PENSION BENEFIT GUARANTY CORP. V. LTV CORP.
496 U.S. 633 (1990)
NATURE OF THE CASE: PBGC (P) appealed a decision by the Court of Appeals which affirmed
the conclusion that P’s restoration of LTV’s (D) pension plan was arbitrary and capricious
or contrary to law within the meaning of § 706 of the APA.
FACTS: 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.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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