Opposition Brief — United Mine Workers of America 1974 Benefit Plan & Trust v. LTV Steel Co.

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No. 91-933

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

UNITED MINE WORKERS OF AMERICA 1974 BENEFIT

PLAN AND TRUST, JOSEPH P. CONNORS, SR., DONALD

E. PIERCE, JR., WILLIAM MILLER, WILLIAM B. JORDAN

AND PAUL R. DEAN, as Trustees of the UNITED MINE

WORKERS OF AMERICA 1974 BENEFIT PLAN AND

TRUST,

Petitioners,

V.

LTV STEEL COMPANY, INC., BCNR MINING CORPORA-

TION, NEMACOLIN MINES CORPORATION, and TUS-

CALOOSA ENERGY CORPORATION,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF IN OPPOSITION TO PETITION

FOR A WRIT OF CERTIORARI

KAYE, SCHOLER, FIERMAN, KAREN E. WAGNER*

HAYS & HANDLER SHARON KATZ

425 Park Avenue BETH L. GOLDEN

New York, New York 10022 DAVIS POLK & WARDWELL

(212) 836-8000 One_Chase Manhattan Plaza

New York, New York 10005

(212) 530-4000

* Counsel of Record

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QUESTION PRESENTED

Whether the Retiree Benefits Bankruptcy Protection Act of

1988 abrogates the contractual obligation of the United Mine

Workers of America 1974 Benefit Plan and Trust to pay

retiree benefits upon expiration of a debtor’s obligation to pay

such benefits.

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TABLE OF CONTENTS

PAGE

CRURSTION PUMSENVED «25.6 ies eds cee ee eee 1

STATEMENT OF THE CARB o.oo ax cs oeueeaeeeen 2

THE PETITION SHOULD BE DENIED ...............4-- t

1. No Conflict Exists Among the Circuit Courts of

ADE 65 5 68 5h sda Cela eee +

2. Chateaugay Was Correctly Decided ......... 6

3. The Benefit Trust is an Inappropriate Party to

Seek Review of this Bankruptcy Legislation .. . 7

OWI USING 6 5 <n sve a + cancel ee rae ae ee 8

lil

TABLE OF AUTHORITIES

Cases

Fraser v. Magic Chef-Food Giant Mkts., Inc., 324

Ee a

In re Chateaugay Corp., 11! B.R. 399 (S.D.N.Y.),

appeal dismissed, 922 F.2d 86 (2d Cir. 1990) .....

In re Chateaugay Corp., 945 F.2d 1205 (2d Cir.

een hola y dy vee 540s cones

NE MIS AS ae aa a

In re Federated Dep’t Stores, Inc., 132 B.R. 572

De 2

International Union (UAW) v. Roblin Indus., 561 F.

muon. Zoe (WD. Mich. 1983).............-65-.

Statutes and Rules

The Bankruptcy Code

CN Se ere

NE Dre ae ay vcd de ae Na

Retiree Benefits Bankruptcy Protection Act of 1988,

Pub. L. No. 100-334, 102 Stat.610 .............

Pub. L. No. 99-591, 100 Stat. 3341-74 (1986) .......

to

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IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

UNITED MINE WORKERS OF AMERICA 1974 BENEFIT PLAN AND

TRUST, JOSEPH P. CONNORS, SR., DONALD E. PIERCE, JR.,

WILLIAM MILLER, WILLIAM B. JORDAN AND PAUL R.

DEAN, as Trustees of the UNITED MINE WORKERS OF

AMERICA 1974 BENEFIT PLAN AND TRUST,

Petitioners,

es

LTV STEEL COMPANY, INC., BCNR MINING CORPORATION,

NEMACOLIN MINES CORPORATION, and TUSCALOOSA

ENERGY CORPORATION,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF IN OPPOSITION TO PETITION

‘FOR A WRIT OF CERTIORARI

Respondents LTV Steel Company, Inc., BCNR Mining

Corporation, Nemacolin Mines Corporation, and Tuscaloosa

Energy Corporation (collectively, ‘“LTV Steel’’), respectfully

request that this Court deny the petition for a writ of cer-

tiorari seeking review of the judgment of the Court of

2

Appeals for the Second Circuit. (Petition at la-19a).' A

United States Bankruptcy Court, a District Court, and a Court

of Appeals have each rejected petitioners’ claim. Neither a

conflict among the circuits nor an important issue of statutory

interpretation is presented.

STATEMENT OF THE CASE

Petitioners, the United Mine Workers of America 1974

Benefit Plan and Trust and the trustees (‘‘Benefit Trust’’),

misstate both the holdings of the Courts below and the ques-

tion presented for review. The Courts below ruled that the

Retiree Benefits Bankruptcy Protection (Act of 1988, Pub. L.

No. 100-334, 102 Stat. 610, (‘‘BPA’’)~ does not relieve an

entity, created and funded under a specific collective bargain-

ing agreement, of its contractual liability to pay retiree health

benefits simply because another party, whose contractual lia-

bility for payment of such benefits has expired, is a Chapter

11 debtor.

Specifically, the decisions below held that LTV Steel’s

obligation to pay retiree health benefits expired under the

collectively-bargained 1984 National Bituminous Coal Wage

Agreement (**1984 Wage Agreement’’), and the obligation to

pay such benefits shifted to the Benefit Trust. The decision is

narrowly addressed to a specific contract, and does not hold

the broad implications asserted by the Benefit Trust in its

petition for review by this Court.

|. Citations to **_a’* are to the Appendix accompanying the petition.

2. The BPA amended Pub. L. No. 99-591, 100 Stat. 3341-74 (1986)

(*°1986 Act’). Both the 1986 Act and the BPA set standards for payment

of health benefits to retirees, but the 1986 Act was of a ‘‘stopgap’’ nature.

The BPA made permanent this transitory legislation, and is codified at 1]

U.S.C. § 1114.

3

The BPA states that ‘‘the trustee shall pay benefits to

retired former employees under a plan, fund, or program

maintained or established by the debtor prior to filing a peti-

tion,’’ and provides procedures for modifying such plans.

The program at issue here was established by the 1984 Wage

Agreement. The Courts below found that the 1984 Wage

Agreement provides that LTV Steel’s obligation to pay retiree

health benefits expired on February 1, 1988, and at that time

responsibility for payment was assumed by the Benefit Trust,

which was created and funded specifically for that purpose.

See In re Chateaugay Corp., 945 F.2d 1205, 1210-11 (2d Cir.

1991) (Petition at 13a) (‘‘[Tjthe Mining Companies were

responsible for the provision of the benefits during the term of

the Wage Agreement. When that Agreement expired, how-

ever, that obligation shifted to the Benefit Trust. The Benefit

Trust is now responsible for the continued provision of the

retiree health benefits. This conclusion is consistent with our

reading of the Bankruptcy Protection Act....’’) and /n re

Chateaugay Corp., 111 B.R. 399, 409 (S.D.N.Y.) (Petition at

54a) (‘‘The parties that negotiated the Wage Agreements did

not intend to create a loophole that would allow the Plan &

Trust to escape its liability to provide the retiree health

benefits when the employers were no longer obligated to do

so’), appeal dismissed, 922 F.2d 86 (2d Cir. 1990).

The Benefit Trust broadly misstates the consequences of

the Second Circuit’s ruling. The ruling will not ‘‘plac[e] in

immediate jeopardy the large numbers of retirees whose

employers are or will be in reorganization under Chapter

}1....’? (Petition at 11). The Second Circuit’s decision

arfects only the Benefit Trust and its liability for the benefits

of the approximately nine hundred former LTV Steel employ-

ees covered under the 1984 Wage Agreement. The benefits

of these retirees are being paid by the Benefit Trust, as con-

templated by their collective bargaining agreement. If the

BPA was intended ‘‘to ensure that retirees’ pre-petition health

benefits generally remain in place during the entire pendency

of a chapter 11 proceeding,”” (Petition at 11), that goal was

.

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fully served by the Court’s holding that the Benefit Trust

must pay such benefits. The only question raised by the

Benefit Trust is who, under the 1984 Wage Agreement, must

pay retiree health benefits, not whether such benefiis must be

paid. No retirees in this case face ‘‘immediate termination”’

of health benefits. (See Petition at 23).

Petitioners also wrongly contend that the decision creates a

dichotomy between collectively bargained benefits and

benefits that are provided ‘‘at will.’’ Specifically, the Benefit

Trust claims that the Court of Appeals held that ‘the BPA

has no application to benefits unless they are legally enforce-

able outside bankruptcy.’’ (Petition at 9, 11, 15). The deci-

sion does not address this issue, and if it had done so any rul-

ing could be read only as dictum, as the Court was called

upon only to review the effect of the BPA upon the Benefit

Trust’s liability under the 1984 Wage Agreement. The Court

held that the Benefit Trust must make these payments as of

February 1, 1988, and that the BPA does not serve to shift

that contractual obligation from the Benefit Trust to LTV

Steel. The Court expressed no opinion on the application of

the BPA to any other contract. The Court’s decision is pri-

marily one of contractual, not statutory, interpretation and Is

therefore without broad policy implications.

Finally, the Benefit Trust is not an entity intended to be

protected, let alone granted a windfall, by the enactment of

the BPA. No party intended to be protected by the BPA has

suffered injury. The Benefit Trust’s petition is therefore an

inappropriate vehicle for review of the statute.

THE PETITION SHOULD BE DENIED

1. No Conflict Exists Among the

Circuit Courts of Appeal

Petitioners cannot assert any conflict between the circuits

because each court that has considered similar issues has

ruled in accord with the Courts in Chateaugay.

5

The court in /n re Doskocil Cos., 130 B.R. 870 (Bankr. D.

Kan. 1991) considered whether a debtor must comply with

the modification provisions of Section 1114 of the Bank-

ruptcy Code? prior to adjusting retiree benefits of employees

not covered by a collective bargaining agreement. When the

employer established its non-union plan, before it was a deb-

tor in bankruptcy, the employer reserved in unambiguous plan

language the power to amend, modify or terminate plan

benefits. Concluding that the contract permitted the employer

to modify or terminate the plan, the court held that Section

1114 did not apply to the plan, reasoning:

‘There is no language in § 1114 to indicate that

Congress expected it to operate on nonallowable

claims —claims for which the debtor has no contrac-

tual or other legal liability. If Congress had intended

§ 1114 to create some new right in the retirees upon

debtor’s entry into Chapter 11, it is improbable that

Congress would have adopted the same standard for

§ 1114 as prescribed for modification of agreements

under § 1113. The better inference is that Congress

intended to focus primarily on the modification of

debtor’s legal obligations to retirees as opposed to

creating for the debtor some new obligation not

already imposed by the terms of ,the retiree benefit

plan.”’ /d. at 876.

Similarly, the court in /n re Federated Dep’t Stores, Inc.,

132 B.R. 572 (Bankr. S.D. Ohio 1991) refused to expand

upon the protection afforded by Section 1129(a)(13) of the

Bankruptcy Code, which requires that a plan of reorganiza-

tion address benefits provided under Section 1114. The court

stated that § 1129(a)(13) *‘creates no new substantive rights

s. Section 1114 is the permanent codification of the transitory legislation

at issue in this case. See Petition at 7 n.3 and 13 n.7.

6

to benefits for pre-petition retirees’’ and that ‘‘interpreting

§ 1129(a)(13) as a ‘vesting’ provision would be a windfall to

pre-petition retirees and put them well ahead of post-petition

retirees. This vesting’ would be an added benefit for which

pre-petition retirees did not bargain, and one which neither

the Code nor case law authorizes.’’ Jd. at 574.

Petitioners’ suggestion (Petition at 24) that this Court need

not await an inter-circuit conflict because all cases are likely

to arise in the Second Circuit is unfounded. Courts in the dis-

tricts of Kansas and Ohio have already issued rulings inter-

preting the BPA. Issues relating to the BPA may well arise in

many of the bankruptcy petitions filed throughout the country.

The Benefit Trust’s self-serving suggestion that generating a

conflicting interpretation of the BPA will be more ‘‘burden-

some and time-consuming”’ (Petition at 24) than generating a

conflict on any other issue is demonstrably wrong.

2. Chateaugay Was Correctly Decided

The courts that have considered this and related issues have

concluded that the BPA does not confer upon retirees of a

bankrupt employer more benefits than those to which they

would be entitled if their employer were not in bankruptcy.

Nevertheless, if this petition is granted the Benefit Trust will

ask this Court to rule that the BPA relieved it of its contrac-

tual obligation to pay retiree benefits just because another

party to the contract, whose contractual liabilities had

expired, is a Chapter 1] debtor. The Benefit Trust offers no

explanation for the contention that Congress legislatively

imposed upon a debtor an otherwise non-existent obligation

to pay benefits, especially where the result is to give a

windfall to an entity created and funded for that precise pur-

pose by inexplicably relieving it of its contractual commit-

ments. Any such contention is a perversion of the BPA. The

BPA does not alter or extend the bargain between LTV Steel

7

and its retirees. The BPA simply governs the standards and

procedures for modification by a‘debtor of existing contrac-

tual obligations to pay benefits. No such modification

occurred here. The retirees here have been ‘‘denied’’ no

benefits to which they were entitled, and therefore no issue is

raised under the BPA.

3. The Benefit Trust is an Inappropriate Party

to Seek Review of this Bankruptcy Legislation

The Benefit Trust’s petition is not an appropriate vehicle

for review of Section 1114. The BPA was enacted to govern

modification of retiree benefits by a debtor. It was not

enacted to relieve the Benefit Trust from its contractual obli-

gations to pay benefits. If the Court is inclined to review the

BPA, Respondents respectfully suggest that it do so only

upon the petition of a party directly affected by the statute

who would be far more likely to ensure proper presentation of

the bankruptcy issues than is the Benefit Trust.

4. It is well settled that ‘‘the rights conferred under a collective bargain-

ing agreement do not normally survive the discontinuance of a business or

the expiration of a bargaining agreement.’’ International Union (UAW)

v. Roblin Indus., 561 F. Supp. 288, 298 (W.D. Mich. 1983) (emphasis

added) (citing Fraser v. Magic Chef-Food Giant Mkts., Inc., 324 F.2d

853, 856 (6th Cir. 1963)).

8

CONCLUSION

For the aforementioned reasons, the petition for a writ of

certiorari should be denied. —

DATED: New York, New York

January 15, 1992

Respectfully submitted,

KAREN E. WAGNER

Counsel of Record

Of Counsel: Davis POLK & WARDWELL

SHARON KATZ One Chase Manhattan Plaza

BETH L. GOLDEN New York, New York 10005

(212) 530-4000

KAYE, SCHOLER, FIERMAN,

Hays & HANDLER

425 Park Avenue

New York, New York 10022

(212) 836-8000

Co-Counsel for Respondents

APPENDIX A

PARENT CORPORATION, SUBSIDIARIES,

AND AFFILIATES

Chateaugay Corporation

Reomar, Inc.

The LTV Corporation (parent corporation), f/k/a

Kentron International Company,

Jones & Laughlin Industries, Inc.

and Lykes Corporation

LTV Steel Company, Inc. f/k/a/

Jones & Laughlin Steel Corporation

Jones & Laughlin Steel Incorporated

Republic Steel Corporation

Youngstown Sheet and Tube Company

Republic Hibbing Corporation d/b/a

LTV Steel Flat Roll and Bar Company

LTV Steel Tubular Products Company

f/k/a LTV Tubular Products Company

LTV Steel Specialty Products Company

LTV Specialty Products Company

Jones & Laughlin Steel Specialty

Products Company, Inc.

LTV Sales Finance Company

LTV Aerospace and Defense Company

AM General Corporation

Amland Corporation

Bardaie Coal Company

Barrel Corporation of West Virginia

BCNR Mining Corporation

Crystalane, Inc.

Crystalee

Dearborn Leasing Company

Erie B Corporation

Erie Development Company

Erie I Corporation

Erie Mining Company, a limited partnership

A-2

FC Divestiture Corporation

Georgia Tubing Corporation

Gulf States Steel Corporation

Halcorp, Inc.

J.K. Industries, Inc.

J.W. Storage Company of Ohio

Jalcite I, Inc.

Jalcite I, Inc.

Jalore Mining Company, Ltd.

Jones & Laughlin Environmental Properties, Inc.

Jones & Laughlin Mining Company, Ltd.

Jones & Laughlin Ore Mining Company

Juddcorp, Inc.

Kentron Saudi Arabia, Inc.

LSC Leasing Inc.

Lorain Pellet Terminal Co.

LTV Education Systems, Inc.

LTV Electro-Galvanizning, Inc.

LTV Energy Products Company

LTV Holdings, Inc.

LTV International, N.V.

LTV Leasing, Inc.

LTV Properties, Inc.

LTVUS Corp.

Lykes Equipment Corporation

Lykes Leasing Corporation

National Telepone Systems, Inc.

Nemacolin Mines Corporation

Oil States Offshore Marine, Inc.

Oil States Rubber Co.

Repsteel Overseas Finance, N.V.

Republic Buildings Corporation

Republic Drainage Products Company

Republic Technology Corporation

Republic-Reserve, Inc.

Sierra Information Systems Corporation

a/k/a SISCOR

Sierra Research International Corporation

A-3

Technical Plastics, Inc.

Tuscaloosa Energy Corporation

Universal Time/Frequency, Inc.

Vought Industries, Inc.

Vought International, Inc.

Vought Overseas Ltd.

Vought Properties, Inc.

Youngstown Erie Corporation

YST Erie Corporation

LTV Corporation — Wyoming

Continental Emsco

Reserve Mining