- Case Type:
- Case Status:
- 19-1419 (6th Circuit, Dec 28,2020) Published
- Affirming the lower court’s grant of summary judgment to the Pension Benefit Guaranty Corp. (PBGC), the U.S. Court of Appeals for the Sixth Circuit (Circuit) held that the termination of a salaried employee retirement plan (Salaried Plan), effected via an agreement between Delphi Corp. (Delphi), the sponsoring employer, and PBGC, the federal agency responsible for regulating such pension insurance programs, complied with the relevant statute and due process and was not arbitrary or capricious, a termination key to the success of Delphi’s modified chapter 11 plan (POR) after the first’s botch.
- Procedural context:
- On August 10, 2009, PBGC and Delphi executed the termination and trusteeship agreement that ended the Salaried Plan, effective July 31, 2009 (Agreement). This Agreement was reached after PBGC, as part of its oversight over such pension programs, had dismissed its suit for the formal termination of the Salaried Plan, pursuant to Title IV of the Employee Retirement Income Security Act of 1974 (ERISA), in the U.S. District Court for the Eastern District of Michigan (DC). It came, moreover, after the BC had approved Delph’s POR, which had incorporated another accord between Delphi and General Motors Corporation (GM), its former owner, pursuant to which GM assumed Delphi’s pension liabilities under this federal statute to its hourly, unionized employees. This GM-Delphi contract had been seen as crucial for avoiding a second failed Delphi plan. Cognizant of these complexities, the DC heard the challenges of three retirees (Retirees or Appellants) to the Agreement. The Retirees made three arguments: (1) termination of a pension plan required court adjudication pursuant to the controlling statute (29 U.S.C. § 1342); (2) the termination process violated their due process rights; and (3) the PBGC’s termination decision was arbitrary and capricious. The DC rejected these arguments after “protracted litigation.”
- In its heyday, Delphi, once but a GM subsidiary spun off in 1999, was the largest U.S. auto parts maker and supplier. Like other seemingly flush (and sturdy) corporations, Delphi served as plan administrator and the contributing sponsor to several defined-benefit pension plans. Such plans exist as parts of an insurance program, designed to protect employees’ pension benefits, created by ERISA’s Title IV. PBGC, a wholly owned corporation of the U.S. government, administers the overall program and thus bears oversight responsibility for employers’ management of any plan covered by ERISA. Falling within PBGC’s jurisdiction, the Salaried Plan covered approximately 20,000 members of Delphi’s salaried, non-unionized workforce, including the Retirees. Delphi’s winding course through bankruptcy began when it filed for relief under chapter 11 on October 8, 2005, in the U.S. Bankruptcy Court for the Southern District of New York (BC)—and its emergence eventually required the participation of, and an agreement with, its former owner. At that point, it halted its Plan contributions. Tendered in 2008, Delphi’s first Plan of Reorganization (2008 POR) provided that all Delphi sponsored pension plans would be frozen but would continue to be reorganized under Delphi. This first stab at reorganization failed when Delphi’s post-emergence investors refused to fund their investment agreement with it. Stymied, in a move apparently supported by PBGC, Delphi turned to GM and asked its progenitor to assume the liabilities of the Plan. By then, however, GM faced its own terrible reckoning, its survival after a harrowing 2008 ultimately secured via an infusion of $30.1 billion from the U.S. government’s Troubled Asset Relief Program conditioned on its completion of a “‘quick-rinse’ bankruptcy.” As part of these almost byzantine arrangements, an agreement was reached: (1) GM would assume Delphi’s pension liabilities to its hourly, unionized employees (Hourly Plan), but (2) PBGC, now in possession of Delphi’s surrendered pension obligations, would terminate the Salaried Plan and release any remaining liens and claims on Delphi's assets. Thereafter, two court cases proceeded apace—and apart. In the BC, Delphi moved to modify its first amended plan to account for the agreement’s termination of the Salaried Plan and safeguarding of the Hourly Plan in June 2009. The Retirees naturally objected to this modified plan and argued their objection. On July 30, 2009, one day after oral argument had been held, the BC overruled these complaints and confirmed the POR. Before the BC heard the Retirees’ objections, on July 22, 2009, PBGC initiated an action in the DC to adjudicate termination of the Salaried Plan. Along with this filing, PBGC issued a Notice of Determination to Delphi, notifying Delphi that it had determined that the Salaried Plan must be terminated and that PBGC should be appointed as statutory trustee of the plan. On August 6, 2009, the Appellants sought PBGC’s consent to intervene in these proceedings; within twenty-four hours, PBGC voluntarily dismissed its termination suit. Three days later, on August 10, 2009, PBGC and Delphi executed the Agreement that so offended the Retirees.
- Eugene E. Siler Jr.; Julia S. Gibbons; and John B. Nalbandian
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