fund the follow-on plans. The Bankruptcy Court granted D's request and noted that P 'may have legal options or avenues that it can assert administratively . . . to implement its policy goals. Nothing done here tonight precludes the PBGC from pursuing these options. . . .' P then determined that the financial factors on which it had relied in terminating the Plans had changed significantly. D was experiencing a dramatic turnaround. P determined that restoration was appropriate. P then issued a notice of intent to restore the terminated Plans. D refused to comply with the restoration decision. This prompted P to initiate an enforcement action in the District Court. The court vacated P's restoration decision, finding, among other things, that the P had exceeded its authority under § 4047. The Court of Appeals for the Second Circuit affirmed. The restoration decision was arbitrary and capricious because P did not take account of all the areas of law the court deemed relevant to the restoration decision.