# Appendix — Pension Benefit Guaranty Corporation v. LTV Corp. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0672%3A03 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1990 - **Citation:** 496 U.S. 633 ## Text JOSEPH F. SPANIOL, JR In THE Supreme Court of the United OCTOBER TERM, 1989 PENSION BENEFIT GUARANTY CORPORATION, 8 Petitioner, THe LTV CorporaTion, LTV Stee. Company, IN., OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF LTV CORPORATION, SUBCOMMITTEE OF PARENT CREDI- TORS OF THE OFFICIAL COMMITTEE OF UNSECURED CrepiTtors oF LTV Corporation, LTV BANK Group, OFFICIAL COMMITTEE OF Equity Security HOLpERs, BANCTEXAS DALLAS, N.A., Firte Tuirp BANK, HUNT- INGTON NATIONAL BANK, CITIBANK, N. A., Davip H. MILLER, and WILLIAM W. SHAFFER, Respondents. APPENDIX TO PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT Of Counsei: Caro. CONNOR FLOWE Tuouas S. MARTIN Generel Counsel JENNER & Block Counsel of Record 21 Dupont Circle, N.W. JEANNE K. Beck Washington, D.C. 20096 Deputy General Counsel RIcHarRD K WILLARD James J. ARMBRUSTER CHARLES G. COLE Pauta J. CONNELLY Stertoe & JOHNSON Attorneys — 1 N.W. den Bawarrt GUARANTY a CORPORATION 2020 K Street, N.W. Washington, D.C. 20006 (202) 778-8820 Ween - Gras Pemrime Co... Inc. - 788-0086 . Wasniwerow. O C. 80001 Ai V TABLE OF CONTENTS PBGC v. The LTV Corp., Nos. 88-6244, 88-6246, 88- review sought) —— —— In re Chateaugay Corp. (PBGC v. The LTV Corp.), Nos. 87 Civ. 6863 (RWS), 87 Civ. 7261 (RWS) (S.D.N.Y. June 22, 1988) (opinion of the district PBGC wv. The LTV Corp., No. 87 Civ. 7261 (RWS) (S. D. N. V. Sept. 13, 1988) (judgment of the district GOED eeeeeeenee Statutory provisions: 29 U.S.C. §§ 1302(a), bane 1341, 1342, 1347 —— PBGC Opinion Letter 81-11 (May 11, 1981) . — — PBGC Opinion Leter (unnumbered) (April 24, 1981) PBGC Opinion Letter 86-27 (Dec. 17, 1986) Minutes of PBGC Board of Directors’ Meeting (Sept. Tk GEEEEE ccsntensstethemeentemmnsnincietiiniiinitasiideiiememenainaiis —— ee ee basa 22, 1987) . —s Memorandum from Douglas A. Fraser, president of United Auto Workers Union, to UAW staff (Dec. 8, —ſ— —ͤ—ũ4¹ä. 4 2 W — la APPENDIX UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT Nos. 695,696 August Term, 1988 (Argued January 13, 1989 Decided May 12, 1989) Docket Nos. 88-6244, 88-6246, 88-6252 PENSION BENEFIT GUARANTY CORPORATION, Plaintiff-Appellant, Cross-A ppellee, Davm H. MILLER and WILLIAM W. SHAFFER, Intervenors-A ppeliants, V. THE LTV CORPORATION and LTV STEEL COMPANY, INC., Defendants-A ppellees, OFFICIAL COMMITTEE OF UNSECURED CREDITORS oF LTV CORPORATION, SUBCOMMITTEE OF PARENT CREDITORS OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF LTV CorRPORATION, LTV BANK GROUr, OFFICIAL Com- MITTEE OF Equity Securiry HoLpers, BANCTEXAS DALLAS, N.A., FirtTH THIRD BANK, HUNTINGTON Na- TIONAL BANK and CITIBANK, N. A., Intervenors-A ppellees, THE LTV BANK Group, Intervenor-Appellee, Cross-A ppellant.' 1 The LTV Bank Group filed a Notice of Cross-Appeal from the final judgment of the United States District Court for the South- 2a Before: VAN GRAAFEILAND, MESKILL and MINER, Circuit Judges. Appeal from a final judgment of the United States Dis- trict Court for the Southern District of New York, Sweet, J., that denied plaintiff Pension Benefit Guaranty Corporation’s (PBGC) motion for summary judgment, vacated PBGC’s Notice of Restoration of certain pension plans, and entered judgment in favor of defendants The LTV Corporation and LTV Steel Company, Inc. Affirmed. GARY M. FORD, General Counsel, Pension Benefit Guaranty Corp., Washington, D.C. (Carol Connor Flowe, Deputy General Counsel, Jeanne K. Beck, Assistant Gen- eral Counsel, James J. Armbruster, Paula J. Connelly, Pension Benefit Guaranty Corp., Washington, D.C., Philip W. Tone, Jenner & Block, Washington, D.C., E. Calvin Golumbic, Arent, Fox, Kintner, Plotkin & Kahn, Wash- ington, D.C., of counsel), for Appellant Pension Benefit Guaranty Corp. R.A. KING, Pittsburgh, PA (Kenneth R. Bruce, Janet R. Thompson, Buchanan Ingersoll, Pittsburgh, PA, Stuart Cotton, Mound Cotton & Wollan, New York City, of coun- sel), for Appellants David H. Miller and William W. Shaffer. LEWIS B. KADEN, New York City (Karen E. Wagner, Sharon Katz, Joan Greco, Davis Polk & Ward- well, of counsel), for Appellees LTV Corp. and LTV Steel Co., Inc. ern District of New York. It did not file a separate brief in sup- port of this cross-appeal, but rather joined in a brief filed on behalf of the LTV Corporation, LTV Steel Company, Inc. and the Official Committee of Unsecured Creditors of the LTV Corporation. Its position appears to be indistinguishable from the other parties’ claims. There being no separate brief filed, we consider its cross- appeal to have been abandoned, 3a MICHAEL J. CRAMES, New York City (Herbert S. Edelman, Mare Abrams, Levin & Weintraub & Crames, New York City, of counsel), for Appellees LTV Corp. and LTV Steel Co., Inc. Frank Cummings, Leboeuf, Lamb, Leiby & Macrae, Washington, D.C., on the brief, for Appellees LTV Corp. and LTV Steel Co., Inc. BRIAN COGAN, New York City (Lawrence M. Handelsman, Stroock & Stroock & Lavan, New York City, Leonard E.M. Rosen, Theodore Gewertz, Harold Novikoff, Wachtell, Lipton, Rosen & Katz, New York City, of coun- sel), for Appellee Official Committee of Unsecured Credi- tors. GEOFFREY M. KALMUS, New York City (Joel Zweibel, Peter V. Pantaleo, Kramer, Levin, Nessen, Kamin & Frankel, New York City, of counsel), for Ap- pellee LTV Bank Group. CLAUDE D. MONTGOMERY, New York City (Edgar H. Booth, Peter D. Wolfson, Sara L. Chenetz, Myerson & Kuhn, New York City, of counsel), for Appellee Official Committee of Equity Security Holders. KATHRYN C. MALLORY, Dallas, TX (Robin E. Phelan, Haynes and Boone, Dallas, TX, of counsel), for Appellee BancTexas Dallas, N.A. Carl B. Frankel, Paul V. Whitehead, Karin S. Feld- man, United Steelworkers of America, Pittsburgh, PA, Bruce H. Simon, Richard M. Seltzer, Babette A. Ceccotti, Sophia E. Davis, Cohen, Weiss and Simon, New York City, on the brief, for Amicus Curiae United Steelworkers of America. G. Stewart Webb, Jr., William D. Quarles, Warren W. Hamel, Venable, Baetjer, Howard and Civiletti, Washing- ton, D.C., on the brief, for Amici Curiae Armco, Bethle- hem Steel Corp., Inland Steel Industries, Inc., National Steel Corp. and USX Corp. 4a MESKILL, Circuit Judge: This is an appeal from a September 12, 1988 judgment of the United States District Court for the Southern Dis- trict of New York, Sweet, J., that denied a motion for summary judgment by plaintiff Pension Benefit Guaranty Corporation (PBGC), vacated PBGC’s Notice of Restora- tion of several pension plans that were maintained and administered by defendants The LTV Corporation and LTV Steel Company, Inc. and ordered entry of judgment in favor of LTV. The district court’s opinion is reported as In re Chateaugay Corp., 87 B.R. 779 (S.D.N.Y. 1988). We affirm the judgment of the district court and re- mand the matter to PBGC. BACKGROUND A. PBGC and Title IV of ERISA The Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461 (1982 & Supp. IV 1986), as amended by the Single- Employer Pension Plan Amendments Act of 1986 (SEPPAA), Pub. L. No. 99- 272, 100 Stat. 237, governs the maintenance and admin- istration of employee pension plans. PBGC is a wholly owned United States government corporation which serves as a national insurer of pension plans. It was created under ERISA section 4002, 29 U.S.C. § 1302, “(1) to encourage the continuation and maintenance of voluntary private pension plans. , (2) to provide for the timely and uninterrupted payment of pension benefits to [plan] participants and beneficiaries . . , and (3) to maintain 2 Certain sections of ERISA relevant to this appeal were further amended by the Pension Protection Act of 1987, Subtitle D of Title IX of the Omnibus Budget Reconciliation Act of 1987, Pub. L. No. 100-203, §§ 9301-9346, 101 Stat. 1330, 1330-331 - 1330-374 (codi- fied as amended at 29 U.S.C.A. §§ 1001-1461 (1985 & West Supp. 1988)). These amendments took effect after the events relevant here, and therefore are inapplicable. 5a premiums established by the corporation . . at the lowest level consistent with carrying out its obligations.” Under ERISA, single-employer pension plans may be voluntarily terminated under certain circumstances by plan administrators under ERISA section 4041, 29 U.S.C. § 1341. They also may be involuntarily terminated by PBGC under ERISA section 4042, 29 U.S.C. § 1342, for various reasons such as the employer’s inability to ade- quately fund the benefit programs. PBGC is required to guarantee payment of non-forfeitable benefits under ter- minated plans, subject to certain limitations. See ERISA sections 4022, 4022B, 4061, 29 U.S.C. §§ 1322, 1322b, 1361. To finance the payment of these benefits, PBGC uses funding obtained from two sources: (1) the annual insurance premiums paid by the administrators of covered plans pursuant to sections 4006 and 4007 of ERISA, 29 U.S.C. §§ 1306, 1307, and (2) the employer liability pay- ments collected under section 4062 of ERISA, 29 U.S.C. § 1362, which makes employers whose plans terminate with insufficient assets liable to PBGC for part of the terminated plan’s unfunded guaranteed benefits, see 29 U.S.C. § 1362(b). Section 4047 of ERISA, 29 U.S.C. § 1347, provides for the restoration of plans that have been terminated. Spe- cifically, section 4047 provides, in pertinent part: In the case of a plan which has been terminated under section 1341 or 1342 of this title [PBGC] is authorized in any such case in which PBGC] deter- mines such action to be appropriate and consistent with its duties under this subchapter, to take such action as may be necessary to restore the plan to its pretermination status, including, but not limited to, the transfer to the employer or a plan administrator of control of part or all of the remaining assets and liabilities of the plan. Whether PBGC properly exercised this restoration au- thority is the focal point of the instant dispute. 6a B. LTV and Its Financial Difficulty pany, Youngstown Sheet & Tube Company and Republic Steel Corporation. LTV Corporation and LTV Steel Com- pany, Inc. will hereinafter be referred to collectively as “LTV.” LTV maintained ee the for its employees, including the three plans that are subject of the instant dispute, the Jones & Laughlin Hourly Pension Plan (J&L Hourly Plan), the Jones & Laughlin Retirement Plan (J&L Salaried Plan), and the Pension Plan of Republic Steel Corporation Dated and Effective as of March 1, 1950 (Republic Hourly Plan) (collectively “the Plans”). The Plans were subject to the minimum funding standards found in section 302 of ERISA, 29 U.S.C. § 1082, and section 412 of the Internal Revenue Code, 26 U.S.C. § 412 (1982) (amended 1986), both of which required LTV to make contributions to them. When LTV began experiencing financial difficulty in 1985, it applied for and received from the Internal Reve- nue Service (IRS) a waiver of its minimum funding re- quirement for the 1984 plan year pursuant to section 412(d) of the Internal Revenue Code, 26 U.S.C. § 412/d). According to the terms of the waiver, LTV was permitted to amortize over a fifteen year period the 1984 contribu- tion due under the plans. In 1986, LTV. still experiencing financial difficulty, sought waivers of the amount it owed for the 1985 plan year and the amount due under the amortization agreement for the 1984 plan year. In No- vember 1986, the IRS denied the request and revoked LTV’s waiver of the 1984 payment obligation, making LTV immediately liable for the contributions for the two years. On July 17, 1986, LTV and most of its subsidiaries filed petitions for reorganization under Chapter 11 of the 7a Bankruptcy Code, 11 U.S.C. §§ 1101-1174 (1982 & Supp. V 1987). On December 16, 1986, LTV sent a letter to PBGC stating that “because LTV is currently in reor- ganization under Chapter 11 of the Bankruptcy Code, LTV cannot and will not make contributions to the Plans to eliminate the accumulated funding deficiencies arising upon the denial of the funding waivers,” and that ity, to fund the Plans for future years.” C. PBGC’s Involuntary Termination of the Plans On January 12, 1987, PBGC brought an action under section 4042 of ERISA, 29 U.S.C. § 1342, to terminate the Plans and to be appointed statutory trustee. LTV agreed to the terminations and the United States District Court for the Southern District of New York, Owen, J., entered consent orders terminating the Plans as of Janu- ary 13, 1987. The United Steelworkers of America (the Union) filed an unsuccessful motion to vacate the consent orders. We affirmed the district court’s order denying that motion. Jones & Laughlin Hourly Pension Plan v. LTV Corp., 824 F.2d 197 (2d Cir. 1987). Pursuant to the consent orders and the guarantee found in ERISA section 4022, 29 U.S.C. § 1322, PBGC became liable for funding the payment of the non-forfeitable benefits under the Plans. Payment of benefits was reduced to the extent they were not guaranteed by PBGC. Benefits not guaran- teed by PGBC, such as certain early retirement, disability and surviving spouse benefits were lost completely as a result of the termination. D. The Union Lawsuit and the 1967 Collective Bargain- ing Agreement The Union is the representative of LTV's non- management employees. The Union brought suit in bank- ruptey court alleging that LTV's failure to provide the full range of benefits specified under the Plans amounted 8a to a breach of the existing collective bargaining agree- ment between the Union and LTV and was a violation of section 1113 of the Bankruptcy Code, 11 U.S.C. § 1113 and hoping to settle the lawsuit, LTV sought and obtained approval from the bankruptcy court to make a single hardship payment to each retiree. The Union and LTV subsequently entered into nego- tiations that resulted in a new collective bargaining agree- ment (the 1987 CBA). The 1987 CBA, which settled the Union’s suit against LTV, is an interim agreement that is to remain in effect until confirmation of a plan of re- organization. Under the 1987 CBA, some of the benefits that employees had enjoyed under the previous collective On August 12, 1987, the SEPPAA Trusteeship Work- ing Group (the Working Group), a PBGC committee es- tablished to advise PBGC, unanimously recommended re- storation of the Plans to avoid abuse of the pension termi- nation insurance program. The recommendation was based on: — —ñ—j—äꝓ—ũ — — ee 7 ˙ðI— - 9a a. LTV’s establishment of abusive follow-on plans which, together with the PBGC’s guarantee, pro- vide substantially the same benefits as the termi- nated plans and restore amounts in excess of PBGC’s guarantee limitations; b. the improvement in LTV’s financial condition; and e. LTV’s demonstrated willingness to fund employee retirement plans. According to the minutes of the August 6, 1987 meeting held to consider restoration, the Working Group “dis- cussed the purposes of Title IV of ERISA, PBGC’s duties and obligations under Title IV and SEPPAA’s Declara- tion of Policy” before reaching it recommendation. The Working Group’s recomm.-ndation was reviewed by the Executive Director of PBGC who concurred in the reasoning and the result. On September 22, 1987, PBGC issued a Notice of Restoration stating that pursuant to ERISA section 4047, 29 U.S.C. § 1347, it was appropriate for PBGC to restore full liability for the Plans to LTV. Restoration was effective as of January 13, 1987. former salaried employees of LTV companies who were entitled to benefits pursuant to the J&L Salaried Plan, intervened individually and on behalf of to have the Notice of Restoration enforced at least with respect to the J&L Salaried Plan. The Official Committee of Unsecured Creditors of LTV Corporation, the Subcom- mittee of Parent Creditors of the Official Committee of Unsecured Creditors of LTV Corporation, the LTV Bank Group, the Official Committee of Equ’ty Security Holders, Banc Texas Dallas, N. A., the Fifth Third Bank, Hunting- E DISCUSSION A. Jurisdiction In rendering its judgment, the district court stated that it “determined pursuant to Rule 54(b) of the Federal The grant of Rule 54(b) certification is reviewable on appeal under an abuse of discretion standard. If the district court abused its discretion in issuing the certifi- cation, we lack jurisdiction over this appeal. Burr by Burr v. Ambach, 863 F.2d 1071, 1074 (2d Cir. 1988) (citing Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 437 (1956), Brunswick Corp. v. Sheridan, 582 F.2d 175, 183 (2d Cir. 1978)). The district court did not strictly comply with the requirements for the issuance of a Rule 54(b) certification in this case. Nevertheless, we conclude that we do have appellate jurisdiction to adjudicate the merits of this case. — — — 1 11a Rule 54 (b) states, in pertinent part: f claim, or third-party claim, or when mu are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express deter- mination that there is no just reason for delay and upon an express direction for the entry of judgment. Unquestionably, there are several claims and multiple parties involved in the instant dispute. At issue here is whether all of the claims were specifically addressed by the district court, and, if not, whether the Rule 54(b) certification was properly granted. BancTexas claims that the district court did not adjudi- cate all of the claims of intervenors-appellants Miller and Shaffer or of intervenor-appellee the Official Committee of Equity Security Holders (Equity Committee). Specifi- cally, BancTexas argues that the district court neglected to address Miller's and Shaffer's request “that the Court decree that the J&L Plan is to pay full promised plan benefits with interest to each reti both retroactively to January 1 9 4 22 . 5 i that the court enter judgment (1) On the First Claim against LTV and LTV Steel, declaring the consents of LTV and LTV Steel to the Terminations to have been unnecessary and in violation of Section 363 of the Bankruptcy Code (which regulates the trustee’s use, sale or lease of property of an entity in bankruptcy and the rights of third parties that have an interest in that prop- erty) and Bankruptcy Rule 9019 (which concerns compromise and arbitration of controversies affecting iy PEST SHIH Pa eee HE 1 0 e l f 1 i EaT : Tt pin 172411121 4 Barca rea bar ae vy 1 15 171105 e ü t fille in 122853 8 168775 2 4 11 224121 Bat 5 Hei del 3 5 1115 lie , 3731 272111171 3 188 5 d 7 Under judgment ord the genuine issue of fact and that the moving party is entitled to judgment as a matter of law.” Cinema North Corp. v Plaza at Latham Associates, 867 F.2d 135, 138 (2d Cir 1989) (citation omitted). As there were several material facts in dispute in the present case, the district court correctly denied the motion for summary judgment and undertook a review of PBGC‘s restoration decision. it 187 i + | 1 ES cl 722 F.2d 1043, 1051 (2d Cir. 1985); New York Council, Ass'n of Civilian Technicians v. Fed- eral Labor Relations Authority, T57 F.2d 502, 508 (2d Cir.), cert. denied, 474 U.S. 846 (1985). Because ERISA, bankruptcy and labor law are involved in the ust be a showing on the administra- 15a tive record that PBGC, before reaching its decision, con- sidered all of these areas of the law, and to the extent possible, honored the policies underlying them. “One of Congress’ central purposes in enacting [ERISA] was to prevent the ‘great personal tragedy’ suffered by employees whose vested benefits are not paid when pension plans are terminated.” Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 374 (1980) (quoting Senator Bentsen, 3 Legislative History of the Employee Retirement Income Security Act of 1974, 94th Cong., 2nd Sess. 12 (Comm. Print 1976)). Accord- ingly, PBGC was created to encourage the maintenance of voluntary private pension plans, ensure the uninter- rupted payment of pension benefits and maintain the premiums established by PBGC at the lowest possible level. ERISA section 4002, 29 U.S.C. § 1302; see Belland v. Pension Benefit Guaranty Corp., 726 F.2d 839, 843 & n.4 (D.C. Cir.), cert. denied, 469 U.S. 880 (1984). The purpose of a Chapter 11 reorganization under the Bankruptcy Code “is to restructure a business’s finances so that it may continue to operate, provide its employees with jobs, pay its creditors, and produce a return for its stockholders.” H.R. Rep. No. 595, 95th Cong., 2d Sess. 220, reprinted in 1978 U.S. Code Cong. & Admin. News 5963, 6179. Debtors in reorganization receive an auto- matie stay under section 362 of the Bankruptcy Code, 11 U.S.C. § 362, which prevents the recovery of any claim against the debtor that arose prior to the commencement of the bankruptcy case. Thus the results of a reorganiza- tion are the shielding of a debtor from the financial pres- sures imposed by its creditors, and the promotion of the equitable distribution of the debtor’s assets to its credi- tors. See NLRB v. Bildisco & Bildisco, 465 U.S. 513, 528 (1984); United States v. Whiting Pools, Inc., 462 U.S. 198, 203 (1983). “A fundamental aim of the National Labor Relations Act is the establishment and maintenance of industrial 16a peace to preserve the flow of interstate commerce. Cen- tral to achievement of this purpose is the promotion of collective bargaining as a method of defusing and chan- neling conflict between labor and management.” First Nat'l Maintenance Corp. v. NLRB, 452 U.S. 666, 674 (1981) (citation omitted). Although this case arose under ERISA, the competing policies of bankruptcy and labor law must also be ac- corded due weight. In fact, section 514(d) of ERISA, 29 U.S.C. § 1144(d), explicitly states that “[n]othing in this subchapter shall be construed to alter, amend, mod- ify, invalidate, impair, or supersede any law of the United States (except as provided in sections 1031 and 1137 (e) of this title) or any rule or regulation issued under any such law.” See also National Stabilization Agreement of the Sheet Metal Indus. Trust Fund v. Com- mercial Roofing & Sheet Metal, 655 F.2d 1218, 1223 (D.C, Cir. 1981), cert. denied, 455 U.S. 909 (1982). Thus, here the policies and goals of ERISA must be — along with those of bankruptey and labor aw. These bodies of law have been harmonized in several instances. Section 1113 of the Bankruptcy Code, 11 U.S.C. § 1113, is meant to encourage collective bargain- ing. In re Century Brass Prods., Inc., 795 F.2d 265, 273 (2d Cir.), cert. denied, 479 U.S. 949 (1986). Included as subjects of mandatory bargaining under section 1113 are retiree benefits and pension and insurgnee benefits for active employees. See id. at 274-75 (discussing Al- lied Chem. & Alkali Workers of America, Local Union No. 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157 (1971)). Thus section 1113 of the Bankruptcy Code re- flects labor law concerns. In 1986, we affirmed a district court decision that specifically stated “(t]he Bankruptcy Code and ERISA must be interpreted together.” In re Baptist Medical Center of New York, Inc., 52 B.R. 417, 419 (E.D.N.Y. 1985), aff'd, 781 F.2d 973 (2d Cir. 1986) 17a (per curiam). Hence, each of these areas of law is to be interpreted in light of the policies and goals of the other two. In the instant case, a review of the administrative rec- ord fails to satisfy us that PBGC adequately considered the policies and goals of the bodies of law involved in this case and their interaction with each other. Rather, PBGC focused inordinately on ERISA. This failure renders PBGC’s decision arbitrary and capricious. Even when we examine the factors upon which PBGC did base its decision, we find no support in the admin- istrative record for the conclusion reached. Thus, the restoration decision is insupportable as a matter of law. 1. Follow-on Plans PBGC based its restoration decision partly on its find- ing that the adoption of the 1987 CBA Plans, while LTV was in Chapter 11 reorganization, constituted an abuse of the termination insurance program. We disagree. Although ERISA section 4047 states that PBGC may restore terminated plans “in any such case in which {[PBGC] determines such action to be appropriate and consistent with its duties under this subchapter,” 29 U.S.C. § 1347, this does not lead to the conclusion that PBGC may base a restoration decision on the establish- ment of follow-ons. As indicated infra, the legislative history of section 4047 and the intentions of ERISA, bankruptcy and labor law belie such an assertion. The legislative history of section 4047 reveals no indi- cation that Congress intended the establishment of suc- cessive benefit plans to be a ground for restoration. Con- gress’ focus in enacting section 4047 was mandating res- toration if there was an improvement in financial cir- cumstances. “[A] terminated plan being operated by a trustee as a wasting trust may be restored if, during the period of its operation by the trustee, experience gains or 18a increased funding make it sufficiently solvent.” H.R. Conf. Rep. No. 1280, 93rd Cong., 2nd Sess., reprinted in 1974 U.S. Code Cong. & Admin. News 5038, 5158. Simi- larly, the legislative history of SEPPAA bears no indica- tion that Congress considered the establishment of fol- low-on plans subsequent to an involuntary termination to be a ground for restoration. See H.R. Rep. No. 241, 99th Cong., And Sess., pt. 2, at 51-55, reprinted in 1986 U.S. Code Cong. & Admin. News 685, 709-13. The legislative history surrounding the most recent enactment of amend- ments to ERISA, the Pension Protection Act of 1987, Subtitle D of Title IX of the Omnibus Budget Recon- ciliation Act of 1987, Pub. L. No. 100-203, §§ 9301-9346, 101 Stat. 1330, 1330-331—1330-374 (PPA), indicates that Congress considered and rejected the idea of pro- hibiting the establishment of follow-on plans and making the establishment of such plans a basis for a restoration decision. See H.R. Conf. Rep. No. 495, 100th Cong., Ist Sess. 879-85, reprinted in 1987 U.S. Code Cong. & Admin. News 2313-1245, 2313-1625—2313-1631. Although this amendment governs only terminations occuring after De- cember 17, 1987 and thus is not applicable to the instant case, it reflects the continuing consensus not to include the establishment of follow-ons as a basis for a restora- tion decision. Section 1113 of the Bankruptcy Code, 11 U.S.C. § 1113, encourages collective bargaining for debtors in reorganiza- tion. That LTV was in reorganization was no reason for pension plans not to be the subject of bargaining. See Century Brass, 795 F.2d at 274. LTV, in entering col- lective bargaining with the Union, sought to ensure in- dustrial tranquility by averting a strike. The Union was bargaining to ensure that its members received benefits commensurate with what had been promised them. Con- struing the policies of labor law and bankruptcy law in concert with ERISA’s goal of the continued payment of pension benefits, we agree with the district court that the establishment of the 1987 CBA Plans was acceptable, 19a Not only is there no indication that the establishment of follow-ons is impermissible, but PBGC offers no de- tailed comparison of the two sets of plans to support its conclusion that the 1987 CBA Plans were merely con- tinuations of the old Plans. The record reflects only a brief comparison of the two sets of plans in the affidavit of C. David Gustafson, Manager of PBGC’s Actuarial Policy Division. This is insufficient to support PBGC's conclusion. While the 1987 CBA Plans did continue many of the benefits that were guaranteed under the Plans, there are several differences in the two sets of plans. For instance, (1) none of the new programs under the 1987 CBA Plans are guaranteed by PBGC; (2) benefits under the new Plans are provided through welfare plans, in- surance companies or general corporate assets, whereas benefits under the old Plans were provided under a single defined benefit plan; (3) the 1987 CBA Plans have more restrictive age and service eligibility requirements; and (4) the length of service does not necessarily increase the amount of some benefits under the new Plans. No- where in the record is there a showing that PBGC under- took an analysis of these differences. Collective bargaining agreements can establish a con- tractual obligation to provide pension benefits, following termination of a plan, in excess of the amounts guaran- teed by PBGC. ERISA contains no restriction on the employees’ rights to receive benefits not guaranteed under ERISA. See Murphy v. Heppenstall Co., 635 F.2d 233, 237-89 (3d Cir. 1980), cert. denied, 454 U.S. 1142 (1982). From this it follows that the establishment of the 1987 CBA Plans, which contains some programs which are not guaranteed by PBGC and thus may be regarded as being in excess of the guaranteed benefits, does not violate any provisions of ERISA. PBGC places substantial reliance on three of its opin- ion letters which express its policy against follow-on plans and identify factors that may result in the restoration 4 First, the opinion letters all involve cases of volun 11173 1111105 1115611 i 4472523 + 1271! ployees obliga tarily terminated by PBGC. evidence that LTV contempla in the new Plans or entered into an attempt to assure its em nation level. In contrast, fits while circumventing its 14127 118 4 idl 111 Hh 2171 110 ny 52 1111 For the foregoing reasons, the establishment of the follow-on plans cannot justify PBGC’s restoration decision. 22a $120 million. According to the figures before us, LTV Steel's net income for 1987 was estimated at $238.5 mil- lion. The projected operating income of LTV for Janu- ary through May 1987 was $118.8 million, whereas the actual operating income was $163.7 million. Reviewing these data, the Analysis stated that “[b]ased on LTV’s own cash flow projections, it appears that the debtor will generate more than enough cash during the immediate future (1987 and 1988) to support the reinstatement of the pension obligation.” This conclusion is problematic. The first problem with PBGC’s restoration decision is that it was based partly on the fact that LTV’s actual operating income for the first five months of 1987 had surpassed the amounts projected in the 1987-1988 Operating Plan. But, five months is too short a period of time to determine an income trend. A longer period of time should have been used to determine whether the improved financial condi- tions would have a long-lasting effect on LTV. Addi- tionally, as the district court pointed out, “PBGC’s cal- culation was based on two fundamental, yet unexplained and unexamined assumptions.” One assumption was that LTV would be able to obtain IRS waivers of its funding contribution requirements for the years 1984-1986. The Analysis fails to take into account that the IRS had previously denied LTV’s waiver request for 1985 and had revoked its waiver for 1984. The record discloses no reason to believe that the IRS, after having denied previous waiver requests, would grant such requests in 1987. Accordingly, if the Plans were to be restored, LTV would immediately become liable for contributions that it owed for the years 1984-1986, thereby seriously impairing its financial ability to fund the Plans. The other unexplained assumption was that the $50 million savings resulting from job reductions made pur- suant to the 1987 CBA would be preserved in subsequent bargaining agreements. The Union made these conces- 23a sions because it was faced with a choice between receiv- ing none of the nonguaranteed benefits or receiving some of them if it made concessions. If PBGC restores the Plans, the Union will get back all of its benefits auto- matically. Under these circumstances, the Union will have no incentive to make similar concessions. Thus there is no basis for assuming that the Union will make concessions following restoration of the Plans. Because these two assumptions are unjustified, the basis for the Analysis’ conclusion that LTV could sup- port the reinstatement of the Plans is substantially undermined. b. Effect of Chapter 11 Reorganization PBGC did not effectively assess the impact that LTV’s status as a debtor in Chapter 11 reorganization had on its financial condition. As a Chapter 11 debtor, LTV was able to reschedule some of its debt obligations and in effect free up its cash flow. Hence, looking at LTV’s cash flow figures, it might appear that LTV’s financial posi- tion had improved, when in reality, the apparent improve- - ment was directly linked to its basic financial plight. A second factor related to LTV’s position as a Chapter 11 debtor in reorganization that must be considered is the status of the claim for payment into the pension plans. Pension benefits accrue to employees as a result of their past labor on behalf of the employer. In the in- stant case, the employees of LTV have given their labor in consideration for receiving pension benefits from LTV. This occurred prior to LTV’s bankruptcy filing. Thus, any claims arising out of LTV’s obligation to pay into the pension fund plans are pre-petition debts. See Trustees of the Amalgamated Ins. Fund v. McFarlin’s, Inc., 789 F.2d 98, 103-04 (2d Cir. 1986). Pre-petition debts are satisfied by a fair distribution of the debtor’s assets, each creditor receiving a proportionate share of the amount of its claim. Hence, any additional money 24a that LTV has must be distributed fairly among the creditors, with the pension plans receiving no special priority. When all the pre-petition claims of LTV’s other creditors are considered, and they receive their fair share of any additional funds, LTV’s apparent ability to fund the Plans suffers. The district court concluded that restoration did not implicate the automatic stay provisions of the Bankruptcy Code, but that if it did, restoration would be exempt from the automatic stay under section 362 (b) (4) of the Code, 11 U.S.C. 8 362 (b) (4), as an act to enforce PBGC’s regulatory authority in furtherance of the public health and welfare. We are less convinced than the dis- trict court that the automatic stay provisions are not implicated. However, we need not decide this question for we agree with the district court’s alternative theory that restoration is exempt from the automatic stay. This hold- ing is consisent with Congress’ purpose in enacting ERISA—protecting the public welfare and the “continued well-being and security of millions of employees” who participate in pension plans. 29 U.S.C. § 1001 (a). ce. PBGC’s Focus on Short Term Factors A major problem with PBGC’s analysis of LTV’s financial circumstances is that it focuses principally on factors that relate to LTV’s short term economic condi- tion. While LTV may have been able to fund the Plans for a limited period of time because of the improvement in its financial circumstances, the administrative record included no information addressed to the long term ability of LTV to fund the Plans. ERISA is concerned with the promulgation and main- tenance of plans that are viable in the long term as opposed to those that are uncertain or “pay-as-you-go.” See 29 U.S.C. £1002(31). Likewise, section 1.401-1 (b) (2) of the IRS Regulations, 26 C. F. R. § 1.401-1 (b) (2) (1988), which pertains to deferred compensation 25a and compliance with which is required for PBGC insur- ance, see 29 U.S.C. § 1321(a), states that “(t]he term ‘plan’ implies a permanent as distinguished from a tem- porary program.” Here, if the restored plans were viable only for a short period of time, they might in the near future once again have to be re-terminated, thereby de- feating the purposes and objectives of ERISA and the tax laws. We note that nowhere in the administrative record is there any evidence that PBGC assessed the possibility that the Plans would have to be re-terminated. ERISA contains no special provisions governing re-termination; however, the standards would be the same as for an ini- tial termination. If in the near future LTV were once again found unable to adequately fund the Plans, the resulting vacillation in agency policy would lead to un- certainties on the part of the retirees, plan sponsors, creditors and the government. Such uncertainty is to be avoided where possible. See New York Council, Ass’n of Civilian Technicians, 757 F. 2d at 508. In sum, the administrative record does not support PBGC’s conclusion that LTV could afford to fund the pension plans. In contrast to sound administrative agency decisionmaking, in reaching its deterftf tion of LTV’s financial viability, PBGC placed undue reliance on some factors and not enough on others. 3. Willingness The third articulated basis for PBGC’s decision was LTV’s demonstrated willingness to fund pension plans. On appeal, PBGC contends that this rather amorphous factor is “subsumed in the other two” and therefore need not be addressed separately. We agree and thus decline to discuss it further. In summary, we are left with the conclusion that PBGC’s restoration decision was arbitrary and capricious. 26a See Motor Vehicle Mfrs. Ass’n v. State Farm Mutual Automobile Ins. Co., 463 U.S. 29, 43 (1983). 4. PBGC’s Procedural Approach Section 4047 of ERISA, 29 U.S.C. § 1347, does not discuss the procedures that are to be followed by PBGC when reaching a restoration decision. However, when assessing an agency’s actions under the arbitrary and capricious standard, it is a principle of fundamental fairness that [a] party is entitled ... to know the issues on which decision will turn and to be apprised of the factual material on which the agency relies for deci- sion so that [it] may rebut it. Indeed, the Due Process Clause forbids an agency to use evidence in a way that forecloses an opportunity to offer a con- trary presentation. Bowman Transp., Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 288 n.4 (1974). Consistent with this view, we have previously held that an agency must “pro- ceed[] in accordance with ‘ascertainable standards,’ and provide[] a statement showing its reasoning when apply- ing the standards.” Patchogue Nursing Center v. Bowen, 797 F.2d 1137, 1143 (2d Cir. 1986) (quoting Holmes v. New York City Housing Authority, 398 F.2d 262, 265 (2d Cir. 1968)), cert. denied, 479 U.S. 1030 (1987). In the instant case, PBGC neither apprised LTV of the material on which it was to base its decision, gave LTV an adequate opportunity to offer contrary evidence, pro- ceeded in accordance with ascertainable standards by which to evaluate when a plan sponsor’s financial condi- tion has so improved as to warrant restoration, nor pro- vided a statement showing its reasoning in applying those standards. Failure to do any of these things ren- ders the decision arbitrary and capricious. 27 CONCLUSION On remand, PBGC may be able to justify its decision. However, based on the administrative record presented to the district court and to us, its decision cannot be up- held. Because PBGC’s decision was not sustainable on the administrative record, the district court provided the appropriate remedy by vacating PBGC’s Restoration No- tice and remanding the matter to PBGC. See Vermont Yankee Nuclear Power Corp. v. Natural Resources De- fense Council, Inc., 435 U.S. 519, 549 (1978); Camp v. Pitts, 411 U.S. at 143. On remand, PBGC should con- sider all of the issues, including those raised by the Equity Committee that previously were left unresolved. Affirmed. 28a UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK IN RE CHATEAUGAY CORPORATION, REOMAR, INC., THE LTV CORPORATION, et al., Debtors. 87 Civ. 6863 (RWS) PENSION BENEFIT GUARANTY CORPORATION, —against— Petitioner, THE LTV CORPORATION, et al., Respondents. 87 Civ. 7261 (RWS) PENSION BENEFIT GUARANTY CORPORATION, ins Plaintiff, THE LTV CorPoRATION, and LTV STEEL CoMPANY, INC., Defendants. OPINION APPEARANCES: Attorneys for Plaintiff: PENSION BENEFIT GUARANTY CORPORATION 2020 K Street, N. W. Washington, D. C. 20006 . By: Gary M. Forp, General Counsel CAROL CONNOR FLOWE, Deputy General Counsel LONIE HASSEL, Assistant General Counsel WILLIAM G. BEYER, Associate Genera] Counsel FRANK MCCULLOCH, Senior Counsel JEANNE K. BECK, Esq. JAMES J. ARMBRUSTER, Esq. JOHN FosrER, Esq. PAULA CONNELLY, Esq. Of Counsel CLEARY, GOTTLIEB, STEEN & HAMILTON, EsQs. One State Street Plaza New York, New York 10004 By: GEORGE WEISZ, Esq. Of Counsel Attorneys for Defendants The LTV Corporation, et al.: DAVIS, POLK & WARDWELL, ESQs. “ One Chase Manhattan Plaza New York, New York 10005. By: LEWIS B. KADEN, Esq. KAREN E. WAGNER, EsQ. SHARON KATZ, Esq. JAMES GODDARD, EsqQ. DOUGLAS BRANDON, Eso. JOAN GRECO, EsQ. Of Counsel LEVIN & WEINTRAUB & CRAMES, Esq. 225 Broadway New York, New York 10007 By: MICHAEL J. CRAMES, Esq. HERBERT S. EDELMAN, Esq. Of Counsel LEBOEUF, LAMB, LEIBY & MACRAE, Esds. 1333 New Hampshire Avenue, N. W. Washington, D. C. 20036 By: FRANK CUMMINGS, Esq. Of Counsel Attorneys for the Intervenors: KRAMER, LEVIN, NESSEN, KAMIN & FRANKEL, ESQS. Attorneys for the LTV Bank Group 919 Third Avenue New York, New York 10022 By: JOEL B. ZWEIBEL, Esq. GEOFFREY M. KALMus, Esq. MICHAEL J. NASSAU, Esq. 80a MICHAEL J. DELL, Esq. PETER V. PANTALEO, Esq. ALICE A. THOMPSON, Esq. JEFFREY S. TRACHTMAN, Esq. NANCY J. MRAZEK, Esq. Of Counsel Stroock & STROOCK & LAVAN, EsQs. Attorneys for the Official Committee of - Unsecured Creditors of The LTV Corporation Seven Hanover Square New York, New York 10004 By: LAWRENCE M. HANDELSMAN, Esd. MARK A. SPEISER, Esq. BRIAN M. CoGAN, Esq. LAUREN G. KLEIN, Esq. BARRY M. SABIN, Esq. Of Counsel BLANK, ROME, CoMIsKY & McCAULEY, Esq. Attorneys for the Subcommittee of Parent Creditors of the Official Committee of Unsecured Creditors of The LTV Corporation Four Penn Center Plaza Philadelphia, Pennsylvania 19103 By: RAYMOND L. SHAPIRO, Esq. Morris L. WE!SBERG, Esq. THOMAS E. BIRON, Esq. FAITH R. GREENFIELD, Esq. REGINA STANGO KELBON, Esq. Of Counsel GRAYDON, HEAD & RITCHEY, Esds. Attorneys for The Fifth Third Bank P. O. Box 6464 Cincinnati, Ohio 45201 By: ERIC C. OKERSON, Esq. MARGARET WEINGARTNER BURGIN, Esq. Of Counsel 31a HAHN LOESER & PARKS, Esos. Attorneys for The Huntington National Bank 800 National City E. 6th Building Cleveland, Ohio 44114 By: LEE D. PoWAR, Esq. LAWRENCE E. Oscar, Esq. Of Counsel SHEARMAN & STERLING, Es@Qs. Attorneys for Citibank, N.A. 153 East 53rd Street New York, New York 10022 By: Davin J. MARK, Esq. Of Counsel MYERSON & KUHN, ESQs. Attorneys for Official Committee of Equity Security Holders of the LTV Corporation and LTV Steel Company, Inc. 237 Park Avenue New York, New York 10017 By: Epaar H. Booru, Esq. CLAUDE D. MONTGOMERY, Esq. PETER D. WOLFSON, Esq. RICHARD LEVY, IR., Esq. JANET SHPRINTZ, Esq. SARA CHENETZ, Esq. Of Counsel BUCHANAN INGERSOLL, P. C. Attorneys for David H. Miller and William H. Shaffer 600 Grant Street . Pittsburgh, Pennsylvania 15219 By: R.A. KING, Esq. KENNETH R. BRUCE, EsQ. Of Counsel 32a MOUND, CoTTON & WOLLAN, Esq. Attorneys for David H. Miller and William H. Shaffer 125 Maiden Lane New York, New York 10038 By: STUART COTTON, Esq. Of Counsel HAYNES AND BOONE, EsgQs. Attorneys for BancTexas Dallas, N.A. 3100 First Republic Bank Plaza 901 Main Street Dallas, Texas 75202 By: ROBIN E. PHELAN, Esq. MARK X. MULLIN, Esq. Of Counsel Amicus Curiae: COHEN, WEISS AND SIMON, Esos. Amicus Curiae for United Steelworkers of America 330 West 42nd Street New York, New York 10036 By: BRUCE H. SIMON, Esq. RICHARD M. SELTZER, Esq. SOPHIA E. Davis, Esq. Of Counsel NORTHEAST OHIO LEGAL SERVICES Amicus Curiae for Solidarity USA, Inc. 700 Metropolitan Tower Youngstown, Ohio 44503 By: STAUGHTON LYND, Esq. Of Counsel LEGAL SERVICES FOR THE ELDERY Amicus Curiae for Solidarity USA, Inc. 132 West 43rd Street—3rd Floor New York, New York 10036 By: JONATHAN A. WEISS, Eso. Of Counsel 33a TABLE OF CONTENTS Page POD etc LTV’s Financial Difficulties and Chapter 11 Filing. The 1986 Collective Bargaining Agreement The PBGC and Title IV of ER IS The PBGC’s Involuntary Termination of the Plans.. The USWA Lawsuit for Non-Guaranteed Benefits.. The 1987 Interim Collective Bargaining Agree- c Court Approval of the 1987 C44 The Restoration of the Plans .......................------------+-- The Notice of Restoration Prior Proceedings in this Court 111 ö K I. The Automatic Sta ˖,e4„kek4e II. The Nature of the PBGC’s Claim III. Restoration Does Not Violate the Automatie Eee en IV. Section 362(b) (4) of the Code Exempts Resto- 11111110 ————— —-— The Enforcement Action V. The Scope of ReviWWWmw . VI. The PBGC’s Restoration Authority .................... VII. The Restoration Decision was Arbitrary and 8 ——ů—— A. The 1987 CBA Plans B. LTV Steels’ Improved Financial Condition. VIII. The PBGC’s Procedures Were Inadequate........ .. ³ ee TERE PROTO Ie TNO On m_— 34a SWEET, D. J. The Pension Benefit Guaranty Corporation (“PBGC”’) has moved pursuant to Fed.R.Civ.P. 56 for an order granting summary judgment directing the LTV Corpora- tion (“LTV”) and LTV Steel Company (“LTV Steel”) to comply with the PBGC’s Notice of Restoration (“Res- toration Notice”) dated September 22, 1987 and to re- sume full responsibility for funding and administering three of LTV Steel’s four major pension plans, which were terminated on January 12, 1987. LTV, for itself and on behalf of the other debtors and debtors-in-posses- sion in these cases, has moved for an order decreeing and adjudging that the PBGC acted in violation of the automatic stay of section 362 of the Bankruptcy Code (the Code“) and a restraining order of the Bankruptcy Court by issuing the Restoration Notice and thereafter commencing an action to enforce it. These motions in the context of the facts presented raise difficult and deeply perplexing issues concerning the reorganization of a corporate entity that includes the second largest steel company in the United States, the powers of a public corporation created by Congress to protect the pension benefits of more than 30 million American workers and their families, and the effect of congressionally sanctioned collective bargaining between the United Steelworkers of America (“USWA”) and LTV. Underlying these issues is the fundamental ques- tion: what processes and institutions are to be responsible for the casualties suffered by a basic American industry that has been battered by intensive and successful com- petition from abroad? No central authority in this litigation has spoken to this bedrock problem. No U.S.A., Inc. has been heard, or even exists. The issues have, therefore, necessarily~ been parsed in terms of the existing body of bankruptcy, labor and pension benefit law, largely created before the present exigencies existed. The threshold resolution of 35a these competing considerations is, indeed, a daunting task but one assisted by excellence of counsel who have striven with some success to order these complexities. Whatever follows on remand, review or in the halls of Congress, it is this court’s initial obligation to find the facts and to reach conclusions by the application of estab- lished analysis, where it exists, leading hopefully to the earliest possible resolution of the interests at issue. The court has reached the following conclusions. First, with respect to the automatic stay, although the PBGC’s claims against LTV Steel under Title IV are prepetition claims, restoration per se does not affect a recovery on those claims or in any other way constitute- an act to possess or to control LTV Steel's assets. Restoration is simply one regulatory component of the federal pension insurance program that protects the nation’s employees, and nothing in the Code or in ERISA justifies a debtor’s reliance on that program except in cases of severe hard- ship. Second, with respect to the restoration decision itself, the 1,592 page Administrative Board (the “PBGC Record” or “Record”) submitted by the PBGC in this case does not support the PBGC’s decision to restore the Plans on any of the asserted grounds. There is no factual or legal basis for the PBGC’s finding that LTV has abused the pension termination insurance program, and the record is not sufficiently developed to permit a find- ing that LTV Steel’s financial condition has improved to the point where it can afford to sponsor its previously terminated plans. Therefore, LTV’s application to enforce the automatic stay by declaring restoration null and void is denied, as is the PBGC’s motion for summary judgment. These findings and conclusions are described in the following portions of this opinion which set forth the context of the litigation, its prior proceedings, the issues raised, the resolution of the issues, and the conclusions reached at this stage of the litigation. 36a FACTS LTV’s 1986 Financial Difficulties and Chapter 11 Filing LTV is a Delaware corporation active in four basic industries: steel, aircraft products, missiles and elec- tronics and energy products. LTV’s subsidiaries include LTV Aerospace and Defense Company, AM General Cor- poration, LTV Energy Products Company and LTV Steel, the nation’s second largest steel operation, which was created by the merger of Jones & Laughlin Steel Company, Youngstown Sheet & Tube Company and Re- public Steel Corporation. Directly and through its subsidiaries, LTV has ad- ministered approximately thirty defined benefit pension plans, including the three plans at issue here: the Jones & Laughlin Hourly Pension Plan (“J & L Hourly Plan”) ; the Jones & Laughlin Retirement Plan (“J & L Salaried Plan“); and the Pension Plan of Republic Steel Corpora- tion Dated and Effective as of March 1, 1950 (“Repub- lie Hourly Plan”) (collectively the Plans“). The Plans are covered by the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended by the Single- Employer Pension Plan Amendment Act of 1986 (“SEPPAA”)?, 28 U.S.C. §§ 1301 et seg. (1987 Supp.), and are subject to the minimum funding standards in 1A fourth LTV Steel pension plan, the Republic Salaried Plan, which was terminated involuntarily in September 1986, was not restored by the PBGC. 2 On December 22, 1987 Congress amended Title IV of ERISA with the enactment of the Pension Protection Act of 1987, Subtitle D of Title IX of the Omnibus Budget Reconciliation Act of 1987 (“OBRA”), Pub.L.No. 100-203, 101 Stat. 1330 (Dec. 22, 1987). Because the Pension Protection Act antedated and, thus, does not apply to the events that give rise to this litigation, the description of ERISA’s statutory scheme set forth below does not reflect the 1987 amendmens, and all citations to ERISA, as amended by SEPPAA, are to U.S.C. (1987 Supp.), except where expressly noted otherwise. 37a section 302 of ERISA, 29 U.S.C. § 1082, and section 412 of the Internal Revenue Code (“IRC’’), 26 U.S.C. § 412. LTV’s intent in acquiring and merging three major steel companies was to combine them, shut down ex- traneous or outmoded facilities, and emerge with a streamlined, efficient steel company that could survive the extreme financial pressures placed on the steel indus- try in the late 1970s and early 1980s. The streamlining process resulted in massive lay-offs and premature re- tirements and corresponding massive pension liabilities. By 1986, LTV Steel had an extraordinary ratio of 77,182 retirees to 24,544 active workers, over 3 to 1. On July 17, 1986, LTV and substantially all of its active subsidiaries, including LTV Steel, filed petitions for reorganization under Chapter 11 of Title 11 of the Code in the United States Bankruptcy Court for the Southern District of New York, but continued to manage and operate their businesses and properties as debtors- in-possession. The filing of the petitions triggered the automatic stay provisions of section 362 of the Code, and on July 17, the bankruptcy court issued a restraining order enforcing the provisions of the stay. In connection with its ongoing financial difficulties, LTV Steel had resulted in 1985 funding waivers from the Internal Revenue Service (“IRS”) for its minimum funding contributions to the Plans for the 1984 plan year.“ The IRS granted the waiver request, permitting LTV Steel to amortize over 15 years the contribution of more than $170 million due for the 1984 plan year. In 1986 LTV Steel again requested contribution waivers for over $200 million owed to the Plans for the 1985 plan year and the amount of amortization for the 1984 plan year. The IRS denied that waiver request in November Under ERISA, unfunded benefit liability is amortized over time through annual payments by the plan sponsor into the plan. These payments are called minimum funding contributions. 38a 1986 and revoked LTV Steel’s 1984 waiver due to its failure to continue contributions after its Chapter 11 fil- ings. As a result, LTV Steel immediately owed more than $350 million in past unfunded contributions to the Plans for the two years.“ LTV Steel made some contribu- tions in 1986 to amortize the 1984 waivers, but made no contributions for the 1985 plan year. In addition to LTV Steel’s accumulated funding deficiencies, at the time LTV entered Chapter 11, the total present value of LTV Steel’s future pension liabilities exceeded $2 billion. The 1986 Collective Bargaining Agreement On April 1, 1986, a few months before its Chapter 11 filing, LTV Steel had concluded negotiations for a collec- tive bargaining agreement (“1986 CBA”) with the USWA. The USWA had agreed to concessions which re- duced labor costs by $3.44 per hour. In return, the 1986 CBA provided for an employee profit sharing and stock plan pursuant to a new Employee Investment Program (“1986 EIP”) which would be funded with stock in lean years and cash in profitable years. The 1986 CBA in- cluded the Jones & Laughlin and the Republic Pension Agreements (“1986 Pension Agreements”), pursuant to which LTV Steel established the J & L Hourly Plan and the Republic Hourly Plan. The 1986 Pension Agreements did not limit LTV Steel’s obligation to provide benefits in the event of termination of any pension agreements or termination of the pension plans or any pension trusts. Under the pension agreements, LTV Steel’s obligations to fund and pay benefits continue beyond any termina- tion of the agreements themselves.“ 18175 million of LTV Steel's obligation had been secured by a pledge of stock of LTV’s aerospace and defense subsidiary. 5 Paragraph 10.2 of both the J & L and the Republic Pension Agreements provides: “Any benefit properly payable pursuant to this Agreement shall continue to be payable, notwithstanding the termination or expiration of this Agreement.” 39a The PBGC and Title IV of ERISA The PBGC is a wholly-owned United States govern- ment corporation that was established in section 4002 of ERISA, 29 U.S.C. § 1302, to insure pension benefits under terminated pension plans and to administer and enforce the provisions of Title IV of ERISA which creates a pension plan termination insurance system. The PBGC’s regulatory, investigatory and enforcement authority is set forth in sections 4002 and 4003 of ERISA. The PBGC, for example, may adopt such rules and regulations “as may be necessary to carry out the purposes of [Title IV],” 29 U.S.C. § 1302 (b) (3), and “may make such investigations as it deems necessary to enforce any provision of [Title IV],” 29 U.S.C. § 1303 (a). Moreover, under section 4003(e)(1) of ERISA, the PBGC may bring “[cJivil actions .. for appro- priate relief, legal or equitable or both, to enforce the provisions of [Title IVI.“ 29 U.S.C. § 1303 (e) (1). Title IV sets forth procedures for the termination of single-employer pension plans by plan administrators, 29 U.S.C. § 1341, or by the PBGC, 29 U.S.C. § 1342, and permits the appointment of the PBGC as the trustee of a terminated plan. Id. The statute requires the PBGC to guarantee the payment of nonforfeitable benefits under terminated plans, subject to certain prescribed limita- tions. See 29 U.S.C. §§ 1322, 1322b, 1342. This statutory guarantee is funded primarily by annual insurance pre- miums paid by the administrators of covered plans. PBGC funds, however, also consist of the amount of em- ployer liability payments collected under section 4062 of ERISA. 29 U.S.C. § 1362; see also 29 U.S.C. § 1305. Section 4062 of ERISA imposes liability on employers whose plans terminate with insufficient assets to pay guaranteed benefits. Such employers are liable to the PBGC for part of the terminated plan’s unfunded guar- anteed benefits. See 29 U.S.C. § 1362 (b). Section 4068 40a of ERISA creates a lien in favor of the PBGC for the amount of its claim under section 4062 which has the priority status of a tax lien under 26 U.S.C. § 6323. See 29 U.S.C. § 1368 (a), (e). In addition, an employer may be liable to a trust established by the PBGC for plan participants for the outstanding amount of certain un- funded “benefit commitments” that exceed the guaranteed benefits payable by the PBGC. See 29 U.S.C. §§ 1342(i), 1362(c), 1349.“ An employer may also be liable to the PBGC in PBGC’s capacity as the statutory trustee of a terminated plan for the plan’s accumulated funding deficiencies, for the outstanding balance of waived fund- ing deficiencies, and for the outstanding balance of the amount of previously allowed decreases in the minimum funding standard. See 29 U.S.C. § 1362 (d). The Pension Protection Act of 1987 (“PPA”) includes amendments to ERISA that enhance the PBGC’s rights of several major respects with respect to plans terminated on or after December 27, 1987. For example, the PPA amendments allow the PBGC to perfect a lien upon all of the property of each member of a plan sponsor’s “con- trolled group“ for missed minimum funding contribu- tions and make all members responsible for plan fund- ing obligations when due. Prior to these amendments, controlled group liability for certain unfunded benefits ®Sections 4042(i), 4062(c) and 4049 of ERISA, 29 U.S.C. §§ 1342 (i), 1362(c), 1349, were either repealed or substantially modified by the Pension Protection Act of 1987. A plan adminis- trator’s liability to the PBGC for the “total amount of unfunded benefit liabilities” is now governed by section 4062 (b) (1) (A) of ERISA. See 29 U.S.C. § 1362 (b) (1) (A) (1988 Supp.). a 7 The PPA amendments define “controlled group” to include the plan sponsor and “all other persons under common control” with the sponsor within the meaning of the Internal Revenue Code (“IRC”) and Regulations thereunder. See 29 U.S.C. § 1301 (a) (14) (1988 Supp.). Under the IRC and Regulations, LTV Aerospace and LTV Steel are members of the same controlled group. See 26 U.S.C. § 414 b), (e); Treas. Reg. §11.414(c) -1 through -5. 4la became fixed only upon plan termination. The PPA gives the PBGC the right, upon plan termination, to — 100% reimbursement from controlled group members for the total amount of unfunded benefit liabilities.” See 29 U.S.C. § 1362 (b) (1) (A) (1988 Supp.). Previously the PBGC’s reimbursement claim upon termination was effectively limited to 75% of the unfunded guaranteed peng hyd — oe do not apply to pension „ ans at issue he i — uA. The PBGC’s Involuntary Termination of the Plans Because of the Plans’ failure to meet ERISA’s mini- mum funding requirements and LTV Steel’s precarious financial condition, the PBGC reviewed the Plans’ status in December 1986 under ERISA’s involuntary termina- tion provisions. The PBGC determined that the Plans were severely underfunded, even though they had suf- ficient assets to pay benefits then in pay status for sev- eral years without additional contributions. The under- funding for guaranteed benefits as of December 1986 was estimated at more than $2 billion. Moreover, the underfunding was expected to increase by an estimated $65 million in 1987 and by an additional 863 million in 1988. The estimated additional cost to the Plans of shut- down benefits was in the range of $300-$700 million for more than 6,000 entitled participants. On December 16, 1986 LTV informed PBGC by letter that “because LTV is currently in reorganization under Chapter 11 of the Bankruptcy Code, LTV cannot and will not make contributions to the Plans to eliminate the accumulated funding deficiencies,” and that LTV does not intend, and is not likely to have the ability to fund the Plans for future years.” Thereafter on January 12, 1987, PBGC initiated proceedings under sec- tion 4042 of ERISA, 29 U.S.C. § 1342, to terminate the Plans and to be appointed Statutory trustee, on the 42a grounds that termination was necessary to avoid an un- reasonable deterioration of the Plans’ financial condition or an unreasonable increase in the liability of the PBGC’s insurance funds. LTV, the administrator of the Plans, consented to the terminations. On January 12, this court issued consent orders terminating the Plans effective January 13, 1987 and appointing the PBGC as statutory trustee.* As of the termination date of January 13, 1987, the Plans’ assets were insufficient to pay the benefits guaran- teed under Title IV of ERISA. Accordingly, PBGC be- came responsible for paying Plan benefits to the extent of the statutory guarantee in ERISA. See 29 U.S.C. § 1322. The PBGC guarantees only nonforfeitable bene- fits and does not guarantee benefits becoming nonfor- feitable solely on account of the plan termination. /d.; 29 C.F.R. § 2613.6 (1987). In addition, the PBGC’s statutory guaranty does not cover certain amounts and types of benefits that had been provided under the Plans. Following termination of the Plans, therefore, pay- ments of current pension benefits payable under the 1986 Pension Agreements were reduced to the extent they were not guaranteed by the PBGC. Certain early retire- ment, disability, and surviving spouse benefits not guar- anteed by the PBGC were terminated completely. As a result, more than 7,000 LTV pensioners under the age of 62 immediately had their monthly pensions reduced by as much as $400. Thousands of retirees who were solely dependent on pension benefits for food, clothing, housing and other essentials received substantially re- duced pension benefits foliowing termination. Thousands of current employees who had worked in return for a In re Jones & Laughlin Hourly Pension Plan, No. 87 Civ. 0232 RO (S.D.N.Y. Jan. 12, 1987); Jn re Jones & Laughlin Retirement Plan, No. 87 Civ. 0235 RO (S.D.N.Y. Jan. 12, 1987); In re Pension Plan of Republic Steel Corporation Dated and Effective as of March 1, 1950, No. 87 Civ. 0234 RO (S.D.N.Y. Jan. 12, 1987). 43a contractually guaranteed right to early retirement there- after forfeited such benefits and stopped accrual of serv- ice for any pension plan. Surviving spouses of employees who died while actively employed also lost certain pension benefits. The USWA Lawsuit for Non-Guaranteed Benefits In response to the hardship inflicted upon its members by the Plan terminations, on January 16, 1987 the USWA initiated an adversary proceeding in the bank- ruptcy court seeking payment under the 1986 Pension Agreements.“ The USWA lawsuit alleged that LTV Steel’s failure to provide the full benefits set forth in the Plans constituted an abrogation of the 1986 CBA and a violation of section 1113 of the Code. The PBGC inter- vened and opposed the USWA’s request that LTV Steel pay the nonguaranteed portion of the benefits, arguing that requiring “the Debtor to continue to pay the pre- petition claims of retirees outside of a Chapter 11 plan of reorganization” would be inconsistent with ERISA and “would pervert . .. the collection scheme for pre- petition debt embodied in the Bankruptcy Code.” The USWA lawsuit represented only one of the meas- ures the USWA was prepared to take against LTV Steel. The USWA had inflicted a damaging strike on the Wheeling-Pittsburgh Steel Company, also a Chapter 11 debtor, for failure to pay pension benefits after its plan termination. At the very beginning of the LTV cases, the USWA had struck Indiana Harbor, LTV Steel’s most ® Immediately upon learning of the terminations, the USWA, as an intervenor, moved to vacate the consent orders and obtain an evidentiary hearing on the PBGC’s request for a court order approving the terminations. The district court denied the motions to vacate. The USWA appealed and the Court of Appeals for the Second Circuit affirmed the district court’s orders. Jones & Laughlin Hourly Pension Plans v. The LTV Corp., 824 F.2d 197 (2d Cir. 1987). 44a important facility, in response to LTV’s inability to pay certain retiree benefits. Before the strike spread, LTV Steel obtained court authority to pay these benefits. See In re Chateaugay Corp., 64 B.R. 990 (S.D.N.Y. 1986). LTV Steel was well aware, therefore, that the USWA could take powerful action to compel the payment of benefits under the 1986 CBA. The 1987 Interim Collective Bargaining Agreement In an effort to resolve the USWA lawsuit, LTV Steel obtained bankruptcy court approval in April 1987 to make a single hardship payment to each retiree at a cost of $6.7 million and thereafter began negotiating an in- terim agreement with the USWA. Following weeks of intense bargaining, negotiators for the USWA and LTV Steel reached a tentative agreement on May 13, which was rejected by the local union presidents. Under the threat of a major strike, which LTV Steel estimated would have cost the company $100 million per month, the parties resumed bargaining on May 26. On June 25 the local presidents approved an agreement (the “1987 CBA”) which replaced most of the lost (i.e., nonguaran- teed) benefits to retirees and created new benefit pro- grams for active workers. The 1987 CBA is an interim agreement that governs the relationship between LTV Steel and the USWA until confirmation of a plan of reorganization. The 1987 CBA provides that if “any of its provisions become unenforce- able” or if PBGC pension payments for guaranteed bene- fits are not realized on a continuing basis, the 1987 CBA may be terminated, upon notice, by either party and the 1986 CBA will then “snap back” and be in full retro- active and prospective force. It also provides that pay- ments thereunder will offset any equivalent bankruptcy claims against LTV Steel, and will be offset by any equivalent benefit paid by any trust established pursuant to section 4049 of ERISA, 29 U.S.C. § 1349. Further, 45a the 1987 CBA specifically provides that it settles the USWA’s suit for retirement benefits. The 1987 CBA has several major components which together revise certain terms and conditions of employ- ment for LTV Steel’s union workers. LTV asserts that three of these components—cost sharing health and life insurance programs, maintenance craft efficiencies, and job elimination—will ultimately generate annual savings to LTV Steel of $50 million. LTV Steel, however, an- ticipates paying an estimated $70-$75 million annually to fund six other components, which comprise the new retirement programs. These new benefit programs are: the Individual Account Trust (“USWA IAT”); the LTV Steel/USWA Pension Plan (“USWA Pension Plan“); the Lump Sum Severance Program; the Pre-Retirement Surviving Spouse Benefit; the Disability Income Benefit Plan; and an Extended Supplemental Unemployment Benefit Plan (“Extended SUB Plan”) (collectively, the “1987 CBA Plans“). Court Approval of the 1987 CBA On July 8, 1987, LTV Steel applied to the bankruptcy court for approval of the 1987 CBA. LTV’s Senior Vice President and Chief Financial Officer, and LTV Steel’s Vice President of Industrial Relations, testified that the interim agreement was necessary to avoid a crippling strike and to permit LTV and LTV Steel to reorganize. In opposition, the Executive Director of the PBGC testi- fied that portions of the new pension programs violated a PBGC policy against post-termination benefit arrange- ments that constitute, in its view, a de facto continua- tion of previously terminated pension plans. Over the PBGC’s objections, the bankruptcy court approved the agreement, exercising its equitable powers under 28 U.S.C. § 157(b) and section 105 of the Code, 11 U.S.C. § 105, to ensure the success of reorganization, stating: 46a Based upon the complete record before me today, ineluding all filed papers, it has become abundantly clear that this Court may and should utilize its equitable power to authorize the terms and payments contemplated by the agreements as they are clearly necessary and appropriate to the goal of rehabilita- tion for this Chapter 11 Debtor. PBGC Record, p. 622. The bankruptcy court found that the PBGC’s claims of ERISA “abuse” or “illegality,” which did not address the authority of the bankruptcy court to authorize interim payments, were premature. By orders dated July 30, 1987, the bankruptcy court granted LTV Steel's application in all respects.’ Both before and after the bankruptcy court’s ruling, the PBGC attempted to stay implementation of the 1987 CBA. The bankruptcy court, this court, and our Court of Appeals, denied the PBGC’s applications. Finally, the PBGC appealed the bankruptcy court order approving the interim agreement to this court. LTV Steel moved to dismiss the appeal on the grounds that the July 30 order was only an interim order governing the conduct of the parties during reorganization. In response, the PBGC withdrew its appeal, without prejudice to renewal. 10 In its application, LTV also asked the bankruptcy court for authority to establish similar pension arrangements for non-union salaried employees and retirees in the J & L Salaried Plan, in an Individual Account Trust (“Salaried IAT”). At the same time, but by separate application, LTV asked the bankruptcy court for au- thority for LTV Steel to make pre-petition stock contributions to the 1986 EIP, the profit sharing and employee stock ownership program covering approximately 27,621 LTV Steel employees that had been established in the 1986 CBA. The USWA had insisted that implementation of the 1986 EIP, which was designed to com- pensate employees for their economic concessions under the 1986 CBA, was an absolute prerequisite for any USWA concessions for the 1987 CBA. 47a The Restoration of the Plans In August 1987, the PBGC’s SEPPAA Trusteeship Working Group (the “SEPPAA Working Group” or “Group”), an administrative group established to pro- vide advice to the agency regarding plan terminations and related matters under Title IV, met to consider restoring the Plans. The Group reviewed the status of LTV Steel’s ongoing reorganization, including the estab- lishment of the 1987 CBA pension programs and what it perceived to be LTV Steel’s improved financial cir- cumstances. After discussing the purposes of Title IV and the PBGC’s duties and obligations thereunder, the Group concluded that the 1987 CBA plans abused the termination insurance program by providing, together with the PBGC’s payment of guaranteed benefits, sub- stantially the same benefits as were provided under the terminated Plans. Moreover, in addition to noting sig- nificant improvement in LTV Steel’s financial situation, the Group noted LTV Steel’s agreement to contribute an estimated $90 million to fund benefits pursuant to the 1987 CBA plans and io contribute an additional $90 million in value to the 1986 EIP. The Group also con- sidered actuarial estimates of the minimum funding costs if the Plans were restored. In addition, the Group considered a financial analysis (“PBGC Summary Financial Analysis”) of LTV based on information provided to the Official Committee of Unseeured Creditors which, the Group concluded, indi- cated that LTV Steel alone would be able to fund the restored Plans in the near future, although the PBGC did not have sufficient data to predict LTV Steel’s long- term cash flow with any certainty. In addition, the PBGC Summary Financial Analysis suggested that LTV and the members of its controlled group would generate more than enough cash in the immediate future to sup- port the Plans if restored, 48a Based on its analysis of LTV’s financial condition and on the assumption that LTV Steel would obtain funding waivers from the IRS for the 1984-86 plan years, the Group estimated the total annual funding costs for the Plans upon restoration to be $260 million. The Group then deducted an estimated $90 million in annual funding costs for the 1987 CBA Plans to arrive at an incremental cost of full restoration of $170 million. Based on a fur- ther assumption that annual savings of $50 million from negotiated job reductions and other USWA concessions would be realized whether or not the Plans were restored, the Group calculated the net effect of restoration after the job reductions to be somewhat less than $120 million. Against this estimate of the cost of restoration, the Group weighed LTV Steel’s consolidated financial results as forecast in the LTV Corporation and Subsidiaries 87-88 Operating Plan (the “1987-1988 Operating Plan“). The 1987-1988 Operating Plan estimated net income from LTV Steel of $239 million in 1987 and $260 million in 1988; net cash flow from LTV Steel of $270 million and $265 million, respectively, in those years; and $267.9 million annual operating income from LTV Steel in 1987. The Group also considered LTV Steel’s actual operating income for the period from January through May 1987 which exceeded the Operating Plan’s estimates by $44.9 million. : Having considered this information, the Group decided that restoration was necessary to prevent abuse of the pension termination insurance program. The Group ac- cordingly voted unanimously to recommend restoration based on the establishment of abusive follow-on plans, the improvement in LTV Steel’s financial condition, and LTV Steel’s demonstrated willingness to fund employee retirement plans. The SEPPAA Working Group’s recommendation was forwarded to the Executive Director of the PBGC for 49a approval. Before acting on the recommendation, the Executive Director asked for general policy guidance on restoration from the PBGC’s Board of Directors, which consists of the Secretary of the Treasury, the Secretary of Commerce, and the Secretary of Labor, who is the Chairman of the Board. See 29 U.S.C. § 1302 (d). After meeting briefly to consider the matter by telephone con- ference call on September 18, 1987, the Board unani- mously adopted a resolution that “confirms, as a matter of policy, that the PBGC may exercise its discretion un- der Section 4047 of ERISA to restore plans as appro- priate,” and “affirms the authority of the Executive Director of the PBGC to determine when particular pen- sion plans should be restored and to take all appropriate actions necessary to effect those determinations.” PBGC Record, p. 1583. Before the SEPPAA Working Group first met to con- sider restoration of the Plans, the PBGC had had several meetings and had exchanged letters with representatives of LTV and the USWA in May and July 1987 as the parties attempted unsuccessfully to resolve the PBGC’s objections to the 1987 CBA Plans. In early September 1987, LTV’s Chief Executive Officer called the PBGC’s Principal Deputy Executive Director to ask whether it was true that the PBGC had decided to restore the Plans. Upon being informed that the agency had not reached a final decision on what action it would take in response to the 1987 CBA Plans, but that restoration was still being considered as an option, LTV requested an additional meeting with the PBGC. The PBGC’s Execu- tive Director responded by letter that the agency “would, of course, be happy to consider any additional informa- tion you might wish to supply.” PBGC Record, p. 1572. As a result, representatives from LTV and the PBGC met in Washington on September 12 and 21, 1987. In response to the PBGC General Counsel’s inquiry as to the effects on interested parties of restoration, LTV’s outside 50a counsel stated that the economic effect of restoration was unclear and that restoration would give rise to time- consuming litigation, cast doubt on the reorganization, and be hard on other creditors. The Notice of Restoration On September 22, 1987, the Executive Director adopted the recommendation of the SEPPAA Working Group to restore the Plans and executed and sent the Restoration Notice to LTV and LTV Steel restoring the Plans, effec- tive immediately, to their pretermination status as of January 13, 1987. The Restoration Notice explained that the PBGC had determined that restoration was appro- priate and consistent with its duties under Title IV of ERISA because, among other things: (1) LTV Steel had abused the pension plan termination insurance program by establishing follow-on plans that essentially continued the termination Plans, with the PBGC picking up much of the cost; (2) the financial condition of LTV Steel had substantially improved since the Plans were terminated; and (3) LTV Steel had demonstrated its willingness to fund retirement programs. The Restoration Notice informed LTV and LTV Steel that restoration “means that the Plans are ongoing since [January 13, 1987] for all purposes, including... minimum funding obligations” and that “|bJenefit pay- ments to retirees that were reduced because of the ter- mination shall be restored to their full amounts under the terms of the Plans, and the Plans shall pay to such retirees any amounts that were not paid because of the terminations, together with interest. PBGC Rec- ord, p. 1578. The Restoration Notice also informed LTV that, as plan administrator of the restored Plans, it must comply with all of the fiduciary duties of a plan admin- istrator under ERISA and under the terms of the Pians. 51a PRIOR PROCEEDINGS IN THIS COURT Asserting that restoration of the Plans violated the automatic stay under section 362 of the Code, LTV ob- tained, on September 23, 1987, an order to show cause from the bankruptcy court seeking, inter alia, a finding that the restoration violated the automatic stay and was, therefore, null and void (the “Stay Application”). On September 24, 1987, the PBGC moved for the withdrawal of the reference of the Stay Application under 28 U.S.C. § 157(d). On November 24, 1987, this court granted the PBGC’s motion to withdraw the reference, finding that “the presence of significant issues of first impression, considerations of judicial economy, and the need to pro- tect participants in the restored Plans from unduly pro- tracted uncertainty about the status of their benefits” established sufficient cause for withdrawal. PBGC v. The LTV Corp., No. 87 Civ. 6863, slip on. at 13-14 (S.D.N.Y. Nov. 24, 1987). On September 28, 1987, LTV applied to the bankruptcy court for appointment as administrator ad litem of the Plans and for the appointment of Mellon Bank as trustee ad litem of the Plans. On September 28, the bankruptcy court entered consent orders appointing LTV administra- tor ad litem and Mellon Bank trustee ad litem of the Plans. The PBGC consented to the orders, but reserved its position that entry of such orders was neither neces- sary nor within the jurisdiction of the bankruptcy court. The orders provide that they are without prejudice to the PBGC’s right to seek to vacate or modify the orders. The orders authorize payment of benefits from the assets of the Plans at least at the level guaranteed by the PBGC and expressly do not prejudice the positions of any interested party as to the appropriate level of benefits payable from the Plans. As a result of LTV’s refusal to comply with the resto- ration, evidenced, inter alia, by LTV’s application for ad litem appointments and failure to pay benefits at full Plan levels, the PBGC filed a complaint in this court on 52a October 9, 1987, to require LTV to operate the Plans as ongoing plans in compliance with the restoration (the “Enforcement Action”). This court, which had before it the PBGC’s motion to withdraw the Stay Application, accepted the Enforcement Action as a related matter. On November 3, 1987, LTV supplemented the Stay Ap- plication to assert that, like the restoration, PBGC’s En- forcement Action also violated the automatic stay. On December 31, 1987, LTV filed an answer and counterclaim in the Enforcement Action. By that same date, various creditor groups affected by LTV’s Chapter 11 petition had been permitted to intervene by stipula- tion: the Official Committee of Unsecured Creditors of LTV Corporation et al. (the Committee“), the Commit- tee’s Subcommittee of Parent Creditors, and the LTV Bank Group. Later, on January 11, 1988, the Committee of Equity Security Holders intervened by stipulation. On January 15, 1988, the Motion to Intervene of BancTexas Dallas was granted. On January 21, 1988, a stipulation was filed in which LTV and the PBGC agreed to the intervention of the Fifth Third Bank, the Huntington National Bank, and Citibank. Finally, on January 26, 1988, the motion to intervene filed by two individual participants in the J & L Salaried Plan, David H. Miller and William W. Shaffer, was granted. Oral argument on Miller and Shaffer’s motion for class cer- tification was held on June 6, 1988. Following limited discovery, the submission of briefs from the PBGC, LTV and the intervenors and other in- terested parties, oral argument was held on March 4, 1988 on the PBGC’s motion for summary judgment in its Enforcement Action and LTV’s Stay Application. 11 The USWA filed a memorandum of law as amicus curiae in which the union argues that the 1987 CBA Plans are legal in all respects and cannot constitute a basis for restoration. In addition, Solidarity USA, Inc., a nonprofit corporation organized under the laws of Ohio and representing certain retirees who were hourly employees of LTV Steel, has filed a memorandum of law as amicus curiae in support of the PBGC’s motion for summary judgment. 53a THE STAY APPLICATION I. The Automatic Stay LTV contends that the Restoration Notice and the Enforcement Action violate the automatic stay in sec- tions 362 (a) (1), a(3), and a(6) of the Code. Section 362 (a) of the Code provides that, unless the Code ex- pressly provides otherwise, the filing of a petition for reorganization operates as a stay, applicable to all entities of : (1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title; (3) any act to obtain possession of property of the estate or of property from the estate, or to exer- cise control over property of the estate; (6) any act to collect, assess, or recover a claim against the debtor that arose before the commence- ment of a case under this title. 11 U.S.C. § 362 (a). Section 362 is intended to provide a breathing spell for the debtor and to guarantee equal treatment for creditors. See, e.g., H.R. Rep. No. 595, 95th Cong., 2d Sess. 340 (1978), reprinted in 1978 U.S. Code Cong. & Ad. News 5963, 6296-97; Fidelity Mortgage Investors v. Camelia Builders, Inc., 550 F.2d 47, 55 (2d Cir. 1976), cert. denied, 429 U.S. 1093, reh’g denied, 430 U.S. 976 (1977). The legislative history of section 362 reveals clear con- gressional intent that the automatic stay be brvadly en- forced so as to preserve the status quo as of the petition 54a date, insure the orderly administration of a bankruptcy estate and prevent a race among creditors: The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debtor a breathing spell from his credi- tors. It stops all collection efforts, all harassment, and al! foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or sim- ply to be relieved of the financial pressures that drove him into bankruptcy. The automatic stay also provides creditor protec- tion. Without it, certain creditors would be able to pursue their own remedies against the debtor’s prop- erty. Those who acted first would obtain payment of the claims in preference to and to the detriment of other creditors. . . . Subsection (a) defines the scope of the automatic stay, by listing the acts that are stayed by the com- mencement of the case. The commencement or con- tinuation, including the issuance of process, of a judicial, administrative, or other proceeding against the debtor that was or could have been commenced before the commencement of the bankruptcy case is stayed under paragraph (1). The scope of this para- graph is broad. All proceedings are stayed, including arbitration, license revocation, administrative, and judicial proceedings. . . even if they are not before governmental tribunals. Paragraph (3) stays any act to obtain possession of property of the estate (that is, property of the debtor as of the date of the filing of the petition) or property from the estate (property over which the estate has control or possession). The purpose of this provision is to prevent dismemberment of the estate 55a Paragraph (6) prevents ereditors from attempting in any way to collect a prepetition debt. H.R. Rep. No. 595, 95th Cong., 2d Sess. 340-42 reprinted in 1978 U.S. Code Cong. & Ad. News 5963, 6296-98; see also S. Rep. No. 989, 95th Cong., 2d Sess. 49-51, reprinted in 1978 U.S. Code Cong. & Ad. News 5787, 5835-36. LTV contends that, by restoring the Plans, the PBGC seeks to impose additional liabilities upon LTV so that a greater portion of LTV’s assets will be paid to the PBGC and to satisfy its multibillion dollar claim against LTV Steel ahead of other creditors. Upholding the PBGC’s actions, LTV argues, would frustrate the two major purposes of the Code: “achieving equality among creditors and giving the debtor a fresh start.” In re B. D. Int'l Discount Corp., 701 F.2d 1071, 1075 n.8 (2d Cir.), cert. denied, 464 U.S. 830 (1983). The PBGC contends that neither restoration nor the Enforcement Action “was or could have been commenced before the commencement of the case under [Chapter 11).” 11 U.S.C. § 362 (a) (1). The PBGC argues that under Title IV of ERISA, the PBGC’s claims against LTV Steel first arose post-petition and that, in any event, neither restoration nor the Enforcement Action is an act to recover such claims. See 11 U.S.C. § 362 (a) (1), (a) (6). In addition, the PBGC contends that because restoration does not directly affect the assets or property of LTV Steel, neither restoration nor the Enforcement Action constitutes an act “to obtain property of.. or to exercise control over property of the estate.” 11 U.S.C. 362 (a) (3). Finally, the PBGC asserts that both resto- ration and the Enforcement Action are excepted from the stay by section 362 (b) (4) of the Code because they are regulatory enforcement actions taken to further the important public policies underlying ERISA. 56a Il. The Nature of the PBGC’s Claims Section 104(4) of the Code defines “claim” to mean: (A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, un- disputed, legal, equitable, secured, or unsecured; or (B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured. 11 U.S.C. §101(4) (emphasis added). The legislative history of 11 U.S.C. § 101 (4) reveals that Congress in- tended to define prepetition claims broadly: The definition is any right to payment, whether or not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, un- disputed, legal, equitable, secured, or unsecured. . . . By this broadest possible definition and by the use of the term throughout the title 11, especially in sub- chapter I of chapter 5, the bill contemplates that all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in the bankruptcy case. It permits the broadest possible relief in the bankruptcy court. H.R. Rep. No. 595, 95th Cong., 2d Sess. 309, reprinted in 1978 U.S. Code Cong. & Ad. News 5963, 6266; see 918 S. Rep. No. 989, 95th Cong., 2d Sess. 21-22, reprinted in 1978 U.S. Code Cong. & Ad. News 5787, 5807-08. The broad definition of “claim” is central to the policy of a “fresh start” for a debtor and permits a debtor to receive “the broadest possible relief in the bankruptcy court,” because liability on a “claim” can be discharged only by the confirmation of a plan of reorganization. 57a Id.; see 11 U.S.C. 88 101(11), 1141(d); see also In re A.H. Robins Co., 63 B.R. 986, 989 (Bankr. E.D. Va. 1986), aff'd sub nom. Grady v. A. H. Robins Co., 839 F.2d 198 (4th Cir. 1988). The PBGC has two major types of claims against LTV. As the agency responsible for administering and enforc- ing Title IV, the PBGC has a claim under section 4062 (b) of ERISA, 29 U.S.C. § 1362 (b), for statutory “ter- mination liability” in the amount by which Plan assets were insufficient to satisfy guaranteed benefits on the date of plan termination. In addition, the PBGC has a second statutory claim under section 4062(d) of ERISA, 29 U.S.C. § 1362 (d), asserted in its capacity as statutory trustee on behalf of the Plans, for due and unpaid minimum funding contributions. See also 29 U.S.C. § 1082; 26 U.S.C. § 412. The PBGC contends that under ERISA these claims first arose upon the post- petition termination of the Plans. Section 4062(a) provides that any contributing spon- sor of a plan, or a member of such sponsor’s controlled group, shall incur termination liability “in any case in which a single-employer plan is terminated.” 29 U.S.C. 1362 (a). Such liability “shall be due and payable to the [PBGC] as of the termination date.” 29 U.S. C. § 1362(a), (b) (2) (A). Section 4068 of ERISA, which 120n November 30, 1987, the PBGC filed these claims, which were non-contingent during the period between the termination of the Plans on January 13, 1987, and the restoration on September 22, 1987, as contingent claims in the bankruptcy case based on the contingency that restoration is held to be ineffective or that a sub- sequent valid termination of the Plans occurs before the confirma- tion of a plan or plans ef reorganization. The PBGC also filed other contingent claims in the bankruptcy case, including contract claims asserted on behalf of the Plans as third-party beneficiaries for the amounts by which Plan assets may be insufficient to pay promised benefits, and claims under section 4062(c) of ERISA, 29 U.S.C. § 1362(c), for certain unfunded “benefit commitments” owed to the trust established under section 4049 of ERISA, 29 U.S.C. § 1349. 58a imposes a lien for unpaid termination liability, provides that the lien “arises on the date of termination of a plan.” 29 U.S.C. § 1368 (b). Under section 4048 of ERISA, the date of plan termination is the “date estab- lished by the corporation and agreed to by the plan administrator” or the “date established by the court.” 29 U.S.C. § 1348 (a) (3), (a) (4). Here, since the ter- mination date was January 13, 1987, the PBGC argues that its claim for termination liability first arose six months after the commencement of LTV’s bankruptcy proceedings. As for its claim as statutory trustee for due and unpaid contributions to the Plans, the PBGC contends that under section 4062(d) of ERISA it had no statutory responsibility or authority to collect due and unpaid contributions until it was appointed statutory trustee on January 12, 1987, the date on which the con- sent orders terminating the Plans as of January 13, 1987 were entered. 29 U.S.C. § 1362 (d). LTV does not dispute that LTV Steel’s liability to the PBGC did not become due and payable under ERISA until the date of termination. LTV contends, however, that the accrued benefits, for which the PBGC has now— through restoration—reimposed LTV Steel's funding obligations, were accrued or earned by LTV Steel’s em- ployees prepetition and thus are attributable to the pe- riod pre-dating the Chapter 11 filing. Therefore, LTV argues, the liability to fund such benefits constitutes a prepetition claim and remains a prepetition claim regard- less of when it becomes fixed. Recent bankruptcy cases that distinguish between when a claim arises for the pur- poses of the Code and when a cause of action accrues on a claim under state or federal law support LTV’s position. Consistent with the goals of uniform treatment for creditors and a fresh start for debtors, courts have deter- mined when a claim arises for Code purposes by focusing upon “the time when the acts giving rise to the alleged 59a liability were performed,” since only reference to pre- petition acts of the debtor will result in treating liabili- ties flowing from such acts in an equitable fashion. In re Johns-Manville Corp., 57 B.R. 680, 690 (Bankr. S.D.N.Y. 1986); see also In re Revere Copper and Brass, Inc., 29 B. R. 584, 588 (Bankr. S. D. N. V.), aff'd, 32 B. R. 725 (S. D. N. V. 1983); In re A. H. Robins Co., 63 B. R. at 993; In re Edge, 60 B. R. 690, 699-705 (Bankr. M. D. Tenn. 1986). Where the debtor's obligations stem from contractual liability, even a post- petition breach will be treated as giving rise to a prepetition liability where the contract was executed prepetition. See 11 U.S.C. 8 365 (g)(1); NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984); see also In re Ahrens, 64 B.R. 5, 6-7 (Bankr. E.D. Pa. 1986); In re William H. Herr, Inc., 61 B.R. 252, 253 (Bankr. E.D. Pa. 1986). In In re Johns-Manville, 57 B.R. at 690, the bank- ruptey court held that “for federal bankruptcy purposes, a prepetition ‘claim’ may well encompass a cause of action that, under state law, was not cognizable until after the bankruptcy petition was filed.” The court de- clined to follow the Third Circuit’s holding in Matter of M. Frenville Co., 744 F.2d 332 (8d Cir. 1984), cert. denied, 469 U.S. 1160 (1985) that “the threshold ques- tion of when a right to payment arises, absent overrid- ing federal law, ‘is to be determined by reference to state law.’” 744 F.2d at 337 (quoting Vanston Bond- holders Protective Committee v. Green, 329 U.S. 156, 161 (1946)). The Johns-Manville Court noted other bank- ruptcy courts’ criticism of the Frenville decision for its “reliance upon state law to determine if a claim existed against the debtors at the time that the bankruptcy cases were commenced,” Jn re Yanks, 49 B.R. 56, 58 (Bankr. S. D. Fla. 1985), and for failing “to distinguish between ‘claim’ as defined in 11 U.S.C. § 101 (4) and a cause of action for indemnity or contribution under state law.” Matter of Baldwin-United Corp., 49 B.R. 901, 903 * 60a (Bankr. S. D. Ohio 1985). The bankruptcy court also noted the Second Circuit’s statement in In re Baldwin- United Corp. Litig., 765 F.2d 343 (2d Cir. 1985), that it has reservations about following Frenville: “We are not as certain as the District Court that, if we reached the issue, we would follow Frenville and hold the stay inapplicable to Paine-Webber’s third-party complaint. The broad definition of ‘claim’ in the Bankruptcy Code . . . creates a substantial question whether the stay ap- plies to the third-party complaint.” Jn re Baldwin-United Corp. Litig., 765 F.2d at 348 n.4. Notwithstanding widespread bankruptcy court disap- proval of Frenville, this and other district courts from this Circuit have held that the issue of when a claim arises cannot always be resolved solely with reference to the Code but sometimes requires an analysis of com- peting interests behind other federal laws. Thus, for example, in three recent cases our district courts have held that when the EPA’s claim for cost recovery and a joint tortfeasor’s claim for contribution under the Com- prehensive Environmental Response, Compensation and Liability Act of 1980 arise against a debtor in bank- ruptcy cannot be determined solely with reference to the broad definition of claim in section 101(4) of the Code but requires substantial consideration of the competing interests protected by federal environmental laws. See, e.g., American Telephone & Telegraph Co. v. Chateaugay Corp., No. 87 Civ. 8160, slip op. (S.D.N.Y. April 22, 1988); In re Combustion Equipment Assocs., Inc., 67 B.R. 709 (S.D.N.Y. 1986); In re Johns-Manville Corp., 63 B.R. 600 (S.D.N.Y. 1986). Indeed, the need for material consideration of ERISA provided part of the grounds for the withdrawal of the instant case from the bankruptcy court. See PBGC v. The LTV Corp., slip op. at 11-12 (material consideration of ERISA required to determine when PBGC’s claims arise). Therefore, in order to determine the status of the PBGC’s claims, this court must consider what acts gave rise to LTV’s pen- 6la sion liabilities, when they occurred, and, finally, whether any competing interests in ERISA require that such lia- bilities be treated as post-petition claims of the PBGC. Here, the events that gave rise to the PBGC’s claims and that mark them as prepetition were LTV Steel’s creation and maintenance of a pension plan that was subject to ERISA’s Title IV termination liability pro- visions and LTV Steel's employees’ labor during the years preceding the Chapter 11 filing. The PBGC’s right to payment upon termination was, on the petition date, a classic example of a contingent claim“ one which the debtor will be called upon to pay only upon the occurrence or happening of an extrinsic event.” In re All Media Properties, Inc., 5 B. R. 126, 133 (Bankr. S.D. Tex. 1980), aff'd, 646 F.2d 193 (5th Cir. 1981). If the ex- trinsic event occurs post-petition, the contingent claim simply becomes a liquidated one; it, however, is not thereby elevated to the status of a post-petition claim. Here, the extrinsic event was plan termination, which simply fixed LTV’s liability to PBGC.” 13 Indeed, the PBGC’s reimbursement claim in these cases as stat- utory guarantor is analogous to the claim of any guarantor or surety that pays post-petition under a guarantee that existed prepetition. As one commentator notes: To the extent that the claim of a surety for reimbursement or contribution of payments made after the filing of the case is .. . allowable, such claim is treated as though it were given no higher status than is the claim of the creditor against the debtor. To give the surety better than prepetition status merely because he has made a payment to a prepetition credi- tor following the filing of the debtor’s petition would distort the scheme of the statute with respect to prepetition claims and, when appropriate, post-petition administrative claims. The surety had a contingent claim against the debtor at the time of the commencement of the case. Its becoming fixed after that time in no way changes its status as a prepetition claim. 3 Collier on Bankruptcy, § 502.05[2] (15th ed. 1987); see also Maynard v. Elliott, 283 U.S. 273, 275 (1931); Matter of Fuzzy Thurston's Eau Claire Left Guard, Inc., 33 B. R. 579, 581 (Bankr. W.D. Wisc. 1983); 11 U.S.C. 5 502 (e). 62a The Code’s deliberate refusal to distinguish between contingent and mature claims reflects a fundamental bankruptcy policy that “all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in the bankruptcy case.” H.R. Rep. No. 595, 95th Cong. 2nd Sess. 309 (1978), reprinted in 1978 U.S. Code Cong. & Ad. News 5963, 6266; S. Rep. No. 989, 95th Cong., 2d Sess. 22, reprinted in 1978 U.S. Code Cong. & Ad. News 5787, 5808. The Code’s broad de- lineation of prepetition claims was intended to embrace contingent claims and avoid the problems that some- times occurred under the former Bankruptcy Act, when contingent or unliquidated claims were disqualified from sharing in the estate and, equally important from the debtor’s point of view, were not discharged. See In re Johns-Manville, 57 B.R. at 687. In support of its argument for post-petition status for its claims, the PBGC cites statutory provisions in ERISA that make the PBGC’s claims for termination liability and for due and unpaid minimum funding contributions “due and payable” as of the termination date. See 29 U.S.C. § 1362 (b) (2 (A), (d). Relying on these pro- visions, the PBGC argues that its claims against LTV are based upon a post-petition event—termination—and, therefore, arose post-petition. Termination, however, merely made the PBGC’s contingent claims fixed, that is, non-contingent. The fact that the PBGC may not pro- ceed against LTV Steel on its contingent claims until termination occurs does not distinguish pension liability claims from any other contingent claims that are trig- gered by a post-petition event. Termination alone could not convert the PBGC’s contingent prepetition claims into post-petition claims." 14 The cases cited by the PBGC in support of its contention that its claims against LTV arose post-petition are distinguishable. In each case, to the extent that a claim was found to have arisen post- petition, the court found that the claim arose upon the post-petition 63a The PBGC has failed to raise any overriding policy objectives of ERISA that would warrant a departure from the well-settled bankruptcy rule that contingent, unmatured claims be deemed prepetition claims subject to the automatic stay and dischargeable pursuant to a plan of reorganization. The PBGC has not cited to legis- lative history or provisions of ERISA that suggest that a debtor’s minimum funding obligations and termination liability are entitled to post-petition status in the con- text of a bankruptcy proceeding. Indeed, the 1987 PPA amendments to ERISA, which increased the PBGC’s claim for termination liability from 75 to 100% of all unfunded benefits, indicate that Congress chose to im- prove the PBGC’s claim by increasing it, without award- ing it post-petition treatment in bankruptcy. The court is not aware of any proposals during consideration of the 1987 amendments that would have afforded post- treatment to the PBGC’s claims. Finally, LTV Steel’s liabilities, and the PBGC’s claims, are analogous to ERISA claims for “withdrawal liability” conduct of the debtor, not the creditor. See, e. g., Holland America Ins. Co. v. Succession of Roy, 777 F.2d 992 (5th Cir. 1985) (claims with respect to a fire at the debtor’s property two days after Chap- ter 11 petition was filed held to be post-petition) ; Jn re Continental Air Lines, Inc., 61 B.R. 758 (S.D. Tex. 1986) (action brought by minority shareholders of corporation which was target of debtor’s post-petition takeover attempt was found to be post-petition ac- tion); Jn re Newman Companies of Wisconsin, Inc., 45 B.R. 308 (Bankr. E.D. Wis. 1985) (declaratory judgment action by former employee of debtor to test validity of a noncompetition clause with respect to debtor’s post-petition business activities was allowed under 28 U.S.C. 8 959 (a) which permits suit against debtor with respect to post-petition business activities); Turner Broadcasting System, Inc. v. Sanyo Elec., Inc., 33 B.R. 996 (N. D. Ga. 1983), aff’d mem. sub nom. Turner Broadcasting v. Rubin, 742 F.2d 1465 (11th Cir. 1984) (debtor’s breach of post-petition contract resulted in post-petition claim.) Here, as discussed above, the service of LTV Steel’s employees during the years preceding the Chapter 11 filing gave rise to LTV Steel’s pension liabilities, and hence to the PBGC’s claims. 64a owed to multiemployer plans.“ Courts considering the status of such claims uniformly have held that with- drawal liability is based on vested benefits relating to prepetition services and that claims for withdrawal lia- bility are prepetition claims. See Trustees of the Amal- gamated Ins. Fund v. McFarlin’s, Inc., 789 F.2d 98 (2d Cir. 1986); In re Great Northeastern Lumber & Mill- work Corp., 64 B.R. 426 (Bankr. E.D. Pa. 1986) ; Amal- gamated Ins. Fund v. William B. Kessler, Inc., 55 B.R. 735 (S.D.N.Y. 1985); In re Silver Wheel Freightlines, Inc., 57 B.R. 476 (Bankr. D. Or. 1985). In MeFarlin's, the Court of Appeals for this Circuit reasoned that the liability to a pension plan to fund plan benefits that were earned through prepetition services is not a post- petition expense of administration, even though the lia- bility matured post-petition upon plan withdrawal. Since the “consideration supporting [the] . . . liability” was the employees’ prepetition labor, the consideration was at- tributable to the period pre-dating the filing of the Chap- ter 11 petition” and the liability was classified as a general unsecured claim. Id. at 103. The Honorable Walter R. Mansfield, rejecting an argument similar to that made by the PBGC here, stated that a “debt is not entitled to priority [i.e., post-petition administrative status] simply because the right to payment arises“ post- petition. Id. at 101. Rather, an obligation, he said, is entitled to administrative post-petition status “only to the extent that the consideration supporting the claim- ant’s right to payment was both supplied to and bene- ficial to the debtor-in-possession in the operation of the business.” Id. (quoting In re Mammoth Mart, Inc., 536 F.2d 950, 954 (Ist Cir. 1976 13 Under sections 4201 and 4211 of ERISA, when an individual employer withdraws from a multiemployer pension plan, the with- drawing employer must pay to the plan an amount equal to the employer's pro rata share of the total unfunded vested benefits plan as of the date of termination. See 29 U.S.C. §§ 1381, 1391. | | ) 65a In an effort to distinguish the instant case from Me- Farlin’s and other withdrawal liability cases, the PBGC suggests that those decisions turned on a finding that withdrawal liability was not a necessary cost of preserv- ing the estate and that the denial of administrative pri- ority does not necessarily mean that the claim arose prepetition. The rationale of the withdrawal liability cases, however, is broader than the narrow issues there decided. As the court stated in Jn re Pulaski Highway Express, Inc., 57 B.R. 502 (Bankr. M.D. Tenn. 1986), a prepetition claim for pension liability remains a prepe- tition claim regardless of when it becomes fixed or ma- -tured in the context of multiemployer pension plan with- drawal liability: Although withdrawal liability may be triggered by a post-petition event, the conclusion that it then con- stitutes a “post-petition claim” for bankruptcy pur- poses is unsupported by applicable law and is in- consistent with important bankruptcy polices. In substance, the claim is an obligation to ensure the payment of pension benefits which have previously accrued but are not payable until a future date The liability, i.e., the “right to payment,” is incurred when the employee benefits become nonforfeitable. An employer may meet this obligation either by continuing normal operations and making the re- quired regular contributions into the plan, or by withdrawing from the plan and paying the with- drawal liability. . . . The liability may be unliqui- dated and the amount may be contingent upon with- drawal or whether the vested benefits are unfunded, but such uncertainties do not defeat the existence of pre-petition claims for benefits which accrued prior to withdrawal, which stem from pre-petition events and conduct and which were nonforfeitable and fully vested prior to filing. 66a The withdrawal liability attributable to pre-petition labor is generically indistinguishable from the rights acquired by any pre-petition creditor who provides contractual services or goods to the debtor, accrues a right to payment from the debtor, but is not paid as of the date of the petition. In re Pulaski Highway, 57 B.R. at 507-508 (citations omitted). The PBGC has not offered a compelling reason why the post-petition termination of a pension plan should displace the actual service of employee-beneficiaries as the “acts” that give rise to a sponsor’s pension liabilities. Based upon the foregoing consideration of the policies of the Code and of ERISA, the objectives of the Code will be furthered and those of ERISA not frustrated if LTV’s pension liabilities to the PBGC are treated as prepetition claims. III. Restoration Does Not Violate the Automatic Stay The PBGC contends that neither restoration nor the Enforcement Action are actions to recover on its claims against LTV Steel. Neither the Restoration Notice nor the complaint in the Enforcement Action demands pay- ment on the PBGC’s claims against LTV Steel, and neither will result in any payments directly to the PBGC. The PBGC asserts that because the Restoration Notice restored the Plans to their pretermination status, the PBGC, post-restoration, is in the same position vis-a-vis LTV as it was before the Plans terminated on January 13, 1987. LTV argues that the PBGC’s contentions ignore the practical effects of its acts. The Restoration Notice in- structed LTV Steel that the Plans were ongoing “for all purposes including . . . minimum funding contributions.” Thus, LTV argues, although restoration will not effect a direct recovery by the PBGC on its prepetition claims, 67a restoration will (1) make LTV immediately liable for due and unpaid minimum funding contributions, (2) make LTV liable for currently accruing minimum fund- ing contributions, and (3) result in the ongoing accrual by LTV Steel employees of pension benefits under the Plans. Further, LTV contends that, in the event that the Plans are reterminated at some future date, res- toration will have served as the predicate for a substan- tial increase in the PBGC’s termination liability claims against LTV under the 1987 PPA amendments to ERISA. Focusing on what may prove to be the practical effects of the PBGC’s restoration decision in this case, as LTV urges this court to do, could lead to an erroneous con- clusion as to whether restoration, when properly effected, violates the automatic stay as a matter of law. Here, LTV has argued that the relief sought by the PBGC in its Enforcement Action—the enforcement of the Restora- tion Notice compelling minimum funding payments—ex- ceeds the PBGC’s authority under Title IV. LTV has also argued that if restoration is upheld, the Plans will have to be reterminated, at which time the PBGC can be expected to contend that it is entitled, under the 1987 amendments to ERISA, to increase its termination lia- bility claim against LTV. However, the fact that the PBGC may have erred in restoring the Plans or that it may have requested relief beyond the scope of its author- ity does not necessarily lead to the acceptance of LTV’s argument that restoration must always be subsumed by the Code and subordinated to the goals of reorganization. These considerations underlie the conclusions concerning the direct effects of restoration under sections 362(a) (1), (a) (3), and (a) (6) of the Code. Sections 362(a)(1) and (a) (6) of the Code’s stay provisions bar all acts or proceedings to collect, assess or recover prepetition claims. Restoration returns to LTV Steel the immediate obligation to contribute to the Plans the minimum funding amounts required by ERISA 68a for the plan years 1984-1986 and imposes on LTV a continuing obligation to make minimum funding con- tributions for the years 1987 forward. Whether LTV will be required to make these payments, however, is not determined by the simple act of restoration. In order to compel payment for past due minimum funding contribu- tions, the Department of Labor, not the PBGC, is re- quired to institute enforcement proceedings under Title I of ERISA. See 29 U.S.C. 1132 (a). Whether an en- forcement action by the Labor Department would be barred by the automatic stay or whether the bankruptcy court would lift the stay for such an action are issues not now before this court.“ It suffices to note that res- toration per se simply reimposes on the debtor the same minimum funding obligations for the vears 1984-1986 that existed prior to termination and reinstates LTV 1% Restoration in a bankruptcy proceeding does not mean that minimum funding payments, otherwise payable on account of un- funded prepetition benefits, must be paid, because the provisions of Title I of ERISA, which set forth the minimum funding obliga- tions, see 29 U.S.C. § 1082, are expressly subordinated to other non-ERISA federal laws, like the Code. Section 514(d) of ERISA, in relevant part, provides that “[n)othing in this title [Title I) shall be construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States or any rule or regula- tion issued under such law.” This section has been cited for the proposition that “ERISA should not be interpreted as displacing any pre-existing federal legislation.” See Bonin v. American Air- lines, Inc., 621 F.2d 635 (5th Cir. 1980) (Railway Labor Act), on remand, 562 F. Supp. 896 (N. D. Tex. 1983), aff'd without op., 738 F.2d 435 (5th Cir. 1984), cert. denied, 471 U.S. 1005 (1985). On the other hand, the PBGC has offered authority for the proposition that payments for minimum funding contributions by a plan sponsor in Chapter 11 may be entitled to administrative expense priority, pursuant to sections 503(b)(1) and 507 of the Code, as actual and necessary costs or expenses of preserving the estate. See Columbia Packing Co. v. PBGC, No. 85-2241-C, slip op. at 5-9 (D. Mass. Jan. 6, 1988). Because an application for admin- istrative expense priority status for LTV Steel’s minimum funding payments is not before this court, whether Columbia Packing should be followed need not be decided at this time. 69a Steel’s ongoing minimum funding obligations for plans that have been restored to their pretermination status. Restoring the Plans to their pretermination status does not result in any direct payments to the PBGC or in any direct payments to the Plans and, therefore, does not result in a recovery on claims for past due minimum funding contributions in violation of sections 362(a) (1) and (a)(6)."" Similarly, because the PBGC lacks the authority to compel minimum funding payments, its decision to restore the Plans does not directly result in the PBGC’s exercise of control over LTV’s assets by the PBGC in violation of section 362(a) (3). LTV advances a second theory under which restora- tion will result in the exercise of control over property of the estate. If restoration is made effective as of the January 13, 1987 termination date, LTV Steel’s em- ployees will continue to accrue service benefits from that date forward. LTV equates the compulsory accrual of liabilities under the Plans with the exercise of control over property of the debtor which is barred by section 362(a)(3). However, the scope of section 362(a) (3) does not by its terms encompass such indirect effects of restoration. The purpose of section 362(a)(3) “is to protect the estate from direct action taken by creditors against a debtor’s personal or real property, and to prevent an un- controlled scramble to liquidate the estate.” In re Con- tinental Airlines, Inc., 61 B.R. 758, 778 (S.D. Tex. 1986) (emphasis added). Cases interpreting section 362(a) (3), therefore, “have generally involved direct action taken by creditors against a debtor’s personal or real property.” Id. at 779; see, e.g., In re 48th Street Steakhouse, Inc., 61 B.R. 182, 187 (Bankr. S. D. N. V. 1986), aff'd, 77 B. R. 17 It must be noted that today’s decision does not resolve whether an action by the Labor Department to collect due and unpaid mini- mum funding contributions to the Plans would constitute an action to recover on the PBGC’s contingent claims against LTV Steel. 70a 409 (S. D. N. V.), aff'd, 835 F.2d 427 (2d Cir. 1987), cert. denied, —— U.S. ——, 108 S.Ct. 1598 (1988) (cancella- tion of debtor’s lease) ; Jn re Tel-A-Communications Con- sultants, Inc., 50 B.R. 250 (Bankr. D. Conn. 1985) (re- possession of debtor’s vehicle); Proyectos Electronicos, S.A. v. Alper, 37 B.R. 931, 932 (E. D. Pa. 1983) fre- covery of purchased goods from debtor’s estate). Courts, moreover, “have clearly distinguished between the entry of judgment, and attempts to enforce a judgment against property of the estate in determining whether a viola- tion of subsection 362 a (3) has occurred.” Jn re Con- tinental Airlines, 61 B.R. at 779; see, e. g., Kommandit- selskab Supertrans v. OCC Shipping, Inc., 79 B.R. 534 (S. D. N. V. 1987) (Section 362(a)(3) stays enforcement of judgment against debtor’s property). Restoration does not constitute direct action against LTV’s property or assets. Restoration simply reimposes on LTV Steel the obligation to provide pension benefits for employees. This obligation is an ordinary cost of doing business and one that LTV Steel has readily ac- cepted under the 1987 CBA Plans, albeit outside the reg- ulatory framework of ERISA. However, contrary to LTV Steel’s assumption, termination did not remove the company and its Plans from ERISA’s regulatory frame- work. The PBGC’s authority to restore terminated pen- sion plans to their pretermination status necessarily im- plies that termination does not erase a plan sponsor’s obligations under ERISA but rather suspends certain obligations and transforms others into liability claims. For example, although termination relieves the plan sponsor of its obligation to make minimum funding con- tributions directly to the Plans, section 4062 of ERISA recasts the sponsor’s minimum funding obligations as liabilities directly to the PBGC. As the bankruptcy court stated in In re Beker Indus. Corp., 57 B.R. 611, 624 (Bankr. S. D. N. V. 1986), “the Code does not change the business and regulatory en- 71a vironment in which a debtor operates.” Although LTV Steel seeks to minimize the application of ERISA to its post-petition pension activities, ERISA’s restoration pro- vision compels the conclusion that an employer who funds a qualified ongoing pension plan may under appropriate circumstances be required to resume its statutory obli- gations for a plan that has been terminated. Therefore, the continued accrua! of employee pension benefits re- sults from maintaining a qualified pension plan under ERISA. The liability that LTV Steel incurs as such benefits accrue does not transfer or exercise control over LTV Steel’s property. LTV’s final attempt to place restoration within the category of actions barred by the automatic stay is premised upon the assumption that retermination of the Plans is inevitable. Because Plan liabilities exceed Plan assets, if, upon restoration, LTV is not able to make current minimum funding contributions to the Plans, the Plans will ultimately be financially exhausted, and the PBGC will be compelled to terminate them. If the Plans are not restored, the amount of the PBGC’s termination liability claim in this case would equal 75% of the un- funded guaranteed benefits. But if the Plans were re- stored and then reterminated, the PBGC can be expected to claim reimbursement for 100% of all unfunded ben- efits under the 1987 PPA amendments. Thus, LTV argues, even if the PBGC is now seeking to restore the Plans for the sole purposes of allowing full retirement benefits (not just guaranteed benefits) to be paid out of Plan assets and allowing active workers to continue to ‘fecrue benefits (as was the case immediately prior to termination), without compelling minimum funding pay- ments, restoration violates the [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0672%3A03. Public record. Not legal advice.